Q4 2021 Boralex Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the Boralex fourth quarter and yearend 2021 financial results Conference call.
Please note that all lines are in listen only mode.
Following the presentation, we will conduct a question answer session in which financial analyst shareholders and investors will be in the best will be invited to all the questions.
If you have any questions or comments at that time. Please press star followed by one and you tend to find please also note that the conference is being recorded.
For webcast participants you may also ask questions during the conference, but they will be answered by email after the call.
Finally media Representatives always invited to conduct thorough next director of public Affairs and communications is a beautiful thing.
Her contact information is provided at the end of the quarterly press release.
I would now like to turn the conference over to Mr. Stefan <unk> Senior director Investor Relations for Boralex. Please go ahead.
Merci beaucoup well, thank you operator, and good morning, everyone and welcome to <unk> fourth quarter results Conference call. Joining me today from our head office in Montreal, starting Becker, our President and Chief Executive Officer, Bruno Guilmette, Vice President and Chief Financial Officer, and other members of our.
And finance team.
<unk> will begin with comments about market conditions and the highlights of the quarter afterwards, Mr. Guilmette.
Well be.
Sorry carry.
Carry on with financial highlights and then we'll be available to answer your questions.
As you know during this call we will discuss forward looking and are historical information when talking about the future. They are a very T of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. These documents are.
Billable for consultation at SEDAR Dot com.
In our webcast presentation document the disclosed results are presented both on a consolidated basis and on a combined basis unless otherwise stated all comments made in this presentation. We refer to combined basis figures. Please note that combined is non-GAAP financial measures and do not have standardized meaning under.
There I FRS.
Accordingly, combined may not be comparable to similarly named measures used by other companies. So for more details see the non I FRS and other financial measures section N D. M D N a.
The press release, the MD&A, the consolidated financial statement and the Cop yesterday's presentation are all posted on the Biotics website that violates dot com under the investors section. So if you wish to receive a copy of these documents you can also contact me.
Mr. <unk> will now start with his comments. So please go ahead.
Yes, if I didn't thank you and good morning, everyone.
I am pleased to present, you our fourth quarter Russell's Judy thanks.
Thanks to the integration of acquisition, the commissioning of new wind wind and solar farms as well as the positive effect relating to sharp increases in market prices in France. We ended the quarter with should combine a b D. While the 163 million.
Nice person increase over the fourth quarter last year.
Production was lower than the fourth quarter last year, and also lower than anticipated production due to soft wind conditions in France and Canada.
Our development teams continue to be very active during the quarter.
137 megawatt of project towards pipeline and advancing three projects totaling 41 megawatts in construction already to build phase of our roadmaps.
In terms of market conditions delays in approval of certain portion of the build back better plan in the U S caused a delay in the announcement of the rentals of the 800 megawatt.
A project, we submitted with nice shrewd in September .
We are new expecting resolute in March for this bid.
In Quebec as announce a 300 megawatt request for proposal for wind energy and the 480 megawatt RFP for renewable energy are planned for this year.
The process for approval of the Hydro, Quebec Transportation line to the city of New York is also progressing.
As mentioned before.
This combined with the Quebec Green plan.
Should be positive for the overall development of renewable energy in Quebec in the coming years.
Our 200 megawatt up we'd project is in fact, a good sign that wind energy development in Quebec as we started.
Moving to France now.
We remain highly confident in the future development of renewables in the energy.
As mentioned before Archie the French transmission system, a breach or recently issued six different scenario.
420, 50 production mix and all of them are highly promising for renewable energy.
The most conservative scenario refers to our solar production seven times higher than two D. As.
As well as onshore wind production two five times higher the.
The most ambitious scenario indicates a solar production 21 times higher than today and onshore wind production four times higher.
France is facing important issues with the aging of its nuclear fleet and more specifically recent corrosion issues noticed with some reactor cooling temporary shutdowns.
For instance, that's consider for a moment the recent assertion from the chairman of the French nuclear safety Authority D. Although we did just in your P. A R E S N <unk>.
Regarding the lack of margin to support contingencies and the difficulty the nuclear industry will have to achieve even the most conservative Archie Eastern argue a 50 person you and 50% renewable energy.
The Ace and chairman also insisted that margins need to be maintained to avoid facing a tradeoff between security of supply and facility ceased.
In February 2022 precedent back home.
<unk> said that the open double the country's renewable energy production by 23.
And increased solar production tenfold as well as double onshore wind power capacity by 2015.
As you can see there is plenty of potential in the French market and let's not lose sight that the market is not an easy one to develop with strong barriers to entry, which is an important competitive edge for an established player like us.
I would know remained review the main variances in our portfolio of project. We added six wind power wind project and five solar project in France to the preliminary phase representing a total of 137 megawatt plus 23 megawatt for.
For the optimization of winds project.
Project in the pipeline continued to progress was 124 megawatt of project moving to mid stage and the hundreds and one megawatt of project moving to advent stage.
In total.
We are know developing a portfolio of wind and solar project of 3.2 gigawatt and the hundreds of 90 megawatts of storage project.
Let's move now to the review of changes to do gross baths.
I said previously previously.
Two wind project and one solar project in France, totaling 41 megawatts moved to the construction or ready to build phase.
We know if 647 Mega went into grow fast full 493, Mega wanting to secured stage and the 154 megawatt in the under construction or and ready to build space. We also have a tree megawatt storage project under construction in <unk>.
Hence.
In total when adding the growth path to our existing production capacity potential capacity is 3.1 gigawatt.
In conclusion as you can see on slide 12, we're pursuing the execution of our strategic plan and are making good progress on all four strategic orientations.
I've talked about growth and diversification.
But we also announced the signing of two corporate P. P. Recently.
A 20 year contract with Mittal falls in a three year contract with L'oreal in France.
Market conditions are highly favorable for corporate PPE and we are continuing to see a very strong interest from corporations.
In terms of optimization I would like to highlight that we started the repowering work I thought where Mulder visa to project.
And optimize menton ins for wind operations totaling 161 megawatts in Canada.
One last point from my part.
Today, we published our 2021 CSR report.
I invite you to read it as as you will notice we made very important progress in 2021 with regards to CSR and have a clear path for years to come.
I would like to take this opportunity to thanks, our CSR director be high loss Stefan off me Hyla rapidly two charges of the CSR strategy mobilize our entire organization around CSR and ESG Criterias.
CSR has always been part of bottlenecks D. A knee, but we have been drastically increased we have drastically increased the pace of change and accountability in the past year.
This complete my part we know let Bruno covered the financial portion in more detail and we'll be back later for the question period.
Thank you Patrick good morning, everyone.
I will start with a review of the progress made in light of our 2025 corporate objectives.
Capacity increased in the fourth quarter were decommissioning of our wind farm laggard on bone on December 1st 'twenty 'twenty. One are floating solar farm. They are all on December 14th and our solar farm likelihood Asia on December 23rd total capacity now reaches 2.5 gigawatt.
Our last 12 months EBITDA continued to increase the D. F F will slightly decrease due to lower wind volumes for comparable assets.
Our reinvestment ratio stands at 48%, which is slightly lower than our 50% to 70% target because of the aforementioned decrease in F. F O.
About our CSR strategy, we continued to make good progress on the environment Society and governance aspects.
We finalize the assessment of our carbon footprint.
And I've set at 2025 target for C O two avoided.
We created a working group to analyze and integrate T. Cfd recommendations and held voluntary training sessions on the impacts and conclusions of Cop 26.
We completed our training on indigenous culture with a strong participation rate of 96% in Canada, and 93% for North America.
Finally, we completed a revised version of our procurement policy.
Taking a look at our debt objective now our corporate debt to total debt ratio increased slightly compared to the end of 2020, we are pursuing to work toward our objective to obtain an investment grade rating.
In order to broaden our financing options and increase our flexibility.
I will now cover the financial results for the quarter starting with production.
The fourth quarter was challenging due to weak wind wind conditions in Canada and also in France when.
Wind production in Canada was 11% lower than our anticipated production and 10% lower than in the same quarter last year.
In France wind production was 17% lower than anticipated and 14% lower than the same quarter last year.
Overall total wind production for the quarter, combining Canada, and France, western 18% lower than anticipated and 12% lower than last year.
Turning to hydro now.
It was another strong quarter for U S hydro assets with production, 23% higher than anticipated production hand eight.
85% higher than in the same quarter last year.
This more than compensated for the weakness in Canadian Hydro and resulted in total production 40 hydro sector.
8% higher than anticipated and 20% higher than in the same quarter last year.
Finally production from solar was 11% lower than anticipated.
Due to slight delays in commissioning of new solar plants in France, and lower production and anticipated from our U S solar assets.
In summary.
Total production for the quarter West Alpha is 12% lower than anticipated and 6%.
Lower than last year.
Overall for the year.
Total production was 6% lower than anticipated, but 7% higher than in the previous year with growth coming from our U S. Hydro operations U S solar acquisitions.
Acquisition and Canadian wind acquisition.
Fourth quarter revenues were down 6%.
Compared to last year, mostly due to the decrease coming from the wind and terminals segments.
For the fourth quarter of 2021 operating income was up 8% to 82 million and EBITDA was $163 million compared to 155 for the same quarter.
Of 20, 25% increase.
We generated 81 million of net cash flows related to operating activities compared to $59 million in the same quarter last year.
Cash flows from operations were $116 million in the fourth quarter of 15 million increase over the same quarter previous year.
<unk> was 58 million compared to 67 million. The decrease is mainly due to lower volumes for comparable assets in the wind power segment.
Our financial position remains solid with our net debt to total market capital ratio of 48% on December 31, 2021 compared to 41% on December 31st 2020.
In conclusion.
Q4, EBITDA was higher than in the same quarter last year due to acquisitions commissioning of new assets the increase.
In electricity prices and our optimization initiatives.
In 2020 , one we invested in our development resources and updated our corporate targets.
'twenty two 2022 will be a year of execution on our four strategic orientations, while many projects underway are expected to materialize.
Lastly.
Our balance sheet remains solid and we will continue to work to optimize our capital structure and improve our financial flexibility.
Thank you for your attention.
We are now ready to take your questions.
Thank you as a reminder, ladies and gents remind me if you do you have any questions or comments. Please press star followed by one on your telephone and wait for your name to be announced if you wish to leave draw. Your questions. Please press the pound or the husky once again, it still wind up for any questions I'll comment at this time.
We have our first question is coming from the line of Rupert <unk> from National Bank. Please ask your question.
Hey, good morning, everyone.
Hi, Robert Hi, Good morning, I was wondering if you can give us a little more color on the contract structure in France that are enabled the higher realized power price in the quarter and as you can tell us how many of your contracts are structured in a way that you can see the upside on spot prices.
Yes sure.
During the quarter in France.
The market price were around 200 euros per megawatt hour.
And with the some of our feed in premium contract due to high market price, we are reimbursing money to EDF over when the prices over the strike price, which is obviously the keys are 200, Europe Omega one hour.
We have.
An installed capacity of 201 megawatt exactly which is was this kind of contract.
Where when.
The cumulative sum of the money we receive from media from the beginning of the contract is exactly equal.
To the community if some we have paid to EDF.
We are at the kind of breakeven, where we don't we aren't we don't have to continue to reimburse ETF and then we are enjoying.
Enjoying the high price and benefiting from the high price of electricity. So this is for 201 megawatt.
And this is also for 125 megawatt of project under construction.
Okay, so when warranted.
More recent projects than the newer projects that have that contract yet.
Yeah exactly it's it's it's it's.
It's some.
C R 16.
The C or 17, and the C R, which come from period 125 of the RFP in France. So this is a 201 megawatt and with the under construction project as I mentioned, it's 125 and this is Phil.
T H Mega Watt from C. R 17, because you have to date.
Deep be careful to take the whole.
Power when it's Repowering and for the there RFP period 125, its 67 megawatts. So just to be a simple way to see it. It's in under construction project. The only project, which is excluded from this kind of asymmetric.
A contract for difference is more due to all 465 megawatt, but all other projects are benefiting from disclose.
Great and if future Rfps for the government do you think they'll have this contract structure and does that give you.
A potential to see higher returns on future future bids.
No the future the RFP of last November did.
It did not include disclose so we are not benefiting from that what is important for the future is two things. The first thing is.
During Q4.
We there was this breakeven point tipping point when the cumulative sum received is equal to the curative. Some paid so you can make the math for Q1 for example, and look to the the price.
As of today July the first the first months in 'twenty 'twenty third days in February and and and and evaluate what it will be.
And the schools apply roughly from the first of January for for the contract. So this is one one thing. The other thing is when you look to the future and I will let you do the math, but you can go to European Energy exchange, which is the.
The exchange.
The market for forward contract in Europe , and see all the market is evaluating the next quarter and evaluate.
The impact on Boralex and abuse need there is an interesting fact is with our high wind exposure in France. Despite the last quarter. The seasonality is in favor because seasonality in production and seasonality in price is in favor of biologics and the second point, which is.
Interesting.
Is that.
The the important interest incorporate P P.
With the signal of the price on the market gifts opportunity.
We are deemed for ore and hunting for choose to.
To take advantage of these high price in Europe .
I was going to be my my follow up question. If I may are you looking at those corporate Ppas or U C.
Seeing inflation and potential pricing in those ppas, where.
The corporate PPA.
You should be more attractive than the government PPA.
Yeah. There is there is clearly an interest when when the price on the market is is around 200 true and I'm not saying that it will stay at this level with what I think is that it will not land back to like 40 to 50, you wrote in the future of the Goose.
The reason of the high price in Europe is not a knee you know.
The situation with Russia, and just the price of the gas. It's the problem on the nuclear fleet I just mentioned it.
Production from EDF has gone from.
On average.
400, Terawatt hours, a year to 300 to our door. This year and next year. This is already announced by EDF. So this put a lot of pressure on the global system. Germany's closed four gigawatts on the December 31st and we'll close another four gigawatts of nuclear on the next December three.
First so all these pressure the price of seal to create an environment. When we're at the corporation are not looking only to cooperate PPE for ESG and marketing like in the past, but they are looking for that to secure their electricity price on the long.
Term.
And so this this creates a lot of optionality to us.
Great. Thanks, Thanks for the color I'll leave it there.
Just one comment that.
Rupert to make sure.
You model it right from.
The effect on the contracts is that he has agreed to take care of their seasonality like meaning that Q1, Q4 are usually stronger which means higher production in iron ore prices, but Q2 Q3, you have to model.
Lower prices forward. If you look at this because it's just the seasonality of the business that makes it work like that so you'll you'll see that any way. If you look at the forward prices of hard contracts.
Very good thank you.
Thanks.
We have the next question is coming from David. Please is that all from Raymond James Please ask your question.
Thanks, Hi, everyone.
My first question here just on and.
On Wednesday, it are you able to comment at all I mean, it sounds like things have gotten better in France. So far this period could you just comment a crusher.
Whether or not.
Wind speeds of kind of recovered or their how they have been relative to anticipated levels for <unk>.
We shouldn't Renault is about wind speeds for our Q1 now it looks like like versus Q4 and I David <unk>.
So as you know these are these wind forecast our long term averages and we.
We do not particularly like to comment on a shorter term basis on.
And our wind forecast, so I guess.
As a as we said in the past.
There's a there's hopefully some data available for you to to look at that.
We don't we don't give out our forecast on a quarterly.
Or before the quarter is over.
Yes.
Okay understood. Thank you for that maybe just one other one for me.
Curious if you have any thoughts around the upcoming election in France.
Certainly it sounds as though in virtually all scenarios is very supportive.
I'd platform today is very supportive for renewables D C any.
Any any changes potentially coming about from that from the election, depending on how that shakes out.
The answer is is is a globally no.
Yeah.
But you never know what will happen in an election. This specifically since 2016, so I would not comment the resolute, but what is what what seems to be clear is that if president Michael is reelected he will go because because this is the industry situation. Its not a question of of Polish of poly.
<unk> is France need to Ah.
Somewhere refurbished and build some more nuclear because of the aging fleet and France need a lot of renewable energy and in every scenario. When you go to specialist specifically like our T. E. R. T. He is independent from any politics.
They are looking to scenario as I mentioned with a high potential.
For solar and wind and offshore wind and <unk> and Crystal Mackall confirmed that social issue. So that's that's what I think will be.
And I am confident that <unk>.
This is also within the European framework, where there is commitment from France.
The two two to 420 30 and 2035 and this will continue you know the European cannot remember the name, but it said the 55% of reduction of <unk>. Two from 1990 420, <unk> target for 'twenty 30, each day.
Here and it's a commitment of France.
That's great color. Thank you very much and just and just maybe another point, it's because I know that there is some noise about this in the market about the nuclear.
The fact that nuclear has been recognized like a highly.
Efficient natural gas.
European taxonomy as transition energy not as Green energy.
This is important but there is so much challenges.
On the nuclear fleet and.
On one side chat.
Challenges in term of cost and Lee if somebody in September decide to really order new nuclear plant. They would be online in probably 2035, if everything goes well and I cannot I would not bet opinion the cost in the budget. So so this is this is a point there.
There will be challenges for to bring HR. In this business you know lot of engineers loads of specialized technicians like welders and so so I think for us it's not it's not an issue and when you look to natural gas, it's a specific clause for Germany.
Because the Germans wants to close their call.
2030, instead of 2038 during the Mercury period.
But to do that they need natural gas and they need highly efficient natural gas and they will have to switch their new plant from gas to hydrogen one day or another and it should be green nitrogen. So when you put all that together lots of opportunity for renewable energy in in Europe .
Excellent thanks again for that Patrick.
We have the next question is coming from Nick Poly Chuck from Cormack Securities. Please ask your question.
Good morning, gentlemen, thanks for taking my questions.
I'm wondering if we can get some extra color around repatriating or the service and maintenance they protect windows.
I'm, sorry, Nick I'm not sure I understand we understand well your question could you just repeat it please.
Sure. So it was interesting to see that you repatriated the service and maintenance.
Contracts.
Wind assets I think it was negative 160 megawatts.
I'm wondering if you can give us a little bit more color on.
And the decision, making behind that the impact it might have on cost and margins and whether or not there are other similar assets that you could do.
Such as this.
Yeah.
Yeah, Yeah, Yeah sure Nick it's it's really in Indy optimization orientation of our strategic plan, we have for <unk>.
Started.
To do this in 2019.
In Quebec with Loopnet to 'twenty 'twenty.
With us and at the end of 'twenty 'twenty four senior readable P and it's going very well. So we are pursuing over plan when it's possible with the within <unk> gone with the contract we have with them. We have a close to two exit the contract and we are taking over there.
Here through this.
And it's going really well, we are reducing the cost and we are increasing the energy availability because we are more flexible we have people on the site, which are incentivized on the production and not just on the time based availability and during the last months.
I'm very happy because.
And in the in the in the ANAC on contract.
There is a lot of inflation closer like in any O&M contract and we are somewhere protected from that not totally but we're protected from the some indexes off see German industry index, which are going up full 20 year like 20 person, which is high but since it's the cost is reduced.
On our side and its internal where it's also a protection on inflation, so it's going well.
And if you know it's.
It's better than the budget on this side, it's one of the reason.
The global EBITDA is not exactly following the top line and there is some optimization in cost.
Okay, that's great color. Thank you.
The development cost side.
Wondering if you could please give us a little bit more color, if you're seeing any increased costs.
Either.
Partnering or acquiring or sourcing even early stage development opportunities.
Industry participants have been talking to are suggesting that.
The valuations and the cost at the earliest stage are increasing are you guys seeing that at all.
Yes. This is does this this is clearly something which is a trend.
The market because investors.
Morris Moore.
Strategic investors are taking more risk with early stage pipeline.
This is why we have decided to invest much in our own people and as you have seen we are we're developing 3.1 gigawatt for the moment, which is really higher than if you go back three years ago. It was it was less than that and we're really monitoring to be sure that every quarter, we are adding new real project not.
Just Ids and we are we have the right people on the ground.
To make the project we have really increase also the size of the team for Greenfield development in the U S is I don't I don't think I mentioned that three months ago, but we have starting a real development negotiations with the landowners and agreed apply for grid.
Connection in two other new states outside the state of New York, when we will achieve some milestone that will always see where where it is but it's similar place. So we are really investing to avoid to have to pay for the premium on the <unk> on the project when you have to buy it from local.
Small developers.
Okay got it that makes sense and then last one for me just on that organic growth machine I'm wondering if you guys could you. Please give a little bit more color on kind of how projects are moving through the pipeline stages.
Obviously, there was the one project this quarter really jumped through.
Okay.
The typical stages and I was wondering if you can kind of.
Give us an update on the timeline to get these projects through to operation and if there are any other projects that we don't currently have information on but that could somewhat soon reach construction ready to build days.
Uh huh.
Yes.
Essentially in the pipeline on the what is we are waiting for too.
Two important things the first is.
The rustled off the nice sure Dara.
<unk> 2021 tender.
Tender.
As I mentioned, we're expecting that in March.
And.
And so this is this is this could be an important part and the second part is also I mentioned, we are preparing ourselves to the to the RFP is in Quebec, It's clear the government clearly mentioned that after the 300 and 480 megawatt RF.
P for 2022 there will be other tender.
In the future be goose.
In Quebec to govern the.
The province will need an increase.
Of roughly 12 version of electricity demand, which is a 20 terawatt hour, which is which is significant for Quebec.
And do you have a review.
They're they're they're 2019 target.
This.
November from the 29 that no sorry, they have reviewed the 'twenty.
Nine.
2029 target.
From the target they had two years ago and they have increased by $6 five terawatt hour due to the to do the biofuel demand the hydrogen demand battery factories data center blockchain and all the new demand in Quebec, and so this means an environment, where we think there will be more rfps.
So this is to think.
It's independent from Master planning, but we think that this will be a important move in the pipeline and in France. It's more a question of you can see every I think every quarters, we are announcing a one.
One O two project, which are moving to the right direction.
Okay, that's great color Patrick Thank you very much.
Thank you.
We have the next question is coming from Sean Stewart from TD Securities. Please ask your question.
Thanks, Good morning, everyone.
Patrick I wanted to follow up on on the New York RFP.
I think the indication you provided is that good.
Ladies and the build back better legislation.
Gating factor to moving that forward.
Youre still indicating an expectation that we'll have results by the end of first quarter can you can you reconcile those two things we don't have any.
Context on the legislation moving forward can we be confident on that timeframe still.
Yes, two good questions. The first point is when it was when the announcement was move.
And in the non steward to the bidders and in December it was because the.
<unk> and the government.
We're optimistic.
Optimistic full build back better and to see you don't have to have.
I see.
Positive impact.
And some see windfall profit coming from that.
And then you know what happens to build back better what is.
So the situation today is we expect.
That the state of the Union speech next week on the first of March we'll give some light on this obviously are the U S administration is focused more on eastern Europe for the moment. So you know that's still the last information I have from the team is that we we are waiting for something.
In March but that could move you know you know this distribution today was the U S administration is what it is and and that's how we can reconcile to the planning.
And just to add to what Patrick surety to link that.
We're making is because of that Patrick mentioned between build back better and the bids nicer that could decide to split dose I mean, they could decided if build back better is delayed further that they still announce.
The results are again splitting.
The two elements.
And on the politics sides.
Two question on build back better was more on on the social aspect and some some.
Some some some aspects which are not the support to renewable energy and so our understanding is that they will split also build back bedroom two different legislation to to go ahead with the part which is which is accepted globally bye bye bye to population.
And by the politics and wait to negotiate the other part which was the China engine in December .
Thanks for that detail.
My second question is.
With respect to your French.
Organic development portfolio, you mentioned that all of the Rte scenarios are shifting more towards solar growth or at least faster solid growth and win.
All of the scenarios.
Just wondering if you can give us a sense the.
The projects that you have in your early mid stage solar pipeline in France.
Is there a bias to move those up faster than the wind projects or are you agnostic.
Certain in the overall portfolio that you have there.
No as you have probably seen we have we have started to two two.
To switch not not completely to solar but to increase our all were.
Development expenses and focus on solar development in France since our since before June <unk>.
Last year before the new strategic plan so.
So we have hired different People's solar he said, it's a it's a different challenge in France, you know wind the challenges, especially specifically, social acceptability and and the visual and landscape impact and biodiversity impact management. So this is this is the.
Challenging on wind the challenge of solar is more a question of lend axis and so it's a it's different people, which should be dedicated to developing so we are investing to accelerate the sport and generally speaking the delay to develop a solar.
<unk> project in France is shorter and the lead to develop a wind project. So so we are working on that.
Just remind you that yes.
If you take for example, the the February nine the speech of please don't Mccomb and therefore had the G facility. He said.
Yes.
Said like this but it finally you reduce.
The target for onshore win from 50 to 40 gigawatt, but it means that it's still doubling the onshore wind in France, and you increase dramatically the solar part from 50 to 100 gigawatt, which is which is.
Which is a good sign and we have anticipated that.
Our strategic than any nowhere team.
If I could add that also Patrick that there.
But we've seen in the last.
The most recent request for proposal or is that still.
So offer cannot meet the man on onshore wind. So this is still true and there's a scarcity of land and in France, and it will it will remain so.
We're very positive about our pipeline and we intend to continue to grow it and to develop it to their construction phases.
That's great detail, thanks very much.
Thank you.
We have the next question is coming from Andrew <unk> from <unk>. Please ask your question.
Thank you good morning, I guess the first question is for Patrick and it just really relates to critical mass in a market and when you're going forth into a new market area and trying to develop it.
What kind of resources do you think you need in that market.
For it really to to catch and to really start being able to develop assets and have credibility with.
Corporate buyers and local utilities and really offtake in general.
Yeah, It's a good question Ed.
But there is different parts you know to start of real.
Greenfield development.
No the team off of.
Five people three years, it's a good start you know if you start when do we start New York, We Didnt put more than five people. When we were starting to other state as I mentioned, it's not more than that in the U K, we have start through a partnership and we will definitely accelerated.
Because of the environment of price I mentioned.
So, but the team off the developer is roughly 10 people, where we're developing so soon so this is for <unk>.
Greenfield development for to get a credibility. It's another it's another situation first.
First to get the possibly do you have a team.
And some some operation I think.
We have an organization today.
I saw I saw clearly the difference in France from 202 to 300 megawatt. When you are in this situation you can have specialists people on on then but I was I was alone in France at that time, and but but typically if we want to enter Spain or the UK. It will be the French team, who will give service like <unk>.
Like we do in the U S from from Ontario, and Quebec.
So it's probably still.
Something acceptable and then and then to create the branding in the market. It's another things you know we have a clear brand in Quebec, we have a clear brand in France in in New York, We think we have a good brand in in Greenfield, but we need to continue to develop our branding.
And and and and reputation for to sign cooperate PPE to sign contract if needed.
So it's different stages.
Okay, that's very helpful color and context, and given all the irons in the fire that you've got.
We're pretty disciplined with that.
Maybe if I could turn the question now to Bruno just on.
Obtaining that investment grade credit rating and just how you see the gating items on the balance sheet, you've got a fairly large opportunity set.
And does that investment grade credit rating reinforced your credibility in the market and your ability to develop on a more accelerated basis into the future.
Thank you for the question certainly we believe that it's a it's an important milestone to reach.
We're organizing to reach it.
As soon as we can as I think I said previously.
This is just.
Is that also to reach a balance between corporate debt flexibility and a long term nonrecourse debt on projects.
So it's important for us to to achieve that balance to achieve that flexibility.
And to.
To get there to organize to get there.
We need to continue to optimize our different sources of financings.
And.
And.
Where we believe we're at we're close but we have we still have some work to do.
To get there.
Two.
For example on some of our some of our project debt what it means in the future is will likely turn it down a little bit on non specific projects and.
And.
Make sure that we have more corporate inflows there.
There are also steps that we need to take to optimize our corporate debt is currently structured.
So these are milestones that that we're looking at in terms of also.
Getting a getting.
Getting our cash flows from our from our future our future assets that are being constructed tests as you mentioned the pipeline so.
Which we've talked about the additional revenues that we're getting in Europe for example.
So I think all of these elements taken together.
It bodes well for for us and in the near term to get a ticket to that result.
Okay. That's great. Thank you very much.
We have the next question is coming from the line of Ben from private Investor. Please ask your question.
Hi, Thanks.
Ben Pham BMO capital markets a.
A couple of questions on on France.
Is there any update on that.
Potential capital.
Capital recycling.
Yes, so we as we've mentioned in the past we are a we're going to an organized process on 222.
To get into a partnership with a with an investor in France with our French operations.
Assets in.
And the pipeline.
And that process is well advanced and we are happy just to to see keen interest in this partnership with biotechs in France.
So we'll.
We'll come back with further details as well.
In time, but despite this processes certainly.
Demonstrating.
The interest at our French operation.
As has raised into Martin with private investors.
Okay, and then through your at your compensation for these potential investors that has that opened up in that area.
Maybe incoming.
All parties may be recycled parts of your portfolio.
What certainly what and it's been the it's been our strategy really from from the get go is we create values and by developing our assets by developing our teams.
We're doing a similar approach Patrick mentioned it in the U S.
We believe that that's where a good way for <unk> to create value. We're also creating value on our operations, obviously and so on but.
So it's it's a question of sequence. It's a question of of maturity of assets and markets. So.
Two last to market in France, and our operations there we're at the right time at the right stage for us to do that that partnership.
We believe that.
We can create additional value by waiting a little bit on some other regions for example, but clear.
Clearly we've partnered in the past.
This is a decision processes going well and we expect to do more partnerships in the future.
Okay, Great and another question I had on on France is how do you. How do you think about counterparty risk. These days with EDF the share price the financial implications that.
Does that change your process on where you allocate capital in France going forward did I have any sway on theater rfps in France, or they'll all government driven.
Yes.
An important point Ben.
Yeah.
EDF is not acting as EDF.
S. A corporation EDF is acting when he's the off taker off of biologics.
As a D.
The arm of the French state so the off taker is the French state this is by low.
The role of EDF because of its obligation of public service coming from I think.
1990.
Nine usage correct, yeah, 1999, new or something that is so so so so it's a long way when you when the mark the French market was liberalized.
EDF as some advantage of being a public service and some obligation of being a public service when he really act as the arm of the state.
And this actually haul all the banks are looking to it.
And if you want on that I can put a penny is because its its distribution is after the election.
The the so called <unk> project, which is a potential split of EDF into the public service part and the nuclear part on one side.
And on the other side the hydro the renewable to service and I don't know where the grid will be will will continue to go ahead, so something which will.
Make possible for the French state.
States to finance, new nuclear and on the other side and pay for it and the depart of of our you know the role of EDF will be clearly defined and is under the law. We are protected so no no risk on this site.
Okay. That's a good reminder, okay. Thank you everybody.
Thank you.
We have the next question is coming from Betty Bacon from <unk> capital markets. Please ask your question.
Hi, good morning.
Just wanted to ask about your U S strategy spent over a year now with the portfolio of solar assets under under your belt.
Maybe if you can just give us a bit more detail on the next steps for Boralex and the markets, where you acquire those assets and if there are any learnings from a corporate PPA progress that you've made in France that you can apply to the U S.
Yeah, our strategy in the U S. As we continue to develop Greenfield proved.
Project in the state of New York, because we know that there is.
There is a yearly.
RFP.
Journey during the summer there is one that I think in which is which is scheduled for August .
As I mentioned, we're working on two other states to do the same states where.
There is a there is the possibility also to do a large scale development and go through public RFP on.
On the existing contract the 20th 19 contract where.
We are working hard to see align the planet finalize the development on one side, meaning the grid connection and all the authorization to build and also aligns the planets in term of return.
Taking into account.
New costs are the new financing situation and hopefully also the build back better.
Direct piece duration and things like this so we have to take into account everything and take a final investment decision on this project and and also last but not least we are.
Looking to some disciplined M&A in the U S to accelerate our.
Penetration of the U S market and or diversification also to solar.
Okay, Okay. It sounds like.
Maybe if I need this year on the existing projects and then exploring a couple of other states outside of New York.
My last question is on M&A do you feel any pressure to make any acquisitions to hit your 2025 capacity targets and maybe a bit more broadly.
<unk>.
Is it going to take a corporate debt raise or would you prefer to wait at least for the minority stake fill in France before you.
Sort of commit to an acquisition.
You mentioned pressure so I'll just comment on that.
First.
There is no pressure to two there is a strategy to get to our numbers Theres a strategy to get to there's a plan.
And timing, especially on M&A is somewhat unpredictable M&A as part of the strategy as Patrick mentioned, so it's not a it's not that there's there's no M&A, we can create value on M&A.
But certainly.
We can't predict the.
The timing these and any opportunities need to fit in our in our Criterias.
Our return Criterias et cetera, and they need to.
To fit with our strategy. So its assets, where we can create value, where we can add value with our teams and our skill sets.
Its pipeline.
And it could be a week with teams our partnerships with our with other teams that are in for example regions or as Patrick mentioned more diversification and a solar. So this is really about our strategy. So M&A will come when it comes in.
If if we are to our process on on.
On France French process then.
We'll have some some money available to that.
And otherwise there are other sources of financings. We are we can tap depending on the size of the transaction.
Financing as I mentioned in my presentation.
Is not is not really a problem for us.
At bionics.
In this instance, we have a we're well funded tier for our plan.
Okay. Thanks, Thanks for that Benno just my last quick question for me.
If I'm looking at your development pipeline you have about 60 megawatts of advanced stage projects in Canada. Another 500 megawatts in mid stage.
The bulk of the projects you would potentially look to bid into the upcoming RFP in Quebec.
Yes. It is the project we are developing for the need of off of Quebec, as I mentioned, a 20 terawatt hour.
To be added in the next the next seven years. So so if you issue.
No.
It could be this RFP could be another one it could be another opportunity we're working on.
But we're very confident that we have.
The right access to land and the right access to grid connection on some of these project, which is a competitive edge for us.
Okay. Thank you for details.
Thank you.
We have the next question is coming from the line of Bob <unk> from CIBC capital markets. Please ask your question.
Thanks Gordon.
Just wanted to come back to the higher spot prices in France, and clarify a couple of things one it wasn't clear whether or not there was a component for many merchants water over there at all.
Vast majority from the contract for differences.
No it comes due.
The main question, we have very small merchant exposure.
It's.
Eight megawatt from the first side of in unit that we kept in this and some other we have also you know in our in one of our corporate PPA contract we have.
Potential merge merchant exposure, but also a possibly due to fixed price due to define the price when it's interesting to us. So this is the only pure merchant exposure that we have on the contract I mentioned 201 megawatts you have to look to dislike.
Floor price the strike price is finally, a floor price and when you.
You have reimbursed we have sorry, we have reimbursed to EDF to.
The same money then we have received from EDF from the first day of the contract then the floor price is really a floor and there is no more a defined price, but we are.
We are benefiting from the market price at that time. So so it's not the merchant pure exposure, it's a nurse symmetric merchant exposure kind of floor.
Just one point on that market and just wanted to add that.
Never really talked about that because you know we were not in this kind of pricing environment, but.
Mike.
The probability of getting this upside was was quite low but you know we're now that we are in this types of pricing environment did the S class for that 201 megawatt contracts that Patrick referred to applies now. So this is really something.
Really new because of the pricing environment.
Once you have reimbursed the subsidy you get the upside.
Essentially got it and then just based on that cumulative.
Hearing that breakeven point.
Prior underperform like waiting for existing assets over the last couple of years factor in from I guess My question is is the upside in your existing assets. The same as the upside in newly commissioned assets or is it a bit of a difference between those.
The upside of it apply on the first asset we have 87 megawatts on C. R. 16, 33 on CRE 17, and 81 on a period of one to five after the request for proposals CR contract.
So so <unk> 16, we start putting this kind of asset in service in 2019, I think because the old or 2018 may be some one in 2018 I think and then so so it's not it's not all of the asset.
And on these assets during the period until Q3 2021 we have received money from eds.
So day's asset has to clear all the money they received from EDF with a market price between 45 to 50 Euro C and tour and a strike price which is roughly.
For the C. R 16, the strike price was eight.
<unk> to your rule of megawatt hour or see roughly 82. So you see the difference in My example is 30 Euro and then during the quarter the price go to 200.
You may get $1. So the difference is no more.
The euro.
The difference is 120 euro so it takes four times less.
It was the same production to go back to the breakeven points you understand my My example.
And so and so so so and on new asset on new asset the asset that we that will we will commission in the next months with the good contract I mentioned is a 125 megawatt since we have not we would not receive any money from EDF from day, one we will.
And Joy and we will benefit from the market price from day one.
Got it okay.
And then just coming back to the question about.
Adding sort of into the construction ready build ready fee you talked about potential success in the RFP, but what about the stuff the senior secured pipeline like this quarter you added some stock with secured in the build rate is there anything that you guys. Some final permit authorizations can move.
And being ready for construction and commissioning in 2000 22023.
Are they more a little bit longer dated everyone else's and that's our current pipeline.
Question is in the secured stage Omani project you think.
And the timeline for the secured stage project is it correct, yes, exactly yes, okay. So in the secured stage project essentially we only put in this part project, which which are in line with our 2025 target.
Target.
So for example.
Up with is a 'twenty 'twenty four.
2025 project.
The if you look to the old <unk>.
The solar project in the U S.
It's all project, which are either 2023, and maybe 'twenty 'twenty four for Green corners.
And there is no cliff date on this project. This is also important and for the French project I don't have the detail by heart, it's essentially depend on the French project, which are in this part it depend on the final authorization or clearing challenges.
Challenges from third party and are on one or two of these project like water gas and mass E and last but not least speaking about limekiln in.
In Scotland.
We are presently at the late stage of authorization of the extension of the project in term of number of turbine.
And also increasing the size of the turbine is this something where every every developer in Scotland has to go. So we are in this process and as soon as we have.
Who the permitted project, we will really start to do the marketing for.
The corporate PPA in the and in the present environment I think we will we will be able.
I'm confident that we will be able to find enough to acre for this project to Sue and then we have two years of contraction.
Okay, and maybe one final question for Bruno just in terms of the cost printer.
France wind operations Theyre down year over year in terms of dollars and euros and constant currency basis really onetime or is that just the benefit of the vessels contract you signed a couple of quarters ago.
I think it said general strategy, our general approach to try to optimize our costs. It. So its fastest is one of them one of these.
Reasons, but certainly we're working through all the process on the on the operations on the administrative costs.
So it's a it's some.
It's part of our strategy of optimization.
That will Mark we did we did a lot.
Optimization and in Canada too.
Our wind assets.
Yes, perfect. Okay. Thanks, Evan.
Okay.
Yes.
Right.
We have a last question or okay, yes.
Yes, we have the last question from the line of Matt Taylor from Tudor Pickering. Please ask your question.
Yes, Thanks, Scott sorry, squeaking in here right at the last minute Stephane just wanted to go back to the map.
The potential.
Hey, how are you doing guys just wanted to go back to the sale understanding it's still.
Ongoing but I'm just wondering in terms of funding I think it would be helpful. Just to refresh your memory on funding needs and looking at your disclosure you have about $287 million yourself capital.
Invest that you still need to invest in that's under construction and then 20% of that is only about 60 million bucks it looks like relatively modest.
Just what's in that project under construction.
But if you want to just refresh our view on whether or not the sale is looking to cash out and fund those needs plus the other the other projects that Patrick was walking through there on the secured growth or do you have other plans for the proceeds.
While the proceeds what would clearly go to.
Some I think everything is linked right. We talked about we talked about the investment grade rating, we talked about different.
Different things today, including organic growth and M&A. So the proceeds would likely go to some.
Some debt rebalancing, our we have some debt, which is more a more expensive that we could pay down.
And so certainly we expect that we would have money remaining floor for growth whether it would be.
Funding the pipeline in the past I've said that we're get until late.
Late 'twenty to 'twenty two.
Our funding.
Yeah.
And so that that's a starting point and if we get a.
If we get the additional money or once we get it then.
Yeah, we can apply this to to what I've just said.
Okay, great Yeah, it's a bit of an all of the above approach is probably the way to think about that right a bit of organic what's in the pipe.
AIG and maybe some M&A.
Yes, and it would clearly help us.
Reduce reduce our needs for for equity issuance.
Excellent. Thank you. Thank you very much for taking my question.
Thank you. Thank you.
There are no further questions at this time I'll hand back the conference to you for any closing remarks.
Alright. So thank you. Thanks, Thank you and thanks, everyone for your attention. That's been there I think are a record calls an hour and 15 minutes. So we appreciate all the good questions and interest in bottleneck. So.
If you have additional questions. Please call me and it's the same number 514 to 1310 far five I'll make sure we quickly answer yes.
To your question. So our next call to announce first quarter results will be on Wednesday may 11.
Hope you all remain healthy at a nice day ahead then.
Jai upcoming spring vacations as much as we will do thank you.
Thank you.
Ladies and gentlemen that does conclude our conference for today. Thank you for participating you may now disconnect your lines. Thank you.
Okay.
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