Q3 2021 Brookfield Renewable Partners LP Earnings Call
Capture the growing decarbonization opportunity and.
And we recently increased our annual target for investing equity capital into growth two one to $1 2 billion.
Throughout our platform.
We are consistently executing business plans that not only enhance and derisked, our existing assets, but also create future growth and development opportunities.
Accordingly.
While the outlook to deploy capital through M&A remains robust.
We also benefit from a number of fully financed organic growth projects that are already under construction and contracted.
We are fortunate to have operating capabilities to enhance the scale of these ongoing growth opportunities to further supplement our expansion through acquisitions.
As a result, we are well positioned to continue to deliver strong <unk> per unit growth to support our long term distribution target of 5% to 9% annually.
While we expect to continue to deploy increasing amounts of capital through acquisitions. We believe that we can achieve the upper end of our growth targets through organic initiatives alone.
This comes from inflation escalation in our contract margin expansion through revenue growth and cost reduction initiatives.
And the building out of our growing development pipeline, including eight gigawatts of capacity over the next three years at premium returns.
We will now walk you through the highlights for the quarter.
We generated record third quarter third quarter funds from operations of $210 million or <unk> 33.
<unk> per unit, a 32% increase over the same period in the prior year as our assets continue to perform well with high levels of asset availability and contributions from new acquisitions.
We agreed to 19 power purchase agreements for approximately <unk> hundred gigawatt hours of renewable generation with corporate off takers across major industries.
We progressed approximately 8000 megawatts of development projects through construction and advanced stage permitting.
We also added approximately 5000 megawatts to our global development pipeline, which is now approximately 36000 megawatts.
We invested or agreed to invest approximately $2 4 billion or $600 million net to Brookfield renewable of equity across a range of transactions year to date.
And finally.
We have maintained a robust balance sheet with over $3 3 billion of available liquidity and no meaningful near term maturities term maturities.
Now.
Turning to our growth initiatives.
This quarter, we executed on several growth opportunities that demonstrate the value of our global platform.
Deploying capital across multiple technologies and jurisdictions enhancing our position as a leading diversified clean energy business.
We continue to grow our leading distributed generation business, both in the United States and globally positioning us as a partner of choice to companies and other institutions by providing a one stop solution for onsite and Offsite Offsite energy generation storage.
And efficiency services.
In the U S. We have grown our distributed generation business by almost five times since the beginning of the year to 3600 megawatts of operating and development assets.
We accomplished this through a combination of acquisitions, both larger scale platforms and smaller tuck ins.
And organic growth initiatives, such as channel partnerships joint development agreements and our recently announced cooperation agreement with Trane technologies.
Recently in Europe, and Latin America, we agreed to acquire interest in portfolios of an aggregate 785 megawatts of operating and development assets for a total investment of $250 million or $60 million net to Brookfield renewable.
Further in China, our rooftop solar joint venture with a local partner has continued its strong growth momentum and is expected to have 400 megawatts of operating assets by the end of 2021. In addition to our further development pipeline of over one gigawatt in the region.
As one of the only globally diversified DG platforms. We believe we are uniquely positioned to leverage our customer relationships and economies of scale on a global basis to maximize each of our regional businesses and continue our current track record of substantial growth.
In addition, we signed an agreement to acquire three late stage solar development projects in the U S, which have a total installed capacity of 475 megawatts.
We will be closing on each of these projects once they have been significantly de risked which is expected over the next 12 to 24 months.
Concurrently we are progressing PPA discussions with a large corporate buyer of renewable power to fully contract the generation.
The projects are expected to be commissioned by 2024, and we expect to invest $135 million of equity or $335 million net to Brookfield renewable.
We are also in the early stages of seeing meaningful growth in emerging technologies.
One that we are following very closely as green hydrogen.
Green hydrogen plays to the strengths that have defined defined our business for decades.
Knowledge of global power markets clean energy expertise.
Large scale capital and.
And best in class operating and development capabilities.
Although still in its relative infancy, the potential market for green hydrogen is significant due to its storage capabilities.
And the ability to address harder to abate emissions coming from the heavy duty and industrial sectors, such as long haul transport and steel production.
And while green hydrogen is not yet economic on a widespread basis.
We are increasingly seeing specific opportunities to invest at attractive risk adjusted returns.
We are currently advancing almost one gigawatt of green hydrogen opportunities positioning us well to be a first mover. So that we can invest and scale as the cost curve continues to come down and the technology is adopted more broadly.
In addition.
In addition to our agreement to fully energized a hydrogen companies plans green hydrogen production plant in Pennsylvania, one of the first industrial scale facilities in North America. We are also progressing one of Canada's largest green hydrogen projects, providing green hydrogen to our pipeline operator as the off taker.
For injection into its natural gas network in Quebec with construction targeted to start next year.
With that I will turn the call over to white to discuss our operating results and financial position.
Thank you Connor.
In the third quarter, we generated <unk> of $210 million or <unk> 33 per unit, a 32% year over year increase as our business benefited from recent acquisitions and strong asset availability.
Globally, we are seeing elevated power prices as economies around the world ramp backup.
Our business is well positioned in this environment.
Although our portfolio is almost entirely contracted.
We have been able to benefit across our hydro electric and storage businesses given the ability of these facilities to provide dispatch will carbon free baseload generation.
For instance, in the U K, we're below average wind resource and elevated natural gas prices drove higher and more volatile power prices are pumped hydro facility delivered record results during the quarter as we sold critical balancing and stabilizing services to the grid.
In Brazil, where the country continues to deal with historically dry condition, our production is well matched to our delivery obligations.
But we are opportunistically, leveraging gummer government power procurement opportunities to reconstruct our assets to take advantage of the high price environment.
And more broadly across our global portfolio, we have taken advantage of the strong pricing environment to both lock in attractive all in pricing for our hydro facilities that are available for re contracting as well as to secure attractive long term ppas for new wind and solar developer.
Projects.
During the quarter, our hydro electric segment delivered <unk> of $142 million with favorable generation in the U S and Colombia, offset offset by below average generation in Brazil and Canada.
The portfolio continues to exhibit strong resilient cash flows given the increasingly diversified asset base and high asset availability.
Our wind and solar segments generated a combined $130 million of <unk>.
We continued to generate stable revenues from these assets and benefit from the growth in the business and highly contracted nature of the cash flows with long duration power purchase agreements.
Our energy transition segment generated $48 million of <unk> during the quarter as our portfolio continues to grow while we assist our commercial and industrial partners achieve their de carbonization goals and become their partner of choice for energy transition solution.
Despite widespread challenges to global supply chain, we are making good progress executing on our approximately 7000 megawatt construction pipeline.
In the U S. Our wind repowering projects are progressing well.
At our New York project over half of the turbines are operating and we expect to complete the remainder by the end of the year.
At our shepherds flat project in Oregon, The Repowering equipment is on site and we have begun replacing the turbines in line with our plan to deliver the project by the end of next year.
In Brazil during the quarter, we delivered our 360 megawatt <unk> solar project ahead of schedule and construction is progressing on our 200 megawatt <unk> solar project.
We also expect to start construction on our 270 megawatt Brazilian wind project in the first half of 2022.
Finally in Poland. Following the award of an inflation linked 25 year contract for 400 megawatts of offshore wind capacity, we are finalizing the environmental permits and have begun to procure turbines.
These opportunities represent only a subset of the organic growth initiatives that we expect to execute in the coming years.
Next looking at our balance sheet and liquidity.
Our financial position continues to be strong we have approximately $3 3 billion of available liquidity, our investment grade balance sheet has no meaningful near term maturities and approximately 90% of our financings are nonrecourse to Brookfield renewable.
During the quarter, we continued to take advantage of low interest rates and executed on almost $2 billion of investment grade financing and other financing initiatives across the business.
We also continued to execute on several initiatives to further bolster our liquidity and support growth.
Recently, we raised approximately $700 million of proceeds from strategic financings and capital recycling initiatives.
Including agreeing to the sale of our Mexican assets developed by <unk>, our global solar developer for $400 million more than doubling our invested capital over our two year hold period.
Looking forward, we expect to continue to generate meaningful proceeds from these initiatives as the market for Derisked renewables continues to be strong and the positive price environment and increasing demand for clean Baseload power has created significant contracting and financing capacity within our hydro fleet.
Sure.
With a robust pipeline of capital deployment opportunities, we remain committed to our growth plan that is not reliant on equity funding.
Sure.
We continue to focus on growing and diversifying our business and executed on our key operational priorities, including maintaining a robust balance sheet access to diverse sources of capital and creating value through enhanced cash flows from our existing portfolio.
We remain committed to helping our partners achieve their de carbonization goals and in the process, earning our investors a strong total return of 12% to 15% over the long term.
On behalf of the board and management, we thank all of our unit holders and shareholders for their ongoing support.
That concludes our formal remarks for today's call. Thank you for joining us this morning, and with that I'll pass it back to the operator for questions.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from Sean Stewart with TD Securities.
Thank you good morning.
Couple of questions to get through.
<unk> can you give us.
Can you quantify the gains you secured in the quarter on wind development project sales in <unk>.
And the Brazil balancing pool catch up.
To what extent did those items.
Port EBITDA in <unk> this quarter.
Yes, Sean Thanks for the question, it's wired here so in both cases the gains on the wind sale the development assets.
As well as the.
The Brazilian regulatory matter that you referenced each of those is around $15 million to $20 million.
So in aggregate they were around 30% to $35 million benefit to our results from the quarter.
Okay.
In Brazil that that would be the end of those.
<unk> payments I suppose.
I would expect so but we have been positively surprised as the.
The.
The benefit has continued to come so I would expect so but who knows there could be further additional benefit.
Okay, Thanks for that detail.
And you referenced your ability to lock in attractive <unk>.
Reising for re contracting for some hydro facilities can you give us some context on the scale.
In terms for those those initiatives and the potential.
For for follow on.
Success on that front as well.
Sure Sean its corner here. Thank you for the question.
Theres, probably a couple of points, we would make there first and foremost we've always felt that this has been an underappreciated upside lever within our business.
<unk> in our North American Hydro portfolio, we have fantastic exposure to higher power prices that really has not shine through in recent years and.
In the current environment, our ability to lock in those.
Attractive prices in today's environment.
Is one of the reasons why we're so confident heading into next year, our ability to hit the high end of our earnings targets on just organic initiatives alone.
There's two other points that it's probably helpful to add which is something we're seeing around power contracting within our hydro portfolio.
And the cross wind and solar which is just a tremendous increase in demand driven by two things one more and more corporates and off takers looking to secure power a greater number of customers and then two for some of our largest customers around the world. They are now signing very large scale.
<unk> ppas for very significant amounts of power often taking 100% of the production from either a solar asset or a large wind farm or a hydro and we're seeing that across all of our technologies not just hydro and that allows us to not only secure but lock in some of these gains.
<unk> for a longer duration.
And then the last point, perhaps to be made is it's great that we're getting these these higher prices, particularly in our north American hydro's, but the other thing that's really supporting the performance of our hydro is their ability to provide.
Other.
Our ability their ability sorry to generate other forms of revenue streams.
More and more ancillary services grid balancing services, given their embedded storage capabilities with more and more intermittency going on to global power grids, we're not only seeing.
Our hydro's generate more revenue from the power they sell but also generating more revenues from these additional.
Phyllary revenue streams and that's that's it.
That's a theme that we think is going to continue for for a number of years to come.
Thanks for that detail Conor.
We will get back in the queue. Thanks very much.
Our next question comes from Robert <unk> with National Bank financial.
Hi, good morning, everyone.
Going back to Brazil can you discuss the outlook for Brazil over the next few months, so thats a continued drought.
And remind us how does the use of centralized pooling mechanism work for you going forward in this type of environment.
Yeah.
Good morning, Rupert I'll take the first part of that and then hand to Wyatt for the second half.
There is two comments, we would make in both the current hydrology conditions in Brazil, and how it affects our business.
The first is.
But we would reiterate and we reiterated it in our letter.
The way we power market in Brazil is we always leave cushion.
In our delivery obligations to ensure that even in periods of low hydrology.
Never over extended and caught short and and.
This year.
That has proven to be very beneficial.
And we see ourselves in a great position to match, our ongoing supply to those delivery obligations.
Sure.
Both for the remainder of this year and into 2022.
The other thing that we would highlight in one month certainly does not create a trend but October is the beginning of the call at rainy season in Brazil.
And.
The country and ourselves we're very fortunate that there was a tremendous amount of rain in October. So there does seem to be some modest relief, we'll see if that continues but the good news for us given how our portfolio is structured how our delivery obligations are structured is that incremental hydro.
<unk> is essentially excess power that we can we can sell into the market capitalizing on the high prices in the region today I'll hand to Wyatt of both the central pooling.
Yes.
Effectively the central pooling mechanism, just socializes generation risk across the entire country. So you don't take any specific facility.
Exposure really is how does the overall country the pooling of generation across the country. How does that generate and then you get allocated a percentage of that based on the capacity of the facility. So long and the short of it is it just socializes any specific risk across a broader portfolio.
Leo and so what we would say for the upcoming year.
Depending on how the rainy season goes over these next two months.
But if reservoirs.
Historic lows, we will get it in line with all generators generators around the country will get allocated.
Below what we would normally expect.
In our case that is we don't expect that to be a meaningful impact to our business because as Conor mentioned on the <unk>.
We still expect to get allocated what we've contracted and where we have delivery obligations and right now we still expect to get some additional generation that we can sell into the market and as Conor referenced us into a very strong pricing. So I hope that answer your question.
Yeah, that's great. Thanks for the color and secondly, you are highlighting one gigawatt of hydrogen pipeline potential.
With your disclosures can you give us a little more color whats the timeline on this maybe what would be your scope of supply look at the contracts look like ex any any color you can give there.
Yes.
Sure.
Rupert I'll take that one.
So we would reiterate that green hydrogen is still in its very very early innings and.
It is not cost effective on a widespread basis, but the cost curve is declining very very rapidly and will really put our.
Our activities in this space in <unk>.
Two buckets there are some I would say smaller near term opportunities, where we do see the potential to build electrolyze. There's of a very modest size, we would highlight that although very modest sized to support clean fuel obligations or <unk>.
<unk>.
<unk>.
Specific.
The industry, they get subsidies and therefore green hydrogen can be cost effective today.
There is one project that we highlighted in our opening remarks in our letter that we are well advanced on and we hope to begin construction on next year and that's in North America.
The second component of the opportunities. We're looking at is much larger and we're looking at opportunities both within our own portfolio and third party opportunities, where we can bring our capabilities to bear our knowledge of power markets, our knowledge of clean energy technologies are developing capabilities.
Our large scale capital.
As the cost curve comes down and as the demand for green hydrogen.
Increases, we will be well placed in the future to invest significant.
Invest significant dollars into this space when green hydrogen becomes cost effective on a widespread basis that second bucket is still a number of years away.
It is likely an opportunity that develops in larger scale in the middle part of this decade, but what we're doing right now is getting prepared such that we will be in the pole position to invest and scale well that when that opportunity does materialize.
Greg Thanks for the color I'll leave it there.
Our next question comes from Nelson <unk> with RBC capital markets.
Great. Thanks, and good morning, everyone.
Just a quick follow up on <unk> question on Green hydrogen so.
Yes.
You mentioned that the larger projects are still years away.
So big picture like roughly how much capital we will.
Brookfield be deploying over the next.
Call. It two to four years is not very material.
<unk>.
That could start construction next year.
Good morning, Nelson I think that's fair, we would classify it as modest.
It is something that we view as a.
A large scale opportunity in the future that we're well positioned to be a leader in.
But we would expect the capital deployment in the next few years to be modest.
Likely in in call it the low hundreds of millions of dollars range.
Okay got it and that would be net to BP or so.
For BP on their institutional investors.
That's probably in total for TEP and institutional investors.
And then the next question this relates to the three solar developments that you're acquiring.
The 475 megawatts in the U S. Can you give some color as to where those projects are located and will they be paired with batteries.
Yes, certainly so so these.
These projects are located.
Right in the heart of America rate right in the.
The Midwest.
The.
The current plan is not to pair them with batteries, but that is an option that we do have for the future.
Our intention on these projects and it.
It is a process that we are relatively well advanced on is to secure a long term corporate offtake for 100% of the generation that's something we'd hope to do before the end of the year and the economics of the projects that stack up on just the solar in that contract, but we do preserve the optionality.
To install batteries in the future.
Okay. Thanks for that and then just one last question before I get back in the queue in terms of the <unk>.
Initial 26% interest acquisition of a 750 megawatt project in Spain and Mexico.
Is that wind and solar or wind or solar and then.
I think I mentioned the potential to increase your stake to 60% can you just give some color.
<unk>.
I guess, what scenario, where you would increase the stake.
Certainly Nelson and I'll clear up a couple of things there.
Believe the opportunity you are speaking about is a distributed generation investment we made this quarter, it's a European based company.
That has assets both in Iberia and Latam.
And the structure of the investment as such debt.
We made an initial investment into the company to fund the near term visible growth pipeline. The company has a large capex pipeline ahead of it but was in need of capital. So we have committed today to fund that initial growth. We also have the right, but not the obligation to invest future.
Dollars into that business at pre agreed valuations and based on the business plan for the company, we absolutely expect.
To do that so it's a distributed generation business is purely solar.
We invest an initial amount today with a plan to with the right, but not the obligation to invest more in the future.
Make two more comments here the first is.
Despite we starting only with a minority position, we do have co control.
The business and we are partnering with what we think is an exceptional management team.
And then the other comment we would make and it's something we really wanted to highlight this quarter is we've long had a leading distributed generation business in North America, and a leading distributed generation in Asia Pac but through our.
A couple of acquisitions, we now have.
Acquired DG capabilities, both in Europe, and in Latam and with the very significant growth, we see in DG and the increasing tailwind for the sector.
We're quite proud of the global capability, we've assembled and we think that will be a huge differentiator for us when dealing with large global clients as we may be the only if not one of the only.
The providers of <unk> services on a global basis.
Great. Thanks for the color Conor I'll get back in the queue.
Our next question comes from David <unk> with Raymond James.
Thanks, Good morning, everyone. My first question.
Just on your development pipeline as you saw a pretty significant.
The increase on the quarter wondering if you could just discuss what drove that with respect to geography, and modality and maybe some commentary around the pace of opportunities you've seen in the last few months as it relates to the development pipeline.
Great David or maybe highlight the pace of opportunities in some more thematic trends I'll, let why it provides a detail of exactly where that additional pipeline comes from.
There's really two things going on in our business that is leading to.
Our development pipeline growing.
Consistently on a quarter to quarter basis.
That is a process we started I would say a number of years ago three to four years ago, that's really hitting its stride in todays market, which as we know in each of our regional platforms have personnel focused on generating organic development pipeline and this allows us.
To not only grow our pipeline completely in house, but it also allows us to make small acquisitions or large acquisitions I should say at any point in the development lifecycle.
Any of our major geographies and that is why.
There is just such an expansive growth opportunity set in development that we didn't necessarily have the global capability to capture four or five years ago. Today, we have that in each of our target markets and with the growth in renewables. There is certainly a large opportunity for them to capture.
Secondly on your comment about where are we seeing.
The.
<unk> from a technological perspective.
It is across all technologies.
We are quite excited that within our portfolio. Our construction pipeline. We do have wind we do have solar we do have hydro coming through as well, but make no mistake about it the vast majority of our growth ongoing today and our near term pipeline in the future is in solar.
That is where we are seeing the greatest amount of growth. Both currently and we expect that to continue for a couple of years at least.
I'll hand to you.
Yeah and Jim.
Echo what Conor mentioned, our development activities have been growing meaningfully and as a result of our development pipeline has.
Specifics around this quarter the increase.
From prior quarter. This quarter is largely on the back of one distributed generation.
Both are trained partnership.
As well as other initiatives that are ongoing we've been increasing that development pipeline and then secondly from a utility scale solar perspective of again, a lot of that focused in the U S.
Those were the main additions this quarter, but as Conor mentioned, that's just a snapshot of this quarter, but broadly our development pipeline is diversified across multiple technologies.
Multiple technologies and geographies.
And we continue to see.
Additionally to that pipeline over the longer term.
Each of those areas.
Fantastic. Thanks, that's great color.
And then maybe just one other from me I guess, maybe more of a longer term strategic question.
On the topic of carbon credits I think we've seen pricing for voluntary credits increased quite a bit I'm just curious.
If you have any upside.
Cross your footprint from the creation of <unk>.
Carbon credits and B would you consider targeting a new class of investments in that space.
Certainly so on your first point or are we seeing upside the answer is absolutely, yes, and one thing we've been looking to do within our portfolio for a number of years now is.
The generation, we have produces a lot of credits and we always want to make sure we're maximizing notes and maximizing the value of those in.
The growing demand for.
For those credits.
It's showing up in the pricing and therefore, it has become a more meaningful.
<unk> driver for our business and something that is driving some of that organic growth.
That we see.
To your point around is it affecting strategy.
To the extent that carbon prices.
Carbon taxes carbon credits.
To the extent they affect electricity prices, we obviously take that into our underwriting too.
To the extent they affect the economics of any of our underlying investments, we absolutely do take that into our underwriting.
It's just a revenue stream and we think about it can we manage that revenue stream can we optimize that revenue stream. What is the stability of it is there upside or downside to those revenues. So it absolutely isn't increasing.
An increasing revenue stream I would say are across a number of our asset classes and a number of our regions.
But we don't think about it any differently than we do other revenue lines and it's something that comes to us very naturally to just baked into our investment decisions on our operating decisions going forward.
Excellent thanks for that Conor I appreciate it I'll get back in the queue.
Our next question comes from Mark Jarvi with CIBC.
We're exploring island.
I was hoping you could just touch on <unk>. It's been a couple of years since you bought into that business. Just curious your view on how the asset sales will go on the pace of growth.
Originally maybe would suggest and you can do about 500 megawatts a year development or is that still the right amount when.
When youre looking at for that business.
Mark. Thank you for the question, we love to talk about <unk>.
This has been a we're thrilled with the performance of the business.
And the performance of the team that runs it.
Sure.
The business has always had a focus on developing assets building assets and then recycling capital from assets that have been constructed and reinvesting that back into more accretive development and really creating this virtuous circle of capital.
Recycling and I would say the business is certainly firing on all cylinders, but but theres, probably two things we would highlight the most and the first is the pace of capital recycling has been very very strong. It continued this quarter with the signing of the sale of the Mexican asset.
And in only approximately two years of owning the business.
We've been able to recycle.
That's majority of the existing operating assets and redeploy that capital into development and what that has done is it's given the business tremendous firepower to expand its development pipeline and well years.
Go when we only two years ago, when we invested in the company. There were hopes of 500 of development 500 of construction in 500 of asset sales every year.
We would expect the business in the current environment to be working towards targets of almost double that and the management team is doing a tremendous job of growing the business and growing the pipeline towards those objectives.
We're thrilled with the business and our ambitions for it have certainly grown since our acquisition two years ago.
That's very helpful. And then can you minus again clients will have a right to buy out your partner I know you guys bought it some of the investors and that is there an option to acquire.
Full control of that.
There is no buyout right on on that business.
We have a great supportive partner there.
No no buy outright.
Okay.
And there was talk earlier to vote.
Some of the real benefits of the hydro asset is the ancillary revenue streams.
Quantify that at all or at least sort of guide in terms of I mean, we've talked about carbon pricing.
<unk>.
Investor day around uplift on <unk>, but just what youre seeing in the volatility of the market in terms of what you think affiliate revenue is concerned to step up over the last couple of years, if some of the stuff we've seen in the last year or two persists.
Yeah.
Good question, Mark, we're not going to give a <unk>.
Guidance.
But.
If you look at the increase in power prices and you look at the forward curves that are liquid and we can lock in today.
There is a material amount of upside there and we're working to harvest and crystallize that.
Part of the reason why we don't want to give specific guidance is.
Actually think it would understate the opportunity.
The real joy of having those perpetual assets of significant scale. The only source of green base load power in the world today is.
There is a number of knock on effects.
Perhaps most importantly, as power prices increase and you can lock in those power prices.
You can also do significant up financing on those assets and that gives us capital to very accretively redeploy into growth in that knock on impact is very material and.
Sure.
Absolutely generated by the increase in power prices and the potential to re contract some of those assets over the longer term at more attractive rates and we hope to execute on that and bring some some real world examples to life I would say in the next six to 12 months.
Got it.
I've made my ladder.
Mark just add the other thing I would just say we did put.
Find out some numbers as part of our Investor day presentation, and I would just say.
The environment around pricing has only gotten better so the numbers, we would have to find out we would just say we have more confidence of being able to achieve them and as Conor mentioned, even potentially outperform.
Got it that makes sense.
Last question for me is just around the U S reconciliation bill and some of the tax credit extension. There is obviously some domestic content.
Almost tied to.
Getting a sort of premium incentives.
Are there any challenges of that in terms of transitioning where youre procuring today versus maybe bringing more U S supply and does it impact the DG business any differently than the utility scale solar.
Certainly.
Those bills.
And the number of the.
What I would call regulatory matters as it pertains to our equipment in the renewable power space.
A lot of them are being socialized, but arent locked in yet.
What we're doing is we're positioning our business very well to manage and outperform.
No matter what environment ends up being crystallized and this is really a benefit of our centralized procurement we have people within our platform whose sole job is is to one ensure we're getting the cheapest source.
Of equipment across all of our technologies, but to no different.
Different than we almost think about raising capital for our business ensuring that we have diversified sources such that as markets change and as you know.
Regulations change and in different regions, we're always flexible and have the ability to capitalize on that so.
We're following all those changes very closely but we would say we expect to be very well positioned.
To manage them no matter, how they come out.
To your question on does it affect DG versus utility scale, we're not seeing too much of a difference there.
Okay. Thanks, a lot I appreciate that.
Our next question comes from Mark Strouse with Jpmorgan.
Yes. Good morning, thanks, very much for taking our questions.
Wanted to go back to an earlier question on your development side, when you look at input prices.
Increasing kind of across your different technologies can you talk about your ability to pass on those those higher input prices in the form of higher Ppas is that leading to.
Somewhat of a dichotomy between your different technologies, and leading making you lean towards a particular technology at least near term.
Yes, great question, Mark and simply yes, and yes to the first part noted the second part.
On the first part are we seeing the opportunity to pass.
<unk>.
Those.
Higher input costs through to Ppas absolutely.
There is no question about that.
Wyatt in his remarks highlighted some of the new development projects that we're hoping to to pull out of the ground starting next year than we've seen in almost all of our geographies the ability to win.
Looking to simultaneously secure equipment, where being able to pass through that increased price.
Into the PPA.
To your to your second question is that leading to.
Big swings or changes into which technologies, we're focusing on not typically.
Maybe very briefly around the edges, but it has not been material. The majority of our development continues to be solar then followed by wind were.
We're not really seeing huge shifts in that mix as a result of equipment prices.
Okay. Thanks for that and maybe kind of similar kind of question from a geographical perspective are there certain regions that have.
Maybe less impact from from transportation issues are geopolitics, whatever it might be.
I would say the supply chain issues.
Our relatively global.
The reason why we're pausing in answering the question is it's it's almost more project level. Then it is geographic I don't think were seeing difficulty in <unk>.
Securing wind turbines or solar panels for Bruce.
Brazil versus Europe, I would say, it's pretty consistent.
And.
Maybe a more helpful response to your question is there is no doubt that the supply chain disruptions have gone on a little longer than expected.
But.
To be clear they are having a very small if not minimal impact on our business.
The way that we.
Like to quantify that internally is the impacts of supply chain disruption are not changing any of our investment decisions at this point and they have not changed any of our construction timelines. So well it is something that from an operational perspective, we have needed to manage through.
And our team has been dedicated to two managing and solving any issues that pop up it really hasnt affected any of our construction timelines are our expected investment returns at this point.
Okay very helpful. Thanks Connor.
Our next question comes from Andrew Kuske with Credit Suisse.
Thank you good morning, I guess its a big picture question for you Conor and it's it's really how you see that on a longer term basis.
I guess I asked the question in part to CPAP as kind of an umbrella organization for a lot of the efforts you have in.
Renewable power and clean Tech.
I ask the question in part because you've also kind of carved out the Canadian hydro business on the evolution kind.
Kind of unit as it stands now with a bit of dock green hydrogen opportunity embedded in there and just how do you see the longer term evolution of bap and is it partly to develop companies internally and then eventually spin them into the market when appropriate.
Thanks, Andrew.
I would say our strategy remains the same and.
<unk>.
We rebranded our Canadian business evolution, but it really didn't change the way we operated it whatsoever.
Today, we run our business.
Regionally, we like to be local in every market that we operate and within those regions. We have operating in M&A capabilities across all technologies as well all technologies on a regional basis.
And when it comes to how we would look to monetize investments in the future, we're always going to be opportunistic.
We're always going to look to only recycled capital when we think the compensation, we will receive is greater than.
What we what we would earn by holding it.
But at this point there is really no change in our strategy and we view ourselves as a long term owner and operator of assets, we real recycled derisked assets, but the regions that we operate in are all core to us and we expect to be into in those regions as players in perpetuity.
Our platforms.
Looking to exit any of them.
Okay.
For clarity and then I guess just on the further development of the platform and really the acceleration of equity capital for growth and really starting to solidify some of that pipeline.
Are you at the point, where you have enough confidence in the pipeline and the outlook on the pipeline and then obviously the value of that gets associated with that pipeline.
To order turbines in advance or order panels in advance so you've got a very active forward Q and in some cases in certain jurisdictions, you have to safe harbor them for tax reasons.
So where are you in the process and partly it's some inflation based question on can you secure pipeline to effectively avoid daughter mitigated to a certain degree.
Absolutely fantastic question in.
The most overarching thing that guides, our timing and our approach to securing equipment is we like to time.
The acquisition of equipment in the locking in of an equipment purchase with the time that we lock in the PPA for that project and that way.
We can we can lock those two things and at the same time, and if equipment prices change or power prices change in the future. It doesn't in fact, it doesn't affect the investment returns.
Our deployed capital so that is absolutely.
The single largest driving factor in how and when we procure equipment.
And what it ensures as we arent ever in a position where we.
We lock in our PPA price and then Capex goes up and our.
Investment returns are severely degraded that that is the downside we look to take off the table.
In certain situations, we will on the margin look to buy equipment ahead of time for exactly the reasons, you mentioned things such as Safe Harbor.
Only if we are extremely confident but I would I would really <unk>.
<unk> focus everyone on the first driving factor because that that dictates the vast majority of when and how we procure equipment across both wind and solar.
If I may just sneak one more in.
Just really relates given your size are you finding less supply chain issues.
<unk> say smaller players in the industry.
I wouldn't want to comment on what other people are feeling what I would say is given our size.
And apologies for almost treating it like a buzzword, but our centralized procurement we do develop these high quality long term relationships with tier one equipment manufacturers and we all recognize the current supply chain disruptions are a short term blip in a lot.
Long term growth story, both for us as a business and for them as equipment suppliers and what it leads to is very pragmatic.
Problem solving.
To help.
US achieve our goals and I think where that really shows up as are we.
Working through the supply chain disruptions, absolutely, yes, but it hasnt affected any of our construction timelines and I would say that is a great illustration of our ability to work well with those tier one suppliers to adjust things around the edges as needed, but in a way that doesn't hurt our economics.
We are going to come out of this situation, even stronger partners than when we went into it.
Okay very helpful. Thank you.
As a reminder, if you'd like to ask a question that is star then one.
Our next question comes from Anthony <unk> with Mizuho.
Good morning, Good morning, Conor hopefully a quick question. Thanks for all the detail in the slide deck.
That there is a lot of wins or maybe a lot of tailwind.
EEP plan.
It looks like the bottom end of the distribution growth rate is unlikely that you'd hit that 5% any thoughts and narrowing of raising that low end of the distribution growth rate and I'll leave it there.
Certainly and thank you Anthony for the question.
<unk>.
There is no doubt.
A very constructive and strong long term outlook.
For our business when we think about our distribution.
We are very firmly committed to that 5% to 9%.
Annual growth rate of the distribution, but the biggest deciding factor for US is are we seeing attractive opportunities to put back capital to work in the business and given the very strong growth pipeline. We have today, both on the organic side as well as the pipeline of <unk>.
M&A opportunities that is going to be the single largest decider of of where we set that distribution growth rate going forward and given the tremendous opportunities. We do see I would expect that.
We expect to increase the growth rate.
Two we how we have in recent years.
Great.
Just.
The lower end of that range is probably more indicative of just the ability to keep growing or the ability to get attractive projects versus that theres, a failed execution or something like that to the company that gives you at the low end.
Yes, absolutely.
I would say in this environment.
The growth opportunities, we see within our business.
Or are the best thing that we have going for us and that's what's going to drive decisions around the distribution.
Great. Thanks for taking my question.
That concludes today's question and answer session I would like to turn the call back to Conor Jetski for closing remarks.
Great as always we want to thank everyone for their support and we look forward to updating everyone at the end of the year with our full year 2021 results. Thank you and have a good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
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