Good day, and thank you for standing by. Welcome to the Enlight first quarter 2023 Earnings Call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Yosef Lefkovitz. Please go ahead, sir.
Thank you, operator. Good morning, everyone. Thank you for joining our first quarter 2023 Earnings Conference Call for Enlight Renewable Energy. With me this morning are Gilad Yavetz, CEO and co-founder of Enlight, Nir Yehuda, CFO of Enlight, and Jason Ellsworth, CEO and co-founder of Clēnera. Gilad will provide some opening remarks and will then turn the call over to Nir for a review of our first quarter results, and then to Jason for a review of our U.S. activity. Our executive team will be available to answer your questions.
Certain statements made on the call today, including but not limited to statements regarding business strategy and plans, our project portfolio, market opportunity and potential growth, completion of development, and the company's future financial and operational results and guidance, including revenue and Adjusted EBITDA, may be forward-looking statements within the meaning of U.S. federal securities laws, which reflect management's best judgment based on currently available information. We reference certain project metrics in this earnings call, and the full information 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 earnings release 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 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 call, which are posted on our investor relations webpage. With that, I will turn the call over to Gilad.
Thank you, Yosef, and thank you all for joining us today. Enlight delivered record quarterly results in the first quarter, and our strong start to the year gives us further confidence in reiterating our guidance for the year. As a brief reminder for those new to our story, Enlight is a greenfield developer of utility-scale renewable energy projects. We source projects from scratch organically and control the full project life cycle. As the first pure play utility scale developer to be publicly traded on a national exchange in the U.S., we aim to deliver value to our shareholders by continuing to deliver on our twofold objective, executing on above market project returns and above market growth. Our unique footprint across the U.S., Europe, and Israel provides opportunity in some of the fastest-growing renewable markets in the world.
We have significant portfolio diversification, not just in geography, but in technology and revenue structure. We are not only in solar but are also experienced in storage and wind, and we believe we have a cost of capital edge. Now moving on to our Q1 results. Quarterly revenue grew 103% year-on-year to $71 million. Net income grew 275% year-on-year to $33 million. Adjusted EBITDA grew 118% year-on-year to $54 million. As we continue to benefit from the ramp-up of our operational portfolio, totaling 1.4 GW today. These are record quarterly figures for the group. In comparison to the same period last year, the company added Emek Habacha, Beit Shikma, and Björnberget to its operational portfolio, totaling 810 new MW. These new projects collectively contributed $32 million of revenue.
We also benefited this quarter from the indexation of PPAs to our operational portfolio at an average of 6% year-on-year, which contributed $2 million of quarterly revenue, which is a unique advantage in today's inflationary environment. We are also seeing significant growth in our cash flow generation. The company generated cash flow from operations of $55 million in the first quarter, a growth of 315% year-on-year. We believe this rapid growth is poised to continue at pace over the coming years as we execute on the conversion of our mature project portfolio. By 2025, we expect to reach 4.5 GW and 3.5 GWh of operational capacity, over 3x our current operational capacity. To deliver this growth, we are laser-focused on execution.
First, regarding our portfolio under construction, the 1 GW and 1.7 GW hour of projects we have under construction are moving ahead as scheduled. I would like to hit on some of the major projects. Apex Solar, our first project in the U.S., is concluding construction and on schedule with a COD anticipated by end of the second quarter, 2023. Genesis Wind, the largest renewable energy project in Israel, which we have expanded to 207 MW this quarter, is in the midst of commissioning and is on pace to reach COD by the end of the third quarter this year. Atrisco Solar, a 360 MW and 1.2 GW hour project in New Mexico, which commenced construction last quarter, has made significant progress. We believe project is on schedule to reach COD by the end of the second quarter, 2024.
We made significant progress during the first quarter on the project finance package for Atrisco. The company is negotiating arrangements with several lenders to provide both a construction facility exceeding $800 million, permanent back leverage of $380 million, and tax equity of $450 million at competitive terms. The banks include some of the largest and most active financial institutions in the renewable sector, highlighting the strength of the project. We are on target to reach financial close before the end of the second quarter and hope to have further details upon closing. In their first full year of operations, Apex, Genesis Wind, and Atrisco are expected to contribute $90 million of annual EBITDA in total. Moving to our pre-construction portfolio, totaling 2.1 GW and 1.8 GW hours.
The majority of this portfolio is driven by two main projects. One, CO Bar, one of the largest solar projects in the U.S., totaling 1.2 GW solar and 824 MWh storage. Two, Gecama Hybrid, the hybridization of our operational wind farm in Spain with co-located solar and storage. Both projects are moving ahead on schedule. Starting with CBar. In the first quarter, the company contracted an additional 475 MW of the cluster. Nearly 1 GW of the project is now contracted, with the remainder of the solar project expected to be contracted with a different counterparty in the coming months. The first 824 MWh of storage at the site is expected to be contracted in the coming months as well. Jason will elaborate more in his remarks on this unique and strategic project.
Gecama Hybrid has received its interconnection and is in the process of permitting now. Once the permit is secured, the project will be largely de-risked, and we will commence procurement of key equipment. Construction is on schedule to commence by the end of the year. If we aggregate the contribution of these two projects in their first full year of operations, CO Bar and Gecama Hybrid, we expect to see over $100 million of annual EBITDA. We are also pleased to have further increased the size of our mature project portfolio this quarter by 800 MWh, reflecting the addition of one standalone storage project in Italy and a standalone storage cluster in Israel, both which are expected to reach COD by 2025.
We believe that our growth trajectory is clear, and we are poised to deliver not just this iconic project, but also our mature projects. We believe we will continue to drive strong execution across our development verticals and project financing. Taking a step back on our IPO roadshow, we emphasize two elements of our strategy, growing faster than the market and delivering project returns that are above market. I've just described the growth strategy we are on. I would now like to spend some more time on returns. We are focused on maintaining the return targets we have set, delivering above market returns on our projects, and we are pleased with the results. This is driven by, one, our greenfield development expertise, particularly on interconnection, enabling us to secure attractively priced PPAs. And two, game-changing benefits under the IRA.
In the first quarter, we successfully amended nearly 500 MW of PPAs at an average price increase of 30%. This is in addition to the nearly 1 GW we amended last year. These price increases are designed to enable us to offset the return compression we have seen from increased CapEx and financing costs. Our ability to secure price increases is driven by the strategic interconnection position on our projects. Our projects are advanced from an interconnection perspective. As of the date of this release, we have nearly 8.7 GW past system impact study, which we believe is a unique position in the U.S. market. This also puts us in a strong position to negotiate attractive PPA pricing. We signed another 475 MW of PPAs this quarter at attractive pricing terms. Our portfolio's returns have also uniquely benefited from the Inflation Reduction Act.
PTC benefits our U.S. portfolio in significant ways, as it's largely located in the Western U.S. location that are perfect for solar. We are also pleased to share more information surrounding our U.S. portfolio's presence in energy communities according to the latest Treasury guidance under the Inflation Reduction Act. As of the date of this release, we estimate that approximately 25% of our total use portfolio is located in energy zone and is therefore expected to benefit from a 10% ITC or PTC adder. This will further enhance the returns of such projects. We believe our unique portfolio is poised to deliver above-market returns despite higher interest rates and the broader in-inflationary environment. Today, we're pleased to present our funding capabilities, which is informed by the strong growth and return profile of our project portfolio and supported by our strong financial position after the U.S. IPO.
We believe we have sufficient equity capital required to complete the mature project portfolio, which includes 4.5 GW of generation and 3.5 GW-hour of storage, utilizing existing resources, including cash on hand and distribution generated from our project, all based on our current operating plan and its underlying assumptions. Moreover, we believe we have the financial flexibility to further accelerate our growth thereafter at our stated project deployment guidance of 1.5 GW per year from 2026 based on the current operating plan through a combination of distributions generated from our projects, proceeds from a sale of a minority ownership stake of our projects in the U.S., issuance of unsecured bonds or project refinancing without requiring additional equity financing. In our investor presentation posted to the company's website, we have included additional detail on our financing capabilities.
In short, we had an excellent Q1, and we believe that our successful IPO has put us in a unique financial position to capture the massive opportunity we see ahead. I'll hand it off to Nir, who will provide more details on our Q1 performance.
Thank you, Gilad. In the first quarter of 2023, the company's revenue increased to $71 million, up from $35 million, year-over-year a growth rate of 103%. The growth was mainly driven by the revenue contribution of new operational projects, as well as the inflation indexation embedded in the company's PPA for projects that were already operational last year. In comparison to the same period last year, the company added Emek Habacha, Gecama, and Björnberget to its operational portfolio, totaling 810 MW. These projects collectively contributed $32 million of revenue. The company also benefited from inflation indexation embedded in its PPA, which contributed an additional $2 million of revenue during the quarter. This reflected an average indexation of 6.3% across 483 MW of PPAs.
42% of the company's operational projects possess PPA with annual inflation indexation, which we believe is an advantage in today's inflationary environment. The year-over-year increase was also partially driven by the recognition of all profits from the sale of electricity by the Halutzit project as revenue, following its reclassification out of financial assets in the second quarter of 2022, which contributed an additional $2 million to the revenue in the first quarter of 2023. This positive impact, totaling $36 million, were offset by weaker currency exchange rates, particularly between euro to US dollar, which had a $2 million impact. In the first quarter, the company net income increased to $33 million, up from $9 million year-over-year, a growth rate of 275%. $40 million of the growth was driven from new projects.
The residual growth of $11 million was driven from interest income on deposits, as well as foreign exchange impacts strengthening US dollar relative to shekel on our cash-on-cash equivalence. Moving on to Adjusted EBITDA. In the first quarter of 2023, the company Adjusted EBITDA more than doubled to $54 million compared to $25 million for the same period in 2022. The increase was driven by the same factor which affected our revenue increase in the same period, offset by $3 million increase in overhead as the team scaled to accommodate rapid growth. The first quarter benefited from higher EBITDA on project Gecama, as the vast majority of the production was hedged at high prices.
In addition to the above, the company sold $3 million of electricity in projects treated as financial assets in the quarter, which under IFRS we are required to account for as financing income or other non-P&L metrics. Moving to 2023 guidance, we are pleased to affirm our outlook for 2023, including revenue between $290 million and $300 million, Adjusted EBITDA between $188 million and $198 million. I will note that electricity sold by our financial asset is not included in our financial guidance. I will now hand it over to Jason, which will go into detail on some of the key themes we are seeing in the U.S.
Thank you, Nir. It's great to be part of the Enlight team at such an exciting time. In the U.S., the company delivered meaningful progress across its large portfolio during the quarter. Gilad mentioned Apex and Atrisco. Both are in construction and progressing on schedule. In Montana, Apex Solar is on track to achieve commercial operations by end of Q2. In New Mexico, construction crews are advancing Atrisco Solar on schedule for a Q2 2024 completion. With Apex and Atrisco, the company is demonstrating ability to maintain strong project economics and predictable execution, all with attractive project financing. In Arizona, the company is making meaningful progress on the CO Bar project. At 1,200 MW of solar and 824 MW hours of storage, or ultimately 4 GW hours of potential storage, CO Bar is a huge project.
As Gilad noted, we successfully contracted an incremental 475 MW on the project, bringing the total contracted solar at CO Bar to nearly 1 GW. A PPA on the remaining 200 MW is presently under negotiation, and that PPA will add the first 824 MW hours of storage on the project. More details will be announced in Q3. On the development front for CO Bar, the project has primary land control and permitting in place. The system impact study for interconnection is complete, and the facilities study is nearing finalization but moving slowly. By signing and funding an EMP or engineering and procurement agreement with APS, we've implemented a mechanism that allows us to advance interconnection engineering and long lead time orders despite possible delays finalizing the facility study.
CO Bar is expected to start construction in the fourth quarter of 2023 and achieve COD in phases through 2025. Discussions are underway on contracting all or a portion of the remaining 3.2 GW hours of storage capacity at the project. CO Bar lays the foundation for completing a series of other large projects in Arizona and builds on relationships we have with Arizona utilities. In Arizona, we see a combination of lots of sunshine, good land, great utilities, and strong demand for both generation and capacity. All that, coupled with our large Arizona development portfolio, signals great things to come for the company in the Grand Canyon State. Across the portfolio, we continue to make significant progress on project development, especially interconnection.
With more than 8.7 GW of projects past system impact study, that's incrementally 240 MW versus where we were in Q4, the company believes it is well-positioned to accelerate its growth in every one of its U.S. target markets. While some interconnection delay may be unavoidable, the advanced stage of our projects allows us to move forward confidently on scheduled milestones. Knowing the utilities and their unique transmission rules and processes allows us to address most delays as they arise. One example is the use of EMP or engineering and procurement agreements to keep projects on schedule. Pricing power remains strong given the advanced stage of our interconnections and related development versus the market. We have an amazing crop of maturing projects. We look forward to updating the investor community as major milestones are reached, especially as PPA awards are converted into signed PPAs.
We see significant demand for our projects, with particular emphasis on storage. Based on the published U.S. Treasury guidance, the company can now estimate the percentage of its U.S. portfolio, which may benefit from the energy community tax credit adder under the Inflation Reduction Act. The energy community adder gives a 10% multiplier to the project's PTC value and a potential 10% addition to the ITC rate. The company estimates that approximately 25% of its portfolio in the U.S. may qualify under the guidance. Note that the 25% estimate does not include any projects that may qualify as brownfield sites. We are reviewing brownfield possibilities in detail and will have a more informed view by end of quarter. Moving to supply chain, the company's diversified sourcing strategy continues to meet its module supply needs in the United States.
The company has the right to purchase up to 2 GW of modules from India with delivery through 2025. We also have access to additional supply from Southeast Asia. Our battery cell source is now qualified in factories, in international factories, and we are seeing strong progress in reaching our goal to have qualified domestic supply for 2024 deliveries. Our procurement strength is proving to be a source of strategic advantage in negotiating project contracts with utility offtake and demonstrating to financing parties we can hold construction schedules. With that, I'll turn it over to the operator for questions. Operator?
Thank you. As a reminder, to ask a question, you need to slowly press star one one on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star one one again. Please stand by. We will compile the Q&A roster. This will take a few moments. Now we're going to take our first question. The question comes from the line of Mark Strouse from J.P. Morgan. Your line is open. Please ask your question. Mark Strouse, your line is open. Please ask your question.
I'm sorry. I was on mute. Sorry about that. Wanted to go back to the comments about improving returns. You signed 470, or no, 480 MW with increased pricing. That's in addition to the 1 gig from last year. Can you just talk about when those price increases flow through into the financials? How does kind of the pace of these negotiations compare with kind of your targets that you were planning back at the time of the IPO? A quick follow-on would be just kind of as you look at the portfolio now, how many additional MW are out there that you think you could still renegotiate higher?
Yeah. Hi, Mark. Good morning. It's Gilad. I'll start with a general overview, and then Yosef can compliment me on a walk-through on the numbers. In general, some of the PPA we've amended are already influencing, like the one in Björnberget in Europe. All the PPAs amended in the U.S. will start to impact result as soon as 2024, when Atrisco is scheduled to become operational, first half around June 2024, and then going forward towards 2024 and 2025. We will see the impact still upsiding in the next one or two years.
Just to add, Mark, to Yosef, we've got 550 MW roughly of further PPAs under negotiation. We expect increases there to be roughly in the range of 20%-25%, in accordance with, I think, the commentary we've given across the IPO process.
Okay. Thank you. Maybe a question for Jason. Just thinking about the energy community adders. I understand there's still some analysis on the brownfield side, but just overall comments that you could provide on what that process looks like, when everything is known for sure, when you start receiving that funding, is it retroactive? You know, any other color would be helpful.
Yeah, absolutely. Thanks, Mark. On the Energy Community side, we've been through the analysis based on the Treasury's guidance. As noted already, roughly 25% of the company's portfolio is located in Energy Community zones or in locations that will qualify. On the brownfield side, there is further analysis required at each site, really site by site in more detail, and we're working through that with outside legal help and progressing quickly in terms of understanding where those projects sit. What that impact is to each project will be realized in the future as these projects are either in construction or not yet in construction.
There's really a situation here that reflects growth in the future and revenues to be realized in the future. Not really something that we need to look at looking back and capturing those benefits historically.
Yeah. All right.
Just maybe to jump in, Mark, as well, to add to Jason's commentary. One of the projects we have which sit in the energy community is 1.2 GW of solar and 4 GWh of storage. Assuming 10% adder on the PTC, we're talking probably a value of $57 million just on the solar addition. Then on the storage, for 4 GWh of storage, it would be an NPV, an extra 10% on a storage cost of $120 million. It has a significant impact on project returns, and particularly projects with significant amount of storage in our portfolio.
Okay. Very helpful. I'll take the rest offline. Thank you.
Thank you. Now we'll go and take our next question. The next question comes from line of Julien Dumoulin-Smith from Bank of America. Your line is open. Please ask your question.
Hey, good morning, team. Thank you guys very much. Appreciate it. Just following up on the last set of questions, if you don't mind. First off, can you talk a little bit about the financing plan today, just in terms of, you know, potentially selling assets down versus call on remaining equity that you guys have on the balance sheet? Just thinking about the geography shifting and any thoughts about that. Related, if you can, also, you guys updated your pipeline chart here on development. Can you comment a little bit on the pace of activity just to sign new deals, just given the ambiguity around domestic content?
Do you expect some kind of true up or acceleration later this year as you think about, you know, the counterparty willingness to engage without that clarity?
Yeah. Hi, Julian. Gilad. I'll start with answering the question on the final strategy, Jason, why don't you elaborate on the development questions? Regarding the, the financing strategy, I think we've reached an excellent point in our, I think in our life cycle, where we have created a kind of an autonomous machine with our mature portfolio. Where from one side we have a mature portfolio of 4.5 GW and 3.5 GW-hour of storage that is already fully funded. If you walk through our presentation, we can see that we need additional $800 million of investment in order to complete the mature portfolio, we have availability for $850 already.
The outcome of that is a portfolio that generate for us distributions of $155 million per year. If you reduce from that the overall overhead of the top corporate and so forth, which are around $55 million, so you reach a free cash flow that is distributed in Enlight parts only of $100 million per year. If you translate this $100 million to our growth plan, it means that together with minority sell downs, we would be able to autonomously funding of a pace of around 1.5 GW per year. Without requiring additional equity raise or any other means.
Just the quick calculation is that the cost or the average, the blended cost for us to construct 1.5 GW between the geographies will be around roughly $0.9 million per mega or $900 million per GW. We believe that the weighted average equity check that will be required will amount to around 20% of this sum. Altogether, in order to construct 1.5 GW per year, we will be required for $270 million per year.
If you look on our what this machine of our mature portfolio is creating, we get first this $100 million from distributions, and then if we perform minority sell downs on the 1.5 GW, under an assumption which we believe is reasonable fair, of a premium of around $200K per MW. If we sell down only 30% of the holdings, we remain the majority holder and the control holder, of course, of our portfolio. We keep growing. We reach this, I would say, sources of $270 million per year to match the equity required to fuel this growth.
We believe that the combination of, you know, the conversion rate of the company bringing us to this point of maturity with our portfolio and the U.S. listing, the raise of $290, has helped us to create this machine that can help us now to grow with our current, I would say, current resources plus a strategy of minority sell downs. Of course, we have additional tools, so we have a lot of flexibilities in the market that we can raise if we want to further accelerate the growth or to blend it with other means. I think this brings us to a very good point right now. Maybe Jason can elaborate on the development right now.
Yeah. Thanks, Gilad, and great question, Julian, on the development portfolio. We have several awarded PPAs, and we are actively. That's both in solar and storage. We're actively working through negotiations to finalize and sign those PPAs. We'll have more information to announce as those are as those are finalized and project milestones have been achieved. On the front of domestic content, and the impact on those PPAs and potential delays in terms of signing, all of that pricing has been negotiated and finalized in advance of the domestic content. We have not incorporated into our analysis, nor into the pricing any of that domestic content benefit.
We see that as upside. Offtake have finalized with us the pricing on those projects. None of that is again dependent on the further clarification we expect to receive on the domestic content side.
Excellent. Thank you. If I can just to come back, I think your storage development number was up like 58%, if I see this right here. Do you want to just elaborate just what did you guys see or find here in the development side of the world? Is this tied to California, or what are you guys seeing on that front that would push it that much quarter-over-quarter here?
Maybe I'll take that. What we're seeing is a lot of the conversations with utilities maybe before were just solar. Now every conversation there's a talk about solar and storage. On an interconnection positions that we have where we initially were thinking of just doing solar, now much of that has been upscaled for storage as well.
I would add just quickly as it relates to storage here in the West, there is a maturing demand for storage and capacity. That theme that Yosef is pointing to of a consistent sort of solar plus storage demand is playing out really in all of our conversations in the West, where the bulk of our portfolio is concentrated.
Excellent, guys. Thank you for the time.
Thank you. Now we'll go and take our next question. Just give us a moment. The next question comes from line of Maheep Mandloi from Credit Suisse. Your line is open. Please ask your question.
Hey, hey, good morning and congratulations on the quarter. Just a question on the guidance here. You saw a nice growth in revenues in Q1, and you've also increased your PPAs in some projects here. Just curious, like could you see any upside to the guidance over here or, yeah, just wanna understand the drivers for guidance going forward?
Hi, good morning. Thank you for the question. First, yes, we are very confident on the results and very satisfied with the results. Having said that, we are still on the first quarter. Of course, we enjoyed some high electricity prices in Europe this quarter. Looking forward, since we see also some volatility, we would like to be careful and we'll wait at this time with changing the guidance. Of course, we are very confident with the current guidance.
Got it. For the U.S. portfolio, your slide nine is pretty helpful to understand that. Just curious for the other projects, is there any are you waiting for any other details on those projects or could they qualify in the future or, do you avoid them to fight them to not qualify over there?
The question was on the brownfield, Maheep?
Yeah, yeah. brownfield. Yeah, sure. Sorry.
Yeah. So in general, as Jason just related, we are working on a classification right now of the project where we believe there is a brownfield potential in order to get the tax equity adder. We hope that we will have a news on that soon.
Got it. Just one last question from me. Just looking at the slide 12 on the economics of the 1.5 GW on cash users and sources. If I do the math, that can somewhat implies a 6% cash yield for your minority stake investor. Does that sound reasonable or do you expect or am I missing something else over there?
No, no. It'll be a much significantly higher cash yield there on a sell down. You know, we're thinking high single digits for a potential sell down. Cash on cash.
I appreciate that. All right. I'll follow up on that offline. Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. Now, we're gonna take our next question. The next question comes from line of Justin Clare from Roth MKM. Your line is open. Please ask your question.
Yeah. Hi. Thanks for taking our questions. I guess just first on Q1, your cost of sales actually declined in the quarter relative to what we saw in Q4, despite the higher level of revenue that you had achieved. Just wanted to check in on that. You know, what enabled you to kinda achieve that lower level of cost, and how should we think about that going forward from here?
Yeah, definitely. We see an increase in the margin, both of the both on the profit and the EBITDA. It's impacted by the fact that during the last year, we have another project in Europe come online, mainly Gecama, which enjoy from a high returns due to the high electricity price in Spain. This is why you see an improvement in margin, both in the profit and the EBITDA.
Got it. Okay. Just shifting to the U.S., wondering, you know, can you talk more about how you're managing your equipment purchases for U.S. projects? You know, given that we don't have guidance yet on the domestic content adder, you know, are you holding back on making some purchases at this point until you have more clarity? Wondering if you just elaborate a little bit more on the strategy there.
Jason, should you take this answer?
I'll take that. Great question. Looking at the U.S., of course, supply chain is a major strategic decision for each project. Well, we have roughly 2 gigs of module supply secured out of India as we require that module supply in Southeast Asia. In general, those modules available, we're seeing strength in terms of ability to support this project.
Jason? Jason, can you hear us?
Yes.
You were disconnected a little bit, I can try to take the answer and then see if the line is improved. In general, we will divide it to the solar panels and the batteries. On the solar panels, Jason said we are building supply coming mainly from India right now with very good supplier. We are complementing that with ADCVD eligible panels coming from Southeast Asia under the decree. On the battery side, as we mentioned last discussion, we have purchased the batteries for the very large project in Atrisco from a U.S. supplier, therefore, I would say also controlling the risk of trade with China this way. Jason, if the line is now better, you can elaborate on that.
Let's go to the next question, please.
Yes, of course. Thank you. Now we will take our next question. The next question comes from line of David Pass from Wolfe. Your line is open, please ask your question.
Hey, good morning. Can you guys discuss your unlevered and levered returns in the U.S.? Are unlevered returns expected to be consistent with the 8%-10.5% you outlined for Atrisco and CO Bar going forward? Do you see any potential uplift or degradation in that? Maybe just some color on levered returns.
We do see this trend continuing with a high single-digit return on unlevered basis also in the U.S., mainly because of strong fundamentals of the project, the higher PPAs and of course the IRA adders. We do see even some upsides from energy community and local content that may still be in addition to what I just mentioned. In terms of the levered return. At this environment of high single-digits, even with the higher interest rates in the current financing in the next one or two years, it will still result in nice double-digit returns. Again, with the upside maybe, a very nice team.
Of course, in the future when interest rate, hopefully will go slightly down, I think the spread will be even a little bit better.
Just maybe quickly on the financing for future financing plans. Can you maybe elaborate on the 30% minority interest assumption as well as the 200 KW premium that you guys illustrate here? Just maybe where are you getting that from? Why 30%? Thank you.
Yeah. We, we believe that this is a good trade-off and a good balance from, I would say our strategy to continue and use the PPA and developer combined business model, which we believe brings the highest returns and the highest differentiation in the market, while still recycling the required amount of equity to fund our business. I would say, having said all that, if you look on our average holding in our current project in Europe and Israel, it matches this principle of 70%. Currently, all the portfolio in the U.S. is held entirely by our group.
It leaves us this flexibility of matching the average holding that we currently have and still manage to fund our business in a very good manner.
In terms of the $200K per MW assumption, that's effectively the midpoint of the $180-$220 that we expect to receive on a recent project sale, Project Serra, which we're under contract to sell. That guides us and we see kind of what's going on in the market today.
Okay, great. Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for a name to be announced. We will just give some moments, so for the participants to press star one one. There are no further questions. I would like now to hand the conference over to the management for any closing remarks.
Yeah. Thank you all for joining the call. We'll be in New York next week for the Credit Suisse conference, so we look forward to connecting with you. Good morning.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.