Q4 2020 Innergex Renewable Energy Inc Earnings Call

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Thank you.

Hello, everyone and thank you for dragging us today.

I'd like to specify that this conference will be out of an English members of the museum are invited to ask the questions by phone after this call.

The presentation supporting today's discussion is that other bolt as we speak on the homepage of our website or through the both of you that in our jackpot Party.

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

Although the corporation believes that the expectations and assumptions on the which forward looking statements are based off of your Sunday of bolt ons or the current circumstances listeners are cautioned not to rely on Judy on the forward looking statements as no assurance can be given that the twin proves to be correct.

Forward looking information.

Containing of it is maybe that's at the date of this call and the corporation does not undertake any obligation to update or revise any forward looking information whether as the result of events or circumstances are occurring after today's heroes on the.

Net will required by law.

During this call we will refer to financial measures that are not recognized according to international financial reporting standards <unk>.

Please refer to debt on the as far as Ms or section of the MD&A for more information.

Our speakers today with the ministers, all sorts of low Chief Financial Officer, who will present, you for it and year end results and Mr of Michelle at the he's President and Chief Executive Officer, who will review our operational highlights and I'll turn the alert the conference to Mr. In the.

Thank you, Kevin and Hello, everyone.

I am pleased to report strong financial results the growth we posted in 2020 over last year is mainly attributable to the commissioning of the Phoebe solar and the Foard City wind facilities in late 2019.

And the contribution of the south of it all and Montana acquisition completed in May and July 2020.

Production and revenues from the year were up 24% and 10% respectively compared to the same period last year.

Adjusted EBITDA was up by 3%, while adjusted EBITDA proportionate was up by 8%.

Before going further I would like to stress that we are reporting on the continued operations basis, which excludes hs of cost from the 2019 results.

On page eight we will comment on the three month period results, while the remaining of the presentation comments will be made on the full year results for.

For the three month period ended December 31 2020.

The EBITDA increased by 14% compared to the same period last year.

This increase was mainly attributable to a higher contribution from the idle facilities in British Columbia, and Quebec and to the mountaineer and Salvador acquisitions completed in 2020 of these.

These items were partially offset by lower revenues from the foard city due to an unfavorable net selling price and other operational expenses.

And a lower contribution from the friends when facilities.

The joint ventures, and associates contributed $15 $5 million to the I adjusted EBITDA proportionate compare with the contribution of $21 million in the same quarter last year.

The decrease was mainly due to a lower contribution from the Shannon and flat up facilities, mostly due to unfavorable net.

Selling prices, partly offset by a higher contribution from Jimmy Creek and to Obama drove facilities.

In addition, the proportion of Ptc's production tax credit increased from $17 $8 million to $19 $6 million due to the higher production from the wind farms located in the United States.

Overall, adjusted EBITDA proportionate increased by 8% compared to the same period last year.

On page nine for.

For the yearend December 31, 2020, Hydro electric power generation segment generated $173 $9 million in adjusted EBITDA, representing a 2% increase compared to the same period last year, mainly due to the higher contribution.

From the facilities in British Colombia, despite the curtailment imposed by BCCI drove four five facilities.

Operational expenses in British Columbia, where ire compared to last year due to a favorable settlement of the water rights claim in 2019.

Wind power generation segment generated $263 $9 million and adjusted EBITDA, representing a 4% increase compared to the same period last year. This increase was mainly attributable to the Montana acquisition completed.

Earlier in the year, the commissioning of the Foard City wind farm in late 2019, and higher revenues from most facilities in France.

These items were partially offset by a lower contribution from the Quebec facilities and temporary shutdowns and production restrictions at some facilities in France.

Solar power generation segment generated $39 $2 million in adjusted EBITDA, representing a 26% increase compared to last year due mainly to the commissioning of the Phoebe solar facility in late 2019 and to the.

Sorry about the acquisition completed earlier in 2020.

On page 10, the 8% increase in adjusted EBITDA proportionate in 2020 is mainly due to the production tax credit generated by the Foard City wind farm following its commissioning and higher revenues at the toolbar Montrose and Dulcie facility.

DS.

These items were partially offset by a lower contribution from the U S. Wind facilities explained by lower revenue from unfavorable net selling prices.

The lower contribution from the first of the DS in Chile, as well as by a lower contribution from the Jimmy Creek facility, mostly due to the curtailment imposed by BC hydro.

Continuing on page 11 of the $122 $2 million increase in long term debt is related to construction activities at the Hillcrest and Griffin trail and to the long term loans and borrowings assumed in the month of near acquisition.

This increase was partially upset by the corporate revolving credit facility. The repayment made following hydro, Quebec private placement net of the amounts used the word the respective purchase price of month in there and sell by the <unk> acquisition.

On page 12 changes in the total assets stemmed mainly from the increase in property plant and equipment related to satisfy the all in Montana acquisitions the.

The increase derived from the construction activities related to credit.

The Griffin trade projects.

The increase in investment tax credit recoverable relating to Hillcrest construction cost.

These increases were partly offset by $228 $5 million in depreciation and amortization and of $65 $1 million decrease in the investment in joint ventures, and the associates due to distribution received and an impairment charge on the.

Investment in <unk> Llaima.

Changes in total liabilities, the mainly from the increase in long term debt and the increase in derivative financial instruments due to a general decrease and the interest rate curves.

The change in shareholder equity is explained by the private placement of $661 million to hydro, Quebec, and an increase of Noncontrolling interest stemming from the Montana acquisitions.

These items were partially offset by dividend declare on common and preferred shares.

As shown on page two of the.

The free cash flow remain constant on a trailing 12 month basis. The factors that has impacted the free cash flow are.

The free cash flow contribution of recently acquired commission projects the.

<unk> contribution from interjects hydro facilities in British Columbia.

And lower interest payment on the corporate revolving facilities concurrent with the hydro Quebec private placement of these favorable items were partially offset by the BC hydro imposed curtailment the sale of <unk> ownership interest in <unk> in May 2019.

Lower contribution from the Quebec wind facilities.

General and administrative expenses to support the corporation growth.

Free cash flow was also negatively impacted by an increase in debt principal repayments and by the recovery of maintenance capital expenditures and prospective project expenses. Following the sale of Hs the car in 2019.

For the trailing 12 months ended December 31, 2020, the payout ratio amounted to 135% of free cash flow compared with 102% for the corresponding per yard last year.

When normalizing its free cash flow and payout ratio with the nonrecurring curtailment imposed by BC hydro and the decrease in corporate revolving facility interest payment combined with the increase in the quarterly dividend and the <unk> estimate its payout ratio to be at 190 per cent.

Also the board of directors has decided to maintain the annual dividend at 72 cents per common share for 2021 in light of the foreseeable growth plan, both in terms of acquisition and Greenfield development.

Before I conclude.

Let me update you on the Texas situation on which we recently issued a press release.

At the time of the press release.

We estimated the financial impact of the recent weather events to be on the consolidated basis between 45 million to $60 million Canadian dollars.

This estimate was based on the publicly available information.

The February 17th.

And the objects now estimates that the financial impact of the weather events. During the storm that persisted until February of 'twenty, yet as reach on a consolidated basis.

Similarly, 80 million Canadian dollars, mainly due to the unfavorable impact from the realized loss on the power of Ed just on flat up Phoebe and China and sites.

This financial estimate.

We'll change as additional information becomes available.

Force measure and other mitigating possibilities are being evaluated.

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

Thanks.

Thank you Francois and the good morning, everybody.

I think that we have to be covered a little bit of of this fixes the seats.

Nation beef.

Before going to the the review of the year and little bit of a forecast for next year, it's very unfortunate.

All of that we had to.

The two live through this crisis, it's a financial crisis, but it's also of human crisis. The a lot of the techs and the risen and had the gone through a really bad time last the last week just.

Just like to also say thanks to our dedicated employees that are gone through this crisis, even though.

The were facing.

From problem at home and the the went on site. It's true also for the Vista and the.

Guy that help maintain our facility. So it was not an easy situation I would stress that our it with the quite extreme in terms of temperature and also duration.

And that has led the the PUC to arbitrarily come up with a ceiling or floor price of electricity for quite a long period of time and as you all read it the standard for a period of the few days at $9000 per kilowatt hour, which is.

Extreme one could say and look back and say well it could have been the foreseeable that the these things have happened.

True but.

When you put all of these stats the together it was very very difficult to forecast that the that type of a magnitude both in terms of weather.

Event, and also on pricing and duration.

Over and above that as you are you use the you've seen our press release and probably read about it in the in the press.

The the extreme winter had brought in started with freezing rain debt. Unfortunately, as froze up our plant in flat top.

And the crews were trying to come up with the solution, but unfortunately, the winter persisted and also all of the road access were very very difficult and IC, So hand spray of being a big trucks and the supply to come due to site. So it was a little bit also.

A perfect storm in a sense that the unfortunately, our other sites were available we have Shannon and we also have.

Phoebe and foard.

The we're able to produce but somehow at the at the throughout that crisis, we've seen lower.

Wind regime and over cash situation in some some snow also that has the reduce the capacity of solar plan to produce and when of course due to produce so all of that was a very I would say come up with this notion of being caught in the perfect storm.

Are we happy with this no.

But we are we had already initiated a new strategy in our investment in the United States. If you remember we were talking about Griffin trail.

Three different approach, where we have secured the a minimum of a.

Revenue for the project to.

Kind of it's Pfizer tax equity because one of the has to understand that all of these power hedges were put in place in Texas in the U of securing the tax equity financing for the PTC and the ITC in the in this in this in this market so I.

I would say that our we wanted to get out of these the power of hedges it.

It was not necessarily easy we were in the midst of talking to some of our tax equity partner at the time, but we definitely wanted to have the different structure in Griffin Trail and we did we did also a different approach, which for which worked very well we have a PPA.

Based on us produce the electricity for for all of our on 300 megawatt out of 350, and we kept 50 megawatt of our exposure to merchant and actually for it did theory of where they were very well in the last the true that prices and if the Griffin trail would have.

Ben.

And the in service of Griffin Trail would have done a fantastic financial result during that period of time.

So.

Here with US we want a half of different approach for Texas, and we did and we had already initiated this new strategy. We will we want also to invest differently in the United States than we've shown through the Hillcrest the law.

And then debt 200 megawatt in Ohio that were going to talk about the.

In terms of construction. We also made the acquisition month in the air that the diversified our footprint in the in the United States than those of project car for the <unk>.

Contract it so.

We just want to make sure that you guys understand that we were not happy with what happened.

We wanted to take a this has a good lesson learned and try to find ways also to improve going forward. There is might be some possibility of reducing the potential liability has shrunk from sweat said.

I think that the oil industry in Texas is the now sitting down and looking back up for what happened and are hopefully coming up with the new rules that would.

Enable debt market to be a I would say more stable I know that are caught and PUC and the governor and probably also on the federal level. They will all sit down.

This is going to generate a lot of negotiation a lot of the new Ids.

And I'm, hoping that at the end of the day. This crisis would have will change, Texas to be a better place to.

To invest and to to take advantage of the great resources that debt. The state has in terms of renewable energy.

So with that being said they'll all be a vulnerable. It also to answer some questions at the at the end, but just wanted to make sure also that we.

We wanted to say that we're not taking this as the as a small.

The back Oh, it's how do we say, it's not a small hint of.

But it's definitely something that is the is out there in the sense that we we.

We knew that these contracts were not perfect and we are we certainly had a different strategy of night I'm, hoping that you guys are going to focus on on debt.

In terms of the of corporate development at this time of the year, we always go back.

To look at the to do a little bit of a look back on what we have done during the year and I'm I'm I'm.

<unk> reported the 2020 was a very busy year.

Do you all remember together on page 16 debt, we will come hydro Quebec in.

In our.

As a shareholder.

And also as the joint venture potential partner to develop a per.

<unk> renewable project.

The together so we're quite quite happy and all of that aspect, we have a start to work with the team how about air, Quebec, but COVID-19 that slowed down a little bit the effort that we were able to put together, but the fastly.

This alliance is the is something that we wanted to.

Mature and and take advantage of we also did the two acquisitions, we've done the <unk> acquisition in Chile called sounds about all of its a solar plant that is doing just the just great and also we bought six wind farm in Idaho, The project called Montana Air If you remember.

So these are also part of the strategy to diversified our footprint in the United States and also those two acquisition. If you remember were made on the basis of making sure that the itself being of.

The the corporation to buildup, it's a cash on cash.

The short term position to improve actually our ability to help reduce our payout ratio. So we've said that the how many will be of tool in our toolbox to improve on this and to create value for our shareholders and those two acquisition are two good examples.

Of what we intend to do with the M&A.

So on page 17 are also pleased to reported we've been busy in construction activities in the in 2020.

We are we were hoping to have the yield kras finish by December.

But the COVID-19, the and the temperature I must say the the temperature in the Ohio was quite rainy trail of the years in that had the created a little bit of the issue for our.

<unk> to install the the panel, but all in all of I am very Oh pool that are by the beginning of April we should be all finish we're producing.

Electricity as we speak.

It's just a matter of finalizing all of the the the connection and testing all of the the system, so pretty a pretty a pretty hopeful that the by the beginning of April.

The things will will be in full a full production.

I think project in the in the North of Quebec has has been the advance quite well. If you remember we were afraid the because of the pandemic, we would not be able to start construction and at the end of the day, we were able to establish a good.

Our system, where our employees were safe and also the local resident were safe and we did quite a bit of advancement in the near the very happy to.

To look back at what happened during the year and we're in a position to start the construction at soon that springs come back the.

Small project in France called the young it's not a big project, but like we said, it's our first the project to be fully permitted and built by our energy steam in France.

It's just a matter of days.

Today's two to be fully interconnected.

The MTA in France, So and everything went very well very.

Very happy to have our first the henhouse project to be a.

Good luck in the built in the in France.

And a little bit of surprise of last year was the Griffin Trail project I just mentioned in Texas.

This is very different from a power hedge.

<unk> exposed to the merchant pricing over there, but we don't have any exposure.

To cover our production in Texas. So this is in the in a way a good achievement in the sense that we have convinced of the tax equity provider.

Two of them to have this new structure to benefit of.

The two.

Benefit for us and not being force into power hedge as we mentioned this is something that we will not do in the future.

And this approach of Griffin Trail, we would like to.

Perhaps have the exposure to some corporate PPA in index. There's just has the forward. So this is something that our team is going to work also to have a portion being a PPA based but cash produced so that we don't want to have the problem of being short of Inc.

The electricity to service those PPA, but things arent going very well and Griffin trail in terms of construction, we have used the same theme.

We've done in Ford and the actually pretty pretty enthusiastic on how fast. These guys are doing we have.

Today's date, all of the foundation and all of the major civil.

Civil infrastructure are done.

We have about 2020 turbine already erected.

And if things are going well in terms of the winter, we're putting a almost two turbines per day, so we need and other 40 45 days perhaps of.

The good weather to finalize these the erection of the turbines.

On page 18, the lockman activities.

Have been also on the forefront of the of 2020 are remember that we have for project you know why that we're working hard to get the permits and starts from scratch loans construction on two of them.

So this is the this is something that the is very important for us because as you know the.

This is the coupling solar and batteries and in the market where Eric the the.

The local utility.

He is the concern and wants to the lump sum good technical aspect to have this wind and solar being introduced so we're learning a lot and I think that these are these experience all of these project will help us replicate these type of of project Orion.

On Oh on the our market I think the solar and battery are the way to go in many many.

Many of market to develop renewable energy and to be able to supply capacity true the evening.

We also have the made a good advancement in the project on the App, which is only of battery and this is also a good FERC.

The first the.

The commercial.

The transaction with <unk>, low, which is the subsidiary of Hydro Quebec.

Have low it is producing and selling.

Selling a very good battery.

We were proud to be the first customer of the hydro Quebec in the in this and we love to be able to deploy more battery storage initiative.

Together with the low end potentially some of them some some other supplier, but we like to.

The loved this relationship with hydro, Quebec, where the half of great expertise on how to match.

Manage grid, so we're very hopeful that this.

First of the project will bring many.

Many more in the future and in terms of Chile, We we have continue the loving frontier of and as you know what I spoke of boats and Carlos.

Water rights that we own the just upstream frontier I think how low it is also advancing in terms of permitting.

With the Covid everything as flow down a little bit in Chile.

But we are developing a like I said the some other.

The leads in our in the in Chile, and also some solar project that we're looking from some terminal. The solar project also we're insuring some of the RFP from.

From a copper mine in Chile, and so very very it's still positive on the future I'll put the Chile.

Yeah.

This year on page 19, where we're giving you and we're willing to.

Report on this on the quarterly basis is the prospective project. We were trying to give you a little bit more color on how advance. These projects are I think that the in the past the word lumped into one big.

One big category, but.

We think that the bringing you a little bit more color on how advanced the project car true three categories going to give you a little bit more perspective on our successful.

We are advancing these these project and I'm pretty happy on the.

The advancement we did in 2020 are youre seeing that we are we have advanced solar you know that we want to work in the United States in deploying our solar panels that.

Our basically of grandfathering.

Or pre free of quantifying some are.

Up to about 600 megawatt of solar project in the state with full of ITC.

And I'm very happy to have 200 megawatt, but youre seeing also in mid stage that we have another 300 megawatt 370 megawatt so working hard on that aspect and the working also to diversify true PGM.

Pennsylvania, Ohio West of the northwest of the United States. It's also a target for these type of project, where the lumping win as well we have the portfolio in the U S debt is the <unk>.

Very promising as well so going forward.

You will hear us in one every quarter, giving you some updates like this.

One of them make sure that the also France is developing well in the in this we are we are advancing our France, it's an important market for us it's not big project, but those projects have but usually good economy, though are also putting a lot of the effort in the in France.

On page 20.

We just want to give you a little bit of the guidelines for for next year 2021.

We'd like we'd love to be able to increase our production by about 15% revenue by 12 adjusted EBITDA by 12 and also adjusted the EBITDA proportionate by about 12%. So I think we're going into the right direction.

Sure.

Of course, we want to improve also on the cash on cash or the the cash flow of generation.

In 2021 same same strategy here, we wanted to make sure that we are the lobbying our own project and use them. Many ads of tool to rebalance the cash on cash.

You've seen what we've done last year in London here and some of the door. So all of the team and many team our focus to the alert.

This again in 2021.

And if we go to page 21.

We just wanted to give you a little bit of what we what we forecast for the 2025 strategic plan.

The timeline I'd love to be able as we said in the past you provided the 10% adjusted EBITDA, but what we are.

While focusing more and giving you more guidance now is to also bring a an increase of about 12% on free cash flow per share by 2025. So that's a commitment that the the corporation has yes, we want to grow the EBITDA, but we also want to grow.

The cash flow per share to improve our payout ratio and as I've mentioned.

M&A will play a role with this but also our own development pipeline project debt that we are developing.

So on this I think that we will be opening the floor and I. Thank you and it's not for us and myself are available.

Thank you for what you would like to ask the question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press the pound key what parts of it.

At the moment to compile the Q&A roster.

Yeah.

Your first question will come from Rupert <unk> from National Bank. Please go ahead. Your line is open.

Morning, everyone.

<unk>.

If we can.

With the with Texas.

Slide of the benefit of Griffin Trail, which will diversify your contracts what can you do to reduce the risk of of having a similar outcome in the future of have you looked at.

Adding technology and maybe you could talk about what that would cost or what your opportunities are to make changes to your hedging strategy.

Well, that's a good point.

For I think that Texas now of tax equity are going to be also a I would say a partner also in trying this solution in the past the wear.

Acting more as a sort.

For the lenders.

Sort of peak, but with the.

With this happening of course, the the power hedge or provider have now.

Come up as potential.

The lender or credit or in the staying so suddenly tax equity.

Our.

Now a liquidity partner deal with it we're always an equity partner, but they were kind of a preferred equity partner almost like a well almost like it of lender they were acting more like a lender.

So I think that the will be part also of the solution in the past we were trying to unwind. These things and then finding the financial solution to a on one day staying in the were very very reluctant to engage we were trying to reduce the exposure in Shannon for the last year or so.

It's always difficult always complicated to get their attention on these things. So now that they're part of the solution and they are basically sitting on the same side of the table for.

Than us.

I think we will be in a position to unwind some of these.

The power edge is either by reducing them completely or going a little bit like for or Griffin trail and having them.

Time to renegotiate, perhaps some corporate PPA are different a different approach, but the high seeing.

Tough in technology, you know if we go back to flat to up it.

It is true that the flat to up would have been in the better positioned to produce.

We would have anchor a lot less losses, because we would have been producing a true.

All of these these period, but the but the problem is this $99000 ceilings that was introduced the nice thing that.

This is something that we will have to change in Texas going forward.

Of course, like I said, I think we will be in a position or trying to be in a position to get rid of the east liability. These power hedges get out of these positions.

But nonetheless that wouldn't solve the problem of of Texas per Se I think that.

This is a good time to reflect on the on the market rules and perhaps it's been the while that Texas was the entertaining some.

The discussion around capacity payments as you.

All know things of this doesn't have any capacity payment they rely on having this big volatility on the energy pricing to entice invest for investor to to invest in Texas, but that has those limits.

At one point, what is 9000 dollar going to do to use.

Use the people to try to produce when youre frozen when the when the lines of the gas line is frozen when the pipe the water pipe are frozen.

What else can you do I mean, $9000, none of helping anybody's interest, creating chaos and I think that people will will realize that I also think that.

The might reconsider of being interconnected to the rest of the of.

The country of the only have a few interconnection.

To the rest of the state of the neighboring states. So all of these I think will will come up and there will be a lot of discussion. So yes, we could definitely look into perhaps the.

A look into what we could do in our own facility to improve our ability to produce with the cold winter, but you know even in Canada.

A lot of our wind farms are frozen up and Oh in the.

Recurrent.

And in Canada. It's just that we are building these downtime in our long term forecast.

And in that sense, it's just that the when you're not producing it sad, but youre not youre not losing you don't have to cover yourself with very very high pricing and this is what happened in Texas. This is the main reason why we had suffered these losses is the fact that the price went through the roof at $9000 per kilowatt.

Yeah.

Okay. Thank you and what are your contracts.

Sure and what is that.

Look like from here.

Well we.

We will be in the litigation.

The.

Rupert I will not comment on this that much.

Just saying that.

I think that a lot of players have retain.

The litigator, we have we're in the process of evaluating all our position.

And how to react we're in a position where our <unk>.

The settlement.

The data are on a monthly basis. So we have the few weeks before.

We have to make.

Sure.

<unk> position.

Clear, we have a huge force measure to our hedge provider and I think that some other folks have.

The only five days due to settle and they are right now in the middle of some discussion. So the this is going to be a very dynamic.

The situation in the sense that the a lot of players are going to be.

B.

In this.

What I can say is this what we have provided is the maximum liability that we have and one has to remember also that.

We own 100% of Phoebe, we own 100% of for but we only own 50% of flat to up and 50% of Shannon and those are nonrecourse to to interject. Some of these no way that.

This can filter and increase the financial liability to interjects whatsoever more than the equity portion and Shannon.

In the.

And the flat up.

Okay, Great I'll get back in the queue. Thank you. Thank you.

Your next question comes from David because that off from Raymond James. Please go ahead. Your line is open.

Thanks, Good morning, guys.

Just a quick question a follow up here.

On Texas, Michel I think you just.

Describe the 80 million of maybe I should just confirm this with you that it was that it was $80 million, but I think you also mentioned that there might be some movement in that number or would that kind of suggest that you think the $80 million is the high end of what the exposure could be and do you expect any changes to that number would be two to reduce it well.

Well, yes.

Right now and I of course, we're in the middle of the crisis, there there's litigation going.

All of it plays Theres politician sitting down with Eric caught PUC, but what we hearing is that.

A lot of.

Stakeholder are questioning.

This $9000 and also.

The the time debt $9000 were effectively in force so anything that the debt come out of those discussion that would reduce debt.

At $9000 or the numbers of our debt that $9000 were input would be directly proportionate.

If you if you if you would bring the debt ceiling to three or four then then suddenly our exposure would be limited to something around the.

Thirdly, 30 ish million dollars so.

What we what we wanted to be very transparent in this and some of you might have been surprised that $80 million.

The that $80 million stand versus the the.

The the ceiling, where all of the of the range, we had provided but bear with US we were in the middle of the crisis. We wanted to give you some guidance early on that prices and we.

We were trying to forecast what it would be.

Happening.

Further the during the weekend.

We were surprised by it turns the losses that we had the insured.

For a very little Sun in the forecast that the forecast of a little bit more sun and the the the cold Sanford of true continued and unfortunately very weak when the Aspen and the night a Friday.

Thursday, Friday and Thats the increase the.

The losses versus the hour call on Wednesday.

So yes, I think of the 80 is the maximum exposure that we have and again it's.

The potential liability, we haven't settled we haven't sent any cash yet.

To the third party.

So like I said, it's a little bit early.

Everybody are scrambling with lawyers and in an argument and then meetings and stuff like that so I think that will.

We'll know we'll know in in the next few days, if the PUC and Eric caught our revenue staying the.

Debt ceiling pricing it would be due I guess that will will issue, perhaps and we'll keep the market in line with with those news.

That's great color. Thank you I'd appreciate it certainly is a very dynamic situation.

And then maybe just one one related question just with respect to your 2021 outlook and the 12% year over year EBITDA target I guess that youll.

Youll, probably wait until things settle down settle out with the the little litigation on the force Majeure before you look to potentially revise that number yes.

Yes, I agree and this was normalized without debt debt.

Settle settlement. So yes, we'll give you more color as the.

As this situation unfolds.

Excellent. Thank you very much for that I'll get back in the queue. Thank you.

Your next question comes from Sean Stewart from TD Securities. Please go ahead. Your line is open.

Thanks, Good morning, and thank you for all of the detail.

Michelle.

It's still 23% of your perspective the capacity pipeline.

And as you gravitate away from the hedge contracts structure.

Just your comments on appetite for more merchant exposure I guess, the preferred is that corporate ppas, where you have price certainty but.

If if more merchant exposures of part of the plan can you comment on.

I need to build out of an energy marketing.

Component to the to your company is that something that's the part of your thought process going forward.

The good not so good point Sean.

We had.

I don't know how all of them how much we can describe that in percentage, but increase our team from zero to two.

The two expert in the.

In the.

I Wouldnt trading, but also <unk>.

<unk> funds flow. So we wanted to be more more out there theres. Some new platform also of that have been put in place, where it's a little bit of like.

And the electronic dates between producer and corporate off taker that platform is actually a pretty dynamic and it's helping us has already approved the <unk>.

Anything from for Us we.

We have.

Initiate a term sheet with some corporate off taker for some some project in the states. So this is a.

Very interesting I would say I would add up also on this notion of.

Merchant.

We want to have.

Some exposure to merchant and it depends on which.

The market I think Texas with I think a good.

The example of not necessarily being force to deliver capacity when you have the variable.

Asset.

<unk>.

But for a day is probably what we are aiming to having the majority of the output being under contract and having a little bit of the.

Of the exposure, so that you're not necessarily.

<unk>.

All in for a lower price of electricity.

But so you can have access to those spikes.

But talking about also Texas and perhaps.

You have seen some negative pricing in some areas and pyxis is notorious in the northwest of Texas to see these things happening.

And low price of electricity, but I think there is a game changer.

Here is the.

He is hydrogen.

The green hydrogen.

It will play a role in the demand and being able also to stabilize these volatile market because electrolyze or.

Can be switched on and off almost immediately and that doesn't hurt the the process at all I think that just to give you a perspective for some of you that knows the lead that the.

Those mats with with hydrogen, but it takes between 50 and 55 kilowatt.

Our to produce a kilo gram of green hydrogen so put debt 50, and put the $220 per megawatt hour or two cents per kilowatt hour and then the variable cost in terms of energy to produce of green.

Green origin of kilogram of Green hydrogen in the us about the dollar so that gives you a little bit of a perspective that the.

If price are low in the region and then you have the ability to go and install electrolyze or and transferred that very low.

Renewable energy into Green hydrogen this is going to hack of a little bit of asset buffer and as the floor to see price of electricity going forwards I'm getting more and more optimistic in the sense that.

These market will not be in a position to have very long.

And prolonged low low price of electricity day will be some arbitrage to be to be done and these electrolyze or it can be installed fairly quickly and also they can be more volume. So if for some reason you have the five years 10 years.

Outcome in terms of the area of being weak.

We can pricing.

And so all of these things in.

And I think that eventually price of electrons or it will go down and so I don't think we will be seeing these type of market, having very very low price of electricity.

They will they will be acting also as Texas. These things can be stopped. So you can take advantage of very low electricity. When it is available and if there's a spike you shut down. This this electrolyze her and then you flow through the the electricity to the to the to the market and then take advantage of perhaps on high pricing.

So I think that the will be a lot of the.

I'll come and potentially positive outcome in some area, where you see these pricing today, the Dar very low.

Green hydrogen will make a revolution around these market in the future.

That's great detail you actually answered my second question with the yes, the answer to the first I will turn it over thank you very much alright, thanks for your son.

Your next question comes from Mark Jarvi from CIBC Capital markets. Please go ahead. Your line is open.

Thanks, Good morning, everyone.

I'm just wondering a few more details around on the Texas and potential losses, it sounds like the $80 million.

Net of any EBITDA gains from powertrain for assets that could generate can you quantify at this point.

The losses are below the line on EBITDA what is the impact.

Through the debt.

Mark.

The right. So we should see a pickup in our EBITDA and then on realized losses on financial instruments on the one side and the loss of share of loss of joint ventures and associates for all of the realized loss on Shannon and flat top it's too early to guide you, but you will.

See quite of good pick up in adjusted EBITDA.

We should see coming in the big loss on power edges on financial instruments.

We have decided not to disclose you know the whole form of Q1 and desktops, Sean but this will happen this way.

Mark exactly.

I think it's a little bit early and that's why we're trying to give you.

The financial impact, but we.

We're still negotiating we're going to have a lot of discussion with our power hedges supplier.

And also we're in tune with whatever.

The policy or adjustment in pricing debt.

Eric Cot might.

Mike communicated in the in the days the head so bear with US I think we're giving you the ultimate.

And maximum financial impact and we're going to work hard in the next few weeks trying to mitigate this but the net the impact on the turning will come to around $80 million.

So and this is also excluding all of the potential reset on mark to market on any other so it's.

It's will become from easy to more complex to analyze all of this at this time you said is right.

Okay. Thanks for the.

Detail and then can you just in terms of how you settle these losses I know you kind of do it on a monthly basis, but in terms of the where the cash comes from I think maybe some of these projects.

That might have of reserve fund and I'm, just curious how much capital from interjects like.

From the from the corporate level has to go into <unk>.

Cover these losses.

Does that.

All of your willingness to energy M&A or take on new development projects until you have clarity on how much sort of corporate cash infusion and you continue to settle these losses.

That's a good point margin.

As for each of the project they provide the tracking accounts the calm the bank. So and this is settled monthly so up to now in the Michelle of said nothing has been settled at the maintain.

We'll receive the final invoices, so what we have on and his daily statement of accounts of the tracking of accounts. So the $80 million is coming from those statements, but nothing has been settled for now so the.

The level of the tracking of accounts <unk> been disclose for those III project up to now but.

I'd say that the $80 million, if we needed to refund everything above the tracking accounts, which is around 15 million for two project and $12 million BB for Phebe. So then maybe what you would have to disburse could be a bit lower than the $80 million. If you follow.

But the but this is the way it works at the project level, but as I said, we don't want to come in to precisely on this given the current.

And integration that is ongoing.

In a way.

A little bit crazy, but Ford made money for.

For it has more cash flow if everything settled this this way it's very positive for for forward, which is very.

One the one that has been hurt the most is of course slapped up because it hasnt produced for all of that period.

The the pain is is then a little bit more.

Towards the flat to up where.

Theoretically we will have to sit down and see what we can do with.

With the taxes.

Ex equity yet, but the.

The power edge provider and the.

But in no way will be will be exposed to more than this.

And to win for your second question very important the.

Revolver capacity is sufficient enough would come and the cash payments following in the discussion or litigation process and the no. It does not impair our ability to it on a per.

And to you on the many of.

Option not at all.

Matter of fact, we have paid down the E&P loan.

At the January we have option to refinance debt portion.

Pew option ahead of us the Griffin trail equity debt needs to be invested in the second to third quarter, but looking ahead in terms of availability on our revolver, we don't foresee in the issue and most of all we are pursuing RM in the activities.

The.

Strong as before so it does not impact that at all of our ability to install the debt.

Okay.

And then.

The Griffin trail for revenue projections have moved around some of this on assumptions around the spot curve, but do you have a sense today as a standard I mean, obviously, there's a lot of volatility in pricing on the short end of it.

The other foreign curve.

Mike do to forwards.

In your where you think power prices will trend in Texas over the next three to five years.

Well I think that Mark we gave the when we did the financing of.

Griffin trail, the it's something around four.

$4 million, if I recall the.

It was not possible.

We gave on the on an average on the.

On average for the next five years of little bit of over $4 million.

And it's unclear where DISA.

The bar Michelle.

Could have an impact on future power price curves are I think it's clearly understood that this is unprecedented and the one off so well I think mark what we what we said is that.

We're pretty conservative in the curve, where you were using for.

We're using wood Mackenzie without carbon.

Now with Biogen.

Would it be I would I would love to see.

The federal <unk>.

On carbon somehow somewhere that would help definitely these these future power pricing.

Also we have been conservative we think in the basis.

Losses.

In Texas, you deliver on the note and then sometimes you get paid on the on the hub.

Pricing. So that is also playing in the in the assumption that we have.

Put forward for Griffin Trail, maybe and I'll put also for these these project in Texas, not necessarily tomorrow, but I think that the.

The all of the.

Are caught in all of the stakeholders that are now sitting down and looking at the past prices and trying to.

Find.

Better solution for the future of maybe the need of lot more investment in their interconnection and also on all of the transmission capacity across Texas and the May get some federal help in order to do this so that might also improve.

The market because it takes us has been known to be volatile, but more interconnection and more possibility to export from Texas.

Would probably reduce that volatility going forward, so as I mentioned the green hydrogen.

In Texas, even if theyre not that green.

In the sense that the.

The the certainly have a lot of the Republican.

People in Texas, which is all good but the have also all kinds of the infrastructure that are consuming a lot of hydrogen and I think that the customer the.

The the customer that.

Is the these finished goods are starting to put more and more pressure on the.

The old process, and reducing the carbon footprint of <unk>.

All of that industrial output.

And I think of it.

Somehow some.

Green hydrogen is available in Texas.

And the south of the Louisiana also have huge.

Industrial the.

Our refineries.

The are consuming a lot of hydrogen so if somehow somewhere the arb.

Becoming a buyer of our green energy and other to reduce their footprint then suddenly I think electrolyzed will be installed in Texas.

Quicker than we thought initially.

Understood part of.

Different factors at play there last question maybe for Jeff.

Operations and maintenance expense the hydro segment.

Higher in the quarter higher year over year from a full year basis for where anything sort of one off in the last year.

The hydro segment.

Natural sort of part of 10% increase.

And the full year volume.

Michelle can comment as well, but I see debt. Yes. This year was a bit of the catch up but we did list also capital expenditures in this year. So we went through more.

Operational expense to support the project what I foresee is maybe more.

Capitalized expenditures in the months or quarters to come.

<unk> was a bit of of catch up in terms of.

In Florida the project in BC.

Yes, mainly.

For the wet and the H LP tax also was the was hoping that we.

We were to have it reduce and.

I think that the next year, we will.

We will be of good news on that front, we're working to reduce this exposure but.

I'll get the debt.

What sort of if you compare to 2019 2019 was.

<unk> by again that reduced operating.

Operating expense by $3 million I think.

Because we had the recovery of the distribution of the water tax okay.

So don't compare it to 2019, but 2020 was a bit higher versus our budget as well so.

Got it thanks for thanks for the the Taiwan and the interest of appreciate it.

Your next question comes from Andrew <unk> from Credit Suisse. Please go ahead. Your line is open.

Thanks, Good morning out there I promise not to ask the question about Texas.

Hey, Steve.

Maybe just focusing a bit more broadly on on the solar initiatives from the existing assets you have and then whats in the pipeline.

Given the really regulatory permitting and construction of solar just the an opportunity to generate cash faster. How did you have more solar in your portfolio.

Well definitely solar takes especially in the United States.

A little bit quicker to do.

For for for some of you you've seen the.

Yes.

The project Palomino came into into the in using the few times. The last thing the last few weeks in the states. So yes, we're very active on that project is the 200 megawatt project.

In the Ohio.

We're getting very advance we also have some very good.

The discussion with the.

Off taker.

And I think that we're seeing in the states of lot more willingness from corporate offtake or two.

Take on solar as well.

Yes, I mean solar are being once they are built and fully commissioned and what I view, our fishing quite of bit of a premium I think.

But when we can do of love them.

We can certainly generate decent cash on cash on these project for.

Our own Greenfield project. So that's why we're quite enthusiastic about our pipeline in the U S on that basis, we we said quite a bit about it.

Regarding the investment we've done.

The year ago of little bit more more than a year in buying the equivalent of a little bit over a 100 megawatt of solar panel and this is all around this.

Ivy of pre qualifying about 600 megawatt of solar project in the states of working really really diligently and these projects have to be in service by 2023. So Thats gives you a little bit of the guidance, where we are heading in that direction.

Okay. That's very helpful and the I guess my second question is for US also thus far and it really comes down to.

Just any increased flexibility the associated with Green finance things I'm, just the sort.

Staying ability of initiatives that are happening from virtually every bank globally on whether it means more favorable lines of credit how you project finance from could you quantify any basis points that youre going to benefit from them in the future.

Why.

The large question I mean of course, we're always on the look to improve in those green bonds are there in the.

As a possibility right now we're a bit.

Tied up with our project debt structure for the next few weeks few years is difficult to really reshape of the moment those project debt given the large medical the Av.

With some institutions. So we don't foresee that we can the benefit so much in the next two to three years on this Michelle.

It's the it's.

So very good question and.

We've been enquiring quite a bit and then of course, the always open to receive some some input from our friend the.

The merchant.

Bank and what have you but.

We have not seen a big spread reduction just yet, but we are seeing a lot of demand.

I think a matter of time, when when we would see a little bit of of benefit or spread reduction for that green bond.

I am hopeful that the.

This is going to start to <unk>.

Become a big advantage for for us anything that ESG.

As we know is becoming more attractive also my concern is a little bit of what we've seen.

You guys you must have seen it the little bit of the Greene, Washington, and Theres a lot of the.

Of the issue that are borderline Green initiative.

In my.

In my books, so I think that.

As the market mature I think the market will be more disciplined in the real green bond.

Will become something sought after and all fully we'll see a benefit in the <unk>.

And the spread so far we have like <unk> said, we have not been so aggressive because we we have the structure. Although we have if you remember we have 16 unencumbered assets that support the credit line that the at the.

<unk>.

Some of those projects have now been offered the new PPA and could be theoretically a good target.

To take out what is our portfolio for a green bond.

Quite quite interesting interested in figuring out if we can leverage it.

But hopeful that going forward.

Is the famously helping.

I am very.

I'm very happy to see that.

All of the investors.

All but a lot of of investors are putting more and more weight into the ESG criteria.

In their investment and we've seen some index the fund being being created some infrastructure fund the based on ESG criteria of being created so quite hopeful that this.

The the pool of money smart money will will help us being.

The cost cap debt.

Would bring our cost of capital.

Being very competitive to.

Not only us I think the.

The renewable the energy industry.

We will see a lot of.

The new funds being directed to them and this is good I mean, we.

We have tremendous opportunity to grow and to replace the.

Fossil fuel.

In the near future and will need a lot of capital and that capital has to be competitive for us to displace the fossil fuels. So I'm very hopeful that the.

This is going to help and also that the fuss. If you will will have a higher cost of capital enhance.

The total competitiveness of.

Thus, we will will become more clear going forward.

That's very helpful. Thank you very much.

Thank you.

Your last question comes from Rajeev <unk> from <unk> capital markets. Please go ahead. Your line is open.

Hi, Good morning, good morning, I appreciate it's.

It's early days in Texas. So so maybe we can talk a bit more about the longer term outlook.

Put up pretty strong.

Guidance for 2025, I'm just wondering if you can walk us through what's baked into your outlook in terms of organic growth. How quickly you can move projects forward in the development pipeline.

Factoring in any M&A that outlook.

Yes, M&A and many will play a role we said that the for the next.

The next few years, we'll use it as a tool to rebalance because as you know we're spending.

Over $20 million in prospective expenses, and we think that if a parking the visa rise we may be in the position to increase thats of a little bit so in order to the islands. This obviously, even if we are developing where success fold in the lapping just the permitting and building and putting in commercial operations.

A few years.

So M&A is a tool that we're going to use now we're going to be.

Laser focused on our M&A, we want to create this has the balancing tool we want to create value, but we want to create value also in our Greenfield project just to give you an idea we're set up to hopefully bring from our own Greenfield project something around 300 to 400 megawatt.

Of project per year now megawatt.

I think that will be useful also to the clearer in the future but.

You will have to take also in consideration that we might have capacity batteries that.

Or not necessarily.

<unk> base, but are generating cash flow and.

And the investment opportunities. So I think that the if you. If you think forward of something of the run rate between 300 400 megawatts of Greenfield project.

And the rest would be balancing with the.

With M&A.

That we have been set up in the last few years due to do one or two of many acquisition per year.

This is this market is not easy we in order to be successful in one or two acquisitions per year.

We're looking at something around the 80, we.

On an average year, we would send the.

A letter of intent without.

Without being firm probably around 80 85, and then you are selected on I would say 10 15 processes and.

If you are successful and one of them too.

Roughly the average so it takes a lot of effort.

But it's also is useful because you can select where you want to go where you want the diversified with M&A. So I know that the mini can be perceived sometime as dilutive to.

The two shareholders, but it depends on how we do it and it depends also if it is a tool to help.

Sustained also the payment of the dividend and also sustain the our ability to continue our own Greenfield development.

So that's sort of helpful. Thank you just a follow up on that I guess, we're thinking about the three to 400 of Greenfield development of year I mean.

So so you're pretty confident on being able to build a lot most of the sort of prospecting.

Non stage development pipeline.

All of that implies or do you think you'll also be looking to acquire additional development projects as you go along.

And many we.

And many of it.

It all depends if the premium that that one has to pay for the development project is worth the.

It is worth the the the return.

Or the the risk that we're taking but.

It goes pretty fast.

Yes, we're confident in our pipeline we're confident that.

Palomino will see the light of the day and then we have a few more.

Solar project that are pretty advance as well working in Chile, we have a few other leads in Chile and in Canada, we were happy to see that Quebec.

<unk> is now talking about future Rfps in Inc.

Quebec so.

There will be opportunity in France, we our intention is to have at least one or two project per year coming out of the.

Greenfield. So yes, we were confident that were are <unk>.

Starting up and mind you that it's only.

Been three years roughly that we have put a lot more effort in the Greenfield development.

And now we're spending like I said, something around 20 ish million zone prospectively.

Prospective the expenses.

And we have hire more people we have more people underground we have.

We're more diversified also in our presence in the United States.

I'm pretty confident that this.

This numbers is achievable for us.

And then just a related question I guess.

The overall funding of financing plans to achieve these objectives I guess similar to what you would of how you restructured your growth from the past.

The combination of tax equity and debt.

Financing.

Yes.

Well, we'll see how tax equity evolve of course has the the sunset clauses.

The slowing down perhaps tax equity will become less of the.

Ill.

Of the driver in the future for the United States, but in the meantime.

Yes.

Interesting to take care of tax Sui as we.

To take advantage of the PTC of course.

Yeah, we like to have a balance of the project finance and tax equity and of course the equity component of this is always a big portion of these financing or structure.

But when when the.

When when debt is cheap.

It's always interesting to take advantage of it.

Just just one last question if I can.

I know, it's been a year now.

And I appreciate it's been.

More difficult with the pandemic, but just wondering if you can give us an update on the hydro Quebec the lines, how that's gone so far you partner with them on one project.

In France.

Any more color on what we should expect from other lines going forward.

Well like I said I think storage is the big play we want we wanted to take advantage of the great.

The resources that hydro, Quebec has the great.

Yeah.

The capacity too.

Two.

You gave us support on interconnection and the studies of interconnection also I'd love to be able to play a role with them in M&A. Our team has worked together on a few ones.

But like I told you I mentioned that the that the odds of or the.

You need to look at many in order to be successful so I wish ourself and the joint venture with Hydro, Quebec success for some M&A also in the in the year to come.

And working hard on trying to debt to deploy the storage.

Investment opportunity I think that this is becoming mainstream in.

In all of the market.

Our intention is to be present in the of lump and take advantage of the synergy of the two companies but.

It takes a little bit of time right then the COVID-19. The unfortunately has not help us in terms of being able to travel and meet the in.

And so.

Thank you.

It's just a matter of us starting to.

Make the ball rolling and things will.

Hopefully you will see some good news in the next few months on debt.

I appreciate that thank you lots of helpful details. Thank you.

Mr. <unk> there are no further questions at this time.

Thank you very much and thank you for everyone will gather again in May for our next conference call. Thank you. Thank you everyone.

Ladies and gentlemen, you may now disconnect your lines.

Okay.

Okay.

[music].