Q3 2020 Atlantic Power Corp Earnings Call
Hello, and welcome to the Atlantic Power Corporation third quarter 2020 results Conference call.
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Please note today's event is being recorded I now turn the conference over to Jim Moore, President and CEO Mr. Moore. Please go ahead.
Welcome and thank you for joining us this morning.
Is run by the Braskem director of Finance at Atlantic Power, our results for the three and nine months ended September Thirtyth 2020 were issued by press release yesterday afternoon and are available on our website Www Dot Atlantic power Dot com and on Edgar and SEDAR.
Management's prepared remarks, and the accompanying presentation for todays call and webcast can be found in the conference call section of our website.
A replay of today's webcast will be available on our website for a period of one year.
National figures that we'll be presenting are stated in us dollars and are approximate unless otherwise noted.
Please be advised this conference call and presentation will contain forward looking statements.
Discussed in the Companys Safe Harbor statement on page two of today's presentation. These statements are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our various securities filings.
Actual results may differ materially from such forward looking statements.
In addition, the financial results in the press release and the presentation include both GAAP and non-GAAP measures, including project adjusted EBITDA.
Reconciliations of this measure to the most directly comparable GAAP financial measure to the extent that they are available without unreasonable effort. Please.
Please refer to the press release, the appendix of today's presentation. Our annual report on form 10-K.
Our quarterly reports on form 10-Q, all of which are available on our website.
Now I'll turn the call over to Jim Moore, President and CEO of Atlantic power.
Thank you Ron welcome everyone. Good morning.
With me on the call. This morning are Terry Ronan our CFO.
<unk>, our SVP commercial development.
Nick Giladi, our SVP operations.
And several other members of the Atlantic Power management team.
All of US at Atlantic Power Hope that this call finds you and your families healthy in sales.
The results for the third quarter are provided in the press release, the presentation and the prepared remarks, which were posted on our website last evening. Please review those materials I will briefly cover key points. This morning.
Following my remarks, we will take your questions.
As highlighted on page four presentation, our safety performance numbers have improved as a result of continued focus on this critical area.
With two recordable incidents year to date down from seven a year ago.
We're continuing to manage well through the pandemic to date, we have not experienced a material impact on our business or our plant operations.
Our financial results for its third quarter year to date keep us on track to achieve our 2020 guidance for project adjusted EBITDA.
Okay.
We have continued to repay debt using our strong operating cash flow from our existing businesses.
Year to date, we have repaid 61 million of debt, including our equity all Chambers project.
Our consolidated leverage ratio at September Thirtyth was 3.9 times or 3.7 times net of cash.
We expect that continued to debt repayment and anticipated higher project adjusted EBITDA in the fourth quarter should result in an improved leverage ratio at year end.
On the operations front.
We returned Cadillac plant service in August and expects to reach a final settlement of our insurance claim by year end.
Also in August we returned the Williams Lake plant the service slightly ahead of schedule.
She'll availability has improved recently.
As a result, we now expect Williams Lake did generate modestly positive project EBITDA. This year and we expect continued improvement next year.
On the commercial front in September we executed a new capacity agreement rocks not for 2021, I should yield positive project adjusted EBITDA next year and.
And we are currently exploring opportunities for 2022.
At Calstock were the P.P. a schedule to expire December we are optimistic that another short term extension will be granted that would provide time to see if the parties can agree on a longer term rig for the plant.
We have had a strong year in terms of capital allocation.
Through July we invested 48 billion in common and preferred share repurchases.
<unk> represented a significant acceleration of return of capital to shareholders.
Let me know we have two interesting significant investors.
One is a fund was intrinsic value when its name and the other is called humble capital.
Well, we focused on intrinsic value and making capital allocation decisions.
We also try to be helpful.
Well, it's probably fair to say our record on returning capital to shareholders is strong.
$80 million of common share repurchases and another $25 million for the last five years with $48 million of that occurring this year.
We have reduced shares outstanding during that period from a high of 122 million shares.
The current levels approximately 89.
On our second quarter call in August we said, we would need to rebuild cash before considering another substantial issuer bid or S&P.
At the end of September we had 9 million in discretionary cash we expect to reach about 20 million by year end with the insurance settlement added to the 9 million [noise].
That level of discretionary cash would allow us to consider an S&P for either common or preferred shares or both with manageable cost relative to the size on that side.
We can also use our normal course issuer bid if we decide against an S&P.
But the answer might be limits the amount of repurchases relative to an S&P.
Actions speak louder than words, so when we say, we'll move with speed and scale when opportunities and cash levels are attractive. It's important to remember we have done so with 150 million of capital allocated to repurchases of common and preferred shares and asset acquisitions in the last five years.
We expect to take the same approach with the cash flow in excess of required debt repayment that we expect to generate over the next five years.
We as we've said over the past few quarters that you expect it to be about $115 million to $165.5 million of discretionary cash so its $115 million to $165 million of discretionary cash versus our current map market cap of 108.
80 million or so.
We expect the markets will catch up with intrinsic value one way or the other.
I'll conclude with the chart on page five of the presentation.
We continue to see signs of slight improvement in power markets as reliability issues from an over reliance on intermittent power sources of Merck.
On a broader level, we may be near a bottom in the long down cycle when commodities.
The chart shows the relative performance of commodities index versus the S&P 500, its works will walk.
The ratio is currently at the lowest level in 50 years.
We will now take your questions.
[laughter].
Yeah.
Thank you we will now begin the question and answer session.
You ask a question you May press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
To address your question. Please press Star then Sue.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Nelson Ng with RBC capital.
Great. Thanks, good morning, everyone.
<unk> just a quick question on the biomass facilities I know that's a I think this past year we've seen.
Bit of downtime and operating issues at a number of the platts just from a big picture perspective like are those facilities just more difficult to operate are you like is there any change required in terms of how they operate like what's your.
What's your take on some of the headwinds you've seen on your biomass facilities.
No. This is Nick Laudico no I think in terms of the biomass issues that we had not had grayling Craven, particularly issues was centered around the steam turban.
On the seen cycle, so I really had nothing to do with the fact that the fuel was bombed out so I think a bit of bad luck, where but where we've had issues with turbans at both plants in the same year routine inspections that ended up being more work than anticipated.
But I think generally the plants are running well I play I bought a national it's running well.
I think going forward, we expect to excuse me at those plants, Doug the two.
<unk> being a pad that we we expect to run through the life of the PVA with those turbines.
Okay. Thanks.
My next question's more big picture as well like given the likely Biden governments I'm not I just big picture on what you think the impact is I guess, where we're not sure how much of his <unk> climate change policies. He can push through which includes carbon neutrality for the power.
Our second 2035.
Obviously, you have some gas fired facilities and I guess, one coal facility, but like what's your what's your take on that Jim.
Yeah, well I think too.
Two areas one is on taxes and a I think a lot of that will be to determine by the Georgia outcome. If it's if it's 50.
One way and then I think they'll they'll get some taxes squirrel, if it's more than that probably not but.
No better at political prognostication than anybody else I think the the more likely thing to happen and where they don't need this and it is the.
On the power side I expect like you know put us back in the Paris, and he'll ban fracking on federal lands we've laid.
I might actually be a.
Supply enhancement for for oil and gas stocks, you might you might see prices go up as always sort of sees on intended consequences.
So it's really hard to predict what's going to come out of Washington, and what are the real impact I don't see any immediate or a big upside or downside to anything coming out of Washington, and any of the remaining.
Scenarios I do expect a bite and would use.
Use executive orders.
To to do things on the EPA.
Paris and fracking.
None of that could have a huge impact on us I mean, I think like 2035 carbon neutrality.
And as you know that the green to deal I mean, those things are just fairy tales, that's never going to happen. It physically can't happen. It's just not the math doesn't work and there's a number of good.
Oh, you know Bill Gates has been looking at this and his argument is if you buy the conventional wisdom, which is catastrophic climate change Ah Ah near term or not even near term you know reasonable term you got to be doing ocular I think you can write a book on that and.
You start digging into these things and look at the numbers.
It's it's very difficult to man axio too with wind and solar as it did.
Current technologies is not great.
It's not it's not good on Clos despite the the headlines you see.
Levelized cost of energy analysis as you see you know when we get high levels of penetration in a jurisdiction. We got high prices, New England has high prices, California has high prices.
There's a good book about a guy name I think its Michael Shellenberger called Apocalypse, not <unk>, who is an environmentalist you know and and I consider myself, an environmental steward moved to a per month in 2001 and started a wind energy company up I've been on the boards of solar companies you know.
No happy to buy into wind and solar, though if the prices make sense for us.
In terms of public policy. These things that politicians are thrown out.
They're they're they're fairy tales and Doug and.
Now what can happen is before the math and physics in true you'll get price spikes I think and and then you know as a holder of assets that's going to be good for us I think you're seeing in California.
We're starting to wake up to the fact that you need a heck of a lot more wind and solar.
And then then CCPT natural gas plants, the balance of grid and make it reliable and if you've got a poor more demand on through East then you're going to have to have more electricity you know south east would be terrific for this company, a and and for.
For all electric providers, Oh, but some of these things the politicians say or or just you know they're not they're not really.
They are they're kind of Liberal arts analysis, they're not stem analysis, you know and.
And if I think if you really dig into it it's just not going to happen that way.
And Oh, no having said that that the margins you know people trying to do things that are ultimately not feasible in the timeframe that laying out could have a material impact on our business I think it's been a headwind it's been a headwind for us for.
10, or 20 years, now that wind and solar early on when I, what I shifted our company up in Vermont too.
2001 to win.
Terrific returns and people were skeptical about the technology and now we've hit the other in the spectrum where.
Returns are really modest the poor and and the public opinion in the conventional wisdom is all over it. So the pendulum has swung completely to the other side and frankly, the conventional wisdom and the political wisdom, they they're not looking at the environmental impact and they're not looking at the efficacy.
Of wind and solar on on.
On the C O two but I don't expect that to happen you know politicians don't do deep dives and analyze math and physics, and economics and compare one one detriment to the environment to another detriment to the harm it in a big big pick things that are popular Oh, So I think I think what.
However, when it comes out you know, we're pretty well balanced we have hydro you know so things like the New York policies continue to roll out there's likely to be higher prices and ER and that benefit our hydro facilities things like California, you get more widespread and people realize the limits of the current battery.
Maliki lithium ion and start realizing they need to have more reliable more cost effective.
Ways to balance the grid than than CCPT comes back in a frame and we have plenty of that and then the.
The bio mass has its own kind of attributes but so.
So that's a that's a longer answer, but I think both on the tax side and on the energy policy side, we're fairly well balanced and we don't we did we don't see a big.
A impact on the business either way there wasn't the last four years and there probably won't be the next four years.
Okay. Thanks for your thoughts on that Jim. So just one last question before I get back in the queue in terms of realizing shareholder value if you've been buying back some stock.
But can you comment on the degree at which you've looked at divesting assets, obviously valuations for renewable assets.
Like Hydro as you mentioned are at very attractive levels I'm just wondering.
If you've looked at that a potential decision of divesting assets and whether there is any key considerations or or impediments to to divesting assets yeah.
Yes, So we Oh said I think maybe last year now that we come in every day, we rank order everything on what's the current estimated returns you know when we're when we're investing and we do the same thing on the divesting side, we've done a lot of divesting I mean, we we sold off our entire wind portfolio.
At a nice multiple and enabled us to pay off our ER <unk> Bod, we've closed out a number of plants. We've we've sold maybe one other plant.
Between plant sales and closures I think there's a large percentage.
Oh, I don't have that number I thought my head, but so probably over a quarter of the plants that are that were there when I showed up in 2015, we've either closed or sold Ah I think.
The problem is where a micro cap now and I think that hurts your share price and liquidity and it makes it difficult to do the things so.
I think you know we could sell off the hydro and I think we could get an attractive price whether or not it's a price that's above what's implied in that in the current share price.
You can't be sure, but because you don't know what actually the markets, playing but I I assume you know.
So a BAFTA hydro, we would get better value than the current price, but that's that's the same thing for the whole company I mean, that's that's why we've been aggressively buying in shares.
Yes, we've expressed our opinion on the share price with a boatload share buybacks over the last five years and particularly this year.
End up we're always open where we where.
We're deal people and we're always open to sell anything at the right price and we're always open to buy anything at the right price I think just to take a decision that you were going to spin out we've looked at spinning out and attach free basis, the hydro a number of times.
You don't want to sell them for cash.
You know, there's a lot of tax consequences up and then you have to decide is is is the value of that that transaction plus the stub company in the public market better than if you. Just went ahead and sold the whole company off you end up.
But we're the opposite of entrenched management and we're we're we're deal people were always looking at buying assets are doing kind of corporate M&A deals or or selling you know assets and we're very open to corporate M&A deals and so everything is always on the table and we're always doing our numbers and.
You know, we're as frustrated as anybody else I mean, I've got a large share of my net worth in the company and and.
The.
The thing to do when when prices seem to be disconnected from.
Economic reality that as you see it forecasted is to go ahead and buy and that's what we've been doing on the share side or on the asset side.
There, there's not a big demand for for Oh, biomass, Oh or coal and CCPT is is turning into more of a merchant play and <unk> and it kind of a short the batteries play.
And then the hydro we could pull out and again, we've looked at it for years now on.
Do we sell it do we spin it off is it better to sell company together you end up.
We do.
Were driven by what we're seeing in the markets and and I think you can see by our capital allocation.
If we see a pianist surface shareholder value.
Based on what's going on markets, where we move aggressively and so I wouldn't I wouldn't take anything off the table. You know, we're very laser focused on how do we make the shareholder some money from holding the shares.
Okay. Just a quick clarification, you mentioned that you've looked at spinning out hydro are just divesting it outright.
You flagged the negative tax consequences like does the bank.
I know wells you have in Canada, or the U.S. help in any way to offset those attacks yet because they help on the federal level. They don't help on the state level and then Ah we did it we did a.
A corporate restructuring a few years back and I think you know as as the NFL season, you get more efficient and how you use them.
But I haven't looked at the spin off Ah Ah you know in the last couple of months, but I've looked at it I think four or five times over the last five years, because oh. Please keep in mind that John Malone, you know tax free spin off kind of idea.
But.
Di di di taxes, the unit wells as you say would would help offset some of the federal taxes, but not the state taxes and as I recall I don't know if we hit a point of diminishing returns yet, but the longer we held them to the more efficient, we kinda, Indiana wells vis-a-vis hydro sales.
And off.
But again the question would be are you better off spinning them off are you better off selling number having an auction or are you better off selling all company.
Okay. That's great. Thanks, I'll get back in the queue.
Yeah.
Thank you and the next question comes from Sean Steuart with TD Securities.
Thanks, Good morning.
Two questions on re contracting initiatives and I'll start with the Calstock. It it sounds like you're targeting another six months short term extension.
The question I suppose is longer term how are you thinking about.
The long term contracting opportunity set for that asset and and how do you advance side, what how should we think about longer term contracts for calstock walking.
Hi, This is Joe good morning, Sean.
First of all when you mentioned six months I think what we've said is that we expect that.
The plant will be extended under a short term extension, we didn't specifically say six one so.
Yeah, that's what I just want to make sure that I will answer on that.
As far as longer term contracting the biggest struggle that we've had a in Ontario is a.
Having a framework that we could engage on the if you look at other jurisdictions like.
British British Columbia, we were where we were successful with Williams Lake Yeah. The government recognized the non power value of the assets and a and that's what's required for for biomass plant to be constructed because as we all know the cost of a biomass plant for electricity purposes, only generate electricity. It's it does.
Just not competitive and.
And so the struggling Ontario, and this goes back to even the previous government has been finding a path of engagement.
You know when we received the last extension.
A biomass review kicked off.
In an August you know an important document was as you would have reported was this I think it was sustainable growth I think it was called Ontario's for us so.
The strategy.
And as referenced in the budget I think that just came out and I believe it's on page 53, and what the government is doing this is it's focusing on growing the forestry sector and as part of that report Decatur August included a commitment to putting a forest bio mass action plan and.
Place and that's and that's the plan, but deals would there you know essentially to know by products as a result of a growing before surgery sector and so what's different now compared to where we were before is we now have a path for.
Engagement you know when when the Calstock to now can now be considered as an alternative for dealing with this quite residuals. The plant waste ER and you know we haven't had that situation before and I'm sorry. So what's happened is is that there's no I mean, the good stuff things go guaranteed.
That does that will that will negotiate successfully a longer term contract, but I think that what we have is oh, a way to engage and we are engaging oh. That's the good news. So so we'll see where this goes but as you know because this has been a significant step change in Ontario.
No, that's encouraging and beyond Calstock and Oxnard.
Any detail you can give on other re contracting initiatives for assets.
That are expiring.
By the end of 2022.
Oh, you said other than sell stock start yeah, I mean, I think we've got the opex on those do that beyond those sure those assets sure. Yeah, I mean, I mean, we have a fredrickson coming up.
I just have a play 22, and that's that's a very important asset for us.
And now we're within two years of the PT exploration and so you know we're at the point now where a potential off takers no. We'll consider looking at the asset. So you know we are beginning to ramp up our efforts there we feel good about it central Recontracting the plant.
No is is that a great location for both power and natural gas.
It it's a very liquid point.
Oh on the grid, where it's located.
You know what you know we'll continue to pursue all contractual options you know we're looking at potential utility. Our piece you know we're talking directly to the Pvs and we're considering other options also so that but that will be ramping up soon but the if you look at that asset that assets a capacity factor has been strong it's actually been.
Up over the.
Two years, which which is a good indicator of the value of the plant. Its you know we do think it's clearly needed, particularly the hydro sensitive markets like that where you just have to have reliable capacity that you can turn on.
The backup the hydro so yeah, we're beginning to ramp that up tool, even though we don't have any more to say on it but we're working on that Kenilworth. You know you know we continue to engage with Merck, we still feel good about the prospects for further you know, it's a short term extension there.
And then in Ontario the.
Yes assets, we just have to wait and see what happens in that market largely be driven by supply and demand you know the most recent Ontario forecast was that a big issue, but yes. So in July showed a requirement.
Maybe 2022 23, you know.
So were you know we're ready there for the Recontracting at Nipigon and.
And you know potentially bring back by the either or both Kelk else Saar kept the staging of one last thing so.
I think that about covers it unless you have a question on a specific asset and didn't didn't mentioned now that that's great. One last question for me and then I'll turn it over you mentioned that the Williams Lake feedstock situation was strongest quarter in tandem I suppose with surging lumber markets.
It does seem though that there is a likelihood of further sawmill closures and BC over the mid term is temporary supply.
Continues to decline how are you thinking about the the supply for that asset over the mid to long term.
Well I think to me. This is Nick already I think in the short and mid term I think we're feeling pretty good and he said the lumber supplies helped us with the mills ER.
Weve purchased two separate grinders to generate our own fuel with bars residual food that supply will be there, but from a long term standpoint, I think it's a you know it's everything we're seeing now is on the short term and we from month to month to up to a year in terms of contracting, but I think it's oh.
It'll be a it will be a short term year with year over year for us and for now.
Okay. That's all I had thanks very much.
Thank you.
Thank you and the next question comes Rupert Merer of National Bank.
Hi, good morning, everyone.
Jim you mentioned that we could be at a at the bottom of the cycle in commodity and power markets and you talked about some of the challenges of running a grand on renewable energy.
In the near term if you have some challenges re contracting some of your your assets with capacity well what is your sense be should you you sit on those in weight and does the market come back to these assets in a couple of years or looking out into the future I have you looked at things.
Like a hydrogen for example, and converting your combustion turbines to burning hydrogen, whether its green or or or blue hydrogen you just can't give some thoughts on on where you think that the market's going to head for somebody who's assets in the future.
Yeah. So you always compare what could I sell the assets for today versus whats the likely.
Recontracting scenario on the assets, we like our positions at.
Curtis Palmer, which is obviously the hydro and we like our position at the Frederickson, which is gas I think at a at a kind of a higher level again, I think when people really dig into these things likes happening in California, now and you look at cost benefit of Uh Huh.
Cash cost of one thing your benefits at the other night and you look at the the efficacy on the environmental side and the damage done on the environmental side, when you're building a new stuff.
In releasing a lot of C O two.
You know I think I think it starts to shift at some point, but you know I wouldn't you'll kings thing you know I would.
I would bet on its happening or happening near term. So so we don't have any view that the markets are suddenly going to rationalize.
Our view is you know, it's a long slog and and that you're going to get more growth from a wind and solar than you are from a firm gas and that public policy generally.
If sporadically will will will favor you know more wind and solar are and I think the the work that people like gates are doing that kind of pointing out that.
The efficacy there is not is not at all high and you really need to look at things like that that's going to take a while to play out.
So the problem you have is when you sell off assets you sell them off based on today's price curve.
And you know, we're not big on predicting price curves and generally people in a commodity business or overly optimistic about you know prices fundamental prices versus ER versus cost curves I would say my guess is the best use of the assets will be as people realize the limits.
Wind and solar and batteries lithium ion batteries.
You know with four or five hour you know durations.
As we are starting to see in California that things will start to normalize now in California, maybe they double down at more of the same it until you get a larger problem and then and then maybe they'll pivot I think I think that will be one of the last states that kinda pivots, you know towards reality in the near term or you know what we really need.
It's better technology in wind and solar or battery, you said and I'm afraid this rent seeking regime, we've set up as a a as I understand it as well or do you might R&D.
Going into those things. So we don't have any kind of rosy scenario, if things are going to pop back on gas I do I do think even now even today in California, even from you know a year or so ago, we're starting to see more appreciation.
Of the mouse and the physics and the economics on the ground and you're seeing it not only kind of in a broad macro although specialist kind of Ah places not.
It hasn't been trued it into the broader discussion yet.
But you're seeing it on the ground Oh, sorry, I think it's not fanciful to think that gas is going to start to catch up a better a better bid here in terms of output sales yeah and.
Well certainly auction arts improved over last year.
The prospect for OCC Smart I think I think the outlook for Freddie and Curtis Palmer are improving as well and they were probably aarti good.
You know so we do feel like we have reached a bit of an inflection point in terms of a hydrogen you know oh.
Joke hopefully she spent more time on that than I have so he could talk more.
Forcefully than I can tell you want to weigh in on the prospects for hydrogen as an option.
Sure sure things, Yeah, I I guess to central issue is you know when we'll hydrogen be cost effective but that's always the question with these things and you know is it isn't really a commercial option that would be a force in the timeframe that we're looking at it right now we're not seeing that I mean, there are a number of different.
Potential applications and structure using hydrogen you know one one of the one that's bandied about is we're going to take essentially worthless wind and solar power that we created by over building wind and solar.
And what we're going to use that power to manufacture hydrogen and then we will take the hydrogen or we're going to start and then we're going to inject into storage and take it out of storage and then we're going to convert gas turbines to run on them. You know, there's a significant amounts of capital cost from the wind and solar all the way through on that so I think that the struggle with hydrogen is.
I think it's going to be a while before we find a path forward with hydrogen that does that's cost effective and.
And so you know we monitor it we actually were looking at it recently and the Calstock area as an option and a you know it's just you know a.
Well a lot of these things are all three to five years out you know you can spend some time getting ready ready for them, but you know there's nothing on the horizon that we're seeing right now that would actually help us.
With the plans that we have that are you know that that better either.
Upto Recontracting soon or Waffled, and we have to keep in mind too that the plants that we have the mothballed right now our inventory or when they are in northern Ontario, and the biggest problem. We have is our location. There you know we're in the north of the province, the not in an area of great demand and so the plans are well situated you know.
Finally, the serve Toronto, you know once and that's it that's when the struggles we face.
Yeah, just to be just to reiterate reader reiterate a point, we're very agnostic on these technologies and were very massive come public policies. You know I mean, yeah. If you want to do drill baby drill and that's good for our gas plants. If you want to do Green New deal that's good for our hydro plants.
You know if a if you if you have a highly Ah Ah. If you believe the climate is highly sensitive to axio too and the outputs of that or could it be catastrophic in a reasonable timeframe I think gates and those people are right that we really need to focus on no cure and urgently.
And and wind and solar not helpful. I Cook cases, and say that he would say yet de carbonization is good but we would say that it's not nearly enough then I think James Hansen, who was with NASA and one of the big.
People early I talked about the CEO to us at the same thing you know we're agnostic we're in the business to make money. We're not we're out here for any agenda is like I say I went to firm up to 2001 and converted an IP company to an all win strategy I was on the board of a commercial software developer in New Jersey.
I think our favorite asset class today's hydro because if you think about the defend diagram between the outcomes.
I think I think it is a more reliable than things like wind and solar and it it's a price taker. So that gas prices go up that's good for it if you start to ban fracking and and and we do supply you would have increased prices so that would be good for us. So.
We're just in this to make money for the shareholders and you know, we we I saw wood business, a wood business twice 2005, and 2008, we had a big pipeline and that was an early adopter of the win strategy and you.
If I if I thought we could make a ton of money on lithium ion batteries, we jump on it I think what usually happens is people who write the greenway each and the most popular thing you know they they end up destroying a lot of capital over time, we saw that with those clean energy Tech funds back up.
You know 58 years or so ago, now and and you know people you know if you look at.
The actual performance of wind and solar plants, you know, they're they're they're P 90 type outcomes and things like that but it's it's been a tough slog for for cash investors on the wind side for the most part if you're a buffer of cash investments if your attach investor. It's it's been much better now.
So so we have we have a view that the the kind of high level, you know political level analysis of what actually works and what the economics are and what the math and physics are.
Really don't follow some of the political you know a fuse that either side I mean, the you know the last four years, they focused on subsidies for coal or coal and nuclear or you know I guess that makes little sense to me right and saying you're going to de Carbonize by 2035 is equally nonsensical.
Okay.
You know, but people feel like all well. We're we're we're we're at least going in the right direction, but you know you're not you're not having a material impact.
But but so that's a public policy thing I think most people don't weigh in on these issues. It's just better to kind of go along with the crowd, but the problem is if you invest with the crowd you often end up with poor results add up and so we're we're not doing anything based on any kind of political agenda or trying to teach the world a better way to.
To anything we're just looking at the facts on the ground and you know if if wind up if we can make a really attractive.
Return to picking up when a project from cash investors that turned out to have poor flipped points post there are 2001 to 2015 investments.
We're going to we're going to jump on that we have in fact were work were talking with.
With something investors right now, but looking at things like that you know I've looked at it getting up a solar commercial developer you know we will you know we're open to all of that it's it's just driven by how could we make money for shareholders not by any kind of macro level views, we take our views would be great.
So we've got a great deal of a pistol biological humility around here because you know what I see the Wynn Company 2001, you know I had that out a book on peak oil said Hey, This is a real thing and it was I don't hurt or immigrants on down in the woodlands, Texas George Mitchell.
Who showed that we were all wrong about that burden every ball, but consensus was wrong about that so so so we're very bashful about betting on our ability to forecast that he these things and we just kinda swing at the pitches that come across the play.
So if we.
Look at the next five years, so were looking out into the future a assuming status quo I know you're going to be looking for opportunities, but if nothing comes up you talked about a 115 to 165 million in discretionary cash you are projecting a repayment of debt to get down to about $258 billion.
At what point does does does get down to a level that is sustained by your long life assets like like Curtis Palmer and then if we look out to 2025, what does the business look like then.
Yeah. So I think we've said in the past that we can get to net debt.
Zero by 2025 2027 as I recall, assuming you know we just focused on the debt, but we don't we have said in our materials that we don't think that's the most likely way. We'd go you know that the other end to the extreme you had 100.
80 billion less than a $180 million market cap and you know if you generate you know, it's a up to 165 million of cash and if you divide $2 a share to that.
Yeah, you could take out or you know another 80 million shares you had 89 million shares outstanding [laughter]. It's a it's crazy. The you know in that scenario I'd love. It I mean, because I'll be your holding my shares and then at some point I hand them off to my kids and they're going to own Curtis Palmer on the Hudson River you know.
Good luck trying to replicate that and they're going to have some gas plants that I say go out you know value that's emerging over the next five years long life biomass now there would be practical limit side. You know you can't there at some point, we can't continue to buy shares because there will be a liquidity issues or regulatory.
[laughter] legal issues and it I think at some point you you stopped going down that road and you would you would pick two well okay with them you know.
For the money or all the body preferred for a while or or you know weve taken as far as we can if your front hopefully things emerge over five years, where you would best and you know we didn't do any investing around here. The first three years, because we didnt see anything particularly interesting we did.
A lot of selling and closing.
Closing a plant and in for a couple of years all of a sudden we hit it hard and bought for biomass and we bought a hydro we spent 45 million.
So I think over the last five years, if you look at it we spent $80 million buying shares and $25 million by an impressive.
At at an implied 10% plus return.
The common shares at a significant discount to our our base case best estimates of intrinsic value and then the $45 million of stuff that we bought where we're at a you.
Good return levels and we continue.
I continue to think those are going to have turned out to be terrific investments I pulled the trigger on them again today, if I could do with another set like that yeah.
So it will be lumpy and opportunistic you know, but those are the major you know ways. We'll we'll deploy the capital does that does that answer your question or did I no.
Yes, no that's great. Okay. Thanks for the color.
Yeah.
Thank you that does conclude the question and answer session. So I'd now like to return the conference back to Jim Moore for any closing comments.
Okay. Thanks, everybody for getting on with US This morning, and hopefully that helps people think about where we're going with the company. We think about this company like we're we're all our family monies tied up in it and you know we're in it for the long haul and.
What would we do if in that scenario and now and we try to act accordingly.
And I think we've got a pretty good record of allocating capital you know the markets don't recognize that there's there's you know probably micro cap issue you know.
No we're not paying dividend currently and Ah Ah you know.
With all that good uses of capital we have I think.
Oh, we're likely to focus our capital the way we had the last five years, but we're willing to pivot whenever we think we can we can do.
That are for their shareholders.
And that we're laser focused on shareholder value. That's a you know we're we're major shareholders and the insiders I think it's gone from something like 1% to 4% and ER and we like our position and.
But we're also keenly aware that Oh, we've got to surface value here and you.
Over the next three to five years will Recontract Curtis Palmer and ER.
We'll re contract.
Freddie and animal and and then I think we'll have a lot more clarity and then the question is what do you do the next three to five years and the good news is you know we've got a really a high level of cash availability to if you look at kind of a cash free cash flow yield. The next five years, it's terrific.
And we've got a lot of great uses.
On our balance sheet, and we've got a lot of liquidity and a revolver, if we start to see better opportunities.
In the power markets, a different asset classes and that usually happens things things a surprise you and all of a sudden things that go on sale and then we can we can move quickly in that direction.
So thanks for your interest and participation on the call and we look forward to updating you on our progress on the year end conference call. Thanks again.
Thank you. The conference has now concluded. Thank you for attending today's presentation, you know to central lines.