Q2 2023 Innergex Renewable Energy Inc Earnings Call

Good morning, ladies and gentlemen, thank you for standing by welcome too.

Sure.

No.

<unk> second quarter results conference call and webcast.

Yeah.

Yeah.

The next question.

Okay.

At this time, all participants on the phone and Internet.

The only mode.

Following the presentation, we will conduct a question and answer session for analysts.

Investors and instructions will be provided at that time for you to chew up for our questions.

If anyone has any difficulties hearing the conference Please press star.

Sure.

At any time I would like to remind everyone that this conference call is being recorded I will now.

I'll turn the conference over to senior Director Communications. Please go ahead.

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

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

Sensation supporting today's discussion is available as we speak on the homepage of our website at <unk> Dot com.

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

Although the corporation believes that the expectations and assumptions on which forward looking statements are based are reasonable under the current circumstances listeners are cautioned not to rely on Julian. These forward looking statements as much science can be given that it will prove to be correct forward looking information contained herein is made as of the data.

This call and the Corporation does not.

Undertake any obligation to update update or revise any forward looking information, whether as a result of events or circumstances occurring after today skyros unless so required by law. During this thousands will refer to financial measures that are not recognized according to international financial reporting standards <unk>.

Please refer to them on their first major section of the MD&A for more information.

Our speakers today will be Mr. Michel Letellier, President and Chief Executive Officer, who will present, our corporate development and growth opportunities and Mr. Johnson, Chief Financial Officer will discuss the execution of new initiatives and financial overview and I'll turn the conference over to Mr. <unk>.

Thank you.

Good morning, everybody. Thank you for being with US. This morning, I'm pleased to to talk to you.

This morning regarding the achievement, we have done in the last quarter I think we've done very good advancement in our development.

Activity in construction, but also we have been concentrating our activities also on our funding initiative and on that note. We were very pleased to welcome exactly cause.

Our French portfolio as you might have seen physiological just bought 30% of our platform in France, I think that it's a great opportunity for us to join a great financial institution in France. It's also demonstrate the value that our French team has done already.

Years, as you know French development takes quite a bit of time.

We haven't seen yet many project coming from our Greenfield initiative, but it's just that the fact that it takes five to six years to develop in France.

Is the reason why we haven't yet see the benefits of the work that our development team has done but this transaction is showing that French institution or European institution can see through these development period and have crystallize some of the value.

On that portfolio effort on the development side, so pretty pretty happy to have a long term partner that will help they've loved the French activities and we might create some synergy also in the development and with their.

The relationship with.

Local community. So pretty please do you have that announcement done and this is obviously, helping our funding activities and he will help.

Fun and help our growth development, John is going to talk about it a little bit more we have as you know other initiative underway to create a little bit more liquidity for funding our activities going forward.

On that note I would switch to page five.

I'd like to talk to you about our development and construction activities more specifically on project by project as you.

No we've been working hard in innovate to make sure that we can put that project in C U E.

Please do note that we have done a lot of testing we have been successful in raising the.

Head pond on.

On our facility. So now we have the ability to test our turbine.

Final testing with hydro, Quebec should occur in September so that by the end of September we should be in full.

The moat pretty impressive work over the years and I'm proud on that task on that project. Because we are as you might recall displacing 90% of all the diesel that are remote community have use over the years and very proud to have our partner <unk>.

In with <unk>.

Being partner in this first our hydro facility in the north so great FERC com, both on our team and of course, our local community partner on this activities sounds that all storage battery and Santander, Chile are advancing.

Very very well we are pleased to report that we have already started testing.

Couple of my megawatt in Salvador, and this is going to increase by week. So that by the end of August beginning of September we should be in full swing.

Demoed in Salvador, and sometimes it will be.

Following by the end of November December we should also be in operation in the San Andres just in time for summer.

Yes said peak.

Production in the solar area of Chile as you are as you know this.

This part of the Chilean <unk>.

Market is.

<unk> by the fact that a lot of solar is producing during the day. So great volatility. There. That's why we think that this storage facility will take advantage of this great, but they know that the as we've discussed before so pretty optimistic on the output of this these machine on the long run there will be also.

Opportunity to fix these revenue through either PPA or future RFP for storage in Chile.

I'll come I'll come back to this a little bit later.

But for the time being to short term volatility of that market will be a great for this this asset and looking forward to see this in operation and very soon.

Very proud also on Boswell sprained the team has worked very hard to start the construction.

Pleased to announce that are almost 50% of the transmission line is is done we have about 20% of the foundation of the turbine already poor. So construction is well underway in Boswell and John's going to talk about the initiative for funding. This this great project.

All good Green light on Boswell, we still hope to have this project being in operation by the end of 2024 highly Kuwait finally, we got the PPA price increase approved by the PUC has been a while but this is a great news.

Ft, 6% price increase is allowing us to re start to construction on site.

<unk> date should be Q3, Q4 2020 for.

MS Giga, Justin as you know is the expansion of our existing project a new one.

Together with our three make Mac.

The partner in.

The initial one so we have actually again partner to to create this opportunity for you too.

Glad to announce that we have completed our PPA, we signed a PPA with hydro, Quebec ongoing discussion with the turbine supplier and construction.

Provider in order to have this project being in.

<unk> in 2026 one.

<unk> in France are interesting.

Fact that we manage to actually re repriced this BPA by putting it into.

A new phase of the RFP.

We increased the price by a little bit over 10, a 10 euro per megawatt so great initiatives from the part of our development team in in France. So this project shows that are you know when you have sometimes PPA price that in the past be pre price at work.

A little bit low there is some market the ability to increase that we've seen that in a in Hawaii and now in this case on the board when you. So our team has taken the advantage of these RFP to increase the profitability of that project very pleased on the on that aspect.

If you switch to page six I'm going to talk a little bit up all our opportunity to develop in our four market I think that you have heard us saying that are we have a lot more pork Trinity in Canada, and U S, France and Chile.

And then in the past interjects is really focusing on Greenfield development, we've been active in the M&A.

In the latest.

The past, but we're focusing now on Greenfield development, we have tremendous opportunity starting with Canada. As you may recall, we have talked about Quebec, but I think the rest of Canada.

Is waking up also great opportunity and British Columbia also going to to have an RFP in 2024, we were waiting for.

This call for a bit they will also calling for future calls Saskatchewan is active with 2000 megawatt called solar and wind we have some project down there to be able to put into the E. R. The RFP.

In the next few months, Ontario, as you know has been active in storage opportunity I think that they will also be in the near future looking for more.

Renewable energy wind and solar so we'll get rid of it down there too but.

But the most active opportunity in the short term and mid term is Quebec, Quebec is looking for a lot of new RFP.

We have the support entity coming in September to.

Answered the actual RFP, but more are to come we're talking about probably 12000 megawatts of wind in the next 10 years or so so great opportunity for us.

All in all the development in <unk>.

Canada will have.

Some shape or form I will have to be a partnership between first nation and community Interjects is well positioned we have been embracing this this type of a joint venture in the past we have our call.

Sure being developed to fit well into these these type of structure. So we think that we have this.

Well, we are very well positioned to take advantage of the development in Canada I think that's just reading a little bit of a barrier of entry for other players that might not be has confronted ball as we are in that type of partnership.

New Brunswick is a small market, but it's a it's also.

Quite active these days and we're well positioned in that market as well.

Page seven United States as you know is probably one of the biggest market.

In the world.

Aside China really no don't worry we're not in China at all.

But we have to focus a little bit on some area of course the market is so huge it would be very difficult to cover it all.

But we you are seeing here some some area, where we are working hard are we.

We think that we can also expand on the existing footprint that we have we are as you know in Ohio are high now Wyoming, We're very close also to the northwest with our facility in in British Colombia. So we are working in these area as you know we have.

Both solar and wind very few opportunity for hydro, but working hard.

In and developing our wind and solar in this region.

The market in the in the U S. As you know is.

It is very active we have also been able to.

Be very effective in creating structure with the tax equity. So we're very familiar with these facility she's going to talk about what we have done for our Boswell. So we're well equipped and I think that we have support from tax equity and lenders are players in order to support big.

Big project in the states. So we don't need that many project to be put.

Put in service in the state.

Like Boswell Palomino those are pretty big.

Big Project 300, 200 megawatt were working with what Thomas as an example for 400 megawatts in the northwest So I'm very optimistic on our ability to deliver within the United States, we're focusing on Q area of a very promising market, where we already have some footprint.

And people on the ground in these in these market.

Page.

Eight are the other market, where we are active I just spoke about France, France.

I think is is a market where we can create.

A little bit.

It's a little bit of a niche market in a sense. It is part of the carnal Big certainly not as big as it is in the U S or in Canada.

Given the complexity of the lumping in France. Once you have a project that is ready to to go into construction, usually you have a little bit better margin than in other area. Just the fact that it's more complicated and the demand for the product is great. So we have this market is a little.

Bit of a niche loved the fact that we have now really is he actually called to support the future development like I said, we may be able to develop some synergy with their.

Local.

Branches in all over France, So very pleased and positive about the team congrats to the team in France. They worked really hard in the last few months to deliver these transaction and they are looking forward to work in developing more.

Project in France, both in solar and wind Chile as you know, it's not again, a big market, but it's a market where we I think have mastered the recipe to have success in Chile.

As you know we want to have a diversified portfolio with many point of delivery through the the market.

That's what we have as you know we have hydro with storage we have when we have solar and now we will have some batteries. So we're very well equipped to.

To service this market I don't think this market will expand.

Not much in our portfolio.

But I think we can create great opportunity for us to be a strong player in Chile, and the profitable player in Chile.

If we go into.

The other the other slide where she.

A little bit our diversity diversification target in revenue I think that we just spoke about our core market, Chile, France U S and Canada.

As you see right now chili's, representing roughly 12% and we don't think we would expand a lot more as we were mentioning Chile has some great opportunity, but it's a fairly small market. So has USA and Canada grow.

It will pick up a little bit more space in our portfolio, France, we loved the market as I mentioned, but again.

Those are fairly small project profitable project, but small so it'd be hard to see friends being much bigger than 10, 15% of our portfolio.

<unk> is is a strong strong market I think we can grow pretty fast also there, but we want to make sure that when we grow in the USA. It will be profitable. So we think that the USA should represent something around 30% of our portfolio and I think that in Canada.

<unk> has a as a Canadian company as that culture also to be also.

The partner of choice of first nation and community I think this is where we have the strongest competitive advantage. So we think that the Canada Wills will remain.

In at least 50% of our portfolio going forward.

In terms of the contracted it tells me I think that the long term contract has been what.

What we are looking for in in our history, we still wanted to have long term contract, but today.

Today is a pretty neat sometimes create a lot of.

Great financial opportunity to take advantage, sometimes of a shortage of energy in some part of the world. So we are re remain I would say opportunistic in our review of sometimes staying a merchant sometimes it's just a transitory phase where we would.

Be waiting to have the great opportunity to sell.

Long term PPA, Chile is a good example, I think that we have been patient.

With our <unk>.

Commitment to have longer PPA.

We have been.

Taking advantage of a great opportunity there you know that in France. We took also the important NTT to stay.

Floating on a couple of our projects. So I think we just want to be.

Opportunistic there.

But when we have the chance to secured long term PPA, that's what we like to do.

You know that we are also matching project finance with that type of long term PPA.

Johnny's going to also expand on that fact.

<unk> opportunity as you know two to refinance some of the hydro facility, where we have actually re contracted a dose facility. After 20 years <unk> has expired.

In conclusion, I think that our sector as you. All know is booming I think that this morning, we had the news that the July 2023 was the hottest July ever.

See that it never been hot like that in July for 120000 years.

This doesn't bode very well for the future I think that you have experience in some shape or form.

Extreme weather pattern really warm.

Extreme heat in some places.

With of our of the United States is under a heat wave right now, Texas is running at 105 degrees.

So I think that the world is waking up and saying and seeing that we have to do something about clean me up and and reduce this hugh to emission and we think that in all our markets. We have great opportunity to take advantage of that so interchange that is going to focused on greenfield.

Laughter and opportunities where I have.

Food on our feet on the ground I'm sorry in many of our market our teams our experience we have some great.

Opportunity to secured.

RFP, we are going to focused on putting in and enhancing our green.

Greenfield development portfolio in order to be in a great position to secure future long term PPA in those RFP. So on that that would give the floor to <unk> and we will be able for answering a question afterwards. Thank you.

Alright, Thank you Michelle and good morning, everyone. So on slide 11, I'll start to talk about it would be the financial performance. So the corporation actually posted strong growth for the three months ended June 32023, compared to the same period last year production was up 3% at.

Two nine gigawatt up to.

2000, 2900 gigawatt hour revenues and production tax credits were up 13% at $69 million compared with the same period last year.

This increase is mainly explained by the contribution of the acquisitions of <unk> and St Marys solar facilities in Ontario.

<unk> generation of the critics Palmer hydro facilities in the U S and higher net selling prices from the Chilean facilities and also higher production and revenues from the French wind facilities due to the new ppas at higher selling prices that are in place that some of our facilities in France and also higher production at the hydro <unk>.

<unk> in British Columbia.

These items were partially offset by lower production and selling prices at the Griffin trail that wind facility in the U S. Lower production from the wind facilities in Quebec, and nowhere in that setting prices at the Phoebe solar facility in the U S. So for the three months period operating and general administrative and perspective.

Expenses were up 19% at $79 million compared with the same period last year.

The increase is attributable to higher maintenance expenses at several of our facilities in Quebec, the acquisition of Veda and the impact of the 2022 supplementary budget Act in friends, which measure should end actually in December 2023.

These items were partially offset by lower maintenance cost at some of RBC facilities and lower operating expenses at the Chilean solar facilities.

As a result, adjusted EBITDA for the quarter reached $187 million, which represents a 17% increase.

Compared to the same period last year revenues in production tax credits proportionate were up 13% at $285 million and adjusted EBITDA proportionate reached $199 million, which represents an 18% increase compared to the same period last year.

The Corporation recorded net earnings of $25 million for the three months ended June 30th.

Compared with a net loss of $24 million for the same period last year.

On the next slide.

For the trailing 12 months.

The corporation generated free cash flow of $115 million compared with $174 million for the corresponding period last year.

Increase was primarily explained by a decrease in cash flows from operating activities marked by exceptionally low water flows in BC as we discussed before in Q4 2022 in Q1 'twenty two 'twenty three.

Which overshadowed really the contributions from our recent acquisitions.

It was also explained by an increase in interest paid mainly stemming from additional indebtedness to finance acquisitions or with the loans coming with acquisitions like <unk>.

St. Mary for example.

And also it depends on the construction activities, but also the timing of semiannual payments on the Chilean Green bonds and also a slight increase in maintenance capital expenditures.

These items were partly offset by the increase in merchant pricing.

Certain U S and Chilean facilities, a decrease in free cash flow attributed to noncontrolling interests of the BC hydro facilities. So the decrease of $58 million in free cash flows resulted in a payout ratio of about 127% for the trailing 12 months compared with 82% for the same period last year.

So I think it's important to normalize these figures. So what we are providing you with information as the.

The normalized long term average excluding our operations in Chile, because we.

React differently to pricing.

Compensate the lower.

L T a nor production so we normalized LTE for.

All of our facilities, assuming 100% of LTA, except for Chile, and so if we hadn't met this for Q2.

Only our revenues and production tax credits and adjusted EBITDA proportionate would have reached 289 and $210 million respectively. In the second quarter. So there is a variation of $20 million and on a trailing 12 months basis.

Excluding the Chilean operations.

When we adjust the four previous quarters normalized for 100% LTA, the resulting payout ratio would have been in the range from 75% to 80%. This is really a figure that's important because if.

It really represents our earnings powers and capacity to generate free cash flow how do we had.

Been in a normal weather environment.

So next to next slide talking about the funding initiatives.

I would just taking a few minutes.

<unk> talked about it.

Firstly I guess on July 14, we announced the construction financial close of our Boswell Springs Wind project.

Very pleased with the terms of this financing.

It demonstrates for you the strong market confidence and in our technical and financial liabilities to build up this high quality and well structured assets, which will generate attractive cash flows.

Once in COPD.

Out of this financing we.

Used $136 million to actually reduce the corporate revolving facility at closing.

And the next step is to obtain the commitment from the tax equity investors and this is a process that is very well advanced and we expect it to close during Q3 2023.

Just second second initiative on August seven as Michel mentioned, we're very proud to announce the signature of the agreement for the long term partnership with kids, Yeah, you've heard us announced for the minority interest in the French portfolio, which represented proceeds of $188 million.

And as Michel mentioned this is a very good demonstration of the confidence of this strong French partner and our ability and our French team ability to create value in this market. So the proceeds will be used.

Clothing immediately to reduce interjects corporate facility corporate revolving facility and then of course used to fund our growth activities going forward. The long term co investment agreement will also support <unk> development and growth strategy in France by providing additional equity commitments.

From PAA for the development and financing of ongoing projects at various stages of development in France.

The transaction is expected to close in the second half of 'twenty two 'twenty three we have to meet the antitrust.

Thresholds and such.

It should be.

That should be done by.

They're not in the last half of the year.

And finally.

We are present, we present the own and operate many facilities, which are unlevered as you know we're present the advancing in the nonrecourse project financing or three hydro assets in Canada and this is expected to close in a few months.

Our intention is to project finance three additional facilities as part of their future initiative next year and these initiatives are specifically there to protect our investment grade rating for the coming years by decreasing the corporate leverage.

In the future so the target proceeds for the first.

<unk> III hydro assets to be financed will amount to about $170 million and approximately $80 million for the second group of facilities next year. This will help us to surpass our $400 million funding target when we combine this initiative with the friends as sell down.

Now about our <unk>.

Capital allocation strategy.

Next slide so given the diverse sources of capital available to us at the corporate and asset level, we are well positioned to execute our funding plan for organic growth. During the next three years. So following the execution of the initiatives that we mentioned earlier.

<unk> available funds will reach about a bit over half a billion dollars to support our capital requirements.

So the cash flows from operations.

Access to nonrecourse project financing at the asset level and tax equity partners, when we develop or build assets in the U S. And also the available funds under the revolver that are expected to reach as I said half a billion dollar with the initiatives that I mentioned before will help.

We'll actually be sufficient.

To fund the Capex for 800 megawatts of existing projects under construction.

<unk> under development and.

So our prospective projects of 160 megawatt of prospective projects. So.

This would also finance of course, the annual prospective investments to develop new prospective projects.

For about $35 million to $40 million per year.

It will also financed the annual scheduled principal and interest debt payments that we have and of course the <unk>.

Well dividend of <unk> 72 per share to shareholders annually.

So overall our funding sources are already identified for the next three years the execution of the initiatives intends to strengthen and of course, our balance sheet.

Initial foundation, and we expect to fund profitable.

Sustained growth, while maintaining our commitment to an investment grade rating.

I will now turn back the floor to himself.

Remarks, thank you all.

Thank you.

Uh huh.

I think that.

We have stuff that we can control and unfortunately, its difficult to control the weather pattern, but we can certainly have strategy also to diversify our portfolio.

Alder to mitigate any.

Other pattern that would.

<unk> be coming in.

In the future I think that we will be focusing on stuff like I said that we can deliver certainly completing the financing of its tree hydro.

Asset and also the fourth initiative will create liquidity for us too.

New developing our.

<unk>.

Working on the construction and delivering on Coa date on budget project is something that we have to deliver on and working really hard on it we are working towards the <unk> side of it all and Santander is a battery project in Chile, advancing boswell screens and equally so.

That we can meet our COPD data in 2024 are top priorities for us and of course, our development teams are focusing on developing our development portfolio.

Being in position to answer RFP like I said is top priority as well we have great opportunities in all of the <unk> market.

Special focus will be.

Done in Quebec, and in Canada, where we think we have also a great advantage in terms of our ability to partner with local community and first nation.

So stay tune.

For the result of future RFP, our team will be dedicated to make sure that we have product to submit into these RFP I think also that given the great opportunity that we have.

Youre seeing a lot more RFP a lot more demand for our product. So I think that our industry had a little bit of the struggled in the last few years to create and keep margin I think that going forward, our industry and <unk> has more.

The bargaining power in the sense that we have more opportunity I think that we can create a little bit more margin in order to keep up with the capital cost increase that we've seen in a sense that interest rate has gone up so theoretically our in juice.

Return on equity has to go up as well we are.

Fairly.

Like I said in a better position I think.

Given the fact that we have a lot of opportunity of course, there is competition in in our world.

But the opportunity is a lot more than before so I think that our price.

Bargaining power has increased a little bit enhance.

We are expecting to have a little bit more margin in our project. So on this I would open up the question period.

Thank you ladies and gentlemen, if you have a question. Please press the star followed by the one on your Touchtone phone.

That's all I'm acknowledging your request.

Thanks will be called <unk>.

Please ensure you Lindsay handset, if you're using a speaker phone please.

Thank you Kenny.

One moment. Please for your first question.

Your first question comes from.

From Carmack Securities. Please go ahead.

Thanks, Good morning, the credit Agricole partnership.

Publicly stated that they're reaching we're trying to reach a <unk> 14 gigawatts of renewable capacity over the near term and you mentioned some of the potential local market synergies.

You guys expand on what those opportunities might look like particularly as it relates to project growth or financing and whether or not that could extend beyond the French borders.

For the time being we are focusing on on the French market.

As you might recall the French system is providing twice a year the opportunity to submit project in Rfps, So I think that the.

Alone this is creating a lot of opportunity.

I would say that limit.

This growth is our capacity to generate project.

It takes quite a bit of time to basically get the permits when we advanced project.

We tend to have to invest a little bit.

In front.

To make sure that we have the social license, except the ability in order to.

That answered.

And third the calls so the only limit is our ability to develop project in France. The market will take almost all of the project that the system can deliver pruning.

Turning process in franchise.

Limit.

In the last few years.

Just over 2000 megawatts of solar and probes and wind projects have been permitted per year. So they need almost twice as much. So the limit is.

<unk> not the market is the ability to produce projects enhance our ability to create a little bit more value I mentioned, some some synergy because.

Hey, Karl has a lot of local <unk>.

<unk> not necessarily.

Thanks, but their prison all over France, So theres, maybe some possibility just a little bit like Quebec, or Canada to eventually have the local community.

A small portion ownership of these projects may be crazy because it can help us.

If all leading in this market that might help the social license exit, particularly some of the project as well going forward.

Going out of the border of France is not necessarily a priority.

We may eventually in the future look.

<unk> Europe , but for the time being we're focusing on France.

Okay, that's great. Thanks, Michelle.

And then in Canada can you just expand a little bit more on the opportunities that youre seeing by province in and what the return profile might look like as you go between each league if you're thinking from a capital allocation perspective, how would you rank them based off of the attractiveness for $1 deployed.

Quebec first top top top top top first.

<unk>.

Quebec cannot build up enough.

Like I said.

12000 megawatts of wind in the next 10 years is going to test the limit on our ability as an industry to build out that much.

Wind facility.

Remember that we talked about 20 years to build out the existing portfolio of Quebec 4000 megawatt now we want to have.

Net forward, but three times as much.

In half the time, so I think that that will have a lot of opportunity to deploy capital and then.

In Quebec.

After that I think thats, the Saskatchewan Theres, not a big market, but it's a repeating market and BC will we will certainly be.

Great market for us as well.

But Ontario, right now is talking about lumping nuclear for the future, but I think that.

They will have to to make room for a renewable energy and they will have to invest also on degree its who do you have the ability to have win being interconnected in the north.

But for the time being Quebec is the prime target for us focusing Saskatchewan is acting like I said, so we're there and we're still going to be.

NBC as you know we have a strong office in Vancouver, and we have a great relationship with first nation also in BC.

So those are the main target in in Canada for the time being.

Excellent. Thank you very much guys.

Yes.

Question comes from David Tusa.

Raymond James Please go ahead.

Thanks, Good morning, everyone.

Maybe just.

First question on the.

How discussions are going with off takers at palomino.

It sounds like pricing environment still pretty supportive.

Just curious what youre expecting there in terms of timing.

As you as you know PJM is.

Is.

Challenge is interconnecting project I think the demand is really strong we still have some very good.

Ongoing discussions with potential offtake or in.

Ohio.

We.

Don't want to speak too optimistic but we.

We are in the final stage of being put into the fast lane for interconnection.

As you.

Maybe read we have all the permits for our project in.

And palomino. So I think this is helping also we have answered a lot of questions from the grid operator in order to rank the priority of projects. So we have demonstrated that the project is ready to go.

We just need a date to interconnect.

Slightly more positive and potentially seeing that project in service late 'twenty five or early 2006.

That's the only thing were waiting is to give us a date and we will be there.

And then we would finalize it.

Take agreement.

The demand is still very strong.

Okay excellent thanks for that.

Thanks for that detail and then maybe just.

I appreciate that you've got some great opportunities and in Quebec in Saskatchewan I'm, just curious in D. C. As you prepare for that RFP is there any color you can provide on kind of like the development stage assets that you have that you've kind of kept warm there.

Do you anticipate the call along will be primarily wind and solar it could it include hydro as well.

It would be very surprising that it's not excluding but.

The last.

Pricing open at BCA drew has given as you know we have renegotiated or other fared better and brown, they're looking to have production during winter.

Winter months.

And the default they don't need.

The electricity during the spring frechette, the have a lot of that product.

With their own installations, and the existing small hydro fleet.

Down the road, it's not impossible. They are even talking about the potential pumped storage, we have couple of pumps Serge.

Project in the early stage.

We certainly can answer RFP on that aspect as well, but it will be mainly when maybe some solar but I think that when will be the big winner for the next RFP in BC.

In terms of the project that we have there we have some project in the northeast we have some.

Also in <unk>.

Indeed.

<unk> West.

I think we're very well positioned I don't like to talk too much about where we are positioned when theres going to be an RFP, but I think that we have assets down there.

We'll be competitive.

The future RFP and like I said.

We're very willing and and I think we have been.

A good partner with.

First nation in that province, as well and I think we will be able to take advantage of.

The experience that we had remember that we have more than 21 hydro facility operating in BC.

A different shape of agreement with first nation. So we have developed a very good.

Long term relationship with many first nation NBC as well.

Okay excellent thanks for that Michelle I'll turn it over thank you.

And your next question comes from Rupert <unk> from.

From National Bank. Please go ahead.

Hi, Good morning, good morning, good morning Rupert.

So we're hearing more of this morning.

Supply chain issues in the wind industry as well.

Wonder if you could remind us on what your strategy is for Boswell, whose turbines here are you using it and do you have confidence the supply chain will be there to meet your schedule.

We have secured the GE turbines last year.

Paid the limited notice in advance.

That's why also we had reach vary quite a bit of money when we did the financing.

The turbines are scheduled to be delivered we are actually negotiating with GE to have.

A little bit advanced delivery, we're making room on the on the facility to store some some components of that spring.

Next year there'll be already delivered onsite so no worries on that aspect on less something really strange happened.

Everything is well organized that scheduled and we had.

To come it money last year in order to do this.

And.

Also early this year in order to securities.

Delivery, but we have done that.

Alright, great.

And in your disclosures you talked about higher maintenance costs at several Quebec wind facilities.

Ford can you talk about what happened there and are those costs.

Done now and what are the chances of seeing Reoccurrence.

In Quebec, It's just luck.

I would say a little bit of a bad timing there is not any <unk>.

<unk> or a fundamental problem with what we have experienced some time it just happened that you have.

Bit more capex to do.

In the quarter, we don't see any pattern in Quebec.

Problem that we had with CT was related to.

I would.

Be careful there, but it's it was a serial defect with some bearings.

GE had.

Had experience in in quite a bit of our turbine they have deployed to their created a very strong team in order to replace them. It's done now.

So on that aspect, we have gone through some of the same bearing were delivered also in Griffin trail, but at the same repair has been ongoing.

Almost everything is done.

Now as well so hopefully we won't have any other.

I would say major component to fix.

That problem is behind us now.

Okay. Thank you and then was that largely covered by <unk>.

Well.

Fuel cost.

Did the repair at their cost.

The problem is that we had reached the.

Availability guaranteed.

We lost revenue.

Last year based on that but the repair was mainly cover by there.

O&M guarantee serviced.

Okay, Alright, thank you very much I'll leave it there thanks.

Thanks.

Yes.

Your next question comes from Nelson.

RBC. Please go ahead.

Great. Thanks, and good morning, everyone.

My first question.

And that was only out yesterday, but I guess any initial thoughts on the <unk>.

Power of Canada forward vision document that the federal government release last night I know it sounds like Alberta wasn't too happy with with the document in terms of potential strings attached to tax credits, but I was wondering if you have any initial thoughts.

I think it's.

This is the right thing to do.

If you want the money well.

For it.

For me I don't think that.

As you know Alberta is another market that we're interested in.

We are focusing on Quebec, Ontario, and BC I think that.

These and new Brunswick, and Saskatchewan I'm sorry.

So I think it.

Yes, if you are to provide that much money and support and I think that Alberta and west prior prairies are receiving quite a bit of a commitment.

For Q2.

Capture.

So.

I'm not apologetic I don't certainly don't want to do politician, but usually when you when you.

Support.

And industry.

You are hoping that.

This industry is reacting and enacting on good faith to reduce their emissions.

Yes.

One thing is for so I think that it is.

Is the right thing to do and I think that in the market, where we are actually act as well.

We will benefit from these federal initiative.

Okay. Thanks for your thoughts and then the next question is probably for John in terms of raising debt on the three hydro assets.

I presume it will be like long term fixed rate amortizing debt.

Given where interest rates are in terms of how high they are.

Is there any way to structure the debt or leave some of the debt floating to benefit from.

Long term rates when they eventually come down or is it is it your strategy to just kind of fixed.

The rate today, yes, so it will be fixed rate. So we structured it as a typical project finance with 20 year Morris.

It's on three hydro assets.

So we tried to obviously maximize or optimize the rate by decreasing the spread.

For the Canadian Bond, which is which is elevated but not that high if you think about the last.

10, or 15 years.

I mean, we've lived through an era, where bond yield was so low that makes us think that this rate is not as attractive.

Attractive but the.

The intent is to is to fix we've hedged a portion of our exposure until closing.

For that and we have what we structured the deal is.

An interest only period.

So we will start the amortization of the loan after if I'm not mistaken five or six years.

Private and a half years I think actually so so thats, how we will that we will payout so with the idea to have two stages also as to that enables us to do one initiative with one in their own.

And then the second initiative will be done next year and.

Also on a group of our hydro assets.

Again, yes.

I think that like you are saying is these days.

This two phase might give us the opportunity to take advantage of potentially long term long term bond decreasing but like youre, saying.

Long term bonds 10 years 20 years are right in the range bound of $3 43 $3 50.

It's more expensive obviously than the last four or five years, but I.

I come from the time my age is showing.

<unk> were trading at 10% so.

Not that it is expensive, but I think it's still competitive.

Cost of financing certainly comparing to stop.

Stock or equity so I think that.

We're taking advantage of the market and we think that we can redeploy that money at much higher rate.

Okay. That's great. So just to clarify when you raise the debt and get roughly $170 million proceeds youre pulling these assets from.

The credit facility that it supports right. So does the size of the credit facility you have to come down or.

No actually.

Right now, we have $950 million facility and.

The.

So it supports it's supported by the assets that are Unlevered, but also by all of the excess cash flow from all of the other assets right. So it's sufficient right now to support the 950 and more so even by doing this we will delever the corporate facility.

We'll keep the same access to the 950 anyway, we're actually right now amending also that facility.

In view of that.

I drove refinancing.

And right now I don't see any reason why we would.

You know why we would lower the availability under the ICF.

And it's the same thing when the second phase of that financing will happen, we'll still.

Keep the same availability under the ICF anyway, and so on.

At the end of at the end of the day Windows initiative will have been completed we will have well above $500 million availability on that.

Line of credit so, hence slow a lot more flexibility in terms of using this as a funding base for our developing activities and as we put into the assets that are under construction on <unk>. Obviously it helps to grow the cash flows that are supporting the 950.

<unk> and.

And eventually more obviously in time.

But the idea is to always to keep a level of corporate debt that will satisfy our fitch rating to remain investment grade. So we keep these measures always in check just to make sure that the ratios are.

Are okay for that purpose.

Okay. Thanks, and then a quick one on prospective project costs. I think you gave some guidance that youre looking to spend about $35 million to $40 million per year.

I think thats trailing 12 months was about $26 million.

On prospective projects. So do you expect to kind of quickly like obviously you have a lot on your plate right now.

So is that 35 to 40 more like.

Like something you would look to spend next year.

And I gave you the number yes.

The 35 to 40 years over the next.

For a year, but increasing over the next three years, obviously, we're beefing up the teams.

As an example.

<unk> deal with the French team allows us to beef up the team still spend the same amount of money from our perspective, but obviously you have more people on the ground to do more to achieve more on the French market. We're building up also and you've heard Michelle I mean, we're extremely busy in Canada. So were.

Beefing up our teams on the underground four.

For that in many provinces in and in the United States as well. So the idea is this is this is the sum.

This prospective investment as some of our internal.

Salary costs G&A costs, but also external costs. So it comes also sometimes with for example in the United States you need to put deposits for interconnection or on deposits for ppas or so that accounts for that as well right. So sometimes there are some that are important for some some of our development assets. So it support.

Net debt at the $35 million to $40 million as necessary.

And then I'm just trying to squeeze one last quick one.

ERP implementation.

I think you started earlier this year when will that be done.

So we expect to turn the switch on if I may say it that way.

Two we would close the third quarter in our present solution and close the year and into new solutions, So turning to switch on somewhere in October .

That's we're phasing it in though.

We have all of the North American.

Uh huh.

Aspects and then we'll turn to the trends in Chile, essentially like too.

Two.

And I guess to implement the ERP and these to other markets.

In 2024.

So most of most of the.

Cost is spent this year and next.

Yes.

Okay I'll leave it there thank you.

Great.

And your next question comes from Ben Pham from BMO. Please go ahead.

Alright, Thanks, Mark just wanted to start off.

Funding.

So you basically you apply now.

Okay raised $400 million.

Pretty much done great higher megawatts.

Yes.

But.

Im assuming that theres going be more megawatts, so youre, adding palomino, maybe more projects that.

Anything beyond 800 megawatts, you need to source additional.

Equity funding.

For the time for the time being.

What we have and what we have as the.

Advanced development and construction, we don't need we don't need equity of course, I mean, if we if we're very successful in the development of future project.

We may have reconsidered.

We will be doing in terms of funding well.

Welcoming partners in some of our facility might also be considered.

You heard me in the past being reluctant to recycle capital.

But strategic recycling capital can be also seen as a way to to fund future.

<unk> project.

But definitely seeing that.

Our strategy of being more aggressive in M&A.

We've done what we had to do and now we're concerned creating in developing projects.

And if there is a need for more equity because we have been so successful in securing project that I think will be good.

Good problem to face and like I said.

I think that we can also think about partnering or setting portion of project that would have been put in COPD are in advanced development.

Stage, we will be very careful though in dealing with project, where we have first nation and community partnership. We always said that we are committed to be partner with them on a long term basis. So those type of project will not be.

I'm target to recycle capital.

And are you.

Proactively.

Targeting that 2025.

Guidance still or.

Okay.

Yes.

M&A was a big chunk of that now you're slowing that down.

Looking at thyroid.

I agree with you the band at this.

Well, we'll be coming back to you.

Some somewhere late fall to give you a little bit more guidance on that aspect, but of course, if we're not making the M&A that we were supposed to do.

That will have some quantic lenses on the short term.

Our reach of that target.

About the dollar per share.

But we'll get back to you later this fall on the on a specific call for talking about what we're thinking.

About long term longer forecast.

Okay, Alright got it thank you.

Your next question comes from Sean Stewart from TD Securities. Please go ahead.

Thank you good morning couple.

Couple of questions.

Just following up on the sale of the minority stake in France. The implied multiple is is well above where you bought a day's or Dan.

And I know they weren't exposed to the development pipeline, but is there any additional context on the valuation where you're you were able to secure on the sell down and that that difference between.

When you bought <unk>.

Thank you.

It's all of us.

At the.

The French and.

And European investor or putting more value on the platform.

Theres nothing was not part of the platform so.

I guess, it's not fair to say that we double the price.

It's not the same product we sold a participation and the platform we sold the long term ability of the platform to develop.

Project so.

I would say that it's there.

Difficult to.

Be in the position of transact because to give you exactly what the what the price in terms of portfolio versus the platform.

I think that the platform.

Value added that leaves $35 million to $40 million.

So I think that this is a good proxy.

On what type of value that the French.

Our team has created in the last five years and Thats why.

I wouldn't say that we were frustrated because we cannot be frustrated with valuations in the industry, but I think that the value of that platform was little bit hidden in the fact that it takes five to six years and like I said too.

Bring project from the Greenfield side up to be ready to put into <unk> or even to put into rfps. So that was also part of the strategies to welcome a very respected financial institution.

But also to crystallize, a little bit and to put a light on our ability to create value in terms of Greenfield initiative.

Okay. Thank you for that.

Second question.

Don't know if its possible to give any broad thoughts on second half.

Hydrology in BC I know, we entered the summer with.

No snowpack to speak of.

Any any broad context on how production.

<unk> is shaping up.

As you know it's difficult to forecast the future but.

You're right that the July and August I think it's no secret BCS pretty dry.

But it's not extreme as what we have seen in the last quarter in the first quarter. So.

In the quarter, it's still early I mean, we can recover.

<unk> as you know it can be fast if it starts raining earlier in September .

Might catch up quite a bit on that quarter.

What.

What we have seen in Chile.

And I know that those are not necessarily related.

But you must have heard and I guess, it's all over the news that the El Nino.

As is.

He is going to be affecting the planet this year, especially the west <unk>.

But we are seeing a lot more rain.

In Chile. This this winter.

<unk>.

Scientific.

<unk> per se, but.

It seems that the pattern that we have seen in Chile being very dry.

As of now stop and we're seeing a normal if not a wet winter in Chile.

So I don't know if El Nino will have the same impact.

Our early.

Late late summer or.

Early fall for BC.

I must say that we are overdue to receive some rain in BC for sure.

But it's not as extreme.

And then what we have experienced in the fourth and the first quarter not good but not as a.

That as Matt and maybe if I may it's repo the SBC rates because so far.

The month of July for Quebec, Ontario, The states, Chile in terms of hydrology, we're actually doing very well, so, but yet <unk> still drawing as Michel mentioned.

But working always on diversifying the portfolio is the key in.

Im little bit surprised that our.

Portfolio has not produce.

Some better resolved but.

Very confident that our strategy is just a good one.

We have technologies diversification and location diversification that should equal in the future and where we're striving to make sure that we are diversifying.

Our activities in terms of development, we're focusing on diversifying.

Locally and in terms of technology as well so our strategy to answer potentially.

Climate effect is to be more diversified and be careful also.

And conservatives in establishing the long term forecast.

In our new project with force.

Thank you very much.

Great.

Yes.

Your next question comes from Mark It's Jeremy.

Yes.

Please go ahead.

Yes. Thanks, good morning, everyone just.

Just coming back to the transaction in France announced early this week.

Can you just clarify in terms of the capital with the proceeds from credit Agricole.

Does that create like a reserve for funding our future growth or is that just for the operating assets and now participate pro rata with interject on any future development dollars needed.

So all the all the proceeds from the sale will be outright introduction of our facility and they will on a pro rata basis co invest.

The prospective development actually we will increase we will keep our same.

Implication I guess budget wise in terms of investment on prospective and friends and they will jump in for a third or 30% and any capex future needs for the funding of our activities in France will be shared 70 30.

And they've committed additional capital towards the deal to do that actually so it's going to be over and above.

So does that answer your question on just on that last point when you said over and above can you clarify what that means I mean over and above the proceeds were received so we're receiving they're okay to us.

And then.

Whatever is required in France will be shared 70 30.

Yes.

And then given the more bullish outlook in Canada, obviously, you've identified a bunch of growth opportunities in the U S market and said, France will never be that big a component the valuation was quite attractive as we talked about on the call already so was there ever consideration just to sell outright your whole stake in France, and just refocus in terms of all the opportunities in north.

Liquor and Chile no.

Both Chile, and France are definitely smaller market, but both are niche market in the sense that we think we can create value there.

And also it's part of the diversification as well right.

We'd like to be exposed to different locations different technology.

I think as the solution is to be widespread in terms of diversification.

Going forward, so France is still a big part of our commitment to develop.

Project I think that this is providing to some degree.

More autonomy in France, so that.

We will have a board of director composing of.

The director from <unk> and <unk>. So we are going to operate France, a little bit more.

I wouldn't say, an independent because France is benefiting from the bigger team of <unk>, but a little bit more autonomy in terms of their operation and development will be will be given to the French team same will eventually be done in terms of.

Having the Chilean market being a little bit like a profit center. So that our team in North America will be more focused in developing in Canada and the states. While these to market will be come a little bit more independent and their ability to develop themselves.

Okay, and then just wanted to come to come back to slide nine where you guys talked a bit about some target revenue mix is in terms of regions and pursuing a contracted those have evolved since the last update last fall.

Little less you asked but more merchant I would've thought if you want more I guess you guys went down maybe your merchant exposure to go down just.

What's changed in terms of those I guess target mixes.

Both on the merchant contracted in the geographic mix I wouldn't take the merchant as being bigger its range right.

And that can vary from quarter to quarter, obviously, depending on the on the price. We just want to beat a little bit more flexible and opportunistic in terms of merchant.

I wouldn't read anything going into these number in saying that the <unk> is once more exposure to two merchant we have the ability and we have in the past take advantage of signing long term PPA.

I don't think that merchant will ever be much slower much higher than 10% ish.

Youre right.

And.

I wouldn't say that U S would represent.

A smaller portion is just that we think can right now is hot.

And the U S is just that.

Can be lumpy too right quarter from quarter.

If we're lucky and then U S. And then you develop a 400 megawatt.

That makes a big step so.

These are target very loose target I think that the were met also to say that Chile will Chilean will never be 30%, 40% of our mark of our portfolio.

As.

Canada and U S are growing and are a lot.

Faster in sets and greater opportunity we.

We will take a bigger chunk.

Okay, alright, thanks, Shawn Thanks, Michele Thanks, Thank you.

Your next question comes from Matt <unk> from.

From a capital markets. Please go ahead.

Hi, good morning.

Just want to address.

Capital recycling topic again.

It's significant transaction in France.

We're making good progress on your logical projects, but it.

It doesn't seem to be a big.

Market reaction to these positive news I guess.

How much of this do you attribute to maybe volatile results. The past couple of quarters and do you think there is anything else that can or should be done going forward.

Yeah.

I agree and looking at the market. This market is not positive, but that I cannot do much right. I mean, what we can do and that is to provide to the market. The guidance, where we wanted to focus I think that it's clear that we want to focus on providing more lobbying.

The opportunity for <unk> Greenfield opportunity.

We have the team on the ground.

I think that the market may wait until we are winning projects.

I think that we have addressed the liquidity issue and funding issues on that.

Concerning at all on our need to go and issue stock in the near in the near future.

So hopefully that will answer some of the concern of the investor.

And also the other thing is that we have to deliver on our project on time and budget. We are working on this and the third the third bullet is to provide more.

Result in winning RFP working hard on it and we have a lot of opportunity we are creating a lot of as you have seen our development pipeline. Both in early stage in that Vince stages growing.

And we intend to keep growing that portfolio of opportunity.

That's that's.

That's what I can control.

And we're working on it.

Just on the topic of growth I mean.

More focus in Canada I'm, just wondering if it's fair to say that there is a bit of a shift back.

Maybe.

Okay.

<unk>.

How do you.

Yes.

It says U S risk return.

Between the different projects.

It is.

Sometimes I get that.

U S is more is perceived to be more competitive, but we've shown with with Boswell that we can do good returns right. We are doing double digit mid double digit return on Boswell.

I think that we can we can provide good return in the U S.

I think that.

Our team, we're not shy and I don't think we.

We should be in terms of our ability to create value in the United States.

But of course, Canada is our home market, we have grown in Canada, where it can in company and like I said.

We have they've loved this this culture of lobbying hand to hand shoulder to shoulder with community I think that the first nation has appreciated.

I appreciate it and good.

Something that is interesting is to see the Mi'kmaq community.

After five six years of developing the project and operating IMMU. One has joined us to expand in <unk>. So I think that the this shows that we can develop partnership and long term good relationship with the community.

And I think this is.

The advantage that we have in Canada, two to develop project will Canada being more profitable than the U S.

Difficult to say, but I think that in both market. We our intention is to create accretive investment.

Like I said, we have an on pro two to see that we have been able to create quite a bit of accretion with boswell.

And our strategy.

Is to develop those projects and like I said, our industry has been squeezed maybe in their margin in the last few years for all kinds of reason.

I think that hopefully the industry's smartening up.

And the opportunity that laser ahead of us is providing the opportunity to have better margin I think we.

We are certainly.

Going to bid project, where we're going to see some profitability.

Just a final question on Chile.

Pretty large upcoming here.

Here with it seems like favorable contract.

Terms.

Im assuming youre going to participate in the upcoming auction this year.

Any comments on competition I know in the past pricing has been a bit difficult to chase, but thoughts on sort of the upcoming tenders and how you can play in that market.

Well I think that.

The Chilean market has been.

A place where some investor has been hurt because they have been answering proto answering calls with only one asset.

This is not the way to the left.

As I said in the past we have studied it we have established our strategy. We have built out a portfolio of diversified portfolio. Both in terms of technology and also in terms of location in <unk> in Chile.

Our intention is to participate in future call, but always in the thinking of proposing profitable.

Project for us.

And the idea will be to grow the portfolio in terms of diversification we will not.

The answer RSP with one single asset in Chile. So the idea is to grow slowly the portfolio in order to keep that balance that we have.

And in.

That strategy, we're comfortable we would not.

Try to answer Big call with only one asset this has proven to be the wrong strategy the wrong approach for the Chilean market and at all.

The Lopper has been hurt in doing so.

Maybe that's why sometimes an investor or thinking that chili's is.

Risky I think Chile is a great market when you have this smart and balanced portfolio approach.

Ladies and gentlemen.

Is there any.

Question at this time, please press the star followed by the one.

As a reminder.

Please proceed handset before pressing any teeth.

Our next question comes from Justin strong from Scotiabank. Please go ahead.

Yes.

Hey, Thanks for taking my call guys.

Just a quick question on the financing.

The Canadian Hydro assets apologies, if I missed this but I'm just wondering what youre thinking.

That may free up in terms of <unk>.

Capital and.

What assets are those BC hydro assets.

Yes.

There is two groups. So we're going from a with a first financing that will.

Group three assets there are.

<unk> ended in Quebec actually.

So that's going to be a 20 year financing and we expect to raise.

$170 million in the next phase is three hydro assets in Quebec that should raised approximately 80 million. So in total the $250 million.

Is the target for the refinancing.

And as I mentioned earlier that coupled with the.

<unk> sell down to CAA like it is going to help us surpassed the 400 million target that we had talked about last night.

This quarter.

Great. Thanks, and do you think youll be.

Putting those back in the markets.

Are you looking for PPA counterparties.

They've been actually re signing PPA, so that hence they are.

They are starting a new phase I guess, because we re signed Ppas on these assets, we had helped us to actually secure this financing for the next 10 years. So because of these because of these re contracted assets.

Great. Thanks.

Okay Youre welcome.

Mr. <unk> there are no further questions at this time.

Thank you very much everyone. We'll talk to you again in November . Thank you. Thank you. Thank you everyone.

Ladies and gentlemen, you may now disconnect your lines.

[music].

Okay.

Okay.

[music].