Q3 2021 Boralex Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to Boralex, Inc. Third quarter 2021 results Conference call note that all lines are in a listen only mode.
Following the presentation, we will conduct a question and answer session and if at any time. During this call you require immediate assistance. Please press star zero for the operator.
Also note that the call is being recorded Friday November 12, 2021, and I would like to turn the conference over to Stefan <unk>. Please go ahead.
<unk>. Thank you operator, so good morning, everyone and welcome to Biotics third quarter results Conference call. Joining me today from our head office here in Montreal.
So I think that got our president and Chief Executive Officer.
Again, Matt Vice President and Chief Financial Officer, and other members of our management and our finance team.
So that cost will begin with comments about the highlights of the quarter afterwards, Mr. Guilmette will carry on with financials.
And then we will be available to answer your questions. As you know during this call we will discuss historical as well as forward looking information.
I'm talking about the future. They are a very itchy of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. But these documents are all available for consultation at SEDAR Dot com.
In our webcast presentation. The disclosed results are presented both under Ifr Aspasia basis, which we now call consolidated and on a combined basis. So unless otherwise stated all comments made in this presentation will refer to combined basis figures. The press release, the MD&A and the consolidated.
<unk> financial statements and a cup yesterday's presentation are all posted on <unk> website at <unk> Dot com under the investors section.
If you wish to receive a copy of these documents. Please contact Mr. Like US will now start with his comments. So please go ahead.
Thank you stfan, well drew good morning, everyone I.
I am pleased to present, you our third quarter resolute to date, one of the highlights of the quarter was the continued growth in operating income and EBITDA.
In spite of the law word unexpected wouldnt conditions.
The submission of solar projects totaling 800 megawatts in the tier one New York State RFP and the addition of 103 megawatt to the preliminary phase although with pipeline are also important elements of the quarter.
One last highlight of the quarter was the closing of our first sustainable financing through the renewal and extension of our corporate facility credit facility and letter of credit facility totaling 525 million.
In terms of market conditions in Canada, and U S for sure the proposed U S energy infrastructure plan West followed very closely by the industry.
This plan was finally approved by Senate and will be an important driver of future growth of the renewable industry in the U S.
The coming months, we're expecting rentals from the tier one RSP in New York State and more information on the 300 megawatt wind RFP and 450 renewable energy RFP in Quebec.
The selection of Hydro, Quebec export line to New York City in the tier four RFP should also be positive for the overall renewable energy development in Quebec in the coming years.
Moving to France now notwithstanding.
Notwithstanding the political debate Archie the French transmission system, operator recently issued six deferring production mix scenario full 2050.
And all of them are highly promising for renewable energy.
The most conservative scenario was the highest nuclear capacity projection refers to a solar projection seven times higher density and onshore wind productions to five star is higher.
The hundredth person renewable and must ambitious scenario indicates a solar production 21 times higher density and onshore wind production full times higher.
Final point for France, we are planning to submit our bid in the next request for proposal plan in the coming weeks.
I'll now review the main variance you know, we're a portfolio of project.
We added four wind projects and two solar project in France to the preliminary face representing a total of 103 three megawatt including the optimization.
Wind projects.
Projects in the pipeline continue to progress with 45 megawatts of project moving to mid stage and.
680 megawatt of project moving to advance stage.
In total we are know developing a portfolio of wind and solar project of 3.1 gigawatt and 193 megawatts of storage project.
Let's review change to the Roes fast now.
Wind project in France moved to the secured phased adding 34 megawatts gross baths, including the optimization of the APAC more Repowering project.
Projects under construction are progressing well with three project totaling 30 megawatts to be commissioned as planned in the four quarters of this year.
We have no 664 mega watching the growth fast 521.
The secured stage and the 143 megawatts in the under construction and ready to build phase.
In total when adding the growth fast to our existing production capacity potential capacity is 3.1 gigawatts.
In conclusion as you can see on the slide 12, we are pursuing the execution of our strategic plan and are making good progress on all four strategic orientations.
This completes my part I would know let Bruno cover the financial portion in more detail and we'll be back later for the question period Greenough.
Thank you Patrick.
Everyone I will start with a review of the progress made in light of our new 2025 corporate objectives.
Total capacity increased slightly in the third quarter with the commissioning of our wind fire makes tarseal Glen distribute on August 1st 2021 and now reaches two five gigawatt.
Our last 12 months EBITDA continue to increase thanks to our acquisitions and commissioning, but the F. F. OHL slightly decreased due to the increase in project debt repayment and distributions to Noncontrolling shareholders.
Our reinvestment ratio stands at 53% in line with our 50% to 70% target.
But yes, our strategy, we continued to make good progress on the environment Society and governance aspects. We are finalizing the assessment of our carbon footprint. We have reviewed our calculation methodology for C. O two avoided and are putting together a more formal.
We'll plan for managing end of life assets.
We also launched a training on indigenous Sculpsure with a participation rate of 97% so far.
We set specific diversity targets as indicated on the slide notably for the percentage of women in management positions and new hires.
Finally, we have increased our participation in different referential like S. N P. N C D P and as mentioned by Patrick We closed our first sustainable financing.
Taking a look at our debt objective now our corporate debt to total debt ratio.
Stable compared to the previous quarter, we are working towards our objective to obtain an investment grade rating and increase the proportion of corporate debt.
I will now cover the financial results for the quarter starting with production.
Wind production in Canada was 6% lower than our anticipated production and 5% higher than in the same quarter last year, driven mainly by acquisition.
Comparable production was 10% lower than last year as wind conditions were.
Weaker in the second half of the quarter end compared to a strong third quarter in 2020.
In France wind production was 15% lower than anticipated and in line with the same quarter last year as growth coming from commissioning compensated for the decrease in comparable production. When conditions were also weaker in the second half of the quarter in France.
Overall total wind production for the quarter, combining Canada, and France was 10% lower than the anticipated production and 3% higher than last year.
Turning to hydro now it.
It was a very strong quarter for U S assets with production, 81% higher than anticipated production and almost three times the production generated in the same quarter last year.
This more than compensated for the weakness in Canadian Hydro and resulted in total production for the hydro sector.
At 21% higher than anticipated and 42% higher than in the same quarter last year.
Finally production from our U S. Solar acquisition was 10% below anticipated production caused by a mix shift.
Less variable sandy conditions, and some maintenance work.
In summary, total production for the quarter was 7% lower than anticipated and 22% higher than last year.
Third quarter revenues were up 8% compared to last year, mostly due to the increase coming from the hydro wind and solar segments.
For the third quarter of 2021 operating income was up 7% EBITDA was 93 million compared to 83 million for the same quarter.
2020 at 12% increase.
We generated $47 million of net cash flows related to operating activities compared to seven 3 million in the same quarter last year.
Cash flows from operations was.
$66 million in the third quarter, a $3 million increase over the same quarter last year.
<unk> was 21 million compared to 26 million in the third quarter of last year due to the slight increase in debt repayment and distributions to noncontrolling shareholders.
Our financial position remains solid with our net debt to total market capital ratio of 46% on September 30th 2021, compared to 41% on December 31 2020.
In conclusion again this quarter, we reported strong growth in operating income and EBITDA in spite of unfavorable and favorable wind conditions.
We are making constant progress in the execution of IRA all strategic orientations and 2025 corporate objectives.
The results of the 800 megawatts solar projects submitted in New York State request for proposals are expected by year end.
We are in an excellent financial position to pursue growth organic organically and through accretive M&A.
And we are pursuing to work to optimize the capital structure and improve our financial flexibility.
Thank you for your attention we are now ready to take your questions.
Betsy. Thank you ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one audio Touchtone phone you will then hear a sweet home prompt acknowledging your request and if he would like to withdraw your question simply press star followed by two and if you're using a speaker phone, we do ask Pat to please lift the handset.
Before pressing any Keith. Please go ahead and press Star one now if you do have any questions.
And your first question will be from Nelson, Inc. At RBC. Please go ahead.
Great. Thanks, and good morning, everyone.
My first question.
Good morning. My first question is related to cost escalation, which has been very typical very topical recently.
You, obviously have about 200 megawatts of New York solar projects under development.
And I believe the 200 megawatts needs to be completed around 28 23 am Kenny.
Can you just talk about.
Pricing, how much or what portion of those projects in terms of the cost has been locked in.
And just.
Color on.
On costs labor tightness schedule and things like that.
Yes.
What I can tell you Nelson is on specifically on base project, we have an update some weeks ago with the team about.
All the different variables that change and then the date of the of the global portfolio model and we're still in an area where these project are interesting for both Alex.
He has not been taken already but we are finalizing the things and looking to two to what happens on one of these project there was.
<unk> date by the end of 2022 but we just get the extension suite suite. So so to your point, we're flexible and two D. We're still in the Reits waters.
So just to clarify so one of them had.
And data 2022 and you have got an extension and then are the rest yes at the end of 2023 and they're there.
<unk> got an extension on those aren't as well if needed.
Yeah, and and and.
The one we get an extension is a 20 megawatt project.
And so so I'm confident that we will fine.
Time to to settle this thing center <unk> in the next.
And in India in the timeline that we where we it's possible to build and to do.
The project.
Okay. Thanks for that my.
My next question just relates to rats, obviously.
There is a pretty good pipeline in France.
And there is plans for a lot more wind and solar.
Can you talk about.
I think last time, you mentioned that you would roughly been about 100 megawatts per year in two rfps in France is that still the case and then the second part of the question is in terms of funding growth.
Believe.
One potential option you are looking at is to sell a minority stake in <unk> in the French business, but can you just touch on.
Both the questions.
Yeah on the first question.
This is indeed, the short term say target is 100 plus megawatt per year, that's that's the French target globally.
And and I know the second part.
We are evaluating.
We have we have started a process and it's a it's an alternative to other <unk>.
And then sing globally as a corporation, we have to look at the different alternatives.
So we have we have a we will decide.
On the partner on the basis of essentially three things. The first is the value. The second is the governance and to fit the the last one is the fit with the team to be sure that we will continue to be.
Nimble and the line on the long term and create value for four bottlenecks on the long term.
Great. Thanks for the color I'll get back in the queue.
Thank you. Your next question will be from David Cassata at Raymond James. Please go ahead.
Thanks, Good morning, everyone. A question just I believe at your Investor Day, you talked about potentially.
Expanding and diversifying within Europe through M&A just curious.
Today's higher power price environment in Europe, how is your view of M&A in the regions that you mentioned.
Elsewhere in Europe, how has that evolved.
Since then.
Thank you David for the question.
Analyzing different opportunities, whether it be in Europe, or North America.
We also want to continue to be disciplined as you as you mentioned.
It's a competitive environment out there.
And we will.
According to our to our investment criteria.
So client has not changed.
M&A as a complement to our <unk>.
Internal.
Internally generated growth or organic growth.
So we'll that will continue to be disciplined on that front, but we're looking at different opportunities in.
In France, specifically in Europe in France, and then potentially some some other countries.
Okay, great. Thank you for that maybe just one other one for me.
Just with some of the PPA expires you have over 'twenty, three 'twenty, four and again, referring to the higher pace power price environment, we're seeing today.
Is there any is there any potential to renegotiate those earlier.
No. We we should we wait for the exploration of the of the existing P. P. What is interesting is due to the.
The present, a high price in Europe. There is a lot of interest from corporation to buy Green electricity on the long term to protect them on on the on the the price. So that's that's stronger than two years ago and I think it will.
Last for a certain period because no people understand that when you were exposed to gas and fuel price, which is the marginal electricity.
Cost drivers youre enough protected so soon so that's that's very interesting and and we have even know some demand for Greenfield project Ppas signed four with new assets was the additionality and we're discussing discount thinks too.
So which create another alternative for us for the future.
Excellent. Thank you for that I'll turn it over.
Thank you next question will be from Rupert <unk> of National Bank. Please go ahead.
Hi, good morning, everyone.
Following up on the.
The French market. So looking at your pipeline it looks like you have.
About 133 megawatts of advanced stage and 687.
Mid stage and I understand youre targeting about 100 megawatts per year.
But if you see any.
An acceleration in the market either through rfps or through <unk>.
Say potential green.
Greenfield development directly for corporate optics, how quickly can you accelerate.
Those mid stage.
Assets and get them into construction.
Yes, essentially Fred good morning, Rupert sorry, essentially in France, as you know the what.
What is limited is done the deal to rise Asian, the number of authorization to build and operate so as you also know we are I think quite successful on this.
In obtaining authorization and because we are we do the right process full consultation and when we apply so so yes. There is interest from the market in term of economy and.
I don't know exactly hall.
The global authorization process could be change in the future because maybe the government and they have already you know they have already done something there was some declaration some weeks ago was about the harpoon PD the minister to explain how she wants us.
Industry to develop project and Nicola was there because nikola as you know he is the chair of the wind in your G Association in France. So we are really involved in this.
Not provided that it will accelerate I can tell you that we're working hard on that to have a constant flux of project in France, and what is good is with the Archie scenario, we have no longer term view after 2030 was very important.
Project in construction so.
That's my view.
Okay. Thank you. Thanks for the color and then following up on Nelson's question earlier without inflation, you gave us some good color on the.
The first 200 megawatts of solar you have in New York and thoughts on the impact of inflation on those projects what are that would be the 800 megawatts that you paid.
Into.
New York recently can you talk about your.
Your strategy in bidding those 800 megawatts and what contingencies you may has four for rising costs on those projects and actually.
What do you see the rest of the pipeline look like your <unk>.
500 megawatts, let's say.
Our ready to build projects.
Yes, the point is.
The risk today is is not inflation is as you know.
The volatility of the price and not to be squeezed between the defined price and costs of construction, which change. So in this situation first of all we have to take quickly your decision when the decision you know when the planets align we don't have two months to take a decision to.
We have certain January two weeks and in the end and that's how we can do with existing project and that was part of my answer to Nelson.
We need to be sure that the planets are aligned for the 200 megawatt them. Then we will take the decision and go full steam ahead at that time.
For the other project the 800 megawatt obviously, we have taken into account.
The last information about the cost and in some risk.
About this.
Inflation risk and I think it's in.
The price that we bid.
So generally speaking.
We will not be taken by surprise.
Because it's already in the price that we bid.
Alright, very good I'll leave it there thank you.
Okay, and just just on the on the on the project.
I already mentioned.
As also of our strategy in France.
When we beat different project and are in the in the bid we have.
Leather of the of the of the return.
And of the price.
So we.
We don't want to be competitive on hundred persons.
Or if we are competitive on the person's we should be very happy to be competitive. So the last project has a return which is higher than.
<unk> and this is also creating a portfolio of projects in term of return and in time.
Thank you Patrick.
Thank you and next question will be from Sean Stewart at TD Securities. Please go ahead.
Thank you and good morning.
Patrick can you touched on Quebec.
The opportunities for future procurements in Rfps there.
And I Wonder if you can comment on what your prospective pipeline beyond the App development.
Development looks like in the province and.
The scale that you might be able to bid into future Rfps in Quebec as well go ahead.
Yeah. The first the first point I didn't mention in the speech is the fact that 10 days ago or 11 days ago, the government HQ with us.
Find is the update of their electricity supply for the next full 2029 and this has increased.
From what the deep provide two years ago by six five terawatt hours. So this is this is due to the greening of the Quebec industry. This is due to the will of the government and the action from the government to bring new.
Each sector here like Biofuels hydrogen battery factories data center, blockchain, and all those things, which create demand and the fact that Quebec ones also to switch.
Vehicles to electric vehicles. So just that's the general.
Situation and on our side.
We have nurture our all our projects even after a 2018 and continue to work on their development and and <unk>.
It is a public information done on senior readable pay.
We are developing a heightened with megawatt project.
I do.
Is this this is under the process of consultation locally and so we have disproved checked and we have extension of other projects. So we have the we have we have an interesting pipeline for the future in Quebec on our site.
Thanks for that detail.
Second question.
You've touched on France, specifically in New York wondering if you can comment on.
The broader perspective pipeline in the U S I, suppose, California to focus in and outside of France, and Europe, any particular projects or areas that are.
More advanced relative to the rest and how should we think about the prospective pipeline there.
Yes in California, we have applied for 100 megawatt storage, we have another part of storage in the pipeline, which is in New York State.
State. This is greenfield development in those two states.
In California.
What I see for today and what we see is not.
In your AG production Greenfield development.
It's an optimization of the project in place with storage.
And we are working on other states in the U S that are will not say disclose today, where which are similar to the state of New York, two or three years ago, meaning thinking about changing their low end with <unk> with the important population.
And the need for green electricity to essentially to start.
Greenfield development Dear also that's what we are doing as Bruno mentioned, we are also evaluating different and many opportunity and see discipline them that too and if we find something which is which is interesting and good.
And accretive.
Like in the past we would go ahead, if not we will continue to to hunt.
Understood. Okay. Thank you very much that's all the questions I have.
Thank you. Your next question <unk> question will come from Mark Jarvi CIBC. Please go ahead.
Okay.
Just a question on the RFP submissions and New York are you able to kind of give us a sort of timeline for the earliest potential conditions, and then sort of like the <unk>.
<unk> for the longest dated commissions are these projects that would be somewhere between 24% 27 or any other sort of bookends on the timing of those projects.
Essentially mark good morning, essentially I think is.
We have first of all to to wait about decision, which will be at the end of this year or beginning of next year.
And yes, it will be probably a 2026, so 2027, but I don't know.
We should have an idea of the volume first and we should and at that time, we will be able to to be more specific about.
So you're when we think this will be connected.
But it couldnt be any sooner than that.
Projects that get sliding into 2024.
Okay.
No no no. That's that's the project we discussed earlier the 200 megawatt.
Yeah.
Essentially the.
To date without changing coming back to the RASM question without changing anything to date are four one project is 2023, thanks to the extension and the two the other project our 2024 without any extension and I think the fact that we get an extension on the small project.
It shows that <unk> is willing to have the production of <unk> and not to squeezes between B and so so we think we all thing that inflation is his temporary so we can we can manage that and the counterparties understanding. This so I think it's good.
Makes sense, and then going back to the corporate PPA market in France.
Today, you're contracting to make sure you brought up the comment about maybe being able to go some interest on Greenfield projects are you seeing an uptick you think within the next couple of years. If you could maybe do you like a 15 year.
Corporate PPA and bypass the.
RFP process.
Yes.
It depend off of I think three.
Three things the first is.
If a project is.
Meet the criteria of an RFP with EDF.
Uh huh.
The first priority is to is to bid the project in the RFP, but if the competition is too important and if taking into account that we have we don't have the same car.
<unk> Patria risk generally speaking there is no no. If you go for any corporation to counterparty risk is generally higher than EDF guaranteed by the French state and then we need to have a higher return in a higher price for electricity too. So that's where we are but yes. It could be an important I'll turn.
It is for us on the long term and I think it's important to ask.
One foot in each to be able to to have alternatives.
Because if the market is closed for any reason like like we have seen and in different market than for any reason.
In some years, the French state decided to temporarily stop RFP then we have the alternative and I think in terms of risk management is the right way to go.
Thanks, guys and then Bruno for you.
The remaining steps I guess, what are the remaining steps to get the investment grade credit rating and timing on that and then second if you can do.
We'll go to the pop of longer term corporate Ppas, how does that fall in or how do your lenders. When you guys had that sort of portfolio of financing approach in France treat those contracts.
Well first of all.
Good morning, Mark.
Essentially on the R&D credit trading with working hard on.
That front.
As you know it's a it's a 2025 target we generally are.
And are hopeful to achieve it.
As soon as we can but.
Well, we'll certainly disclose the progress.
At the right time.
On that but we're certainly getting organized to two.
To do that as soon as we can.
On the corporate Ppas, we believe Theres a financing market for the.
The corporate in <unk>.
France, there was a financing market.
That is willing to consider.
Those types of those types of new customers.
New off takers and.
I mean, we're having those kinds of discussions.
We've signed corporate Ppas in the past these were not for greenfield assets, but.
We certainly believe there and are entertaining discussions on financing dose types of contracts, which would be.
Fairly innovative in the market, but there are some some existing.
Small number Airbus there are some existing precedent.
So just to clarify Bruno under your existing agreements you have.
These projects fit in to that or what are you asking sort of outside that sort of larger financing vehicles, we've set up in France.
We would likely we would likely go with with separate.
New financings for dose corporate Ppas.
Got it okay. Thanks for taking my question.
Yes exactly perfect.
Thank you next question will be from Matthew <unk> at capital markets. Please go ahead.
Hi, good morning.
Just wanted to.
Start with New York.
Maybe if you can give us some color on the expectations for.
You're bidding.
Strategy, there I guess I'm, just trying to understand the tradeoff between.
Bidding the entire 800 megawatts, all at once or different sort of <unk>.
Stages or tranches throughout different processes.
Good morning, Matt.
Essentially as I mentioned.
There is project which are.
C really optimize.
There is project, which are in the indie optimization.
And then and then and then and there is project, which are a little bit more earlier in this and so so it's good to bid.
And two when you you.
You mean, the criteria of bidding.
I think it's a good discipline to do it and you do not.
If some project are not advance and accepted or.
<unk> the clearing price then you continue to optimize them and you bid them you're after show. So I think essentially its debt and so was the project which are less optimized today, we have an expected return, which is higher and cover the difference. So we can and we have more contingency.
Everywhere. So we know that that we will be happy if we if we were selected and this these are the consequence of that is that the.
What he called the leather lies.
<unk>.
Cost, which is which is the cost of direct on top of the expected curve of early for a price that nicer dice staking is different and we know that that the key.
Hearing level ice wrecked costs.
We'll be we'll be somewhere in between our project on or yes.
Okay, Okay understood.
Sort of a diversification and risk.
Playing around the risk that's been the question.
Just on M&A as well as <unk> talked in the past about structuring activities differently, maybe taking a different approach to acquisitions can you maybe just talk about what initiatives you're undertaking to achieve this goal and maybe how that's affected the way you analyze or look at deals or approach here.
Any strategy.
Yeah.
Good morning is the AR on the M&A front.
We hope that where we're always improving and getting more sophisticated.
Really it's about a portfolio of strategy. So we know.
We have a fairly good deal on our organic.
<unk> on our pipeline and we want to complement that with M&A as I said previously.
So we look at different financial Criteria's, but we also look at the strategic.
Factors.
As mentioned that could.
Could bring either into a new territory.
Having having the appropriate team that complements our existing workforce.
And so on and so forth. So there's a few elements. There's a few criteria's that we consider.
And.
We believe that done on some acquisitions will be quite competitive also because of our.
Of our of our strengths where.
Where we can optimize some assets as a suite.
Doing in California.
And we can we can add onto the strategy that the previous owner at.
So in terms of being more sophisticated.
You also look at who's the owner.
Uh huh.
What type of partnerships, we can dive on that asset and so on and so forth.
Okay got it very helpful. Thank you.
Thank you and your next question will be from Andrew Kuske of Credit Suisse. Please go ahead.
Thank you good morning, I guess, it's a broad question. When you think about your pipeline of opportunities, which you continue to grow.
Do you feel you are at the stage, where really what you're delivering at the end of the day are really high graded opportunities and you have a number of other things that you could do.
They're providing they would they would provide sufficient returns, but your balance sheet constrained or theres. Other constrains that effectively hold you back from doing those so again, maybe if you could just sort of frame that to start.
I guess, it's a it's a it's one way to look at it.
Andrew.
In terms of.
Constraints for sure our balance sheet is as one although we believe that.
We have different sources of financing our balance sheet is strong.
We have different sources of financings.
Where we've mentioned we've mentioned partnerships as one.
On the debt front, we're working hard towards diversifying our our toolbox on different types of financings.
And then and then from an equity perspective.
We try to be.
Disciplined on issuing new equity.
But certainly we do need to prioritize.
We have opportunities on.
I mean at least three or four different countries.
But so far.
I can't say, it's been a very serious constraint other than.
M&A and as I said, so the key elements that we need to prioritize R&D add ons on many fronts.
Okay. That's helpful. And then maybe just thinking about at operational level, and whether youre thinking about just existing expansions of assets or opportunities or M&A.
Could you, maybe just give us a bit of a refresh on yes.
How you approach your maintenance activities around a bunch of the units you have whether it's relying on Oems internalization, where youre doing it yourself, how do you sort of think about that process or the opportunity set that that could present in certain M&A.
Okay.
Yes.
We are agnostic about.
Relying on the on the OEM or internalize, we're not agnostic on risk reward after situations, so typically in Quebec and in.
Yeah, essentially in Quebec, not yet.
Because for contract.
Maintenance contract constraining, Ontario, and B C, but in Quebec, we are presently internalizing waste a lot of success.
The maintenance and when I see a lot of successes, we are choosing the right people in or come to come with us They are eylea motivated I make.
A round trip around all of our sites in Quebec during the last months and I can tell you that there were people on the field are really motivated to do it better.
And to optimize and we're successful also on the costs part and the production part because it's not just because we are reducing the cost of the maintenance. It's also because we are increasing the production and the energy availability of the turbine in France.
We have just make D D opposites.
The move in June by signing was best Us.
Very interesting contract long term contract for maintenance, where they are taking more risk and when we make the evaluation of where we are and win where the what the proposed to US. It was really interesting too to go the other side, an externalized a men's knits again with vis status I think to me.
Move we did in the past in the starting in 2007.
But many times in France to internalize was was also something which pushed the turbine suppliers two to organize themselves to propose something different to their customers. So so so just to see that when we externalized the costs are interesting and the risk are also.
<unk>.
Sure So having said that on an acquisition.
It's really depend although where youre analysis during the due diligence on.
On CRE.
We didn't put money.
On on the internalization or of dimension into the solar assets, but it was a potential upside and we're still working on these speakers because.
The existing contract is interesting and if we want to make a better.
In a new country. Finally, it's a it's a question we have to look too but.
But I see some optimization again on CRE on energy availability Hodge dimensions, not just to reduce the cost and maintain the cost but two to have the right.
The right availability. So so this is a complex things, but we're analyzing it.
Every point of it.
That's very helpful color and so I guess just in context, your ability to be either internalized or external.
Got this sort of duality that you have experience on the internal side and that probably gets you better price tension from the external side. So you have a bit of a best book.
The best of both worlds, which then drives our return framework more than anything else.
Yeah.
I think we are not an easy client for men's and its people.
But we are a good partner to them be curious as you mentioned all of our people.
There's a lot of skills and I'd.
And then and then.
It makes things more interesting and.
And I think that's the that's good for us and I think that's good for the AUM for the moment within have gone in Canada.
Clear that we're doing better on hours hours or doing it ourselves. So it's a it's the trend.
And that should be good for shareholders to I appreciate the time. Thank you.
Thank you next question will be from Ben from BMO. Please go ahead.
Hi, Thanks, good morning following.
Following on some of your comments around non core asset sales.
Moving through the process.
I'm wondering.
What is the primary financial metric you guys are going to look at NSS thing.
SaaS like is that even if it does it free.
Free cash flow per share accretion is at MTV like what what are you looking at when you would do to the relative analysis.
We're very much focused on non tree.
Discretionary cash flow per share.
It's important it's an important criteria for us but.
But also the long term.
Value creation for our shareholders. So.
So it's cash flows, but certainly we do monitor.
Long term irr's on each and every one of our opportunities.
Okay, and then Ken I can and then add to that because I know in the past.
You mentioned, maybe not to focus on the EBITDA build multiple as much first secured projects like that.
So is this really situation you can maybe you can sell an asset at nine times EBITDA I'm just trying to remember when you're building at 11 times like you would do that as long as its free cash flow accretive on a levered basis.
So I don't think I got to your question completely Ben.
Yes sure.
So.
My question really is you know what let's.
Say, you're you're building assets at 10 times, EBITDA or something like that.
Five 5 billion or herself.
And and when you look at asset monetization is like are you are.
Are you willing to sell.
Sell an asset.
That number on an unlevered basis.
I know, you're selling I'd say eight to nine times I'm not saying that's a number.
And youre willing to do that.
Headline doesn't look great, but when you do on a levered basis, just how you structured it the debt it's still accretive.
To your free cash like what would you want would you be willing to do that.
Okay.
I mean, essentially you're you're asking if we're willing to look at selling well first of all our <unk>.
All of our partnerships are based on an accretive value.
Multiples the issue with multiples is youre not taking into account for example.
Duration of contracts.
So I mean, the way we look at at selling our assets as long term value creation to our shareholders.
Not on a multiple basis, because multiples don't tell the whole story I guess, that's probably what I said in the past.
So so it's really aimed at a we can add value to our shareholders long term and.
I mean, when I look at it all of our assets so far the value today is certainly higher.
Again, what we've built it for us.
So that issue Hasnt arisen yet.
Okay, that's great and then.
Maybe on the French elections, the news headlines of U.
Are you considering maybe you need to.
When you bid into the next couple of around is there a political risk premium you need to consider in your bidding behavior.
Which market are you talking about.
Now this is this is in France.
Okay.
Sorry, I don't think we're taking any any.
Political risk the point is that if you look to the French.
Elections, Jason.
Coal ash to play with 50 persons on renewable and 50 person on nuclear.
The nuclear has more challenge than renewable too to be you know to restart the industry and I'm not speaking about on the about social acceptability cost and delay I'm speaking about also interesting people talent to go back to the nuclear industry and to start studies and all those things.
So there is a lot of challenge on decided and he has to play with that because there is there is a lot of people working in this business in France, and yes, you have the extreme rights, which are always speaking more loudly than the others and they are speaking of against wind industry, but they would not they would not make it at the end because they will not win the election.
I am confident about this.
And so we you know.
It's I think it's my fifth or sixth.
Election presidential and extending trends since I started with <unk>. So we are used to that and that's also something which is important.
When I mentioned that Nicola was Barbour Harpoon PD.
When she announced that 10 measure for easing.
Dave Lockman whenever an acceptable wind development.
We are quite close in trim off the message we can bring to the majority in the P. M. In the PR about wind developments. So <unk> is really I think one of the of the.
Obviously, there is EDF and engie, which are partly or totally state owned company, but we are the challenger since yours, no and we are well positioned to understand what is behind I'm not sure that all international investors are understanding that in France in whole we'd be it because when you read the newspapers, it's not what you see.
Okay.
Okay. That's very helpful color. Thank you.
Thank you.
Reminder, ladies and gentlemen, if you do have any questions you would like to please press star one on your Touchtone phone.
And your next question will be from Matt Taylor of Tudor Pickering. Please go ahead.
Hey, good morning, guys. Thanks for squeezing me in here.
Top of the hour I just wanted to follow on that.
Questions on divestitures, there wanted to hear your thoughts on your hydro portfolio.
Seem to be performing quite well I guess, theres ebbs and flows there, but with no growth in the pipeline what strategic value to those assets.
Provide more lax and.
Could they be viewed as noncore in China and looking to fund your 2025 growth plan.
Yeah, essentially I think I think just to go back to.
Matt to your question and to Ben's question I think.
Divesting is really something.
And not just divesting portfolio management is something we have to which is more complex than a multiple or or just a financial decision. Indeed, we have to take into account you should look to.
Should we have sold our U S assets the last quarter would have been totally different so I think that when I am speaking of hydro assets.
Assets, So I think.
The <unk>.
Diversification is important in term of revenue pattern today, our hydro assets are really.
Really optimize and I think it's it's not it's not like a.
The co Gen in France or the.
The biomass, which is completely different business than hydro wind and solar hydro is managed from distantly and so Joe.
If we have an opportunity it could be I don't again I met agnostic about this but we have to take into account different factors into the decision on the long on the short term and on the long term and I think that's that's how we do it.
Thanks, Patrick is there some strategic value there too as you you've mentioned the Quebec government is more supportive and looking at not just renewable power with different technologies to do that.
Those assets and could that give you.
An opportunity to be involved in and customers that one hydrogen or various other pieces that we should be thinking about end market should be thinking about in terms of you've mentioned some rfps that are coming up in Quebec is there some strategic value of these hydro assets.
Not specifically I think I think what comes from how our hydro from our assets in Quebec, and our presence here.
It's again the knowledge of <unk>.
After the.
No.
We did the government is planning the next 10 years, we like I mentioned for France, we obviously when their spend it quite correctly I think in Quebec.
We have a good view of what is what is the plan what is what.
<unk> C to the media and what will be somewhere.
Most realistic scenario and we're working on around this and the word greenfield developments. The hydro assets. Some time is very good for example, when do we start in the U S. In New York State. We start really if you look geographically we start to read the first project around the area where.
And what do we have hydro assets no we and it was important in term of refrigeration and then and then we have no turn for larger project in.
The other part of the state of New York, but but the first step was really built on our reputation as the a good hydro.
Play, you're there and a good reputation. So soon so we have to take that into account too.
Okay, that's great and that mid last night, how can you frame.
They are not this export line to New York City gets built here how that changes your view on what your cadence might look like in sanctioning.
Or at least securing more renewable projects in Quebec overtime.
It's for sure it was since the since full five years, even before Sophie Busher.
The goal of Hydro, Quebec West you use is what they call the they're available energy to export to different market.
The Atlantic, Massachusetts, and New York City know they have signed the last they have agreed to last or or be selected for the last.
A block of this strategy. So I think it's very good because this will create a new new need in Quebec, and when when you look to the.
The balance between production and demand in Quebec.
They need new.
Electricity, new power, new energy and new powered so which is good and they don't have any energy available for example, if when they are another another province or state need more electricity. If for example, Ontario need need some electricity for there.
Periods, when there was stuff Pickering and there is no more you're just you're available in Quebec. There was there was one year ago or even some months ago, but no no. It's dedicated to New York. So it means we need to build something either in Ontario, and Quebec. In My example, so I think I think that's good for the whole industry.
Yes.
Okay. That's helpful. Thanks for the comments Patrick.
Pleasure, Matt Thanks, Thank you.
And at this time gentlemen, we have no further questions. Please proceed.
Well, thanks, a lot our operator and thanks, everyone for your attention a lot of good question on this call. We're past the hour out already so if you have any additional questions. Please call me at 504 to 131045 I'll make sure we quickly answer your questions are.
Call to announce fourth quarter and year end results will be on Wednesday February 23.
F 2022 so already there so I all I hope you all remain healthy at <unk>.
De and quality time with your families during the upcoming Christmas vacation, yes, we're almost there ready for guarantee.
Thank you bye.
Merci. Thank you ladies and gentlemen, this does indeed conclude your conference call for today once again.
Thank you for attending and at this time, we ask that you. Please disconnect your lines.
Sure.
Okay.
[music].
Yeah.
Yeah.
[music].