FULL TRANSCRIPT

Slava Rubin (00:00)

In this episode of Smart Humans, we talk with Mike Silvestrini, who's the co-founder and managing partner of Energea. He talks about the world of investing into solar projects, from starting his own company and exiting to now having a platform where anybody can invest at least $100 in projects across the world. He already has over one half billion dollars of investment into his various projects from domestically in the U.S. to all the way in Africa, in Cape Town.

He talks about his favorite cards in baseball like Ted Williams to what the potential is for investing into Brazilian bonds. All of this and more in this episode.

Slava Rubin (01:55)

Hello and welcome to the latest episode of Smart Humans. I am excited for today's guest. We're gonna be talking about the world of energy. We have co-founder and managing partner, Mike Silvestrini here from Energea. Mike, welcome to the show.

Mike Silvestrini (02:09)

Hey Slava, thanks for having me.

Slava Rubin (02:11)

Absolutely, so we always like to get started in the beginning. How did you get into the world of alternative investments? What was it like for you growing up? How did you navigate from wherever got you excited to how you got here today?

Mike Silvestrini (02:24)

Hmm. Like I don't think that a lot of people view their, their path as getting into alternatives. You know, for me, it was more of a culmination of life experience that brought me into renewable energy. and specifically global renewable energy. I started off traveling a real lot in my twenties, and I think it gave me a broad perspective and a broad lens through which to view the world.

And whenever I speak to young people, I always try to say, you know, go out there and see lots of perspectives, because only then can you spot these massive trends happening in our society and our business and our cultures. And, , you know, after traveling quite a bit, I came back, finished grad school. was.

and,  discovered solar energy around 2007 and fell madly in love with it. And started a solar energy company. was 27 years old, but like I said, I was already kind of viewing the world through,  a diverse lens and it just seemed to make a lot of sense. If you remember, you know, we were still in conflict over fossil fuels in those days. , it was a pretty tough year in, in the battlefield in Iraq and my brother was there. So.

climate change was starting to really make some noise out of the IPCC, out of the UN. And when I discovered solar energy, I said, that's what I want to do. Started a company called Greenskies and got pretty lucky along the way. We ended up with customers like Walmart and Target and Amazon providing them solar energy services in the infancy of the industry. And that gave me a front row seat to

learning how to finance these projects, learning how to develop and implement these projects, learning how to care for customers in managing a company. So for me, I kind of evolved into the alternative space because around 2017, 10 years after I had started, we sold Greenskies, my partners and I. And for the first time in many years, I didn't have any solar plants, but I had capital.

And I started to view the world through the lens of an investor and being fully liquid at that time period. said, I can invest in whatever I want to. What should I invest in? And even back then, it seemed like the market for public securities was a little overheated. Maybe it wasn't, but that's what everybody was feeling at that time. And I decided to invest in what I know best, which is renewable energy assets and

to put a little bit more of a twist on it and to try to find the highest yielding opportunities, expand my vision to look at renewable energy assets anywhere in the world. So, Energea was born really out of necessity to invest my own capital into an asset class that I know best. And,

After that worked, we started inviting friends and family and then expanded that to be open to the general public. Whoever wants to invest in this asset class along me can do that at Energea. And that was kind of how we ended up in the alternative investing space, but really first as lovers of the asset class and then as investors ourselves.

Slava Rubin (05:31)

Yeah, so you're pretty early for solar and you mentioned it was partially given your travels. How do you think your travels influenced you getting into solar energy and what was that catalyst, that aha moment? Because you probably were thinking maybe a few ideas. I don't know what they were, but somehow the idea of creating Greenskies and getting into solar energy back in 2007, is that right? 2006, 2007? That was you had that aha moment. Tell me how that happened.

Mike Silvestrini (05:56)

Okay. Yeah.

You know, I mean, I had already lived in places like Mali and West Africa where I was a Peace Corps volunteer. And I'd seen with my eyes what the difference is between having electricity and not having electricity. And solar is really quick to deploy. And it can get into the far flung reaches of the globe. And so I already knew that it had a huge use case for many places outside of the United States, but also.

Like I said, we were embroiled in a conflict in the Middle East for the umpteenth time. And it just seemed like something better needed to evolve. And I think solar energy just makes so much sense where your fuel is free. You don't need to defend the pathways to the feedstocks. You don't need to fight over it. Everybody has direct access to sunlight. And for that reason, it just seemed like it would make sense. It was also cleaner energy.

which was a popular sentiment at that time was to kind of move towards cleaner energy sources and solar energy scratch that itch too. And it didn't make economic sense. That was the only missing piece. But you know, when you're 27 years old, I wasn't concerned about that. I still had that youthful spirit to just dive right in. And over time, it did make economic sense. And then probably around 2014 or 2015.

Solar energy started becoming naturally cheaper than fossil fuel based energy supply in certain pockets in the world and those pockets have grown over time and now I feel like we could go into any country in the world without any incentives or you financial adulteration and Create solar energy projects that are going to be beneficial to our clients as well as those other attributes so

It was seeing that through the global lens, I think that spotting that there's going to be a river of capital flowing towards this asset class early enough to gain some expertise so that when that capital did arrive, you we had some contracts and we knew what we were doing. So it worked out in timing, but you never know when you start these things.

Slava Rubin (08:03)

So you mentioned you had your 10 year operating company, you had your exit after having killer clients, and then you're obviously flush with capital trying to decide what to do with your balance sheet to invest it. Why invest into other people's projects versus roll your own and create a whole new company, maybe copy paste, maybe a different niche, maybe a different space, just because you know solar so well.

What was the thinking there in terms of obviously creating a new startup, but less about operating specifically in the solar space like you did for 10 years?

Mike Silvestrini (08:39)

I mean, the hardest part about this industry is building and interconnecting the projects. It's really tricky. And, you know, we're experts. We've been doing it for many years. We can do it. We do do it still. We have a development branch of our enterprise so that if we see a market that we really like, for example, when we first got to Brazil around 2017, 2018,

Slava Rubin (08:54)

Okay.

Mike Silvestrini (09:02)

I knew I wanted exposure to the Brazilian solar market, but when we looked around and I went to Brazil a bunch of times, met with all the solar companies, I couldn't find anyone that I really wanted to bet on or anybody whose projects I would want in my portfolio. So we stood up a development apparatus and made our own inventory.

Slava Rubin (09:24)

Sorry,

that the equivalent of Greenskies?

Mike Silvestrini (09:27)

Yeah, basically it's a development company. originates deals, finds land, gets interconnection from the utility companies, buys the solar panels, installs them all, you know, kind of the whole rap. And, I didn't want to get back into that business, but it was necessary to unlock the Brazilian opportunity. And fast forward here where we are now in Brazil is that's changed. And I can go back to my preferred position of buying operational assets because there's.

Slava Rubin (09:34)

Got it.

Mike Silvestrini (09:54)

loads of inventory in the marketplace. So we can when we need to, to activate a hunch on a market opportunity, we can develop Greenfield as we say, but my strong preference is to buy the operating assets because they're so much more reliable and dependable and predictable than before you start.

Slava Rubin (10:15)

Awesome. So you said the reason you started this is because you're trying to figure out how to deploy your own capital. And we love on this show to understand how the entrepreneurs and money managers such as yourself are deploying your own capital, not only the capital on behalf of the investors, et cetera. So when you think about your net worth, obviously you have your exposure to your own company. So let's just put that aside because I imagine that's going to be a big slug of it. So let's just put that aside. How do you like to deploy your net worth? So the classic

Mike Silvestrini (10:38)

Okay.

Slava Rubin (10:42)

background for folks is 60 % into public markets, 40 % into bonds, 0 % into alternative investments. So how would you break down your 60-40-0? I imagine that's not what you're following.

Mike Silvestrini (10:56)

Yeah, not even close. I'm probably somewhere around 20 % public securities across 15 different tickers. I select them myself. I did the whole, you know, dog and pony show with the bankers and how we're going to invest in books of thousands of stocks and things like that. I just never got comfortable with anybody other than myself managing my money. So for me, I like to pick my stocks. pick them very slowly and over time.

And because I'm so slow at doing the due diligence on a publicly named company, I have a fairly small basket of stocks that I like. And then the rest of it is, you know, I have some crypto, probably a little overweight in crypto, maybe 10 or 15%. Have some real estate. I invest in small businesses as sort of an angel investor. I have maybe a dozen of those opportunities in my basket.

I am both, I have Energea as corporately, you know, as an owner of the business, but I also, you know, use Energea as product as our clients do and, and take long positions in renewable energy assets and compound the dividends. And then I have, you know, an alternative that I is near and dear to my heart is actually baseball cards. Cause I know baseball, I know the cards I've been collecting with my dad since I was a kid.

And I just think that Ted Williams is a Ted Williams, it's gonna store certain value and probably keep up with inflation and then some so you could argue a little overweight in antiquity baseball cards.

Slava Rubin (12:31)

love

it. what percentage you said some categories without percentages. So you said 20 % stock picking, which leaves, you know, 80 % for the alternatives. Should I assume it's zero bonds?

Mike Silvestrini (12:44)

Actually, no, I have bonds, but not American bonds. really love the price point of a Brazilian bond right now. I think we're really being overpaid at 14.7%. And you can pick your tenor, whether it's three years, you three months or 10 years, it's really in that middle 14 range. That's a nominal price. And I think that's too good to pass up.

Slava Rubin (13:08)

What's your exposure to bonds out of a hundred percent? Okay, so let's call it 20 % public equities, 20 % bonds, obviously not US, but Brazilian having a really nice return, which leaves you 60 % for the alternative asset. Yeah, so if we were gonna open that up 60 % to be called a hundred percent, right? So how would you split that hundred percent of alternative assets? It sounds like it's about 20, 25 % crypto, and then what would be the rest?

Mike Silvestrini (13:10)

Maybe 20 %

Real estate,

I would chop it into four buckets and I'd have 25 % crypto, 25 % real estate, 25 % renewable energy infrastructure, and then 25 % for what I would call, I guess, angel investing or startup sponsoring.

Slava Rubin (13:39)

Okay.

Where's baseball cards in that?

Mike Silvestrini (13:54)

yeah, and then throw a nickel in there for baseball cards for good measure. Yeah, probably something like that. You know, it's, fun. ⁓ but, it's, difficult to predict and there's not a lot of data around how baseball card valuations move. until, until, until I can really sink my teeth into some data, it's, yeah, I buy a few things, but don't go too crazy.

Slava Rubin (13:58)

Got it, just a nickel.

Nice.

Is the Ted Williams your favorite card or what are your favorites?

Mike Silvestrini (14:20)

I have a Hank Aaron rookie card, 1954 Topps That's  It's a PSA five.

Slava Rubin (14:23)

nice, what's the grade on that?

Nice. Yeah. No,

no, no. , you know, we actually, , I have some Michael Jordan sneakers, , some of the originals and also, , we have a Goudey , Babe Ruth, you know, actually PSA actually PSA eight. Uh, yeah, it's actually quite special.  I think there's only like, , like five or six cards that. Yeah. And then like, you know, Messi rookie cards and all kinds of fun stuff like that. Uh, so.

Mike Silvestrini (14:38)

Nice, that's Whoa!

That's an exceptional card, yeah, that's exceptional.

Yeah, getting

braver and braver and starting to buy some really nice things, but I don't like the new stuff. There's too much recency bias.

Slava Rubin (15:02)

Yeah, yeah,

it's all about super vintage and also just super rare, right? When it's rare because there are 17 colors of it, it kind of gets a little annoying.

Mike Silvestrini (15:06)

Yes.

I'm with you. I'm with you on that.

Slava Rubin (15:13)

Okay, amazing. So you're talking Brazilian market, we would love to get your perspective on the US market. Open ended question, where are we today? Which is, you you got the stock market trying to reach all time highs, you have talk about inflation, you have talk about recession, we're not sure about what's happening, obviously, with geopolitical. Right now, as we speak, there's conflict happening in the Middle East, who knows if there's gonna be any additional tension with China or what's happening in the Ukraine.

Mike Silvestrini (15:19)

Yeah.

Slava Rubin (15:39)

you know, are we like at a Goldilocks or are we about to have a hiccup from some of these tariffs and messing us up, in the second half of the year? It's really open end to take you where you'd like.

Mike Silvestrini (15:49)

Yeah, I I feel really comfortable about the American economy. I think the primary drivers of ingenuity and capital availability and entrepreneurial spirit are in pretty good shape right now. I do think that we have to be careful when we adulterate markets. And I'm in energy, which no, no industry gets messed around with the way energy does. And for example, our solar energy investments in the U.S are heavily dependent on a tax credit.

because they are so heavily burdened with tariffs and have been for 10 years. So I'd rather get rid of the tariffs and the tax credits and go au natural against natural gas and oil and whomever else wants to put power on the grid and let the market play out. I think solar would perform very well in a natural competitive space. And I know that because when we invest in South Africa or Brazil or Colombia,

there are no tax credits and there are no tariffs. So we get to see a direct side by side, natural competitive environment for different sources of electricity. And solar is the cheapest. we have this.

Slava Rubin (16:55)

That's an amazing question. That's an amazing

point, which is in those countries when there's not the subsidies, you're saying solar performs as cheapest. Do you think that's because there's less infrastructure for some of these other products? Or is there some other reason that you think it really would be cheapest here in the US as well?

Mike Silvestrini (17:04)

Is that you?

I think it's just cheaper because there's no fuel costs. know, it costs pretty similar to build a 200 megawatt natural gas plant and a 200 megawatt solar power plant. They have similar costs to install. But once you install them, the natural gas guys have to keep on buying natural gas to burn it, and we don't. And over time, and we look at this through long-term financial strategies,

Solar just can't be beaten easily by any fuel source that requires feedstocks.

Slava Rubin (17:47)

Nice. So going back to your point of view on the US, are you thinking interest rate cuts? Are you thinking recession? Where's the market headed? What are your thoughts?

Mike Silvestrini (17:57)

Yeah, I would like to see some interest rate cuts personally. I think inflation is starting to get under control, but we're definitely, you know, if there's something to be concerned about, it's that we're at an escalated risk situation between the important relationship between interest rates and inflation, right? And, you know, when everything gets heated up, you have high inflation and high interest rates. That's where you start losing the tools to control the strength of the currency.

And it's hard to tell exactly where that goes, but we pay really close attention because we're international investors. We're constantly looking at our inflation rate versus the inflation rate of other countries. And it's been a really fascinating thing to study over these last few years. We start to see what is our confidence in our inflation rate. We generally in the United States assume that our inflation rate is 2%, but that's really not true. It's higher than that.

But other countries do the same thing. Brazil says that their inflation rate is 4%, but it's truly higher than that. And basically, foreign exchange rates are a result of the differential between those two inflations. So as Brazil out inflates the United States, its currency weakens by the differential year after year, approximately. They're very highly correlated. So I do think that there is softness.

in America's relationship between interest rates and inflation right now. I think we're, got our back against the wall a little bit, but that only matters if there's somebody else out there who, who's not in that position and I'm not seeing anybody. So yeah, we're making some lousy decisions, , fiscal decisions, but everybody else is too. And that's keeping us in the driver's seat for at least the near future. So

I like to have a little bit of diversification. That's why I like exposure to foreign currencies. I like exposure to multiple markets and industries. But at the end of the day, there's no reason for us to believe that the United States is going to lose that competitive edge.

Slava Rubin (20:01)

So quick lightning round on your opinions where I wanna put you on the spot. A few questions. Recession in the next year, yes or no? What number does interest rates get to a year from now?

Mike Silvestrini (20:09)

No.

Probably around the same. I would say we're gonna hang out in that middle single digit range for a while. I don't see that. There's nowhere, there's no way to bring it down right now.

Slava Rubin (20:27)

Got it, so you don't see the Fed bringing it down.

Mike Silvestrini (20:30)

Not substantially,

maybe a little a tick here and a tick there to show trajectory, but nothing of nothing that's going to really change the mortgage markets or in our case, project financing costs.

Slava Rubin (20:40)

Yeah, it's a really big deal. How about inflation a year from now?

Mike Silvestrini (20:44)

I think that's what's gonna be the driver is we're gonna keep that as static as we can. Everybody hates inflation. Yeah, I think we got to keep that flat and that's what's gonna keep the interest rates high.

Slava Rubin (20:49)

Pretty flat.

And then public markets just at a macro, the S &P, the Dow, the QQQ, what happens in the public markets a year from now?

Mike Silvestrini (21:00)

I mean,

it's been so interesting to watch as we print all this money and it all ends up in, your usual suspect publicly traded companies stock and we think there's no way that's sustainable and then those companies perform so phenomenally that they actually deserve and merit that huge valuation and that just seems to keep happening. So as long as our companies can continue to grow so rapidly that they absorb all that extra value.

I think we're going to be okay. And the AI opportunity is obviously, you know, what we're banking on the next chapter, the next decade of that phenomena should continue. So I feel bullish about the American business economy.

Slava Rubin (21:44)

So you have to guess, is it flat to today's number plus 1%, plus 10%, plus 20 % a year from now.

Mike Silvestrini (21:49)

Let's, yeah,

I would say it's probably pretty flat.

Slava Rubin (21:54)

Got it. So you've obviously built incredible businesses and now you have Energea crushing it with investors. Not everybody knows it. So can you just give some context? What exactly is Energea? How long have you been around? Can you give us some perspective on metrics and ⁓ perspectives on size?

Mike Silvestrini (22:08)

Sure.

Yeah, the whole idea of Energea is again, starting off with a lifetime of being a solar practitioner and then becoming an investor in my middle thirties. After that exit, I started to recognize the attributes of the asset class that were useful as an investment product, as opposed to, you know, a power plant and the reasons why I got involved in the first place. And when I look at the characteristics of this asset class, it's got some things I really liked.

has long-term power contracts with credible off-takers. So as long as I make the energy, it's pre-sold generally for 15 or 20 years. I love that aspect. That's like a hotel that's sold all of its rooms for 20 years before you buy the first brick. I like the fact that power contracts adjust with inflation. So when energy prices go up or the consumer price index goes up, so does my power rate. So that gives me some insulation.

from what other asset classes are generally exposed to. I like the fact that if you do it correctly and you keep your solar projects completely separate in a private market, you don't let them trade because that screws up the value of the security. The security should be equal to the net present value of the future cash flows. That's going to be your NAV and you divide that by the number of stocks. so we don't

allow our stock to be bought and sold based off of the perception of demand and supply from our users on our platform. We set the price so that users are getting the type of return on investment that the portfolio is actually achieving. generally that's, we have multiple products, but they've averaged to just north of 12 % over the last five years of an IRR off those solar energy portfolios.

So if you can get that double digit yield, which by the way, 80 % of our clients compound it, we take all the cash from these solar projects each month and distribute it in the form of a dividend. And most of our clients will take that dividend and buy more stock in that solar portfolio, compounding their return, which is wonderful to see people take advantage of that. But if you're using the product correctly and you appreciate that,

diverse exposure to international markets and currencies, and you're comfortable with the technology of solar power generation in general, and you're looking for expert managers who, like us, have been through the battle of solar energy since the beginning, then I think it really does belong in almost every investor's portfolio.

Slava Rubin (24:44)

Awesome. Can you give us a sense for like how many investors or how much dollars you've transacted or how many projects you've done or anything of that nature?

Mike Silvestrini (24:52)

Yeah, we're rounding the corner towards half a billion dollars of capital that we've raised. You know, we have this platform called the energea.com There's about 14,000 users on the platform. And it's we haven't really done much marketing. We basically just got started focused on building great inventory, selecting great projects. And, you know, we're 50 people. And most of us are focused on becoming the best

solar energy investors that ever lived. That's our goal. We want to be better at this than anybody else. Yeah.

Slava Rubin (25:24)

Amazing.

So how many projects is that that you're investing in? A couple hundred.

Mike Silvestrini (25:29)

geez, a couple hundred, probably

a couple hundred, somewhere in that neighborhood, maybe 300.

Slava Rubin (25:35)

And this is across the world.

Mike Silvestrini (25:37)

Yes, in select markets. you know, right now we're in Brazil pretty heavily. It's the belle of the ball. It'll change. I think that Colombia is about to have its moment in the sun and we're positioning ourselves there and looking at the structure of the deals and how to move money in and out and how to pay taxes and all the other things that go along with getting involved in a foreign market. We have a pretty good base beachhead, if you will, in Africa.

primarily our office is in Cape town and our projects are mostly in the Cape town area, we're, supporting development of projects in Sierra Leone and Botswana. And I think there's a way to do that at shockingly low risk. If you do the work and you do it correctly and you bring in large credible support, like the world bank. I think there's a way to get those projects done. We'll see. But yeah, so we're, we're in multiple markets.

And that's intentional.

Slava Rubin (26:32)

So you're mentioning some of these countries, know, for some folks they might be thinking, whoa, that's super scary to get that type of international exposure. How do you manage to get these projects without having, let's call it, political risk, fraud, of, you know, not nice things happen that have nothing to do with the execution?

Mike Silvestrini (26:51)

Yeah, I mean, first, not nice things happen all the time. So we have projects that get robbed and we have to dramatically accelerate our security provisions for that asset in order to protect our investors capital. We have contractors who go bankrupt in the middle of construction. We have feuds with utility companies who are not upholding their obligations under law to interconnect our projects. So first and foremost, it's a war, but

The returns are so high that these projects can take a punch and still deliver a 12 % or greater return to our investors over the last five years. And that comes with time as we have more years in these markets, we get better and better. And the way that the solar energy industry at least has worked is you need to stick around. You need to fight those fights. You need to be tough out there.

and defend your clients. And if you do that for long enough, windows of opportunity open. And we've been making money about 14 % in dollars, IRR in Brazil since we started. But the opportunity to make a lot of money in Brazil has just opened. So I mean, we, know, and because we're one of the last men standing, so many people went to Brazil and got their butts kicked.

but if you were like us and you, and you built it correctly and you did, what you needed to do to position yourself to aggregate now we're in the buying mode. So other people's broken dreams are becoming price, you know, great prices for us to acquire operational projects. And, we're really in the driver's seat. So you have to kind of, that's the, it's, it's not a typical management process where.

You know, you're just competing against my cost of capital versus another company's cost of capital. We don't have much competition. We're the only capital. So we can be really selective, looked at hundreds of projects and pick the ones that we like the best and avoid as many risks as we can. And double down on our due diligence as it relates to things like security. You know, you get wiser as you, as you go. And so we feel like we're in a great spot, but we've managed to dodge a lot of punches so far.

Slava Rubin (29:02)

Nice, so I'd to understand, imagine I'm your customer, I'm trying to potentially buy, you're obviously probably the best salesperson for your company. So let me just try to understand, so do I have to be accredited or can I just be a retail investor?

Mike Silvestrini (29:14)

You can be a retail investor too with certain limitations put on us by regulation A.

Slava Rubin (29:19)

And what's the minimum investment that I can make? amazing.

Mike Silvestrini (29:22)

100 bucks. Yeah, we try to

make the barrier to entry as low as possible so that people can try the product and experience our communications and our reporting and our sophistication. And if they like the dividends, they come back for more.

Slava Rubin (29:37)

Perfect. And what's like the average investment?

Mike Silvestrini (29:39)

Probably about 15,000 bucks.

Slava Rubin (29:42)

about 15,000 and is that

typically all upfront or is that over time their wallet just increases?

Mike Silvestrini (29:46)

No.

It's over time. They start off at about 20 % of where they end up and they're not ended up because we're still going. So we're seeing people continue to pound more capital into this segment as they get more comfortable with Energea and international solar as an asset class.

Slava Rubin (29:57)

Sure.

And do I have to pick project by project or are there baskets that I pick or what are my choices?

Mike Silvestrini (30:14)

Yeah. So you're picking baskets and you know, it's, it was tough for us to figure out what level of control do our clients want versus, you know, too much information. And, I think we w where we ended up was, look, I'm gonna do what I do, which is scan them out the marketplace for great opportunities. And then when I find something like we did in Brazil or, have now in, in South Africa,

Slava Rubin (30:22)

Yep.

Mike Silvestrini (30:39)

I'm going to draft up the investment thesis for that play. And then that's going to be a product. So you can take a mixed bag of, of all these strategies. have a domestic U.S product with, you know, super high credit off takers. It's very, very low risk thing, but the return is more like a seven, seven and a half. And what we suggest to our clients is to mix it, get some Brazil exposure, get some Africa exposure, get some U.S. exposure.

And inside each of those are dozens of underlying operating projects.

Slava Rubin (31:11)

How many options do I have to pick through? Is it three baskets or 30 or?

Mike Silvestrini (31:16)

Right

now there's three, we're about to launch Latam, which will cover all of my non-Brazil opportunities south of the US border here. Cause I'm seeing a lot of stuff in Panama and Chile and Colombia, like I mentioned. So we're going to open up a Latin America product to compliment those other three.

Slava Rubin (31:33)

Got it, so is it US, Brazil, global and Latam?

Mike Silvestrini (31:37)

It's US, Brazil, Africa, and Latin is, in the way. Yeah. You got it. Yeah.

Slava Rubin (31:42)

Coming soon. Amazing.

Super cool. So the 12 % is after fees. How do you take your, and how does it work? you kind of manage it. You might get back on making this up 16 % or something, and then you pay back 12%, you keep that 4 % spread. Is that how it works?

Mike Silvestrini (31:50)

That's after our fees.

Yeah.

Approximately. So first the projects send money up to a Delaware holding company. No matter where the project is in the world, the company that you're investing in is a Delaware holding company. It has no employees, but it owns the projects. So the money from the project companies, which are generally single purpose entities like real estate. So each project is its own pass through company. As it makes money, it sends that money up to Delaware.

Then Delaware has some operating expenses, regulatory fees, lawyers that we have to pay and things of that nature, blue sky laws. And then an Energea has to pay Energea for our fees, because we have all the employees and all the horsepower to do the work, it rests with us, they pay us. And then whatever's left over gets distributed out to those shareholders. So just to understand that you're really buying a yield co is...

One of the terms of art here, although it's different, there's no such thing as a publicly traded portfolio of solar energy assets. It doesn't exist in the US current market. The only way to do that is really through energy and access to these private markets. And it's an asset class that does better in a private market setting than it would in a public market setting because of the risk of adulterating the share price as I was explaining before.

Slava Rubin (33:22)

Sure, so let's say I put in 10 grand today. Let's say I put it into the Brazil basket. You're saying I get like about 14 % annualized, right? So I'd be getting $1,400. Do I get that dividend weekly, monthly, quarterly, yearly? How does that work?

Mike Silvestrini (33:35)

Well, first one correction is that your IRR is 14%. Your cash yield is something less than 14%. As the capital, we still have a lot of dry powder, and we're buying solar projects. So eventually your cash yield will be higher than a 14%. But for now, it's where it is. And the other portion that makes up that 14 % when your cash yield is lower than a 14 % is appreciation on your equity on your energy of shares.

Slava Rubin (33:43)

Okay.

Mike Silvestrini (34:04)

So while you're waiting patiently for these new projects to come online, you're getting appreciation of that stock price. So if somebody wanted to come in and get nearer to that full cashflow situation, they're going to have to pay you a little bit higher premium in order to get there. that's what basically creates that equilibrium. So it's a 14 % IRR. You can basically sell your stock anytime. It's very liquid. Yeah.

Slava Rubin (34:29)

That was gonna be my next question. And how liquid

is it? Like if I bought it today, can I sell it in three weeks or is that, not.

Mike Silvestrini (34:36)

I think

that there's, I mean, I'll have to, please read the offering circular in order to know this, but I want to say it's a 30 days because there's some transactional and IT issues that actually prevent us from selling it that fast. But once you've helped us out.

Slava Rubin (34:46)

Sure.

But typically

people aren't doing that, right? Typically they're buying, they're holding for.

Mike Silvestrini (34:53)

98

% of our clients are holding their stuff because they like it. I think, when some, you your daughter's getting married or life happens and you want to get that capital back, the company itself, which is sitting on a large amount of cash, will just buy your stock back from you at the then applicable price, completing your return profile. Now, in order to incentivize investors to stay around longer, we charge a 5 %

penalty that stays in the company, the Delaware company, that benefits all the other investors, not us, but it benefits the other investors, because it's inefficient for the other investors to constantly be using their cash on hand to buy investors out when they should be buying solar projects. So there's sort of this 5 % penalty. After the three-year period, you can come and go as you please. But that's how we structure to try to find the fairest way for investors to have maximum amount of liquidity.

without being an expense to their other shareholders.

Slava Rubin (35:53)

So I know you're gonna say it depends on how the cash gets allocated, but let's say I put in the 10 grand today. What would you expect the actual cash returns to be for the Brazil basket for year one, year two, year three?

Mike Silvestrini (36:04)

14, 14, 14. mean, cash yield or IRR? Oh, well, that's all right there. You can look at on the platform and you can see what the real-time cash IRR is right now. Let's see here. In Brazil, I'm just going to Energea.com to 5.7 % cash yield right now. So I would expect that to, that's.

Slava Rubin (36:08)

Cash, cash yield.

For you.

Mike Silvestrini (36:34)

going up as we interconnect projects and turn them on. Each time we do that, it adds a substantial amount of more cash flow monthly. And as that continues to happen throughout this year, that cash yield should continue to go up against the, there's also dilution happening because we're also constantly raising money for the next project. So, over the years, it takes time for the thing to stabilize and your cash yield to continue to increase.

And then as that happens, know, you, you can always exit if you wanted to complete your, your 14 % return profile at any, at any given time.

Slava Rubin (37:07)

Amazing, sounds super unique. Is there anything else that you think the listeners should know as they think about getting into your product?

Mike Silvestrini (37:14)

No, I don't think so. think that what people really liked about Energea is that we really bend over backwards to explain to people what it is that we're doing, how it works. We have these great quarterly webinars that lots of our investors come and they show up and they listen to us blabber about solar for an hour and a half and they seem very attentive and ask smart questions. And, you know, our statements and reporting have been

Again, above and beyond the call of duty because we want people to really understand what they're doing and what we're doing and why we're doing this together.

Slava Rubin (37:44)

So you're obviously a smart guy, traveled a lot, very knowledgeable. What are some of the things you like to read, listen to, or watch that makes Mike Mike?

Mike Silvestrini (37:53)

Hmm, that's a good one. you know, I, when I sit down in the morning, I pop on Bloomberg, so I can see the headlines flashing across and they get some osmosis of what's going on in the world throughout my work day. and then when I have time, know, generally I'm reading industry related stuff. I'm looking at market research and where I see bond rates, cause you know, basically solar energy rates have to be substantially higher than a bond rate in that very same country. And there's a bunch of other science that goes into it.

Slava Rubin (38:19)

What's an example

or two of a trade magazine or newsletter or something that you like?

Mike Silvestrini (38:24)

Well, actually, I don't really read a lot of solar trade stuff. What I'll read is I'll read like, you know, the, Brazilian newspapers, which is called global. I'll read the Kenyan newspapers. I'll read the Colombia newspapers every day. I kind of go through the websites of the, of the best news agencies in those respective groups. And then for a global, you know, high level news, there's no real good one. I, I find myself constantly flip-flopping between the BBC one month and then.

Slava Rubin (38:27)

or even macro.

Mike Silvestrini (38:51)

You know, I'll be with Reuters for another month until they piss me off. And then I'll switch over back to wall street journal and you know, there and then until they annoy me, I move on to the next one. But there's just, I haven't found one that I really trust on an extent for an extended period of time.

Slava Rubin (39:06)

Amazing.

right, Mike, we covered a lot of ground. And on that note, we started out where you discussed that, you know, travels help to inspire you to get into solar. You started your first company, Greenskies, and then sold it 10 years later. Had to figure out what to do with it. So you create Energea. You're not into the 60-40-0. You have a 20-60, but your bonds are actually Brazil. So even more interesting than that.

Your alternatives really get quartered up into crypto, real estate, venture, and to obviously your Energea portfolio yourself because you like the yield there. Sprinkle in some baseball cards, especially since you love Ted Williams. I did love your point about trying to get into Brazilian bonds. 14 percent, pretty killer. Obviously a little bit more risk than the U.S., but it seems like we're getting overpaid there, you mentioned. You do think inflation is getting under control. You don't see recession coming forward. You do think interest rates are going to stay about steady and the stock market.

Mike Silvestrini (39:50)

Mm-hmm.

Slava Rubin (39:57)

You know, we'll stay there about steady as well a year from now. You do love the energy market, trying to get into whether it's Africa, whether it's other markets in the world. You get to pre-sell like a hotel room 15 years forward. You really got me on that one. I love that, getting your client for 15 years out. And you can rise up with inflation, so you don't have to worry about that. You've been around for a while. You have over half a billion dollars of investments that are already made, 14,000 users. Super awesome.

getting yields around 12, 14 % IRR. Already you have three different baskets of domestic US, there's Brazil, there's Africa and Latam coming soon. I love the fact that you're retail, you can enter with only $100 investment, but on average people already have about 15K in their wallet with you. And it's awesome that you mentioned how many times you love Ted Williams, but you like switching on your news sources from Bloomberg to BBC to Reuters, Wall Street Journal.

Thank you very much, Mike.

Mike Silvestrini (40:48)

Awesome job Slava, thanks man.

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