Unidentified Analyst: Excellent. And I’ve been a shareholder for a long time. So like one question is like I’m trying to understand the solar farms you’re building out. Is it like — can you give an example, let’s say, we take just like a cooked-up example using a $2 million investment? And how would it affect like the balance sheet and the income statement? So — if it makes sense.
Michael Stein: Sure. Absolutely. Avi, you want to take that one? I think the question is if we’re putting in, let’s say, a $2 million investment into a solar farm, what — how does the results that flow from that affect the P&L and the balance sheet? Do you want to take that, Avi?
Avi Goldin: Absolutely. So when we’re talking about the solar farms that we’re expecting to own and operate, the ones that are going to be part of our long-term portfolio, so initially, let’s say, if we’re investing what we expect to be, ultimately, let’s say, $2 million worth of equity. That’s after recapitalizing for the tax equity that might have come in, the other incentives and the potential debt that we might put on the facility. So, if you think about it during the construction phase, we might be spending more than that unless we seek to find construction financing as well. And then once we recapitalize the solar field to take the equity piece down to what needs to be filled in from those other sources. And let’s say, in this case, it will be the $2 million, that would be our equity investment.
And then you would see revenue from the sale of power — revenue from the sale of solar energy credits that were generated offset by cost of maintaining the facility which would then just — which would then fall to taxes and paying off any cost of financing and that would be cash flow to Genie that would flow from the facility. So depending on the nature of the facility and the location which is placed — what we’re expecting and what we’re seeing in the marketplace is that you could end up owning these facilities with anywhere from, let’s call it, $15 million to $30 million — 30% equity at the end. So using an example for $2 million, you could have a relatively large solar facility that did require some additional upfront investment but then got recapitalized down to only $2 million worth of equity.
So I hope I’m answering the question. There’s a few different pieces that are moving around there but that would be sort of a strong example.
Unidentified Analyst: Okay. So from the — what I’m trying to understand is like when you start getting the money back, so let’s say, you use like the tens and lower our rate, what kind of money can we expect coming from that — like from the $2 million?
Avi Goldin: So what — so we’re looking at returns to equity on the types of investments that we’re looking at, north of — our targets are always north of double digits. And we’re seeing as high as 20%, 25% in some opportunities that we’re looking at. So those would be — that’s a way of thinking about what types of returns Genie is targeting for what ends up being the equity portion.
Michael Stein: So just to add to what Avi is saying. So if, let’s say, we are looking at a project and it has, let’s say, somewhere between that 15% to 25% IRR, I think you’ve got to think also about the tax incentives and the renewable energy certificates, a lot of which comes back in the earlier years. So your payback on the investment might be a lot shorter than, let’s say, 6 or 7 or 8 years. But that — once you’ve gotten your money back, let’s say, potentially in 3 years, then you’re looking at kind of a return on no equity and might be a smaller percentage of the original equity. But again, your equity is fully out of the picture at that point.
Unidentified Analyst: And so it’s like initially, when you build it out, it’s like it goes like assets like real estate on the balance sheet? And does that make sense?
Michael Stein: Yes, it’s a capital asset on the balance sheet, yes.
