Q3 2020 Innergex Renewable Energy Inc Earnings Call

Welcome to you know shakes renewable energies tween Sweeny third quarter results conference call and webcast.

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Thank you.

I know everyone and thank you for joining us today.

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This call contains forward looking statements within the meaning of applicable securities laws.

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Our speakers today will be Mr., there's also a new chief financial Officer will prison Q3 results and let me show that the U., President and Chief Executive Officer will review our personal lightly.

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[music].

Thanks, you got in the morning, everyone.

Our third quarter results posted growth over the same period last year, mainly due to the commissioning of the Phebe Solar project and the Ford City when project last year.

And to the contribution of the thought about all and Montenegro acquisitions completed in May and July this year.

Production and revenues in the quarter were up 21% and 14% respectively compared to the same period last year.

Adjusted EBIT de was up 1%, while revenues proportionate and I'd, just IDBD proportionate were up by 14% and 6% respectively.

Before going further I would like to stress that the comparable period. In 2019 is still reported under continued operation basis, which excludes each historical results.

Production for the three month period ended September Thirtyth, 2020 was 21% higher due mainly to the factors Miss mentioned previously and to higher production from the Qubec hydro facilities and the idle facilities in BC.

<unk> dot were not affected by the curtailment.

These items were partially offset by the curtailment mpos in BC hydro four five I draw facility.

On page nine river.

Revenues were up 14%, mainly explained by higher revenue from the Qubec hydro facilities, the contribution for TD and PB.

And the acquisition of mountaineer and somebody else.

These items were partially offset by lower revenues from friends and the facilities in BC.

Due to a combination of BC hydro curtailment and lower average selling price.

On the next page adjusted EBITDA increased by 1% due to the contribution of the recent acquisition in a win and the commissioning of Phoebe and Port City.

As well as to higher contribution from the cubic wind and hydro facilities due to higher revenues. These.

These items were partially offset by a lower contribution from the hydro facilities in BC and lower contribution from the wind facilities in France, due to lower revenues and higher operational expenses.

The 6% increase in not just the EBIT deep proportion that is mainly due to the PPC generated by the Ford City Wind farm. Following its commissioning are your revenues and lower operating costs, the Shannon and plucked out facilities and I are real venue at the Dokey and too but.

Montrose facilities. These items were partially offset by a lower contribution from the facilities in Chile.

And the Jimmy Creek facility due to lower revenue, partly caused by the curtailment NBC.

Continuing on page 12.

The 42 million increase in long term debt is mainly due to the 171 million the aircraft construction loan and tax equity bridge loan.

The 172 million long term loan.

So the piece I assume in the mountain their acquisition and the strengthening of the U.S. and euro against the Canadian dollar.

These items were partially offset by the net repayment of 238 million up the corporate credit facilities from the proceeds of the investment made by Hydro Qubec.

And scheduled principal repayment of long term debt as well as tax attribute allocation.

On the next page changes in the total assets stay mainly from the increase in property plant and equipment used to help address the end the sound, but all that month in acquisition the increase in investment tax credit recoverable relating to hill crest.

The increase from the construction activities related to the Gryphon Trail when project and the strengthening of the U.S. and euro against the Canadian dollars change.

Change in total liabilities them, mostly from the increase in long term debt.

The change in shareholder equity is explained by the private placement of 34.6 million shares.

From my Hydro Qubec and an increase in non controlling interests stemming from the Montana acquisition. These.

These items were partially upset by dividend declare on common and preferred chair.

As shown on the next slide the free cash flow decreased by 5 million on a trailing 12 month basis.

The unfavorable variance in free cash flow is mainly due to the commencement of the repayment period on certain project financing, which were not in full effect in the comparative period, an unfavorable impact of the adjusted EBITDA proportionate stemming from the BC hydro imposed.

Sure Tim entering 2020 a.

The decrease in free cash flow attributable to discontinued operation, including the recovery a maintenance capex expenditures following the sale of it just took off in the second quarter of 2019.

And lower generation due to unfavorable weather conditions. These.

These items were partially upset by the timing of certain project loan interest payment, which resulted in the corporation, having made five quarterly payments during the comparative periods.

The free cash flow contribution of the recently acquired Commission project and lower interest payments from.

The corporate revolving facilities concurrent with the hydro Qubec private placement.

And that does not consider the 96 million to represent the current cash generating capacity of its operation.

When normalizing its free cash flow with the nonrecurring curtailment imposed by VCA drove the increase in the quarterly dividend following the hydrophobic private placement offset by the decrease in corporate revolving interest payment. Following d. I drew cubic policemen, we would have reach a free cash flow of around 100 million.

For the trailing 12 months ended September Thirtyth 2020, the payout ratio amounted to 124% up free cash flow compared with 93% for the corresponding period last year when normalizing with the item mentioned before the corporation.

Dimmit its payout ratio to be closer to 100%.

On a forward looking basis, we are confident to remain around our little above 100% over the next 12 month period.

Finally.

On next page, we are proud to announce that we are close to 93 million construction and long term credit agreement for the in a big hydroelectric project.

The construction to enroll and bear interest at three point, 95%.

Following completion of construction the remaining balance of the aforementioned alone will be converted into a long term loan bearing the same fixed interest rate and maturing 40 years after diversity reach.

D, which is scheduled in December 2022.

On that note I will give the floor to Michelle for the operational review of the past.

Well thank you.

Wow and welcome everybody first.

First and foremost I'd like to make.

Thanks.

Good. Thank you to all our employees and also our business partners that have.

Help us through their dedication and adaptability during this and they make to keep our plant operating in our construction pipeline of development goal.

Morning.

We've been innovative in our approach and also we have been successful to keep our working.

Space being safe so thank you to all and.

Tip my hat to all our leadership.

Deemed to have been able to keep.

This.

This business going the way we have in this challenging time and our thoughts also goes to.

Other that are a little bit more unfortunate in their in their businesses so on that aspect.

We also have given the fact that we have seen the second wave being strong.

Listen to the government.

Guidelines and we have.

Our working from home.

Paul as he until next spring.

And we'll monitor of course, the evolution of the depending make love to see that the vaccine.

Evolution are going well.

Of course, we have to be patient, while this vaccine will be distributed enhance our CFO.

Our safety comes first so we.

We will be.

B on the forefront of the new policy or carbon policy. So thank you all for being so dedicated and.

Im very proud of all the team and see how we have been able to advance.

We are in the same taught we yeah, we have been also.

In our construction our final development I'll talk about it but we also have been.

We'll have to close on acquisition a lot to report that we have done two so far this year remember sounds that are in Chile, and most recently a month in there a wind farm in high that whole USA.

Those two transaction are the type of M&A.

You know Jack says.

He is.

Aiming at.

As we said in the past I think that M&A will be a great tools for us to rebalance our portfolio of Oh of activities and and.

Plan to basically rebound since the cash on cash.

Do you know that we have our payout ratio that is a little bit of the of a challenge we want to make sure that this payout ratio becomes a less comfortable.

We have said that we're looking to have a payout ratio below 100% and we want to continue developing also so M&A will be a good tools.

To rebalance a kidney from between our own development Greenfield projects, especially the ones that have a tax equity as you know a little bit more cash on cash.

Towards the little bit longer term. So if we can find M&A to rebalance this cash on cash in the early years. This.

This is our strategy and I think that we have started to the to deploy it and we are still focused on on doing this so I think that on the long run will have.

A better approach on our cash on crash and pain and development of projects.

So pretty a pretty happy on this and the team. The M&A team is focused to find other other transaction in that in that type.

In terms of construction weve been pretty a pretty.

Pretty busy also this year as you know we are working in the old credits.

Getting very close to the closing I'm very happy to report also that we have made the first the funding on tax equity or people that knows thanks Lydia on the.

The task.

Yes.

Our role in their approach and the team has been able to answer all the questions from the different.

Stakeholder in this.

In this approach so pretty appealing on that aspect. So it's behind us and we are continuing putting a section of our.

Power plant in.

In service.

We have eight.

Blocks that we have to complete so so far one is done meaning interconnected and fully operational and roughly we'll have one every two weeks or so so theoretically we should we should be very close to have six or seven.

Blocks by the end of the year and the remaining at the beginning of 2021. So we will be selling electricity in the next couple of weeks and it will be a gradual.

Unique in phase as we Interconnects those blocks.

Vicki project is going very well as you know we have been able to go back this year or even.

Even if the coated with inflate and happy to report that everything has been going very well on the Navy and as Sean Francois has mentioned, we have now finalized the construction financing and long term financing.

You will see in the future that this financing is a little bit different.

It's a it's something that we'll be looking into some hell of a of a.

Reverse mortgage for the first five six years the ability of the project to support the debt is really high. So we were able to restructure little bit. This this financing and and this will generate or free.

Almost 100% of the EBIT da to be distributed to partner in the first five to six years. So this is a fairly you know it is financing that we're putting in place as well to promote the.

The visibility of cash on cash for the partners.

The young project in a in France does the extension of an existing park as we know.

It's not a big project, but as I said before this is the first project from the team in France from Greenfield to construction. So hopefully its not the the last as you know we have a very.

Aggressive development in France for the for our pipeline I'll talk about it a just a little later.

So we are still.

Counting on this huge d. bye bye the first.

Q1.

Of 2021, although we might be surprised to see but depending on the pandemic and the restriction in France. That's why we were cautious and call. It for the first.

First quarter of 2021.

Right.

Griffin train project.

He has been going very well. This project as you know has been been developed very very very fast and.

And we have been able to secure the EGPC contractor and the GE supply for the wind turbines.

This is the same team that has done for the city.

And the work very well together Blatner is a very proficient old.

Contractor in the U.S. they have a lot of experience in building wind farm. So far we're very pleased on how the approaching the approach.

Project and very confident.

You have this plan being commissioned by the.

Third quarter of 2021 also we have been able to secure the interconnection.

To be before the blackout period, sandy or call. So as the wind farm will be erected we will be able to sell electricity to the.

To the market as early as June probably.

So that covers the construction now the development activities have been also quite.

Quite AXT is even though we are facing this pandemic. Our team has found ways to make public a public meeting virtual public meeting and being very creative in their approach to.

Engage with all the government agency in order to advance our permitting so very happy to report that the things are going well in that why.

We have been also.

And able to sign two ppt and this as you know is a factor of growth that we think in our checks will be successful then.

Producing renewable energy matching it with batteries is definitely a sector of our industry that we'll see a big big growth in the future. So these projects are a very good example, and provide us with a lot of experience on how to deal with.

With the utility and how do we are integrating batteries in the these utility that that being said we are also counting on our joint venture with hydro Quebec to further develop this sector given the fact that hydro qubec has a lot of.

The experience and good people in order to help us understand in either of the utility and hence being able to deploy.

This strategy going forward.

In term of a of a general development as you know we are putting a lot of effort in the U.S.

Maybe I guess that.

I can have a word regarding the U.S. selection not that I want to get into politics at all.

But isn't the primary.

Resolve we.

We think that the Democrat or Joe Biden will be well the way again don't want to do that.

But it seems that we will have a democratic president in United States.

So therefore, we are pleased given the fact that their program are very pro renewable energy.

And therefore, we think that our strategy to get into do you Wes what's a good one.

Even though we have had some success with the prior.

Exploration, we thing that are giving Mr. Biden has with.

I would say more.

HM.

More views on putting a growth in renewable energy in the United States. So therefore, we are glad to have our team on the ground and our policy and the policy, but our strategy to grow solar project in the states remember.

We have a target of around 600 megawatts by 2023 is on track.

We want a diversified also outside their costs. So we're very present in the PGM and into northwest as well in order in the.

In the United States in order to.

Deployed the panel that we have secured remember that we have little bit award 100 megawatt of solar panels that are grandfathered for a full ITC grant. So this is going very well, we're still on track to have that target by 2023.

France as I mentioned early on is doing good in the sense that our pipeline is growing now it's over 350 megawatt of course.

These pipeline are staggered in the in in their maturity of they've laufman, but the idea. There is to have one or two project by you by 2021 or 2022 to be able to put forward for future RFP as you know, France has announced a very aggressive.

Future RFP for wind and solar.

In the in the coming years, so we want to make sure that we have a pipeline that can match. These future RFP and we have grown also the team of development in in friends so that.

Our people can.

Come up with the new project for the future.

The Chile, the Chilean market is also very interesting in a sense that even though we were seeing a slowdown in demand.

In Chile, because of that covered the Chile has been a heart or hurt pretty a pretty bad with the with the code it but.

[music].

One of the strength of the economy of Chile is the ability to export raw material and mainly a copper and if you have seen the price of copper lately, given the fact that China seems to doing very well in terms of recovery.

The copper pricing has been going up and it's a one of a well I would say.

Getting to a range, where it's very profitable to produce copper in South America. So we're seeing a lot of activities over there in the mining that are promising and one thing that is very interesting in Chile.

The lower house of the government, Chile has voted to have.

Have a E regulation to cancel any coal plant by 2025 mines you did that that law has to go through Senate, which might have been which might be tempered a little bit, but the movement to cancel coal in Chile is growing and.

Remember that Chile has about 30% of the synergy coming from coal. So we think that we will see some opportunity in Chile in the next few years there to replace the coal that will be shut down.

So on a on that note I would open up.

A question.

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Your first question comes from Nelson and G of RBC capital markets. Please go ahead.

Great. Thanks, and good morning, everyone and morning life.

My first question relates to Griffin Trail.

Can you just talk about the like how should we think about the.

Project costs too.

EBITDA multiple and the expected returns for that project.

Yes.

As you know American trail for the time being has been that as the merchant plant.

That doesn't mean that we would not be looking to have a long term contract with the potential offtaker if the price makes sense.

On that aspect, we have now a small team, but 18 of.

Specialists in.

In while it would seen trading and marketing energy in the unit in the USA. So I think it will be a better equip also to retail for customer on that basis, but that that might come in the future.

We're still.

I would say.

The positive about the future market the inner core.

One thing I was I was happily surprised to see is the price of natural gas that is coming up in United States, even though we are in the shoulder season, we've seen natural gas coming from their bottom up on maybe a dollar.

To your dollars 60 per can get drilled to now close to three dollar in the last week. It went up to 350 340. So this is getting a little bit of a hope also on the minimal cost to produce electricity in a in a merchant plant.

Scheme in the USA IDE.

I think that one of the aspect of the pandemic has to some degree slowdown the fracking for oil and as you know natural gas is sometime a byproduct of that activity and we have seen.

Less activities of course for for fracking for oil so potentially less.

Really cheap natural gas being deployed into marketplace, so that give us a little bit of the although relief, but I would say that our long term forecasts we are looking at suncors.

That are not taking into account.

Carbon pricing.

And so therefore something around in the 20 dollar range is is is probably conservative.

Mind, you that we have also the the PTC. So if you if you take the PTC at a 2025 dollar index.

Index plus.

Plus something around in the range of $20 on average you you you still have a decent total revenue for that type of a project Nelson so.

As far as the total return of the of the project you will definitely depend on devolution of Doctor.

We're hoping to do a type of project. This type of project, we were aiming to the high single digits and possibly double digit depending on how fast the curve will evolve and if I didn't say it gets in and put some more.

Pressure on pricing for carbon.

Then these type of project may see some benefit from from those policy.

Mr. Biden said that he will rejoin the call so in order to.

To follow through this somehow somewhere a price on carbon will have to be established in the USA and these type of project will benefit from it.

Okay. Thanks, a lot so.

You mentioned that the yeah. It looks like your EBITDA assumption or your underlying assumption for EBITDA forecast for Griffon trail as about $20. If you were to contract or enter into a hedge for that project, whereas the.

Market price today, it's I presume, it's a little bit below 20 like similar to afford.

Yeah, it's a little bit below its its anywhere between 13 to 18, you know it depends it depends on the location depends on the.

The expectation of a of the market, but that's why we we said that we better take a chance to be merchant.

That that aspect.

It is a little bit on.

Unusual for us and I'm, not saying that we will do this.

Yeah and for every project.

But given the.

The I would say the disconnect between Pete.

CPA and merchant merchant pricing.

I think that's it's a good bet to stay floating for the time being and see how things are going to be but like I said with biden coming in as a prudent as as a new leadership I.

I think we'll see a little bit of a.

Potential on on on carbon pricing and therefore.

We think will a little bit more optimistic these days than.

And then six months ago on that aspect.

Okay got it and and then suddenly.

No. So just to clarify also if you're trying to make an EBITDA multiple on that project Griffin trade I remind you to use our proportionate figure which includes the ptcs that.

That is very important that we want to remain.

To remind you that PTC serves to pay down the tax equity investments so in fairness in order to Abbott proper multi.

Multiple on that project you need to add back the PPC value, which is.

Around 28 million Canadian dollars to Tonight, because we now as you as you know it was up plus one maybe you can explain it was little bit better for for for our crowd is that.

We do now book that as the debt the tax equity is a.

Almost a project debt for us so with the PTC revenue, we are offsetting that liability in our balance sheet. So it's a.

It's definitely we see that as a total revenue PTC plus other revenue on a on the market and distribute you help decrease at Thanksgiving week equally over time, yes.

Okay got it and then just moving over to France.

Looks like the a temporary shutdowns at two facilities.

Continued on from from Q2.

Can you give some color as to.

Hi, what those shutdowns relate to and will they.

Carry on into Q4.

Well the we.

We had two event of a win a blade.

Failure and and.

Those two blades app and on one wind facility, but we have the same technology with the Wynn Park, just beside it and the agency in France, a being very I would say conservative have ask us to shut down.

Both.

Planned until we could see a long term plan or long term solutions provided by this this.

Now we have had the possibility to restart those wind farm.

Some curtailment.

[noise] process.

Meaning that a we want it to go progressively a that was the plan ex accepted by the.

Prince a government agency.

But so far it has been proven that.

The or.

I would say the the new strategy has worked and since mid August or so on the plant now are free to operate except in a couple of.

Special occasion, where when and.

Speed and direction would happen.

But this is temporary because theoretically we are going to implement a.

Upgrades or re per year in the into blades to reinforce and so it shouldn't it shouldn't.

Be that way for the long term.

Until we have the upgrade on the on the blades Parral.

Perhaps I don't feel peri or probably next year, but the lost revenue will be fairly low concerning that it's only a few occasion, where we will have to apply this curtailment.

Alright, thanks for the color I will leave it there and get others to ask question I give others a chance to ask questions. Thanks.

Thank you.

Your next question comes from David President of Raymond James. Please go ahead.

Thanks, Good morning, everyone. My first question here.

Just on the on your solar business.

Business development goals in the U.S. I'm wondering how with the with the new government.

Coming in.

How could changes or I guess reduction on the solar panel tariffs affect that business and do you see potential for a change or extension or modification of the tax credit and is that something that you're starting to plan for.

Difficult to know because as you are.

Well, we'll know by a I guess a mid January.

Is the Senate is.

Has gone into a majority of Democrats.

But in general PTC, an ITC has been supported by both parties.

As you remember the PTC were to be.

Walt decreased.

By 2020, and an ITC by 2022.

So I think that.

The new administration might revisit that might make some extension on the on those we don't know, but that's that's one possibility.

In terms of Ah Julie on.

Solar panel coming from China.

We'll see how biden strategy will be.

If the is the get relief on those it's only good for the industry in a sense. It's a if it lowers the price of those panels.

Our industry will benefit from it so that might be positive, but on the other end of the market in the U.S. had somehow.

Adapted to to those Judy in either way, we're comfortable with it.

We did bought some some are some panel of course, but it's it's only a 115 hundred 20 megawatt worth of panel that would the secure.

Secure.

Roughly 600 megawatt worth of projects, if we apply a certain ratio.

So if we get to have some benefits in seeing some panel being reduce will will benefit from a from the balance of selves, a 600 megawatts.

No supply so either way, we would be happy with the with the solution, but I'm I think that.

The Biden administration will that will put more pressure on carbon pricing, which ultimately could help also seeing some green credit Rouven you own on those type of project.

Great. Thank you for that and then maybe just one more.

In the U.S.

I understand that that New York the state of New York has signaled the increased openness to renewable energy imports Im curious if you have any development stage projects and come back that can maybe move forward to satisfy that potential demand in oral or if you can maybe get involved in some kind of a project with hydro qubec.

If that were to.

The possibility.

Sure.

That's one possibility we do as the other developer we do have some project came in Quebec that could be useful to export.

And we also have some project in New Brunswick, Some Greenfield project and brought in New Brunswick that we could theoretically a bill.

Built for export as well. So this is definitely something that we.

We are.

Looking into and I do cut back has in the past been open to.

Make some kind of a of a of.

I wouldn't say joint venture, but pro.

Provide the wind project with the support of a big I'd really in order to be from energy being sold into you Wes.

That's also something that we could to undertake a as well, but all that is good news actually the more.

More energy, we could the export from from Quebec to two you Wes would free up some some room in Quebec for future development.

Excellent. Thank you very much I will get back in the queue. Thank.

Thank you.

Your next question comes from Sean Gerard of TD Securities. Please go ahead.

Thank you good morning.

Question on the front Terra project I know, it's it's been under review.

For some time now any update you can give on that.

Advancing that project, so we've taken that off the schedule.

Any update on Frontera specifically.

That's a good question.

Working on on one strategy to have frontier are being.

Security in terms of of permitting deadline.

We are.

Vince to a point where by definition. This project could have been seen or could be seen by government agency to be already under construction.

And.

I would not be subject to a timeframe for the duration of the older permits. So this is a it's one way that a local management are.

Working on and if successful that takes a little bit off the pressure for us to.

To start well.

222 to <unk> to continue the construction to because theoretically the construction costs have been defined as us as a start.

So that gives us a little bit more time.

To negotiate a financing and to to look for an off taker.

In some discussion that been initiated to find potentially and Offtakers slash partner in the project to develop it and in the meantime, we as a a as you might remember we have an older project a few kilometres upstream call San Carlos.

And Saint Louis.

Was a project going on on the Yakima, and some water rights, which also owned by coal womb, a local a utility.

And we bought those water rights so now within cash flows.

Good.

Basically merge these two water rights and have a project in around 150 megawatt that have more.

Pounding capacity so storage.

Would be around five to six hours and this project is a little bit more cost efficient than frontera and so we're looking to do is to as a potential.

I would say portfolio to attract a local a local.

Local partner Slash Offtaker in this project so.

It's not done.

Far from it but.

It seems that those.

Those two together are a better.

Better.

Proposal economic proposal, then frontera by itself.

Thanks for that detail.

Second question, the 225 year PPA she signed in Hawaii recently can you give us some idea of what those terms might look like.

What do you mean.

The price or the.

As you remember dose the dose PPA in Hawaii for more of a I would say capacity payment. We are translating it into a a to a price per megawatt, but ultimately what we get is a an annual payment will and monthly.

Payment for if their liability of the total installation.

But the pricing, we published a place the pricing or equal that has great equal.

Equalized.

I made the pricing. So there is one that is a little bit below 10 cents the equivalent of megawatt per hour and the other one is little bit higher than than 10 cents.

So little bit overall.

I would say if you want to make two to two common.

Given the fact that why is.

Quite costly to bill.

These are fairly fairly competitive.

Pricing when you consider the size of those projects and this is giving me a lot of confidence that these type of project can be done on the main island or or in United States were in Chile, and become very competitive down the road as we see battery.

Wholesale price being.

Being or reduce.

In the next few years so.

All in all I think that these project car or interesting in the site, but they are not.

No not big but what we like is that we get to have a 25 years PPA and that that give us the chance to.

To work this this new field and to understand also the interaction with the need.

The utility on how to manage to solar how to manage to the battery and how it works to get her so that's.

Thats roughly it it's a little bit below 10, and little bit higher than 10.

Okay, but think of it like it capacity payment structure.

Yes, it's yes implied calculation yes.

Got it okay.

Okay. That's all I had thanks very much thank.

Thank you. Thank you.

Your next question comes from Rupert Merer of National Bank. Please go ahead.

Good morning.

The morning are correct.

You tell me how are you thinking about the dividend and the payout ratio right. Now you mentioned it could be close to 100% for the next 12 months is that with say a typical dividend increase and then looking at your longer term forecasts, how long before you can bring that down to a more.

Couple level given your your pace of development.

Yes, well I will not comment on.

On the dividend increase for next year, that's a board the prerogative, but but.

Additionally, cleat like what I said group or at the beginning.

We want to grow and of course there's.

There's a lot of activities going on and and whenever we invest in the any greenfield project with the construction and then permitting period and depending on the type of project we get.

The they're not necessarily cash friendly in the sense that the cash on cash on those.

Greenfield project are little bit.

Okay.

Backended.

Not necessarily really bad in a sense of when they are in operation, but when you did love then you have to build them. So you are putting a little bit of a capital upfront of course and it takes at least two to three years before you get to do have some some capital back so our strategy.

Mixing M&A.

Our own development.

He's going to to Hell and depending on how we have success and I think we've shown that our M&A team is it's very capable by by the two acquisition we did.

Last year, some of that or in a month and a month and.

And in there. Thank you.

I think that we can do that every year at least one or two a type of transaction like that if were successful in this.

Our payout ratio will be declining.

Pretty pretty fast and as the pro.

Project, a greenfield project that we're developing are getting.

NCD. So we're confident in the next two three years will.

We'll manage our payout ratio in a range, where we will be a little bit more comfortable and.

We will continue that that strategy, because I think that bolt works pretty well and we don't want to reduce.

The development.

<unk> expenses.

We have seen some very good advancement in our portfolio of Greenfield project.

There is tremendous opportunity and friends in <unk> and also in the U.S. and therefore, we think we're creating long term value, but given the fact that.

We have been committed to pay our dividend and increasing it in the past we want to make sure that we have.

The cash profile to to do so and I think our strategy is sound and we have to mean to deploy it.

Okay, great. Thank you and then looking at the cash profile of some of those projects you mentioned the cash is.

Typically backend loaded in these U.S. projects and you've talked about a couple of potential stimulus mechanisms in the U.S. market carbon credits and tax equity can you talk to me about which you would prefer and maybe which one the wind industry would prefer if the wind industrys lobbying one way or another it would seem to me that.

Maybe carbon credits would offer more.

Revenue streams for your existing assets, maybe provide better a terminal value how how are you thinking about that.

Yes market and stimulus.

It's a complex.

Hi, Andrew.

Do we like the tax equity do we like the the the PTC. Yes is it simply came to the very very very complicated. So if there is a a system, where we would not have to rely on tax equity provider hi, He if there's the a carbon credit a turtle.

Robin credit a little bit like what we had in the past here in in Canada, the cooling or G., if you remember in Rupert.

That would be freeing.

The structure of tax equity and he would make.

Lawyers, probably sat because the lawyers and bankers are making a lot of money with the tax it quickly these days.

[music].

Yeah, if there's the transparent and long term commitment on having some kind of the carbon incentive paying directly to the project that would be probably the best one other aspect that the wind industrys lobbying is the cash grant.

We've seen that in the past, it's a it's a system where the.

The PTC.

He's well looks more like the <unk> at the end of the day, because it's a it's a derek.

Cash grant given to the project instead of going through a tax equity provider that could.

Deduct this.

Tax deduction on its own the income tax payment. So that would also be little bit more flexible and friendly to the to the they've locker.

But we can live and we have learned to live with the PTC and the ITC as we how should we know Dan right now.

Like I said.

A lot of work a lot of fees around these the structure.

But on the other end.

This is very friendly to our industry, we're getting to have 2.5 cents U.S. index that.

On these projects. So you know it's more than half.

The total revenue needed to develop a project in United States. So one has to be happy also to that although it's complicated.

I think it's very very positive for the industry at the end of the day.

Thanks for the color I'll leave it there.

Sure.

Your next question comes from Mark Choppy Sea IVC Costar market. Please go ahead.

Thanks, Good morning.

First question just on the on the desktop of things I'm wondering if there's any opportunity to refinance or repay higher.

Interest rate debt out there, maybe surplus cash or capacity on our credit facility to.

Interest expense.

Yes, that's a that's a good question I think Jeff has mentioned that last time, we have one easy target, which is we call it the MP loan.

We have postponed this reimbursement given the.

'cause it crisis.

Last spring.

It was planned to be repaid all of the proceeds of hydro, Quebec, but given the opportunity to start Griffin trail and just want it to be little bit more conservative depending on how depending make would have the evolved we have postponed this repayment, but for 2021 its deferred.

In late target.

Easy a that's an easy a I would say a fruit to to pick and always looking into how we can.

We refinance some of our asset but.

There's not a ton of opportunity there. The next one could be a month in there, yes that we could look at but.

We're not at this stage for now.

And Thats, all and remember that we still have we have no 16 or 17 asset uncovered assets in our basket.

So given the fact that we have also been renewing PPA with some of these assets, especially in Quebec Hydro in Quebec.

And so so we might see some opportunity there with potentially a green bond as well too.

To replace some of our.

Corporate facility so.

So we're looking into into those.

Given the fact that the market seems to be hungry also for these type of product.

We might be opportunistic down the road to look into those.

Okay.

And then my second question is just around the renewable energy credits and just wondering.

When you see a project like Hillcrest, just sort of view again on hardware repricing Peco and you know as you think about.

Morse wind projects under PJM or are caught how much.

Do you guys, assuming that there is upward pressure on rent pricing and it can remind us again, whether or not you.

Keep all that benefit or can you share with your off taker.

In the case reveal kras, we we were sharing it with our Offtaker.

And then Griffin trailing them and Oh I want to.

Forward.

I can't remember exactly how we share it with forward Griffin trade of course, we have a 100% of it and into future they'd.

London that we're doing in solar market in.

In the west.

Like I said, we'll see how biden.

New policy.

We'll drive those market, but I think they'll be on their pressure. These market. If if we if you wish to join to Patti I call.

The Paris accord, how you like all the petty in French it since it's it's it's a.

A little bit easier for me.

We'll see some pressure on on those price for sure.

And wrapping a real differences in pricing.

As happened in the US market does that inform your views of where you want to do more solar thats market, giving that optionality here, yes.

Got to go in with just better initial contract terms.

Well, if we have the opportunity and I don't want to this.

Disclose but we have been successful now to need to negotiate the PPA.

A term sheet for a PPA for a little bit over 100 megawatt in the states.

It's it's conditional of course of older permitting and that's it.

Very early stage, but I.

I think that we'll see also.

That will come with the same thing if there is a pressure on renewable credits. There will also be pressure on off taker to secure long term PPG that could include those and I think that we've seen we've seen a lot of pressure on pricing over the on the downside the over the last.

The few years in the state for PA, and Offtaker, but somehow I think that trend might change a little bit and.

Of course in big markets like Air caught where it's probably easier to develop projects that might not be the capex or or or the pressure.

On the upper side might be a little bit lower but in places like a PGM, Ohio, Illinois and stuff like that where it.

It's not that easy to develop projects.

And so we think that the available project.

Might not be that plenti, considering the potential need.

Need for Offtakers to secure long term p., so I think I'm I'm starting to be more positive.

The pricing, especially on solar in United States going forward.

Okay. That's great detail. Thank you Michelle that's all the questions I have.

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Your next question comes from.

From Ben I'll be M. Please go ahead.

But all that thanks.

Hi, Good morning, I wanted to touch base on Sunday.

I'm going to school.

Reshaping that.

Okay got that and I'm wondering I know you pay down that each year on hydro assets that you look at the trends were seeing what lenders are you getting a sense that that maybe you can really.

Really reshape the water.

At that in the years ahead, you can keep leverage on a bit more than we expected in the past.

That's a very.

Very good.

And that's a good question the event.

It'd be difficult to do it on on project finance.

Specifically, but if you if we look at the our corporate total culprit exporter.

That strategy could be applied Ben because in a sense.

Especially with our our hydro portfolio, if we are repaying debt.

On the on a much faster pace than the than the life of the asset or do a lot with the order life of the P. Eight.

One good thing that.

There is some room.

Two to two to two.

To restructure some kind of a corporate corporate loan but.

But it's too early to two two home to be from on this but we will definitely be looking into this and same goes with the tax equity structure as you.

As we mentioned.

Our tax equity is treated like a project debt in our books and they are forecasted to be fully repaid in in 10 years or so and some of our assets will be lasting for 25 30 years 35 years grew up in solar so there's some.

Definitely some room there were at the end of the year 10 or directly on the forecast basis on your 10-Q, you don't have any any debt anymore. So.

There's potentially opportunities to restructure some kind of a total leverage at the corporate level that represent more or more regular type of a refinancing or financing.

Okay.

Hi.

I was wondering.

The site the site C project, probably a low probability of it being canceled those nursing using.

I bought it in the press.

Can you comment on it lets just say.

It does get cancelled so Steve you need more power and.

Does your prospective client position here that.

Well, that's a that's a shame to to to see what's happening in Sightsee.

The independent industry, we're cautious when the decision was put forward and had a proposal and alternative proposal from small hydro to wind farm to biomass.

That would have been probably a lot more competitive than what we know now that both sightsee.

Now it's difficult to to understand.

What will be the decision of both the government and beside real but my understanding of the Geotech challenge over there is not an easy task.

And it will cost money.

So we'll see how the we'll deal with it but if ever decide to cancel it.

I think that this will be a good support to anybody for high PDP to come back and and filled the gap now what I'm a little bit disappointed in BC is the lack of.

Determination to switch from.

Fuel eating well.

Using fuel to eat the houses NBC, two words are going and electrified b.

BC BC houses.

We have seen some some a willingness from the federal to help but we have yet to see how BC Andrew will embrace.

Those proposal there is a tremendous.

Opportunity.

To have more electricity being sold to individual NBC if the replace natural gas for heating same same goes with the rest of Canada, and Ontario, Quebec has done that in the past successfully and there's only a few percentage of the houses in Quebec that that's been that Harbin.

Heated by natural gas, so I think in a way for Canada to meet their future target. This is a very easy target. These to switch from natural gas and put more E bump in in the system and the federal government has been.

A positive about the these program and I think frankly this is an easy solution for Canada.

Okay, Alright, thank you very much.

Cubans.

Ladies and gentlemen, if there are any additional questions. At this time. Please press the star followed by the one I see.

As a reminder, if you are using a speakerphone. Please leave the handset before pressing the keys.

Your next question comes from non G. be doing also in those trials and I on Securities. Please go ahead.

Hi, good morning.

Good morning.

Just wanted to go back a comment you made earlier about renewing periods and come back I think you have about no 100 megawatts total of of hydro between cutback in Chile that are going to be a coming off their periods by next year have you renewed the PPS in qubec and for the Chile facilities are you comfortable.

Those on a merchant basis going forward.

That's good in Quebec, we have renewed.

Yeah same pooling wins, all we have yet to renew Paul no and SM one.

So those are Paul enough is only 26 megawatt than this one.

The initial one these seven megawatts so it's not a huge exposure there.

In Chile.

We have when we bought do kcl or there were some existing PPG place and they are.

Going to.

And by in 2022.

But we are actively renegotiating PPA theres a active market in a in.

In Chile.

Right now the market for five to seven years BP range anywhere between 43 to $47 per per megawatt hour and the big question in Chile as I mentioned is when are going to.

When they are the.

Coal plant will be shut down.

Right now like I said, the lower chamber ants propose a lot to shut them down by 2025.

I think it's a little bit aggressive because Chile would have to turn around very quickly to.

To change their portfolio of how to produce electricity.

So I think that the customer are getting <unk>.

A little bit more nervous past due to our 2025 2026, so pricing that were seeing up to two to 12 2025 26 are in the range of mid 40 ish you Wes fully indexed.

And also there is another component shelia that we we forget but the children.

Operator.

The system is providing capacity payment also so do kimco is benefiting from capacity payments in the range of 15% to 20% of its total revenue. So it's even though you could be merchant in Chile, you can have a certain.

Portion of your of your Ah.

Total revenue that are based on capacity payment from government agencies.

But like I said, we're aggressively looking for renewing a P and we do so.

Sign pp those are sometimes smaller P 50, gigawatt 25 gigawatt, but they are adding up and the right now up to 2024 five were.

We're fully booked 80 80 ish.

80 ish percent P. and still looking to.

Tibet.

That's very helpful. Thank you just one last question for me on Chile.

I guess your development pipeline today and the country is more hydro heavy.

What's your strategy to sourcing more maybe wind or solar prospects to develop some maybe outside projects for industrial customers.

Yes, we in Chile, there's a there's a there's a lot of solar project that have.

Ben.

Did.

Love or Pat vans to certain certain stages. So there's an active market there for M&A on very early stage project that a we want to participate.

And it's just a matter of matching or the price of those versus developing our own so.

So the team over there is looking into this we have in the last a year or so been active in in.

And looking into existing facilities that were caught between a unfortunately, the the price that a wind down and there.

Banking facility. So there is an active in many activities over there that is generated by the.

The banks that have repurposed to repossess or into.

Or in the midst of reprocessing some asset. So this is an active market then in uneasy when see easy but.

But it quicker.

Access to solar and that's what we've done in the case of Salvador, but we're active in bidding in some other facility and I think we will be successful in a few of those but the same with when we.

We have a small portfolio of when the data side that we are also.

I would say.

We also advanced.

But the M&A market. These very very active in Chile, because a lot of project were financed when the price of electricity was in a range of 80 90, a dollar per megawatt hour and now with the range of 45 ish.

Of course, the economy mix are not favorable for these oh project or not that old project that project that are five six years old are.

Our suffering right now and I think theres, a great opportunity for us to get there.

Okay, great. Thank you.

Sure.

She is very strong there are no further questions at this time.

Thank you and thank you everyone for joining us today, well talk to you at our next conference call in February. Thank you every month in Q.

Ladies and gentlemen, you may now disconnect your line.

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