And in that environment, as a sponsor that has a strong balance sheet, which we do, we want to make sure that we make smart choices about how and when we fix the structures that we’ll employ. Other sponsors may not be in a position to wait. But in the 6 months since guidance was first issued about how that transferability market would take shape, we’ve seen the structures and the depth of the market really improve in favor of projects and we expect that will continue. So when I look out to the future, my hope is that this market will really do many of the things that were hoped for when transferability was incorporated into the text of the statute by deepening the range of options that projects have to monetize tax credits. And what we eventually, as an enterprise, will want to do is to try to come up with structures that we find most efficient for dispositioning the depreciation benefits that the projects we create produce.
Operator: Our next question comes from the line of Noah Kaye of Oppenheimer & Company.
Noah Kaye: I appreciate all the incremental details and disclosures and, frankly, the reframing of the platform here points well taken. Called out the Capistrano refinancing timing. I just wanted to ask about the project level debt in the portfolio. It does appear like there’s a fair amount of debt coming due over the next few years for some of these projects at the project level. How are you thinking about any potential additional refinancings? Or are all these basically going to be paid off the term?
Chris Sotos: Sure. It depends on the market, to be fair to your question, but I do think that we should be in good shape from a refinancing perspective. So the next 2 large project refinancings, what’s referred to as NIM solar in 2024, I believe Buckthorn in ’25 or ’26. So I think is Buckthorn is backed by, still is about a 20-year PPA still underneath it. So we have quite a bit of length there to be able to refinance. The NIM solar assets, once again, that’s kind of September of 2024. So from our view, that should be able to be refinanced. So we don’t, yes, not to minimize the question. We don’t have a lot of concern about near-term nonrecourse assets needing to be refinanced.
Noah Kaye: That doesn’t impact the pro forma CAFD outlook?
Chris Sotos: If the interest rates are drastically different, it may move it around. But keep in mind, NIM solar is about $148 million, if I recall correctly. So 100 to 200 basis points move overall is $3 million, not to minimize $3 million, but it’s not a major driver.
Noah Kaye: Yes. And just the key point here, right, is that your refi risk both at the corporate level and at the project level is very minimal for the next several years.
Chris Sotos: Correct. I’m not saying it’s zero, but yes, there is not 10, it’s maybe 3 depending on where you go.
Noah Kaye: I appreciate adjusting the P50 expectations. Does that generally apply to how you look at future drop-downs or acquisitions as well? I mean, I’m sure there’s some degree of regional resource specificity here to the adjustments. But just talk to us a little bit about how you model in expectations for P50 going forward and whether that’s changed at all.
Chris Sotos: Sure. Step one, just for way of background, we always ask for an additional return on wind assets versus solar to take into account that volatility. So part one note to your question is we view wind as a riskier asset in general because of P50 volatility and we typically look for a higher IRR or CAFD yield or both when we negotiate those, just for way of backdrop. The other part is, we haven’t seen anything that we need to change how we model our P50. Those are based upon long-term rates. But I think as we’ve talked about in previous calls, once you’re kind of getting through 5 years, we try to take a much more what’s actual approach on assets than kind of what a statistical model may say. We’re trying to be much more empirical and kind of use the most relevant near-term data set as we adjust and blend the two.
So for us, to your point, while you’re looking at future drop-downs or looking at other acquisitions, we try to take into account those deviations between what might be a 30-year, let’s say, fiscal model and what we’re seeing in the past 5 years, try to add on a premium for wind in certain regions that are showing more volatility. But once again, we’re trying to get that as tight as we can. We take recent events into account, that’s when we easily see the revision. But it really is trying to be comprehensive between, yes, not overestimating what’s happened in the past 2 years either to make decisions either.
Operator: Our next question comes from the line of Justin Clare of Roth MKM
Justin Clare: So first off, I just want to ask about the 2024 guide. It looks like about a $15 million impact to the guide as a result of change in the expectation from growth investments. I was wondering if you could just provide a little bit more detail on the project timing and what led to that reduction for 2024.
Chris Sotos: Sure. I’ll let Sarah address it. But I think, for us, we took a look at our 2023 results and obviously we’re not happy with them. And part of that, as we talked about during the year is due to P50 generation, some of it’s due to availability. So for us, we kind of take a comprehensive look at our overall portfolio. And yes, I’ll let Sarah kind of reflect anything she wants to, but that’s really the basis of it.
Sarah Rubenstein: Yes. And Justin, just to clarify, were you asking about the $50 million of timing for growth investments?
Justin Clare: Yes, exactly. Just what led to that? Because it looks like it’s impacting 2024 and then it’s going to be contributor in probably 2025. So I just wanted to understand a bit more there.
Sarah Rubenstein: Yes. It’s not a change in 2024. It’s just a bridge between 2024 and our pro forma outlook, which is supposed to reflect sort of the full amount of CAFD once the drop-downs are sort of up and running and at their full CAFD amount. So it’s really just a bridge item because we’ll only be picking up a smaller portion of those in the 2024 guidance because of the timing of the drop-down or the project COD. So we’ll have sort of like a fraction of that CAFD amount just in 2024. But by the time we get to the pro forma outlook, we’ll have the full amount, and that difference is the $50 million.
Justin Clare: And then just I was wondering for the projects you have committed investments for and then for those that are identified as potential drop-down opportunities in 2024 or 2025 here, can you talk about where you are in the process of securing the permit the interconnection for these projects? I’m wondering if there’s still risk there that those factors could cause delays, and just where you are in that process?
