Q1 2022 Innergex Renewable Energy Inc Earnings Call

Good afternoon, ladies and gentlemen, thank you for standing by it will come to <unk> renewable Energy's 2022 first quarter results conference call and webcast. If you have new relic telecom telephonic.

Telephonic and I went to see them they have usually starts pardon.

Do you mean vendor Denise Jackson does she kind of labs at this time all participants on the phone and Internet are in a listen only mode. Following the presentation. We will conduct a question and answer session for analysts and institutional investors and instructions will be provided at that time for you to queue up for question.

If anyone has any difficulties hearing the conference. Please press star followed by zero for operator assistance at any time I would like to remind everyone that this conference call is being recorded I will now.

The conference over to Kevin Buchel Senior Director Communications. Please go ahead.

Thank you Hello, everyone and thank you for joining us today.

I'd like to specify that this conference will be held in English members of the media are invited to ask their questions by phone after this call.

A presentation supporting today's discussion is available as we speak on the homepage of our website, that's freed up old use chegg dot com.

This call contains forward looking statements within the meaning of applicable securities laws.

Although the corporation believes that the expectations and assumptions on which forward looking statements are based.

Reasonable under the current circumstances listeners are cautioned not to rely unduly on these forward looking statements as no assurance can be given that this will prove to be correct.

Forward looking information contained area is made as of the latest Cisco and the corporation does not undertake any obligation to update or revise any forward looking information whether as a result of events or circumstances occurring after today's gyros, unless so required by law.

During this call we will refer to financial measures that are not for Tonight regarding to international financial reporting standards. Please refer to the non your first measures section of the MD&A for more information.

Our speakers today will be Mr. Johnson, Chief Financial Officer, who will present Q1 results and Mr. Michel Letellier, President and Chief Executive Officer will review, our operational highlights and milestones the conference over to Mr. Stan.

Alright, Thank you, Kevin and Hello, everyone. It's a pleasure to be back on these calls for a seven year absence of our boats and I look forward to the Q&A session that will follow but before I will give you a bit of a.

The financial highlights so the corporation's financial performance boosted this strong.

Our strong growth for the three months ended March 31, 2022 compared to the same period last year production was up 29% and said 2003 or four gigawatt hour and revenues were up 40% at $188.7 million versus normalized compare.

The figures.

This increase was mainly explained by the contribution to the 2021 and 2022 acquisitions, namely the remaining 50% interest in Lima.

I'm on for which results are now included in our deck consolidated performance. The Lee can hydro facility Curtis Palmer Hydro facility as well as the Sen Hendrix solar facility. The commissioning of the Griffin Trail wind farm and the Hillcrest solar facility as well as higher production, mainly from the Quebec wind facility.

Also in the quarter, we received a settlement payment from BC hydro regarding the May 2020, curtailment notice that we disputed and resolved to our satisfaction.

I have four interjecting the industry and I'm thinking also about the lenders to our industry. It was very important to demonstrate the validity of our long term take or pay contracts that are fundamental to the economy viability of our projects. So this win NBC was very important and we were very good.

Good to see that the reversal of our revenues in our favor.

The items previously mentioned were partially offset by lower average selling prices at the foard city facilities during the quarter.

Operating general administrative and prospective project expenses were up 25% at $58 $2 million.

The increase is mainly attributable to higher corporate general and administrative expenses to support the business higher maintenance cost at some of the British Columbia Hydro facilities as well as the 2021 and 2022 acquisitions and assets commissioning that we that I mentioned earlier.

These items were partially offset by lower variable expenses following lower revenues at the Foard City facility. So as a result, adjusted EBITDA for the three months period ended March 31st 2022 reached $135 million, which represents a 48% increase compared to the same normalized period.

Last year.

So moving to the next slide our proportionate financial performance also posted growth for the three months period ended March 31st 2022, the increase in proportionate metrics was largely driven by the variance is explained on the previous slides and in addition to the PTC contribution from the commissioning of the Griffin Trail.

Wind facility.

Continuing to the next slide for the trailing 12 months ended March 31, 2022, the corporation generated free cash flow of $129 $4 million compared with $89 $6 million for the corresponding period last year. After excluding the impacts of the February 2020.

One, Texas Evans.

This increase was primarily explained by the incremental contribution from the acquisitions and that's its commissioning activities mentioned earlier from the full year impact of the mountain there and Salvador acquisitions realized in 2020 as well as the BC Hydro curtailment payment received during the quarter.

These items were partially offset by the higher debt principal repayments stemming from the analogy I like my acquisition, the beginning of debt repayments for the upper end of wet and Boulder Creek project loans and increase in free cash flow attributed to noncontrolling interests stemming mainly from the Creatives Palmer acquisition.

<unk> and the full year impact of the mountaineer acquisition as well as unfavorable unfavorable differences between cells at the Phoebe node and purchases at the ERCOT salad hub.

The increase in free cash flow versus 2021 resulted in a 34% point improvement to our payout ratio.

Which amounted to 106% for the 12 months ended March 31, 2022, compared with 140% for the same normalized period last year.

When excluding prospective expenses of $25 $6 million, the adjusted free cash flow stood at $155 million versus $108 $4 million for the same normalized period last year. So the adjusted payout ratio, Consequently reached 89% compared to a.

Hundred 16% last year, which is a great improvement.

The next slide I would like to remind you that on February 22nd of this year and our JAKKS has successfully completed its bought deal equity financing and the concurrent private placement with hydro, Quebec for aggregate gross proceeds of approximately $210 million.

These proceeds were immediately used to repay part of the corporate revolving facility, which will then be drawing back at the closing of the Elan acquisition. So this leads me to the next slide to talk to you about.

Our continued expansion to our Chilean operations through the acquisitions of the San Andres Solar facility on January 28, and the eight our wind facilities on February 3rd 20 2020 seconds.

These acquisitions did not only double our existing capacity footprint in Chile, but they also contributed to further diversifying our geographic coverage and energy mix of our Chilean operations. Furthermore, These acquisition allowed for rereading of our Chilean portfolio.

Which opened the way for or helped to actually optimize the capital structure.

And these this additional leverage that we secured or that we will secure will be used to finance our two best projects that we announced earlier today without requiring new equity investments.

As you all know I guess the next slide as you all know the absurd and unfortunate war in Ukraine as rocked the markets and geopolitics of energy driving oil and gas prices to their highest level.

In nearly a decade.

These macro events and coupled with the governments, increasing desire to de carbonate and to achieve a greater level of energy self sufficiency as.

Created a backdrop from which the corporation benefited in the form of higher than anticipated spot prices and more favorable PPA re contracting environment in the majority of our markets.

And as an example, and subsequently to the first quarter.

Period end the cooperation successfully re contracted on April 29, 2022, three power purchase agreements for the 28, and the Fox Yang and French wind farms in France of course at favorable energy prices.

And we also extended the contracted term to December 31 2025.

We also believe that global decarbonization targets as well as National Energy Security concerns will continue to support high energy prices for green and renewable electricity in the years to come.

And finally on May 10, 2022 in order to add greater balance sheet flexibility and efficiency and supporting our growth activities. The cooperation successfully increased the size of the corporate revolver revolving facility, adding an additional $250 million to the borrowing limit now standing at <unk>.

$950 million and we also at the same token extended the term by four years through 2027.

So I will now give the floor to human shelf for the operational review of the first quarter. Thank you. Thank you. It's good to have you back and you've done well in Q [laughter] construction activities.

We have a we have done in the quarter and I know that you guys have a lot of question regarding the DIY and pro.

Project can.

The fact that the.

U S government the commerce the Department of Congress I have started an investigation on patent all coming from South Asia. So we'll cover that as best as we can and and I'm sure. You will have a few more question, but I guess in general.

The development in Hawaii has been challenge as you know with the <unk>.

The the crisis regarding the logistic and the availability of equipment.

We were.

We were supported by the fact that we.

We had a contract where we have a contract with Tesla, but unfortunately at Tesla had had so much.

Difficulties to have supply in order to provide us with their I would say the full package that they have designed initially.

They have sent US a force measure, saying that they have to change the design.

Some part of the design and that would basically delay.

Delayed the project for four or five months.

Over and above that we had as you know the DN famous inquiry now from the department of Commerce that has put the oil industry dealing with solar in the U S. In a very difficult spot, where we don't know when.

And how much Judy could be imposed on <unk>.

Imported a panel so what we have done and I think.

We're talking with John over the last few days and with the team I think it is it's in the parking entity for us to sit down with equal and the PUC over there and to look into the economies of these project and the challenge we're facing.

All of the known the law for NOI have done the same thing as far as we know we have initiated some discussion with eco reaching out regarding these challenges. We also have a flow through our force measure for the <unk>.

And equally project under construction to them. They have accepted it. So I think we have an important entity to reset a little bit the economy. All of these four projects will take our time.

To negotiate.

We think that.

We will be working in open book.

The fashion with the eco and the PUC.

I think that the they are concern of course and they understand the challenge that the all the IPR facing in Hawaii.

That they need more than ever these projects, especially the solar with battery the unique capacity the need renewable energy as you know diesel is going through the roof and a lot of avoided cost in NOI is based on diesel.

So there is a logic for them and for PUC to sit down with us and come up with with this resolution that would permit these project to go ahead.

The other alternative if we cannot agree on the revised price and a revised schedule is to basically rebid. These project in RFP tree or RFP for.

Hawaii has to come up with future RFP. They they have this commitment they have to shut down their fossil fuel.

Project, So I think that.

The price for RFP tree wouldn't be very different from a renegotiated price from the initial RFP, one and two and matter of facts in the RFP one they were a ninth Tc.

Local state tax credit that would not be available for RFP treat so I think that the economies are.

Guiding towards having them being reasonable with us and finance solution. So.

I'll be happy to answer your question, which are at the end, but the idea there is to pause and basically minimize the equity that we are putting in the next two.

Two months and making sure that we're coming up with the <unk>.

A better case for the viability of these project given the different.

Challenge regarding to supply on on the island.

On the underground in zinc is going fairly well construction has restarted our spring has come to the even to the north.

And we have announced just a slight move from the late 2000.

22 of the fourth quarter 2020, due to the forward to the first quarter of 2023 due to some some small delay giving.

Giving the latest orosz, while some difficulties to access the site last year at the end of the year with the with the Covid. So I think that.

It's only a few months and we.

We should be okay to be in full operation by the end of the first quarter of 2023.

So now today it is getting very close to being full commissioning we have been testing we've been using the battery in some and some.

Some circumstances.

Some tests are yet to be finalized completely we expect that all of those steps and full <unk> release should be done by the end of.

June .

Now for the development activities I guess this is the.

Besides the issue with the Hawaii I think we can treat the four projects that we have in Hawaii in the same basket as I mention for the rest I think that it's very very positive we've been making great product pro pro.

Progress progress. Thank you in the development activities.

Proud to remind you that <unk> in France is our first project coming from our Greenfield initiative that has a PPA. So.

Thanks to the team there is the first certainly not the last.

But it's always nice to see one of our own.

Getting through all the process in France.

Also big Big move from from the development perspective is Boswell and palomino.

Boswell in Wyoming, we are in final discussion with Pacific Corp. Its long, but are the are there they're tough negotiator in some ways and they are facing also some delay themselves for their transmission line project. So.

So everything is link together and but we're sitting down with them and I think that we're also advancing on some updated our.

Cost there for <unk>.

A little bit of a fluid true, but we managed also to change the turbine supplier as we mentioned earlier on.

That makes it more efficient in terms of utilization of this space. So we're all in good shape for Boswell, we just need a little bit of adjustment and finalizing the detail of the.

Power purchase agreement, it's going well.

Palomino, we have shown in our MD&A that we're moving that project potentially in 2025 just to be sure. We have signed a term sheet with first solar to supply the panel those panels will not be subject to the inquiry from the.

Commerce the department of Commerce in the U S. We're.

We're working hard trying to find another solution.

Do you have.

Panel move it for earlier, so that we can we can put the palomino project in 2024 working on it we have some leads but we have secured the supply of the panel with first solar as a I would say a plan b.

We don't mind being long on panel to some degree because we are advancing also quite a bit and the Ah.

Development activities in <unk> in the U S.

We have talked about what Thomas which is in the in the in the northwest and also <unk>, which is in other projects. So we're advancing quite well in solar. So we were very confident that we'll need a panel to supply. These these project down the road.

Also as you know we have announced two.

Best project.

John has mentioned.

This is the strategy in <unk> in Chile that is adding up to the diversification of our portfolio in Chile, I think that Chile will benefit from those battery going forward. It's a great flexibility addition to our portfolio.

That Chile will and have quite a bit of a solar production.

And can have also in the future a lot more so we think that having battery establish an interconnected to the grid is a great tool for us to take advantage of the capacity payment I'm I'm stressing about this notion.

Chile, new system to recognise capacity for battery is very generous and.

And could represent anywhere between 40% and 50% of the revenue.

For that for that system and the rest is going to be making arbitrage between today and tonight or the evening or it's going to put us into position to be able to sign firm contract to be delivered.

Complementary with the rest of our portfolio just to give you a heads up to a little bit on what's happening in Chile in terms of pricing I remember that we have talked about the pricing in Chile being quite robust.

Lately, it's still very strong, but the best the best single I think is the fact that corporate Ppas are now coming from $38 $40, a year and a half ago four approach for.

For short term from five to 10 years now, reaching almost 50 megawatt per hour.

So for US it's just the timing and we will we will secure longer PPA, we just need to have the sweet spot and take the full value of the long term.

You have a green energy in Chile, So we're very upbeat on the on the pricing.

Capacity in.

In Chile.

So that's that makes a quite a bit of a turn around our development activities and then from that prospective project.

We'll see that some some pieces have moved there, but I think that the biggest move here is the fact that we have.

Put some effort lately to answer.

Future RFP in Quebec, I think that this is a great turnaround for Quebec for people that have Paulo, numerous RFP had been announced for supply of renewable energy in Quebec. So that's a.

That's a fantastic news for us its a greater part community too.

To take advantage of the good relationship that we have across Quebec, we have just put about one point well 1700 megawatt of new.

When opportunity in Quebec, and we intend to add some more.

For the future, so it's and I think that.

This is only an indication that perhaps Ontario, and BC will do the same.

In the near future, we have seen ISO making call for desperate RFP for capacity between 2025, and 2027 and now we are seeing a big gap also for 2029, which can lead to about 8000.

<unk>, so it's only a matter of.

I guess time also to CBC waking up so we were very upbeat also on the our ability to redeploy.

Our resources in Canada, and you'll see the prospective project.

Coming in the next few years heading into the Canada possibility, but that doesn't mean that we will.

We'll go down and in our other markets, France, and the U S. In GB as you see there.

There's also great opportunity in Europe with the pricing.

Josh mentioned that we have now reached.

Our reach out for corporate PPA extension.

Youll see the numbers are huge.

It's only represent.

The disparate.

Situation in the energy sector in Europe .

Europe or France will we will see also some good.

Single from corporate PPA off takers. So we're and we have also initiated some discussion.

For a long term PPA with corporate par.

Party also in France, all in all I think that.

Our industry as you know is facing some challenge a lot of you have.

Ask question about the.

The inflation cost and availability of <unk>.

Services and component.

Yes, we are facing that but on the other end, we're also seeing great opportunity and price escalation, so as I mentioned earlier.

We have seen this turnaround now.

Our ability to price our product with a premium and I think it's a it looks.

Promising for the future and hopefully our industry will be disciplined also in future calls so that margin will improve also in the development sector. So on this I think I will open up the question period.

Thank you.

Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a sweet home prompt acknowledging your request and if he would like to withdraw your question. Please press star followed by two in the future.

Using a speaker phone, we do ask that you. Please lift the handset before pressing the keys.

Please go ahead and press Star one now if you have any questions.

And your first question will be from David because later at the Raymond James. Please go ahead.

Thanks, Hi, everyone my.

My first question here just appreciate the commentary around the challenges in Hawaii I'm, just curious about the the Pia who project specifically what what the challenge was there.

With respect to the circuit court decision and how you see that resolving going forward.

Well I think that we have engaged in a mediation process now things are going okay.

But of course it is.

Not easy I think that.

We'll go through that process and answer the question and then make good faith mitigation eh.

Session.

And if it's not working we'll come back and resubmit.

We there is a limit of what we can do and I think that our team did a great job in.

Designing and making a.

Compromising in the design of the project to a certain limit.

We're leasing I guess that.

In any project.

Even if you're saying that you have done everything you can it's it doesn't hurt to listen in and maybe find a solution that can kind of work on both side, but.

We're getting there with good faith and open to finding a solution.

That's great color. Thank you and then maybe just.

Another one on just on the on the PPA renegotiation at Boswell I'm, just curious if I mean, it certainly sounds like things are going well I'm. Just curious if there are still any material hurdles before you would.

Successfully renegotiate that PPA and just a measure of your confidence on that going forward.

Yes, we don't want to share too much but.

There is some issue about the schedule and also on the <unk> date and Pacific Corp has also some issue in their own permitting and building of the transmission lines. So there's a little bit of a back.

Back and forth on this flexibility for both of us.

So there is cost also do you have flexibility and we do we want to see that recognizing in that PPA.

And like I said, we.

I think it's very reasonable what what we're asking but I don't want to get too much into the Delaware in the middle of the negotiation with them.

I think also that some of their partners.

RFP.

Supply.

We're coming from solar project in order to feed that deadline.

And as you know these projects are facing some challenge as well so I think that our project is very well positioned I think it's very competitive.

We have all the other permits and we think that we can deliver that project to the satisfaction of Pacific Corp. So.

We're positive, but and negotiation are ongoing.

Excellent thanks for that that that's it for me.

Thank you.

And next question will be from Nelson <unk> RBC capital markets. Please go ahead.

Great. Thanks, just a follow up on the Hawaiian projects. So.

Are you able to essentially.

Walk away from all four projects right now is there any I know you received a force majeure notice and you pass it on so does that mean.

You've essentially press the reset button and there was like no liability or.

Or can.

Tesla when they say hey, we can deliver everything now like are you obliged to.

Accept these batteries and do you still need to deliver.

Any of these projects by a certain date.

I.

Through our legal.

The apartment, we feel very comfortable that.

We can especially from from the side of our PPA that are giving the.

Force measure and the.

All of the issues and challenges that we're facing that we wouldn't have we wouldn't have to pay a penalty to walk away from from PPA now there were some contract regarding the.

Tesla as an example.

We think that the change to the contract quite a bit. So I don't think we if we decide not to go forward with these contract that we have that we would have to pay big <unk> same with visa on panel I think we can certainly claim that it's not us who changed.

The design or the the duty because our contract with <unk> was with very clear that they were responsible for all the duty and it was to be delivered on an.

On premises in Hawaii so.

We're a very good place, but the idea here is to try to protect also the schedule.

And the availability of components. So that this is a big part I think on our good faith negotiation with Pacific Pacific Corp, with eco there and the PUC.

Because.

If we're asking new money.

But we were presenting huge delay that's not going to fix their problem of having capacity on the island quickly. So I think that if we can.

Secured a good schedule with with the supplier that we have under contract now.

And the range for an adjustment in price that has been a chance then ask just canceling everything.

And just hoping to check.

Uh huh.

Settlement with them, but I think we're there in a sense it.

We're positive that Hawaii need these projects they really need these project and I think we're there in our strategy to protect our investment.

And to make a reasonable return on our equity on these projects.

Okay, and then you mentioned earlier that you want to kind of parse the projects and I guess stop or pause any additional contributions going into the project.

Are you able to.

Give a rough sense of how much has been invested into at least the project that was under construction.

Under construction and the love and I think you can find it.

In the MD&A Manny can you see something around we had 25 million on the projects under construction.

And there is another.

Think it's another 17.

And development.

And now it's about roughly 47% and $48 million.

Investments, so far and in Hawaii.

Okay got it.

Alright, Thanks, John and then next question is the the French Ppas.

In terms of breaking the Ppas like I noticed that I think they were originally the original ppas were supposed to expire in 2025, and then you <unk>.

The Ppas and then you have.

New contracts that also expire I guess at the end of 2025. It was there a break fee you have to pay and I guess the other question is why.

Does it end in 2025 and why don't you.

Extend the term of those projects.

It's just that there is a very sweet spot in the next four years, three and a half years.

Price were like close to 300.

<unk> per megawatt.

The first year then declining.

Proportionately to roughly 100 100 year Roe.

On the last year, so we took that advantage.

Two secured debts.

It was also we needed the.

The agreement of the banks to do so.

We think that through that period of time, we will have time to rethink on the long term.

<unk>.

We can resubmit some of these project we've committed to.

But it was.

I guess it was in <unk>.

To take advantage of the huge pricing right now.

And there were no penalty actually on those we could work.

Walk in and canceled it we have to give three months notice.

Okay, well, that's a pretty favorable contracts.

And then I'll try to squeeze in one more question if I if I may in terms of the BC hydro settlements, obviously the settlement wasn't disclosed but was it close to the I guess lost revenues and maybe you recovered some legal costs as well can you give a bit of color as to.

Whether you are fully made whole.

Yes.

Pretty much yeah. The only concession we've made with the average downtime that those project can experience in that period of time, but we did receive interest and legal fees.

Okay. Thanks, I'll get back in.

Thank you.

We have signed a nondisclosure agreement, but you can understand that we're happy with that.

There yet.

That's a great outcome.

Okay.

Okay.

Next question will be from Rupert <unk> at National Bank. Please go ahead.

Hi, Good afternoon, everyone just to quickly follow up on the.

Yes. The last question on France. So did you say the revenue you can get on your new contracts.

Is close to $300 a megawatt hour declining to 100 megawatt.

Megawatt hour in the final year.

Yes.

So it's there's something consistent with the futures prices in France I imagine.

Yes.

And its short term and it's a it's not a full corporate with a trader.

Yeah.

Very good credits.

But it's we were amazed to see these pricing.

Yeah.

So do you think it's possible we may see some corporates come forward that could be looking for.

Longer term contracts I imagine you probably need something up to 10 years to convince you to walk away from some of your other contracts is that possible is that something you're investigating.

In that range of pricing, we haven't seen that yet. So that's why we are we have not yet secured longer term, but we are in discussion with a solar project that a.

To corporate.

Corporate PPA are.

Yeah.

Kind of early discussion, but they're they're they're willing to go 15, 20 years, but certainly not at that $300 for obviously, but at the very competitive pricing and without.

Direct negotiations so yeah.

We're looking to do this for the development assets that we have outside of potentially the rfps and friends and to go straight with corporates and more favorable pricing environment and also corporate doesn't necessarily have the same.

And frankly, they call it the <unk> shown some restriction on panel origination and land qualification so.

Probably easier to to develop project that way also in trends for solar.

Okay, and then just sorry, just to be clear I think you had said 300 euro once in $300. It's 300 euros three years I'm, sorry, three yes, okay.

Alright, moving on to the battery facility in Chile, you talked about the.

Revenue split you anticipated between capacity markets and arbitrage how much revenue do you think you need.

To underwrite this investment in one of the assumptions around the.

Well the life of the battery, whether its cycle life for a number of years and you need those battery too to be working to get.

I'll give you the returns that you need.

Sure. We have 20 years of life expectancy with that battery with a contract with Mitsubishi in trying to maintain these battery in a good sense mind, you that theyre not.

Doing a lot of cycles. These battery, we in Spain, only one cycle of day, we could be surprised and have more opportunity to cycle them a little bit more.

Typically we need anywhere between 35, and 45 ish dollar per megawatt hour.

In arbitrage and the rest would be covered by the <unk>.

The capacity payment that Chile is putting together for battery.

This is the system in Chile for pain for recognizing the capacity is sometimes the equivalent of RFP that are going on in New York or some other places just for capacity. So it's.

For us, it's something I think of great interest because.

Almost half of your revenue is already secured through this capacity payment process and that.

Process or regulation.

It's not new in a sense that hydro has some capacity in recognition when same thing solar will see their capacity payment diminish over time as our solar is building up.

But it's not new and the fact that.

The rules there apply for.

For a battery that have five hours.

If you have five hours, then theyre fairly generous because.

The perceived at that.

Our system is flexible enough to meet the critical hours of the grid enhanced or giving a fairly good.

But John maybe you have all this victory numbers, Yeah, I guess, we've established our base case on more conservative number than what you see today in the market. So as Michelle said I mean, if you have 45, a spread of $45 U S. I guess.

That does it but right now we see spreads that are much wider than this so actually and in fact as soon as we can be a nine.

If the pricing environment stays the way it is it would be a lot more beneficial to us but.

So yeah the capacity payments.

I guess, whereas estimating a $7 a kilowatt month dollar.

Payment.

And that's also I think a conservative number.

In our base case, so that that was sufficient for us to actually purchase the battery installed them at our sites and make a good business case out of it.

Great and then on Joseph.

Maybe one thing to add Rupert also is that we were right on time and when the purchasing of these batteries if you see the.

I guess the price we paid for these batteries compared to the price today, even if we've announced them earlier, we started the negotiation of some months ago.

And I think that benefits also our case study here in it because we entered the market at the right time right now the price of batteries now.

<unk> kind of come up like a quite significantly I guess by.

By about 30% in the last month.

A month and a half or two months.

Great and on the the market dynamic there I mean, you talked about the fact that you could see more solar coming online and I suppose that's a risk to your existing solar plants.

Alright.

You see any risk that you could see more batteries as well which means.

Let's see.

Reduce the attractiveness of the economics for for your battery.

The market dynamic what how much visibility do you have on what's coming online.

Brokerage there will be a lot more battery because there are a lot less coal. So wherever you are taking out cost coal you have to replace it somehow by capacity for the evening and Tonight.

Also the system, operator has been calculating the demand and offer or the the.

The balance of the of the market based on.

Historical hydrology going back through the 40 years, and we know that the hydrology in Chile has changed probably for the for the worst.

And we have calculated that when we when we're making our investment thesis on hydro we're taking the last 10 years.

Instead of looking at for the last 40 years. So maybe eventually the hydrology will come back but lately.

The hydro contribution.

Is not has high has historically so if you take out the cold U.

Are you seeing permanently some of the hydrology in Chile, and you are taking into consideration that natural gas will be expensive for the next near future.

In Chile, even if you still need a lot more batteries because right now the our.

Taking some diesel capacity under under call and the price.

Fairly high.

We've seen 200 $300 per megawatt hour fairly.

Often in the marketplace. So yes, there will be more battery that sonangol is there we are in the early adaptor with a fairly good price.

And we don't have much exposure in solar anymore. Because these have translated these the solar project into evening or even night projects. So we're feeding our own battery with our own solar and we have probably only 20 megawatt in excess of 20%.

Five megawatt in excess in solar.

<unk>.

We just under designed a little bit the battery just to make sure that we have a little bit more solar capacity.

That's great color. Thank you I'll get back in the queue.

Yeah.

Thank you next question will be from Sean Stewart of TD. Please go ahead.

Sure.

Thanks, guys good evening.

Couple of questions I wanted to talk about your perspective pipeline for wind in Canada in the one six gigawatts that you've moved to your your mid stage development bucket, presumably all in Quebec ahead of the RFP.

Can you speak to the bidding strategy, there, if youre able to or willing to it.

The total capacity that you have would be.

Most of what's I guess being envisioned by hydro, Quebec right now.

And your expectations on community and first nation's participation in those types of projects.

Well Sean.

Theres a lot more of that have been announced you'll have the 300 megawatt only win then 480 megawatts all renewable and <unk>.

Or are they kept for two terawatt hour yes.

80 megawatt right.

So that's a lot more and then they call for another Townsend and and in other areas.

300, and then yes.

So and the Strat plan for Hydro, Quebec calls for the accretion of a portfolio of projects of 3000 megawatts on top of the Rfps that will be issued they will need a whole lot of future energy in Quebec.

For wind and the electrification is serious.

Sure.

In Quebec, it's advancing the only solution for Quebec to really reduce the.

The current quarter the to.

To decarbonize the.

Quebec is not going into reducing electricity.

Carbon emission is to go to transportation and big industrial.

In some buildings that need.

Need.

Oil or natural gas to heat, but not that great.

Quebec will need quite a bit more in the next 20 years.

Okay understood and the four projects that.

That you've moved to your mid stage bucket.

The first nations and community involvement has already.

Thought through with respect to those projects I suppose.

Not completely but the big part of it yes.

Okay.

Thanks for that.

Second question is on your your broader U S prospective solar pipeline, which I think is about 20% of your overall perspective capacity that you talk about.

And the question is.

Appreciating that a lot of what's happened in Hawaii is.

Related to the force majeure from Tesla in and temporary.

Presumably supply issues.

The developments there, though change any of your thought process on on the.

The longer term opportunity for solar in the U S any anything that tempers your ambition.

For that prospective pipeline at all.

No.

Sean we're looking into alternatives do you have supply of panel in the states I think that they will come up with some kind of a resolution I guess.

But I understand why.

These rules are in placed into favor.

The fabrication of.

Solar model in the states I think is fair game.

To have that in in a sense it.

Whenever you are developing your renewable energies, it's great. If you can support some jobs.

But I think there is any kidney grown between.

How how fast you wanted they've locked and deployed a renewable energy in a certain market together with creating a manufacturing job in the same area.

It's not easy and I think that <unk> will swing back and forth a little bit and we will have.

U S is known to have these crisis right I mean, when it's not.

ITC or PTC Cliff. It's this inquiry, there's always something in the U S that that makes people nervous on the long run.

U S have shown resiliency in our in their ability to have more and more renewable energy being being built.

And they are still have this ITC and PTC support program that the Democrats are trying to to pass I don't know if there'll be successful before the mid terms.

But remember that the last.

Package was a be part isn't pack.

Package so.

We're confident that somehow somewhere the U S will come up with the support.

For a renewable energy in the meantime, like I said, we have secured the panels for palomino.

We have if you remember 125 megawatts of panel that we bought for ITC.

Purposes.

We have paid a premium to.

A few years ago for them now that premium has disappeared in the sense that they look cheap compared to some pricing that we've seen lately. So I think we're in good shape. We also.

And the industry will eventually put a right price to the future RFP mind you that.

With the ITC.

Term PPA Hillcrest long term PPA was signed around 32 through the through the four box per.

Per megawatt hour, so thats pretty cheap too.

So even if people have to sign at $40 45 Bucks, it's not that expensive to have green energy in either so I think that one has to put that all in perspective in perspective, I think that the U S have benefited.

From really dirt cheap renewable energy project and.

I think that the corporate the corporate America has the room to pay up.

The reasonable and a fair price do have renewable energy.

Thanks, Sean if I can add.

I can add just on the do you see a investigation there is senatorial the support for it is bipartisan as well from both Republicans and Democrats right now to put pressure on the do you see so that they have a preliminary determination faster than than what is anticipated. So it could also be determined as early as <unk>.

In may that we that's what we hear.

So the schedule could be advanced to have a determination here. So the whole renewable industry is supported by by both Democrats and Republicans I think it's important to note that because the winter whenever there is an issue.

Facing the industry, it's always been supported and they found ways to move forward.

Last thing I guess, the build back better.

It's a large bill but the components that are regarding renewables support.

Theres also a bipartisan support so maybe they will I.

I guess cut the build in smaller pieces and one piece that is one of the most certain to move.

I mean, if you have time, obviously in Congress and Senate to passengers before mid terms would be the support for the renewable energy year programs. So so I mean, the industry is pushing back very hard on this and actually making putting another pressure and the response is pretty positive so far.

Thanks, John I appreciate that detail that's all I have thank you.

Thanks.

Just a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.

And your next question will be from Andrew Kuske at Credit Suisse. Please go ahead.

Thank you good evening.

I guess, just given the broader energy market dynamics that are happening in Europe , and then some of the specific issues in France surround the nuclear units that Edr stars.

How do you think about just your perspective project pipeline.

And in particular, just what you have in the queue on France do you believe that that.

Pipeline is going to expand and maybe grow more rapidly than we'd see on some of your other areas of exposure.

Well.

Love to but as you know, France is not easy to that love.

I think that solar we may see a little bit of a.

I would say more flexibility in some of the <unk>.

Process too to get permitting.

In France.

I think that the.

The agencies in France understand this.

It's not easy to change those rules, but there is definitely some area where they could speed up the process like I said, maybe if we can have direct negotiation with corporate off taker.

Some constraints on land might be easier for us to meet.

So we're looking into all of this but obviously.

Given the.

The price Samuel.

We.

We may have some ability to.

Give her.

Perhaps some more compensation for for the for the project to two land owner and to potentially municipality. So.

The team is really aware of that.

Any project that we can bring.

We will find a home in France, we're sure it's not a lack of demand it's a lack of project.

The difficulties to bring project too.

Two determination and then being able to start construction.

Yeah.

That Douglas very helpful perspective, and then maybe if you look across your geographies.

Where do you think you have the best risk adjusted returns at this point in time.

That's a good lenses suggests that it's always.

It's easy to say that easy to adjust.

In some ways, but.

We've been active in Chile and in ways I think that has been great in the last couple of years, but I think Canada, and Quebec is showing great create opportunity.

Very well position in Quebec.

<unk>.

<unk> like I said, BC will wake up and smell the coffee beside row is sleeping on the on the road right now and it is going to crash.

Ontario is waking up as we speak.

We have seen Quebec turnaround in less than three years from surplus to Oh, My God, we need a lot of megawatts.

And I think this.

We will see that in some other markets, it's happening everywhere, they carbonation and friends and self sufficiency is is top of mind right now so they're trying to.

<unk> got the the duration of developments and it does renewed interest for onshore wind and solar and obviously offshore wind, which were not present there but.

The nuclear is not going to replace the demand is not going to come from nuclear because nuclear it takes too much time and theres already issues with the existing nuclear so friends I guess all over the world right now I think there's a lot of demand and the carbonation is a reality and you just really have to meet their targets.

And so.

Yeah, I think Andrea I think theres, a lot of opportunity and we risk adjust and risk adjust each investment that we make.

Because every project is different the reality is not always the it's not saw similar or in some cases. So we we try to risk adjust each time.

I wouldn't say that.

David.

The best the best surprise for US is Canada.

Lately.

Canada, Quebec is waking up in the rest of Canada, just a matter of maybe time zone, though.

There are a little bit, but it'll wake up eventually in the west.

Okay fair enough I appreciate it thank you.

Thank you next question will be from <unk> capital.

Capital. Please go ahead.

Hi, Good afternoon, just wanted to follow up on that last comment in Quebec.

I guess, contrary to Chile, or European market dynamics pricing signals in Canada, and Quebec are going the other way.

Does that necessarily impact.

So, but the returns on the projects that Youre looking at in the province.

I think it was it was true a few.

You are few months, even a few years ago.

I don't think that.

That Quebec.

Things that they're going to get win at three three cents per kilowatt hour in Quebec anymore.

I think youll see decent pricing being put forward, perhaps in the past, we've seen really really aggressive pricing.

Alberta, and Saskatchewan with very little size.

200 megawatt in Saskatchewan, and perhaps at <unk>.

When times are subscribed to RFP.

Brought the pricing really low, but remember that was about 18 years ago, when when the bonds, where that 1% and wind turbine.

Given where give it away.

Think that things have changed big time, now and actually even the CEO of hydro, Quebec, a few boss you mentioned that the next megawatt that decode procuring Quebec. If you include capacity distribution and production would be renting a would be at about 11 cents per kilowatt hour. So they are very mindful of that.

The date of the time, where.

Pricing was around $30 a megawatt hour has gone it's long gun, yes. It is.

One of them.

<unk>.

I think that the industry also is waking up to the fact that discounting the.

Price curve, and hoping to see discount and discount.

I think well anyway, the serious player in our industry I think will be more disciplined in the RFP to come.

So very helpful detail. Thank you and just on my part let me know if you can give us an update on.

How the discussions are going with the current off taker or a few to be our.

Looking at somebody else and you get the price that you were looking for.

Yes.

We'll be in a position this summer to two.

Due to shop.

That project, although the two existing.

A term sheet.

Participants are very.

<unk> to continue in the half requested more time.

In the meantime, we are looking at the market and the market has improved.

In that area for corporate PPA Big time.

So we're very confident that it was the great. The best strategy for US is to have this winter.

Window of reopen.

Negotiation.

And we're in good shape I think that the palomino will be a great project.

We just need to have to find a solution to have panel.

Made in the U S or not subject to this inquiry.

Like I said, we have the first shorter alternative being delivered very early 2025.

But no our team is looking hard to find a solution to have.

Panel that could be delivered early so that we could continue.

Putting this project in service by 2020 'twenty four.

But on the economy, we feel very comfortable with.

Okay got it.

Just one last question for me on Chile.

Specifically on the portfolio refinancing initiatives.

Just thinking about the debt that you already wanted to raise and now youre, saying it could take up more equity to fund the battery projects.

How far along is that process and your.

Cost of capital assumption there changed at all or is it still sort of in line with what you were expecting.

Well, John will give you more color but.

We were lucky enough to fully hedged at.

That loan as we had announced the acquisition when we signed the purchase sale agreement, we did put a.

A hedge strategy so we're protected.

From.

The last run into the interest rate matter of fact, we.

We kind of catch the low.

The low end when the ore in Ukraine started and we benefited from a little bit of a deep dip.

Into the.

At the end of the long term interest rates. So we're in good shape in terms of having fixed.

The economy mix, there and maybe the negotiation is going the negotiation is going well, it's a rated private placement that we intend to put in place and obviously.

Secured on the entirety of the portfolio in Chile, including the projects and we also are.

Putting in the new best projects.

Within the financing as well so no it's advancing very well and we expect this to close.

In Q2.

So by the end of Q2.

As Michel mentioned I guess, the micra, the macroeconomics hasn't changed I mean, we were hedged so the.

Still we didn't we weren't impacted from macroeconomic movements here at all.

Okay, so the refinancing and the acquisitions still on truck changeover, yes, yes, alright.

Thank you very much.

And welcome.

Next question will be from Ben Pham BMO. Please go ahead.

Hi, I had two of clean up questions I wasn't sure. It on my first question is on that.

2020 guidance, whether it's EBITDA free cash flow are you I wasn't sure. If you mentioned anywhere are you reaffirming that guidance.

For 2022, yes, but what we said is that I'm mixing maybe when the annual meeting.

I gave the guidance on 2022, yes, we are maintaining our guidance for 2022. It may improve because we haven't included the <unk> acquisition.

Acquisition.

We are forecasting it to be to be in the first of June 1st of July right.

We will reaffirm guidance in Q2, I guess or at the closing of the Halo because it has a significant.

In fact in the refinancing so once we close and we have certainty on refinancing a lot and so I guess at the end of Q2, we reaffirm guidance for the year.

Okay.

Got it and.

Do you think.

This year on your payout ratio there is.

Uh huh.

A potential for it to be to come in below 100% because you've made some.

Good progress this quarter looking at percentages I'm, just curious how that's trending for the rest of the year.

If weather keeps for being on P 50, or a long term average.

We see no reason why we should.

Wish we shouldnt be below a 100%.

Yes.

We're thinking that we're going to be below 100%.

Okay. That's great. Thank you.

Thank you.

At this time, we have no further questions. Please proceed.

Thank you very much everyone. Thank you Jeff Thank you Ross.

Ladies and gentlemen, this concludes the conference call for today once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

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