Q2 2022 Brookfield Renewable Corp and Brookfield Renewable Partners LP Earnings Call
continue to favor investors like ourselves who are well capitalized and globally diversified.
with significant development capabilities to build out renewables in scale.
As always, we remain focused on growing our leading renewable power platform.
Expanding the spectrum of decarbonization solutions we can provide to our customers.
and building global businesses that are critical to the transition to net zero.
The recent growth in our business has been significant.
So far this year, we have deployed or agreed to deploy $4.5 billion or $1 billion net to Brookfield Renewable.
This capital spreads across a wide range of investments, including battery storage, carbon capture, distributed generation, and utility scale wind and soar. The capital spreads across a wide range of investments, including battery storage, carbon capture, and
To date, our investments into new transition opportunities comprise only a small portion of our capital deployment.
but mark valuable entry points into segments that we feel have the potential to grow significantly over time.
These investments represent new and incremental growth levers for our business beyond our continued expansion in renewables.
Our approach to investing in these new transition opportunities is similar to how we look at renewable investments.
We look for opportunities that are economic without government subsidy.
Technologically proven and underpinned by strong macro-cales lens.
We focus on situations where our key advantages of access to capital, knowledge of power markets, operating in development capabilities, extensive customer relationships, and global reach can differentiate us both as investors and as operators.
Over time, as more decarbonization products and services scale, we expect transition investments to grow within our portfolio.
But that being said, investment in clean power generation remains the largest decarbonization opportunity today, and we therefore expect it to represent the majority of our deployment for the foreseeable future.
our global distributed generation business.
Continues to be a significant area of growth as the trends of decentralized power generation and direct customer interaction accelerate.
In the past year, we have grown our USDG business by three times to 6,500 megawatts through various organic growth initiatives.
These include channel partnerships, joint development agreements, and strategic partnerships like our cooperation agreement with Trane Technologies, which enables us to leverage our respective capabilities to create full suite decarbonization solutions for our customers.
We recently agreed to acquire a leading integrated distributed generation developer in the US with a proven track record of developing and operating projects.
We intend to invest $700 million, or $140 million net to Brookfield Renewable, representing both our equity purchase price and additional equity deployment to fund future growth.
The business has in house expertise across all stages of the development life cycle.
with 500 megawatts of contracted, operating, and under-construction assets located primarily in the U.S. Northeast.
and an 1800 megawatt identified development pipeline, of which almost 200 megawatts are derist with long-term creditworthy counterparties.
With this investment, we further enhanced our position as the global leader in distributed generation with over 10,000 megawatts of operating and development assets. And development assets. And development assets.
With capabilities and scale across all our core regions, we are well positioned to keep growing and provide our customers with innovative decarbonization solutions across multiple markets.
This will help our partners meet their sustainability targets while reducing operating costs through onsite renewable energy and other decarbonization services.
We also expanded our North American carbon capture and storage platform through a recently announced joint venture to establish a new carbon management business.
Under an arrangement with California Resource Corporation, an independent oil and natural gas company committed to the energy transition.
We will fund the development and construction of identified CCS projects in California with an initial goal of deploying up to $500 million of capital, or $100 million net to Brookfield Renewable.
We expect that the joint venture, where we will retain the option to fund projects meeting our objectives. Future Average
We'll benefit from a first mover advantage through CRC's ownership of prospective CO2 storage reservoirs that are a critical asset for carbon capture in California.
One of the most desirable jurisdictions globally, given the state's low-carbon fuel standards credit system. The state's low-carbon fuel standards credit system.
The joint venture is targeting the injection of 5 million metric tons per annum and 200 million metric tons of total carbon dioxide storage development.
which if reached
could result in an additional investment opportunity of approximately 1 billion dollars or 200 million dollars net to Brookfield Renewable.
Lastly,
As illustrated, the growth of our US business continues to be significant.
However, it is important to emphasize that all of our recent underwriting did not factor in the recently proposed Inflation Reduction Act. Inflation Reduction Act.
and we believe the investments will deliver excellent results regardless.
However, not unexpectedly, if the bill is passed in its current form.
It will without doubt be a net positive to the growth of these investments and our business.
We are fortunate that with the recent acquisitions we have made this year, including Urban Grid, our US-based utility-scale solar and storage developer,
along with the recent acquisitions and growth of our DG business.
as well as our CCS joint venture and our green hydrogen development pipeline that we are uniquely positioned to benefit from the bill.
Our growth prospects in the US are significant.
Our in-house, organic growth, development pipeline in the United States alone covers a broad range of transition products consisting of 35 gigawatts of wind, solar, and storage. of wind, solar, and storage.
and 5 million metric tons per annum of CCS.
With that.
I'll turn the call over to Ruth to discuss some of our recent operational activity.
Thank you, Connor, and good morning, everyone. I'm excited to be speaking with you today about some of our recent operational initiatives. I'm excited to be speaking with you today.
We believe it's our global operating and development expertise, including our commercial capabilities, that differentiates us as a partner of choice and decarbonization. We believe it's our global operating and development expertise, including our commercial capabilities, multiple solutions. organization.
Our 3,200 operating professionals around the world mean we can invest and execute across the entire spectrum of renewable power and transition assets.
We are end to end. For example, we can invest during the asset development stage and leverage our capabilities to secure grid connection, permitting, procure equipment, construct the project, contract the power with corporate off-takers, and ultimately operate the asset. This end-to-end capability is not only a meaningful, organic growth lever for our existing asset.
assets, but it also enables us to sort the wide spectrum of opportunities where we can bring these capabilities to bear and de-risk investments and earn strong returns.
We have a very substantial global development pipeline, which now stands at over 75 gigawatts, along with an 8 million metric tons per annum of CO2 carbon capture development pipeline. Of that, we have 17 gigawatts of advanced stage and ready-to-build construction projects, which we are advancing and delivering on.
We continue to be well positioned from a supply chain perspective, given our globally diversified pipeline and strong global relationships.
Our cash flows have now started to meaningfully benefit from the considerable dollars in the ground that we have invested into our development projects in the past number of years.
These investments will translate into higher earnings that will only accelerate for the rest of 2022 into 2023 and beyond.
Our development investment has increased in recent years, and that will continue.
Meaning we have strong visibility into the future growth of our cash flows as more of our development projects come online.
So far this year, we have commissioned approximately 1,500 megawatts of capacity, which will contribute approximately $20 million of additional run rate FFO.
And we are on track to commission an additional 6,400 megawatts of capacity by the end of 2023.
These are expected to contribute an incremental of approximately $100 million of run rate FFO. This includes our 850 megawatt Shepherd's Flat Repowering Project.
Further, with our scale pipeline, we expect to see continued opportunities to pull forward development and accelerate the deployment of capital at a creative return throughout the
Given disability to execute globally and at scale, we remain a top choice for corporates looking to procure green power.
This is because we can be a flexible partner offering a full suite of decarbonization solutions from our diverse fleet of renewable power and transition assets across the globe. And despite recent pressure on development and financing cost globally, buyers of clean energy are generally accommodating of cost increases in the form of higher PPA prices, given decarbonization imperative, energy security tailwinds, as well as the still very favorably economics that renewable power presents.
Most recently, we signed several agreements of wind and solar development with multinational corporations who are market leaders in their respective industries.
That includes Amazon, BASS, Johnson and Johnson and Salesforce.
Each of these agreements has unique characteristics but would be consistent underlying team of helping these corporations decarbonize their operations.
By way of example, we are finalizing terms on one of the largest national accounts. amazing.
distributed generation portfolios ever awarded globally and we signed a 25 year fixed price renewable electricity supply agreement with BASF, a multinational chemical company. We're going to power one of its largest production facilities, globally, that is currently building.
All of these agreements involve the build-out of significant clean energy and leverage our deep development expertise and centralized procurement platform. And they represent opportunities to continue to enhance our long-term decarbonisation relationships with these global corporations.
With that, I'll turn over to White to discuss our operation results in financial position.
Thank you, Ruth. As Connor mentioned, we had strong results in the quarter as our operations benefited from strong, asset availability.
Higher power prices.
and continued growth both through development and acquisition.
In the current power price environment, we are executing on several initiatives to capture value across our business.
For example, at our hydro assets in the United States and Colombia, where we have a majority of our uncontracted generation over the next five years,
We have been executing contracts at very attractive prices.
At our Punt Store, just this in the UK, we have locked in value through 2024, where we typically only do this month ahead.
Our balance sheet and liquidity to remain strong.
We have approximately $4 billion of available liquidity, allowing us to opportunistically fund our growth pipeline, and no material near-term materi-rities.
Additionally, with the recent $15 billion closing of Brookfield's Global Transition Fund, we have access to scale capital to invest alongside us, which is a meaningful advantage given increasingly volatile capital markets.
During the first half of 2022, we accelerated many of our financing activities, extending the term of our debt, and locking in attractive interest rates before recent rate increases.
During the quarter, we executed over $2 billion of non-recourse financing across the business. And while we got out, originally finding outcomes business.
Notably, on the back of a strong outlook for our Colombian business, and in anticipation of potential market volatility ahead of the recent presidential elections, we raised $630 million in up-finisms at an average term of over eight years.
As a result, our balance sheet is in excellent shape, but an average gesturation across our portfolio of 13 years and very limited floating rate debt. of 13 years and very limited floating rate debt.
Homophilic, which is in Brazil and Colombia, where we have the benefit of full inflation escalation in our contract.
Lastly, we also continue to advance our capital recycling initiatives, which when closed will generate $560 million of proceeds, or $90 million net to broke-field renewable.
On behalf of the Board and Management, we thank all our unit holders and shareholders for the online support.
That concludes our formal remarks for today's call. Thank you for joining us this morning. And with that, I'll pass it back to our operator for questions.
Certainly, ladies and gentlemen, if you have a question at this time, please press star then one on your touchstone telephone. Sorry, star one one. One moment for our first question.
And our first question comes from Line, Ashahn Stewart from TD Securities. Your question, please.
Thanks, good morning everyone. You touched on the developments you've made with corporate off-taker, new contracts, and you touched on the duration for the BASF contract. I'm just wondering if you can give us a little bit broader context on the market for corporate PPAs, what you're seeing in terms of price and duration. What you're seeing in terms of price and duration.
And if there's a sweet spot that you think about in terms of balancing corporate PPAs with traditional contracts and at the margin merchants exposure at this point.
Sure, thanks, Sean. Perhaps I'll start and then I'll hand to Ruth for her to add additional color. Maybe breaking that down into different buckets. The
No doubt the two most important dynamics we're seeing in the market as it pertains to corporate contracts right now is one, demand for contracting of green power continues to accelerate. Year after year, the total quantum of demand that we're seeing from large global corporates is accelerating on an exponential basis. And short term. And short term.
market conditions really have done nothing to to dissuade that that trajectory.
But perhaps what's even more important is there's no doubt been some CAPEX inflation in our sector as most sectors around the world. And what is really interesting and Ruth touched upon this in her remarks is we are seeing the ability to pass along those cost increases into the corporate PPAs in the form of higher prices. And we're not really seeing.
other adjustments as a result. It's not shorter tenor, it's not a lack of inflation linkage. It's simply we are able to pass that price increase through to customers because renewables still is cheaper than the alternative of thermals, which has gone up in price even more. And decarbonization and energy security trends continue to accelerate. Perhaps the last comment I'll make before handing to Ruth is.
Across our business for many years the vast majority of our growth has been tied to corporate contracting.
Feed and tariffs do exist and will continue to exist for a while. They have a long tail. But the vast majority of our new growth is in corporate contracting. And we expect that trend to continue and obviously place to our strengths given our power marketing capabilities. Ruth, I'll hand to you. Thanks. I would reiterate some of what Connor had said. You know, we've been doing this a long time. We have never seen such a world of demand. It's never been stronger for a
The other thing I would say is, look, we've been doing this for a long time and we are somewhat agnostic as to the nature of the contract, whether it's a new build power PPA or more traditional contracts. We look to the fundamentals and that is what's your credit risk, can we get good tenor and duration on the contract. Overall it's a risk management proposition for us. We have a lot of repeat customers that have journeyed from commodity type contracts with us to renewable new build, which has been super.
And overall, I would say, you mentioned merchant power. We generally don't look to hold an author of merchant power in our book. We would much rather de-risk all of our positions, lock in our economics and move on to the next new builds that we have. So that tends to be how we look at things. Hope that helps us.
And Sean, we missed one point, which is just your question around term. We're seeing no shortage of term. You know, corporates are looking for 15 or 20 year contracts or potentially even longer. Really, what this is, is a great insurance policy for them against volatile or higher power prices in the future.
That's great context. Thanks for that. Second question, with respect to energy transition investments outside renewable generation, there is a note of focus on technologies that are economic without subsidization.
Can you give us a sense how you handicap those opportunities?
outside of traditional renewable generation opportunities, how do you think about the other energy transition options you have with respect to not needing as much subsidization?
Perhaps what we can do is look at some of the things that we've done and then look forward into some of the opportunities we're seeing.
If you see the expansion of the types of opportunities, we've looked at from more traditional utility scale, wind solar, and hydro, increasingly our first step out was things like battery storage and DG. From there, we're seeing opportunities in carbon capture where there's very well-defined revenue models that can support the business. And...
The other very large energy transition asset class that is very front and center for us today is hydrogen. We remain focused on it, but we do view it as a slightly longer term growth opportunity as the cost curve for that business comes down and ceases to rely on subsidies.
The only other point we would add as it pertains to energy transition is we increasingly are seeing opportunities in very high quality service providers to the power sector that really provide critical functions to clean energy around the world and as we look at that space we'll only pursue it if we get the right value entry point at the right risk at return objectives.
but we are seeing more and more opportunities in that space that could represent additional growth levers for our business.
That's great detail. Thanks Connor, appreciate it.
Thank you. Our next question comes from the line of Mark Jarvey from CIBC Capital Markets. Your question please.
Thanks, good morning, Roman. I'm wondering if you could shed some more light on the investment in power utilities company. Just, I know you took a direct stake in them. Just maybe you've blocked me through. What point do you want to be? Evidence investors direct an entity versus providers of capital.
Mark, great question. And we'll come at this from two perspectives. One, just highlight of the investment in general and then two are approached to where we want to invest in the capital structure. What this opportunity is, is the opportunity to invest what in what we would describe as a multi-jurisdictional, multi-asset utility, focus across a number of jurisdictions that we're very comfortable with.
financially as a capital provider but also as an operating partner in achieving those goals. And really the near term opportunity is facilitating the build out of a 1.3 gigawatt renewable development pipeline that they have across their portfolio.
As Mark alluded to, we invested both through a preferred equity structure as well as taking a minority position in the common equity. When it comes to the exact structure of how we want to invest alongside our partners, it always comes down to two things. Are we getting the right risk adjusted returns? And two, do we have the appropriate level of influence and control? And is it values or can we stay within some point and not blah blah blah and more or less?
The structure we pursued in this transaction works very well. The preferred equity investment provides very nice downside protection to our returns. Well, the minority equity position ensures that we have the appropriate level of influence and can really bring our operating capabilities to bear to drive the decarbonization plan up the company.
Thanks, Collin. You mentioned that they came to you. I'm wondering also just what the interview transition fund out there now, you've done some stuff on CCS.
different deals here, you're talking about.
What is the interest coming back into you as opposed to you guys chasing deals? Has it changed at all in the last year or so?
I would say it's been very significant coming back to us. No doubt we continue to have a large team around the world that is pursuing and manufacturing transactions the way it always has in the past, but no doubt the launch and the recent conclusion of the fundraise of BGTF has been very helpful in highlighting how we can be that very helpful provider of capital as well as operating partner for businesses when looking to scale.
decarbonization solutions, but two, who need a partner and a capital provider to decarbonize their own operations. And no doubt some of that inbound interest is showing up in the level of growth we're seeing in our business today.
Okay, and then just coming back to the corporate PPA, is there any segment on the market you're missing out smaller industrial off-takers, smaller commercial entities, what floor is that just knowing not the focus for you? And then if power prices do fall back down with the little volatility, do you feel like the pace of the corporate PPA market? I guess contracting that we've seen and you talked about being exponential growth with that flow.
Certainly. So in response to your first question, this is simply a decision we have made to play to our strengths. And our strengths are we can be a scale provider of green power. We can also be a provider of green power across. We can also be a provider of green power across.
all major technologies, whether it's distributed generation, solar, wind. But most importantly, we can be a provider of green power to global corporates anywhere in the world that they operate. And that is something that is very, very unique to Brookfield Renewable, the ability to follow corporates, leading global corporates across all industries around the world to support the decarbonization of their operations. We're supporting the Fleet Book Awards. kitchen??ty music. America breaking the eight quarter degrees throughout theiguous Bueblo ?iel, Toronto. America's America's America's America's America's America's America's America's America's Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing Gop'ing you
Our decision to do this is simply because it is where we are differentiated and we can do the largest and most attractive opportunities. No doubt, we are also doing a number of smaller deals on an ongoing basis, but our ability to differentiate on those large global partnerships is a competitive advantage that we certainly want to continue to pursue.
To your second question around, if power prices come down, do we think demand for corporate PPAs will be reduced? Are there products that virus do require the successor to the Q&A? Yes, that's definitely a normal protocol. You've tilltom mesure your competitor. The right time to report a release fixing it using a unintended reduced.
Absolutely not. And apologies for being redundant here, but the macro drivers of our business are far bigger than short-term power prices or short-term market volatility. The trends around decarbonization that are often set by corporates themselves that are actually outpacing government regulation, the focus on energy security, and lastly, the point around economics. All of those just continue to be solidified.
and therefore if prices are high or prices are low, we don't see demand decelerating at all.
Okay, thanks for taking my question.
Thank you. One moment for our next question.
Our next question comes in line of Rupert Mayer from...
National Bank Financial, your question please.
Good morning, Luca here filling for Rupert. So I'd like to know if you could give us more color on your edgebook in the Northeast US for your eye draw segment.
Certainly. Thanks, Robert. So, Thank you.
Thank you for the question, because it's a very important dynamic to highlight. There's really only two places across our portfolio where we hold to active information.
any scale amount of merchant exposure. And that is our large hydro portfolio in Columbia and secondly our large hydro portfolio in the United States. And there's two important dynamics here. One is we are absolutely not averse to contracting these portfolios. We simply haven't wanted to do it when we think power prices were missing.
low and below call it run rate fundamentals. And that certainly had been the case for a number of years prior to what we've seen in call it the last 6 or 12 months.
The second dynamic we would highlight is when we are not long-term contracting these
assets, we do tend to enter into short-term rolling hedges just to facilitate settlement of our power sales. So therefore, we refer to it as merchants, but they're still under six, nine or 12 months rolling contracts. Why that's an important dynamic is when power prices began to go up in the latter part of 2021, as you move into 2022, we were already contracted under these short-term contracts.
well into Q1, a bit more into Q2, and on a decreasing basis into Q3 and Q4. And therefore, the benefits of the higher power prices we are only now beginning to see flow through our results.
to put all that together and come back to your question, given where power prices are today, we are moving quite consciously to lock in these high power prices as far as we can into the future. Obviously, only where there is liquidity in the market and to only two levels that are appropriate for our P50 generation. But at this point, we are locking in our hydros two to three years in the future in this market.
And maybe it's why here, maybe the only thing I would just add just to add context to the numbers. Is in the prior quarter, we put out a number of 120Million dollars. From the benefit over the next 5 years from the benefit of doing that. And it's really 5500TWh that we have coming off contracts that's available for the benefit of pricing and locking those in on a forward basis at the rate at the time.
Are you seeing much margin pressure for the projects in the pipeline? And if yes, is there a way for you to upset? Do you have the ability to renegotiate any contract prices?
Certainly, so Rupert, I'll take this and then I'll hand to Ruth because some of the dynamics we're seeing with our interactions with customers are really constructive. What I would say is it's really this point that we have been able to increase the market price of the PPAs that we are executing to take into account the inflation that we're seeing in CAPEX costs, whether it be wind turbines or solar panels. So maybe our wireless solar panels. solar panels.
This has led to PPA prices going higher, but I would say that the step change up in PPA prices has almost fully offset the increase in CapEx and essentially another way of saying that is our development returns were not seeing significant compression. Yes, the CapEx is higher, but the PPAs are going higher to offset that. Perhaps I'll hand to Ruth to highlight some of the really constructive conversations we're having with customers around.
into our PPAs and or allowing for re-openers at different points of the capex cycle. So again I'd reiterate a number of things we said earlier our customers see enormous value in the long-term PPAs and the security and pricing that they're getting from us. So any escalation in capex is absorbable at an economic level for them and still presents a lot of value. So they really want to work with us.
on that rather than a scenario where they have seen a number of smaller developers just hand back contracts. Nobody wins in that scenario. So we're working very constructively. In some cases, we're delaying slightly. In others, we're putting some mechanisms into contracts. And so that you're overall, we're in a good place with our economics. The other point I would make is this is this situation is tending to be concentrated and exacerbated perhaps in the US. We have a global pipeline.
So we can accelerate in some jurisdictions and pull back in others if the economics aren't coming towards us. So lots of options in the diversity of our book, to be honest. TO THE ANED.
Awesome, thank you. I'll jump back in the queue.
Thank you. One moment for our next question.
And our next question comes from the line that been from BMO. Your question, please.
All right, thanks for morning. I wanted to ask on your development pipeline and over the last 12 months or 18 months.
How much of that increase is mostly due to any new conditions or conditions or
Thanks Ben, great question.
I want to come back at your question in kind of breaking things into three buckets.
Unequivocally you are correct. We have bought a number of businesses that come with large development pipelines. And that is the largest chunk of the expansion in our... Uh... um... uh...
Pipeline capacity over the last 12 months. We don't have a specific number for you here today, but no doubt I would expect that's probably about two thirds to 70% of the expansion in that number. But there's two other things that have also driven the remaining call it one third or 30%. One is our operating teams around the world in every jurisdiction that we operate in now. We have a local Brookfield Renewable Boots on the Ground Development.
come with an existing development pipeline, but also come with teams that continuously grow those pipelines. We've seen Exilio, we've seen Urban Grid, we've seen Sonovus, we've seen our DG business.
When we bought those businesses, they came with the development pipeline, but under our ownership, they've also organically grown those pipelines higher. So, I don't know if you put that third bucket in M&A or organic. It's a bit of a mix of both, but that's a very significant amount of the increase as well.
grown those pipelines higher. So, I don't know if you put that third bucket in M&A or organic, it's a bit of a mix of both, but that's a very significant amount of the increase as well.
Okay, great. I'm just thinking too that when do you think that
for the development projects you're acquiring. You're paying very little value.
for it in the initial price, but you're basically probably accelerating my years the ability to crystallize volume. Cummings themselves.
Certainly, there's no doubt that the development pipelines we've acquired over the last 12 to 24 months are more valuable today than at the time that we bought them. As many of those development assets are not only worth more, but there's the opportunity to pull those assets forward and pull them out of the ground and therefore on an NPV value basis, simply bring those cash flows forward and increase their value that way.
The other thing I would highlight is when we buy developers, it is probably flippant to say there's a free auction on the development pipeline, that is probably unfair, but when we do our due diligence and underwriting, what we do is we look at what is operating, what is very advanced, and we look at all the different stages of assets in the development pipeline.
and typically go site by site to determine the probability of those assets coming through and coming out of the ground in the near term. What I would say is you do attribute some value to the optionality of some of the early stage projects, but I would say that the value we attribute to those is very, very low and we have probably seen some significant gains there over the last 12 to 18 months.
Yeah, I guess you get a pay for the percent of that's what equity. I'm also wondering, lastly, there's a comment earlier around, I don't know, that's redeploying capital. Exactly, exactly, else goes into sure debt.
be more flexible of where you want to invest geographically. Can you talk about just areas where you've maybe pulled back on focus and other side areas where you've spent a bit more time on?
Certainly, it's a good question, I would say. If we think about our global portfolio right now,
Most of our regions are really firing on all cylinders and that's because the global trends are...
Sorry, the trends driving our business are global in nature.
No doubt, the vast majority of our activity in the last 12 months has been in the United States. You know, there has been a concentration there in the last six months, but I would say our general rule of thumb of call it 75% of our business being in developed countries primarily in North America and Europe , that largely holds. And that's because we don't necessarily do more deals in those geographies, but that certainly tends to be where we do the largest transactions.
and the
Some of this is highlighted in our shareholder ladder, but in just the last quarter, we continue to see growth in our Brazil business, our Indian business, our Asia-Pacific business. So there's nowhere that we're really seeing things decelerate in the current environment.
Okay, great. Thank you.
Thank you one moment for our next question. Our next question comes from the line of David Quesada from Raymond James. Next question please.
Thanks. Good morning, everyone. My first question here is just on the JV and the investment with California Resources Corporation. I'm just curious what kind of role you'll take there aside from an investing role. Will you help finding off-take counterparties or anything like that? And just any thoughts around whether or not you could see synergies between that carbon capture investment and other ones you're making maybe down the road?
Certainly. So maybe just to, thank you for the question David, maybe to highlight
why we're so attracted to the JV. We obviously made our first investment in carbon capture earlier this year, an investment in a company called Entropy in Alberta, Canada. Prior to making that investment, we did a global review in our core geographies of which markets we thought were the most attractive for CCS and the markets we came up with were Alberta.
California and some markets in Europe . So the first thing we really like about the partnership with CRC is we think it targets one of the most attractive markets globally for CCS. And then secondly, once we're targeting the most attractive market, we feel we are partnered with the most well-positioned counterparty.
CRC is one of the largest non-governmental landowners in the state. Therefore, they have access to both land rights and mineral rights that gives them access to significant amounts of potential poor space. And they also have some of the most advanced permits for CCS in the United States.
So what are we bringing to the partnership? You absolutely nailed it. It's not just capital. Very similar to how we...
to the partnership. You absolutely nailed it. It's not just capital. Very similar to how we...
leverage our relationships with corporates around green power, some of the largest potential customers of the CRC JV are some of our largest existing power customers. So we see significant overlap and synergies there. And then secondly, not dissimilar to what we see across our hydro business, our solar business, as we add more platforms and more businesses in the CCS space, we see significant overlap and synergies there.
There is simply the ability to share best practices, share knowledge, share wins to enhance all of our investments. And we think both Entropy and CRC will benefit from that.
The fact that we're, we own both those platforms and potentially could own other CCS platforms in the future. So
That's great color. Thank you for that. And then maybe just one more for me. There's some commentary and release about trying to move as fast as possible to build new projects in Germany. Just curious if there are any goalposts you can provide around the size of that opportunity. And...
Yeah, just any other opportunities that maybe you could see more broadly in Europe related to that high power price environment. Yeah.
Certainly, and there's two things that are helping that ability to accelerate projects. One, there's obviously very, very strong demand. What is happening, due to the energy environment in Europe is essentially every major government, yes, they are taking some short-term measures to try and reduce energy prices.
but the long-term solution is the accelerated build out of renewables. So in Germany, what I would say is our total investment in our German solar business that we bought right around the turn of this year, we've probably accelerated our capital deployment in totality, about 40%. So a fairly material step change, and that's probably a good proxy of some of the opportunities we're seeing.
But the other point that's really helpful is that this is not just driven purely by economics. One shift we are seeing in Europe and it absolutely has room to run is governments are...
working to reduce some of the obstacles around permitting and building renewables and working to accelerate the process of bringing projects out of the ground. And we've seen that across a number of markets in Europe and that's no doubt benefiting our ability to pull some of those projects forward.
Appreciate the color. Thanks, Connor. I'll turn it over.
Thank you. And our next question comes from Lina, William Krippin from UBS. Your question, please.
Great, thank you very much. First question here, you've talked in the past and a little in the press release about locking in your component prices when you're signing contracts with customers. Just curious if you could speak to any component availability, and how that's looking particularly in the US, just given UofLPA enforcement has taken effect and any impacts you're seeing there, thanks.
Certainly, so I'll start and then I'll hand to Ruth.
We continue to see that the very dramatic benefits of one, the global scale of our business and two, are centralized procurement capabilities. And what I would say is, as it pertains to some of the supply issues related to equipment procurement across our portfolio, we are not immune to it in that it is taking significant amounts of being recognised.
our team's time and effort, but it is very manageable for us, given the capabilities we have and the relationships we have. So it is taking a lot of effort and a lot of time, but we are managing through quite well and it's certainly not having any noticeable or material impact on our business. Perhaps I'll hand to Ruth to provide some more additional color. Yeah, sure, Connor is right. We're saying it all for the time on this topic.
The supply chain continues to be disrupted, particularly as it pertains to the US. That ironically is providing some tailwinds elsewhere in terms of being able to picture equipment. So not all bad in our book. Our global supply chain team, based that of APAC and also in North America, are working their way through this. The counterparts that we were dealing with on the solar side are adjusting traceability with regard to that US PLA is going further than they expected.
And I think it will just take time for those supply chains to adjust to that new requirement. As Connor mentioned, look, we're not materially affected because of our global diversification. The US challenges our tailwind to other jurisdictions. And within the US, it's more for us about the timing of our pipeline. That's helping. And we have some flexibility, as we mentioned earlier, with our counterparts, who are being very constructive where we need them to be. So managing our way through it, overall, not material to our business, for chewedously, because we didn't have a deep constriction of activity.
Connor, if you could maybe just give us some perspective on.
Any organizational constraints you see right now in the renewal group. And I asked the question in part because I asked the question in part because and I asked the question in part because
Capital doesn't seem to be lacking. Opportunity doesn't seem to be lacking even the pipeline that you have. Even the pipeline that you have.
You know, economics can vary and that can evidence low, but you've also got a global platform, you know, supply chain issues were mentioned earlier, but that also varies by region. So maybe just step back and big picture of the organization, what constraints exist to you, the really accelerate growth to even another level from where you are now.
Certainly, and appreciate the question, Andrew. No doubt a big focus is from our side on the operational level is scaling up our team.
and that has been both enhancing the amount of resource we have on the investment side, but you nailed it in particular, the operating side as well. And we've been looking to scale up our resources, I would say, in all of our markets over the last two years. And well, it is a competitive market out there for acquiring and retaining talent.
I would say we feel very, very good about our position and the number and quality of people we've brought on board. It's absolutely not going to slow down. Our capital, as you mentioned, is growing, the scale of our operations is growing, so we'll continue to scale our people as well. In terms of limitations on the growth of our business,
We're thrilled about this quarter. We're thrilled about how our operations were performing. We're thrilled about the level of growth. And what excites us is we have very good visibility on this level of activity continuing throughout the remainder of 2022. So while our business is growing and we are requiring a global scale up of our operations, we're certainly not seeing bottlenecks at this point, but it's something that we absolutely need to stay on top of as we take these.
and it also provides a different benefit which is not all markets accelerate at the same pace. And we often, when we see opportunities in a specific region, we will pull resources from another region that have relevant experience or relevant knowledge to help us in either growing a business or doing due diligence on an acquisition. So I think...
that the scale and growth of our platform is attractive to market participants in the space who are looking for roles. But the other thing that we shouldn't underestimate the benefit of in terms of our global platform is the ability to pull resources from any geography or any expertise or any asset class and deploy those resources into a specific transaction if they can be useful.
scale and growth of our platform is attractive to market participants in the space who are looking for roles. But the other thing that we shouldn't underestimate the benefit of in terms of our global platform is the ability to pull resources from any geography or any expertise or any asset class and deploy those resources into a specific transaction if they can be useful. So we've seen this.
all over the world, you know, if we're entering a new asset class in a specific geography, we don't learn from zero. We pull very high-level knowledge from other parts of the organization to that region such that we can start ahead of the game and simply accelerate from there.
You know, if we're entering a new asset class in a specific geography, we don't learn from zero. We pull very high level knowledge from other parts of the organization to that region, such that we can start ahead of the game and simply accelerate from there. Okay, thank you very helpful.
Thank you. Our next question comes from the line of
Najeeb Badal from IA Capital. Your question, please.
To go back to the public of M&A, clearly have a good liquidity and there's not only a rush or need to sell us the fun growth. I'm just wondering if you can talk about...
That more, what are you seeing, sort of a large scale opportunities?
You've been very successful this year with M&A. I was just wondering about the dynamics between...
smaller scale versus larger scale dual flow.
Certainly. Thanks, Najee.
Perhaps the most interesting thing in the current environment is, you mentioned it, we're quite fortunate to have very significant access to capital. Our balance sheet is in a fantastic position. Over the last 12 months, we've pulled forward a lot of our financing activities. We have very little to do over the next 12 months. So, we are sitting on significant amounts of liquidity. Plus, we have our partner capital through the Brookfield Global Transition and Brookfield Infrastructure funds.
We think this could really help in terms of M&A growth as we look forward in the short to medium term. No doubt capital markets are a little bit more volatile and those market participants that rely on the capital markets in order to execute M&A may be a little bit less competitive or a little bit more active in the short to medium term. We are not burdened with those restrictions and therefore we do think M&A will remain quite active.
certainly throughout the remainder of this year. Would you say then that the current market you're seeing better returns on on M&A versus development assets?
It's a good question.
Perhaps what I would say is they're certainly not worse. I'm not sure we're quite at the point where we're seeing distressed sellers. I think that would be a misrepresentation of the current market but what we are seeing is when we look at assets, there are simply less market participants due to the current economic environment. So maybe there is some small upside to returns but perhaps better characterized as absolutely not worth.
Okay, the top, and maybe just staying on the topic of competition. I think SSEW and you both provided some very interesting details about your joint bid and the offshore wind market in Novo and...
Are you seeing more of these types of opportunities of being able to offer maybe more complex structures versus let's say a straightforward government subsidy or versus even your competitors in different markets? And what do you think that strategy of having more tools in the toolbox can really play to your advantage? If you truly say F
The strategy of having more tools in our toolbox, that's been our game plan for years. And there's two things we focus on is one is exploiting the benefits of having those additional tools, but two, constantly adding new tools to our toolbox. And a great example of that is now we have carbon capture as a decarbonization solution that we can offer to our biggest customers around the world. We didn't have that.
that is mutually beneficial for both us and our counterparty and in the current environment there's certainly a lot of opportunities to do that because both counter parties are looking for those unique solutions and there are simply less market participants who are well positioned to execute.
Thank you very much for those details.
Thank you. This sounds conclude the question and answer session of today's program. I'd like to hand the program back to Connor Tesske for any further remarks.
Great, we thank everyone for joining the call and the support of our business and we look forward to providing you an update at our end. Thank you and have a great day.
Great. We thank everyone for joining the call and the support of our business, and we look forward to providing you an update at our end. Thank you and have a great day. Thank you and have a great day.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. Good night, everybody.
The conference will begin shortly. During Q&A you can dial star 11.
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