Enlight Renewable Energy Ltd. Q4 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to the Enlight Renewable Energy Fourth Quarter and Year End 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yosef Lefkovitz. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining our fourth quarter and full year 2023 earnings conference call for Enlight Renewable Energy. Before beginning this call, I would like to draw participants' attention to the following: certain statements made on the call today, including but not limited to statements regarding business strategy and plans, our project portfolio, market opportunity, utility demand and potential growth, discussions with commercial counterparties and financing sources, pricing trends for materials, progress of company projects, including anticipated timing of related approvals and project completion and anticipated production delays, expected impact from various regulatory developments, completion of development, the potential impact of the current conflict in Israel on our operations and financial condition, and company actions designed to mitigate such impact, expected changes in Clenera's leadership, and the company's future financial and operational results and guidance, including revenue and adjusted EBITDA are forward-looking statements within the meaning of US Federal Securities law, which reflect management's best judgment based on currently available information. We reference certain project metrics in this earnings call, and additional information about such metrics can be found in our earnings release. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our 2022 annual report filed with the SEC on March 30, 2023, and other filings for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Additionally, non-IFRS financial measures may be discussed on the call. These non-IFRS measures should be considered in addition to, and not as a substitute for, or in isolation from our results prepared in accordance with IFRS. Reconciliations to the most directly comparable IFRS financial measures are available in the earnings release and the earnings presentation for today's earnings call, which are posted on our Investor Relations webpage. With me this morning are Gilad Yavetz, CEO and Co-Founder of Enlight; Nir Yehuda, CFO of Enlight; Jason Ellsworth, CEO and Co-Founder of Clenera; and Adam Pishl, COO and Co-Founder of Clenera. Gilad will provide some opening remarks and we'll then turn the call over to Jason and Adam for review of our US activity and then to Nir for our review of our fourth quarter and full year results. Our executive team will then be available to answer your questions.

Thank you all for joining us today for Enlight's Fourth Quarter and Full Year 2023 Earnings Call. In 2023, we continued to deliver on the Enlight story with above-market growth and above-market project returns. Moreover, we built the necessary foundation to take the next major step in 2024 and beyond. Enlight is now on the cusp of another major expansion as we begin the construction of several flagship solar and storage projects, particularly in the United States. I will first review the important achievements we've made in 2023 and will then describe our outlook into 2024 and beyond. Let's start with our strong full year 2023 financial results. Revenue for the whole of 2023 grew 33% over last year to $256 million. Net income grew 157% to $98 million, and adjusted EBITDA grew 45% to $189 million annually. We also saw significant growth in our operating cash flow, which reached $150 million for the full year, an increase of 66% over 2022. In the fourth quarter, revenue grew 21% over last year to $74 million. Net income grew 48% to $16 million, and adjusted EBITDA grew 8% to $47 million. Overall, we delivered strong growth and profitability in 2023, even amidst a challenging macroeconomic backdrop. Driving this growth in our financial parameters was our project additions. In 2023, we connected over 480 megawatts across Israel, Europe, and the US, a growth of 33%. This included Genesis Wind in Israel and Apex Solar in the US, while we also ramped up production at Bjornberget in Sweden. As of today, we have 1.9 gigawatts of operational generation as well as our first operational storage project with a capacity of 277 megawatt hours. These results testify to the strength and resilience of Enlight's geographic and technological diversification, combined with our developer plus IPP model. As a result, we benefit from recurring and growing income from our IPP while our greenfield development activity fuels continued growth at high returns. In 2023, we also saw a rapidly improving outlook for electricity demand. Electricity demand is rising in the US for the first time in two decades, driving increased PPA pricing. Moreover, equipment costs have come down significantly, while the cost of financing is now in decline. As a result, we expect to see continued demand for our projects at attractive returns. We demonstrated that in 2023 by successfully amending PPA pricing upwards for over 1.8 gigawatts by an average of 25% while signing new PPAs at even higher levels. Our pipeline of large-scale projects and competitive access to the grid allows us to continue to capitalize on the need for electricity with favorable prices. At the same time, panel and battery pricing fell considerably throughout the year. These trends have continued to consolidate in the fourth quarter. Higher PPA pricing and lower construction costs contributed to the improving project returns, which we expect to reach 10% on an unlevered basis for projects reaching COD between 2024 and 2026. On top of that, in the fourth quarter, we saw nearly 70 basis points decline in interest rates. When overlaying this with our unlevered project returns of 10%, we can generate average levered equity IRRs in the mid to high teens, and in some cases even higher. In 2023, we also continued to convert additions to our mature portfolio. Our greenfield development teams converted 871 megawatts and 2.7 gigawatt hours from our large development pipeline into mature projects. The additions included several major flagship projects in the United States, such as Roadrunner and Country Acres, which will commence construction in 2024. Finally, substantial financing is required to sustain and accelerate such growth. In 2023, we successfully raised capital from a diverse set of sources. Given the constrained financing environment, this constitutes a notable achievement. We raised $271 million in equity through an IPO on the NASDAQ at the start of the year and secured over half a billion dollars in project finance and tax equity. Also important was the completion of our first asset sell-down in the US and some sell-downs in Israel totaling $19 million. While these initial disposals were small, they set the precedent for sell-downs to become an increasingly important source of funds in the future. To sum up, 2023 was a year in which Enlight delivered on its above-market growth and above-market return story. We secured various sources of financing, expanded the portfolio of projects to be built in the near term, and improved future project returns, all amidst a challenging macroeconomic environment. Looking to 2024, we forecast further revenue growth and profitability. We expect to add 543 megawatts of generation and 1.6 gigawatt hours of energy storage to our operational assets, among them the Atrisco project in the US. This represents our major move into energy storage with 580% growth in this segment. Moreover, we expect to commence construction on upwards of 1 gigawatts and 2.9 gigawatt hours of capacity in 2024, which reflects over a 55% increase in our current operational generation and a 1040% increase in our operational storage. This includes major projects such as Roadrunner, Country Acres, and Quail Ranch in the US, Gecama Hybrid in Spain, and several standalone storage projects in Israel and Italy. In total, including Atrisco, these projects are expected to generate $307 million in revenues and $221 million in EBITDA in their first full year of operation. This is a massive step in the growth of the company, and therefore, execution on these projects is our highest priority. These new builds will also help diversify Enlight's current geographical mix, introducing significant US exposure while adding a major element of solar and storage to our technological mix, which is largely wind to date. In 2024, we expect to convert more of our large development pipeline into mature projects. Examples of this include our unique portfolio of solar and storage in PJM in the US, totaling 1.4 gigawatts and 2.2 gigawatt hours of storage. This project, which benefits from exceedingly lower interconnection costs, has been moved to PJM's interconnection fast track, significantly easing their path to further development. In addition, we have additional large-scale solar and storage projects across the Western US and wind projects in Europe that are approaching maturity. The depth and breadth of our development pipeline is a strategic resource for Enlight, with 15 gigawatts and 25 gigawatt hours of storage of potential. It ensures that we maintain a sizable buffer of imminently available mature projects on which we can work. Finally, it is important for me to stress that with the capital we raised last year, we have all the equity needed to fund 2024's activities. We will have to secure significant project finance commitments. However, the success in raising project finance during 2023 provides us with confidence that we will achieve this. With macroeconomic conditions now more settled, our all-in interest rate for project finance now stands at 5.25% to 5.75%. In 2024, we also plan to execute large asset sell-downs, either of minority or majority stakes in the US projects, further underpinning the company's financial position. As Enlight continues to grow, our ability to self-finance also gathers steam, as a larger IPP provides more operating cash flow while additional conversion of projects increases the potential for sell-downs. Both represent sources of funds for future growth and, when combined with our extensive pipeline of development projects, provide a path for growth without the need for external capital. Turning to our 2024 guidance, we expect revenues between $335 million and $360 million, 36% higher than in 2023 at the midpoint, and adjusted EBITDA between $235 million and $255 million, 30% above that of 2023 at the midpoint. Growth continues to be robust as we add new projects to our operational portfolio. Nir will describe in detail the assumptions that underlie this guidance later in the call. To tie it all together, in 2024, Enlight will harness its resources to grow considerably in all markets, but especially in the US. As before, we aim to continue delivering on our two-fold objective of above-market growth and above-market project returns. Before handing the call over to Jason for his remarks, I'd like to comment on the Clenera leadership transition we announced in January. After more than 10 years as CEO of Clenera, Jason accepted a call from the Church of Jesus Christ of Latter-day Saints to serve as a full-time mission President in Chile. He will leave his post with Clenera at the end of June. Clenera's COO and Co-Founder Adam Pishl will assume the role of CEO. Adam is an amazing leader and responsible for building Clenera beside Jason during the last 10 years. We anticipate a smooth transition over the next six months as Adam and the amazing Clenera leadership team remain and continue to move the company and its projects forward. I thank Jason for his leadership and expertise in creating and cultivating Clenera. His vision, leadership, and tireless work, coupled with his talented and dedicated team, propelled the company to make a huge impact on the US renewable market. Adam has always been a big part of Clenera's success, and I'm fully confident in his skills, experience, and leadership and his ability to take Clenera to the next level, which we at Enlight shall continue to support and accelerate. Jason?

Thank you, Gilad. I will certainly miss working with you and the rest of our amazing team at Enlight and Clenera. Regarding our US business, 2023 was foundational. In 2024, we expect to launch from that foundation into a period of significant growth. During 2023, we successfully completed Apex Solar, a 106 megawatt project located outside Dillon, Montana. Apex was the first project completed together by Enlight and Clenera in the US. We also made progress toward completing our Atrisco Solar project in New Mexico. As of today, equipment supporting the full 364 megawatts is installed and work is underway to finalize mechanical completion. Further, during the fourth quarter, we closed tax equity and debt financing on Atrisco Solar, raising $300 million of construction and term debt and $198 million in PTC tax equity. The transaction, which released $204 million of excess equity back to Enlight's balance sheet, demonstrated our continued access to competitive project financing, including tax equity. We have reached a mutual resolution of a supplier matter on the 1.2 gigawatt-hour battery storage portion of Atrisco, and now expect the solar site to reach COD in the third quarter of 2024 and the storage installation in the fourth quarter of 2024. Our overall project portfolio in the US advanced steadily in 2023 with approximately 10 gigawatts through system impact study. We signed PPAs on 806 megawatts and 2 gigawatt hours that will enter construction in 2024. This includes Country Acres, a 392 megawatt and 688 megawatt-hour project delivering to Sacramento Utility District in California; Roadrunner, a 294 megawatt and 940 megawatt-hour facility contracted with AEPCO in Arizona; and Quail Ranch, a 120 megawatt and 400 megawatt-hour project that represents the second phase of our Atrisco facility in New Mexico and delivers to PNM. The full 806 megawatts and 2 gigawatt hours will start construction during 2024, launching a new phase of Clenera's expansion and growth in the US. In addition to advancing and constructing projects in the US, we improved returns by amending many of our existing PPAs. Over the past 18 months, our team successfully raised prices by an average of 25% on contracts covering 1.8 gigawatts of capacity. Strong utility relationships and large-sized projects that are deliverable in the near term made these pricing negotiations possible, and as Gilad mentioned, we are also experiencing economic tailwinds by way of falling equipment prices. Since the beginning of 2023, we've seen our solar panel prices drop by approximately 25% and battery prices by more than 30%. We continue to focus on converting our early stage development projects into mature projects. As an example, in PJM, we are advancing a portfolio of projects totaling 1.4 gigawatts and 2.2 gigawatt hours capacity that have negligible interconnection costs. Prices in the regions where these projects are being developed are high due to a growing appetite for renewable energy and limited availability of feasible interconnections. With final interconnection agreements expected by the end of 2024, we anticipate achieving attractive PPA terms on these assets. In the Western US, we continue to see significant utility demand for our solar and storage projects, with power demand continuously on the rise. Our roughly 10 gigawatts portfolio of developing and mature projects, all with advanced interconnection, puts us in a prime position to meet rising demand with attractively priced generation. Finally, as previously announced, I will be stepping down from my position as Clenera's CEO at the end of June. Adam Pishl, Clenera's Co-Founder and current COO will take my place. I'm supremely grateful for the years I've had to work with Gilad, Adam, and the Clenera and Enlight teams. The company is an industry leader because the organization and its partners are comprised of what I consider to be the most dedicated, talented, and genuinely good people in the business. Both Gilad and Adam are dear friends and trusted leaders. I'm excited to see all the great projects and exciting developments they deliver in the coming years. Now I'll let Adam Pishl introduce himself and add some comments.

Thank you, Jason. Leading alongside Jason for nearly two decades has been an incredible journey. Together we have built three renewable energy companies, developed hundreds of solar projects, and most importantly, have built an incredible team of professionals who are now leading Clenera into its greatest period of growth. While execution is our highest priority for 2024, Enlight and Clenera continue to invest in our growing development portfolio that will take us through the next decade and beyond. I am passionate about renewable energy, this incredible organization, and our dedicated team, and I'm excited about this expanded role. I am confident in our 2024 execution plan and look forward to sharing more of this developing growth story during future earnings calls. Thank you, and I'll now turn the call over to Nir.

Thank you, Adam. In the fourth quarter of 2023, the company's revenue increased to $74 million, up from $61 million last year, a growth rate of 21% year over year. Growth was mainly driven by new operational projects compared to last year, while being offset by a decline in revenue caused by much lower electricity prices in Spain relative to the prices observed in the same quarter last year. Since the fourth quarter of last year, projects in the US, Hungary, and Israel started selling electricity. The most important of these is Genesis Wind, which contributed $9 million to revenue. In addition, Bjornberget, which barely sold power in 2022, contributed $6 million in this quarter. Gecama generated approximately $14 million in revenues; however, its contribution fell 36% year over year due to much lower Spanish power prices compared to Q4 2022 and relative to expected prices in Q4 2023. We sold power in Spain at an average price of EUR50 per megawatt this quarter versus EUR115 per megawatt in the same period last year. In addition, we were impacted by the slower than expected ramp-up in production at Genesis Wind and in Israel. Fourth quarter net income increased to $16 million, a growth rate of 48% year over year. There were three non-cash items this quarter: a mark-to-market loss related to interest rate hedges on the financial growth process at Atrisco Storage of $8 million, gains related to the reduction in expected earnout payments linked to the acquisition of Clenera of $12 million, and a loss of $5 million due to the impact of Israeli shekel volatility on foreign currency liabilities. These figures are all net of tax. In the fourth quarter of 2023, the company adjusted EBITDA grew by 8% to $47 million compared to $43 million for the same period in 2022. Aside from the positive factors that affected our revenue growth, the year-over-year decline in revenues at Gecama, as well as slower than expected ramp-up at projects in Israel, and a $3 million increase in overhead resulted in lower profit margins and slower growth in adjusted EBITDA year over year. We recorded $2 million as final payment recognized from the sell-down of Faraday completed last quarter. Looking to our balance sheet, Enlight completed a large financing deal during this quarter, reaching the closing of both Atrisco Solar in the US and our solar-plus-storage project in Israel. This raised a combined $511 million in project finance, from which $325 million of excess equity capital was recycled back to Enlight. This transaction strengthened our balance sheet and reinforced the financial footing needed to deliver the growth of our business in 2024. To reiterate, no new equity capital is needed to deliver on our plans for this year. As of the date of today's report, we have $260 million of revolving credit facility at several Israeli banks, none of which has been drawn. This is $90 million above what we reported in our Q3 2023 results. Moving to 2024 guidance, we expect annual revenues between $335 million and $360 million, with adjusted EBITDA between $235 million and $255 million. Of our total forecasted revenues, 40% are expected to be denominated in Israeli shekel, 55% in euros, and 5% in US dollars. Noting our last exposure to the shekel and the current high degree of volatility in this currency, our guidance is predicated on the average annual exchange rate assumption of 3.8 shekels to the dollar and 1.05 euros to the dollar, which are lower than the current levels. In addition, 90% of our 2024 generation output will be sold at fixed prices, either through hedges or PPAs. Our guidance reflects annual growth of 36% and 30% at the midpoint compared to 2023, respectively, demonstrating our accelerated growth path in 2024 and the years ahead. I will now turn it over to the operator for questions.

Thank you. We will take our first question. Your first question comes from the line of Justin Clare from ROTH MKM. Please go ahead, your line is open.

Yes, hello, thanks for taking our questions. So first off here, you did mention plans to execute larger asset sell-downs in 2024. Was wondering if you could give us a sense for the possible magnitude of those sell-downs, how much equity capital you might be looking to raise, and what would be needed to support your 2025 developments? And then the projects in the US, Quail Ranch, Roadrunner, Country Acres, are those projects that you're looking at for potentially selling minority interests?

Hi, thank you very much for the question, Justin. So first on the sell-down. Yes, as you said, part of our strategy is to perform some sell-downs on our very large portfolio that is maturing next year. We intend to construct and hold the main projects that we are going to construct next year, such as Country Acres, Roadrunner, Quail Ranch, and other projects in Europe and Israel. However, there is potential for additional large sell-downs. Currently, in the guidance that we provided to the market, we assumed total sell-downs of $15 million. But of course, the potential can be higher. It's important to say that we are already fully funded in terms of the equity needed to invest for all the growth that we are going to construct next year. So we are talking about roughly 900 megawatts of new projects and 2.7 gigawatt hours of new storage projects. All are fully funded, and we do not have to perform any sell-downs or any capital raise or debt raise in terms of the corporate to raise the equity; it is already in the company. So the effort in terms of finance will be more on the construction debt and the tax equity side, so project finance.

Got it. Okay, very helpful. And then you did secure a large number of PPA amendments in 2023. Was wondering what we could expect going forward here. Are there additional possible amendments for PPAs for any of your projects that you're developing? And then also just wondering, on the general trend, we've seen a decline in module prices, battery prices. What are you seeing in terms of the PPA trend? Has that started to level off or potentially decline? Or is demand so high that things are potentially moving even higher here?

Yes, I can start with the answer, and then Jason, you can complement me on the US market if you like. Overall, what we are seeing in the different markets, especially in the US, is that the PPA price curves are continuing to rise, although natural gas prices have already normalized. This is because we see for the first time in two decades a rise in electricity demand in the US market. We believe these are very positive conditions that will continue to fuel our growth in the coming years. Now that we have amended the majority of our PPAs pre-construction, we believe that the next PPAs we are going to sign are going to be new PPAs. I would say materially, but the level of pricing in the new PPAs that we have signed recently, and we expect to sign in the next year, we expect to maintain a higher level of around 25%. This reflects the higher level of electricity pricing and higher demand for electricity in the US. What we see in Europe is that electricity prices are continuing to normalize based on the historical peaks that were observed in the last two years. Still, as we said in previous discussions, the new norm for electricity prices after the decline is still very high compared to our levelized cost of electricity in our projects, in wind or solar in Europe, and therefore the returns are very high. We expect electricity prices in Europe to continue and normalize on the level of 50 to 60 euros, which is still a high level that reflects very good returns for our project.

You bet. No thanks. Justin, great question. Gilad answered this very well. We have a small number of PPAs that we are discussing potential price increases for, but as Gilad has noted, the emphasis is on the new pricing. We are seeing steady growth on the heels of dramatic growth in terms of demand and strong relationships with utilities. Some of what is advantaging the company is our interconnection position, where we have projects roughly 10 gigawatts through system impact study. Projects that are advanced and mature and ready to deliver to utilities, where queues are clogged up and projects are behind schedule with competing interests. This gives us the opportunity to deliver at strong pricing. We see long-term that this steady increase in demand here in the US, along with limited supply capacity, is driving prices incrementally higher year over year.

Got it. Okay, very, very helpful. Maybe just one more. Curious how you're positioned relative to securing the domestic content adder in the US, whether it's for the solar portion of a project or the storage part of a project. What's the timeframe that we should be thinking about in terms of when that content adder could be secured?

Jason, would you like to take this?

Yes, I'll take it. It's another great question. Each of these projects today, when Gilad and Nir are speaking of the economics on these projects, none of those include domestic content adders as a basis. All of that is considered to be upside. We are working carefully along the path of confirming domestic content on a number of these projects, both in terms of storage and the solar side. Some of that does depend on the advances our suppliers make in terms of their production. We are seeing that accelerate. We're watching it carefully and we're not getting out over our skis on our products. We are making certain that we deliver on time and that these projects are producing returns in the coming years. So we're carefully pursuing domestic content, but doing it in a way that supports the overall plan. Again, not included in our current forecast by way of revenue or EBITDA.

Okay. Got it.

Justin, just to reiterate that and as a following to what Jason said, I think that we can now disclose that on Atrisco, we finally selected Tesla to be the battery supplier. As Jason said, the assumption for the project still does not assume the tax equity adder on the battery. However, we believe there is potential for that. We will see in the future, so this is some upside that we believe there might be unlocked in the future.

It may be worth noting just quickly as well, that we have been aggressive about capturing the community adder and have included that on a number of projects thus far. So that is a nice upsell.

Right. Okay. Thanks for the time.

Thank you. We will take our next question. Please stand by. Your next question comes from the line of Mark Strouse from JP Morgan. Please go ahead. Your line is open.

Great. Thank you very much for taking our questions. I'd just like to start by thanking Jason for all of your help since prior to the IPO. And best of luck with your next chapter. Our questions, I think just kind of maybe one multipart question, if I can. The fourth quarter revenue shortfall you mentioned, kind of a slower ramp at Genesis Wind and the Israeli cluster. Just checking, are those now fully ramped? And then on the next part, with the 2024 guide, we didn't notice any major project pushouts, but the EBITDA guide is a little bit lower than what consensus expectations were. So just kind of seeing if you can bridge that gap between. It sounds like asset sales might be part of that driver. Can you talk about any kind of conservatism that you're baking in projects ramping or FX, anything else that you think might be driving that? Thank you.

Yes. Hi, Mark. Thank you very much for the question. So far, I would say just in general, in terms of our guidance and the general way we look at the market and the company right now, after 15 years and founding the company... I think that the conditions that we see in the market and also for the company are the best conditions we've seen. We are seeing a nice and accelerated growth but also based on scale and very high returns. If you look at our presentation, you can see that the average unlevered return of our projects for the whole next three years is around 10%. This means that delivered return, the IRR will be in the mid-teens or maybe higher. I think this is a good number, especially for the large scale that we are going to build and the ones that we are entering into this year. We are talking about a capacity of almost 1 gigawatt of generation and almost 3 gigawatts of energy storage. Yes, there was some shortfall in the fourth quarter, but we still grew 40% on average between the EBITDA and the revenue, and we are going to grow 35% next year. This kind of continuous growth will continue based on high returns. On the EBITDA, there is no particular reason why the EBITDA is 30% lower. I would just like to point out that currently a big portion of our revenue mix is coming from the wind projects in Europe that are partially based on merchant price forecasting and on a tax mechanism that we include in our cost of sales. This reflects the net price in gross margin, but we see the gross price in revenue and then the tax applied, the price after tax in EBITDA. Last year, since the electricity prices dropped a little bit more rapidly, also the tax mechanism created a lower tax on the net electricity price, which reflects in our EBITDA. You see we were more or less like our forecast, or in the middle of the forecast, but on revenues it came a little bit short. In terms of the growth of the company in the next year, we still see accelerated growth based on high returns. In terms of the projects coming into operation and ramping up, we still see some supply chain issues in the large wind farms and solar. I think that across geographies, we still see some supply chain issues. The big suppliers, such as Siemens, General Electric, and others are still struggling a little bit after COVID-19 with their supply chain. This causes our project performance to ramp up in three or four quarters to full capacity and availability, rather than three months or three to six months before. This does not affect the overall return of the project. The multi-year return of the project is still forecasted to be very high, so we will take that into consideration as we go forward until we see that supply chain normalized across geographies.

Very helpful. I'll take the rest offline. Thank you.

Thank you. We will take our next question. The question comes from the line of Maheep Mandloi from Mizuho. Please go ahead. Your line is open.

Hi there. This is David Benjamin for Maheep Mandloi. I have a question on your strategy with tax equity transferability versus traditional tax equity. Can you talk a little bit about where you guys are now and where you see that trending over the next year?

Yosef will refer to that. Thank you, Maheep.

Thank you, David. What we're seeing in the market is the move towards traditional tax equity with credits being transferred through the bank's transfer desks. The banks will come in and monetize the accelerated depreciation and some of the other attributes, and the cash flow in the pre-flip period. But what they will look to do is syndicate the transfers to Fortune 500 customers who the bank services elsewhere. Now, what I think is important to emphasize is that the move towards the transfer market will also accelerate the path to construction finance. While in the past, construction finance was predicated on full tax equity commitments, the ability for tax equity providers to use transfer and syndicate those credits will enable us to access construction capital earlier and therefore reduce the peak equity that we need for projects. I think that's where this is headed and the conversations we've had with the major banks.

Just as an addition, I would say that I believe because of the position of Enlight as a public company and its positioning in the market, we feel that once there is a bottleneck in tax equity in the market, players like Enlight get prioritized. This is why we believe we were able to complete tax equity last year with Atrisco and based on favorable terms. In the future, I think the tax transferability will ease up a little bit of the bottleneck. But still, players like us will be able to play between the traditional structure and the transferability. It's important to say that once we sell down more assets and generate more profit at the corporate level, we will be able to monetize these profits in terms of depreciation, also in the tax transferability structure. Thus, I would say we create a good alternative in terms of our tax structure versus the regular or traditional tax equity. We are positioned very well today in the market to be able to select between the traditional structure and the new structure and execute on the project on time based on that.

Great, thanks. That's very helpful. I'll take the rest offline.

Thank you. We will take our next question. Your next question comes from the line of David Paz from Wolfe. Please go ahead. Your line is open.

Thank you, good morning. I have a couple of quick questions. Regarding the Co Bar interconnection issue, could you please provide an update on the timing and any additional studies or requirements needed to achieve a 2026 COD?

Yes. What I can tell is that there is no change in our assumption or forecast for Co Bar. We will start constructing Co Bar in 2025 and believe that we will reach COD by the end of 2026. The growth that we forecast for 2024 and 2025 is not based on that but will support the additional growth that is needed for 2026 and, of course, following that year. So no change in our forecast right now on Co Bar.

Okay. And just for your other projects in the US, I think this interconnection issue was a surprise, if I recall correctly. Are there any other projects where we should be watching or you're awaiting any studies that could impact timing?

Yes, I think we can point out very good news that we received in our PJM portfolio. As you know, the majority of the portfolio in the US comes from the WECC states. However, there were always areas of development in PJM and MISO. Recently in the last quarter, we got very positive milestones in PJM, with a project totaling more than 1 gigawatt of generation and around 2 gigawatt hours of storage, with five projects getting into the fast track in terms of the interconnection queue and with network upgrades that are less than $5 million per project. This is very good news for PJM. We believe this potential unlocking in a new market for us opens up a lot of alternatives, either to construct these projects or maybe following our sell-down strategy to use that because of their high valuation and perform sell-downs to recycle equity into our growth in the west. This is very, very good news we've received recently, reflected in our presentation in slide 14.

Yes, that's great. Just my last question related to that slide. Can you discuss the growth you anticipate beyond what you've outlined? Are there other projects that are further along than the early stages? Specifically, how are these arrangements with the data centers structured? How do you deliver the service? Are you directly contracting with the data centers?

So, David, and Jason, feel free to chime in afterwards. I think on the data center side, whether the demand is direct from the data center businesses or through the utilities that service them, we see massive demand through Virginia and broader PJM, particularly in Virginia, which is if not the biggest data center market in the world. The interconnection advantage we've developed in PJM, particularly these projects in Virginia, gives us a unique opportunity to provide power to the AI data center. Massive growth and need for power that we're seeing puts us in the driver's seat on terms of offtake. Whether that's ultimately sleeved through the utility or directly from the data center providers, we're in a very strong position on these projects. In addition, there are some other projects outside of PJM in the West Coast. We've got another major project in Arizona called Snowflake, which is another gigawatt interconnection. We've got a gigawatt interconnection in the Pacific Northwest, which is uniquely positioned to serve the big data center markets in the Northwest, the Microsoft’s and Amazon’s of the world. Our portfolio is positioned very well to echo Jason's comments at the beginning to service the massive demand for electricity that we're seeing, coming particularly from the data center market, but also broadly across the US in the coming years.

Great. Thanks.

Yosef and I would note that particularly in the west, we've been successful at maintaining busbar PPA standard, and that's unique across our portfolio and will continue to be a strength of the company, given our strong interconnection positions.

Great. Thank you so much.

Thank you. There are no further questions. I would like to hand back to Yosef Lefkovitz for closing remarks.

Thank you everybody for your time today. We will be at the Bank of America Power and Utilities Conference in New York early next week, and we look forward to seeing many of you there. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.