Q2 2021 Innergex Renewable Energy Inc Earnings Call
[music].
Yes.
Good morning, ladies and gentlemen, thank you Ms Jenny by welcome.
You know Jack's renewable energy 2021 second quarter results conference call out of the webcast judge of that.
See off debt, if we need to get a weighted.
As you said you did you see most of it didn't get off the young.
Now if there's an overlap of the stripe all participants on the phone and Internet our inland and I said early mode. Following the presentation. We will conduct the question and answer session for analysts and institutional investors and instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing of the conference. Please press star followed by.
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Senior director of Communications. Please go ahead.
Hello, everyone and thank you for joining us today I'd like the fact that this conference will be held in English members of the meet the I invite the towards the questions by phone after this call.
Presentation supporting today's discussion is that the level as we speak on the homepage of our website at 3 type of your debt you know jackpot com.
This call contains forward looking statements within the meaning of securities laws of.
Though the corporation believes that the expectations and assumptions on which forward looking statements are based on the ball on third the current circumstances listeners are cautioned not to rely on duly on these forward looking statements as no assurance can be given that the twin proved to be correct.
Forward looking information contained herein is made that 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 occurring after the date hereof, unless so required by law.
During the call we will refer to financial measures that are not recognized according to international financial reporting standard.
Please refer to the ammonia part of this measure of infection of the MD&A for more information.
Our speakers today will be Mr. There's all sorts of on the Chief Financial Officer, who will present Q2 results and Mr. Michel Letellier, President and Chief Executive Officer, who will review our operational highlights.
I'll turn the conference over to Mr income.
The CCAR in the good morning, everyone before presenting the financial results I want to provide you an update following the February 21 exists.
The flat top and Shannon facilities have been excluded from our result from April 1 and on awards due to the project asset and liabilities been classified as disposal groups.
The for sale.
Therefore, the balance sheet values remained at zero and no result, I've been recorded while we removed them from our number of.
Operating facilities.
As for <unk>, we have reached an agreement after the end of the quarter to settle all of the amount that remained on paid.
We have disbursed 24 million U S dollars, representing the net amount of these 3 elements the.
The agreed upon settlement on the disputed the amount the payment on the project tracking account minus the unpaid energy sold during the negotiation process.
Therefore, we consider the February 21, 2021 picks us the event and backs to be concluded.
On page 8.
Our second quarter results posted growth over the same period last year, mostly due to higher contribution from hydro facilities in BC and the contribution of the Silva of in Montana acquisition completed in May and July last year.
Revenues proportionate and adjusted EBITDA proportionate were up by 3% and 4% respectively.
For the quarter ended June 32021 production and revenues were up 10% and 13% respectively compared to the same quarter last year.
Adjusted EBITDA was up by 16%. This increase was mainly attributable to a higher contribution from the facilities in BC.
Because of higher production in 2021, whereas the 2020 figures were negatively impacted by the BC Hydro curtailment.
The increase is also attributable to the contribution of the Montana inside of that our acquisitions the.
Higher contribution from the wind facilities in France.
On the ramp up of production at the Hillcrest solar facility that the reach its PPA commercial operation on May <unk>.
<unk>.
The increase was partially upset by a lower contribution from the Quebec wind facilities and by higher general administrative expense and prospective expense.
On page 9 for the 3 months ended June 30th 2021, I joined electric power generation segment generated $63 million and adjusted EBITDA, representing a 21% increase compared to the same quarter last year due to a higher contribution from the facilities.
In British Columbia.
This increase was partly offset by lower average selling price at some facility in British Columbia and Quebec.
The wind power generation segment generated $57.6 million and adjusted EBITDA.
Presenting of 3% increase compared to the same quarter last year.
This increase is mainly due to the Montana acquisition and 2 of higher contribution from the facilities in France explained by higher revenues from higher production.
These items were partially offset by lower contribution from the Quebec facilities explained by lower revenues from lower production and by a lower contribution from Foard city facility due to lower revenue.
The solar power generation segment generates of $19.4 million and adjusted EBITDA, representing a 71% increase compared to the same quarter of last year. This increase is mainly explained by the ramp up of production at the aircraft's solar facility in Ohio.
And by the contribution of the <unk> acquisition in May 2020. The increase is also explained by a higher contribution from the Phoebe solar facility attributable to higher revenues from higher average selling price despite the lower generation.
On page 10 for the quarter ended June 32021, the joint ventures, and associates contributed $13.8 million to adjusted EBITDA proportionate compare with the contribution of $15.2 million in the same quarter debt last year the <unk>.
Decrease in the <unk> segment was mainly due to the lower revenue from the umbrella that followed the facility and higher operating expenses in Chile.
This decrease was partly offset by a higher contribution from Jimmy Creek facility due to higher revenues from higher production compared to 2020 figures that the included the impact of the BC Hydro curtailment.
In the wind segment. The decrease is explained by a lower contribution.
From Dookie facility due to lower revenues.
Higher operating expense and the lower revenue from visit the novel facility.
The decrease is also attributable to the exclusion of the result from the flat to up in China in joint Ventures facility from April 1.2021 on awards.
Mentioned before.
In addition, the proportionate.
<unk> production tax credit decreased from $19.4 million to $9.5 million was due to the exclusion of the results from flat to up in China.
The decrease is also attributable to a lower per Dcs earn at the Foard city facility due to lower production.
Continuing on page 11, compared to December 31, 2020, the increase in long term debt is related largely to the draws made toward the construction of Griffin Trail project.
In addition, the corporate revolver credit facility was used for reimbursing the outstanding balance of the Alterra term loan on January 11.2021.
On page 12, compared to December 31, 2020 changes in the total assets results largely from the share of loss in joint ventures, and associate due mainly to the February 2021 day exists event and the permanent loss of the Shannon and flat growth.
The fee.
Changes in total liabilities stemmed mainly from the decrease in derivative financial instruments due to a general upward shift in interest rate curves, which were partially offset by an increase in long term debt.
The change in shareholder equity is explained by the total comprehensive loss of $139.8 million the dividends declared on common and preferred shares totaling $65.7 million and by the $11.6 million in distributions to Noncontrolling interest.
As shown on the next page the normalized free cash flow as increased by $18.6 million on the trailing 12 month basis.
This increase in free cash flow was due mainly to the contribution of the sulphide ore and Montana acquisition achieved during mid 2020 and from the Hillcrest facility, which started delivering energy during the second quarter of 2021 a.
The decrease in interest payments on the corporate revolving credit facility concurrent with the hydro, Quebec private placement in February 2020, and the decrease in interest payments related to the Alterra alone reimbursement in full in January 2021.
Also on an increase in revenue from the facility is affected by the BCA draw imposed curtailment, which mainly impacted the second quarter of last year.
And an increase in distribution from joint ventures in the associates, primarily due to of distribution received from energy line in the second quarter of 2021 ahead of the closing of the transaction.
These items were partly offset by an increase in debt principal payments stemming from the Phoebe and Foard City facilities Commission in late 2019 and from the Montana acquisition in July 2020, and increase in free cash flow attributable to Noncontrolling interest stemming mainly from the Montana.
The acquisition and the decrease in cash flow from operating activities before change in non cash operating working cap.
From the <unk> facility commissioned in late 2019.
Due mostly to a non favorable difference between sales at the Phoebe node and purchase at the Aircard south of compare with the favorable difference in the comparative period.
For the trailing 12 months ended June 32021, the normalized payout ratio amounted to 136% of free cash flow compared with 150% for the corresponding period last year on.
No I would give the floor to Michel for the operational review of the past of alright. Thank you.
How fast we're on in Cebu of good morning, everybody.
Busy busy subsequent event.
We have been quite active.
Lately.
You have seen that we have completed the acquisition of <unk> in Chile, So we now own 100% of the of the.
The the activities in Chile.
We did that in a sense of it.
We like what we're seeing in <unk>, we have now been there for almost 3 years.
No of the management and got to know also the lay of the land and I must say on it we have now the.
The good team in order to continue the development and also some M&A activity.
<unk> seen also we have made this a little ex acquisition Lee can.
Not a big acquisition and for some of you that have questions, perhaps the price or the multiple of the EV over EBITDA.
We have been quite conservative in the next few years in terms of the merchant pricing.
These forecasts are using something around $35 per megawatt hour as we speak the spot market in <unk>.
Chile is in the range of 100.115.
Dollar per megawatt hour. So there is some volatility in that market I think that on the long range price will.
The go forward and perhaps stabilizing around 50 to 60.
On a dollar per megawatt hour. The reason behind this and the reason why we are bullish on on Shui as I've mentioned in the past is the fact that.
<unk> doesn't have any fossil fuel.
<unk> is a stair.
Territory the rely on the import.
Especially natural gas and also coal now I'll call on has been.
Targeted by government agencies TB.
Shutdown.
Initially the we're talking to shut it down by 2035 now of there is a lot of rumors.
On the Congress to pass a law to speed up this too.
<unk> 2025, which is big.
In Chile, almost 30% of their production comes with with coal. So thats why we are bullish in the sense that we think debt.
Having coal being removed will actually bring the Merck the.
The the merchant pricing or even the DP opportunity.
To a higher level and we want the we want to be there we wanted to increase our presence in Chile in the sense that we want to have more diversified portfolio.
With solar hydro and potentially some win as well.
If we if we go also.
Quite a great news.
Great team effort for the full commissioning of Griffin Trail.
On the <unk> on budget, so very happy to report that now we will be per.
Using debt potentially taking advantage of the good pricing in Texas in summertime.
This facility is merchant for the time being we would love to have a structure like Foard city, where we would have a ash produced PPA for the majority of the output and then stay exposed on some of the volume Inc.
And to the spot market to take advantage of the volatility in Texas.
It also.
It's showing our strategy to go away from the financial instruments the.
The power hedge, which if you remember create such.
A liability for us in the last.
Last winter.
I think that.
Griffin Trail will gave us some natural hedge against the potential problem with CB with the with the ongoing.
The power edge, we will try to get out of of that on arrangement as we said earlier on but right now, Texas is a little bit busy there's a lot of activities regarding these borrower hedges so.
So we will be patient and now that we have the Griffin trail of fully margin I think we will well protected for future event.
Also on Fortunately you have all seen the fire in NBC.
You've seen also of the sad story about the little town Lytton Nathan is the small town close to <unk> facility now Unfortunately that.
Fire has grown needs now affecting some portion of our transmission line.
We expect most of the costs be covered by insurance, but it's little bit too early to.
To quantify the the amount of work.
Our debt, we will have to do but the team are getting busy to have all of the spare part being delivered on site.
We will assess the the.
The.
The damage.
As the higher received the eventually.
Construction activities, we've been quite active as well.
We have.
Advance almost finished the aircrafts as you've seen we have achieved the COPD.
And we're proud of now to report that we can talk about our off taker and the upper asset <unk> zone, So pretty happy to have reached new of the last quarter.
And we only meeting the.
The substantial completion for the construction will be met in the next few weeks is just a matter of finalizing all of the past on the site.
But the the <unk>.
Production is at full capacity, we are just finalizing all of the remaining small task than the punch list with the contractor.
The construction has started again, we have received the first.
The delivery by boat for the supply of for the the summer so things are going well we are still.
Forecasting the.
So the for the late Q4 of next year also on <unk>.
The 9 megawatt.
Storage in France, the our first.
I would say our first commercial activities with the envelope the subsidiary of Hydro Quebec.
Is advancing very well we have received the first on <unk> in France.
And we are forecasting the on service date late.
The Q4 and potentially.
The first week of.
January so things are going well on that aspect as well.
The development activities, we've been very busy.
We have advanced the Hawaii <unk>.
The <unk> project.
The construction should start fairly soon in the high.
Hany Callaway.
Also later on this year, we should we should start construction and the 2 other kind of on Barbara points out the advancing pretty well the.
People, even if we had.
Some restriction with COVID-19 the activities around the permitting has been.
Going pretty well.
Development activities.
We are glad to report that.
Actually we've been talking about it for a long time.
We just receive our first construction permit for the widening its our first the fully develop project from our team so pretty happy to see this that's the first we've been talking volume export quite a bit.
Remember that trends.
The Greenfield project or a long process. It can take roughly 5.5 to 6 years to the block. So this is the first of <unk>.
Regular flow of project that will be coming out from our perspective in the.
The development activities in France.
So we have less Nate it's of 9 megawatts.
Has signed a PPA, but we only owned 25% Nonetheless, it's great Tc France advancing in delivering these type of projects. So the idea there is to get 1 or 2 of these projects per year.
And also activities around solar development has picked up and we have made some good.
Advancement also on that front, so pretty happy with what's going on in France, not the big market and a sense of the project are fairly small in France, but they will be steadily now coming from this pipeline has we were expecting.
<unk> has been fairly slow activities in the sense that we have all of the permit if you remember for frontier on we are now concentrated in our it development in San Carlos Witches and other hydro facility.
Stream from frontier on the same river St. John Lewis as we mentioned a little bit.
In the past has the squeeze advantage of potentially having a 5 hours storage.
The capacity.
The city, which is great if you remember Chile.
It's a market, where we will see a lot of solar and when Youre talking about order, obviously, the evening and night.
Hours of the day our <unk>.
Interesting in the sense of that usually you see some more pricing.
In these type of today, so we think that having a capacity just like any kind of has a true on all 3 and a half from 4 hours of capacity is a great tool to play in that market also very interesting to see that the price as I mentioned is coming up especially for our off taker.
And.
And the spot market is also quite active and were seeing more and more.
The interest in these 2 projects so we're confident that the.
We will be able to reach an agreement. The eventually 2 signed PPA that would be supporting the decision to start the construction on both fronts, there eventually and counties.
On prospective the project also as you know we have.
Been busy in the U S quite a bit we have now been selected for the our project.
Boswell on its 330 megawatt wind project.
<unk>.
The.
We were perhaps not so clear at the when we when we issue the press release.
We've been selected final selection to sign the PPA. So there is no more.
Collection on the on the price we have been selected for a third of the year PPA issues that we have to sit down with them negotiate the terms in the PPA usually it takes a bit of time, but we don't expect any big issue there.
And then Pacific Corp has to go through the regular regular regular.
The PUC approval.
Should should go through by the middle of the year next year and so we could be building boswell, sometimes in the queue. We could start construction in Q4.2022.
Or in 2023, so pretty pretty happy on the on that aspect also palomino, we have been advancing.
We have had a lot of public meetings on top of immuno things are going pretty good.
We have also.
Advanced our term sheet with 2 off taker for that project as well so on the on the side of the U S.
The teams are advancing very well, we also have been advancing other project earlier stage projects for solar and wind in the U on it in the U S as well.
And of course getting ready for the future RFP in Quebec.
The announcement was made and we're getting ready.
To be in a position to submit some project and that the RFP.
Yes.
On on our general more comment I would say that.
We've been seeing some extreme event lately from the domain of the west.
S fire in the West you've seen also of the big freezing Texas.
More flooding in the north part of Europe and Asia.
I think that all of these events are showing that we are of this.
And actually seeing some low.
Global warming effect, and I would say that the United <unk> never been focused more into trying to participate to solve this problem or to reduce the fossil fuel.
Used in producing electricity.
It's <unk> these things in the obviously, we have of human part of this.
These events debt.
We are seeing all of in the news, but we're definitely seeing.
A great potential for us to take advantage of the new government.
Incentive in order to have the fossil fuel being reduced.
To produce the electricity and <unk> will be there to meet the.
These challenges so on this.
Would open up the question floor.
Thank you, ladies and gentlemen, if you have a question.
Please press the star followed by the 1 for you you touched on.
No.
I'll have Joe on the cloud you request your questions from people in the other day.
Please ensure you leave the handset.
Using a speakerphone beef of Brexit.
The first question comes from Sean Stewart with TD Securities. Please go ahead.
Thank you good morning.
Michel you talked you touched on the the Rfps coming in Quebec.
And I'm, hoping you can give us some more context on.
The scale of projects, you might anticipate submitting to that process as it evolves and the yen.
Coming months.
Well the RFP is not that big.
So obviously project in Quebec, we have project.
Starting from <unk>.
In addition to our existing 1 so those can be 25% to 50 megawatt and we have project up to 300.400 megawatt debt we can.
We can work in the and submit to the so as you know we don't like to talk too much about our strategy. When we are getting prepared for RFP.
The I think the the very positive aspect is that hydro, Quebec and the government are saying that this is the first of.
Hopefully many more RFP in the future. So we're very positive that the.
The end of the day some of our project will be able to to to win in the in the future Rfps.
Thanks for that.
And you also address Griffin trail and.
You touched on opportunities too.
Augment the the revenue stream.
And supplement the the merchant exposure.
We're just wondering how comfortable are you.
Going ahead with merchant exposure short term.
How can we think about potentially changing the.
The revenue stream for that project, what timeframe might that evolves, how hard of youre working on on supplemental debt.
Of that merchant exposure.
Well, we as you know Sean we now have a <unk>.
Team.
Ken market and be more proactive looking for PPA.
So.
We're seeing definitely more and more.
Corporate America.
Desire to sign long term PPA.
Texas is a little bit on the.
Of particular market as we all know.
So but.
We are more confident that the price for long term PPA are getting more.
I would say are attractive for us remember that.
1 of the reason why we win.
The merchant in this case as debt.
Getting the PTC and the volume of New project awards that locked.
In that area long term PPA, where offer of around $13 per megawatt hour.
So I mean little bit hard to commit on on that type of PPA knowing that the on average the merchant is giving you a lot more than that so as long as we could find some some good pricing in the.
And that we can make sense of of the PPA, we would definitely be looking.
And again, we will be looking for a us produce BPA, we don't want to get into a situation, where we have to deliver and not be producing enhance being force to cover ourself on the on the market. So that's why we are more comfortable on.
Right now.
On Griffin trail on the merchant basis, but the family if we can find an attractive level of PPA, we would be.
Of course happy to to engage in such a PPA.
Thanks, and 1 last quick 1 from me and I don't like to focus on.
Quarterly hydrology, but it seems like it's an extreme summer in BC.
On the.
The transmission issues that should be covered by insurance can you speak to how hydrology is trending in the in the third quarter relative to the LTA.
Yes, well the July which was fairly good.
But August is the Darius the.
This month and NBC and we've seen.
The Super 8.
That we have experienced in the.
End of June and the beginning of July have melted of the.
Of the low altitude snow so.
I guess the August 6 of looking a little bit dry in BC.
The for the next few weeks the forecast for rain is not that great either so.
I would think that probably August will be.
Lower than our long term forecast.
Per business.
Okay. Thanks, very much for the the detail.
Thanks.
Thank you. Your next question comes from Nielsen Energy with RBC capital markets go.
Go ahead.
Great. Thanks.
Hi, Good morning, I just wanted to follow up on Sean's question in terms of merchant exposure.
So the last acquisition the 80 megawatt hydro facility in Chile is like Thats fully merchant right and then.
Energy, Alabama, those assets are now merchant as well.
Is that right or not.
Now on to tackle it still have some contract until 2022.
<unk> is for the merchant, but what we wanted to do and.
In Chile is to build up a portfolio of where we can rely on a few assets in order to sign long term PPA. There is always possibility in Chile.
To sign off taker in the range of 4 of 678 years.
There is always on the weekly basis, some small rfps.
Debt are happening.
Price right.
Right now are around $40 of 40 to $43 per megawatt hour for these.
These 2 of 345 years, the PPA, we think that it's a little bit.
Weak and we think that the market will improve.
And we're waiting for the good opportunity to sign.
Some some long term PPA long term 5 to 10 years PPA.
I'm not that concerned about this possibility the if we if we really want to sign Ppas. There is the PPA available in JV interest.
Again, I think that we want to be patient the.
On the coal.
The facility will be.
We will be taken out and we have seen this summer the effect of 1.
The commissioning of coal.
And the difficulties also to receive LNG has created a really.
Market the summer well their winter.
In Chile.
<unk>.
We've seen pricing over the price over $100 per megawatt hour. So we think that eventually Chile.
We will see their PPA.
Pricing to come up and like I said, we will be willing to sign PPA. When we think there are attractive.
And I think that the 45 to $55 per megawatt hour is probably a good level for ching.
Okay. So so youre going to put out ex.
Several of merchant facilities, together, and then market. It together has the I guess the more stable.
The source.
Okay got it.
And then just a quick question on the last acquisition. The 18 megawatt is it the.
Dan.
Half of the hydro facility can you give a bit of background on that sales process like what was it the.
Distressed asset or was it a <unk>.
Competitive process. The reason I ask is I know you assume very very conservative power price, but using the $35 power price I think.
The debt.
The implied debt is about 11 times EBITDA and I think the.
The press release syndicate of that some of the purchase price went to pay down debt. So I just want to try to understand.
Some background on the sales process.
While the sales.
It was some.
Some of some I would say friend from from.
The.
Hi, Mark.
The management, so we were able to have a direct negotiation with them.
It seems the 1.
When you look at the.
The next couple of years, it seems to be expenses although.
We could have chosen to show you the numbers with with 55 or $60 per megawatt hour.
You would have seen of more rigor and reasonable multiple.
Does that.
When we made this acquisition we were very conservative in the next few years, if you look at the.
On the curve in Chile.
On the power curve the power pricing are showing the next 4 years to be weak because some of the on.
All of the not old but the prior rfps.
Half.
Or are going to be putting in COPD.
But I think some of those projects won't be built and I don't think these.
These pricing, we will we'll be reflecting the the.
The actual market.
We like I said, we rather be conservative in the numbers, we're giving you and it's not a big acquisition of course.
But it's of great small.
Almost brand new asset very well built in the region the little bit South third and then our existing facility. So I think.
When we have the ability to acquire of hydro at a reasonable pricing.
With the good a good.
Good design and well built.
I think that we.
Yes, we are.
Going to act on it in Chile, also which is great.
1 of the facility, meaning that you own the land. So these facility our perpetual in the sense that the.
As long as you are maintaining these hydro there'll be lasting forever.
Okay. That's great color and then just 1 last question before I get back in the queue. Your Investor day on September 15th.
I don't remember the last time, you had on Investor day, this might be the 1 of the first.
That would be that would be the first [laughter] you remember from your memory is good.
Yeah, I was trying to think back of say if you had had on fiance, but yeah. So that's your first investor day.
So should we be expecting any kind of new announcements or is this more of an update on strategy could you just give some color on on.
On.
What we should expect on on the on Investor Day.
I think that we are going to deep down a little bit more on our.
Our development activities the market. We're working on there is there is not going to be a big a big announcement or a change of strategy. It's just that we want to explain you what we're doing and I think that we have been investing a lot in our team to to build up our capacity to develop project and.
And grow our portfolio of development activities.
And I personally am very very.
And <unk> about the the latest development that we have reached.
Boswell and Palomino are 2 good examples of those are fairly big project. We're also advancing quite well in France, So I think that.
The message there is to show you our strategy on.
And the amount of effort we are doing in the developments on that you could understand a little bit more our growth and reaffirming how.
2025 financial guidance will be yes.
Also give additional colors on our ability to go even beyond the 2025 guidance. We provided due to the fact that we outlined the Quebec here with us working as a partner for the the GV, We finance last year. So we'll give more color on that so so that would be.
Around the 2025 Strat plan deeper dive on all we will.
The planned finance in Madrid, things that should be around that and give a bit of a color on the potential upside with the hydro Quebec.
Okay. That's great. Thanks, everyone I got back in the queue.
Thank you. Your next question comes from Mark Jarvi CIBC. Please go ahead.
Thanks, Good morning, Ron.
1 of the box to Chile.
Question around the debt some of it out on unlike him, but now that you're on 100% of energy.
On this asset is our plan.
We optimize the debt and if you're doing the same merchant for a while what's the approach.
Operating leverage going forward on something.
In terms of the debt financing plans in chiller at the time being.
For the time being dose those 2 project to kick off and while on the tree project debt.
The facility has the existing non recourse debt.
That are not necessarily optimal.
So I think that.
Also in the end.
Investor Day, I think we will when we do a little bit of ours.
On on our ability to create a little bit more synergy.
Out of these.
Existing debt and some other debt that we have.
In our portfolio I think that.
It will be interesting to see a little bit of our strategy towards.
Some of our <unk>.
Mix of project finance corporate level.
The level, so I think that owning 100% of these will give us a little bit more flexibility on.
Also in the in depth aspect can create a little bit more cash on cash.
The distribution out of these existing facility.
And in order to Inc.
Yes.
Where are the we're early innings into reorganizing Chile to to make all of that possible and we will give more color in the <unk>.
Mid September and we should.
We should start to see some some synergies on our corporate structure, maybe 2022 and forward.
Provide more color on September.
And until you re optimize the debt is like on the actually had positive free cash flow because they think of debt projections, I know youre being conservative pricing, but the.
If you took care of pricing in the debt service.
On the cash flow positive right now, yes, we cover <unk>.
The positive for the first 5 year, we provided but again, we're very conservative on the EBITDA for the first 5 years. So we see on an average of 10 years much better and.
But yes with the current debt structure and.
<unk> schedule, where we're free cash flow accretive.
The other big but there is also something that also in Chile that you guys have to remember.
There is a good system, where the reward capacity.
And in the case of.
Of Lee can we're receiving roughly 25% of the total revenue are coming from capacity payments and I'm, saying that also because it's creating also some opportunity for potential investment in batteries in Chile.
Recently, the rules that have been updated to include.
Battery full recognition of the capacity contribution to the system.
There will be a.
Well the recognition will be subject to a 5 hours capacity batteries and kimi for receiving 100% of the capacity.
Payment, so that's going to create potentially some opportunity for us to mix the solar and battery in Chile in order to have.
I would say a access to this capacity payment and of course trying to take advantage of the arbitrage between solar hours and evening in the night pricing.
Great.
And I know you probably don't want to say a question on Texas, Michelle that kind of come back quickly on <unk>.
Laptop and Shannon.
I know the 1 option of the foreclosure of the other 1 is maybe the tax equity and other partners buy you out there of difference between either of those lines. We now you've taken impairment on the.
The hedge losses or the pretty substantial.
Help us understand I think all of the themes are the foreclosure route or the.
I guess asset sale of your share of your equity is there any change from kind of the.
Our view of what that impact is.
No Mark I mean.
I doubt that foreclosure is an option for the tax equity and the city. Some of this I doubt that this is an option for now so those assets are held for sales so guidance only see what could happen from Shannon and flat to up as a bonus for US okay. So either of foreclose or sales will not.
Bring any more write offs on impairments our net debt. So this is all done so anything that can happen from the sales process is going to be a bonus for us. So we don't want to provide more on this Michel you want to get into it we don't want to provide more color on the outcome of the sales process, but the.
Would see my view is more likely to be.
You know of.
The sale or consensual.
Handover of fuel versus support close, but that's our view of no change.
Yeah.
Okay and then.
Lot of questions around inflation and solar panel cost increases.
You didn't mention Hillcrest capex of a little bit.
Is that from a cost increase on the supply chain or is that just some of the expense.
We think about palomino in the projects in Hawaii, where are you guys in terms of procuring things and trying to lock in prices at this point.
Lots of very good plant hillcrest not necessarily some of them.
Some of some costs were related to 2.
Accelerated.
Means to deliver some some component, but not that much of it I think it was.
On the fortunate because its PCL of Canadian contractor of big kind of income tractor.
Was using also our Canadian subcontractor for electrical component in the.
I would say that day, they had some difficulties in managing the site from from their perspective of using Canadian going into the U S. While we had those restriction.
And it created a lot of inefficiency throughout the.
On the construction period.
Just I guess.
Very unfortunate do you have seen that but the the <unk> had also a lot of people not necessarily skilled people and that might not have been the greatest strategy needed to complete this facility because at 1 point of the hand more than 900 people on site.
All in all.
I would say that we were finalizing these negotiation with bcl, but.
A lot of the inefficiency is that the.
At the bottom of this increase I would say.
And then in terms of.
Hey pressure on cost increases for projects Youre working on income from your ability to pass that on the PPA or just where you guys are in terms of locking in prices on on some of the projects on a complete the next couple of years.
We are quite advanced.
And we have updated our our construction costs for our Hawaii, Roquet I guess at the worst.
There is the transportation costs were hoping that.
We have an agreement with the supplier to share some of the risk on the transportation we're seeing.
I mean, the relief on on on that aspect and the most of the component. We will we will have to be delever.
In the first quarter next year, so, we're hoping debt, but that time the.
Pressure on transportation of without the.
He's a little bit of.
And non it's not huge.
We're still in line with our initial budget with some small increase.
And for Boswell as an example, or <unk> in all of that stuff.
We have had some update before agreeing with the the PPA pricing. So I think we are in.
A good spot on.
On that aspect, where not to expose on on these.
I would say increasing in pricing.
And for future RFP, if price of the equipment are on.
Or more expenses will definitely interest in the PPA pricing that we will be submitting.
That's kind of okay looking forward of the update in September.
Thank you very much.
Thank you. Your next question comes from Rupert <unk> with National Day.
Go ahead.
Good morning, everyone.
Good morning.
In your disclosure or is there some discussion about curtailments on Foard City I'm wondering if you can give us an update on what youre seeing in Texas on curtailments.
What's the outlook for future of curtailments, not just on on Florida, but on the the other project Griffin Trail and non PPA.
Well it's.
Is it the tough questions.
Some.
Some curtailment of our economy or some sometimes they can be related to some upgrades on lines in summer time, usually the they don't work on on the transmission on less it's.
Urgent repair.
I would say that we are seeing some curtailment of economies of them and in GB, but remember to that phebe.
We can when does that when when this happened we can buy on the market and then deliver on.
On the on our obligation on the power of hedge usually when we have economy curtailment in PV is because of price or below.
Zero enhance we can take advantage of buying at zero in selling at our.
Agreed.
Price on there the power edge for Griffin Trail and forward, we're not expecting.
Too many curtailments, we're actually we're seeing a little bit of improvement on the long term.
Basis in in terms of the Griffin Trail I think that the also the last the Christ.
Crisis in Texas are putting a lot more.
Focused on the reliability of of the system of are caught in the I think our planning to upgrade the.
Sure.
Distribution system.
To the take up to.
The 2 take into consideration the new.
That is going on in Texas.
But the Rupert.
It's difficult to answer that question. We of of course, we are asking some expert to give us some guidance on those we're using also our U.
Team.
The specialized and trading to try to understand more of what's going on in the grid in Texas.
But we're hopeful that over time.
The the grid, we'll get up the.
Upgraded in order to take advantage of their great natural resources.
And.
We're still positive with the.
I would say basis story in Texas, but.
It is volatile it's the market that pretty volatile.
Okay, great. Thanks, and then.
Getting back to <unk> settled the the contracts following the storms earlier this year, how do you view of the contracts that you have on the PV now and in the risk to that project going forward.
Well, it's we've said if we didn't change our view, we don't like these power hedges.
They're not that easy to get rid of.
We're working on it.
We have to have also the blessing of the tax equity, which is sometimes a little bit of the challenge.
If we if we can.
Switch that at the reasonable price we will.
We are a little bit more convertible knowing that we now have Griffin trail on on the spot market.
So we think it's sort of a bit of a natural hedge for us another perfect hedge.
Sometimes the wind and solar on us.
Match in terms of the Nat.
Natural resources.
But we think we.
We're better protected this way than before and we settled the with the hedge provider for <unk>, because we think theres still some value economic value in the CB. So it made sense.
We had more difficulty to find some economies of value in the Shannon and flat zone.
Great. Thanks, and can you remind me how long.
Long.
Are the the hedge contracts you have in the TV how much longer.
The business edge contract is ending this December.
On the power of our hedges lasting.
Few more use of LNG.
I think in the 9.9 and a half years left or.
Yes.
So we'll get the I'll get back to you of precisely on the debt.
Or if we find the answer.
During the meeting.
Alright, guys. Thank you I'll get back into queue.
Thanks.
Thank you.
Question comes from Dan Chan with BMO. Please go ahead.
I think tomorrow.
On a couple of questions.
60, wildfires is that impacting any of your other assets.
No not for the time being.
We're early in the season of course, but our our crews are.
Working also too.
Get prepared tried to clean up as much possible the.
The right of way to have the minimal fueled around our transmission line.
But no the.
The fires are more present in the interior and we most of our facility are more on the coast, where it's a little bit more.
Less of an issue these days, but.
The.
We're early in the season, so I can say that we wouldn't be affected the anywhere else, but for the time being there is no other threat.
Okay.
And then.
Some of the Texas Shannon plot cost of SKU.
The southeast assets, let's say that the relatives.
You consider adding out or any other Texas assets in the next maybe.
The improved.
The sale price.
I think it would be it with the difficult to do this the.
In other to have.
I would say.
To manage the timing and the process.
It would be difficult because.
In the case of flat to up in churn.
We have to go with the.
With the timeline of Citi.
We don't want to get caught into being force to a certain time line that we would not control for and other.
So.
Process, so, but I wouldn't I wouldn't.
I would say how do we see that I would not.
Say that.
Sure.
We're not looking into or be willing to sell some more assets in Texas in the near future.
But it would be very difficult to have those.
We're talking about the Shannon and platform, yes, we do.
The partners.
Also we have partners in the Shannon and flat to up so if anything happens, it's not going to be bundle I don't I don't foresee that does the possibility.
Okay makes sense.
You mentioned.
Hydro cutback on the commentary.
<unk>.
Maybe share any day any sort of progress year to date on.
The projects that Youre looking at with HQ anything you agreed on a lot of did not agree on the did you pass on some projects and any additional color on what would be helpful.
Well again as we've said we the teams are starting to work very well together and starting its another good because we've been added for a year on a half.
Got.
It takes of course, it takes a little bit of time right to develop a good chemistry between 2.2 companies that are very different.
I'm very very happy to see how.
On the evolution of the strategy the the way we have been working in some due diligence together are very positive.
I think that.
On the confidence between the team.
Getting now.
Stronger and stronger so we can rely on the each other instead of some time doing twice the same due diligence sometimes that can happen. When you have the partner in this case we.
We are working.
Very well and then sharing some responsibility on the due diligence. So it's just a matter of time I think we.
We'll see some success out of the ease.
Effort.
Then.
Very very positive.
The relationship with with Hydro, Quebec in these processes and also.
Looking into.
The deploying more battery with them is there some.
Some effort.
Also on the on that ground.
It just sometimes it takes a little bit of time before we can.
<unk>.
From some success, but I have no doubt that.
Seeing the team working so hard together will.
We will be successful in the in the near term.
If I can add of Ben the processes, well tuned right now with bid together 3 to 4.
The process.
We are aligning the interest in the everything so I previewed with you Michelle I mean, it's on.
A matter of time and we still are both of us discipline looking into this.
To be.
I'm confident.
Yeah.
Okay very good thank you.
Thank you. Your next question comes from Andrew <unk> with Credit Suisse. Please go ahead.
Thank you good morning.
Thank you.
I think it's on page 20 of your presentation, where you have got prospective projects by region.
Those projects are really skewed the Canada at this point of time and is that really a function of just legacy of competitive positioning and comfort with the market.
And then I guess the follow up question really is when do we see the larger markets like the U.
Yes.
On to a certain degree of Chile, where you start to the adults quite of platform.
Become bigger elements of prospective projects per se.
Very good point and you're right on it's it's a little bit of the legacy work that we have done in the in Canada.
Just in Quebec, we have yes.
Thousands of megawatts in wind resources that we have measured we still have some win also in BC and some hydro NBC. So youre right its a little bit of a legacy effort from the past end of.
Sometimes the these project doesn't cost that much to keep them on our portfolio and we're happy to have kept some of them some active.
Or semi active project in Quebec, now that the RFP are coming back.
But.
You will see a lot more project being the lump in the United States, we're not.
We have started the the United States in the last 2 to 3 years to be more and more active. So yes, you will you will see us being a big driver for future prospective project.
Good example of this is boswell isn't going to pull the plug.
<unk>, but we're still developing we have the strategy to grow in solar in the in the states and also some win.
Youll see numbers coming up soon and.
And in Chile.
Respect this project we have some like I said, we have from <unk> and we have same kind of those working also on the possibility of the lobbying our own pipeline of new projects order and when but lately it has been.
I would say in Chile.
Market, where we could have acquire existing facility.
The discounts remember some of our.
I wouldn't say that lead time is.
As of discounts, but.
Building brand New Hydro facility. These days are.
Costing anywhere between 2 and a half to $3.5 million per megawatt.
So when you cannot acquire 1 fully permitted and then very good design at.
At the lower price than building a brand new 1 we we were taking advantage of these these market right now in Chile, but that doesn't mean that we wouldn't be able to eventually the love our own pipeline of the.
Solar and wind.
So on battery.
And batteries of it I would say.
Okay. That's helpful color and context, and then maybe just a follow up do you see yourselves, having a higher win rate if were going to call it that on <unk>.
Processes in Canada versus the stuff in the us at the stage I'm talking them on when does that start to equalize.
Well.
When definitively in Quebec right.
Solar and solar in Quebec.
Well I wouldn't say that we would've non develop solar in Quebec in the.
In the future, but defense of the wind is less expensive to develop in Quebec, So differently more women in Quebec the.
State would be probably have enough it depends on.
Some of the opportunity, but we're working hard on trying to develop the solar.
In France, it will be.
When more wind, but actually we were making good progress on solar.
In France as well so you will see some.
Solar project kind of being developing in France.
And then Chile, it'll be a mix.
I would say solar will be fairly easy to build in.
In Chile, but solar without battery or without a different portfolio I E. When.
And I go just.
Solar of building solar.
By itself in Chile will be quite challenging economy, so solar will have to be embedded in the portfolio or matched.
With some batteries and Chile has still some opportunity for the lapping. Some hydro is we are mentioning and we're always on the lookout.
To acquire existing hydro if it makes sense in terms of the economists.
Yeah, that's great. Thank you.
Thank you.
Thank you.
The next question comes from Nigel Coe.
<unk> capital markets. Please go ahead.
Hi, good morning.
The money.
Got a couple of questions on on the M&A from to start off I don't know.
You touched on this on their Michelle, but maybe you can provide us more details on 1 of the thesis behind the recent acquisitions in Chile and <unk>.
We originally acquired the stake in the July.
Your line Mark it's been really difficult getting some of your projects off the ground. So in your view of what's really changed since 2018 that gives you a lot more confidence on the outlook on Chile today.
Yes.
Price.
Price price price I think that.
And the and the driver.
Or better pricing in Chile is the decommissioning of coal.
<unk> is working with the marginal cost and the operator of the system.
Is managing first the big I drove available and then it was cole and thereafter, it with natural gas and eventually diesel. So these were stacking in terms of marginal cost and coal was very low at the 10th call within the range of 22025.
<unk> per megawatt hour.
Mind, you that the we're able to be profitable because of the oil receiving also the capacity payment as recognition for their contribution to the system.
So that's why it was.
Yes.
Really really low 1 has to understand that Chile when from a energy prices following the natural gas prices with Argentina, Argentina stop.
Average natural gas with Chile than price went up to the <unk>.
Moving to the roof on the 160% due to a 100 megawatt some contracts were signed at the north of $100 per megawatt hour. So a lot of.
The word that lop at that time.
Given this market Sanyo and it took a bit of time towards the market to digest all of these.
Overbuilt I would say the following that prices.
Remember that some of it all we bought Salvador on that basis, some of the well with it.
In the foreclosure process with their bank so.
And what's a little bit of a legacy of the.
At the earlier prices, where the market sentiment gave of.
A lot of.
Opportunity to renewable energy of <unk>, 2 built facility, but.
Things have evolved and some LNG, where we'll build.
And coal continue to.
On the market. So the price from I would say 5 years ago, when very high to low low low and I think we have hit the ground.
And price are now improving so.
We have non the lob.
Can the low cannula with just the 12 megawatt each.
Could have been.
Okay, but we decided not to focused on kind of low end.
And go for the existing acquisition and having more significant investment in Chile, So I wouldn't I wouldn't say that the management there were not good the work great in the lobbying hydro facility.
From Terra is fully permitted and since <unk> is advancing very well so I think the durability to actually bring.
To the planning permitting and being available for construction of this great.
They were not focusing on the Windows order that was the decision of the prior.
Owner.
And why have the decided to sell it.
While it was not there.
There I would say there.
The core business they have a lot of other investment some of our past partner had a lot of real estate exposure in Peru, Chile and in other places in South America, and you understand that with the Covid.
These investment.
Suffered quite a bit so I think that the.
Other opportunity to deploy their capital and Thats, why we decided to acquire them in a sense that we want to continue with the lobbying and it was becoming a little bit more difficult to have the common view and common strategy on growth Fortunately so.
The guys in Chile, the management in Chile have.
<unk> had some.
I would say some limitation in their ability to grow.
With us I think that we will unlock their full potential in the.
You will see some some more activities in Chile debt.
We will show that.
They have a great.
<unk>.
The great.
Ability and supported with our own team here in the.
In Montreal, I think we can we can do great things.
Okay. That's fantastic color. Thank you for that and you mentioned the South America good segway to.
My other question on M&A I think on the press release could be July of acquisition, you talked about how the ambitions I guess the expense further until on America is that because that's something you are looking at closely today.
Will it be kind of the approach to entering a new market.
Well, we like Chile.
The London America is complicated the T Rowe.
We have seen whats happening in Peru, so the who.
<unk> was always a country, where we wanted to.
To deploy some capital.
I think we can take the a little bit of a pause and look.
Maybe in the.
Phew months, what's the.
What will be the outcome of the existing political I wouldn't say crisis, but the.
Event.
Jimmy on the other end I think we will we will come out from the renegotiation of the constitution.
In the good shape, we will see some of the present the present until the present the.
The election for the new President in the fall.
I've seen that.
It will be something centered less probably we will win which is the good thing.
We've seen some government in the past the center center last debt has done great for the economy I think that it would be even better to have a center to center of the less government too.
Oversee the new discussion around the.
The constitution so.
We feel very comfortable with the political.
Aspect in Chile, and the economy of Chile is looking great and I mean, you've seen the price of copper of these days.
The we understand that the.
Of the economy of Chile, and rely a lot on the copper and the future for the use of copper seems to be very bright given the fact that.
Electrification of transportation will consume a lot of copper for the future. So I think the Chile is a great place, it's not the big market.
We're going to to have this.
The steam on underground so it doesn't take that much effort or time from Montreal to.
Total up smaller acquisition and to continue to the lift on the Chile is just giving us an order.
Platform 2.2 net lumping in other.
The market to grow.
Okay. That's great detail. Thank you and the rest of my questions have already been answered.
Thank you.
Okay.
Thank you.
There are no further questions at this time.
On a few very much.
We look forward to seeing you at the earn first.
First IR day in September. Thank you everybody. Thank you.
Ladies and gentlemen, you may now disconnect your line.