Q3 2022 Boralex Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the Boralex third quarter of 2022, five financial results Conference call.
Please note that all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session in which the financial analyst shareholders and investors will be invited to ask their questions.
To ask a question piece slowly press Star one and then one on your telephone.
Also note that the call is being recorded.
For webcast participants you can also ask questions during the conference, but they will be answered by email after the call.
Finally media Representatives are invited to contact Tammy Lovett Cheol advisor external communications.
Her contact information is provided at the end of the quarterly press release.
I would now like to turn the conference over to Mr. Stefan Malone Senior director of Investor Relations for Boralex. Please go ahead.
Thank you operator, and good morning, everyone. So we'll come to bottlenecks third quarter results conference call joining.
Joining me today on the call, but I think that cost, our president and Chief Executive Officer.
I met executive Vice President and Chief Financial Officer, and other members of our management and finance team.
Mr. <unk> will begin with comments about market conditions and the highlights of the quarter afterwards, Mr. Guilmette will carry on with financial.
And then will be available to answer your questions.
As you know during this call we will discuss historical as well as forward looking information so when talking about the future. There are a variety of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. So these documents are all available for consultation at SEDAR Dot com.
And our webcast presentation document the disclosed results are presented both on a consolidated basis and on a combined basis unless otherwise stated all comments made in this presentation will refer to combined basis figures.
So please note that combined is non-GAAP financial measure and does not have standardized meaning under ifr.
Accordingly, combined may not be comparable to similarly named measure used by other companies for more detail see done none I FRS and other financial measures sections sector I'm sorry in the MD&A.
A press release the MD&A the consolidated financial statements and a copy of today's presentation are all posted on our website at <unk> Dot com under the investors section. So if you wish to receive a copy of these documents. Please contact me.
So Mr. <unk> will now start with his comments. Please go ahead. Thank.
Thank you Stefan and good morning, everyone.
It's a pleasure for me to present, our residents and achievements for the third quarter.
As you have noticed we continue to vigorously execute on our growth and diversification strategy during the quarter 600 megawatt storage project in preparation for the upcoming request for proposals next January in Ontario, and the 111 megawatts of wind and solar project in France.
Added to our pipeline.
And 39 megawatts of project, including our line Kim Wind project in Scotland transition into the construction already to build phase of our gross baths with commissioning expected for 'twenty 'twenty four.
This proves we have invested at the right time in the expansion of our development teams with recent and expected changes in regulations to further accelerates the development of renewable projects. We are expecting to continue delivering strong gross additions to our pipeline.
And gross baths.
Please note that our third quarter resins include a provision relating to the adoption on August 16 of the new 2022 supplementary budget Act in France regarding.
Additional revenues recognized for certain feed in premium contract since the start of the fiscal year.
Provision was therefore recorded of which 28 million relates to revenue generated in the first half of 2022 does.
Provision largely explained the decrease of our route quarterly EBITDA.
Weather for the nine months period, ending September 30, our EBITDA grew slightly reaching 379 million compared to 372 million in the same period last year.
Production in the quarter was down compared to last year and two anticipated production, mainly due to difficult wind conditions in France, as well as unfavorable conditions in hydro and solar in the U S.
Looking ahead, we are in a very solid position to pursue our growth was over 900 million in available cash and authorized financing.
We will also benefit from new contract signed to optimize our revenue starting in the fourth quarter. This year.
Market conditions continued to rapidly evolve by region during the quarter.
In August the United States announced its most ambitious climate built putting the country on track to achieve a 40 person reduction in emissions by the end of the decade to build include 370 billion in grants and tax incentives and aims to increase investments in <unk>.
<unk> energy electrification of the economy and clean energy generation in the United States to help reduce inflationary pressures.
In Canada, the federal government announced that the department of finance with engage was experts to establish an investment tax credit of up to 30% for investments in clean technologies with a focus on net zero technologies battery storage solution and clean hydrogen.
Yeah.
The credit would be available as of the day off budget 'twenty 'twenty, three and no longer in effect at the start of 'twenty 35 subjects with fees out starting in 'twenty <unk>.
Default economic statement is an affirmative response to the United States Irey specifically.
The decision to make the 30 persons credits refundable adoption of these provisions will increase interest in renewable and storage across Canada.
The credits would likely have a significant impact on our projects already under contract.
Yes.
Dinesh and accurate.
We'll also increasing.
The opportunity is.
As for other project like Ontario storage, corporate Ppas as province, and large consumers realize that credit where we do the cost of renewable energy.
In Quebec.
Regardless, we elected on October three 2022, he sparky has committed itself to adding three gigawatt of wind power on top of the RFP a 300 megawatt during the week.
And on the one.
Gigawatt announced recently.
In Ontario, the independent electricity system operator.
You will be called upon to develop procurement mechanism to meet the needs for power confirmed for the years from 'twenty 'twenty five onwards, Rfps I expected to be launched in.
In France, we are waiting to get the latest details of the various measures to accelerate renewable energy development.
This information.
Information we have at this point are the following first.
Concerning to cap on merchant electricity price French is looking at the cap of 100 any euro per megawatt hour as was proposed by EU was the possibility to establish different cap spy technology.
It is not clear at this point, how these cap would apply and which type of contract. It would cover we should get more clarity in the coming weeks.
For the moment the proposed legislation indicates this scaffold apply starting from December 1st 2022 until the end of 'twenty to 'twenty three.
Second we are still waiting to get the price threshold on which revenue sharing will apply for the feed in premium contract.
As you'll have noticed in our financial results.
As the price the price threshold is not known we had to estimate it as well as the implementation guidance often you look.
Finally, we are also waiting to get more information on the application of the 18 months period before activating our contract after the commissioning of a new plant.
In the United Kingdom, the policy of Decarbonizing, the electricity mix by 2035, and the desire to resolve the energy crisis, particularly by increasing energy production are favorable to the development of renewable energy, mainly solar power in England and onshore.
Sure wind power in Scotland.
I would know rapidly review the main variances.
Our portfolio of project and gross baths.
The 47 megawatts in the early stage came from the addition of a new wind project and for new solar projects totaling 211 megawatt in Europe . The increase of the expected capacity of two wind projects and five solar project in Europe for a total of 71 megawatt.
The increases these increases were partially offset by the discontinuation of certain project and the transmission the transition of projected mid stage face.
Project in the mid <unk> and that Vince stages continue to progress with some adjustments between phases and no material changes to report.
In total our pipeline new comprise boucek totaling three nine gigawatts of wind and solar project and 792 megawatts of storage project, including the addition of a 606 hundreds of storage project in the third quarter.
Let's review changing changes to the gross baths now three projects from the secured stage transition to the ready to build phase <unk>.
<unk> project, our 13 megawatt solar project of Chris.
And the 20 megawatt for wind.
Wind project of our food in France, as well as the hundreds and six megawatt wind project Limekiln in Scotland.
These three projects will benefit from long term corporate contract with commercial Counterparties.
The first two projects are expected to be commissioned in the first half of 'twenty 'twenty four white lime kiln is expected to be commissioned in the second half of 2024.
Finally, the <unk> powering project was commissioned during the quarter, bringing our total installed capacity to two five gigawatt.
I won't cover in detail the progress made in our four strategic directions as I have already talked about the major points, but please note we continue to optimize maintenance during the quarter. These.
This complete my part I will know, let Bruno cover the financial portion in more detail and we'll be back later for the question period.
Thank you Patrick good morning, everyone.
I will start with a review of the progress made in light of our 2025 corporate objectives.
Progress made on our EBITDA in <unk> was affected this quarter by the recognition of the provision on French revenues mentioned earlier by Patrick.
Our progress should resume next quarter.
Our reinvestment ratio stands at 54%, which is in line with our 50% to 70% target.
About our CSR strategy, we continued to make good progress on the environment, social and governance fronts as presented on slide 15.
Our balance sheet is very solid with more than 900 million in available cash and authorized financing facilities.
To continue implementing our plan for growth.
I will now cover the financial results for the quarter starting with production.
Wind production in Canada was slightly lower than anticipated, but 4% higher than in the same quarter last year.
And France, where wind conditions were particularly difficult this quarter given the important heatwave wind production was 20%, 21% lower than anticipated and 6% lower than the same quarter last year.
Overall total wind production for the quarter, combining Canada, and France was 11% lower than anticipated, but in line with last year.
Turning to hydro now.
Canadian Hydro production was 5% higher than anticipated and 20% higher than last year.
In the U S production was 16% lower than anticipated and 58% lower than the same quarter last year hydro conditions were particularly difficult this quarter compared to very strong condition in the same quarter last year.
Total production for the hydro sector was 2% lower than anticipated and 22% lower than last year.
Finally production from solar asset was 13% lower than anticipated, but 4% higher than the same quarter last year.
In summary.
Total production for the quarter was 10% lower than anticipated and 6% lower than last year.
Third quarter combined revenues were down 17% compared to last year, mostly due to the recognition of a 28 million provision on French revenues regarding the first six months of the fiscal year and to lower production levels.
The reduction in revenues resulted in a $38 million decrease in operating income and $30 million decrease in EBITDA.
Please note that the increase in corporate costs.
Related to the growth of the workforce and higher external advisors costs to support our development.
On a consolidated basis, we have generated 90 million of consolidated net cash flows related to operating activities compared to $47 million in the third quarter last year.
Yeah.
Cash flows from operations was $40 million in the third quarter at 26.
Million decrease over the same quarter last year, <unk> was $1 million compared to $21 million in the same quarter last year.
This decrease is due to the recognition of the provision for the feed in premium.
Contracts mentioned earlier.
Our financial position is very solid with our net debt to total market capital ratio of 35% on September 32022, compared to 48% on December 31, 'twenty, one 2021.
In conclusion, the decrease in the third quarter EBITDA is attributable to the provision.
Recorded following the adoption of the 2022 supplementary budget Act in France, We continued to make constant progress in the project pipeline and to transition projects and Theyre ready to build phase.
We have significantly accelerated our development in the energy storage.
And we are in a strong financial position to finance our disciplined growth.
Finally.
The evolution of our final management model will allow us to be even more agile and closer to our key markets.
Thank you for your attention we are now ready to take your questions.
Thank you.
Minder Tobolski question, you will need to slowly Presto, one and then one on your telephone and wait for your name to be announced once again, it's still one and then one on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster. This will take a few moments.
We are now going to proceed with our first question.
And he is from the line of now sending from RBC capital markets. Please ask your question. Your line is open.
Great. Thanks, and good morning, everyone.
First question relates to France can you just run us through.
Again, the various buckets of exposure to the merchant power price hike obviously.
The Big uncertainty you have now is that 200 megawatts of 201 megawatts.
And then I think starting in October you have is it close to 300 megawatts.
Ah projects, who have canceled and then you also have projects that you'll be completing this year, but can you just run us through some of those buckets.
Yeah. Good morning Knutsen. The first one that you mentioned is 201. This is cfd contract and this is the one that will be affected in full for which we have taken the provision dimension provision then.
And then we have 326 megawatt.
Which is.
Early termination of contracts for which we have signed a contract with a utility to sell the electricity at higher price for Q4 next year.
And 'twenty 'twenty four not hundred persons, but.
Something like 90% and 60% or 80% sorry for 2024. So this is so this is contracted and the remaining is pretty merchants and then we evaluate that today.
The purely merchant you too.
<unk> under commissioning is roughly 5% of total installed capacity of biologics.
So 123, one megawatt and three megawatts total merchant.
So what that is.
I think to do it.
Hi, good morning.
Okay.
So it's the two O one it's the $1 26.
And then is that 123 part of the 126.
Or why.
When you say that one for you.
$3 three six.
Our three bucket so.
The two O one 326, and $1 23 and within the 326, there is roughly a 10 person going to a 20 person which is merchant exposed yet today.
And there is a 90, respectively 80 per cent for 'twenty 'twenty, four which is already contracted.
Cultural party at the higher price.
And we contracted that dream during when when we receive confirmation letter during the summer.
Okay.
And okay, if I may.
I just wanted to add a comment on that just to make sure we were.
Good luck for the two O one kid.
This is a.
The volume for which we took the provision.
In Q3, so you should expect that in Q4 will do the same.
As we did in Q3, so meaning that we will record registered the revenues, but we will reverse it immediately immediately after an.
Unless we get the threshold you know published by that French government.
So there is no upside there.
For the 326. This is as Patrick mentioned volume, we exited four and we re contracted just to be clear on that right. Now there is a law in France.
Proposal <unk>, suggesting that this would be capped at 180.
Euro per megawatt hour.
With the possibility to.
Modify the 180.
Up or down by technology.
Up to 80 Euro up our 80 Euro down Okay. This will start according again to the proposed law.
December 1st.
And then the third bucket. The 123 megawatts. This is pure merchant volume that we have.
It's that combination it's mainly in France for the recently commissioned asset, but also a small portion of U S. Hydro.
Okay.
Good.
Okay. Good.
And then just on that 326 megawatts, where it looks you mentioned that it's 80% 90% contracted so like.
Are you contracting at rates that are above the 180, so you'll get capped out or are you trying to blend and extend and trying to kind of reduce the power price, but extend the term.
Today, its contracted at higher price than hundreds.
Yeah.
Okay.
Price for a short term.
Yes for the next five quarter its higher price.
Okay.
<unk>.
That's why I mentioned, the Nelson that this this volume.
Starts you know like here and first of October .
But the law the proposal out in France.
180.
Euro cap starting December 1st.
Up to the end of 2023, so that's that's what's proposed so before that.
It should be good.
Yeah.
And we this.
Now as it is currently.
And revision by this the Senate in it.
And we're waiting to hear more from that.
Could could be okay, I'll be quick because it's just again, it's specific but the government the French government used at the that's all been necessarily the <unk>.
<unk> track system does fast strike doesn't exist for the Senate. So it's under review by the Senate Commission than by the Senate. Then if there is difference there would be a mixed commission between Senate and that's helping to show that so sort of like three.
Three four weeks maximum.
Okay and then just one last question here so is there any.
Is there a risk that.
Is there any overlap between the 201 megawatts.
Revenue sharing versus the price cap I could those 201 megawatts be potentially.
Potentially hit by the price cap starting in December and then also be subject to some.
Additional sharing with with the government no no no I don't think so I don't see any possibility that there is.
Double risk on this.
Okay got it.
Taken up a lot of your time I still have a number of questions, but I'll get back in the queue.
Thanks Hudson.
We are now going to proceed with our next question.
The next questions come from the line of David Quezada.
From Raymond James Please ask your question your line is open.
Thanks, Good morning, everyone, maybe I can start just with one quick confirmation I believe you said of the 326 megawatts and the early termination bucket. The contract that you signed starts effective October 1st 23, So Q4, 'twenty three and extends for.
Five quarters to the end of 2024 and that was 90% of that $3 20.
<unk> stomach silbert 2022 it already starts.
Hi.
We're seeing that.
The five quarters, including Q4 2022.
We have signed.
We have.
Uh huh.
Also defined 80% locked defined the price full 80% of the expected production.
In 2024, but it's under D.
100, <unk> you rule capped potential cap.
Okay.
<unk> produced contract.
It's also important.
Excellent okay, great. Thanks for that confirmation and then maybe just on the on the provision and I guess the potential threshold prices. It is it fair to say you basically took kind of the most.
Conservative stance, you could with reversing basically all of the excess revenues are taking provision for the all of the excess revenues and how much how much variability do you see the potential threshold price like do you think that there is.
The chance that some of that provision would would get taken out eventually.
So David Thank you for the question.
Yes, we have been we have taken a reverse.
The revenues for.
Or that that bucket, the 201 megawatt to Patrick mentioned.
We've taken that.
The most conservative approach, we don't think there is a lot of.
A lot of upside related to that position given this.
This was presented by by the government, it's sort of going back to the intent of the contract or the initial contracts. So.
We believe that.
We're conservative but at the same point not.
Also not far from from from.
Even though there is we're still waiting to hear what the <unk> price adjustment price will be.
Okay.
Okay Fair enough. Thank you for that and maybe just one last one for me on France.
Okay.
When you when you think about potential improvement or I guess acceleration of the permitting process and I realize maybe you don't have all the details yet but.
But I'm just curious like what would you be hoping for what how how much.
How much quicker could projects.
It started to be permitted compared to where they are now.
But typically.
They're they're not not yet.
Korea or something paper, but there was a what they call the SIFCO layer. So a letter from the environmental.
Minister of environment through the preferred the people were issuing to see that all the administration should be quicker and take that into account. There was also a.
Our new decreasing debt.
The proteins some limit in term of the delay of instruction by the court when there is a recourse.
They also suppressed in the past there was true potential recourse at the beginning you have two months to make a recourse directly to the preferred in two months to go through the court no you have to go through the court directly. So this is city. Many thing a two months delay which was used by every opponent to file at the last day of the.
The periods. So so what I expect as you know they really need.
Energy very quickly so they really need to accelerate there was also a letter last Friday from the minister to see if we can if we can.
The reduced curtailment of production.
Due to noise or any other curtailments, we should do it during the winter because we really need power. So it show you Oh much friends is needing energy so I cannot.
See you precise delay reduction, but for sure all the seabed survey would be aligned and understand that they would serve the country by accelerating the things and on the other side.
The value for the end customer in France is really important because.
The the contribution of wind evaluated for next year.
Is minus 13 billion euro.
The reduction cost for the end customer of us invoice.
In two point almost three to seven five.
Billion Euro from solar. So this this this is a real clear tipping points also in the mind of the people in the street and politician should follow that.
Okay.
That's great color, Thanks, Patrick I'll turn it over.
We are now going to take our next question.
It's from the line of Nicola Wojciech from Comex Securities. Please ask your question.
Thank you.
First on France, a little bit of additional clarification.
25% of Ppas you early cancer. This quarter does that now represent all of the contracts that are exposed to the dynamic or are there other existing projects that might have this.
Play through in the Q4 results.
So let's clarify.
To us the 25% so youre, referring is 25% of production.
Our French production is that what you're referring to so that's 326 megawatts of capacity.
Yes, the ones that you early terminated for this this quarter does that mean.
26, okay.
Okay. We're talking about the same thing just wanted to make sure we're talking about the same.
And Ah contract or.
Are we hast.
When we received a termination confirmation from EDF, which was the main counterpart.
Between beginning of August and September we have taken.
Lack of position, but it's not exactly position because as I mentioned, it's not.
Volume guarantee, but we have fixed price for 90% of the expected production.
In Q4, this year and next year. So so this is no more exposed to the variation of the market today, but this has taken the benefit of the high price of the forward market in end of August .
In September and this is Alison got all the volume that we were expecting to terminate journey.
Got it.
Theres no additional volume at this point.
Yeah.
Okay perfect. That's helpful. Thank you.
The additional measures that were announced by the French government as well regarding the 18 month window for selling power at spot rates after signing new Ppas.
Inflation protected tariffs and then also the ability to potentially increase capacity by 40% can you. Please walk through what those might be.
Fly for your near term bench developments, where it can be.
Read through.
Additional capacity or improvements to contracts for those.
Yes, essentially the first which is not again it's.
So confirmation by the minister, but it's not yet in any law, but it will come is the 18 months. This is this is very quick.
Quick impact because.
We have a we have built.
Yes.
And put in service during the last months.
<unk> this was a different project.
We are we are building.
Luann will there be xactly bullish about <unk> and <unk> and all these project.
We'll benefit from these 18 months. So this is this is what would be exposed in the future months through the market.
And we we do not what is what is discussed presently is that these 18 months will be an exception to the hundredth they need T. You rope in Macau with our cat because the IV the philosophy of the French government is to say, okay. We don't <unk>.
Once that the existing assets are benefiting too much from the market you have to do your business plan from what you expect when you take your investment decision, but for future project. They are really incentivize us to accelerate the installation and further.
Development of project typically we have our work with <unk> to accelerate in leather law and molded bizarre.
It will be a question of potentially one culture.
Of acceleration, but one quarter was the high price and if it's not capped will be a lot of money on this project and this is a way to to partner was the supplier and have a little bit more exposure. One when is the right time to have merchant exposure.
Okay.
Excellent that makes sense and the potential to increase the capacity by 40% am I right to think that you could.
Yes, that's a more tricky one that's a more tricky one because you have.
You have to take into account the potential technology, increasing we have we have you know.
And then and then you have to take into account.
The environmental impact assessment, because in France. It is not possible for example to put our plates, which are five meters longer without or <unk>.
If it's significant I don't know if.
<unk> is probably not a good direct example, but if you need you typically increase the deep height of the turbine.
Or or make something which is significant.
Not it's not easy so we are for this precisely we are waiting from the government.
The details of the new regulation that they would put in place, but they will they will I think they will do something.
And I take it.
My point on that then my intuition on that is the letter sent last Friday from the minister to EDF to say, please try to decrease any potential wind turbine in France, because we really need energy and power for the winter which is coming.
Okay understood.
Switching gears to Ontario can we please get a little bit extra color on the battery energy storage opportunity.
Quickly how you source those 600 megawatts, what the plan is to develop and roughly what your expectations are in terms of production revenue contract type et cetera.
Yeah.
Actually we we restart development in Ontario.
18 months to two years ago, because we were expecting that one day or another there would be a need off of a power and there will be in the near future need of energy to show. So we start working around the project we have in the.
In the municipality, we already know and with us with the deep induce indigenous community, we already knowing the Ontario. So we have the point is we have identify.
Place in the ultra are you.
System grid, where storage is the most needed and then.
Yes, so publisher lists to say to the competitors the contenders.
Is the place where we need to be and in biologics was.
I have to see that our people has done the right work before.
Because we have we have the right lens to bid.
This is 'twenty 'twenty your 20 plus years contract, it's not yet totally define could be from 'twenty. Two 'twenty three years with the ies, who essentially capacity payments, so a very stable contract and and there would be some.
Some merchant.
Value also but I would not go into details because this is this is potentially a little bit too.
Commercially sensitive to say if I give you figures.
Competition will be high but the good point is.
Is that we are we have the right land next to really next to the REIT substation. So so this is one point, we can do points with municipalities reports began do point was indigenous community and on top of this I think.
And the information from the federal government and we'd have to think how we will take that into account because to bd's Zhu for end of January .
From the information I have today, so we'd have to think about do we the 30% tax credits will apply to this project.
Yeah.
Excellent that's very helpful. Thanks Carolyn.
Yeah.
We are now going to proceed.
Next question.
And is from the line of Rupert <unk> from National Bank. Please ask your question.
Hi, Good morning, following up with another question on Canada, you mentioned, the <unk> project, there and it could benefit from the Canadian tax credits can you give us a.
A sense on how that project is progressing and what are the economics look like with inflation and interest rate increases.
And maybe how the tax credits could help in how soon you might be able to move this to construction.
Yes, so the project is progressing.
It's progressing well.
Still good returns on that project.
We are advancing in our discussions on NAND contractual that negotiations with different suppliers.
And.
Yes, Scott.
There's been inflation since since we first talked about the project.
We have been able given our current agreement with.
Yes, yes.
Given our agreement to it.
Sorry.
Alright.
Hum.
Sorry, sorry Rupert.
So given our agreement with HQ and our turbine supplier, we have been able to increase the size of the turbines.
And.
Increased production so while maintaining.
Maintaining LT returns on that we don't have enough details on the 30% to date to know exactly how.
It could benefit on this project, but.
Hopefully it will but at this time, but I think we'll just hold our calculations until we have more details from the government.
Alright, great. Thanks, and then secondly back to France, I realize there is more information coming soon on the <unk>.
<unk> government policy.
But what what do you think we could see on upcoming Rfps for wind and solar in terms of the size of those rfps and where pricing could land relative to the last few calls.
Yes, that's a very good question and that's one of the reason I mentioned in my speech that two of the project.
We'll go to the growth we are moving to ready to bids Greece, and therefore, our contract with a corporation corporate PPA I think we have to see the RFP governmental RFP.
Yes.
I don't know if it's the worst case, but something like this because there is so much demand.
From commercial counterparty for long term.
<unk>.
At higher price than then what is the case. So we are switching some project.
Two two.
The cooperate PPE and the main question in France is not the size of the RFP is the number of project authorized so this is really where the.
The government will really implement an acceleration off of the process of authorization coming.
Coming back to David's question that thing and this is this is where they can accelerate.
Development and the.
The price will would not would not go back to <unk> for a long period. That's my my guests due to inflation do tool suite.
Demand.
Client demand.
Balance or imbalance between the number of new project ready to build and the demand from corporations because corporations are ready to sign because they have like a big wakeup call was just depressing situation in D. C. We don't want to have this a.
When when the new fossil fuel the crisis will come in I don't know how many years, we don't want to be exposed to that and then we want to sign a contract was renewable so that's typically where where we are in the in France and in the UK presence.
So permitting still the let's say the.
The main hurdle to getting projects built hub of supply chain.
Easing up now or are you getting access to the equipment that you need.
Yes presently is it's.
It does not change really from the last quarter.
Quarters as I mentioned.
We have to take our investment when we take our investment decision we have to to go quickly.
We are doing is typically when we are signing a contract with <unk> was a turbine supply you're we are you know we put.
Like a 10 person down payments.
At risk before finalizing some other points in the past we were waiting.
Financial close of everything no we are taking a little bit more risk, but I think it's the right way to to go for sure, but it's not the big risk and then we are able to freeze the price and the delayed specific diesel so we have.
We have some some contracts under negotiation to close them quickly in the November December and not be exposed to any new change. So the investment thesis for the project would not change.
Great. Thanks for the color.
Okay sure.
We are now going to proceed with our next question.
Question comes from the right dose Mark Jarvi from CIBC. Please ask your question.
Thanks. Good morning, everyone. Just just on the feed in premium contract for 201 megawatts that supplementary budget Act is that for the whole duration of the contract or does it have a finite time, where the I guess the pricing sharing cap.
Expires.
No. There is no that's for the duration of the contract.
Got it.
And then coming back to the IPO It project and the projects you plan to do with Hydro, Quebec and energy or just I know, it's early days on the tax credit, but given you've already got some ideas on the on the on the contract price and probably that capacity.
Is it possible that the equity contribution for Boralex will be very minimal and the returns would even be higher here with these tax credits.
If.
If it's applicable today's projects it will certainly help the return that.
Can say for sure.
Is there anything in the contracts.
Yes, sorry go ahead Barry go ahead.
I'm just going to say is there anything in the contracts, where you would have to share that or there'd be a price adjustment in the PPA term.
Given the sort of tax credit benefits to you.
No there's no there's no such provision.
Okay.
And then just now with inflation reduction Act.
Passed in the U S. Here just updated views on the New York Solar projects in terms of how those are shaping up domestic content requirements in any of your eligibility adhere to capture all of the ITC and expectations for returns on those projects.
Yes, we are.
Clearly.
So you're up to continue to optimize stage project.
And.
There is there is a clear conversation not from only from from us, but from all the the the awarded parties.
For a much geisha enough the offtake price with nicer.
It's clearly easier.
Corporations than with the government body in terms of moving ahead quickly.
But the conversation is with we're speaking about geek out what were discussing was nicer desk, who I think are biologics would be in this.
So we are discussing with the panel suppliers to be sure that we are win.
When when when the price would be adapted from the off taker side, we are able to close on the other side than the and we are waiting for the final. So the implementation of the <unk>. So this is this is an important subject to to finalize this project.
But that's something.
We will we will finalize them when they are another but but we need the new.
The implementation of the <unk> area, and we need something from from the.
From nicer that the good news is that the governor as he is reelected in New York. So that's also something important.
And with the expectation that that would be sorted out next year, and therefore has a number of those projects, which could come into the secured project list in 2023.
For commissioning, but just yeah yeah.
Yes, the answer is yes I E.
The investment decisions.
I expect that we would take them in the next 12 months.
Got it thanks, Patrick Thanks, Peter.
Q.
Hey, Mark.
We're not going to proceed with the next question and the question is come from the line of Sean Stewart from TD Securities. Please ask your question.
Thank you good morning, a couple of follow up questions.
With respect to the Ontario storage opportunity.
Is the intent to bid all 600 megawatts into this January RFP or visibility on how future rfps youre going to unfold.
Any context, you can give us on that.
The bidding strategy, there and where do you envision returns for these projects with Nike.
Good morning person.
Traditional renewable return opportunities.
Yes.
The what they call the expanded the RFP is for there is two two point there is a.
600 megawatt.
Non battery storage and a 900 megawatt battery storage.
Plus anything left from the first 600, okay. So it's a little bit complex and to date. There is a maximum of 600 megawatt awarded by <unk> proponent. This is the reason why we limit our pipeline.
602, because I don't want to do but the answer is yes, there will certainly be.
Other.
RFP for storage in Ontario in the future there would be also RSP for.
The energy that would that would be needed.
Trim off the detail of our bidding strategy I will I will.
Not give more details to date, but we.
We're working.
Sure Steve on this project and every point on the <unk> of the the rules to make to make it.
Okay, Thanks for that detail.
And back to cramp on a 326 megawatt.
Early termination youre opting for this.
Shorter duration solution with credit.
Credit terms.
Okay.
Going on.
The longer term approach there.
The shorter term.
Approach is taken expires.
Look at locking in longer term.
Economics.
Paul you wait for this contract to expire how has the thinking evolved there.
Yeah, we have.
When this first period.
Will will will will end up and.
We have the possibility within our contract to be protective was full 2025 and 2026, we have not defined high percentage or our fixed high percentage because.
The curve of the electricity price wasn't in.
In backwardation too much from a review so we remain exposed for this project, but we can we can we have different options, we can sell them to the same counterparty.
We can also.
No sign.
A long term PPA with <unk>.
Any corporation that would come to us and we have many demands as I mentioned.
And we can keep also a little bit more market exposure. So so this would be really looking to the global biologics portfolio.
And and and also some <unk>.
Some of these projects.
Uh huh.
Half repowering opportunity too.
This is not put on the backburner too much we are continuing to.
Half.
The bus vd to Repower to really increase the size of the plant.
I think I think that will be also an interesting opportunity if we can.
We have we have one site, where we have 39 megawatt than it would have to apply for 80 megawatt.
This is just an example, but on some project repowering can be really significant and I think in the context of France, which is really needing a neat.
Requesting a lot of power for the next.
10 to 15 years and there.
There is no possibility that nuclear will bring that so I think.
The easements after the rules of authorization will help us also for repairing so different options.
And maybe I'll just just as a reminder, the contracts of the.
326 megawatts, we're talking about just a reminder, that these were four years or less.
Maturities in those contracts. These are the only ones. We terminated we still have a number of contracts out there.
What.
This demonstrates is the ability for us to have options in.
In terms of depending on the outcome of different differ.
Different amendments.
Government is putting forward.
We will see in the future whether we have other contracts that we could.
We could also.
Decided to terminate or not but the point is we have flexibility and options and we have other contracts, where we could see if it makes sense.
And the only ones, who we terminated were dose.
Coming to maturity in the next three or four years.
Okay.
That's great detail, thanks, very much for non Patrick go ahead.
We are now going to proceed with our next question.
And the next question comes from the line of Ben from from BMO. Please ask a question.
Hi, Thanks.
Back to that 326 megawatts.
Did you have to pay down.
The project that in Q4 has that been pushed out given that the new one year contract.
So your question relates to the contracts terminated.
That's right.
No. So we.
Yes.
Essentially our sharing.
Some of the economy with the with the lenders.
When we finalize dose dose economy.
So sharing in terms of.
Additional payments or reducing reducing the debt. So it's not it's going to be it's going to be depending on the outcome.
Got to be a portion of that's going to be reducing the deleverage.
Okay got it.
And then.
In your presentation you also have.
The corporate credit ratings.
Progress in anything.
No to the last quarter on our progress.
We're still are we're still working towards that as we mentioned, it's a 2025 objective.
We have as I mentioned.
Our strong financial position, we're looking at also opportunities.
On the M&A front, and we have large projects that are coming as we mentioned so we're putting all of this in.
And the context in the context of today's world, and then deciding where where the best opportunities, but we're more confident that we.
We will be able to reach that investment grade rating.
And as I mentioned in the past not to the detriment of our growth, but we're confident we can achieve both growth and the investment grade rating.
Alright, Thank you Brian .
Okay.
We are now going to proceed with our next question.
Two questions come from the line of Matt <unk> from <unk> capital markets. Please ask your question.
Hi, good morning.
Just on the yet to be determined price threshold in France, maybe you can just a bit more of that I know you said there might not be a lot of of upside than unlikely that you would reverse these provisions, but what was the realized.
Pricing.
Year to date basis.
And then how do you compare that maybe to the price cap or what do you expect the threshold can be.
Not sure.
Just just.
The philosophy of the French government behind this is to see when you have taken your investment decision.
<unk>.
You, probably see probably expect that the price curve will not go over.
Uh huh.
The strike price of the contract for difference for <unk>.
A long period, okay. So that was the that's true okay, and so do you see as I mentioned, they want to incentivize New project and then they don't want to give.
Windfall profit to existing project and so that's the reason why when we read that in detail we saw key.
We cannot expect to have.
150, or 200 euro per megawatt hour threshold.
We will potentially have something.
Which may be higher than the contract price.
But not so much. So so so this is where the upside is is not so important in this is the reason why we have taken.
<unk> positioned to in.
Maybe you want to put something on that.
We essentially rolled back to very close if not at the contract price.
In our in our assumption.
Thanks, Chris based on Patrick's comment, maybe just a point to had us on that is that.
We made some sensitivity analysis and if for example, the <unk>.
Rice architectural this slightly higher let's say below that 100 that the variance is not that big eater. So you should not expect.
Yeah.
A big amount there.
If there is one.
Okay, Okay got it.
Uh huh.
I just wanted to ask on online.
So I guess you've taken on the project it's positive to see I'm. Just wondering if you can give us a bit more details on the contracts that have allowed you to move forward.
With <unk>.
Any details on Counterparties or.
Or anything of that sort of a bill.
Yes.
It's it's.
Utility PPA, it's not really a corporate PPA so it means that.
Got.
It's weak it was a big company I would not give you more details today, whether it will be finally signed but we have sign something which is enough to go ahead for us.
It's a contract which is payoffs produced.
The long term so it's it will be possible to finance the project through this contract.
There is a part of the price which is the.
<unk> of the price.
Three three quarter of the price would be fixed and they would possibly do you have a person merchant part and we have options to fix it. So this will also open possibility to make upside but also protect us if you want if we want.
And it's a it's a it's a company with a.
Credit rating, which is easy to finance the project after that so that's the reason why we go ahead and.
And the site is.
Every planning condition has been toward Houston in the UK is the star discharge.
The connection is underway to be available in 2024, which is very important for project in India.
Revenues of Scotland, and we are finalizing.
Last conversation was the different turbine suppliers, who have acceptable offers from this site and we will be also protected from inflation.
Because we want to close that are in there.
In the next the next weeks.
Okay. Okay. That's great to have Bill look first of all details on a month on that so I'm just just one last question for me.
If you can give us a bit more update on the outlook for M&A.
As you have said.
Capacity to make acquisitions.
As you've been looking at some some deals maybe just are not.
An update on how many deals you've looked at what's coming across your desk.
Most interesting for you today.
And just very very briefly.
You still expect to announce.
The nice projects and good luck. Thank you. Thanks.
Yeah.
Okay nice.
So I'll start with the first first question on M&A and I'll, let Patrick answer on Danish.
So on M&A, we are we're seeing a good number of opportunities both in North America and <unk>.
Europe .
We're looking at.
A few a few serious ones.
Both sides.
Maintaining our return expectations.
That we've given in the past.
It's actually.
In this volatile environment is creating more opportunities I think valuations are high.
Starting to be a bit more reasonable so I think it bodes well given our cash position for us to.
To make accretive acquisitions.
And.
And also to look at development.
Portfolios.
In the.
In the near future.
And on the Nash or there may be some some information to work with.
Turbine suppliers as.
Is progressing.
So project.
Which create a lot of interest from our turbine suppliers, which is a good news we are.
Triangles would work to create value on the project because as you know it's a it's a very windy side, but it's a very icy sciences. Some time, but we know decide very well. So we are working to optimize the the right buyer for every every place within the site.
The work also with our with hydro, Quebec as a counterparty.
As the off taker of electricity is also going well.
So that's all so they are really highly motivated to buy the electricity into into continue.
And.
And within that.
Consolidation of the different stakeholders, including.
The genius community in this area municipalities are progressing in the right way to Sue. So it's also something which is going well a lot of work, but it's going well.
Okay. Thank you very much I appreciate that detail.
Thank you.
We are now going to proceed with our next question.
Is from the line of Nelson <unk> from RBC capital markets. Please go ahead.
Great. Thanks, I just had a quick follow up.
On the question that Mark Jarvi asked in terms of the discussions with nice sort of on the.
Some of these solar projects.
Can you just.
Clarify.
Does this relate to the 180 or 200 megawatts of solar that you have.
And the secured projects and are you essentially looking for some type of a upward adjustment to the contract price next year before.
You can.
Hit F idea and move forward with those projects.
Yes, the answer is yes, a lot of and.
Many players are discussing.
With nicer.
Because due to inflation.
And and constrain on panels also a project or less.
They are not on the economy, but they are not reaching the right threshold today.
And so we need two things is the implementation of <unk>.
And on the other side is.
That nicer dot taking to account.
An increase of.
Now that station due to inflation.
Between the bid time or the award time and today, So thats why they want to go.
You know there wasn't election yesterday, so nothing was really possible before that.
The line is open the conversation is not just with <unk>.
I'm also confident as I mentioned to Mark question that.
The investment decision would be taken next year.
Okay and then just one last question Big picture given that rates have moved up.
When you bid these projects or.
Future projects have you move your required return up by call it 2%.
Given given the interest rate move higher or are you.
Or.
Are you targeting I think in the past you were looking at eight.
8% or eight or 9% ROE, but has that moved up in line with inflation or interest rates.
Our general indication stays stays the same it was 8% to 10%.
Essentially.
We believe we can maintain.
We can maintain those those returns and we are we are adjusting our guidelines.
In terms of inflation. So we certainly are taking into account those additional cost additional.
Interest costs for example, and generally building costs.
In our in our modeling.
But but essentially our maintaining our equity returns.
Jim.
So we're not increasing the risk premium, but we're adjusting for costs.
Okay got it thanks I'll leave it there.
Yeah.
We have no further questions at this time I will now hand, the conference to Mr. Stefan Mueller for closing remarks.
Thank you operator, and thanks, everyone for all your good questions and for your attention. So if you have any additional questions.
Please call me at 514 to 131045 and I'll make sure to quickly answer your question. So our next conference call will be.
On Thursday February 23 of 20 to F 'twenty to 'twenty three.
At 11, a M. So announce our full year results and fourth quarter results. Thank you have a nice day.
Thank you Kent.
This concludes today's conference call. Thank you for participating you may now disconnect your lines. Thank you.
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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