Q4 2023 Altus Power Inc Earnings Call

Participants

Chris Shelton; Head of IR; Altus Power Inc

Lars Norell; Co-Chief Executive Officer, Co-Founder, Director; Altus Power Inc

Dustin Weber; Chief Financial Officer; Altus Power Inc

Gregg Felton; Co - Founder And Co - CEO; Altus Power Inc

Andrew Percoco; Analyst; Morgan Stanley

Justin Clare; Analyst; ROTH MKM Partners LLC

Vikram Bagri; Analyst; Citigroup Inc

Jon Windham; Analyst; UBS Group AG

Chris Souther; Analyst; B Riley Securities Inc

Presentation

Operator

Good afternoon, and welcome to Altus Power's fourth quarter and full year 2023 conference call. As a reminder, today's call is being recorded and participants are in a listen-only mode question and answer session will follow the formal presentation this time for opening remarks and introductions, I would like to turn the call over to Chris Shelton, Head of Investor Relations.

Chris Shelton

Good afternoon, and welcome to our fourth quarter and full year 2023 earnings call. Joining me on today's call are large Meralco, Chief Executive Officer, and Dustin Weber, Chief Financial Officer. In addition, Co-Chief Executive Officer. Gregg Felton will be joining us for Q&A.
This afternoon, we issued a press release and a presentation related to matters to be discussed on this call. You can access both documents on our website, www.staar.com in the Investors section. This information is also available on the SEC's website.
As a reminder, our comments on this call may contain forward looking statements. These forward looking statements refer to future events, including Ulta's Power's future operations and financial performance. When used in this call, the words expect, believe will plan forecast estimate and similar expressions as they relate to all of this power identify forward-looking statements. These statements are subject to various risks and uncertainties which could occur cause actual results to differ materially from those predicted in the forward-looking statements. While this power assumes no obligation to update these statements in the future or as circumstances change, except as required by law for more information. We encourage you to review the risks, uncertainties and other factors discussed in our SEC filings that could impact these forward-looking statements. Specifically, our 10-K filed today with the SEC.
During this call, we will also refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures. We are also introducing a new non-GAAP measure annual recurring revenue or ARR, which we will discuss later on this call or is an estimate that Management uses to determine the expected annual revenue potential of our operating asset base at the end of the calendar year. Arr assumes customary weather, production expenses and other economic market conditions as well as seasonality. We are unable to provide a reconciliation from GAAP to ARR. Our management team uses all of these non-GAAP financial measures to plan, monitor and evaluate our financial performance, and we believe this information may be useful to our investors. These non-GAAP financial measures exclude certain items that should not be considered as substitute for a comparable GAAP financial measures, all this powered methods of computing. These non-GAAP financial measures may differ from similar measures used by other companies. More detailed information about these measures and a reconciliation from GAAP to adjusted EBITDA and adjusted EBITDA margin is contained in both the press release and the presentation that we issued today.
With that, I will now turn the call over to Lars for his prepared remarks.

Lars Norell

Thanks, Chris, and welcome to our call in a challenging environment. We're very happy to be speaking to you at the end of a record year for Altace power. We built all this to be a clean power company and we architected our platform with the goal to be both resilient and nimble to create value for customers and investors in any market climate and the capacity to take advantage of opportunities when they arise.
From the beginning, we have focused on recruiting and retaining what we believe to be the best team in the industry with best-in-class access to capital to deliver value to our customers and shareholders.
As highlighted on page 3 of our presentation, our team continued to execute in 2023, and we notched a number of achievements that are testament to the growth available in our expanding market segment and the strength and momentum of our company. We became the leader of our markets as the largest owner operator of commercial solar in the country, and we're starting to see the benefits that a category leader and choice for a customer-centric company that generates and delivers clean power every day. We grew our enterprise customers by over 50%, and we for forecast that our portfolio in operation as of year end will generate over 1 billion kilowatt hours for those customers this year. We're also growing our capability to serve those customers faster and better, for example, with Altace IQ, which is our AI enabled software that, among other things, helps our customers measure their carbon footprint.
We also had a record year for asset additions totaling 426 megawatts, of which approximately 74 megawatts were newbuild assets and output, which we are looking to grow further in 2024. Our very significant asset growth during the year. Expressed as expected, annual recurring revenue equals to $183 million, a new metric. As noted earlier, we're pleased with the visibility towards 2024's revenue targets. That is a our number provides the market and intend to make use of it as we continue on our mission to educate investors for details on the revenue and adjusted EBITDA growth during the fourth quarter and for the full year 2023.
Please turn to Page 4. Dustin will go into more detail in a moment, but we ended the year with $155 million of revenue, GAAP net income of negative $26 million and $93.1 million of adjusted EBITDA. While that adjusted EBITDA number is a record for Altace and indicative of significant growth at 59% over the prior year's number, it's not where we expected to be for the full year, and the difference is driven by three factors. The first and primary driver. We were surprised by the stubbornly bad weather across most parts of the country during the fourth quarter, recalling that the amount assumption we harvested in Q3 was on the light side as well. Based on our 15 years of operating history, it's rare to see two consecutive quarters below norm, but that happened in Q4 of two thousand and twenty three seconds. And the operational downtime of portions of our portfolio was higher in the fourth quarter than our historical norm outages can be unpredictable when they happen by adding technical staff in the field and building out an active component and inventory of spare parts system, we are cutting repair lead times and bringing operations to normal levels.
Third, we experienced delays in the onboarding of assets, those that are newbuilds as well as those we onboard that are already in operation while some of these delays relate to overtaxed utility interconnection crews and building departments. An element of it reflects our organization being stretched a little thin from the significant asset growth we're experiencing we consider this to be temporary, and we are actively adding to our construction and asset servicing platform to better execute on the growth opportunities available to us.
Turning now to page 5 and looking forward to 2024, taking a range of weather and system performance parameters into account and for the first time offering a view on revenue, we are projecting that our 2024 revenue will be in the range of $200 million to $222 million. We are further projecting that this will result in 2024 adjusted EBITDA in the range of $115million to $135 million. Our cash generation is an important source of funding for Altace, and we expect to take cash from operations and reinvest them into additional customer engagements and solar assets with the intention to drive further growth in these metrics in future years.
Importantly, we believe we are positioned to execute our growth plan in 2024 without the issuance of dilutive equity.
Our adjusted EBITDA projection for 2024 also includes growing our SG&A budget to reflect our efforts to put in place the capabilities that will continue to set us apart and allow us to retain and expand our market leadership position.
On the next slide, page 6, you will find our growing asset base and operation and pipeline of growth assets that we expect for 2024. We are currently pursuing over one gigawatts of newbuild opportunities and assets in operation, both of which when constructed or closed, would allow us to begin delivering clean power under long-term contracts with our customers, we relentlessly apply our playbook for large enterprises that are coming to us from CBRE, Blackstone or other channels. And we seek to continuously refine our approach to speed up the client engagement process. We were frustrated that some contracting times remain elongated or in the case of community solar that the implementation of announced state programs have gotten delayed. At the same time, we are encouraged with the number and volume of large property owners that are choosing to enter programmatic partnerships with Altace. And we continue to build out our construction platform to have the capability to deliver on that growing newbuild flow. In the meantime, we are using that same engineering and construction know-how and horsepower to due diligence and onboard operational assets. Our sector continues to consolidate in our December acquisition of Unico platform pipeline and customer relationships exemplifies AltaGas's intention to play a leading role in that consolidation. Further, we continue to see an attractive pipeline of acquisitions of assets and operations for example, in January, we closed the transaction with the toll, which adds 20 municipal school at Enterprise time in another 2000 community solar customers to our portfolio as our portfolio approaches one gigawatt in size, we are seeing the increased benefits of being a larger platform, including the ability to more efficiently service our customers and us.
Turning now to page 7 and before handing over to Dustin, I'd like to highlight some themes from our segments of the market and some of the things that we're focused on for this year. As we said upfront, we continue to see robust appetite for clean electric power from commercial tenants and strong demand for the associated decarbonization benefits and ancillary income available to landlords in these market conditions. We are really pleased with the superior unit economics available in commercial solar between rate tariffs available to commercial clients and the retail rates that our community solar customers pay our customers continue to pay a lot for power. As a consequence, Altace continues to be able to deliver meaningful value to our customers while benefiting from very attractive unit economics on our assets, we are starting to observe the benefits of our market leadership position. For example, we enjoy greater brand recognition with tenants and landlords. We receive more inbound calls from potential channel partners in markets we've just entered, and we believe that we are seeing most of the available opportunities in our parks.
Finally, as Altace power matures as a public company, we want to continue to refine and improve our market communications. We take seriously the importance of investor education and the additional disclosures that we are presenting today are intended to provide greater clarity into the business. We're also very pleased to announce that our first Investor Day will take place on May 14, and we look forward to interacting with market participants at this event in outlining our long term strategic vision and multiyear growth plan. We will also provide greater details on all of the important areas of the Altace platform with a focus on our technical competencies like our expertise and physical assets as well as our digital capabilities.
With that, I'm happy to hand over to Dustin for details on the numbers. Dustin?

Dustin Weber

Thanks, Lars. And thanks to our investors and analysts for joining the call today. Please join me on slide 8 as I cover our financial highlights for 2023. Starting with the fourth quarter our operating revenues grew to $34.2 million compared to $26.8 million in the fourth quarter of 2022, an increase of 28% for the full year, we achieved a record $155.2 million of operating revenues, up from $101.2 million in 2022, an increase of 53%. Both fourth quarter and full year revenue growth was driven primarily by new additions to our portfolio.
Turning to GAAP net income for the quarter, we posted a net loss of $40 million compared to net income of $67.1 million during the fourth quarter of 2022. This variance was primarily the result of a noncash loss of $17.7 million from the fair value remeasurement of our alignment shares versus a gain of $70.7 million during the fourth quarter of 2022. This same remeasurement was also a driver for the full year 2023, resulting in net loss of $26 million compared to net income of $52.2 million for 2022, you should continue to expect a quarterly mark-to-market of our alignment shares, which will largely be dependent on the change in our share price during the period.
Moving to adjusted EBITDA, we reported $17.3 million for the fourth quarter of 2023 compared to $16.6 million in Q4 of 2022, an increase of 5%. As Lars discussed, fourth quarter weather continued the trend we described during our third quarter call and was the primary driver of kilowatt hours coming in below our 2023 expectation. For the full year, adjusted EBITDA amounted to $93.1 million compared to $58.6 million in 2022, still representing a 60% growth. Despite headwinds from weather, we continued to drive profitability with adjusted EBITDA margin achieving 60% during 2023, an increase compared to 58% from 2022, driven by the economies of scale benefits from our larger operating portfolio.
Please turn to Slide 9 for our 2024 guidance of full year revenues and adjusted EBITDA. In addition to provide greater visibility into our forward expectations, we're happy to also be providing year end ARR metric, which we think will help you understand how management looks at performance of our business. We intend to drill down further into financial metrics during our Investor Day in May, including the composition of our ARR, which is our estimated production measured in kilowatt hours times an estimated average price. So we sell kilowatt hours to our customers for our 896 megawatts of assets in operation. At year end 2023, we expect $183 million of annual recurring revenues. We add to that the assets closed in Q1, predominantly those associated with our acquisition of Atoll as well as forecasted revenue growth associated with other assets we expect to add to our operating portfolio throughout 2024. Altogether, we expect 2024 revenue to fall in the range of $200 million to $222 million, which represents a 36% increase over 2023 at the midpoint and adjusted EBITDA to fall in the range of $115 million to $135 million, an increase of 34% at the midpoint. We believe this guidance range appropriately incorporates our experience in 2023 and allows for a wider range of variability in key drivers impacting generation, notably forecasted sunlight hours and system availability.
Turning to slide 10, which highlights our demonstrated access to capital in the fourth quarter. To start, we closed the $200 million construction facility with Blackstone, which provides significant flexibility as it can be drawn for projects at any phase, whether during development, construction or operating.
Next, we announced a $163 million upsize of our Blackstone term loan facility which provided long-term financing for both our basalt acquisition as well as many of our recently completed assets.
Finally, we welcome Goldman Sachs and Canadian Pension Plan as capital providers with the closing of a new $100 million holdco financing. We believe this efficient financing positions us to continue increasing our market share and executing on the robust growth opportunities available to us.
Moving to Slide 11 to review our expected funding plan. We continue to have no plans to issue dilutive equity or equity-like securities to finance our growth plan. Our successful execution of multiple financings in the fourth quarter has positioned us in the strong cash position of $290 million to end the year, which allowed us ample flexibility to close the Vitol acquisition. In January, we plan to fund our remaining 2024 growth plan with a combination of funds from our Blackstone term funding, facility tax equity partnerships and cash from the balance sheet as our development and construction activity continues to expand. Our working capital needs are able to be funded by the new construction facility as well as our corporate revolving credit facility. Once these projects are completed and begin delivering clean energy to our customers, we plan to utilize our term loan funding facility, which carries a long term fixed rate on borrowings it 200 to 250 basis points spread over the prevailing 10-year treasury rate.
In summary, we believe the strength of our balance sheet and existing sources of capital position us to take advantage of the robust growth opportunities available to us, thanks to our industry-leading platform, which generates significant cash flow and has access to the necessary financing to support our growth.
That concludes my review of our financials. And with that, we're ready to take your questions.

Question and Answer Session

Operator

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one from your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two. If you'd like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we poll for questions.
Thank you. Our first question today is coming from the line of Andrew McCopCo with Morgan Stanley. Please ask your question.

Andrew Percoco

Mike, thanks for taking the question on, I guess maybe to start out with the guidance on, thanks for giving us annual recurring revenue number, can you maybe just help us bridge the gap to the 2024 guidance range, maybe both for revenue but also for adjusted EBITDA. Last year, you gave us kind of an exit par number the right way to kind of maybe think about that if you just apply the 2023 adjusted EBITDA margin against the ARR. and then kind of compare that to 2024 guidance range and then it looks like it seems like there would be a delta. If you could maybe give us a sense for what gets you to the middle of the range. Are you still on track for the 100 megawatts that you're planning to bring online and how much of that will be driven by additional acquisitions?

Gregg Felton

Sure, Andrew. Let me kick this off this is Greg and perhaps Dustin will chime in as well. So thanks for the question, Tom, is the first point I think we should make is that we are very focused on increasing the visibility into our business. And we've taken deliberate steps to make Altace easier for our investors to understand and model. We think this first idea of producing not only annual revenue guidance, but also introducing annualized recurring revenues or ARR is a very important element in order to facilitate modeling. Specifically as we're also introducing annual expected production of in-place operating assets so that baseline of ARR should feature prominently in the modeling. And of course, that leaves the annual growth wedge. And in addition to our annual guidance, we'll be focused on giving you the tools necessary to understand our longer-term opportunity and visibility as it relates to any large acquisitions that we might make. We're intending to provide disclosure around those as well and just the final point I'll make is that on our first Investor Day in May, we intend to cover a number of other areas of our business that haven't yet. I've been on full display for investors. And we're looking forward to sharing insights on our technical capabilities and capabilities as it relates to not only physical assets but also the technology. So there's a lot more disclosure that we're looking to provide and a lot more visibility. We're looking to provide specifically to allow you to take that ARR and bridge it forward over the next not only this year but beyond. Dustin, do you want to add anything to that?

Dustin Weber

No, I think you summarized it well, Greg, I would just add that we think a are our highlights the power of our recurring nature of our long-term customer relationships and we think it's informative and provides visibility and building blocks from 2023 results to our 2024 guidance. Greg talked about the growth wedge that can come in a lot of forms for us where we can add larger amount of megawatts later in the year and kind of fill that growth wedge for we get a smaller amount earlier in the year that would contribute more meaningful to the '24 revenues.

Gregg Felton

And let me say, let me maybe just also you asked about just the texture perhaps of the opportunities that we're seeing. And there's a significant flow of opportunities that are available to us and we fully expect to extend our leadership position in commercial scale solar. So on the newbuild side, we do expect to increase our construction cadence in 2024 from what was a record of 74 megawatts last year. And then as it relates to acquisitions of assets in operation, we are seeing a robust flow of consolidation opportunities, which should grow our market share. Of course, we closed on one such acquisition in Q1, and there are more in our pipeline that we are pursuing as well.

Andrew Percoco

Understood. That's super helpful context. And then maybe as a follow-up to that, can you maybe just give us an update on your return thresholds from? Is there opportunity to increase your returns from here and you kind of talked about and brand recognition, the power of the platform and some of the prepared remarks. And I think across the utility scale solar development landscape, we are starting to see some targeted increases in returns from some of the larger players? And just curious if that's a potential read-through to the C&I space.

Gregg Felton

Yes.
I think there's no question that the financing environment specifically as it relates to higher interest rates should and is translating into higher return opportunities. So without question, we are seeing that today and we expect to see that throughout this year. Maybe I'll take the opportunity on the back of that to talk about a little bit of just the environment that we're seeing, Andrew, because it's no secret that some market participants are experiencing the pitfalls associated with a lack of cash flow generation and capital structures that are also stressed by the current higher interest rate environment. And as you know, that profile translates into dilutive equity issuances or even worse, in some cases, legitimate questions about the viability of a business. And we, on the other hand benefit from a number of key structural advantages as a starting point. One of the biggest differences is our business generates cash flow from existing operations. And also we only invest capital when there are attractive growth opportunities. And to your question that, of course, means nominally attractive growth in terms of the things that are in front of us, but they have to meet the return thresholds that makes sense in the context of the current environment that we there are a variety of other things that we can detail and we'll go into those on Investor Day. But it is critical for me to highlight that we built our business also to have durable access to world-class financing, and we've consistently shown our ability to efficiently access capital, not only in terms of our ongoing access to the Blackstone funding facilities, but also the very recent and attractively priced financing from our partners at Goldman and Canadian pension plans. So we're feeling good about our position. We think that our position is somewhat unique relative to what's going on the landscape and for sure, the current environment should lend itself to high return opportunities.

Andrew Percoco

Great.
Thank you.

Operator

Our next question comes from the line of Justin Clare with ROTH MKM.
And can you just use your query?

Justin Clare

Yes.
Hi, Ron. Thanks for taking the questions here.

Gregg Felton

Absolutely love though. (multiple speakers)

Justin Clare

So first off, I did want to ask about Q4. Just wondering how much lower was the generation in the quarter versus what you would typically expect historically, what's that what's the difference between the historical norm?
And then was the issue only really whether related in terms of the performance of the operating assets or was there any system availability issue as well.
And then I guess finally on that same point is how do you consider weather and the generation of the assets in your 2024 guidance?
How do you think about that?

Dustin Weber

Hey, Justin, this is Dustin. I'll start in on that one. So yes, 2023, we tackled a number of variables on continued supply chain disruptions, particularly as it relates to transformers and switchgears continued slowness by utilities on completing interconnections. Greg referenced the new paradigm of higher interest-rate environment. And so there's some challenges there. I would say weather is one that variable that we couldn't mitigate, and it was the primary driver for our financial results falling short of target in '23.
On the other main contributor was that we expected more revenue contribution from new assets added in Q4. Q4 was one of our best quarters ever in terms of adding new megawatts between new builds and assets and operation, we added 175 megawatts. And the vast majority of those projects, including the salt acquisition, came on very late in December and therefore didn't contribute much to our Q4 revenue. That's a complete. Those is huge for us and setting us up for '24 and we're going to get a full year revenue in '24 from those. So And so overall, I would say it was those are the two primary drivers. So we feel very good about how we've positioned ourselves for 2024. We do expect a more normalized sunlight hours than we've gotten in 2023. And so we're feeling good about that.

Justin Clare

Okay.
I appreciate it.
And then I was wondering if you could also talk about just where you see timelines for projects today. So from the time you sign a contract you how long do would you typically anticipate before you can complete construction, is that extending? Is it being pulled forward? And then I know you're talking about expanding your workforce. Do you see an opportunity to bring timelines and as you expand your workforce and the construction capabilities?

Lars Norell

Hey, Jonathan, this is Lars. I'll take that question. Just to start where you ended, absolutely. The intention with growing our platform is of course, to use a larger team, whether it's engineering or design or construction or construction supervision to overcome whatever challenges exist in the market with respect to building departments or utility interconnection queues or whatever the case might be. So the answer to the first part is it varies significantly by market and it varies, of course, also if you look at our pipeline. If it's an self-originated deal where we've done all the work ourselves in normal time lines might be 12, 15 or 18 months in some markets worse, we're able to do better than that right now and often case, we're able to do better if it's the behind-the-meter solar system so that we don't have to wait for some utility community solar program to open up in exactly the right way on when it is a community solar program. For example, in some of the states on the East Coast, they have been a little slower to open and they've been a little smaller in terms of their aperture for what system sizes can be submitted into them. And whenever that happens, assets that we've already signed leases for with clients. There's still there are they just get pushed out to the right? So instead of being able to build those assets and be done with them and say October of this year, we might currently predict that we're going to be done with them in February of next year or whatever the case might be. We continue to grow our platform to overcome these challenges. We, like Greg said, are expecting to build more newbuild assets next year than we did this year. The timelines for deals that we take over from channel partners where they might have done most of the development work continue to be much shorter. In those cases, we might be looking at sort of a nine to 12 month construction period instead of 2015. And so between the different markets and the different sources of deal flow and a growing platform, we feel pretty good about where we are in spite of some of the challenges with timing from utilities and some progress.

Justin Clare

Okay.
I appreciate it.
Thank you.

Operator

Thank you. Our next question is from the line of Vikram Bagri with Citi. Please proceed with your question.

Vikram Bagri

Good afternoon, everyone. I wanted to start with ARR and put some numbers around the previous question on the call. If I assume it's 60% EBITDA margin on the year-end ARR that you disclosed about $183 million. It seems like at year end the EBITDA run rate was around 110. So you added about $31 million of EBITDA, including grade three. Did this implies that EBITDA addition was at like $72,000 per megawatt, which seems low relative to your what your target has been historically about 100,000, 250,000 per megawatt of EBITDA added.
Al, I wanted to make sure I understand this right and what the factors behind that are. A couple of things that come to mind is perhaps the SG. and E. was somewhat understated at the end of year-end 2022, perhaps the EBITDA per megawatt added in '23 was slightly lower. Maybe you have changed the Radianz assumptions that you have in calculation of EBITDA and our asset prices are having an impact on the on the EBITDA as well. So wondering if you can help us understand and help us bridge that gap and between our EBITDA per megawatt that you add on also include M&A?

Gregg Felton

Hey, guys, it's Greg. Thank you for the question. And this is definitely the type of detail that we would like to get into with you and make sure that you have an appreciation for how we're looking at the world.
So the first important point is, yes, we are reinvesting in the platform every year and the SG&A Align has been growing. That takes the form of expanding our team in all areas, frankly. But we referenced some on this call every technical area of the firm is growing to support our capabilities and to build our business. I think Dustin, we saw 25% type of growth numbers or more. And so I think the year over year increase in SG&A is one source of the bridge.
The other thing, but to specifically reference, as it relates to your question is not all megawatts are created equal as it relates to the revenue opportunity, the revenue per system is very much a function of the market that we're in. So for example, in the Southeast where we added the basalt assets, those the revenues associated with those assets are going to be on the margin lower and the revenue of a similarly sized portfolio in the Northeast might be just because the price per kilowatt hour that we're charging for every unit of energy that we're producing is lower. So we definitely have a desire to walk through that. And we have an intention for something of a math camp in our Investor Day, which is really intended to get into the model. But I'd say, Dustin, I think it is true that on average, the revenue per megawatt hour added or kilowatt hour added in 2023 was probably brought down our average price per kilowatt hour. It doesn't mean the returns were any less attractive to be clear because we paid less relative to a lower revenue. It's just the mix might change. And that's going to continue to change, frankly, as we expand our geography across the country. We're in '25 states and growing in new markets. It might come with a different revenue profile depending on where we're adding assets.

Vikram Bagri

Understood. And then on financing. It appears you are you've clearly indicated no need for equity this year. But longer term, can you frame how much room do you have to add more megawatts before needing any outside equity also, I was wondering if you can share how you look at leverage internally and where you stand on those metrics. I'm just trying to understand the financing needs as we look beyond 2024?

Gregg Felton

Sure.
Let me start with that. So I think that we have been very focused. We are large shareholders of the company, and we are very focused on shareholder experience. And we've been pretty consistent in our messaging that we have no desire to issue equity at dilutive prices. So our business plan has specifically been designed to limit our need for equity capital. We, of course, started 2024 with $219 million of cash on the balance sheet, supplemented by our Blackstone construction facility, which was undrawn at year end as well as our access to attractively priced long-term financing facilities.
So and then finally, I should mention because there's a bit of disruption in the tax equity market, we can talk more about, but we have excellent and ongoing access to tax equity, which we don't think everyone else does in the market. So we feel very good about our financing access. We're going to be focused on not issuing equity. And we have a clearly, we think, demonstrated some avenues to raise capital, specifically the holdco financing would be the most recent one in 2023. But we have other nondilutive sources of capital contemplated to allow us to continue to execute on our growth plan. Certainly well, into the future. That is our current operating plan.

Lars Norell

And perhaps we should just say a word about the way, um, you know, our investors look at leverage as well. We have a we have a page in the investor presentation that's online that we should that we should bring out again. And we, of course, like Greg said, intend to walk through this stuff in math camp on May 14, the Investor Day. But basically our debt is rated investment grade. We have a significant collateral balance of solar contracts that, in many cases are 25 years. In some cases, longer than that, some assets are brand-new. Others have been with us for some time, but that collateral balance is a well-diversified portfolio of other investment grade contracts, which are our customer contracts spread across the country.
When you look at our main debt, which is our funding facility with Blackstone, that debt really goes against that collateral balance of solar contracts with customers in relative to the value of the collateral balance. The debt is sized fairly conservatively. And so when we look at the amount of debt service that comes on comes due each year when we consider the leverage ratios, we and others, for example, Goldman Sachs and the Canadian Pension Plan feel very comfortable about the room we have left in Altice in the cash that we're generating. And we don't think that we brought that particular viewpoint, which is to say, look at the main funding facility relative to our asset values. We haven't brought that forth yet in a way that allows everyone truly understand that we're going to do better job with that.

Vikram Bagri

Thank you. And one last question, if I can squeeze in one more on. Can you talk about what you what you're targeting in terms of return for new acquisitions and how competitive is M&A versus organic growth.
That's all I had. Thank you.

Lars Norell

Yes, we think our customer contracts as being fairly similar, whether it's an asset that we build from scratch or one of our channel partners builds having spent six or nine months developing an asset before they come to us or if we're looking at a portfolio that have a series of assets that have just been completed for our clients. In each case, we look at the terms of the contract, it's a 25 year contract. Is it a 25 year contract to deliver clean energy we look at the system itself, has it been built. So the specifications that we look for and once we've done the due diligence and gone through investment committee, we feel relatively comfortable both looking at newbuild assets and assets and operation as being relatively similar to each other.
And in terms of on the return measures, we, of course, are mindful that we'd invest in with interest rates higher in the market right now. And frankly, with power prices continuing to be fairly elevated for most of our customers and definitely community solar customers, we are entitled to look for a good return on those. And that's a significant spread against whatever the benchmark rate is in the market, and that's on an unlevered basis. And this asset needs to be able to be attractive to Altace on an unlevered basis from a unit economic perspective. And then, of course, the most effective way for us to hold that asset is in our funding facility that then produces even higher returns.

Vikram Bagri

Thank you.

Operator

Our next question is from the line of Jon Windham with UBS. Please proceed with your question.

Jon Windham

Perfect.
Thanks for taking the questions.
Looking forward to mass camp on, can we start with you mentioned some delays in state policies. Can we get a little specific there? And what particular states we should be keeping an eye on.

Lars Norell

Sure.
This is Lars, and thanks for that question out. There is, for example, a very popular state on the East Coast where we own a lot of solar assets in a state that we've been in more than a decade. They have a community solar program that just started going or got going last year we were very fortunate. We swept some of the most awards under that program together with Blackstone, and they're linked portfolio last year. And those assets are now finishing finished through construction and up and running. But the next sleeve was anticipated to basically open up again so that we could submit a number of deals that we already have signed leases for these leases were signed with CBRE Investment Management. They were signed with clients of CBRE. There was more assets from link or Blackstone in there, and all of them were ready to basically go into construction. But for whatever reason, the state decided to limit the sites of each new solar system in this particular go around to one megawatt per system, we had a number of assets that were five megawatts in size and six megawatts in size and seven and eight megawatts in size. And so we had a choice we can either submit those assets into this limited one megawatt size or hold off until the next sleeve opened up, which we are led to believe will happen in June of this year.
Since we've made the tactical and strategic decision to actually hold off. We don't want to send the hard work that we put into the six and seven megawatt asset into a program sleeve that for the moment is limited to one megawatt we actually held off. And all of that those assets are still there with us. We're going to get into construction as soon as they get picked into the program, but at least for the moment, that caused the delay for us.

Jon Windham

Appreciate that.
And then the other thing I want to get into a little bit of help from us all get a little bit more comfortable with the guidance is the Miss around weather in the fourth quarter, investors' experience with blaming weather from the wind industry has not been good rights like weather this quarter and whether again, it just turns out that the capacity factor assumptions were too high. Do you have other than just some idea of how things have tracked maybe last year by quarter over the last couple of years on in terms of you hitting your targeted production, like how common is this how far out of the box was the fourth quarter?

Lars Norell

Sure.
This is Lars and letting customers follow up. So we're happy because we have a 15-year operating history at Altice. We've seen a lot of weather in the beginning of Altace. Most of our history, most of the assets that we built were all in the Northeast because that's where we're located and we knew a lot about the programs in Connecticut, New Jersey and so forth. Then we tended to see occasionally a bad weather through out of the Northeast region during one quarter. But even during those years, we didn't tend to see it happening two quarters in a row in 2014, '15, '16, we started branching out across the country and we built assets in Y. in California and other states. And then it became increasingly rare to see a even one quarter show a particularly sort of nationwide of bad weather pattern. And so in the Q3 and Q4 period of 2023, in spite of having a very well diversified portfolio, weather on both coasts turned really bad and in particular, California that's usually sort of faced with a little bit had a lot of rain in atmospheric rivers and other things going on. So based on this 15-year operating history, this was not something that we had seen before. And as a consequence against us, and we want to make sure that the guidance that we've left for 2024 is understood to incorporate a fair amount of careful analysis going into yet?

Dustin Weber

Yes, I think the thing that's right. I would add that John one on anecdote is December, which was particularly frustrating, was down over 20% from historic norms and forecast. So that was certainly a surprise to us. And Lars touched on like how we how we think about weather as it relates to our forecast, we really want to make sure that we're continuing to diversify our portfolio, which is currently 25 states. That's one aspect and we need to make sure our forecasts are right and appropriately allowing for this variability. And we feel good that we've done that for 2024.

Operator

Thank you.
Our next question is from the line of Chris Souther with B. Riley. Please proceed with your question.

Chris Souther

Hey, guys, thanks for taking my questions on. So it sounds like there's still some more headcount and platform and investment catch up here for 2024. And I'm curious whether you think we'll exit 2024 in a place where we get kind of more operating leverage going forward. So minimum EBITDA growing faster than kind of revenue or if there's kind of a multiyear continued investment at a similar pace of growth?

Dustin Weber

Yes. Hey, Chris, I'll start as Dustin, um, yes, I think um, you know, we're proud of our margins. I think we ended up around 60%. And if you look at 2024 guidance to the midpoint were about the same so obviously deciding exactly how and how much we reinvest those dollars into our business is a key decision for us, um, and so you know, we're making those decisions. I think like the opportunity that we have in front of us really informs us that we need to keep making those investments into our platform, particularly those tasked with development and on the technical side, I would say, second and on the heels of just growing our asset base by 90% last year, we're also intensely focused on building out our technical operations and maintenance teams from that that that aren't ensure that we're generating as much clean energy as possible out of our systems and that we can sell to customers at a discount. So we had very high margins in the past and will continue to have high margins and well also building out our platform and bolstering our teams kind of.

Chris Souther

Okay. And then maybe just the ARR. versus the kilowatt hour produced estimate. It seems like on the dollar per kilowatt hour that you expect to produce with the current asset base is below the historical average. Is that just a function of new assets, you know, throughout this year that we're kind of back end loaded? Or are there conservative or changes or interest rate or other assumptions? I just wanted to see if we could get some color there.
Maybe it's just I'm asking a question.

Dustin Weber

Yes. Yes, Chris. So we will get into it on Investor Day, some more and I like that this math can't fund name is really taking off, Tom, but I think you hit on it and Greg covered a little bit earlier is not all megawatts are created equal. That's probably the main theme here on your reference to the euro. We have a portfolio in the Southeast, which comes out at lower per KW on power prices, which of course corresponds to a lower purchase price for us. So that's probably the big driver on it. But by I mean, I think and I think Rex are kind of eat even I would say to maybe we aren't we all know that Rex, a lot of these incentive programs that states put in place years ago are kind of stepping down in a modest fashion over time. And so there might be a little bit of that in there as well. But I would say for the most part, it's just a function of we've been growing our portfolio over the course of the last year.

Chris Souther

Thanks,

Operator

Thank you.
As a reminder, if you'd like to ask a question at this time, you may press star one from your telephone keypad. The next question is a follow-up from the line of Jon Windham with UBS.

Jon Windham

Okay, perfect.
Thanks.
I may back on my line dropped. While you were answering the question user error, no doubt on, can we go back to the weather just for a second, you mentioned December, any comments around to have monthly data, January and February that give you confidence on going into this year?

Dustin Weber

Thanks, John. Yes, so I would say we're putting out guidance today, and we've accounted for all known matters of variability in that guidance. So and we don't expect any from any big changes from weather.

Jon Windham

Perfect.
Thank you. And I feel honored amused me here for one more simply, we made it this far into a call without a question. I get questions from investors asking about Altace exposure to a data centers. Any comments around that would be appreciated. Thank you very much for taking the questions.

Gregg Felton

Hey, John, thanks for the question. This is Greg. I think the obvious comment that we think investors should be focused on is there is a lot being written about the massive demand increase for electricity associated with AI. And the data center growth is being forecast. Clearly that's inflationary from a long-term perspective for power prices, not only in terms of the natural gas consumption, the power side of it, but probably as if not more importantly, because of the infrastructure and the T&D or transmission distribution spend. So a core thesis that we have here is, of course, our contracts, as everyone knows, are predominantly or majority floating rate nature and designed to capture upward pricing from increasing electricity demand. And so that is the we that we think we're a play on that theme.

Operator

Thank you. At this time we've reached the end of our question-and-answer session, and I'll turn the call back to Lars to for concluding remarks.

Lars Norell

Thank you very much, operator, and thanks to everyone who has been listening. We look forward to meeting with you on our Investor Day to continue the location. But just in summary, for this particular fourth quarter call in the year, we feel very good. The team feels very good. Also, it's profitable. We're the market leader. We're growing revenue and EBITDA in 2023 by 50% to 60% in a very challenging market. And we're going to keep growing in 2024 as well. We're working hard to educate investors, and we're not going to leave any stone unturned as it relates to making sure that we bring forth the sort of precursors to revenue that we work with every single day so that you can follow our progress each quarter and throughout the year and we feel good about our destination. We are a market leader and we intend to go and take that position to market dominant position, but are going to talk more about that in the Investor Day, and we look forward to seeing everyone there. Thank you very much.

Operator

This will conclude today's conference. You may disconnect your lines at this time, and thank you.
For your permission, Peter.