Q4 2022 Power Corporation of Canada Earnings Call

Speaker 1: The to.

Speaker 2: Good morning ladies and gentlemen and welcome to the Power Corporation Q4 2022 Earnings Conference call. At this time, all lines are in the listen only mode. Following the presentation, we will conduct a question and answer session. Questions will be provided at that time for you to queue up for a question.

Speaker 2: If anyone has any difficulties hearing the conference, please press star zero to the operator.

Speaker 2: I would like to remind everyone that this call is being recorded on Friday March 17, 2023. I would like to turn the conference over to Jeffrey Orr, President and Chief Executive Officer at Power Corporation. Please go ahead, sir.

Speaker 3: Thank you very much operator. Welcome ladies and gentlemen. Happy St. Patrick's Day to all. And joining me here today is Greg Treciak, Chief Financial Officer of Power Corporation. And I will walk through some of the slides in our presentation and then we'll open up for questions.

Speaker 3: So I will draw your attention to the cautionary notes regarding forward-looking statements and non-IFRS financial measures on pages 2 and 3. And then with that I will skip all the way ahead to page 6 just to highlight other information available.

Speaker 3: from Power Corp and our operating businesses that have recently come out from different earnings calls or presentations. And then with that, move right to page seven and start to talk about the quarter. Power Corp announced yesterday that it increased its dividend to $0.52.50 per share on a quarterly basis at three cents a year.

Speaker 3: having sold CMAC to IGM and when all that comes out in the wash we float it through and we have a 6.1% increase in the dividend. It was a you know really I we thought a very strong and a very solid earnings quarter for Great West Life and IGM you would have followed their

Speaker 3: particular call, so I won't go into it at this point. And then a lot of noise, like a really noisy corridor in particular, a combination of in some cases some markdowns to market on some assets and in other cases writing liabilities where we actually had positive developments.

Speaker 3: but we either have the liabilities towards minority shareholders or we consolidate the accounting and you're marking to market on the minority interest when it was an increase in value. So Greg's going to walk through some of that for you but obviously a lot of noise when you get outside of Great West Life and IGM.

Speaker 3: The quarter from a business point of view, have to talk about what goes on in the US because that's where we've put a significant amount of capital over the last couple of years. So the integrations of mass mutual and personal capital were completed in the fourth quarter on mass mutual. The expense synergies were achieved and the targets for participants in assets and revenue were ahead of what has consequences and than what was considered ays not share'. The

Speaker 3: I'll speak about IGM strong results.

Speaker 3: And GBL, I'll move all the way down to the bottom. The last couple of points, we had pretty good fundraising at a difficult environment at our alternative investment platforms. And we've been active on the share buyback and capital front. So I'll then move to page eight. And this is a difficult environment. I had both.

Speaker 3: And I haven't seen that way that's been brought forward to the fourth quarter, but it was certainly in my experience having both markets down by this much is really, it was a very difficult year and we of course have fee revenues that are driven by market levels across the business at both.

Speaker 3: IGM, but also at Great West Life Co. and through our businesses. And the right side is just a proxy. This is Canadian mutual fund sales. So that was the first, the worst fourth quarter on record, but you've got the same thing going on in the US where you have significant outflows. So there's a, investor confidence is

Speaker 3: was not a year of high investor confidence. And of course, then we've got what's happened over the last week or so in the US banking and now over with the Credit Suisse. So we're in a very challenging environment as all of you are aware and we're navigating through that. I'm gonna turn it to Greg then for the next few slides to walk through the financial results, Greg.

Speaker 3: Thank you, Jeff. As Jeff said, there's a fair bit of noise in the corridor. We're anticipating with the adoption of IFRIS 9 and 17 for future corridors, we're going to adopt that in Q1. That should hopefully dampen some of that noise that we become used to.

Speaker 3: We'll see some more color on that in the next page.

Speaker 3: Adjusted net asset values were moving up sharply or I should say smartly over the last quarter from the low of Q3. So we're from the year end we're up about 10% at 46.19%

Speaker 3: aspects of our business which is basically the operating companies.

Speaker 3: and their earnings for the quarter. And you can see that net earnings, the operating companies produced an $833 million contribution. And here we have the adjusted earnings at 741 million.

Speaker 3: February when they announced that and IGM certainly reflected the AUM year over year and even though it was down slightly I think that they have produced a very good result in the quarter, strong contributions from their net investment income and

Speaker 3: Northleaf and Great West Life, so a good quarter all in all for them as well.

Speaker 3: And you can see that the contribution from JBL and the effect of the consolidation, which primarily is driven by JBL. So you have to look at the two together. The other thing I'd point you to is where some of the noise in the corridor was.

Speaker 3: $3 million on the revaluation of the NCI. As you may be aware, we manage that particular asset and fund and therefore we consolidate it. So whenever fair values go up, which they did, which is a good thing in the quarter, they are able to do that. They are able to do that.

Speaker 3: that went up on that set of assets to a billion thirty five versus eight hundred and five million and that's you know two hundred thirty million dollar change.

Speaker 3: in the quarter and with that change in the quarter we have to mark to market the non-controlling interest and and take that liability onto our books. We don't get to recognize the increase in the fair value, but we have to recognize that. And the other item that I draw your attention to is

Speaker 3: at PowerSustainable is our China A-Share portfolio, which was repositioned in the quarter. I think, speaking to our team there, they repositioned the portfolio in advance of the October 2020.

Speaker 3: Congress and in anticipation of the March meetings of the party and repositioned the portfolio and adjusted it. So therefore we see a lot of realized gains in the quarter.

Speaker 3: I realize losses. Sorry. Pardon me. Thank you. I'm looking forward to looking for next time. Right. The Standalone Businesses is another one I draw your attention to and you can see.

Speaker 3: that is driven by a mark on Lyon. Lyon, we marked it down by $109 million on our books. They had a good quarter, they just reported. They delivered 174 vehicles, up from 71.

Speaker 3: last year and I think they were right on target with respect to their delivery so I think they were pleased with their quarter.

Speaker 3: And with that, I think I turn it right back to you, Jeff. Okay, so we thank you very much, Greg. We've got the, Greg has already spoken to the net asset values on page 11. So I will just kind of skip over that page and move us on, make a few comments on page 12 on Great West. The results have already been well.

Speaker 3: Publicized and Great West have their own meetings. I just highlight a few things. One is the Great West Life in terms of our disclosure and our communication with the market, you are aware that Great West Life gave medium-term financial objectives back in I think it was June of 2001 when they had their investor day if I am remembering that correctly and they have reconfirmed their medium-term financial objectives.

Speaker 3: And they've also, as you are aware, are tracking that. And then every quarter saying, how are they doing against the objectives that they communicated both in earnings objective and the ROE objective. So that's part of the effort to continue to improve our disclosure and our transparency. And this quarter, I think it is noteworthy. There's a lot of.

Speaker 3: kind of confusion I think is a fair word to say about what was happening at Empower. And so the decision was made that with respect to Empower they would actually give earnings guidance and they gave guidance that they expected in 2023 that earnings would be up 15 to 20 percent from the level of

Speaker 3: So that was another important step forward and that's what I would highlight in terms of IR disclosure.

Speaker 3: I will go then to page 13, not really anything here on this page. I think I have already made my points as I made my introductory remarks, so why don't

Speaker 3: They did announce in just last month that they've now in effect combined the individual business of personal capital which was a direct to consumer business, wealth management business and the individual business of empower which is a retail business. Most of the money in that retail business are flows that come out of the defined...

Speaker 3: their wealth manager right now. Uh, when you combine the assets that were in empowers, a retail business and the personal capital direct consumer business, that's under one brand. It's under a common leadership of Carol Weddell. It was announced a little earlier. Um, as a president, she had been running the retail individual business.

Speaker 3: of Empower and you're going to start to see more branding of that business which will obviously is important in the individual business but also hopefully will have some benefits in our defined contribution business. For those who watch the Broncos or maybe some of you out there that are watching the Broncos we hope that more of you watch if you're a power shareholder we encourage you to watch.

Speaker 3: You saw that the Empower Field in Denver, but you're also there's a start of roll out of ads on TV to talk about to bring the Empower personal wealth brand to the marketplace. So everybody's excited about what's going on there. And importantly again on the disclosure front Great West Life is going to begin reporting that the result.

Speaker 3: Okay, going forward just to comment on on IGM it was a you know, pretty strong year in a very challenging market and good leadership by IG wealth strong flows in a difficult market and everyone is there obviously

Speaker 3: very focused on their expense management and Greg's mentioned as well not only good flows at IG Wealth but Northleaf had a lot of new commitments during the year so good momentum and we're very encouraged by what's happening at IGM. On page 16 you just get a breakdown of the momentum in terms on the on the left hand side of attracting new client flows.

Speaker 3: And that's a testament to what has been done at IG Wealth over the last really six, seven years, a lot of investment in technology, in new products, in different kinds of products, in a different recruiting model, in pricing. And we've been saying for some time we believe we have a very competitive...

Speaker 3: offering and a differentiated offering in the Canadian wealth market and that's showing up in very strong client flows including clients that are bringing accounts to IG wealth that are greater than $500,000 which you see along the bottom of that left-hand chart, even 2022 a difficult year.

Speaker 3: for investor confidence and yet still bringing in really good flows into the platform. Okay, let me turn then to page 17. IG Wealth, their business model is really comprehensive financial planning and it is not a product focus approach. It's a planning. The alternative is AI and prosecution.

Speaker 3: focused approach and part of that is to be as comprehensive as they can be and that includes mortgage dealing with the mortgage needs of their clients, the insurance needs of their clients, and they announced in the quarter that they're going to use Nesto as the basic platform.

Speaker 3: to bring our mortgage services to our clients. And that was announced and basically it's going to allow our advisors with really a leading edge platform that fits right into the financial planning capabilities. It's an online process which is...

Speaker 3: very, very convenient. It's really miles ahead of where we were. The folks at IG Wealth are very excited about it. And this is another example of our FinTech strategy playing out with our operating businesses. Now, I think you're aware our FinTech strategy was much broader than just trying to get some capabilities into our operating businesses. It was much broader than that.

Speaker 3: VC funds to expose ourselves and all of our group companies to what was going on in disruption and emerging technologies. And then there's been some opportunities where the groups have operated together and actually done something on a JV basis. So Nesto is one of those.

Speaker 3: Conquest, which is the financial planning tool, is now being used by IG Wealth and CanadaLife. And Dialog, which is the telephone health app that came out of the groups as well as being offered across the CanadaLife platform to its group clients and some other carriers in Canada as well. This is never an exclusive strategy to our group. So anyway, we're pleased about that.

Speaker 3: And at the same time, IGM made an equity investment in NESTO. So that was... What?

Speaker 3: A very good moment for the group. Turning to page 18, we of course closed the China AMC transaction in January , like a little over a year after it was announced. It was a long process, longer than I think we had anticipated, but we're delighted that...

Speaker 3: We got approval and the transaction went forward. So it is now, you know, this is the last quarter that you'll have direct reporting of CMAC in powers businesses and IGM will be obviously reporting on their now 27-28% interest in the company. I'll just point out CMAC in a difficult year overall and it's been a difficult year for

Speaker 3: difficult year for the Chinese market. You can see on the lower left that you know, it was not a strong stock market year in Chinese equities, but the companies really performed well continuing to grow their AUM and keeping their profitability at a very strong level. So

Speaker 3: Good, good results for CMAC.

Speaker 3: I'm going to turn to page 19 then.

Speaker 3: And just a couple of comments here, GBL continues on their strategy of putting more of their portfolio in private assets and they continued to do so. As well, they've been active on the capital management front.

Speaker 3: In addition to their regular dividend, they've been active buying share buybacks.

Speaker 3: cancelling those shares and have announced an intention to continue to do so. And at the bottom of the page, it's funny how you know a year ago everybody was talking about ESG and it was kind of front and center and it's not going away and it's continuing, it's going to continue to be a very strong focus I think of the world of shareholders of all of our stakeholders and of all issuers.

Speaker 3: but it hasn't got a lot of attention. It's been kind of side-swiped by all that's gone on in financial markets and inflation and then what's been going on in the last week or so, but it's nonetheless a force. And in that regard, our companies continue to be very active on it and GBL was recognized, as you see at the top of the page, they like Great West Life, IGM, the power companies continue with significant efforts.

Speaker 3: in that whole important area. Okay. Turn quickly to page 20 then.

Speaker 3: I mentioned good fundraising and a difficult fundraising environment and we've had more announcements in the first quarter of additional fundings we've announced. And so you see some of the funding here. We've got $21 billion of funded and unfunded AUM and Powers share that.

Speaker 3: continues to decline and so the dark blue lines are power. We do have Canada Life and Great West Life you know participating in some of what we're calling third party here and particularly get into debt products there's and some of the areas where they're in real estate where they have big interest. The real estate business of course that you see on this page which is in cigar was Great West Life's US real estate advisory business that was

Speaker 3: folded into cigar. So, but good build up in our AUS and you see a little more of that as you turn to page 21.

Speaker 3: On the bottom right hand corner you can see the funded fee bearing assets because the 21 billion are the commitments, but the fee bearing assets is at 15.5 billion dollars and you can see Powers portion of that year over year is actually down 600 million dollars.

Speaker 3: On the profitability side, on the lower right-hand side of that slide, a little bit of noise at Cigar at the top in the fourth quarter, and noise can come from, sometimes they'll close a fund that has been out making investments, and we would be putting the capital up. It closes and there's a catch up on the fees.

Speaker 3: And then sometimes there's on the expense side there can be expenses that can be of a one-time nature. We think cigar is running somewhere around breakeven at an FRE point of view. I'm sorry, somewhere is not a very specific term, but we think they're running at about break even more or less as we look at their current run rate even though it's showing a loss here of 5 million.

Speaker 3: terms of their assets and their revenues and their fee-related earnings. And a lot of that is just where they started from and a lot of the business and the expenses are tied to the energy business. A lot of those assets are now in the $1.6 billion Infra Equity Fund. That was the fund that Greg was describing when we talked about the markup.

Speaker 3: And so that's a big group and some of the expenses are that legacy group, they're very talented people, but we're getting that business to the point where you've got fees covering it is a longer effort than some of the other strategies we have. So anyway, that's maybe more detail than you wanted, but PowerSustainable made progress on fundraising and on their revenue side and they're very focused on getting themselves.

Speaker 3: to profitability. Okay, just a quick comment on page 22. Greg mentioned Lion Electric and what's happening there. We did put 25 million US dollars into their raise, their fundraise in the fourth quarter. Some of you may say, well, how's that happening? I thought we're becoming a financial services company.

Speaker 3: and we don't desert those commitments even if our strategy changes. In the case of Lion, it's got a really exciting business, long-term prospects. In 2021, businesses like Lion and other VC type early stage companies were able to raise a lot of capital. We went out and did a SPAC and a lot of money was raised.

Speaker 3: business as they continue to build out. But that doesn't change our long-term goals that, you know, industrial companies are eventually not going to be part of the portfolio and we will look for the right opportunity to monetize those in a way that makes sense for Power Corp shareholders and also honors our commitments to our partners.

Speaker 3: So that's my comments there, and then I'll turn to page 23. So 1.7 billion dollars of capital returned in 2022. It's our dividends plus the share buybacks of 11 million shares or 1.7% of the total participating shares. We did that.

Speaker 3: while also building up our cash position and with the sale of CMAC to IGM, we're at about $1.6 billion of available cash. We like to keep two times our fixed charges. That's a guideline that we keep. We don't follow it religiously if there's an opportunity. We sometimes go below it.

Speaker 3: All right, I will turn to page 24. Everybody's favorite topic of discussion, at least around here, is the discount to NAV. After five years of it hovering at historically high levels, we've been on a march, I think starting really with the sale of Great West U.S. Life Business and then the three-way buyback and then the announcement of the reorganization.

Speaker 3: and we think our strategy as we continue to execute will drive the discount down. I've been asked many times where should it be. I don't know where it should be, but I know that the only economic factor that I can see that would justify a discount is the expense load that we have at power.

Speaker 3: And that when I do the math is somewhere around 2 to 3% of the NAV, not to be too precise about it. And the balance is all available for us to continue to drive and buy shares back and arbitrage that discount. But I think the real strategy is to continue to simplify and continue to execute on our strategy.

Speaker 3: And as we do so, we think that we're hopeful that that discount will narrow over time. We're very focused on it. And I'll just conclude, I won't really, on page 25, it's there for you. You know the strategy. We are still on strategy. We continue to think about what we do next, what can we do better, what can we do differently, but we're basically still executing the playbook that I think most of you know well.

Speaker 3: With that, I will stop my comments. Operator, if we could open it up for questions on the line, we would be pleased to take questions. Thank you, sir. Ladies and gentlemen, if you would like to ask a question...

Speaker 2: please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, please press star followed by two. And if you are using your speakerphone, please lift the handset before pressing any keys.

Speaker 2: Please go ahead and press star 1 now if you have any questions. And your first question will be from Graham Writing at TD Securities. Please go ahead.

Speaker 3: Hi, good morning. Maybe just on power sustainable energy, what drove the large increase in value there? Obviously the impact on your income statement was the impairment charge on the non-controlling piece but what actually drove the increase in the fair value for those investments?

Speaker 4: Do you want to do that Greg? Absolutely. So we've got a, in Western Canada we have a number of turbine wind generation units that have been in production and development and a significant project went...

Speaker 4: went from development into production and that drove the revaluation of that particular asset. We have several other plants that will be coming on stream in the coming year. Certainly as that comes on stream, we would see a similar...

Speaker 4: Yeah, one more if I could, just the fundraising across your different verticals, perhaps the alternative platform, you know, obviously, private equity, venture capital seems like the environment right now is quite difficult, but then private credit and sustainable infrastructure.

Speaker 3: possibly more positive. Can you just give us some color or context of what you're seeing from your outlook for fundraising? I'll start and then Greg you add anything you'd like to. You're quite right. Credit funds have been...

Speaker 3: I've been Where the market has been and we've also been successful the the equity Infrastructure fund we just talked about was a billion dollars and in the fourth quarter another six hundred million Was raised by investors and I think powers participation that when that was at 50 million do I have that wrong on the end? 50 million of 600 which you know the first tranche we were 400 of a billion and we were 50 of

Speaker 3: of $600. Now, Canada Life took a little bit of that as well. But so, you know, that's equity infrastructure in the fourth quarter, so good fundraising there. We've done private credit but we are making some progress on some of the equity sides as well. Power Sustainable Capital launched an Agra.

Speaker 3: Sustainable Agri PE fund is about 160 million raised in that fund. They're looking for more capital and we're seeing some progress in Europe on some of the equity products that we've got there. But your characterization overall is correct. Income safer type.

Speaker 3: products are getting a lot more traction in this market than the higher risk ones and certainly in the VC space lots of opportunities out there to invest some money, but that's a little bit tougher going, but we're so optimistic our track record will get some more money into those funds. Greg, did I miss anything? No, I just say that you know and some of thosearorbitable

to raise capital. It's, they're in the sweet spot as they say. Yeah, good. Is that good, Greg? Miriam, excuse me.

uh raise capital it's uh they're in the sweet spot as they say. Yeah good is that good Greg or Graham excuse me Graham did that answer your question?

We lost nothing. We lose Graham. Oh, sorry. I was on mute there. Apologies. No, no, that was helpful. And I guess just one last one, if I could, with the revaluation that you took on those non-controlling interests, will we continue to see that potentially under the new accounting standards that you're moving to?

As long as we consolidate them, Graham, we will have to do that. And I should have said earlier on, you know, the three fair value marks, you know, there was also the one in JBL where we took another fair value mark for $18 million in the quarter. And you know, on that one in particular, it's due to

JBL and today the mark on that is something like 1.7 billion. So you know we've been marking up the liability for probably a good 10 quarters now and not recognizing the gain.

Thanks for asking that question because it just gives you a bit more insight. So if you add the three of those together, like we had about $180 million of fair value mark in the quarter that contributed to the noise in the quarter. While you're on that, if you don't mind, I meant to say in my remarks and I didn't.

When the company did its stack, we put another 18 US in, as I recall at that time, and then 25 million US in the fourth quarter. So you do the currency there, we're somewhere just a little north of 100, and I think the market value of our position is about 220 is what we got in rate at this time. So we've got a...

We've got a good gain on the position but because when the SPAC occurred we had a dilution gain on our equity position and we had some options to buy more equity that then got marked up onto the book value when the SPAC happened. So we're marking it down from where it was on our books but the actual value of what we own is still significantly above the money that we put in. So just to make that clear. Good comment, thanks. Okay. Graeme, more from you?

us how you're navigating the recent dislocation in US regional banking, you know, and whether you're taking any action to assess counterparty risk with respect to primary banking providers there? You're talking about within our VC and our fintech world and I think that's where your question is focused.

who is chair of the risk committees of the various groups, who's been spending a fair bit of his time just making sure we're on top of this as well as the rest of the team over the last week or so. Greg, did you wanna add anything to that? Yeah, so it's certainly nothing material in terms of the group, but obviously to some of these startup companies, it is disrupting and they're having to...

you know, find different providers of operating lines and look to, you know, their LPs or GPs in some circumstances to provide them with the capital that they need to continue their business. And our teams are going through that exercise right now, but.

No significant dislocation, I would say, from the folks that are operating our platforms, either in Canada or in Europe at Ciena, which is our alternative platform, now renamed JBL Capital.

and Ciena investment management, so it's been split in two. But anyhow, no significant dislocation that we've heard so far.

Okay, that's very helpful. And then maybe stepping back, thinking about the asset management platform more broadly, over the past few years you've been raising a growing amount of third party capital across that platform.

Does there come a point in time when the carry eligible capital seasons sufficiently that you are able to crystallize a significantly higher carry in order to accelerate the path towards profitability there? Is that a few years down the road or how do you think about that opportunity?

Crystalize carry, I think as I want to put that as the strategies mature one would hope and expect that if they are meeting their investment returns then the carry will become larger and grow if that is what your comment is if they are meeting their IRR targets versus funds that are in the early stages. So when we start looking at their sports inAS another thing that this is still going to

So I think that would be our expectation as we move forward. But the carry is also volatile, as you know, because as you get into the larger amounts of the carry, a lot of it's on the equity and on the VC type funds. And so you're susceptible to markets going up and then markets going down.

So that carry line will have volatility on it as will our seed capital. You know, because you mark it up and you mark it down. So when you're in that business, you've got the fee-related income, which we focus on because that's kind of a, how are we doing on our fees and how is that covering our expenses and then...

and then you expect that those will create value over time but there will be volatility is what I'd say. But yes you're right as they mature you'd expect the carry to continue to grow and if it doesn't grow that means you're not making returns for your shareholders, you're probably not meeting your targets and you're probably not going to be doing more fundraising in that strategy. So does that answer your question? Yeah, yeah no that's good. That's it for me I'll pass the line. Thank you.

Okay, thanks Nick. Next question will be from Jeff Kwan at RBC Capital Markets. Please go ahead.

Hi, good morning. You talked about with cigar that you think you're running roughly the break even right now in an FRA, the power sustainable isn't quite there yet.

To getting to break-even on power sustainable, is that like a one-year, two-year, or other kind of time horizon to get to that break-even level in an FRE? Probably, it might even be three years out, I think. It's more than one or two.

But it's a bit of a combination. I was trying to hint at that, which maybe I wasn't clear enough, Jeff. I think of power sustainable as two pieces. And the first piece is just a straight business of going out and fundraising, putting teams in place, launching strategies, getting the revenue side up and managing your costs. And that's what I'm trying to hint at.

Business is not as developed as Cigar. If you think about Cigar, Cigar has done an amazing job of launching new products and new strategies and credit in royalties. An example Canadian PE, but they've also had businesses that had been around for a while at point to....

Cigar Europe , which was a private equity business that power started over 20 years ago. The FinTech strategy, which the Cigar team and Paul 3 and others started, so not to give them credit for starting, but that was done in 2015. So it was already at a point where it was more mature and then they rolled in the Great West Life's US real estate, which already had a bunch of assets under management. So there was a bunch of...

strategies there and then they've augmented that with a fantastic team in launching new products. So it's further along in its revenue base and its scale and scope. In the case of power sustainable capital, its two main strategies were the China fund that was all of powers capital and so they went out you know two three years ago to raise money into China and that's been a bit of a challenge to be for obvious reasons that's not exactly where capital has been flowing in the last few years.

And then they had their energy infrastructure, which is now the $1.6 billion fund. They've done a really good job of bringing outside capital into it. But they are in the process of launching new products to broaden out their scale and scope. So we talked about the AgriFund and there's more that they have in the works and other teams.

that we expect in announcements that we're hoping to be making over the upcoming 12 months to broaden out their base of products. That's one side of it. The second side is we have this kind of legacy of expenses that were development people that work within power and our subsidiaries outsourcing wind projects and sun projects and we have them in Canada and we have them in the United States and they were never set up at power to be.

income generating, they were set up to invest our capital and then you, you know, hope to get a double-digit return on the development part and then we were going to, the previous strategy, and then we'd end up owning a nice stable cash flow earning company. And so that was never set up as a fee generating income and we still have a lot of those expenses within power of sustainable capital.

The plan is to change the mix from how much we have in development and how much we have in income producing properties and ultimately those people end up working for the funds and they end up moving off of the P&L of power. That may be more than you wanted to hear in terms of detail but what I'm saying is power is changeable capital.

very different position and a different challenge to profitability and whether we launched an alternative asset management business or not, we would still have those projects on the books, we'd still have those people to pay for, so it's kind of there whether we're pursuing alternative asset management or not. But it's been in the interest of transparency and disclosure. We've got it all pulled together.

And secondly, there's a development team. A lot of people hear that we've got assets to develop, that we've got to work, we've got to, we are where we are. We've got to continue to develop those assets and that contributes to the greater loss. So that's a long answer to a short question, but that's what's going on. Greg, yeah, please add to that. So Jeff, the only thing I'd add to that is that, you know, they just recently announced two new funds. The, yeah.

And that's going to happen until they actually hit a mature point and they're generating enough excess cash flow to cover their expenses as they're adding platforms. So, you know, that's certainly one thing that would contribute. And, you know, not that they're going to be launching 20 verticals in the next little while, but as you can appreciate, there's a lot of green space.

excuse the pun, in the area they work in. Power sustainable is ESG focused and centric. So they see a lot of opportunity. So that's one of the reasons why we think the runway there may be just a little longer than one might expect.

Okay, and to stop my second question was on the OPEX side, you kind of have been where you wanted to get the OPEX when you collapsed the structure with PowerCorp and Powerfin. Just wondering going forward how you think about what OPEX growth looks like from here. Yeah, it's a great question and one we need to turn our attention to.

that we do. So that's kind of a statement of where we got to. Now we're not going to be crazy about it if we have an opportunity to either add some real talent that can add value to the top line and the value creation and that would mean that we would have some increase in that. We shouldn't be blind to it.

very very focused on meeting the target and right now our view is we're going to hold the line on expenses and grow it with inflation for example, but I also we're not going to be stupid. This is a dynamic business and you know we sometimes we're not a huge group of power as you probably know and if we got an opportunity to hire some talent in that we thought could add value to the business and it was going to mean that our that our costs were going to go up by several million dollars to do it.

and you know our expectation would be that we'll continue our run rate where basically where it is plus or minus a couple million dollars for inflationary expenditures in the course of the quarter. The CFO has spoken. All right, great, thank you.

would be that we'll continue our run rate basically where it is plus or minus a couple million dollars for inflationary expenditures in the first quarter. The CFO has spoken. All right great thank you.

The next question will be from Jane Gloin at National Bank Financial. Please go ahead. Yeah, thanks. Good morning. First question, just on the China shares. Could you give us a little bit more color as to perhaps what sectors those shares were, the losses were realized upon and then...

what exposures are potentially left in that portfolio today, maybe from like an industry perspective or however you wanna break that down. Thanks. Thank you, James. Before I pass that question to Greg, I just again wanna point out that we follow the nav and the returns and how that is.

We look at the NAV all the time and say what's the portfolio worth. The losses as you know, just for everybody in line you would know this James would refer everybody in line. The losses come through when they actually realize the positions. So while we look at the NAV all of a sudden the portfolio manager says they bought some positions and they want to reposition or go more to cash or what have you. So they'll liquidate the positions.

and change the portfolio and those realized losses move through our P&L. But whether they're realized when it's part of the NAV, it's already part of the NAV, it doesn't change the NAV. We tend to focus more on the NAV but the financial statements reflect the actual sales of securities. With that, Greg, did you want to... Yeah, so two things I'd say, James, on that particular question.

One that you'll notice that the nav on that has actually increased lately over the last quarter. I think we're sitting at triple six, like 666 million in terms of nav. So yeah, really nice and mosquitoes at triple six and

When the portfolio managers were repositioning the portfolio in the Q3, I think it was at the bottom, my memory serves. But they basically stay away from the SOE based businesses and that's the state-owned enterprises.

and they have the portfolio basically is composed of non-SOE positions and they didn't change that going into the party congresses or coming out

but they certainly repositioned the portfolio. And the specifics of that, I can't give you the portfolio names, but certainly they would have held a lot of retail-facing positions in companies.

And so and they would have had a certain amount of technology in the fund as well. So they were basically realizing losses and in some cases they just moved off the position to lighten the exposure and repurchased them later after the meetings when they felt that the

some other commercial real estate portfolios, decent marks. Wondering if you have any commentary on commercial real estate and how that can potentially affect the power. You know, we got the comments obviously from great west, but thinking more maybe staggered or elsewhere.

Thank you. Commercial real estate affecting power.

I don't have an answer to that question. I mean, I can think of it in the context of the Great West Life, and they've already made your comments.

the Cigar Real Estate Fund, I don't think there's a lot of our seed capital in that particular fund.

So I'm trying to think on a real estate basis. Question is would power be impacted by drop in value in commercial real estate? I'm looking at it right now. Not directly because we only through an LP investment in our platforms that has commercial real estate. Exactly.

and we do not have direct exposure. Exactly, you're going through the same logic. The reason we haven't, you can see how much we've been talking about it James, I don't think it's an issue, but we're trying to think about it here. It would be in Everwest and Everwest was a great Westlife investment and we brought it over and don't have any seed in it, so I don't think so. I'm pretty confident to say that I don't think we have that exposure.

Thank you very much.

very helpful. Thank you very much. Okay, great.

Thank you. Are there other questions? No. Ladies and gentlemen, there are no further questions. So this concludes your conference call for today. Thank you for participating and you may now disconnect your lines.

Thank you very much. Goodbye now. Thank you.