Q3 2021 Innergex Renewable Energy Inc Earnings Call
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[music].
Good morning, ladies and gentlemen, thank you for standing by and welcome to <unk> renewable Energy's 2021 third quarter results conference call and webcast.
Yeah like if at all silly for Nick Yeah that web just as the only there is just down to 12 him to mist do meal ready or it didn't heal shakes and they'll see that at this time all participants on the phone and Internet are in a listen only mode.
Following the presentation, we will conduct a 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 the conference. Please press star followed by zero for operator assistance at any time I would also like to remind everyone that this conference call is being recorded and I would like to turn the conference over to <unk> Senior Director Communications. Please go ahead.
Thank you Hello, everyone and thank you for joining us today.
Just as surprised that this conference will be held in English members of the media budget says their questions by phone after this call.
A presentation supporting today's discussion is available as we speak on the on page of our website or through the Bellevue the jackpot.
This call contains forward looking statements within the meaning of applicable securities law.
Although the corporation believes that the expectations and assumptions on which forward looking statements are based are reasonable under the current circumstances.
This is a question that you rely on JD on forward looking statements as no assurance can be given that it just proves to be correct.
Forward looking information contained herein is made as of the date of this call and the corporation does not undertake any obligation to update or revise any forward looking information, whether as a result of events or circumstances occurring after.
I said that they've Europe, unless so required by law.
During this call we will refer to financial measures that are not for Tonight.
National financial reporting standard please refer to the Olympia first measure inspection of the MTA east for more information.
Our speakers today will be Mr. John <unk>, Chief Financial Officer will present, the Q3 results and Mr. Michel.
Chief Executive Officer will lead your operation right.
And now I'll turn the conference over to Mr.
Thank you, Kevin and good morning, everyone.
Our third quarter results posted growth over the same quarter last year.
<unk> revenues and adjusted EBITDA were all up 13%.
These increases can be mainly explained by the contribution of any prep, which includes $6 $2 million of U S compensation received.
From the EPC contractor for loss of revenues due to the delay in commissioning.
<unk> celebration of <unk> resolved since July nine 2021, and by the commissioning of the Griffin Trail facility.
These items were partly offset by lower revenues.
And <unk> in Quebec, and by higher operational expenses that the Quebec wind.
Revenues proportionate and adjusted EBITDA proportionate were up by four and 3% respectively.
On page eight for the three month period.
Temperature yet 2021.
Power segment generated $62 5 million in adjusted EBITDA, representing a 1% increase compared to the same quarter last year.
This result is mainly explained by the consolidation of <unk> results, which includes now three hydro asset, namely <unk> <unk> and the recently acquired lead Gen facility.
These factors were partially offset by the fire incident at <unk> Creek facility and a lower contribution from the facilities in Tibet due to lower revenue.
The wind power segment generated $45 $6 million in adjusted EBITDA, representing a 6% decrease compared to the same period last year.
The decrease is mainly due to lower revenues and higher operating expenses at the Quebec facilities and to lower revenues at the Foard city by city.
The decrease was partially upset by the commissioning of the Griffin Trail wind facility and by a higher contribution from the facility and credit.
Yeah.
The solar power segment generated $29 8 million.
In that adjusted EBITDA.
The increase is mainly explained by the contribution of aircraft and by the higher contribution of the sell button and Tampa.
<unk> in Chile.
This increase was partially offset by lower contribution from the <unk> facility due to lower revenues.
On page nine for the quarter ended September 30 at the joint ventures, and associates contributed to a $2 $7 million.
Adjusted EBITDA proportionate compare with a contribution of $29 7 million in the same quarter last year.
The decrease is due mainly to the consolidation of <unk> airline miles resolved.
And due to a lower contribution from the toolbar more specificity due to lower average selling prices.
In addition, proportionate production tax credit contribution decreased from $13 2 million to $10 $7 million.
Mainly attributable to the exclusion of the results from the flat to up in Shannon Joint ventures, and two lower Bdcs.
At the Foard city facilities due to lower generation.
This decrease was partially offset by the production tax credit.
The Griffin trail facility following.
Commission.
Okay.
Renewing on page debt compared to December 31, 2020.
The increase in long term debt is related largely to the debt assumed in the <unk> line and lead Gen acquisition. The draw made toward the construction of the <unk> projects the corporate loans repayment, partially offset by the proceeds received from the public offering of common share MDI dual Quebec.
The private placement applied against the revolving credit facility.
On page 11, compared to December 31 change in the total asset resolved largely from the <unk> acquisition as well as to the head, Chris and Griffin Trail Commission.
The total assets were also impacted by an impairment charge related to the TV solar facility in Texas.
Selecting an outlook of lower than expected congestion charges and.
And by a decrease in investments in joint ventures, and associates explained by the Shannon.
That's it.
Changes in total liabilities, mainly from the increase in long term loans and borrowings the.
The change in shareholder equity is mostly explained by the issuance of common share upon acquisitions, the public offering and hydro, Quebec private placements as well as by the total comprehensive loss and the dividend declare on common and preferred share.
As shown on the next page the normalized free cash flow has increased by $11 $4 million on a trailing 12 month basis.
This increase in free cash flow was mainly due to the contribution from the recent acquisition achieved in 2020 in 2021 and from the commissioning of it Chris and different credit facility.
A decrease in interest payments on the corporate revolving credit facility concurrent with the hydro, Quebec by replacement and a decrease in interest payments related to Alterra alone fully reimbursed and generate 2021.
An increase in revenues from the facilities affected by the BCA ducal tinman, which impacted the second quarter of 2020.
And a decrease an increase in distributions from joint ventures, and associates, primarily due to a distribution received from <unk> in the second quarter of 2021 prior to closing.
These items were partially offset by an increase in debt principal payments stemming from the Montana <unk> acquisition, an increase in free cash flow to be a bit to noncore.
Noncontrolling interest stemming mainly from the months of the acquisition.
The decrease in cash flow from the Seabee first IDT due to a non favorable basis differential this period compared to the same period last year.
For the training for the trailing 12 months.
September 30th.
Payout ratio amounted to 121% of normalized free cash flow compared with 124% for the corresponding period last year.
As you already know.
September 2021, <unk> has completed $201 million bought deal equity financing and a private placement of $50 million with hydro, Quebec to maintain its 19 nine ownership position.
In total $12 8 million common shares were issued.
Net proceeds were used to fund the acquisition of Curtis Palmer and the remainder would be used for general corporate surface.
Before I conclude I would like to add that the 2021 projections.
Our revised to take into consideration the below average water flows when rich Jim and solar irradiation in most regions since the beginning of the year and the exclusion of the results from the trapped up in Shannon Joint ventures.
New projections were positively impacted by the acquisition of the remaining interest in <unk>.
Of lead Gen and Curtis Palmer.
We now expect our revenues and adjusted EBITDA to grow by 10% and adjusted EBITDA proportionate by 2% instead of 12% growth for all measures as previously.
Sure.
Also we were very pleased to have <unk>.
Our first Investor day in September.
In which we provided an update on our 2022 2025 strategic plan.
Despite lower financial projections for 2021.
Yes provided that the Investor day remain unchanged and we're already excluding the impact of Shannon and flat top.
On that note I will give the floor to Michel for the operational review of the past quarter Michelle. Thank.
Thank you.
Good morning, everybody.
<unk> seen that it has been a quarter where the weather.
Corporate so much with us.
Starting also NBC, mainly in BC and some other places and of course.
The fire in <unk> help neither nonetheless, we've been quite busy in that quarter as.
You heard also from self Boswell.
We've been busy and completing acquisition and working also on our development and construction.
No.
So we're happy with the quarter results.
There is something we cannot do whether it's not something we can control.
Just to give you a heads up and I know the question will come later on but.
At the beginning of October and November it looks much better being.
The bigger contributor RBC B C.
He is doing very strong.
Strong October and November and also a very strong win in the U S. So so far.
The quarter is that online on our long term average.
Third quarter should be still a month and a half to go but.
Starting on the on the grid.
To come back to the initiative that we have done during the quarter.
Growth and development initiatives I'm on page 15.
In our check size that acquired the remaining interest of NRG.
So I'll close with that.
Part of our strategy and then and then concurrently we did that now it's also a smaller acquisition of 18 megawatt Lee can.
Our storage the idea of Chile, as we mentioned is that we wanted to have a diversified portfolio and we wanted to have some storage capability. We will also be looking to put.
<unk> in Chile in the future I think that what we have seen for people that have not looked into the market in Chile.
Theres some this summer summer, but the winter for them.
We have seen a spike in pricing in result result in the price of natural gas growing up and also the fact that they are committing more and more commitment towards closing the coal. So we've seen a big improvement in terms of pricing.
And I think that we'll see overall in the near future.
Discrepancy between solar hours during the day and evening and night. So we think that the battery will have to play a good road and defiantly small hydro.
With the storage capability will also be very beneficial so the idea over there. It's too is do you have a diversified portfolio and like I said and now owning 100% of the <unk> will be a lot easier for us to achieve this.
This goal and also making sure that we could put a.
I would say a better financing strategy behind this.
Portfolio growing in the future.
Switching to on page 16.
Also very happy with the acquisition of Curtis Palmer, we announced that in during the month of August we just concluded the transaction.
A few weeks ago very happy to have these these projects in the portfolio.
Of course, very very proud and.
And happy to have been successful in this acquisition with hydro, Quebec, I think that together will be a good team in order to put value into the portfolio on the long term.
In the meantime, we're seeing very good cash on cash from this acquisition given the fact that the still have some PPA remaining in these two these two assets. So the idea is you know.
Our M&A SKU.
Focus more on the early cash on cash of course, we want to have long term value associated also with these acquisition, but if we can find acquisition that also contribute on the on our cash on cash for the next few years.
This is part of our strategy to help our payout ratio, while we're still lobbying and creating value in the prospective and development activities.
Talking about development activities very happy also to conclude.
Commissioning of Griffin Trail that project was.
With I guess put it on the fast track last year when we saw the.
Yes.
The opportunity to.
To apply for the PTC extension. We are also very happy to have been able to come.
Conclude the development and the construction in time and a little bit under budget on that one.
As Sean.
Eluded this was a good contributor during the quarter.
PTC Lupit firm.
Better pricing in Texas also and we don't have a power hedge on this thing.
It's it's.
The production is exposed to merchant.
As Hugh.
Sure. Thanks, Ross mentioned, but remember that we have also a PTC.
In this project and the PTC are fully indexed it for the next 20 years, they are representing roughly $25 per megawatt hour. So it's roughly half of that revenue or the contribution of financial contribution to these to these assets. So it's.
Can you talk about.
<unk> project in Texas with PTC being fully merchant, we have like I said at least 50% of our revenue are based on PTC and potentially also a wreck.
The sale on the long term.
Continuing also on the activities construction on that and Nick are progressing well.
Vic.
Construction with was advancing well.
Colgate and shortly.
Scale skilled worker.
A little bit of pressure on many construction sites in Quebec, especially the ones that are far we like but nonetheless.
Construction is to advance very well, we are still confident to reach the <unk> in Q4 next year.
I have a little bit the same thing a little bit of a logistic two do you have all the equipment being delivered to the site now we have all the equipment in place the transformer had been delivered to site.
Commissioning activities have been initiated so we are hopeful to.
Still meet the end of this year as the COPD it might slip into January but the team are busy trying to reach the end of the year as our COPD. So this again is an interesting project because as we as we said before.
This is the first commercial.
Battery.
Sale with the Hydro, Quebec have no division.
We're working very closely with them trying to find other area or market. So that we can be deployed that technology, we're very confident on the great.
The value of the <unk>.
Technology, very safe and I think that the hydro Quebec is committed with us.
Engineering behind this this product so we are very.
And so as you stick to see how it hits, it's going to be performing in the next few years.
Continuing on that the London activities.
Been busy in Hawaii by finalizing a lot of Permian permitting finalizing also equipment I know that.
The Buzz word in our industry right now is how much.
Inflation are we facing in our construction cost.
And also in.
Indirectly the logistic to deliver equipment.
It's a challenge like everybody.
Everybody in our industry are facing but.
But we were lucky to be to have been very proactive in negotiating in advance the battery with Tesla that best system has been negotiated with <unk>.
A few years, but.
Before so we don't have any inflation built in these.
We had also seek your supply agreement with solar panel.
But we do have a little bit of headwinds in terms of.
Logistic delivery and some inflation in the balance of plan, but as an example in.
Highly kind of why we have perhaps $2 million to $3 million.
So that's 232% to 3%.
<unk> still in potential inflation in our project. So it's not super material, it's there and to enter team are working.
It may be a little bit more maybe between three and $4 million.
<unk> exposure, depending on the cost of deliveries of equipment and what have you, but I think it's manageable.
We were working hard also in continue in our developing and Ken and I and Barbers point.
We will be we will have a little bit more time to negotiate pricing mtc potentially.
Easing.
Pressure on logistic and delivery cost just to give you an idea container a few years ago, a few years ago at year and a half ago to go do a why it was costing around $3000 now we have seen quote as high as 16.
We have also pre negotiated some some delivery of around $12000 per container. So those are built in and are at cost.
But just to show you that there's a potential also to Cds. These.
These pricing to come down in the next year and a half or so so we're hopeful that.
Yeah.
The effort from different government and other agencies to ease that cost pressure on transportation should translate to potentially a little bit of a relief on those two last project can have a high bar.
<unk> point.
On other development activities, we have from Terra as you know frontier is an interesting project, we need to have a little bit more clarity on finding a.
A buyer still long term buyers for that project.
I alluded a few times ago.
Few times about San Carlos which is on the same river, but just a little bit a few kilometers upstream.
We like to thank Angelos, a little bit better the cost to build the San Carlos.
Is is lower in terms of megawatt hours produced in San Carlos will have also the capacity to basically store 45 hours of energy and that project or that storage could benefit from chairman. So we're working also in advancing.
<unk> permitting in the meantime, and like I said looking forwards.
Potentially find a off taker for both project, which then would.
You gave us the opportunity to have a good financing and start construction recognize a very small three megawatts in Chile, we did put that there is just.
We're going to take advantage of the existing infrastructure and we can't go there.
<unk>.
Damn that are releasing water into into the river and where we're going to take advantage of that release water at the bottom of the existing dam. So it's not a big project, but it's a profitable one and then interesting a small addition to the UK coal facility.
Also last name nine megawatt, France, we only own 25% of that project.
Nonetheless, it's going to be a very interesting project, we're going to.
B groh.
Going forward with that one into potentially construction next year, so still waiting for interconnection service agreement.
But hopefully we will have the opportunity to start that construction sooner.
Then later.
Going a little bit fast on project prospective projects.
We're working hard.
Two words.
Lapping more project.
In United States are France, and South America.
Canada is also right now or Quebec.
It's come back to a I would see an active market with the RFP in Quebec for when it's a 300 megawatt RFP for wind.
Hydro Quebec has.
Okay.
Said or released their forecast for 2030 and its encouraging the comes from the consumption of electricity in Quebec is going up so that's a great use for.
Awesome.
In future opportunities to submit.
The project came in Quebec, and eventually I guess that Canada will also see a lot more activity, especially if the price on carbon debt with.
Discuss with.
The Liberal government. If this is inactive and implemented I think that this will also help the rest of the scanner that to move forward with future RFP.
But our main market right now for growth is France.
I'd states.
Effort has been put in Boswell, we are of course advancing negotiation with Pacific Corp.
Also the parking deck to discuss inflation on on on project cost.
So it's a good thing that the approach the PPA we're not.
Please leave finalized so we will have some opportunity could get to discuss with Pacific Corp.
Remember that this is a 300 megawatt with under 25 years PPA. We also have a palomino as you know 200 megawatt solar project in Ohio and in these types of dancing well.
We always have some challenge in and development of the project, but I think that our team has done a great job in meeting local local community and the project is advancing pretty well on that aspect, we still have to finalize the interconnection activities and we have also opportunity to do.
Discuss with our two off taker, the potential inflation and pricing that being said I think that the.
The price of electricity in United States, especially for renewable energy.
Firm up quite a bit and a lot more corporate off taker are very interested in signing long term contracts.
To secure their supply of Green power.
You've seen.
Natural price natural gas price going up so obviously that has also firm up quite a bit some of the.
Pricing.
Rice target in United States, even mid tier has been quite strong this year.
We have one project.
<unk>.
And benefit from the mid C and Miss he has been very strong.
So far all the all the year. So we are seeing a lot more activity is a lot more demand for corporate Ppas and our intention is to big loss further project as you know solar and wind.
We've been very active in the northwest and midway.
Midwest again.
We are advancing and hopefully in the next few quarters, you will see more project coming into the active development project coming and those will be big ticket project.
And in the states, especially in the northwest.
200, 300 megawatt project cannot be easily did law so quite.
Quite happy with with our effort in the prospective project and again also France is advancing quite well we have some lead also on solar we.
Have initiated some did lumping in solar that seems to be promising also in France.
All in all I guess.
Little Award also on the co op.
<unk> six we've seen a lot of articles lately.
In the last couple of weeks a lot of attention that's been put on.
On initiative around the world to curb.
Global warming, so I'm very pleased to see that a lot of the article and a lot of attention are now being put.
In.
In the in front of the public and a lot of financial institution also have been committed committing more focused on ESG well.
Yeah.
Ladies and gentlemen, please stand by while we reconnect the host site.
Once again, ladies and gentlemen, please.
Do not disconnect while we reconnect the host site.
So we're back.
Please go ahead.
Okay, I'm, sorry, I'm sorry.
And as communication issues.
So I was saying that I have been critical about the.
ESG or the Caribbean washing and I'm pleased to see that.
I'm not the only one that was offset by the way sometimes.
Some ESG criteria or some green investment already been green bond.
<unk>.
Marketed around the world so.
We said so many times, we think that we have a great business, we are committed to only produce.
Renewable energy and utilizing also storage to enhance the penetration of green energy in many market and eventually green hydrogen as well, so pretty pretty pretty easy to see that.
Lucas now seems to be having more strict.
Correct any around these criteria and <unk> is very pleased to see that.
That new fact and of course, we're committed to to fully have more and more disclosure on our ESG and <unk> and her team are working hard.
Good.
Good documentation in order to help you assess our ESG rating.
Also one thing that I'm very very very pleased.
Some people that knows me knowing that that was quite focused on the methane.
Emission.
It's great to see the world now focusing on this I think that natural gas guys in the industry have.
Gone.
Much of the criticism on that asset and I guess on marketing aspect, calling natural gas. What it is it's maintained more than 80% of natural gas is methane and and I think that people should understand that natural gas is a fossil fuel and methane.
Mission will contribute to warming the planet so.
Natural gas is not so clean.
Potentially cleaner than coal, but it's certainly not a clean.
Renewable energy and I think it's about time that the world is waking up to that fact, so on this we would open up the.
The floor for questions.
Thank you ladies and gentlemen, if you have a question. Please press star followed by the one on your Touchtone phone you will hear a sweet home prompt acknowledging your request.
Question will be pulled in the order. They are received please ensure that you lift the handset if you're using a speaker phone before pressing any keys. Please go ahead and press Star one now if you have a question.
And your first question will be from Sean Stewart of TD Securities. Please go ahead.
Yeah.
Thank you and good morning, everyone.
Good morning, Michelle.
You touched on the some changes to the perspective development pipeline and there was mentioned in the MD&A of some wind projects in France, and Chile moving to early stage for mid stage can you give us some context.
And what's happening with those projects and why they've moved seemingly backwards in the queue.
Yes.
Yes, well in Chile, we had a small one to nine megawatts.
We.
It was not very material. We had acquired these these right a few years ago, but we're focusing more on bigger projects.
I don't think it is very material.
And in France, I don't have all the specifics, but it was unfortunate that some.
We are positioned local a position that's filed.
I would say in that position too.
To that.
Jack in the handset with a with kind.
Hi.
Reassess in terms of advancement.
Not big project again, but.
It's not positive when when some of the projects that we thought were going forward.
Have some setback but.
Sean I think the team in France.
Discouraged here, where they are going to work even harder on trying to develop potentially other project or.
Find ways to two.
Yes.
But ways to further could you further develop the project that have been re classed but I can't remember exactly the name Sean on this but we can certainly give you a little bit more color on it.
That's useful we're still encouraged to see overall additions to the pipeline even since September.
The second question I have is you touched on the 300 megawatt.
Quebec wind RFP can.
Can you give us an update on the expected timing of that process and.
And as we look ahead to more growth more procurement over the next decade in Quebec.
Your perspective on the scale of.
The opportunity size and timing of future rfps to come in Quebec.
Any thoughts there.
Well I'll be only my opinion.
Yes.
Hydro Quebec.
Yes.
It's all on.
Priorities, but.
I think that what we have.
Against the market perspective is that Quebec is a place where.
Hydro, Quebec and ends on government as Quebec is open for business do you have new companies Green hydrogen.
Good database.
Infrastructure that will need electricity and green electricity.
Theres a lot of talk about the.
The greening also the element of industry in Quebec is certainly well positioned to do.
Take advantage of that so I think that the.
The story here is that hydro, Quebec has been good in commercializing and being.
I would say.
Good.
A good bump that up to Quebec, and in a sense that the Quebec and hydro, Quebec has been willing to utilize hydro, Quebec as a tool to develop the economy in Quebec, and I think that the green economy in Quebec is the top priority.
And I think it is only the beginning.
You see some very nice growth and good.
Economy, using a sense to see more and more companies coming to Quebec to have access to real bold Green energy.
And so I think that the.
The first 300 megawatts is is a good start how much more megawatt we will see in the near future.
It will depend also on the ability of hydro, Quebec to finalize the interconnection with the message that you ship Theres still.
Quite a bit of energy there that was committed to be exported to message you ship.
But nonetheless, I think that the fundamental of seeing hydro, Quebec being on the forefront of welcoming Indus.
Industry that needs the green energy.
Alright, Thank Keith is Paramount and we will we'll see some good news announcement in the next few years.
Quite positive about that.
So 300 megawatts.
In 2026 this is what they have announced.
Hydro, Quebec is going to give all the detail later this year or beginning of January and I would be expecting bid you probably at this time next year or first quarter of 2023, four being able for us to complete the <unk>.
In period and be able to put these projects in 2026. So that's my.
My two cents.
On what will happen with that 300 megawatts.
No that's great detail I appreciate it that's all I have for now thanks, everyone. Thank.
Thank you Tom.
Thank you next question will be from Nelson <unk> at RBC capital markets. Please go ahead.
Great. Thanks, and good morning, everyone.
Yeah.
Just kind of want to start with a few questions on Hillcrest solar.
So I think the budget has been kind of creeping up in the last two quarters.
Can you just give a bit of color as to why.
What's causing the cost increase on delay.
Well, it's finalized now we have settled with Tcl.
<unk>.
I just want to be politically correct here, but I.
I think that.
This project. Unfortunately been received from the Bcl part the 18 that we were expecting to receive.
And a lot of people.
People have worked if you remember we mentioned that at the height of the.
Of the job, we had more than 900 people working on site a lot of rotation and unfortunately, not necessarily skilled worker were selected and that has brought a lot of the repairs that have to be done during summer time.
Now I don't want to get into too much detail in that.
Our contract.
Raymond with PCL, but we thought that we had a very strong case.
To push back on some.
Demand from PCL on the other end.
We wanted to close this project as you know tax equity.
Is.
He is committed to this project and we wanted to close.
Tax equity.
And we wanted to.
Finalize that all of the agreement.
As soon as possible so we think that.
Yes.
We think that.
There is.
<unk> to finalize it now you will not see more costs increase we have settled it.
What we have put in the MD&A as the final numbers.
Through those numbers as Jonathan said, we also were compensated for some liquidated damage in terms of the late.
So no more costs will be seen in the aircrafts its done.
Project finance will be repaid.
The.
The closure or the.
The financial torture for tax.
Equity is scheduled before the end of November so.
All of the I would say the cough and.
The potential delay on financial close are now behind US all of the independent engineer reports has been done and are now being submitted to tax equity.
For their review so we are confident that this is this is the final number.
Again, I think that it was a little bit unfortunate.
That project was built.
In the middle of the Covid.
PCL is the Canadian.
Dave Hopper and their subcontract their mental counter electric Bill one.
<unk> is also <unk>, one so that had complicated a little bit their ability.
Two.
I would say to you to service that project so all in all.
We're happy with the end result, now the project is producing what it should be producing.
And we will be.
Done.
With the tax equity financial close by the end of November.
And we will have a nice project now in Ohio, producing 200 megawatt.
Okay.
Thanks for all the color could you just repeat what was the liquidated damages received and will there be anything recognized in Q4.
I think if the U S $6 2 million U S.
No no more liquidity to damage. Our this is part of the final settlement with UPC.
Okay.
We're done we have recorded it in the Q3 now the project has been fully operational since then.
And there is no more liquidated damage related to the nonperforming.
Awesome.
Okay. Thanks.
Question relates to Curtis Palmer I think there was roughly a <unk>.
Provision that has a cap of about $30 million.
It relates to.
The New York ISO market pricing in 2023 2024.
But I believe that PPA at Curtis Palmer.
Curtis power goes out to 2026.
Can you just give a bit of color as to.
What the earn out provision relates to and under what circumstances would you need to pay.
Some earn out.
I don't want to go too much into detail there, we'll disclose it when will when we will settle but.
Yes.
Is the fact that there is some carbon initiatives that are being discussed and if they are implemented.
It means that the market will.
I would say I wouldn't say permanently but will be affected for the long term. So that's the idea behind it.
Yes.
Initiatives are implemented we will be in a position with hydro, Quebec to kind of seek your our vision on the long long term pricing in the area and there is a formula agreed with the center, where we would be able to.
Agreed on a.
I'd say on the on the long term trend for pricing. So that's the idea even though it's not necessarily a lot.
With the end of the PPA issue that the initiative around carbon pricing.
Should be implemented by that date and they should have a permanent influence on long term pricing in the area.
Okay.
That's good color and then just one last question you mentioned power prices are higher.
You have some merchant power price exposure in Chile, Texas and other regions.
Is this do you see an opportunity to lock in higher prices by entering into contracts or or do you want to.
I keep benefiting short term from from some of the.
The high merchant prices.
You did mentioned that you want to add batteries in Chile, and obviously that's.
That would.
Give you some flexibility too.
To take advantage of price differences during the day, but can you just comment on.
Whether this is a good environment to lock in prices.
Sure.
I'll start with Texas thinks this is a place where it is.
Very volatile lines.
As we've seen in and believe me I have been burned and.
It won't happen again, so the beauty of being a merchant is that you don't have any canny.
<unk> to deliver the the nice thing about us.
Other PPA.
<unk>.
<unk>.
Like the one we have with Ford is that we would be also.
We can.
PPA that we'd like to have SaaS produce right, we don't want to get in Texas again with firm obligation to deliver.
And being forced to buy on the market when the volatility can be so high so unless we find a he asked produce PPA that makes sense for Griffin trail.
We will not commit to the same type of project.
Commitment.
We had in <unk>.
<unk>.
Flat to up or in CV. So.
We're happy now with what we're seeing.
Yes.
Water on average.
We reached something around 30 Bucks Tour Griffin Trail.
And this is net cost basis, we were down.
Delivering on the node. So we don't have any obligation to deliver on the hub somewhere else. So we don't have basis exposure and for the time being we are happy with it.
It's higher than we had expected.
And we're not in a rush unless we can find and produce.
Ppas now Fortunately is a little bit of a different story.
Chile price have been coming up.
There is a lot of curve and the what we have is do you as guidance for <unk> as an example, or even for AI mob.
<unk> are based on the on the <unk>.
Let's say a mix of a curve that are showing reduced price starting next year for a couple of years. The idea behind this is that.
Old PPA had been signed a few years ago and they are seeing with the are supposed to be in those two years now that being said those PPA were signed at very low pricing, hoping that solar and battery price would have calm down even more than what we have seen lately.
So my view is that this won't happen and there will be an acceleration also on decarbonization of the.
The economy in Chile.
And I think that.
Next year, we'll probably see even better opportunity to lock a long term PPA.
For the time being we have seen some pricing during summer time in the evening and night.
110, $120 per megawatt hour. So it's not a bad deals can be merchant these days and in Chile.
Price gas natural <unk>.
Gas price at current Mark as you know Chile doesn't have any so they have to imported LNG there'll be competing against Europe and many other country that meets natural gas. These days, so I don't see any weakness in the natural gas price.
Going forward.
In the next few months so we're not in a rush to sign we have a lot of incoming calls two signed PPA in Chile price have increased for four 510 years, PPA, where patient I think that.
We will have opportunity to lock the price.
Even better condition.
That's great news on Chile, I'll leave it there and get back in the queue. Thank you. Thanks.
Next question will be from Mark Jarvi CIBC capital markets. Please go ahead.
Thanks, Good morning Juan.
Michelle I'll come back to your comments about Palomino Boswell. When you said you kind of manage inflation pressures and maybe you can get some.
I'll take price adjustments.
Would that be easier.
Palomino or the bilateral negotiation versus boswell as an RFP and I was just curious in terms of what capability you have our boswell trying to adjust the price.
Yeah, Youre right. The palomino Palomino, we have a path forward with the to buy.
Buyers that are really clear.
In terms of passive a corpse a little bit more murky as you as you can imagine.
But.
We were <unk>.
<unk> seen the numbers, we were one of the lowest.
Contender pricing.
In that bid.
Everybody.
Everybody in that group must be facing the same issues.
Industry wide issue.
So youre right that its not necessarily an easy.
<unk> in Pacific Corp.
RSP.
But again I think that.
We will be able to find a way.
We don't need huge.
The increase in our PPA price, we need a little bit of adjustment not so big.
We also have been proactive to reach out to.
Potentially other turbine manufacturer.
This was perceived to be the preferred.
Ben.
Supplier at that time.
We have now reach out to others and we have.
<unk> been shown some interesting alternatives that are mitigating the potential increase in cost that we.
We had seen previously so we have also means to mitigate.
This inflation by having different.
Model loss turbine.
That could somehow be more suitable for the prototype in terms of total generation.
I'm hopeful that we'll find a way we don't need a huge increase and I think that.
Pacific Corp.
That energy and are seeing also in it.
The market that they want to serve with that with those contract are seeing also some increase so it's a win win it's not like Pacific Corp, with have to swallow a big.
A big increase in in their supply and not being able to flow through it to their other customers.
Pretty positive that we will find a solution.
And just in terms of timing.
For those solutions.
One sort of the earliest we could see a contract at palomino and move that into the firm development pipeline and the same thing for Boswell.
We have two major.
Customers signed for Palomino.
We had a window of I would say opportunity to show them an increase that was a few weeks ago, we did show them an increase.
Selected.
Another option to wait another six months to see if inflationary prices are still there or get reduced and then they have the option to walk out and then we would be free to negotiate with somebody else, but to be really Frank.
Their option.
We will not be better I mean, the price of corporate PPA have gone up and that's a fact.
And it's not only us trying to be.
Dennis <expletive> here I think the all industry is seeing some inflation.
And the interest rate that has gone up so the cost to produce.
Electricity has gone up as well so I don't think that.
D and we're fair we're open book, So I think we'll find a way to to to continue and make the adjustment that makes.
Both kind of both parties happy.
And so just based on your comments clarity and sort of the Greenlight to proceed on those would probably not happen until mid or late next year.
Well for us palomino as the Green light.
We will find that there is plenty of corporate off takers in that area.
For us it's one it's only getting the permits.
Thanks, guys and then just coming back to M&A you made the comments.
For a while now that cash on cash yield is important but also sort of value maximization with the big accretion that came with Curtis Palmer does that change at all of those types of deals Youre looking maybe a little less focus on our high cash cash for cash on cash accretion more about an IRR maximization.
Maybe a little lower accretion sort of updated thoughts in terms of M&A.
Yes.
The deal flow, you're seeing and just sort of priorities in terms of what youre looking for on an operating asset right now.
Well.
The idea here is that.
Yeah.
It's always a balance works, we focus on cash on cash, but we wanted to we wanted to acquire some some some good some good assets.
We don't want to we don't want to only have the cash on cash in our old to acquire.
Asset.
But I think that.
It's still a good good proposal if we can acquire existing assets that are generating cash on cash so that gave us more flexibility for us to continue investing in our pipeline of development as you know development pipeline can take 234 years due to this.
Lump sum some some area are faster than others, but obviously, putting money upfront with these project are putting a little bit of a pressure on our payout ratio. So I think that this focus of using M&A as a tool to help us.
Mitigate the.
The pressure on our payout ratio because we want to do development because were.
Being more active also we have bigger teams on the ground and we're seeing great opportunities as you know.
<unk> to 'twenty six but.
There are so many.
State initiative and corporate initiative.
Around the world, especially in the markets that were active and we are.
Seeing a lot of opportunity. So we don't want to slow down on the bachman.
And one tools to help us not slowing down on the development is making sure that our M&A.
Comes into help.
To give us.
A little bit of a help on the short term cash flow so.
We are open to look at other type of acquisition that they are really good.
But of course, the cash on cash will still be a priority when we would be deploying capital in M&A.
And just based on the deal flow, you're seeing could be sort of the total amount of acquisition in terms of dollars of investment be comparable to what you did this year. If we think forward to next year in 2019.
Well, it's always volatile at whale dependent and we will.
Looked at a lot of transaction last year, our team, we're really busy and looking in many and the impacts of speeding and diligent so it's a competitive world. So so it all depends.
Depends on the.
The type of opportunity and the players that are also selected.
But I imagine that.
What we have deployed in terms of capital this year can be replicated next year.
It's there's no guarantee of course.
That makes sense. Thanks Michelle.
Thanks.
Next question will be from Rupert <unk> of National Bank. Please go ahead.
Good morning, everyone. Good morning.
Wanted to ask about development in France, if I look at your advanced stage pipeline I think you have 161 megawatts there.
What are the opportunities for bidding into France latest RFP.
Look for interject here.
To be honest Rupert.
It is.
Has better vision on that.
You can get back to you or to the team may be by by giving a little bit more guidance, but the IV.
Is that by 2025, we were hoping to have four or five projects.
Being ready to build and having been successfully.
Spitting in RFP.
We are.
Hopefully that one project might be finished by next year.
And.
Then it's hopefully like we said one or two project per year Star.
Starting in 2023 that could be ready for.
But again, it's it's.
Always a little bit volatile there too I don't want to get too much.
Detail on those because.
You've seen that we were hopeful on one then we had the setback. So one has to be cautious in France.
I think that.
When are becoming also in trends.
Wind project car on there.
There are more and more will position in France, local opposition and organized.
Our position is.
Always been the case, but.
Lately, we have seen a little bit of a pause.
Back there.
Silver on the <unk> seems to have.
Also some promising and it might be.
More acceptable to some degree and that's why we have also focused some of our team and hire.
New.
Colleague to develop solar in France, we have a 60 megawatt that is not yet in.
In the advanced pipeline that.
Seem to be very promising.
So we.
We're working on hard, but it's long in transit.
Project will be more profitable to some degree, but it's a long haul.
It's not easy to lump in France.
With the.
Power prices in France or are there opportunities for building projects with corporate.
<unk> rather than the government backed optics.
Yes.
That's a very good point Rupert.
I think that the price to some degree now.
In some corporate.
Ppas or presumably in ppas are actually higher than the existing contracts. So I think the industry in transit, even looking to potentially cancel their their their utility type PPA to switch.
Towards corporate, especially if those PPA.
Only a few years in there.
And there.
The contract so.
I don't know how long it will last but right now there is a very strong.
Corporate PPA demand defensive.
So looking at that opportunity for corporate off takes in France and in the U S.
How do you go about sourcing corporate buyers.
And your target market. So what does that business development function look like within interjects today and maybe how.
Hi.
How might that evolve over the next few years.
Well right now we have two individuals.
Full time.
Job is to just engage in and look into RFP. We have also two person in Chile doing doing that so this is definitely a.
I'd say a.
An area, where we will have to have more skilled people in.
In the field. So right now we have a small department, but this is going to grow in the future.
Of course, a lot of the business development people folks have contacts with.
Some some cooperation and what have you. So it's it's a team effort.
One has to be dedicated also to be on the lookout for all and every small RFP theres. Some platform in the U S that are starting to be the lock ware.
<unk> like Oh.
In the electronic match, where.
We can.
We can participate and then we see.
Some corporate small RFP that are coming on a daily basis.
And this is helping and I think that this.
We will be also they've locked in the states I think that platform where.
Corporate PPA would come in and put their ask and IPP alike.
<unk> would be in a position to fulfill these these demand I think that this will become a trend in the U S.
Well, we will see some broker.
Like platform.
Being developed so that.
This this match between customer and producer.
Will will become easier and easier in the future.
Great. Thanks for the color I'll leave it there.
Thank you.
Thank you ladies and gentlemen, if there are any additional questions. At this time. Please press star followed by the one as a reminder, if you're using a speaker phone. Please lift the handset before pressing the keys.
And your next question will be from Andrew Kuske at Credit Suisse. Please go ahead.
Thanks. Good morning, I think the question is probably starting off with Arizona, Francois and it really relates to.
Is there something inherent in this business, where you have variability production becomes the sandoz on China's Mot sure China is more than you expected.
I guess, how do you think about.
From a financial standpoint dealing with the deviations from LTA, how do you forecast how do you how quickly do you adjust your internal forecasts as it was very clear on this call that your longer term forecasts everything is intact and admittedly. This is just like one quarter blip, but how fast and how dynamic argue was changing things I'm just.
Dressing and fundamentally how do you think about just your production levels on a longer term basis.
No.
And then sort of quick hit I'm sure Michel you want to you want to take this one so we never add.
Change our LTE Pugh.
Project historically that has been there.
<unk> that the weather generation as some standard variation quarter over quarter year over year. So historically, if you look at our investor deck, we present, the last five and 10 years.
It's unfortunate that recent data whether it was on our side, but can normally at close to 98% 99% of our LTE over the last five to 10 years, so but the most recent years has been.
It's been good and we thought that the diversification Michelle jurisdiction in.
Resource type work.
And support to be closer to the 100% but.
We never did change so when we forecast that we typically like to see our asset that.
Next quarter, we'll be at 100%.
Very difficult to predict but.
I'm sure you have a lot to some this quarter.
It's funny, because we had our audit and board.
Yesterday, the board with us today and of course the.
More members are also asking the same question with climate change.
Are we going to be affected and then <unk> has initiated a review.
A few years ago, we're serious about this we want to understand what's what's going on I think that Jack has been known to be fairly conservative in establishing long term long term forecast.
Lately, we have been challenged and if you in a few ways in a few areas.
It's been a few projects that were not.
Sure.
We're not producing too to the standard that we.
We had hoped Shannon and being one.
I think that.
It's.
It's a matter of being conservative in the first place.
Hydro we have looked at BC, we've looked at Quebec.
And we essentially looked at.
Curtis Palmer.
Our conclusion is that on a on a yearly basis.
BC, Quebec, and New York will benefit from.
I would say climate change to some degree meaning that winter should be warmer and we should be receiving a little bit more rain during winter time, so hence.
Huge amount of snow accumulated during winter time, but remember that for US were run of the river. So if we have a lot of snow.
And that snow melts fast it's not good for us.
Four four bigger hydro reservoir, they can mitigate this by being proactively managing their reservoir and capturing the spring runoff but for us.
Since we're run of the river, having a earlier spring and later winter coming that means that total generation should be growing up now the under.
Aspect is that we will see drier and drier summer time. So July August September for our hydro facility across North America.
We will be under pressure.
Winter and fall revenue should go up and our rate usually are better aligned with production in default in the winter time, so on that aspect.
Pretty pretty comfortable now when it's a little bit more tricky.
A little bit more difficult to have clear answer where the wind will will go.
If we remember all a few years ago, France, we're seeing or experiencing quite a drastic low production and then things came back to a little bit more normal ASP.
Aspects, so it's a little bit hard.
Even with short cycle.
To think that long term forecast will be affected but it's something that we are always looking and whenever we're making an acquisition, we're taking that in conservation and we are hoping by.
Acquiring new facility in different area. We will eventually also mitigated any future climb.
Climate change influence on our long term forecast, but it's something that we have on our top priority.
Andrew in terms of long term planning and strategic plan forecast of course, we do sensitivities on those.
And we plan accordingly.
I put some some dollars buffer.
In order to.
Be covered.
In the case, we don't 100%, but again.
Well answered would show.
I appreciate the robust answer and maybe just an extension and this is one of the mitigating factors on renewables and you think about the use of batteries as it relates to solar.
I guess, what we started to see is a greater bifurcation on some of the solar offerings in the market, where some utilities want to do solar within rate base and how batteries associated with it and then the ppas. They put into the market are really solar only with no battery element.
How do you think <unk> sort of fits into that mix at this stage.
Well, we interject.
I would say that if we have a good price for our soldiers on the PPA basis, we're fine, but the challenge that sometimes corporate or smaller corporate would need some kind of a capacity or 24 hours.
Energy contract and this is where it's becoming a little bit more tricky, if you want us or one customer with one asset.
Battery can help but the battery can do so much for expanding solar hours up to perhaps.
Evening, So that's why I'm talking so much about the portfolio approach in Chile, because in Chile, the great opportunities that we will have a corporate PPA will be on that 24 hours basis. So solar is great because it's cheap production, Germany today, but then you have to have either.
Hydro storage or.
Complementary wind or battery in order to be able to serve them on the 24 hour basis So for us.
I would say that we have also been quiet.
Proactive and in looking into a Y because Hawaii is a great opportunity for us of course to have long term PPA.
It was also seen as an important to really understand how to build and how to manage the relationship with the utility having solar and battery component. So.
I think that those are not big project, but.
Theyre, making us.
Work hard.
Our engineering team and construction team are working together with the blockers so that.
We are learning a lot from our experience in Hawaii and will be well positioned to answer future RFP.
Type where utility would ask to have solar and battery together. So I think we're we're being proactive in this.
<unk> Solar project Slash battery still.
Average in Hawaii is helping us being a better date Robert.
Thank you.
Thank you next question will be from Matthew Baidu at IAA capital markets. Please go ahead.
Hi, good morning.
Just wanted to follow up on the last.
Point on Hawaii, I think there was a competitor that.
Actually decided to abandon our project in Hawaii, citing interconnection costs and supply chain issues I'm. Just wondering if you can talk about.
How do you think that might impact your projects and if you would still want to participate in future rfps in the state.
That's a that's a good question Bret about that article it's hard for me to comment on.
Their prerogative and why they have decided to walk away from the PPA and the only thing I can reinforce is the fact that we were really proactive when we bid bid to have a commitment price with Tesla when we bid. So we had the advantage of securing.
Yes.
Some the law or in the past have been more aggressive in hoping that battery price would go down that's what I alluded also in Chile, some kind of some the flopper, especially in Chile the price of.
Walking out Trump from a project with very low so they saw that as an option and they were betting that the both the solar panel price and battery price would have gone even.
Further down than what we have experienced so I don't know about the strategy of that particularly I think it's N G.
The article you're referring to so I have no idea what were their strategy behind their bid and if they had.
Secured there there theyre battery supply at the time of the bid, but we did so yes, we are suffering a little bit.
In terms of delivery for other component and what have you, but the main cost.
Was the battery component and we had secure it when we when we did the bid.
So.
To be honest.
Through that we are suffering a little bit on Hawaii I mentioned it early on but we still think that the projects are.
Our valid and then again also we're leaning a lot can be set in this project and I think that.
A big portion of our growth in the future.
So I meant dividend power producer will be our ability to be able to propose to customer.
Mix of.
Source of Green energy and storage so.
We're still committed to to the lumpy. These project in Hawaii and the team has done a great job also of Hawaii is a tough place to the left as well we've talked about trends.
Why is that.
That is a place also where the a position to have a lot of Reits and a lot of opportunity to a post project and that is not helping.
Or to meet the schedule.
Schedule date, so hopefully.
The agencies in Hawaii will wake up to that.
To that then perhaps.
Few of.
Those project being <unk>.
Cancel.
May help us bring that message home.
And making sure that their processes.
Of both permitting and perhaps.
<unk> might also have to be a little bit more open to.
Some flexibility in there.
Yeah.
Great that's very helpful.
Clearer about what your strategy or your approaches.
<unk>.
If can you provide any color on the <unk>.
<unk> credit rating.
Why that was withdrawn recently.
Yeah, well it's.
The fact that S&P has.
Change over the years and they have selected some ways to calculate.
The flow of funds available and one one aspect that we really.
Then like is that they were using a P.
90 approach on.
The total portfolio so I was.
It was shocking to some degree because you can use at <unk> 90 on one project, but using P 90 on it on a on a project by project basis.
Part of our portfolio.
Shocking to me and.
And it was not representing I think the diversification of the portfolio of <unk>. So.
Having the rating that we had with them and knowing.
Theyre bias.
Versus our <unk>.
Approach or versus our portfolio approach.
We didn't think it was.
It was.
Useful to try to keep.
S&P we have fiction.
That.
We are sharing a little bit more.
A common philosophy on how to.
To forecast our ability.
To serve our debt and <unk>.
Thank you.
We were perfectly fine with Fitch.
Okay, so not expecting to reengage with the S&P for now anytime soon.
No.
Okay. Okay just my.
My last question is if you had any.
Updates on Dania, Jai Alai mine integration and maybe it might be early days, but any optimizations that you want to do for portfolio insurance.
Oh, well, yes, I think.
We have started to do a lot in Chile.
I think I mentioned it before but when we did the acquisition of <unk> together with our subcontractor. They were 40 per 40 people.
Working on the K Cup.
With the automation and the the approach that <unk> have.
And experience that we have with hydro we have reduced these number of people <unk> 14 now.
We still think there is a little bit of efficiency to embedded there quite you can had 12 people they will be only for.
By the end of next year so.
There is room for us to work a little bit more in terms of being more efficient in Chile financing is also something that in Chile.
When youre looking at.
Project by project project Finance that doesn't work.
Well in Chile, because if you don't if you do.
Don't have a PPA or if you want to have the PPA with a single asset it's kind of complicated because.
Typical.
<unk> our term energy delivery. So we think that by having now 100% of the portfolio, we will be looking into we refinancing or an approach of refinancing as a portfolio.
Approachable.
I think that.
We will see some improvement.
The improvement.
By some with some synergy both in terms of operation and also financial ones.
Okay, that's great I'll leave it there thank you.
Thank you. Thank you.
Thank you.
Mr. Vishal, we have no further questions at this time.
Thank you very much Sylvia and thank you everyone will be talking to him February with her.
Year end results. Thank you.
Hugh.
Thank you Missy.
Ladies and gentlemen, you may now disconnect your lines.
[music].