Good morning, everyone, and welcome to the Barclays CEO Energy Power Conference. My name is Christine Cho, and I am the clean tech equity research analyst here at the firm. Kicking off the conference for us today is Enlight Renewable Energy, a renewable energy developer and IPP with assets across Europe, Israel, and the U.S. Please welcome Gilad Yavetz, CEO of Enlight.
Thank you very much, Christine. Hi. Thank you all. Thank you for joining us today. We'll tell you a little bit about Enlight and our plans for the future. So for all of you that do not know the company, we were established in 2008. We are a greenfield developer and an IPP, and today working in three continents, the North America, nine countries in Europe and Israel, and we have expertise across the main segments of renewable energy today. So we have a balanced activity between wind, solar, and energy storage. During the years, we grew very rapidly, about three times every three years, and with a CAGR of between 50%-70% in the different operations, factors of the business.
Very large portfolio, around 18 GW, 20 GW and 28 GWh of storage, out of which around 5 GW is mature portfolio. So either operational already or under construction, getting into construction. And the company is public. We are public in Israel since 2010, and since February this year, also public here, listed in Nasdaq. And I think being public since 2010 allowed us, first, very good access to capital and attractive cost of capital. The Israeli financial markets, during the years, I think, rewarded us and allowed us to grow very rapidly and invested in renewable energy internationally through our features.
But today, when the company is growing so rapidly in the U.S., and the U.S. market is becoming so dominant in our activity, we thought that the next natural step was going public in the U.S., and we are very happy with that, executing now on the very large portfolio that we have here in the U.S., we will describe soon. So talking about our differentiation, we believe that in our business, in order to have competitive advantage, basically, you need to grow faster than the market, but also to outperform the market in project returns. So the equation of returns multiple by the growth rate will bring or brings the competitive advantage for Enlight. And how do we do it?
So first, with the business model of being both a greenfield developer, controlling the whole life cycle of the project from scratch to asset management, but also being an IPP and then becoming larger balance sheet, revenues, cash flow, and then recycling that in the development, allow us to milk the whole value chain and group higher returns with higher growth. Second is by diversification. So we were successful in growing our business in the last 15 years in Europe and now in the U.S., in the largest market, of course, in our home market in Israel. So multiple geographies, but not only in geographies, although also in technology. You would find in our business many times developers focus either in wind or in solar.
Today, Enlight has a very balanced activity in wind, solar, and energy storage, and this allows us to grow very rapidly, simultaneously in all these segments, coupled also with the technology segment. Very important part in our business is execution as a developer. So today, with our track record from 2008, we have converted successfully 4 GW into operation already, plus some storage capacity. And we have now a very large portfolio owned by our under development or construction that we are going to execute soon. And to complement this, differentiation as a metric, so we believe that in finance and access to low-cost finance, comparing the comps, is very, very important for our business model.
We've done it successfully in Israel since 2010 already, so 50 quarters of being a public company, and the first quarter here in the U.S. as well. So, how did we achieve this growth? So as you see, since 2010, almost 15 years now, we've done 3x every three years. I think we've done it by, I would say, a combination of 2x's. One, with our founder's mentality, founder still leading the business, trying to innovate and be first always in the market.
We entered the European market two years after our foundation in 2010, then we expanded our business to wind, did some of the largest and most exciting wind projects in Europe, and entered into energy storage, really at the beginning of energy storage, and now we are one of the largest developers in energy storage in the U.S. We are now building a project in New Mexico with a battery of 1,200 MWh. The next project is 800 MWh of battery in Arizona, coupled with a very large generation capacity. We are building 14 projects of combined storage and solar in Israel, and we believe that storage will be one of the growth engine of the company.
And of course, getting to, in the U.S. when, we believe it's a great momentum to be in the U.S., where solar and the renewable as a whole, but solar specifically, is going to grow very rapidly. Only in the beginning, 3% of the grid becoming economical together with the IRA, we believe is a very good, timing to get into the U.S., and we are very optimistic of our, our activity here. And we believe that we will do this same, growth, 3x, also from IPOs, so from the beginning to 2023 in the next years as well, as you're gonna see, as soon with our portfolio. In terms of records, so not only in terms of capacity, also in terms of revenue and equity, we've been able to grow very fast.
You can see here in the last four years, but if you go backward, our company is public, you can get the records. So we grew in those and CAGRs on the years. And more than that, we expect next year to show the same level of growth. And very importantly, also, there's a very high rate of return, driven from the business model of being a greenfield developer, and we're backed also today with a very strong need for the energy, both in the U.S. and in Europe, and the tailwind of the regulation. So now a little bit to give you a snapshot of our portfolio. And as a developer, IPP, you can see this kind of transition of the portfolio from operational assets to the asset under development.
And basically, the thing we do best is convert the portfolio from the right side here to the left side. So from development to operation. The strong, I think, aspect here is that we have visibility and clarity towards our growth, because we don't have to acquire assets from other developers, we just develop from green. So we know every year what is our plan. So currently, we have already 1.8 GW are under operation already. We've sold in the past 1.7 GW to other, so it's on the track record, but not on the revenue side. Revenue side come today from the 1.8 GW that are already operational, but as you see, 1 GW of generation and almost 2 GW of energy storage already under construction, plus a very significant capacity getting into construction soon.
So for example, in the last quarters, we began to construct very large projects, like at least in the U.S., 360 MW, plus 1,200 MW of battery capacity. And two months from now, we are going to start and construct a very large or one of the largest projects in the U.S. of combined solar and storage in Arizona, called CO Bar. It's a 1.2 GW generation, 824 MWh of battery. And of course, in parallel, we are constructing other projects in Europe and Israel. So altogether, the projects that are either operational or getting constructed, we call them mature projects, and they comprise 4.8 GW of generation capacity and 4 GW hours of battery.
The good thing is that the IPO and other strong capital raise we did in the past, all of the mature project portfolio is already fully funded in terms of the equity ticket that the company needs to inject. And these projects are estimated to be all commercially operating by the end of 2025. So by the end of 2025, we have kind of a machine working with 5 GW, more or less, connected to the grid, creating revenues. The rate of free cash flow coming from operation already in the first half of 2023 was $90 million for the half, so we can see the cash flow growing.
By the end of 2025, with this capacity generating, we will already have a cash flow that can feed a growth of 1.5 GW per year, without the need to raise more capital. We can complement that only by performing minority sell downs of around 30% of our holdings. So if you look at our current holdings in the European and Israeli portfolio, we hold an average 70%, while in the U.S., we still hold 100% of all this portfolio. By these two tools together, we believe we reached a very important point in the life of the company, where it is already self-funding itself, and we can use, of course, equity markets for accelerating the growth, for additional actions like M&A, whatever. The company is on a very solid basis.
Of course, we have a very, very large portfolio that we keep on advancing. So it's not like a static portfolio. We get all the time new project to the construction line and then operational line. So talking on the market, I think you know them very well, but in Terra, we believe there is a huge opportunity that lies in both geographies. So in the U.S., with the tailwind of the IRA, with 70% of our portfolio in the West, in the West states, that benefits most from the IRA, with PTC track that benefits high radiation areas like in Arizona, Colorado, Idaho, Utah, projects where we developed, you know, multiple GW and also some other pockets in ISO and PJM where we have very strong footholds.
In Europe, where there is a very strong need for electricity, as you know, renewable energy already is the cheapest. They need to build whatever type of energy right now because of the lack of energy. Prices of energy are very high, and so in both geography, we can see now, but also in the future, high returns coming from our projects. When we entered into the U.S. in 2021, I think that we saw unlevered single-digit returns on the project, and now we see on many of the projects in the U.S., unlevered returns double-digit already, which means that on the levered side, so after finance, we see very nice teens, sometimes high teens, on the project in the U.S. But they are also coupled with scale.
This is why we see the U.S. market now very attractive for us, because we see large projects that are combined with high returns. Right now, I think with the good fundamentals of the project and also the way IRS is benefiting our project. So we see this growth, I, I think, continuing in parallel, mainly in the U.S., that is going to be around 45% of our mature portfolio in 2025, and then I think, passing 50%, 2026, 2027, and other geographies as well. As you can see, we are very balanced in our activity, both in terms of geography, on the left, in terms of technology, between wind, solar, and combined storage and solar, and also in revenue structure, where you can see that a lot of our revenues are linked to the CPI, so we benefit a lot.
Even in the U.S., that traditionally, of course, was not linked to the CPI with the PTC, that now is very dominant in our project. In the West, we have 10-year tariff. The $0.03 of the tax equity on the production is linked to the CPI in the U.S. So we have very good exposure to the CPI in terms of the revenues, while the majority of the debt is not linked to the CPI. So we can see a very nice upside right now in our projects that are all secured in terms of interest rates, all swapped, all the existing debt is fully swapped in terms of interest rates, or not linked to the CPI, and a good mix of revenues that are growing and linked to the CPI.
Now, giving you a snapshot on the near future, which is what we call the mature portfolio. So all the portfolio that is either operational or will be operational until the end of 2025, and as I said before, is fully funded. So we can see the growth path toward 2025, that will allow us again to do PPA in three years. You can see that the majority of these projects is already de-risked. I think Assef will show it in a, in the next slide, so, you know, the details. But what we can see here is that we maintain a very high CAGR through this type of roadmap. And Assef, maybe why would you go on the next slide?
As Gilad outlined, the plan for 2025 is to reach 4.6 GW of operational projects. It's a clear plan, which, as Gilad said, is in terms of the equity, is funded. Here you see really the composition. The composition of the plan is really focused on several of our largest projects. Gilad mentioned Atrisco, which is the largest combined solar and storage projects in the U.S., which we're building in New Mexico. We'll touch a little bit about these projects in detail, but the degree of certainty that we have in the plan is really focused in on these projects, the de-risking and the achievements we've made in these projects over the past few years and also recently since the IPO. Okay, so maybe just focusing a little bit on some of the projects.
So Gilad mentioned Atrisco and CO Bar. They're two of our flagship projects in the U.S. Atrisco is located right outside Albuquerque. 360 MW solar, 1.2 GWh battery. Project is under a PPA with, for 20 years with PNM, which is a large investor-owned utility in the state of New Mexico. This project delivers really healthy returns. You see here, unlevered returns, north of 10%, which is driven by numerous factors. One, the ability for us to secure attractive PPA pricing, given the shortage of power in New Mexico... the closing of coal and the need for PNM to really procure power in the short term. There are large interconnection bottlenecks in the U.S.
That's something we've spoken about over the past year, and the ability to deliver projects of this scale in the short term enables us to put pricing on PPAs and improve returns. But not just that, this project also benefits from the PTC track of the IRA, so we're able to take tax equity north of 50% of capital costs. But the project's also located in an energy community. So the project really touches upon the main features that Gilad mentioned: strong fundamentals based on the supply and demand and the need for energy, plus the backdrop of the IRA and the adders that we're receiving on our portfolio. Roughly 25%-30% of our portfolio in the U.S. is expected to benefit from the energy community adder, which gives us an advantage on the returns that we're able to generate.
CO Bar is one of the largest solar projects in the U.S., 1.2 GW. It's contracted to two different off-takers. One is SRP, Salt River Project. It's a massive utility in Arizona, services most of the load in Phoenix. And you also have APS, which is the largest investor-owned utility in Arizona. There is significant demand for the energy that we producing, that we will produce in this project, but also it's a really unique project because it's got a 1 GW of interconnect. There are very few projects in the U.S. today, given the interconnection bottlenecks, where we could provide 1 GW of power at one location. Now, there's potential in addition to the capacity you see here, because in our 1 GW connection, we can add up to 4 GWh of battery.
We can four hours of storage on every one MW of generation. So we have the potential to scale this project further from the 1 GW and 800 MWh of battery today, to the 1.2 GW and 4 GWh battery project in the future. Now touching upon Europe. Europe, we obviously have the backdrop of higher power prices. Two projects which I think are worth calling out. You see here the unlevered returns in the double digits. One is Project Kovačica Solar. It's something which, again, focuses in on our interconnection advantage. Kovačica is the largest operational wind farm today, which we own. It's 330 MW of wind. We are developing and soon to construct a hybridization of that project, adding solar to the same point of interconnection.
So it will be 250 MW of solar, 200 MWh battery, plus 330 MW of wind. Now, this will almost mirror a base load type profile of energy, which will create a really unique package for the grid, and also reduces our returns because we can leverage existing infrastructure that we built for the wind farm and be efficient in development, all on the same point of interconnection. And Pupin is a project that we are constructing today in Central Eastern Europe and Serbia. We already have a 105 MW operational wind farm in Serbia today. This is effectively an expansion of that wind farm on the same point of interconnection.
Now, because there's significant bottlenecks on the interconnection side across the world, with particular issues in the U.S., the ability to leverage on an existing point of interconnection and expand, what we call our land and expand strategy, enables us to be really efficient with development, but also capture significant improvement in economics by leveraging existing infrastructure and capacity we have on the grid to develop future projects. Then Roadrunner, I'll touch upon this briefly, a project in Arizona. This is already getting into 2026. Gilad mentioned that we're continuing to advance projects across the portfolio. This is a project, again, in Arizona with AEPCO, which is a large cooperative in the state, where we're developing 250 MW of solar, another 800 MWh battery.
Again, with signed interconnection, signed PPA, real estate secured, it gives us a lot of visibility of what the growth is going to look like into 2026 and onward. Just touching upon this, because I think it's really, really important and one of the key advantages is Enlight has a developer today. Interconnection remains the main bottleneck across the world. U.S. is in particular issues given how fragmented the infrastructure is here today. We have a unique ability based on our development track record and our know-how in development, really focused and lead with interconnection. If you can secure attractive points of interconnection with large capacity, you box out the competition and secure really attractive returns on your projects, which are above market. In a post-IRA world, where there are still significant issues on interconnection, the IRA did nothing to solve interconnection issues.
Our ability to leverage our interconnection advantage puts us in a unique position to leverage the broader envelope of what the IRA can offer. That will enable us to be outside both outperform on project returns, both to exceed the market level growth based on the quality of the pipeline. This is again, talking about interconnection in the U.S. The impact study is part of the interconnection process in the U.S. It is the critical phase of interconnection. Once you've passed your System Impact Study, which is a study that the transmission operator, the interconnecting utility, does with the project, you have a view on cost schedule for your project. Most projects fall at this stage.
We have over close to 10 GW of projects today in the U.S., which are passed interconnection, and we're not going to develop 9.5 GW of projects and construct them all in two to three years. Gives us a lot of visibility as to the future of the business. All maybe wrapping up so we-
... and have some time for Q&A. I think to Gilad's point, over to Gilad.
Hi, well, good morning. So, yeah, thank you very much. I think to summarize what we can show that we are in a very interesting point, is the life of the company really in the inflection point where we have very strong portfolio, high returns, that really deliver of rapid growth and high returns. That's the outlook. We are funded the next two years in a very challenging period of finance, which always strengthens the case. And we try to provide you the most transparent, I would say, visibility and transparency over the execution of the company in order for you to be able to follow that. Since the IPO, I think four quarters now, as we are public on the U.S., show the execution of the company, we are on track on the timeline, but it's getting them in operation.
We are very confident for the next two years on the plan of the mature portfolio, getting to this 4.8 GW line, and with conversion rates in the U.S., the demand for the product in Europe, we believe we have very good visibility towards the growth of the company also return. Very happy to answer your question.
Questions, Johnny?
Onshore versus offshore wind.
Yes. So sure. So I think—Thank you for the question. So I think that on the onshore business, which is our business in wind and of course, solar, the difference is that the get effort period, when you are a greenfield developer, you buy the concession in order to start and develop. This is, I think, one of the main differences. And the other is that the scale of the, I would say, offshore wind, was that this was the natural transition of utilities in Europe, from oil and gas to renewable. So they had to buy their way in instead of developing, like in buying concessions. Then when there was, I would say, some kind of instability in finance, some projects become, I think we all know, less attractive.
While I think what we do in the onshore business, from a little bit more distributed, of course, the utility scale, but unlike wind, is that we develop from scratch based on low debt, high, I would say, at the beginning, but with very low debt, and the big tickets are being placed on auction only. Then we can have more visibility on the returns and less risk.
Thank you. I think you spoke earlier about, you know, the system impact studies and the cost of interconnects, right? If I got it right, we've seen the cost of interconnects, or at least proposed costs of interconnects, skyrocketing here in the last few years. In your experience with utilities, are those purely negotiated rates, or is this kind of a regulatory goose strike? Why are we seeing such an inflation in that specific aspect?
Yeah, sure. So maybe I'll tackle that. So your connection study processes is regulated by FERC. Okay, it will have variations based on whether it sits in PJM or whether it sits in WECC or other markets. But effectively, your project is studied on the downstream impacts, additional projects point of interconnect will have on the grid. So think of it this way: if I add 100 MW in this location, in order to transport that power to where the utility needs to bring it, what knock-on upgrades that would have on the grid? And this study process is complex because it's also dependent on the hiring and what other projects are also being considered to add. So there's engineering to this.
Because the traditional infrastructure has not been invested in the U.S., okay, you, you can add 100 MW and think it's going to cost you $3million -$4 million of upgrades, but then get a study showing that they need to put in a whole new transmission line, which would bring the upgrades to $100 million. They're skyrocketing because we're asking the grid to do something that it hasn't done. We're asking the grid to take energy from dispersed areas and to bring them to populated areas. The grid has not been designed to accommodate the level of renewables that need to go into in order to transition at pace. So the transmission infrastructure isn't there efficiently, and therefore, if you add a project in the wrong place, the cost can spiral.
That's really important as a developer, because the success of your development will depend on how good you are at during interconnect.
Anyway, one of the success stories of the company has been not only capacity that was active in the study, but in the current. We've been to show, both in the West and in other markets, for example, we are now one of the leaders in PJM, right? We have a cluster of 1 giga in the U.S., where we got a cost of $40 million for 1 gig, which is a relatively low cost. Very attractive to build 1 giga in PJM, and specifically in the West, we are building very, very large integration points with very attractive cost.
Maybe just to end, as a follow-up to that question, go into a little more detail in how you targeted projects that gone through, you know, the System Impact Study so quickly.
Sure. So this is a bit of the kind of clever secret sauce or entrepreneurial sauce of what it means to be a good developer. So, for example, you have a project which sits near a retiring plant, okay? No, three years in advance, the facility intends to close that coal plant. You then lock up land rights in the area near that coal plant. You then put in your interconnection request at a sufficient time so that when you're studied by the utility or the transmission operator, you're studied as if you're replacing the coal plant in terms of versus adding additional capacity. So it's about how you site your projects, also understanding what the transmission and interconnection situation is, where you're siting. That's really the key to success in U.S. project development.
We've had other types of clever, I think, siting strategies where we've acquired capacity interconnection rights from retiring coal plants, and therefore we get studied not as adding capacity, but as replacing capacity, and therefore we get a clean bill of network upgrade. So there are all different types of ways of, I think, being entrepreneurial, and this is really what a developer is, right? Well, entrepreneurs and ensuring that we develop projects that make the most economic return.
Yeah. Other example can be in Europe, where wind farm in Spain, that as I mentioned before, we constructed 3 substation as part of the design of the initial project. That enables us right now to add in much more capacity. We constructed 47 km, or 30 mi, of 400 kV line, the interconnection point of the utility company called Red Eléctrica, the government-based company, in a way that allows us today to feed this transmission line with much more capacity. So with the initial project, that's already very attractive, and now it cost us only EUR 10 million-EUR 15 million more, but right now we have the capacity to add in much more than that.
These are things that a developer can, I think, differentiate itself, and also that we, as a developer that is larger than most of the comps, can invest more in creating higher growth in the future.
With that, we're out of time. Thank you for your...
Thank you very much.