Lease runs to year twelve, the power arrangement resets in year seven

Plain question so I can follow the rest of this. When you say power is a pass-through, does that mean the tenant pays the utility directly, or does the ownership entity get the bill and rebill it? Those seem like very different exposures if the tenant gets slow paying.

Before I could vote I'd want to see the actual second-feed paperwork. A study letter isn't capacity. I've read enough of these now to know the difference between a position in a queue and an executed interconnection agreement, and sponsors use the same word for both in the deck. thicket, does the LP agreement give you any information right on utility correspondence, or do you get a quarterly letter and that's it?

The multifamily version of this is a tenant on a two-year lease in a building where the boiler has four years left. You don't underwrite the lease, you underwrite the thing that has to be replaced. Here the thing that has to be replaced is the electricity contract, and you can't schedule that yourself. That pushes me toward the power term whether or not the credit is good.

Seven years of visibility on the input cost of your entire business is more than I've ever had, honestly. My whole operation reprices labor every year.

Out in the markets I look at, the utility relationship is the asset and the building is the cheap part. If a load that size gives up the interconnection at year twelve, somebody else takes that position fast, assuming the substation is still adequate. So the shell isn't worthless, it's just worth what the next queue looks like. That's a real number, it's only unknowable today.

cairn's boiler comparison is the one that landed for me. But I'd push back a little. A boiler you can price. Nobody can price delivered power in year eight with a straight face, so anchoring to the power term doesn't actually give you a number either, it just gives you a shorter hold and a residual you also can't price.

I came in wanting income and I keep ending up in threads about substations. If the distribution is stable for seven years and the exit is a coin flip, I'd rather size the position so the coin flip doesn't matter to me. That's a different answer than picking a term.

One thing I'd check that hasn't come up. Look at whether the second feed's route crosses land the ownership entity doesn't control. I've seen a power plan die on an easement across three parcels where one owner just said no, and the study letter said nothing about it because easements aren't the utility's problem. If the year-eight case depends on that feed, the easement file is part of your underwriting, and easement recording practice varies by state so check how it's actually documented where this sits.