Q4 2022 Boralex Inc Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Good morning, ladies and gentlemen, and welcome to the <unk> fourth quarter of 2022 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 answer questions by pressing star one and one on the telephone keypad.
Please also note that the conference is being recorded.
For webcast participants you may also ask questions during the conference, but they will be answered by email after the call.
Finally media Representatives invited to contact coming at you from Boralex and her contact information is provided at the end of the quarterly press release.
And I would now like to turn over the conference to Mr. Steven Malone Senior Director Investor Relations for <unk>. Please go ahead Sir.
Festival cool. Thank you operator, good morning, everyone and welcome to <unk> fourth quarter and year end results Conference call. Joining me today on the call as Patrick <unk>, Our President and Chief Executive Officer, Bruno Guilmette, Our executive Vice President and Chief Financial Officer and <unk>.
Members of our management and finance teams. So Mr that gas will begin with comments about market conditions and the highlights of the quarter afterwards, Mr. Guilmette will carry on with financial highlights and then we will be available to answer your questions.
During this call we will discuss historical as well as forward looking information so when talking about the future.
80 of risk factors that have been listed in our different filings with securities regulators, which can materially change. Our estimated results. 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 when talking about the results. We generically sorry, generally referred to come by numbers and when referring to cash flow and balance sheet will generally refer to consolidated numbers. So please note that combined is non <unk>.
GAAP financial measures and it does not.
On today's meeting under Ifr.
Accordingly, combined may not be comparable to similarly.
Measure used by other companies so for more details see the non <unk> and other financial measures section in our MD&A.
At least the MD&A and the consolidated financial statement as well as the <unk> Park and a copy of today's presentations are all posted on our.
Website at <unk> Dot com under the investors section as well as the.
Our.
CSR report, which has been also published today. So if you wish to receive a copy of these documents. So please contact me and Mr. <unk> will now start with his comments. So please go ahead Patrick.
Thank you Stefan and good morning, everyone. It's a pleasure for me to present, our results and achievements for the fourth quarter and fiscal year 2022.
2022 has been a very active year for biologics I'm very proud to say, we surpassed the three gigawatts of production capacity this year, while growing or Esa fool by 34% in the fourth quarter.
And 27% in fiscal year 2020, we ended the year with <unk> per share of $1 63.
Daughter.
27% increase over 2021 hour.
Our dividend payout ratio was 41%, meaning we reinvested 59% of our <unk> into growth project.
At the very end of the year, we closed a significant transaction in the U S. Adding 447 megawatt tulare capacity, but also bringing promising upside for biologics.
Our wind resources.
Our teams showed agility innovation and vision in the extraordinary market conditions associated with the energy crisis in Europe , as well as inflation and global supply chain pressure.
As a result, we succeeded.
In optimizing revenues by the early termination of the short remaining term contracts, allowing us to benefit from higher selling prices. We also commissioned certain assets earlier than expected and negotiated a number of contract with electricity consuming companies.
Allowing us to optimize our revenues project and operating assets.
These actions resulted in 15 million addition to discretionary cash flows generated in 2022, 9% increase over 2021.
We also continue to add project to our pipeline in the four quarters with the addition of solar and wind projects totaling 137 megawatts to the preliminary phase of our pipeline.
Looking ahead.
We are in a very solid position to pursue our growth was close to 500 million.
Dollar available.
In available cash flow and notes rises financing and the ratio of debt net debt to total capitalization of 40%.
We also have a very solid pipeline of projects in development and construction with snow stands at five five gigawatt DC.
This two five gigawatts higher and an increase of 81 person.
Increase of 81 person.
For fiscal year 2020.
<unk> for our 2025 strategic plan.
Before covering market condition I would like to highlight our achievements in the past four years for some key metrics.
First our installed capacity went from one nine gigawatt in 2018 to three gigawatts at the end of 2022.
<unk> CAGR.
As mentioned before our pipeline of project to increase significantly and more than doubled in the past four years.
This growth was achieved while maintaining our depth level almost flat at $3 3 billion.
Our <unk> per share grew by your key garre of 30% and 22% respectively during disappearance.
I am very proud of these resins and we'd like to take this opportunity to thank all boralex employees for their commitment and hard work during these years.
As you can see your efforts really paid off.
I won't go in all the details of the market condition, but in general I would say that for all markets in which we operate and developed favorable programs are being discussed or put in place similar to <unk> in the U S.
In Canada discussions are ongoing about an investment tax credit of up to 30%.
Foreign investment in clean technologies with a focus on net zero technologies battery storage solutions and clean hydrogen.
In France, the low to accelerate the development of renewable energy has been reviewed by the Senate and the Parliament and should be approved in the coming weeks.
This would be followed.
This year was the publication of the <unk>, Adam will plan setting the rules and RFP request for the coming years the famous PPE.
In the UK England's focus mostly on solar.
<unk> outlook for onshore wind farms.
<unk> must be on onshore wind power.
As released a non shore wind policy statement at the end of 2022 in which the Scottish government sets on.
On offshore wind.
<unk> target of at least 20 gigawatt by 2030. This will represent an additional 11 gigawatts of capacity by the end of the decade, Scotland. Currently has about nine gigawatt of operation of operational.
Sure I would know rapidly review the main variances.
Portfolio of project and gross baths.
The eight megawatt decrease in the early stage was due to the addition of new wind and solar projects totaling 137 megawatts in Europe .
Change to the expected capacity of nine wind project and six solar project in Europe for 18 megawatts favorable impact.
These increases were offset by the progression of four wind and solar power project in Europe to the mid stage phase totaling 163 megawatts.
The 37 megawatts, increasing the advance stage resulted from the progression in Europe of three wind project.
From the mid to the advanced stage.
In total our pipeline no comprises project totaling full blown one gigawatt of wind and solar project and 820 megawatts of storage project.
In storage, we submitted our bid for 380 megawatt in the Ontario RFP.
February 16.
Now lets review the change the grows fast now.
No projects progress to the secured stage, but three project from the secured stage transition to the ready to build phase.
These project at the 100 megawatt wind project in Quebec to 29 megawatt wind project Molla block in the 'twenty, one megawatt wind project <unk> in France.
This project totaling 150 megawatts are expected to be commissioned in 2024.
I won't cover in detail the progress made in our four strategic direction as I have already talked about the major highlights.
But you can find all the details in the slides of the webcast and in our MD&A.
This complete my part I will know, let Bruno cover the financial position in more detail and we'll be back later for the question period Reno.
Patrick Good morning, everyone I will start with a review of the progress made in light of our 2025 corporate objectives.
As mentioned by Patrick we made good progress on the install capacity by surpassing three gigawatt Mark.
The EBITDA and reinvestment ratio are progressing according to plan.
While we had a strong <unk> increase of 27% in 2022.
About our CSR strategy, we continued to make good progress on the environment, social and governance fronts as presented on slide 16.
In 2022, we updated and published our environmental mission, we surpassed our 2022 target of women's.
Women in management position and increased the target for female representation on the board of directors from 30% to 40%.
Currently women represent 45% of our board members.
Finally, we created the position of senior Vice President Enterprise risk management, and corporate social responsibility with the goal of integrating ESG with risk management.
For more detailed information.
Including data on Seo to emissions and work done in relation to the climate changes and the TC FDA initiative.
Invite you to read our 2022 CSR report, which has been published earlier this morning.
Lastly, on our corporate objectives, our balance sheet remains very solid with close to 500 million in available cash and authorized financing facilities to continue implementing our growth plan.
Our net debt to total cap ratio stands at 40% down from 48% last year.
90% of our debt is project debt with no recourse on bottlenecks and fixed interest rates.
I will now cover the financial results for the quarter starting with production.
Overall total wind production for the quarter, combining Canada, and France was in line with the anticipated production and 16% higher than last year.
Total production for the hydro sector, it was 12% lower than anticipated and 21% lower than last year.
Increase is mainly attributable to U S hydro due to unfavorable weather conditions.
Finally production from solar assets was 3% lower than anticipated, but 10% higher than the same quarter last year.
In summary, total production for the quarter was <unk>.
Only slightly lower at 2% than anticipated, but 9% higher than last year.
Fourth quarter combined revenues were up 63% compared to last year, mostly due to higher electricity prices in France for which a large portion of that to be put aside as a reserve.
To reimburse revenues above the price gap.
Combined EBITDA increased by 6% in the fourth quarter.
Operating income decreased by $68 million or 82% duty.
Recognition of a noncash asset impairment charge on our U S solar assets, a charge relating only to increase interest rates and our annual depreciation test.
Please note that the $12 million increase in corporate expenses is related to increase in the workforce related to the growth of the corporation.
And nonrecurring costs in regards to the management model update.
On a consolidated basis, we have generated.
$189 million of consolidated net cash flows related to operating activities compared to $81 million in the fourth quarter last year.
Cash flows from operations was $141 million in the fourth quarter at $25 million increase over the same quarter last year.
<unk> was <unk>.
$77 million compared to $58 million in the same quarter last year. The increase comes from the EBITDA increase decrease in interest paid and early repayment of project debt in recent quarters.
Our financial position is very solid with our net debt to total market cap ratio of 40%.
Yeah.
I would like to briefly cover one last element before the conclusion.
When looking at our fourth quarter results. Please note that three elements affected some of our financial measures without having a material impact on our EBITDA and cash flows.
The first element is an impairment of assets for our U S solar operations, given southern significant increase in discount rate.
When performing our year end impairment test.
The settlement affected our operating income, but had no impact on our cash flow.
The second element was the announcement of the thresholds for the feed in premium contract as expected. When we released our third quarter results. This level was not higher than our contract price.
We did not have to take additional retroactive charges relating to this on top of the third quarter charge, our prudent approach served us well.
Finally, the market price gap of 100 Euro plus 10% of the difference between selling price and a 100.
Became official in France at year end.
Expected, we accounted for an operating charge during the quarter, which largely offset revenues generated by the assets affected by the cap.
In conclusion.
<unk> 2022 in the fourth quarter were strong periods in which we pursue the disciplined execution of our plan.
We increased production capacity by 21%, surpassing the three gigawatt Mark.
We added 137 megawatt to the preliminary phase of the project pipeline in the fourth quarter.
Our pipeline of projects in development and construction now stands at five five gigawatt.
We generated discretionary cash flows of $167 million for the year end.
<unk>.
2022, 27% increase over 2021.
And we continue to have a strong financial position.
Thank you for your attention we are now ready to take your questions.
Thank you as a reminder to ask a question you will need to press star one and one of your telephone and wait for your name to be announced.
So we go your question. Please press star one and one again once again is still one and one if you have any questions I'll comment and wait for your name to be announced.
We are now going to proceed with our first question.
And the question is come from the line of David Quezada from Raymond James. Please ask your question. Your line is open.
Okay.
Thanks, Good morning, everyone, maybe if I could just start.
And just on the topic of <unk>.
A potential accelerated permitting timeline is there any color you can provide on how that could benefit.
<unk> in your pipeline or what the benefit could be for you there.
Yes, good morning, David.
The LOE has gone through the Senate and the Parliament and the.
Commission on January 10, and the final adoption will be the next weeks.
The French from SaaS.
Hi.
I cannot.
A clear direction to see you all match it will accelerate definitely actively.
France need more renewable and wants to have see less red tape.
Yes.
That's the take and I think the PPE the polygon <unk> annual Denise will be an important step because it will define exactly.
The pace and the volume of.
The RFP for the next year or so, but I think what we already see clearly.
<unk>.
Is that local administration are more diligent than ever in France, when we have to see.
That's something.
On the project. So I think and this is this is the most important point is good to have a low but it's important that.
On the ground, it's accelerating and we already see some signal like this.
And we will push hard to study the impact the significant project that we have in our pipeline.
Excellent thanks for that Patrick and then maybe just.
One more for me.
When you look.
When you look across your footprint.
And maybe specifically if we could touch on line do you see any changes to the budget for any projects or anything that you.
You would point to is being affected by the higher cost.
By higher gross yes.
The point is you have seen that line Tim was in our gross fast insight I think 2020.
And so we had to adapt ourselves to do different.
Paul we obtain the extension agreements, we obtain larger turbine bigger rotor agreement and so we have not.
Taken any any to stretch assumption. So we are we have taken our final investment decision and we are very comfortable with the return which is on the high side of.
The eight to 10 person.
<unk> expected return so.
That's the thing and it's the same on the upward project in Quebec.
We have been able to negotiate a contract was with the turbine supplier and with full the IOP and it's it's sexual costs, but we had we had room to optimize the project between the time beginning of 2021, when we signed the contract with hydro Quebec in today.
So we are also on the high side of this return.
A frame.
That's great color I appreciate it I'll turn it over.
Thank you.
We're now going to proceed with our next question.
The question has come from the line of Robert <unk> from NBC. Please ask your question.
Hello, Rob.
Brian .
We can go with the next one.
Yes, sorry about that I'm a rookie apparently.
Looking at your U S pipeline.
You've you took some write downs in the quarter in New York and I know you've got some opportunities for perhaps.
Pricing some of those projects could you give us some color on how that process is evolving.
Just just to mention real quick so we did not take write downs in New York.
Right down the depreciation is only on our U S solar acquisition done in 'twenty, one because on the annual tests, we are using higher interest rates.
And Thats the only reason, it's not performance related and solely on U S. Solar acquisition completed in 'twenty, one fill California, and some other states and on the New York project, specifically we are.
We're making good progress on the cost and site optimization.
We are like the whole industry in discussion with <unk> and I am confident.
This would be positive because.
You will have.
One way or another take into account the.
The inflation and.
And.
The RFP was nicer.
<unk>.
We have to bid on April 16 for the 2022 ISP that has been postponed in 2023, but after opening all the the offer do we have a clear view of what is a fair price for a project to deal with two discussed including IRA and all those.
So at that time I presumed it will act to to help all the industry to take final investment decision and then start building.
We repurchased.
Sure.
Hi, This is stephane Richard just wanted to add on the impairment question about.
There is also another thing to consider is that because we have a limited amount of assets in the U S. So the Parramatta to do the testing because.
There's not a lot.
Assets is quite small so.
Also.
Triggers like when you get the high Bill No mentioned.
So that the increase in interest rates.
So is it.
In fact on future gaps we were looking at for this business.
It is strictly an accounting.
Measure.
No cash impact either and if ever.
The rates aren't going down this accounting charge could be could go down also.
Okay, great. Thank you.
Bruno on your liquidity, you mentioned you have $500 million.
Forecasting your growth over the next few years, how long is your runway now.
To be able to fund investments before you need more equity and are you still looking at M&A, which of course.
Shorten that runway somewhat.
Yes.
Always.
Robert Thank you for your question, we're always looking at it.
Pat.
And many opportunities whether it is.
In Europe .
<unk>.
As for our.
Our strategic plan so in the regions that we've talked about in the past so.
This is certainly a volatile environment, which can be good for potentially for M&A value valuations are moving around so.
Yes, it's going to create opportunities.
So.
Putting aside.
Unknown M&A.
For your question on runway in the cash.
I mean, we believe that certainly for this year, we're we're pretty pretty well financed.
We have a few large projects that are that are going to begin construction over the course of the year.
But that's taken into account in our projections.
And.
We'll see we'll see what happens on the M&A side.
Great. Thanks, Thanks for the color I'll leave it there.
We are now going to proceed with our next question.
And the question is come from the line of Sean Stewart from TD Securities. Please ask your question.
Okay.
Thank you good morning.
Just following up on the last question Bruno.
Yes.
Any broader thoughts on asset recycling opportunities.
The times, the sell down in France, a year ago very well.
Is there is still strong interest in private buyers.
You might consider.
Additional asset sell downs to bolster the funding position.
Sean.
There is always good interest for the debt.
The types of assets that we own and the team the people that we have to operate in and develop these assets.
So it's it's really our decision to to look at where we believe we have created value and where we believe that we could share some of some of the future.
Potential upside and at the right price at the right time, so we try to essentially.
Look at the portfolio and once we see.
Potential potentials for.
For that to happen.
I mean, we're going to look at.
We're going to look at the possibilities in the portfolio.
Essentially we want to develop that view and then I have a.
<unk> joined by by our key financial investors as we've done in France. So we believe there are other places in our portfolio, we could do that but it's not.
Not for the immediate future.
Okay, Thanks for that detail.
And then Patrick a question for you with respect to Quebec.
<unk>.
The three projects with energy here and hydro, Quebec can you comment on your longer term pipeline in the province and.
I guess the timeline for those projects coming to fruition and if the turnover at the top of hydro, Quebec has any bearing on on that timeline.
We'll start by the end.
The strategic plan of Hydro, Quebec has not changed by the change at the top and clearly.
Division of Quebec governments is very strong and positive on the wind development.
Remind you that.
<unk> needs to add the 100 hour before.
Before 2050.
Which means a 50% increase five zero increase.
Of the present production.
Last Tuesday, the energy Minister <unk>.
Given the announced that in the coming years.
The capacity is intention was to double the capacity in Quebec from four gigawatts to eight gigawatt and two <unk> quadrupled to 16 gigawatt.
By 2040 <unk>.
Is clear that the government.
We will see order hydro, Quebec to start new RFP in the next the next months.
And.
So clear that on our pipeline we have.
From our experience of <unk>.
We project the <unk> project and contract negotiation in the last two years.
<unk>.
Restart strongly to make Greenfield development in Quebec, and that we would be ready to bid in these in these areas.
Okay. Thanks, very much for that detail, that's all I had.
Thank you Sean.
We are now going to proceed with our next question.
Because the question has come from the line of Mark <unk> from CIBC. Please ask your question.
Good morning, everyone.
Coming back to then work solar projects following.
Following up on your comment Patrick.
Once you get it.
Our revised price with Minnesota, how soon can you move to construction.
Project.
Permitted and are you close enough on procurement that we couldn't think of construction.
Finally faisel.
Hey.
What is what.
The team is working very hard.
Two to.
<unk> D C. The existing 200 megawatt project. So we have we have optimized layout, we have optimized inverters have optimize everything we can.
At the same time, we are working on.
The development and optimization of the 540 megawatt and we are working hard on bidding new projects. So we are we have a quite clear view of.
The cost of construction today and the speed of construction in order to optimize that so.
<unk>.
What I hope is that Nisource will do that at the same time, then the federal government will implement the real.
Tax tax credit rules.
Chris rules and then we can we will be able to take that decision very quickly.
Mark also to add on that is that for the 200 megawatt we have all authorization to to go so.
It's really a question of getting that right.
Economics to them to start.
Alright.
I guess I didn't want to have some price.
Hey, guys good to clarify that we can move pretty quickly to construction.
Yes.
Okay.
So coming back to the projects with energy or Hydro, Quebec, I'll say I think of exploration.
Sort of a pause on our procurement.
The planning in siding.
That changed at all projects, which have been done on a bilateral basis does it.
Change the timelines at all.
Or do you still feel like those projects to move ahead in a timely fashion, maybe just update us in terms of where you.
One negotiation of a PPA price.
So this project has been fully negotiated its tree 400 megawatt project.
We are working hard to obtain the environmental authorization and we're working hard on local consultation and everything to be approved we are also working hard with.
In the in the in the follow up.
Order of.
<unk> and <unk>, we are working hard to optimize cost.
The project so.
The intention of hydro, Quebec to sign these III contract was specifically to see or see the correctly to accelerate.
There did the energy supply to them without having to wait for RFP in the government. So so so it's clear that they need energy quickly, you're then 2027, which will be probably the date for the next RFP.
To put in line for the next I repeat that will come soon so no delay on this project.
Okay.
Sorry.
The critical path is obtaining authorization funding.
So how do you think you'll get on.
Environmental authorization and when could you I guess a final investment decision on the project.
Yes, and that's why we are already working hard to negotiate cost.
Working are to optimize the cost because it's a big project to optimize roads platform everything it's a it's an important optimization and the team is did it on the <unk>.
<unk> III full phases <unk> project, so we know that the place, but the critical path is really to date.
<unk>.
Environmental authorization.
And is that expected to be completed by the end of this year.
Yes.
Yes, no yes, yes, if we if everything goes perfectly well no. It could be beginning of next year, if it's a little bit more difficult I do not expect that but the.
We are working hard to.
To make a decision this year, but that cannot provide this to you today.
Understood and then the last question for me, it's just I'll say, it's been price caps in France power prices come down a little bit I'm just curious.
Where the corporate PPA market is now relative to maybe six months ago or 12 months ago sort of updated in terms of where pricing might be able to clear.
10 years or longer.
Yes.
PPA market really depend on the duration of the PPE we have typically.
Extend one of the PPA, we signed some years ago with the with the with the company at a price which is.
Over 100.
<unk> megawatt hours.
But this is this is a three year extension.
If you want to go to longer term I would say the price Judy the negotiation is over 80 between 80 to 90 room again $1 for 10 years and this is this is thinks we are negotiating presently.
Full specifically new assets. So that's one thing.
And.
Yes.
There is a lot of demand because speakers.
Have choices because really companies have.
Who have a vision of the supply and demand of the power market in Europe . They clearly understand that the price will not go down and so do you want to secure their electricity and they know that there is not so much project two D, which are able to sell their electricity because they are old contracts.
Okay. Thanks Thats helpful.
Okay.
We are now going to proceed with our next question.
The question has come from the line of Nelson <unk> from RBC capital markets. Please ask your question.
Great. Thanks, I just have a few quick questions.
So you have obviously you have a lot of developments in France over the next few years.
And I just want to clarify in terms of.
Project costs and inflation.
Are you seeing costs.
Flatten out or come down in the later years.
As you kind of look to cost of these projects or or or.
Project costs.
Or is inflation, just normalizing or is it coming down can you just comment on if you build something in 'twenty three but yes.
Yes, maybe one thing is.
Inflation in France.
You have to think in the project you have the turbines themselves and this is affected by the global international market.
Presently the cost of turbine are still.
Still really acceptable because.
<unk> is not yet in place. So so so this will definitely put a pressure on the cost of the bank for the future, but for the balance of plant.
Don't see.
So much difference.
Then years ago in France speakers.
The French economy is going okay, but its not going like North America economy and pressure on workforce is not on service and workforce is not the same the inflation in Europe is specifically due to energy cost and not.
Salaries and workforce.
Completely different.
Also I think.
A different situation when you compare to what happened in the offshore.
Because because the risk that we have taken.
Typically contingencies in our budget.
Sure.
In line with what happens so we have many projects that have been put in service or Sydney construction in France, and we are on time and on budget on all these projects and this year, we will put in service.
56 megawatts in France, and I do not expect to have.
<unk>.
And any risk on the budget, because construction that are going away and going well and it's going the right direction.
Great News, so just to clarify the receiving 18 months merchant power price once projects are completed.
How far does that.
Go in terms of.
Like if you have projects completed in 2024 do they also get.
The 18 months exposure.
Our upside and it's very good question <unk>.
Presently this eighth.
18 months.
He is an exception as an exemption sorry.
Define and slow for 2023, which put our price gaps.
So if a project you start it.
2022 and 2023.
And affected by the price gap. It is no exempted baidu. This is what we accept six months ago and this is in the low of December 30, <unk>. So what it means is that if there is no extension of the price cap in 2024 and further.
The exemption was stay and we remain and we will have this possibility. So so that's one thing and just just to take your percentage of your question.
On the first of January we have 163 megawatt which will be in.
These 18 months for.
Yes.
2023, and some part of 2020 for six months in 2020 for typically for 90 of these 160 megawatt 63.
And we will putting service 12 megawatts.
S. One and 44 megawatt venous too and this will also benefit from the high price. So I think this is important because pricing in Europe is still in France is still between the one.
100, then.
And 50 around the 150 room megawatt hour and price for next year. When you look to forward price for 2024.
Ray it's quoted 170 megawatt hours. So the market is not seeing the price going down in 2024, which is normal when you look too.
Nuclear refurbishment in France nuclear important work and even the gas situation.
North of 50, you rulemaking whether were in guests.
Okay. Thanks for the thanks for the color and just one last quick question.
Terms of the secured projects the French for protection that secured bucket.
Those likely more likely going into 'twenty, four or more likely into 'twenty five in terms of the completion date.
Okay.
Sure.
Yes, it depends project by project and it will give us some some of this project.
All of these project I'm, sorry, we have already deals origination, but diesel to relation or challenge in front of the court.
Yeah.
We won all our trial during the last.
510 years, probably so so I am quite confident I don't like to say that but I'm quite confident that we will win also these project Thats why we put them in this.
And again the French.
Courts are aware that they have also to accelerate their work on ultra rising.
Wind or solar project.
Four two.
Due to the energy crisis, even the stay remain independent from the government there are enough crazy and they understand that it's the interest of.
The society in France too to accelerate this.
Okay. So some of those projects were just kind of how that.
The court process.
Yes, it's really depend if they are if they are C C.
And I don't have the date in mind, so I cannot answer directly but we can come back to you. If you want but if we have the audience.
In S. One we will be able to connect in 2024, and if we would have to <unk> and as to probably we would go and sleep 2025, but it would not sleep further than that.
Okay. Thanks for that I'll leave it there.
We are now going to proceed with our next question.
Another question comes from the line of Ben Pham from BMO. Please ask your question.
Hi, Thanks, good morning.
I wanted to ask on your recent U S acquisition.
Assets picked up in Texas and surrounding <unk>.
Areas what is your.
Near term and maybe longer term.
Most of that acquisition.
Yes.
The first the.
The first point is.
It's eight accelerate our our exposure in the U S market like we mentioned in our strategic plan.
So.
The very near term.
Good cash flow, a very reasonable valuation I think we negotiate for more than one year of 2014 15 months with the with EDF on this project.
<unk> project are in very good shape also technically.
So.
That's the near term goal.
And the second part is.
We have not start and would not announce that to date as we start the organic development in <unk>.
<unk> has a new Mexico, but it's a strong market with <unk>.
Interesting.
Interesting.
See demographic and demand grows so potentially it could be something where on the long term.
Not today, we will decide to see buildup around based project or continue to to see.
<unk> like to have this exposure.
One thing, which was not part of the goal, but which is good.
Bilateral benefit of the project is that we are partner with action in this project and Nexium is sometimes or many times.
Competitive to buy assets. So we have we'll show conversation with them to be see some time partner off other M&A and leverage their cost of capital private cost of capital and our operational excellence.
Excellence in and skills. So there are different.
Different aspect and last but not least.
To enter the U S market when you go to a tax equity provider. The first question is are you at 10 gig Guy and so today, we are north of one gig guy. So we start having a conversation with these people when we had the <unk>.
200 megawatts in operation It was.
We were.
Less interesting to these people. So I think this is also an important bilateral benefits of this project.
Okay. Thanks, and can you remind me.
<unk>.
Does this.
Your targets.
Perfect vacation percentages for the U S.
This transaction does that.
Does that get you closer or is it seems like there's more to go on in the U S.
On the long term as we said in our strategic plan is to make the U S. Our number one market. So this is part of the plan so quite a way to go still.
Our growth to the U S bolt in wind and solar.
Yes, the target I think for 'twenty 30 is 45% of our installed capacity in the U S with 45% of 10 gigawatt. So it means we need to do to quadruple our exposure in the U S. In the next eight years.
And we work on that.
Okay got it.
And then maybe in France.
A lot of <unk>.
<unk> with price caps, and grills and whatnot that may come up that may not come off but.
If you could just kind of see what happened to us.
Six months or so.
What pricing.
Would you have done what you've done with.
Early retirements, if you knew what you knew today on how to price caps are materialized.
Yes sure.
<unk>.
There is there is two things.
The answer is yes, and if I knew the price gap at that time, we have maybe in the contract we signed with the other counterparty we could have C. C do something an improvement, but we're still very happy with the situation because the project.
The 326 megawatts.
Which way on which we send early termination the average price was 95 megawatt hour.
Okay.
95 megawatt hour due to inflation and because it's sold assets.
In.
Q4, we were selling you said electricity north of 500 <unk> it means that after price gap.
10% of 400, plus 100 means a 140, <unk>, which is still a very good price.
Despite all my frustration and for this year.
It's.
North of 120 Euro after price gap the blended price for this 326 megawatt so I'm still happy with what I did and what the team did could have been really different and.
Yes.
I think it shows the agility of our team and all we were prepared to different scenario, because we start to have.
Trading.
Aggregating team.
I start that was a single Guy and I think 2017.
And we were prepared to do this big move which will create which has created a lot of value, which will create a lot of value for this year and next year.
And again I think it was there was some question.
We don't know today, if there will be a price cap or nuts in 2024 and further so that's also something which is interesting.
And also another things that we have done is we have accelerated by roughly five months led to law project 65 megawatt and bye.
Two to three months I think <unk> project, which is <unk>.
25 megawatt so on this part we have been also <unk> too.
To be exposed to the 18 months, which isn't different things, but it shows how much we are on the ball on these things.
Okay. That's great. Thank you.
Okay.
We are now going to proceed with our next question.
And our question comes from the line of Andrew Kuske from Credit Suisse. Please ask your question.
Thanks, Good morning, I guess my question is for Patrick.
It's really where are you seeing the greatest pressure points and developing projects is it on the OEM side for getting equipment in the pricing of that equipment.
Property is actually building it or is it on the regulatory side with round approvals in transmission interconnections I guess what are your biggest concerns at this point.
Thanks, a lot Pat.
On the very yeah, I would answer Stephane on the very short term.
Thank you for taking my job now.
It's a different buy might get to.
I think on the short term on the very short term what is important for existing project is is the question of the cost and it's working on that and I also already comment on this I think.
We have room of optimization and we have taken.
It's net.
100 megawatts up to 200 megawatts.
Fine then final investment decision.
This quarter, we have taken nine King decision and we're building another 56 megawatts in France. So I'm quite confident we are on the right side, we have to leverage also the one two gigawatt project, we havent get back to.
<unk> negotiated the costs, so very short term to cost as it is.
Something I think on the medium term in this.
<unk> from one market to the other is the grid connection transmission.
And this will affect every market one way or another the margin on the grid and on the transmission system in almost every market in the world.
The Western World are there limits. So the government has to invest lots of money on this and when I see lots of money, it's probably billions, but it's the only way to make the energy transition. So it doesn't rely on bottlenecks would rely on our side is to find the place where there is still capacity to connect.
Project or to find the place and lobby do you have.
Can you get back to you somewhere and be ready to connect or projecting 2027, 2028, where the capacity will be in.
At that time.
Okay I appreciate that and then the second question Patrick you mentioned earlier on just the importance of having a certain scale.
The deal with certain players in the tax equity market from a counterparty basis.
<unk> had very explicit megawatt targets in the market. What you wanted to achieve and are well underway with that when do you anticipate that megawatt targets, maybe return targets, whether it be Ro Ro and some other capital metric maybe it's a question for you Patrick can also for Bruno.
I Wonder could you repeat the question.
When do we expect.
Okay.
The transition for megawatt targets to maybe return targets.
Hitting a target return on the whole project portfolio and being more explicit about the return expectations.
Well, we have we have in a way return targets because were putting not only megawatt targets on our 2025 planned but also a full.
So to US it is it is the return target.
Its firstly.
Our return targets I mean, we wont do as we've said in the past we won't do megawatt just to do megawatts, we want to make sure that we continue our disciplined approach.
And drilling.
Profitably so.
I know, we've talked about our return target bye bye projects, which is which continues to be 8% to 10%.
On an unlevered basis.
And then clearly we are seeing that.
Competitive but.
And the right way, we'd win some projects and we lose some other projects.
So we continue to be to be in the market, but from a <unk>.
Different types of targets I mean for now we believe that.
Focused on the right the right numbers.
Yes, and just maybe a comment on specifics, which is which is important.
Know that we discuss that with investors not sure that we discussed that within that is but.
The 50%.
<unk>.
The short term incentives of every employee in Bahar lakes is to beat.
The the highest.
Free cash flow per share that has been that has been achieved in the past. So that's what we have done for the last the last.
So I think it's to grow the right does that right direction. So it gives a lot of discipline to us when it's time to take investment decision. We're not looking to megawatt we're not too keen to EBITDA, we're looking to <unk> and <unk> per share and this is on.
And watch what we our incentivize so I think it gives us a lot of discipline to the team.
That's great appreciate the color. Thank you.
Thank you.
We are now going to take our next question.
And the question is come from the line of <unk> from <unk> capital markets. Please ask your question.
Hi, good morning.
Wanted to ask.
Couple of questions on online Cowen. Thank you signed agreements already in projects expected to the commission.
Late next year can you just give us an update on the timing too.
And also the corporate PPA.
The financing completed.
Yes next quarter is is what we are.
That's our target to sign Bose, we need to see sign signed booths at the same time because.
<unk>.
It's important to be see back to back on the negotiation of these two contracts.
So thats, what we are planning.
Okay, that's great.
You mentioned <unk>, let's say to different projects in different markets, but those would be kind of at the higher end of your return targets, where do you see.
And what markets today do you also see the opportunities to kind of get.
Better returns is it more on.
Bilaterally negotiated projects in Quebec, because demand corporate Ppas and trials I'm. Just wondering if you can comment on what kind of you see the best risk reward.
On the organic growth today.
Ed.
What I can tell you is that we we have this list.
But.
Since we have controversy on the other side I would not comment on where it is.
I think we're really see all the project that we do or we do it in the same was the same discipline and.
And.
Yes, and it's too too sensitive information sorry.
Okay. So just even directionally more types of markets or regions.
Can't provide any more color.
We said in the past I mean, the supply and demand in France. I mean, it's still offers still offers great potential because it's difficult to develop a project in France. So we've said in the past that we can still.
Enjoying good returns so it's an important market for us and.
It's not statistical question of supply and demand.
I mean there is.
Looking to different regions and different types of opportunities like that.
Okay. Okay.
And just on that last note.
You mentioned still being active on M&A are focused though in the short term more and more U S scale or is it new European markets.
Essentially what we're looking is.
<unk>.
The.
U S is certainly a market we are looking because of the size of transactions.
And it depends on the generation of <unk>, because I don't want to do.
We prefer to do say to one or two transaction.
Not four or five.
So that's one thing so the U S is interesting on this side.
Typically France is not the market, where we are already.
Like France in Quebec, and Ontario, always not things, where we are targeting an actively looking to that.
There could be some.
Vacation in Europe within the strategic plan.
But it really.
Ben.
What is also really important.
It's not it's too.
Clearly understand the market if we are entering a new market. So so so that's also an important criteria on my side to go for.
Any M&A transaction.
Okay.
Thank you.
Okay.
Thank you.
Im going to take our last question.
And the question comes from the line of Nicola Wojciech from Comex Securities. Please go ahead.
Thank you good morning, just quickly come back to the <unk>.
<unk> power dynamic right now I, just want to understand like how.
Thats correct, Youre, saying power on the merchant market at $500 per megawatt hour.
Do you immediately receive that revenue.
Then.
90% of 400 euros back to the regulator.
I'm, just I understand them.
Yes.
The way the way the price cap is functioning in France.
Yes, we get the price from the counterpart controversy could be.
Utility PPA like we have or.
Selling to the market and then we have to make the calculation.
Off.
We have kind of.
We take out the 100 <unk> then.
We calculate the difference between the 100, <unk> ROE and the price at which we are selling the electricity.
Take 10% of that we can keep that in the 90 person we give it indeed through.
It's collected through.
On the existing tax in France, which is school the added value tax which is an existing one and it's just another part of the stacks because it's temporary so so that's the reason why it is in our turnover, but it's already.
Good.
Deducted from our EBITDA.
Okay.
It goes into accounts.
Accounts payable.
Okay, perfect that makes sense, thanks, and just very quickly on the interior battery energy storage opportunities is there any update on the 600 megawatts.
Yes, we are.
We bid.
380.
On the February 16, which was the expedite.
Sure.
RSP there would be another RSP I don't know if we know already exactly the timeframe, but there would be another one we have been able to qualify ourselves to this RFP. So we beat.
The most major project that we have there.
Some some.
Because there is a price.
Points and there is some non price points Mike.
First nations support municipal support.
The place is.
The place of the system itself. So we make our evaluation in this non price points.
Are creating a discount on the price for the price may retarder, So we evaluate and we'd be two project in the in the process.
But to your question, we are still pursuing the development.
Off a larger portfolio onto.
<unk> for the next RFP because.
Need of power.
Not energy power is two five gigawatts from the Ontario system and they need that very quickly. So it's an interesting opportunity for us.
Okay. Thank you for the color.
Thank you.
We have no further questions at this time I'll hand back the conference to you for closing remarks.
Well thanks, everyone for your attention if you have any additional questions. Please call me at Taiwan, <unk> Zafar five I'll make sure we.
Quickly I'm sorry. Your question. So our next conference call to announce first quarter results will be on Wednesday may 10.
And I am in our to be followed by our annual General meeting, which will be held the same day at 11 a M. So thanks, everyone have a nice day.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect. Your line. Thank you.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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