So I just mentioned that we can talk about it off-line. But quite frankly, what we’re seeing is that all things being equal, acquiring late-stage projects, and it is a buyer’s market now. It is one of the most attractive businesses for us.
Operator: The final question for today’s call will be from the line of Michael Sullivan with Wolfe Research. Your line is now open.
Michael Sullivan: I wanted to start with, can we just confirm if there’s been any change to your levered returns targets in the current environment up or down? And then maybe also just you alluded to it a little bit, but just a sense of like how much LCOEs or PPA pricing on new projects have changed?
Andres Gluski: Okay. I’ll take the first part of that. I’ll have the second — I’ll pass that to Steve. Look, we are getting from our portfolio sort of low-teen returns. And that’s at the project level. If we would include sort of core financing or mezzanine financing, we’d be high-teen returns. I don’t think anybody is getting consistently higher returns than us because of the type of projects, the type of markets that we’re in and the scale. We have sufficient scale to compete with anybody. And we have I think, had the best record of supply chain management. So, what I think has changed, we use a CAPM model, which is updated for risk-free U.S. treasuries, and they have moved up, obviously. So that’s when we calculate our net present value that really comes into effect.
So we do look at what’s the net present value from these projects. So what I would say is that we’ve been able to pass on higher interest rates, pass on higher cost. And cost, by the way, are coming down. Battery prices are down 50%, solar prices are receding. And we do new projects for corporate clients outside of the U.S. And solar panels are near all-time lows. So all that put together, yes, we are using higher discount rates to see if the projects worthwhile pursuing in our net present value. And we have maintained our margins. And so we’re seeing right now no stress on the market from that side. Now the second question you wanted to talk about was the particular projects here in the States and the returns we’re seeing.
Steve Coughlin: Yes. So I would say, generally in the States with our corporate clients, in particular, where we’re doing structured products, we are seeing the higher end of that return range. And also, it’s important, while PPA prices have been increasing, over the past one to two years, they’ve actually leveled off and are starting to come back down. We’ve seen significant reductions in solar module pricing this year. We’ve seen significant reductions in the commodities going into batteries and battery pricing coming down. So we’re starting to see levelized costs come back down, which is also supporting the activity and the demand going forward. So I think we’re in kind of past the difficulties of the supply chain past the impacts of the inflation and back to a declining curve in the key technologies we’re using.
Andres Gluski: Yes. Michael, maybe something that hasn’t been asked on this call is that, first, we had the first project that we know they got the energy community additional 10%, which was a Chevelon Butte wind project, the largest wind project in Arizona. But we’re also — in terms of our wind farms, we are achieving the domestic content requirements. We expect that Fluence will be having next year, starting to receive domestic — sufficient domestic content from its batteries and from its and casings. And then we’re also in discussions for solar. We were one of the first to start discussions for solar. So what we see is upside from domestic content additionality. And we also see the energy communities we have already been achieving that.
So I’ll remind you, at least 40% plus of our pipeline is in energy communities as is today. So that would all be upside. So we are seeing upsides from the IRA in terms of the returns of some of the projects, especially those that are already signed.
Michael Sullivan: Okay. One quick last one. Just — can you give any thoughts on just the initial intervenor testimony in the Indiana rate case and what the path looks like from here to whether it be settlement or final order?
Steve Coughlin: Yes. So just to kind of put things in context, too. This is our first rate case in over five years. And as I mentioned in my comments, we have the lowest residential rates in Indiana of any utility. So we’re starting from a very good place. We had our IRP last year where we also have a lot of support for the growth that’s there. So of course, any process like this, there are multiple stakeholders involved and interveners, they need to be heard. But we feel very good about what we asked for, given our position with the lowest rates and the growth plan that’s been supported through the IRP. And again, it’s our first rate case in five years. So in terms of timing, at this point, I would say, middle of next year for this to be all resolved and new rates to come into effect thereafter.
Operator: Thank you. That concludes today’s Q&A session, and I will turn the call back over to Susan for final remarks.
Susan Harcourt: We thank everybody for joining us on today’s call. As always, the IR team will be available to answer any follow-up questions you may have. We look forward to seeing many of you at the EEI Financial Conference later this month. Thank you, and have a nice day.
Operator: That concludes today’s conference call. Thank you all for your participation, and you may now disconnect your lines.
