Q1 2020 Earnings Call
[music].
Good morning, ladies and gentlemen, thank you for standing by welcome to Interject renewable energies 2021st quarter results conference call. The webcast, Indiana coffee cost anybody in Oh, what do you feel if he has deep couldn't it's gonna have to do anything you know checks NLC overlap.
At this time, all participants on the phone in internet or not listen only mode.
Following the presentation, we will conduct a question answer session for analyst and industry still industrial.
Institutional investors and instructions will be provided at that time for you to queue up for questions.
If anyone have any difficulty hearing copies. Please press star followed by Joe for operator systems at any time.
I'd like to remind everyone that this conference call is being recorded.
I'll now turn the conference over to Caffeine Ashok Communications Director. Please go ahead.
Thank you Hello, everyone and thank you for joining us today.
I'd like to specify that this conference will be out in English members of the maybe are invited posed the question by phone after this call.
A presentation sporting today's discussion is identical as we speak on the on page on our website a three to build you thought you know Jake.
This call contains forward looking statement within the meaning of applicable securities laws.
Although the corporation believes the expectations and assumptions on which forward looking statements ore bodies are reasonable under the current circumstances listener a cushion loved to rely on duty on these forward looking statements as well as trends can be given that it's been proved to be correct.
Forward looking information.
We're just seeing information contained therein is made us on the day does this call and the corporation does not undertake no obligation to update or revise any forward looking information what does the result of events or circumstances are occurring after that they see era unless required by law.
During this call he will bear fruit financial measures that are not recognized according to international financial reporting Sunday.
Please refer to the money as far as measured section of the ability for more information.
Our speakers to they wouldn't be missed there's also new chief financial Officer, who will present Q1 results and Mr. Michelin <unk>, President and Chief Executive Officer, who will review operational highlights and acute supergene.
Dolphin does come from Sunedison Mr., though.
Thank you Karen Hello, everyone.
The variation in our first quarter results over the same period last year, there mainly from the commissioning of the Phebe Solar project in November and afford C. D wind project in September.
Production and revenues were up 28% and 5% respectively.
Adjusted EBITDA, he was down 3% wad production proportionate revenues proportionate and adjusted EBIT de proportionate were up by 24, 11, and 9% respectively.
Before going further I'd like to stress that 2019 figures are reported on a continued operations basis, which excludes Hs article.
On page eight production for the three month period ended March 31st 2020 was 28% higher due mainly to the contribution of the Ford to the wind farm and the Phebe Solar facility Commission, respectively on September 27.
2019 and November 19.
2019, and true all your production in France.
These I'd them were partially offset by lower production that kept back wind facility.
[noise] contribution from Ford City, and their friends wind farm were offset by lower production at the came back when facility.
And hydro lower average price and lower production at some capex facilities more than offset higher revenues NBC.
Our next page adjusted EBIT decreased by 3% due to the lower contribution from the wind segment, where lower contribution from the cubic facilities entirely offset higher contribution from the friends facilities and the fourth CD project.
In Texas.
The decrease was partly offset by disorders segment due to the commissioning of TB project in Texas.
Do you, 9% increase in not just the EBIT da proportionate comes almost exclusively from the 10.9 million Ptcs generated by the Ford City, a wind farm following its commissioning.
Here, let me remind you that production tax credits.
You asked $25 per megawatt hour generated by the project is recorded as odder read the news under I FRS and are applied as a reduction of the long term debt since the toxic witty funding was characterized as such under.
Hi, FRS instead of non controlling interest.
No continuing on page 12.
The 400, an 18 million decrease in long term debt is mainly due to do a net repayment of 466.1 million of the corporate credit facility from the proceeds of the investment by hydro Qubec and energetic common share.
Scheduled principal repayments on long term debt and tax attributes allocation, partly offset by unfavorable foreign exchange rate.
On the next page changes in the total assets that mainly from the increase in property plant and equipment due to his Chris.
The weakening of Canadian dollar against the U.S. dollar and Euro and the decrease in derivative financial instruments, mainly related to phebe power hedge and basis edge.
Change in total liabilities stems mainly from the decrease in long term debt.
The change in shareholder equity is explained by the private placement of 34.6 million shares.
I drew Kevin.
As shown on the next slide the free cash flow available for distribution has decreased by 27.6 billion on a trailing 12 month basis.
The adjusted EBIT de on a consolidated basis remained relatively flat despite the acquisition of Kartik.
And the commissioning of two new project due to lower generation from unfavorable weather condition.
This fact combined with the increased debt service payments in the trailing 12 month ended in first quarter 2020 compare with the trailing 12 month ended first quarter in 2019 in part due to a payment already in Q4 2018 on the new car cheap financing.
Contribute to the decrease.
The decrease were partially offset by the decrease in free cash flow attributable to minority interests and by the onetime recovery of maintenance Capex, both stemming from DHS disposition.
Our next page we are proud to announce that we have close on May seven 2020, the head crest financing.
The total construction costs are estimated to adopt.
279.5 million you as daughters, and will be partly financed through a U.S. 82 million constriction term loan and the U.S. 109.8 million toxic with deep bridge loan provided by a group of lenders.
In a jet will fund the remaining U.S. 87.7 million equity commitment.
Our commercial operation a lender would provide the tax stick with the investment to be used to repay the tax equity bridge loan.
And that no I will give the floor to Michelle.
The operational review of the past or the last quarter.
Thank you.
Thank you al Phos well good morning, everybody. If you go to the other webex or we're going to start with a corporate development, obviously up a busy a first quarter of the first a very positive aspect is that we're a strategy galliani I lie.
So with hydro Quebec.
Very proud of being.
Partner with Hydro, Quebec, and we'll we'll talk a little bit later, what would be the benefit but it definitely helped in the in the pre crisis to have this a injection of that capital it put us into a very solid.
Capital position and we will be taking advantage of these favorable liquidity in order to take.
Opportunity down the road there will come back to two dose. So thank you again a for a this a great a potential partnership not potential, but the partnership with hydro, Quebec, I'm very very happy.
Of course, a 2000 the first a the first quarter was.
A busy given that caused in 19 as you all know we're in the middle of the crisis.
We're very very painful a that our industry has been put into a essential services. So that means that all our plan and the continued produce the electricity and I'm very thankful for all of our employees that have been very proactive and resilient in there.
Ability to sustain our operation while this crisis was unfolding.
We also had a all our employees in the office.
Working from home and a big paying a two hour IP teams that put together a the system and provided all the equipment and the phone that seal for these people to be able to be efficient at home or let's say that a it change month the way I have.
Uh huh.
Okay.
The the work from home I was a little bit skeptical that beginning but Ah boy. It a it shows that we could still be quite efficient and again, we've been able to produce all the financial documentation and all the audited financial statements for all our subsidiary.
So a big thing again for the employees that have worked hard and given the circumstances not so easy also working from home with the kids that are around so I'm very thankful for all the employees being so did educated and Oh I believe we.
We're looking forward to continue this a this situation for awhile.
Our policy is not necessarily to rush people to the office, we want to make sure that we're going to take our time.
And that a when people are going to come back to the office, you'll be safe and efficient to do so.
Again, our electricity is sold under long term PPA. So we.
I have confidence that a DSPP will be honored by all our customer. So we are thankful for this situation as a as well now we're also very.
Mindful of Ah the distressed debt. This crisis, that's created also in some area.
We have initiated a.
A campaign to support a some of the initiatives that a local community have abrupt a forward and we have also.
Work with our communication team to redirect some of our economy commitment that we have done in the past, but maybe having a little bit of a different angle to make sure that a these money.
Would serve to own to take care of the urgency that the prices that sector either so again, we're very very.
Painful for being in the industry that we are but we're also mindful that others are suffering and we want to share and be a good corporate.
Citizens.
So if we switched the other page or the operational I like we have continued they'd love developing our two project in Hawaii and as you've seen a yesterday, we were really pleased to be selected.
For final on the negotiation on the PPH just want to make sure that people understood is the same system as a.
The last RFP. So we have to sit down with the utility and final I guess the language behind a PPA, but we have won the right to two signed those PPH. So typically it took about three months last year to finalize the the PPA. So I imagine this.
Here will be similar but given the fact that these are the last the RFP was the first.
Of a new wave of a P.A., having solar in battery together. So it was a little bit the groundbreaking around these a these P. Eight was.
I guess negotiated last year, so I don't see big issue. This time I think that a the p., we have negotiated or the industry or the player has been goes you should last year should be.
Should be the base to basically negotiate a the one that the new ones so pretty happy in a sense that Oh, we have said and will retain read that the later on in the presentation that batteries and.
Stuck out.
Sorry, just thank you.
Is very important for us in terms of strategy and we have now 80 megawatt in ER in development in Hawaii, and we also have a nine megawatt in friends that we have won a with their E. Ah. So it's a we're getting very close to 100 megawatt of.
Have a development for battery. So it's a beginning I think that we are going to see a lot more activity in that sector in our industry.
Also we we have finalized.
The documentation and a negotiation for the on two extension.
Another big project like I said, the yesterday, but it's the first one of hopefully a lot in many new project in France. It was.
Good luck by our team in friends. So its it's a it's a eight street turbine basically a that we are going to put into our existing a you on a facility and also it's a it's the same a substation, where we are going to install the nine megawatt.
Battery. So this is basically the first a project that we could develop or have a have the unfortunately, you put things into construction in France.
We were planning to start a little bit earlier, a this a this spring, but given the the coveted 19 a.
Crisis, we are expecting to break ground or somewhere in June and still hopeful that we could finalized by the end of 2020, but to be little bit more conservative, we're calling skew the for 2021.
On construction site. The we have been very active in the Cresses Alfonso dimension, a big win is our ability to have finalized the financing I must say that a it was not an easy or easy a process.
Given the fact that we were doing it in the a peak of the of the crisis and of course, a lot of questions from the independent engineer came up on our ability to deliver the a D.C. with the by the end of the year, but I'm very proud of our team a construction and ER and the engineering team.
Team followed.
The independent.
Engineer question, and we were proactive also to secure some component that might have been.
Put into a a waiting waiting list. So we have secured Paul the.
Supply the panel and all the other a supply needed to finalize the construction and we're very.
Very optimistic to finalize this project by December this year.
In Quebec, the small project the innovate to small project hydro facility in the north.
It's a little bit more complicated in a sense that the area is very rural and mill in terms of a.
It's a it's in the area, where it people are isolated and the government has closed these area.
So we don't know exactly when we will be able to start construction. This summer.
We might be able to go and start slowly by the end of the this summer but of course, we will be following the government.
Guidelines in order to.
Go and start being.
In that area and traveling and of course, we want to make sure that a the village stay healthy.
If we found a switch page what are we going to focus on Q2, a for sale kras will be a top off the line. We Oh, there's a there's a full crew over there we have roughly 150 workers on site at the peak we are for cash.
Thing something close to 300 people, so it's going to be a busy a construction site and the our contractor and our our team of construction are making sure that it will be also safe working places given the guidelines by.
Well George these regarding construction, but we're very optimistic that we'll be able to be efficient and like I said did over dumbest few the by December.
We will also like I, just said, we're going to start construction on young and a we're going to use in recon has the full EPC contract work on both to finalize the the contract and they should like I said start mobilizing on site by June.
In terms of Ah did laufman.
We are of course.
Working on all our project in Hawaii, and the new one will also be a top of the list to start a initiating older permitting and the community.
Insulting it might be little bit of a challenge consulting community given to call in 19, but a will or will be creates if in the I'm sure that our team will be able to reach out the communities.
We will all we also are working hard on solar project in the U.S., We're working in Texas as you as you know, but we have also said that we wanted to be present in Pennsylvania, and Ohio and I'm glad to report that we have now seek you're at least enough land to produce.
Use.
Two project.
In that area and PGM of at least 100 megawatt each other so the team has been little bit slowed because of the.
Cool the 19, but a the we'll be working hard during the summer to extend these.
These are land to make these project a little bit bigger and perhaps adding two more projects. So the goal is to have roughly at least for project in that area.
We want to continue developing in France, a win and storage storage you've seen that we have initiated.
The a the strategy by a.
Participating in the RFP for capacity and one nine megawatt over there.
But also pleased to report that our portfolio in France is now around 300 megawatts. So it's roughly 50 megawatt additions since last year.
I'd is to have one or two project available for RFP and basically we want have continuous a evolution of one to perhaps eventually three project per year.
France is the.
The project the not a project an area that we want to.
Spend a lot of energy and the team is becoming more and more efficient and so we're hopeful that next year, we'll have one or two project too.
Be permitted.
Development Department in Chile.
We want to lump in the end continue developing the hydro the ideal over there is two did lumpy portfolio a mix of Ah Hydro solar wind and eventually also battery I think Shelly is the perfect place to install battery given the fact that.
A lot of solar we'll be presenting a future in Chile and solar slash with battery just like we're doing in Hawaii would be very I think would be competitive in Chile. So that this is also a big part of our development in Chile.
Like to mention also due to acquisition that we had mentioned when we announced the a strategic alliance with Hydro Quebec has been put on all while we were finalizing the financing with Hill crest.
We wanted to be prudent and making sure that a the financing availed kras would have been put a two GITR before extending and spending the capital into new acquisition. So we wanted to be prudent of course, a when the crisis came out and some bad.
News regarding the a the economy was.
We're basically announced we just wanted to be cautious with our liquidity I think now that the fed and the bank of Canada and the government are helping a lot with the could liquidity I think that things have.
Come down little bit and we have more clarity. So we have reengaged with with the centers and we are quite an advance in our a negotiation and due diligence. So we should be in a position to a country conclude these acquisition in the very.
For a period of time.
If we go back to the the a strategy to 2020 in 2025 strategy Flan. We are we basically have had a a consultation also with our employees I think it was important to have them.
Come it also and provide some ideas in our business, but the biggest a conclusion is that we're not really didn't think herself in a sense that well still committed to be a renewable energy company.
We want to.
We want to stay into the same principle that have created the.
The success of the Nordics.
But we want to evolve and we want to in to embrace innovation.
And I would say that storage and also the ability to communicate with corporate costumer is a very important and he will be a big part of our future effort for development and when I say that I say basic.
They going into managing capacity, a storage for a part of grids that might be weak or help stabilize on some grids and owned that aspect. We're very very fortunate to have hydro, Quebec or a huge expertise in that.
That field, and we love to be able to take advantage of these expertise.
Were in the past sooner Jack's didn't have the that knowledge of managing a grid ori, it's smaller utility so given the vast experience of hydro Qubec I think we will be able to be even better in that a in that area and also being able to help.
Big industrial customer to manage their.
Energy by potentially having behind the meter some batteries and some software to manage their electricity.
Might be also a very interesting and growing segment of our businesses.
Force, we want to grow and we've been growing but we want to do it a responsibility and we want to also to continue diversified our activity. So we want to have a portfolio of mix technology, a we'd love hydro wind and solar and now batteries and we want to make sure that we have it very well back.
Wins that portfolio threw out a diversification of both location and technology and we want to embrace also innovation, but you know nation is not only for R&D innovation is also part of the day to day.
Work in our operation, we want to entice our people to get more innovative in the way we are doing our businesses and the coven 19 is a good example of being innovative and being able to create some.
Some work from home and and being able to work with team and communicate efficiently. So these little things aren't eventually going to broader use I think a bitter and and a more efficient a way to do business in the future.
So on the on also in order to measure our success.
We are changing a little bit the way, we are going to give some guidance in our growth of course megawatt will still be interesting and we'll report on the megawatt install but giving defend that we want also do you have a lot of a storage and batteries are then suddenly us some part of our business will note.
Longer be a measure by megawatts or megawatt hours in the same way. So of course, we want to grow our EBITDA and we're maintaining a growth of about 10% that 10% to be da we'll have.
To be translated also by cash flow and accretion a casual per share as well and of course, a the the board will be and the manager who will be focusing on that creation of value as well, we're still committed to create value in terms of total return for.
Our investors.
We always said that hi Inn in our business.
We we want to create a spread over the can you ended bond and or the U.S. bond the depending on the on how much proportion we would have in the U.S. So were really mindful of that spread and I always said that we want to create.
Some value some spread around 600 200 basis, when depending on the risk profile of our project and also on the market.
So you've seen in the last a few months the spread on the the corporate bond the half moved from 200 basis one.
Prior to crisis do with peak of 450 or close to 500, it's now back to 350 or something so we're mindful of that of course, it's giving us some ideas on where in a market is in terms of.
Potential return so we always have nothing in mine as well.
And in 2025, if we look back and we put our self in in that position I'd be happy if we would have developed a lot more storage capacity capacity that we would have a few more a good long term.
Corporate cost summer, we would have expand little bit in market in the neighborhood of where we are actually.
Prison, meaning Chile, where in Chile, but love to be President also in Peru, and perhaps a Colombia and in Europe, where very present in France, but that doesn't mean, we can expand in <unk> in Europe in the in a few a neighboring countries. So basically the same same philosophy.
Long term investment philosophy also supported by our Tripi philosophy as well as sustainable development.
And create value for shareholders on their long term basis and being a.
Good corporate citizen.
So on that I would open the question period.
Thank you I'd like to ask your question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press the pound.
Thank you, we'll pause for just a moment compiled acute hereafter.
Your first question comes from Jon Stewart from TD Securities. Your line is open.
Thank you good morning, and thanks for all the detailed.
Question on on storage.
Becomes a larger piece of the overall strategy.
Michelle can you comment on the economics and returns on storage investments versus traditional renewable development opportunities and as you think ahead to 2025.
What percentage of your overall mix do you think storage could be at that point.
Well it's storage.
I will depend on different there's many opportunity in storage you could try to do storage bye.
Taking risk on the the volatility on the an energy during the day period and the night and so this part might be little bit more I would say.
Risky enhance their returns should should be higher but what we what we want to also do you have is a mix of of long term contract and long term commitment like why we get down 25, a 25 years commitment from the utility and they're paying us on.
On capacity basically and so we have an annual payment that that is obviously paid on a monthly basis. So those.
Segment of the business will be.
Very.
I would say very close to the business that we have.
Been successful then pass in a sense that were answering RFP, we're providing a service and we're getting paid for it of course for 25 years contract and having to security return is a is going to be lower than the project that you would a installed a battery in a certain area Holt.
To make the arbitrage between Ah the daily a volatility so I don't see storage being very different in terms of return.
Then to conventional.
Business that we were in in the past and.
Of course, we will have a.
Our partner Hydro, Quebec has a battery that there are developing and I think that battery.
He is very good and we'll be very useful.
And we'll try to also take.
Andrew Quebec expertise.
Namely in the North east that might be a good opportunity also hydro qubec is is being able to to trade a lot in these area and have.
A big can find knowledge on on the need to half battery in certain area and in the North East. So these are type of.
Opportunity. We're we're looking in Chile, it's just that in Chile, we want is fine and be in a position to offer a long term contract to a two corporate offtaker.
We have to have to means in order to produce the electricity and of course, a solar will be will be will be a big.
Hey, I would say big segment, the big growing segment in Chile.
But what are you doing during the evening, if you only have sold or in or your portfolio. So having a mix of the hydro that has some storage capacity coupled with a with battery would provide us the tool.
To have a package being offered to corporate off they occur and it'd be difficult due to single out the return on the battery because it would be a portfolio approach and each of the component would help provide the full services, but I I don't think that.
We would be looking into different different return I always said that in our portfolio. If we were making an acquisition of them mature asset.
That is very very well built and then.
Good good long term asset.
The returned the expectation of a return.
Except for special that equation or give me a little more crisis is supposed to be probably the lowest a the Louis return and and theoretically your would make a the best return on your Greenfield project that there you're developing so it's we always see that asset mix.
And the ultimate game is to provide this spread over the Canadian Bano 600, 800 basis points. So.
Your question is is I guess, it's a good one because it's a it's a beginning the storage is it see I would see pretty new and there's few a historical return and you guys are trying to.
Trigger what what is the profitability of that sector, but what I'm, saying to you is that I don't think you'll be very different from.
From a from from form our.
Businesses.
Of course, the some some big utility might or might want to have that.
Specific calls for one or battery in one location in this is basically.
Almost a call on supplying a specific equipment those might be a lower a type of return those might not be necessarily the one that we will be seeking a so we want to create value by bringing the the storage and we're not just sending a battery we're trying to sell also.
Product can that create a little bit more value added to the.
Electrons.
That's great detail. Thank you.
Second question I have is with respect to the the solar in the U.S. beyond Hillcrest 200 megawatts of your.
You are targeting in Texas and PJM.
It seems like tax equity.
Access to that capital pool has not been compromised by Cobot 19, hoping you can provide a little bit of detail there.
Just your thoughts on the general contracting environment.
For for near term.
Our development opportunities in the U.S. how that works.
Yeah, that's a well.
It's difficult to to make a long term forecasts for what the Cofins 19 will have us.
As a full potential.
Impact, but so far you are right Oh, we have we've had some very good relationship with a tax equity provider in the been supporting us through the financing availed grass were in direct contact with them in.
In.
In order to secure future commitments for other project.
So far I think that there's maybe a few a smaller player that will struggle to keep up the same pace as last year. So I think there will be perhaps a little bit of security in the in the tax or uncertainty in the next few months.
I guess before people gets do have a better handle on the.
Ultimate impact of this crisis.
But so far we're still confident and Oh of course, we Oh, we have.
Been able to provide a good project and good execution and so I think it's important in a in the way people will be selecting project can and.
PAMA promoter in the future.
As far as the price.
In Texas, we might see some softening on the price.
Because of the demand or might or might slow down a little bit and hence our Ah desire also to be very active in PJM, where I think a demand can be a can be soft, but oh, no long run I think that those area will be.
Very favorable for renewable energy and solar is very very popular so I'm still positive or on a on the U.S. like I said, we everybody I think he's a little bit cautious on on how fast the economy will recover and hands how fast the demand will recover.
But remember that a solar and renewable energy our moral linked into a switching from the the coal or a the nuclear also decommissioning so even if the demand Oh, it's slow in some cases it may.
Even accelerated.
The closure of a non very efficient a coal facility that might not even be able to compete anymore enhance creates a little bit more room for solar and wind too.
To be prison so.
I know that I'm not answering exactly your question, but I'm I'm trying to tell you then we're still confident and.
We.
We're seeing.
A lot of.
Interest.
For these potential project in the states.
Okay. That's useful thank you very much.
[music].
Your next question comes from Nelson Ng from RBC capital markets. Your line is open.
Great. Thanks, Jeff.
While up on how high can you hear me.
Yes, very well. Thank you okay. Great. Thanks, just to follow up on Sean's question in terms of Oh.
The developments in the U.S. could you just clarify.
Did you say, there's two sites.
Our about a 100 megawatts each.
Our solar and Pennsylvania or.
Are you, saying, they're kind of spread across Pennsylvania.
Access.
We have one in a PGM and one in Ohio, and we have three in Texas I think we've talked about Texas. So in Texas, we already have almost 600 megawatt worth of development that doesn't mean that we will develop them all.
But we were like I said, we were focusing on the PGN and PGN include Pennsylvania and Ohio.
Because we want to we want to be diversified I'm mentioning it often.
We like Texas in a sense that yeah, I think we have a good team there that can there is lot project can can we can build project, but at some point in time.
We want to have a some limitation on exposure on different market and enhance the if we developed these projects we might sell some that have been in that Vince development or we can.
Divest the some of our existing one by having a financial partner. So we are we like Texas and I think will be successful in Texas in the sense that we we already have.
Enough project.
In our development pipeline. So we want to make sure that we also have other area in order area of interest in the in the states is the northwest part.
And potentially partnering with some first nation a entity in that area. So we want to we want to make sure that we have other a good diversification also into unit in the United States.
Okay and this is mainly solar not when are you looking out Oh I'm, just wondering whether the a that potential one year extension to the safe Harbor, yes.
Anything for you.
No. That's the point, we have Grisson trail, which a if you remember we are.
We were developing Griffin trailing the same time as Ford City and at some point in time, we decided to slowdown on the development of Griffin trade, but we had continue the development on Gryphon clearly it's a it's a project that is a little bit a south of Fort City, very close to fourth city and.
We we're pretty yeah pretty confident that the extension of the D. C for one year.
Would apply for Griffin trail, and we would be 100% PTC quantify so suddenly Griffin trail has a revised in a way in our priority and we're continuing a developing it and then trying to secure the.
Tax equity and access due to grid, we would have to make some decision on a.
Interconnection investment by the Middle of this summer So Griffin trail would benefit greatly from a the PTC extension and in the northwest Ah we might be looking also for wind.
But in PJM in Ohio, we were more focusing on us order.
Okay and then.
In terms of your arrangement with hydro Qubec should we assume that.
Most of the.
New developments would be.
On a 50 50 basis like how should we think about the.
You're not interest.
A lot of these developments going forward.
Well as we mentioned everything that we we had under development prior to these strategic we're not part of the of the partnership but we have the option to welcome hydro Quebec in dose so.
We will be trying to.
Two to two invite a hydro qubec and most of our Ah development, obviously, a it'd be nice if we could consolidate a some because obviously the proportion that a it'd be D, where things will which you guys. You your you're doing a great job trying to figure out.
These distinction between a project that where we can consolidate and some that we have on a per watt up basis, but of course, it's always easier. If we can consolidate so those are going to be discussion.
Implied some discussion with hydro, Quebec, but yeah of course, we if we can a if we can partner with hydro qubec and not in future project will will be very happy to have them in.
Okay, and then just one last question.
To go back to.
The other stores.
When you look at the heart check that out of 25 year contract.
Like what's your assumed.
Battery life.
Correct.
I presume you're assuming it.
Right.
Rather than some other technologies as you mentioned.
Well, yes, it but the initial one we're.
We're bid with a slot technology and Tesla had committed to.
Supply the the owing in and have a guaranteed a 25 years not necessarily on each of the Oh the.
Sell but Ah well in there a total costs avoid Andy we're replacing sell do you have to project being being able to deliver a and a face the obligation under contract for 25 years. So he was part of the OEM contract to supply.
At this 25 years. So we will be discussing this same topic with hydro Quebec, obviously.
In the for future project that would have a that long over contract that's will.
Okay. Thanks, I'll go back in the Q.
Good.
Your next question comes from David because I'd ask from Raymond James Your line is open.
They have in Hello, good morning, everyone.
My first question here just on a I guess switching over to France, I know they released there.
They are 2030 National plan recently wondering if you see any implications for your business. There and then maybe walls were on the topic your thoughts on offshore wind in France.
Yeah, well I think that we we were focusing right now on on onshore I think there's a there's still a lot of a potential in France on offshore onshore.
It's a of course complicated we said all along or a full process in France can take at least five years from first negotiation on with land owner to a full permitting and then you have one years of potential claim or that the a proponent can can have so.
It's a long process and the project or are not that big because.
Just Atlanta constraints in the in France is the he's giving a some a restriction on having big project.
So this is basically the the I would say that.
The less a positive axis in France is that takes a long time to develop them and they're not that big of a project, but we think that they're providing good margin and that you can have a certain certainty on the future demand for such a project overtime. So we.
Like France on on that aspect.
Offshore wind is something that is definitely going to be a.
Providing big volume for for a France, and perhaps a many places around the world.
We have yet to be convince ER that return a.
Versus the risk is.
As appropriate.
So we are.
We're still on the on the side track for four for the time being but we'll be discussing with hydro qubec and perhaps other other players if the future joint venture to be exposed or in the offshore it might be possible in the next a few years, but for the time being it's not a it's now.
Other priority.
Okay. That's good to del Thank you and then maybe.
Switching back to U.S. given that.
Fair number projects that you're advancing there do you have any thoughts on on corporate P.P.A. demand or just the availability of offtake or power hedge agreements or I guess, particularly in light of the current environment.
Yes.
We're still assessing.
These are of course, we were also a thinking of of up potentially having some our own.
Ah send to take P.P.A. in a sense that.
Would be a mix of of hedge and perhaps some some some kind of a reserve internal reserves to make a PPA because.
A lot of tax equity requirements to have a hedge or or corporate PA. When you can have a good corporate P.A. a that works, but sometimes it's a little bit more difficult in some areas and.
When you were making the risk analysis sometime its a.
It's perhaps a counter counter.
Intuitive to.
Six seeing at a very low a.
Low a low price you know did the tax equity are basically looking to make sure that the plant has enough revenue to operate because they're making their return on the PTC and T.D.C. only if we just go back it's about 2.5 cents per kilowatt hours.
And sometimes the the market, especially for wind in different area can be as Louis 1.51, 0.6, and even 1.4 cents per kilowatt hour.
Basically is or is.
The goal is to cover the operating a cost of them off of the project to make sure that you're producing and tends to get the 2.5 cents.
But when you're you're reconsidering to risk profile that that force or basically this the strategy or this will begin. This is a is forcing on a project, it's a little bit suddenly becomes.
Most of the time the merchant a price our over two cents and yes, sometimes it can go as low as you know it can be turning a negative.
But if you look at the the profile of ER and the probability of having a better reach a better price then 1.5 cents were 1.4 cents.
It's quite high so we are initiating some discussion with tax equity and and perhaps with a with our partner on how can we are basically a secure a tax equity with enough reserve internal reserve and perhaps being a exposed to.
Little bit more merchant in those are in those places, giving the fact that a 2.5 cents a PTC were present more sometimes and 60, 65% of the total revenue for a project.
So you know we have a little bit of a reflection on those.
Great. Thank you very much for those those thoughts all I get back. Thank you.
Thank you.
Your next question comes from Mark Darby Frenzy, RBC capital markets. Your line is open.
Good morning, everyone I'm at Walmart.
Back on the storage is that something where are we done all through organic development or do you see opportunity around some M&A to accelerate the efforts on storage.
That's good question Mark of course.
Hydro qubec.
Once we deployed there their battery and Ah so far there is still advancing and they're getting really close to have their their their commercial.
In manufacturing capability. So if we wanted to accelerate and have a.
A meaningful.
Investment we might be looking too.
Take advantage of a small team that would have a they've lump sum or some good opportunities that the that can be a strategy as well.
Okay.
And then ask question for JF, knowing what's the cash flow profile look like for Hillcrest.
Now than you had the financing in place and just maybe clarify what repercussions or would it for some reason there's issues.
Kind of covert on gain if I went down by yearend what our server.
Repercussions back to any of that.
So mark the cash flow profile is similar and then the tax equity. So we would look at a more back and that again cash on cash.
So their cash flow profile, we provided into DMD any on an average.
For the first five you provided the figures on an average 10 million you with it'd be de if I'm correct. So we'd probably but Oh God you do you write page with some page 13 of the Indian is we're providing some guidance on the average for is five years of the projects. So.
Obviously.
The cash feedback is over.
When you presented on that because of the profile of the tax equity.
Now your second question is a part of the tactic with the bridge loans. So no sure I got your question correct, but everything would be a bridge loan tax equity financing and the.
Has been put in place so security in that regard to has been put in patients with some new trend, but in your question right. If you if you're if your question is that if we were delayed I think the most important delays to make sure that we have the first 20% a ITC a commitment and paid down.
For the first online of block, one which is supposed to be online by a July the obvious than we have until October has as a kind of a morris strict.
Date for the tax equity to commit so our exposure is more likely to be.
If something is a very meaningful.
Stoppage under coping 19, because as a as we are planning right now I think that the block one or should be in place by July. So we would have a three months, a buffer which seems to be very conservative, giving the fact that the project is advancing a very well right now in Ohio Governor has.
Reopened the the states for construction and we are also consider hasn't essential.
Services, even for construction, so I I I'm pretty confident that we we we don't we're not very exposed to that are definitely mutation or or potential liability on tax equity.
That's great Marcellus exactly I was looking for thank you. Thanks.
Your next question comes from Rupert Merer from National Bank. Your line is open.
Good morning, everyone.
Good morning.
With the two acquisitions that you're looking to close are the deal terms the savings as what youre looking at before the market downturn or have you seen any opportunities to.
Improved economics, either through the asset cost or cost of financing.
That's a good question.
One we we did and the other one we were not so six foot well a very small modification.
We haven't seen a desperate seller just yet.
Rupert in.
Of course, a our business is fairly resilient and operating asset that have long term PA.
Haven't seemed a yet some very depressed the selling price.
Well, we'll see I guess a down the road the how things are going to a low. So that's why we we were prudent also in a in deploying the capital. So we want to still have some.
Some capital to deploy if if things are getting a more interesting and in terms of or total return on potential acquisition and that's why also we might have slowed down the ER the reimbursement of an existing loan the what we call D.A.M.P. alone then.
And we had also week.
The a a personality.
To pay for a reimbursing a little bit any not Vince and we we decided to keep our liquidity or just to be little bit more flexible if a good importantly, the is coming up instead of just reimbursing in existing loan.
What did you say is your liquidity position today.
Right now we have the GE f., we have Oh.
Slide on 500 million folds excess cash yes.
Over 500, and we have as of today, we have almost finalize the equity contribution on the aircraft. So.
So I was referring to our investment as a little bit over $80 million ubiquity and I think we have almost a if any of your seven that's already been funded and I mean, the next 10 will be funded by the enemy. So we have Rupert does that month of me about.
As a billion.
Under the revolver and this is excluding me show the cash on hand, we have in U.S.. So we have more than $600 million and available so we're pretty pretty flexible and right now.
Okay, Great and then secondly.
No I understand that you seemed very little impact from Kobe than your assets are almost fully contracted or we see some reports that BC hydro is looking to deal with excess power because of low demand at this point and they highlighted that they plan to invoke some contract profession provisions with certain light.
Piece to reduce power purchases I mean, they approached you and are there any provisions on your contracts in BC or anywhere else, where were you may see curtailment either paid or unpaid.
That's a very very good question or per ambition to grow has been a aggressively well I would say a communicating this to the industry but.
No our internal legal department and also our external I've reviewed our contract in BC and we are on the opinion that even if it's a post merger the lack of demand is a specific exclusion.
In those in those.
Contracts, so they have the ability to curtail loss and they did in the past in a in the friction but that curtailment. The electricity that we would have been producing is deemed a.
A visible and therefore being a payable as well so that's our position in NBC in Quebec and the other places it's a it's less it's less clear, but so far how to Quebec has been a hit probably.
The less than be Sandro hydro qubec, it was referring to something around 5%.
Donlin decreasing in demand, where BCS, claiming 10, I don't know where these numbers a stand for.
That's a little lower demand NBC, but.
I think that.
From our legal.
Opinion, we we think we're we're we're protected that doesn't mean that decide who might not try.
But oh, we we intend to defend a.
This point very strongly.
Great Thanks to the color.
Thank you.
Your next question comes from Paul Dolly Wall from BMO capital markets. Your line is open.
Hi, Good morning, guys. Good morning question for me here.
Just on the payout ratio on.
Q4 call you'd mentioned that I would these two pending acquisitions.
With completion I would take you into a range closer.
90% maybe below 90%.
Just wondering if the delayed acquisitions are playing into lowering the payout ratio and just generally if you can share any other comments for on size for bringing that lower.
Yeah, that's a very good point.
When we when we announced how do we think it's true that we said that we would be in a position to have a payout ratio at the end of the year below 100% of course that will be a little bit more challenging because the first quarter was not that great. Oh of course. So that's that's that's not helping but that's a weather related so we don't know how the.
The other three quarters will unfold.
I'm encouraged that we see a beginning of may NBC being pretty strong so it's and I'm happy given the fact that a the.
First quarter NBC was a very weak the other thing is of course, if we if we conclude the the acquisition.
Okay fully by by June or something in that a neighborhood.
We would have less contribution to two dose to acquisition. We also had said that would be shipping loan was quite accretive we can still do it.
From June.
And on we would not have the a make whole payment provision.
But again, it's a two to three months less or accretion so but all in all I think that if you're looking forward. The next 12 months. These acquisition will have been also accretive and then 2021 will be.
Easier to to be a to be a in a better position NPL ratio, but.
Nothing has changed in terms of our business is just the timing of those acquisition.
Might be a proved to be little bit more challenging in terms of reducing the payout ratio, giving defend that we had the laid them.
Okay. Thank you that's very helpful.
Right.
Your last question comes from Maji Baby, one from industrial align Securities. Your line is open.
Hi, good morning.
Good morning.
Wondering if you can give us an up there on the front Terra project or what are what are the next milestones on the timelines for enough I'd on that.
We said all along that a financing was a little bit of that challenge and giving the fact that where the total.
Coping 19 days not helping.
We have the option to start the interconnection, which is.
I would say eight very good asset because there's a lot of when also developer that would love to have access to that a interconnection point that we have secured and that would provided us the opportunity to delay the project for full year and keep the the permitting intact so that.
Right give us a little bit more flexibility.
We also taking advantage of of the slow economy and should lead to some degree in terms of construction to.
Further negotiate the.
Balance of plant.
Construction and.
Well, we're having some success in terms of reducing the price.
It's really re pending on a type of financing, we can get and I would say that a decision or is a pending in the Q3 of Ah. This year. If if we go at a at a full construction or.
We.
I tried to maintain.
Our permitting position and ER and perhaps daily the decision by early next next year.
Okay.
Good.
Maybe just going back to Hawaii.
Are there more proposal are due later this year for or other islands.
Are you participating in that Parker.
Well, another where to this is the the timing exactly but we we are definitely still working on securing a other land and we have also the ability to recycle the two project that.
We're not selected in the a in the RFP, but I'm sorry, we could we could provide you the exact a timing for the next RFP.
But there will be some some future one and that's why we like also a why is that there's a repeat a RFP that enabled us to.
Actually a re file our Ah recycle project that we would have the.
Partially developed to Oh prior our fees.
Okay. That's a that's helpful. Just maybe one last question on the your strategic plan for 2025 and financial targets.
Just wanted to clarify two points the.
The adjusted EBITDA proportion that growth target of 10% here is that off of 2019 or or 2020, and and how much of that gross.
Do you expect to come from organic development versus M&A.
That's a good.
That one is stuff you know we in the past Weve of course, a acquisition these quicker and but it can be little bit more challenging in terms of return.
Oh, My best guess would be a you know I'd be happier, if we could develop more organically.
Lets say, 60% and 40% from acquisition.
But it all depends right if if if the market sun suddenly becomes more attractive in terms of the return on existing asset.
We we might take advantage of that and being opportunistic in a in those and.
But we like I said, we stick to our plan of creating value.
And like I said in the last few calls I think that you should be I'm, giving us the benefit that down when we when we announced one particular transaction a one particular acquisition, we always try to.
See it has a whole and potentially as an addition to a portfolio.
You know if I take care, Chile in in it and we buy one asset you could say well.
Doesn't make a lot of send that particular asset, but if you couple that with a potentially another asset that we have or wouldn't lopping then certainly.
As a whole.
It makes a lot more sense, so, but we'll still be opportunistic and the idea is to create a.
Value and sometimes like I said imported lopping, especially in the into states, if we want to counter.
We entered the effect of the PTC back cash back into cash or cash yield, perhaps and making an acquisition that may have a little bit less the.
Return, but a higher cash yield in the first few years. If you put them. Together then suddenly you haven't bid or Ah cash profile and that helps to payout ratio and and stabilize the the totaled a cash looked a company so difficult to answer your question, we just want to.
Make sure that we stayed disciplined and we ever any transaction that we're making we will be or thinking about the.
Total.
On the portfolio and one of the goal is to reduce that they help issue we.
We we think that we have an opportunity to reduce it and Ah, but we want to still create long term value, we don't want to be investing or on a lot of project at the half shorts lives in high payout ratio at not IPO unusual, but I am cash yield at the beginning in <unk>.
And no value no future value. This is not what we want to do we want to have a real balance portfolio that is sustainable on the long term basis.
That's great. Thank you for the details.
My pleasure.
We have no further questions I'll turn the call back over to the presenters for closing remarks.
Alright, well, thank you very much and I'm like I said I I. Thank you all in a I think all the analysts you guys I've produce your Ah report late last night, so sorry for the late a late delay and again for all all of our Investor Center.
Thank you for your support.
This time of a crisis or we need your support so thank you very much everybody have a day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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