Q2 2023 Brookfield Renewable Corp Earnings Call
Good day, and thank you for standing by.
Welcome to the Bep second quarter 2023 results conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one to one on your telephone.
You will then hear an automated message advisor in your hand, just raised.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today Connor Tusky CEO . Please go ahead.
Thank you operator.
Everyone and thank you for joining us for our second quarter 2023 conference call.
Before we begin we would like to remind you that a copy of our news release Investor supplement and letter to unit holders can be found on our website. We also want to remind you that we may make forward looking statements on this call. These statements are subject to known and unknown risks and our future results may differ materially for more information you're encouraged to review our regulatory filings available on SEDAR.
Edgar and on our website.
On today's call, we will provide an update on the business and our development activities.
Then JP of Dania, a managing partner and our Chief investment Officer will highlight our recently announced acquisition of Duke energy renewables.
Lastly, why it will conclude the call by discussing our operating results and financial position.
Following our prepared remarks, we look forward to taking your questions.
Our business performed well this quarter building on the strong start to the year as we achieved 10% annual <unk> per unit growth year to date.
We were also successful in our development activities and growth initiatives, including our Repowering activities, where we have seen a strong uplift in the performance at recently Repower it assets and are evaluating a growing pipeline of attractive opportunities within our portfolio.
We continue to see the benefits of our geographically in technology technologically diverse operating platform.
As we have said previously we have purposely built our business by acquiring and developing a variety of clean energy assets in attractive power markets across the globe, where we are able to sign long term ppas with high quality off takers.
In periods of volatile resource like this past quarter. The benefits of this strategy are especially pronounced as our scale and diversity enables us to consistently deliver on our targets.
On our development initiatives.
We have commissioned approximately 1500 megawatts of new capacity, so far this year, including the final phase of one of the largest ever solar projects in the Americas and we're on track to commission almost 5000 megawatts in 2023.
Which is up from 35000 megawatts commissioned in 2022 and 1000 megawatts commissioned in 2021.
Looking out over the next three years, we expect to deliver nearly 18000 megawatts of new capacity most of which has been materially derisked already.
Meaning we generally have permitting and interconnection largely in hand, and ppas matched financing construction.
Construction contracts in place.
Our approach to development has always been predicated on matching costs with future cash flows mitigating the impact of cost escalation that many renewable power developers are experiencing in the current market.
And thereby securing the economics of our projects and not exposing our business to undue risk.
And with the scale of our broader 134000 megawatt global development pipeline and the depth of our development and operating capabilities, we are well positioned to capture the increasing corporate demand for contracted renewable energy at attractive prices.
As an example, we expect annual demand from large technology companies to accelerate meaningfully.
Increasing by more than three times by the mid to latter part of this decade on the back of growth.
Expected generative AI computing demand.
These technology companies are already the largest corporate procure a green power globally.
So to put this growth into context, we could see the entered the energy load from just one of these large global technology companies with a 100% renewable power target equal the current low demand of the entirety of the United Kingdom.
We have long standing global relationships with firms facing these needs and are currently engaged with a number of them around strategic partnerships, where we are well positioned to be a trusted partner given our capability and credibility to provide large scale clean energy solutions on a global basis.
Today demand for clean energy and energy transition is much more at corporate poll than a government push.
We expect this dynamic which will continue to accelerate to help drive higher returns through the sector and will increasingly differentiate market participants and fever businesses like ours that have the ability to provide a wide set of scale green power and decarbonization solutions with the ability to execute.
Across the development spectrum and across all major power markets.
We continue to scale our business in line with the growth in the sector as shown through our growth in commission capacity, our repowering projects and through acquisition.
We were successful this quarter signing transactions for almost $1 3 billion of equity investment alongside our institutional partners.
Over the past 18 months, we have meaningfully outperformed our growth targets closing transactions or agreeing to invest up to 21 billion or 4 billion net to Brookfield renewable.
On the back of this significant outperformance compared with our targets, we executed a bought deal and concurrent private placement raising aggregate equity proceeds to Brookfield renewable our 650 million our first equity issuance in seven years.
While we are always focused on financing our growth via asset recycling up financing and with a measured amount of corporate debt or preferred equity.
Our step change in run rate growth.
Which we expect to continue.
And our ability to acquire assets at attractive and highly accretive valuations.
<unk> us electing to issue equity capital to supplement these sources of financing.
Going forward, we will continue to focus on execution of our self funding model.
Selectively use equity when we see outside highly accretive growth opportunities.
Following this offering.
We have over $4 5 billion of available liquidity and are well positioned to continue to fund our long term growth targets through a mix of normal course funding sources.
With that we will turn the call over to Jay to highlight our Duke energy renewables investment and some of our recent success with Repowering projects.
Thank you Conor and good morning, everyone.
Kannan mentioned earlier, we're continuing to scale our business in line with the growing demand for green power to development and acquisition initiatives, including Repowering.
This quarter for approximately 1 billion in equity we agreed to acquire Duke energy renewables are fully integrated developer and operator of renewable power assets in the U S with <unk>.
<unk> thousand 900 megawatts of operating and under construction assets and a 6100 megawatt development pipeline.
With the closing of the <unk> acquisition, we will have 14000 megawatts of operating in 76000 megawatts of development capacity in the U S.
Cross all major renewable technologies, making us one of the largest clean energy providers in the country and making it our largest market globally.
With this acquisition with the purchase prices to be paid over to equal installments with 50% at closing and 50% 18 months post closing, we're adding a scale operating renewable platform that is 90% contracted generating strong going in cash flows which are immediately accretive with significant upside from potential.
And commercial synergies and.
Repowering and development projects.
With the incorporation of this portfolio in our business, we see potential to add value in several ways.
First is by leveraging our global procurement capabilities and operating expertise to take costs out of the business.
We expect to be able to reduce corporate G&A costs and realize meaningful savings across the wind and solar fleet given our operating experience.
Cost savings are not factored into our purchase price multiples and we are well positioned to execute these initiatives given our experience of acquiring and integrating assets.
We also see potential to increase the revenue profile of merchant and hub contracted assets through a power marketing capabilities by signing new ppas for uncontrolled assets, leveraging our relationships with large buyers of green power.
Given the potential benefit from investment in production tax credits do you expect full year also had significant repowering potential.
We see the opportunity to Repower at least one five gigawatts of wind assets over the next several years given advancements in technology that each of these assets and a strong wind resource and project locations.
And we believe with our recent experience in the U S. Repowering, we are uniquely capable of executing on these projects. This quarter, we advanced the Repowering of our 200 megawatt Bishop Hill wind farm in Illinois.
Which we expect to complete in 2024 and will increase generation by approximately 15%.
This is following other successful repowering projects, we completed including the first wind Repowering project in the state of New York, which boosted generation across those assets by nearly 30% and the repowering of our shepherds flat wind assets the largest repowering projects in the world, where we have seen excellent results thus far.
<unk> assets are located in some of the best resource locations in the U S and therefore, the benefit from enhancing the productivity and extending the asset life is especially attractive.
Finally, while we ascribed minimal value for development pipeline when we underwrote. This deal there remains significant potential to advance. These projects. The development portfolio has a larger amount of secured interconnection and land, which will be built over time at good returns.
Our financial strength credibility as a counterparty and capacity to review underwrite and execute at scale investment quickly with integral to reaching agreement with Duke.
Key competitive advantage, we have is that capabilities around executing large deals given the expansive team of dedicated investment professionals and access to scaled partner capital.
We also benefited as we were able to gain comfort around the integration of the business and our ability to carve out a large renewable power platform spread across multiple markets in the U S.
We believe our purchase price represents attractive risk adjusted returns and in this market. We believe we relative to see more opportunities to acquire large operating portfolios of renewable assets.
Growing group of sellers looking to monetize for various reasons and limited buyers, who have the scale and ability to acquire and integrate these businesses.
We look at all deals that come to market and expect to remain active.
With that I'll turn it over to <unk> to discuss our operating results and financial position.
Thank you Jay.
S. S. Garner spoke to in his earlier remarks, we continued to build on our strong start to the year in the second quarter.
Operating results reflect robust realized pricing.
Benefits of our organic development and contributions from acquisitions and Repowering.
We generated <unk> of $312 million or <unk> 91 per unit. So far this year, which is a 10% increase compared to prior year.
Our business continues to demonstrate the benefits of operating across diverse technologies and geographies.
With strong resources, and one region asset class, helping to offset weaker resources and others.
Our north American hydro assets were impacted by a drier than normal June .
However, we have seen significant precipitation in July meaning reservoirs across our fleet are in good shape setting us up.
Well to capture strong summer pricing this quarter.
We had solid performance in our wind and solar segment benefited from our inflation linked long duration contracts at favorable prices, which helped to offset an adjustment to the regulated price earned by our Spanish assets.
The adjustment will reduce the revenue generated by these assets. This year, but has a very positive impact on cash flows in the future, resulting in a slightly net positive overall impact to our returns given their regulated nature.
As Conor mentioned, our balance sheet is in an excellent position and our available liquidity remains robust at over $4 $5 billion providing.
Providing significant flexibility to fund growth and be opportunistic.
Following our first equity issuance in seven years, we are well positioned to deliver on our growth targets utilizing our normal sources of funding and are advancing nonrecourse financing initiatives and our asset recycling program.
Thus far this year, we have generated over $600 million of proceeds from our asset recycling program, achieving our dual goals of generating strong risk adjusted returns on our invested capital and helping fund our growth internally further derisking and sale of assets.
As an example, this quarter, we signed the sale of our operating renewable portfolio in Uruguay generating a 20% return and over two times our capital during our six years of investment in the country.
Despite the tighter market for capital, we continue to see strong demand for high quality renewable assets, given accelerating corporate demand and increasing focus on energy security and government supported electrification and decarbonization targets.
We also remain in an excellent position to be patient across our processes, given our strong balance sheet unique access to partner capital and scale operating business that delivers consistent cash from operations.
In closing.
We remain focused on delivering 12% to 15% long term total returns for our investors.
To do this we will continue to leverage our differentiated growth capabilities advancing our significantly derisked pipeline of projects being opportunistic in the current market and invest in our operations to add value.
On behalf of the board and management, we thank all of our unit holders and shareholders for the ongoing support.
We are excited about Brookfield renewable future and look forward to updating you on our progress throughout the remainder of the year.
That concludes our formal remarks for today's call. Thank you for joining us this morning, and with that I'll pass it back to our operator for questions.
As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone telephone to withdraw your question. Please press star one one again.
Please standby will be compile the Q&A roster.
Our first question comes from the line of Sean Stewart with TD Securities.
John Your line is now open.
Thank you good morning.
Couple of questions.
Interested in your thoughts on continued asset recycling plans you have advanced a lot so far this year.
Feels like this is more of a buyer's market corner can you speak to that.
I guess mid term intentions with respect to asset recycling technologies or regions that maybe offer.
Better valuation terms on a relative basis.
Sean Thank you.
What we would say we are seeing in the market is.
Given a higher level of uncertainty around financing for a number of players.
You certainly are seeing situations, where it is a buyers' market and I think an example of that would be something like Duke energy renewables.
However, that certainly is not the whole story and there is still overwhelming demand for de risked high quality renewable assets and and I think this really goes to our strategy, we want to be investing where there is uncertainty and scarcity of capital and the need to improve simplify.
Phi and enhance businesses and then we want to be selling assets that are very simple very de risked and can attract lower cost of capital buyers and we're seeing opportunities to do both.
We bought Duke this last quarter, and we sold Uruguay at what we think is a very attractive valuation and we see both those trends continuing going forward.
We do have a <unk>.
Very robust cash.
Capital recycling program throughout the remainder of 2023 and into 2024, but to put some color around that.
I'd say the key focus of that asset recycling program is very.
Primarily concentrated on wind and solar assets in the Americas and Europe , That's certainly where we're seeing the greatest amount of demand.
Okay.
Useful context, thanks for that.
A question on Westinghouse Youre sticking with the second half closing for that transaction do you have any comments on the U K regulator.
Process here and in many any other context on other approvals that will be needed to get that one across the line.
The only context, we would provide us this is all very normal course.
We needed.
Words out 35 different regulatory approvals.
Got it.
As it pertained to the Westinghouse.
Transaction.
We have received almost all of them at this point there are a few outstanding that we are working through in the normal course, and I would say none of this is unexpected or unusual.
We are simply going through the typical process for a transaction of this nature.
Your question highlights.
And.
Getting point for our business, we have four relatively scaled transactions.
That have been signed that are working through to closing being the 50, the remaining 50% acquisition of <unk>.
Duke energy renewables Westinghouse and origin.
I would say, we probably expect those to close in give or take that order.
The first three coming this year and the origin coming early next year, if not sooner and that gives our business a lot of growth trajectory for the next several quarters.
Okay.
Thanks, very much Conor I will get back in the queue.
Okay.
Our next question comes from the line of Rupert Mirror with National Bank financial.
Hi, good morning, everyone.
You mentioned the potential for strategic partnerships with large customers for renewable power.
With an attractive PPA market do you see any potential to optimize your revenues in your North American hydro portfolio.
And evolve away from hedge strategy.
Rupert Thank you for the question.
It's a great question.
Maybe just taking a step back.
This is something that we have been saying for a little while now but is really coming to light in the current environment the demand for energy transition and decarbonization.
There's a narrative out there that this is being driven by governments, we could not disagree. This is being driven by corporate and it is being driven by the largest most profit seeking corporations around the world. Those are the ones with a seemingly insatiable demand for green power and other decarbonization solutia.
<unk> and because these are the businesses that are not only the largest but are growing the fastest they are going to continue to drive enhanced demand for green power solutions and well the bulk of that is going to be driven.
Yeah.
Through PPA is tied to Newbuild wind and solar projects.
When we have conversations with these counterparties our ability to offer them solutions across different green energy asset classes is one of the things that really differentiates us and you mentioned, our hydro's, our ability to offer contracting solutions $24 seven power mixing wind and <unk>.
Our with hydro is something that really differentiates us for these leading corporates that not only want green power, but one uninterrupted all day green power. So.
The bulk of it is going to be ppas to wind and solar, but we're seeing it across all of our asset classes, including hydro the tail wins are pretty broad based here.
So could we expect to see some ppas on those hydro's as well in the next few years.
Ppas or other long term contracts.
We're relatively indifferent as to the form of those contracts, but I think we could tell you with confidence given the more constructive pricing environment, we're seeing today relative to let's say.
12 to 48 months ago.
This is certainly an environment, where we will look to contract those assets out on a medium or long term basis and walk in.
Some of these benefits for many years to come.
Great. Thanks, and then as a follow up to the conversation you had with Sean on M&A market. So it's.
It's a buyer's market you see more demand for wind and solar in Americas.
In Europe from from competitors has that shifted your view on where you can get the best returns today in M&A and I know, we see you have been buying assets in North America, but is there going to be a higher return opportunity outside of North America and Europe .
I wouldn't say that.
We're always cautious in painting the market in one way or the everything's a buyers market or everything's a seller's market.
Is unique about this market is relative to.
Let's say 18 months ago capital is.
A little higher cost and a little more uncertain for many market participants and thats, obviously going to affect different people different ways, but it can create very attractive buying opportunities for us really literally anywhere in the world or across any asset class subject to.
The discrete dynamics of the counterparty on the other side so.
When we look at things like the European market right now, we do have a pretty robust pipeline and expect to be active there in the back half of the year seeing very very attractive risk adjusted returns while at the same time, we also might sell assets in the European market.
Where we think we're going to get a really good outcome as well so what I would say we're seeing in the market is the slight increases and uncertainty around funding and the slight increases and uncertainty around things like supply chain that are difficult for some market participants to manage through.
Just create.
A more diversified set of opportunities, which means that you can be buying and selling.
Both at attractive outcomes in the same markets at the same time and it really is discreet to the counterparty on the other side.
Quite frankly, we love these market dynamics that it allows us to be playing positively in both directions.
Great. Thanks for the color I'll believe it there.
Yeah.
Our next question comes from the line of Robert Hope with Scotiabank.
Good morning, everyone. I was hoping you could add some color on how youre thinking about how your development pipeline overlays with the expected increase in demand from technology companies.
Okay.
So they look to augment or reorder your projects such that they are.
We align better with the geographies, where we could see the largest increase in technology demand or kind of.
More broadly how do you stack up your development pipeline versus the areas, where you expect to see correct.
Sure. Thanks, Rob.
Perhaps taking a step back.
We are seeing in the market today is a pretty strong supply demand imbalance.
If you have.
Economic.
Ready to build projects near load centers, you have multiple potential off takes for that power. There is more demand for that power than there are ready to build projects to supply it and therefore, one it allows us to attract more constructive pricing.
And put through some of the cost increases of Capex and interest through to the end customer and preserve our developed margin. That's one and then two the other thing that we are doing across our portfolio.
Is because we see such strong demand, we're doing everything in our power to pull forward projects within our device development pipeline to get them pulled out of the ground faster.
And I think the benefits of one programs like IRI and two the step change increase in demand is going to allow us to continue that dynamic of trying to pull for development projects faster.
Sure.
The short to medium term there is certainly enough visibility on it.
In terms of the question around where are we.
Are we going to try and augment our development pipeline.
We have 135000 megawatts around the world, we're going to keep adding to that the point I would say is.
This demand is broad based.
Across all the major geographies around the world. So we're just going to keep working to keep our pipeline robust and strong and then work to keep pulling projects forward within that pipeline.
Quite frankly, I think I think given the dynamics I explained it's.
Likely youre going to buy for value.
Our ready to build project, Jeff to re contract it with a tech company the markets more efficient than that that's already priced in and probably wouldnt generate the returns we wanted.
I appreciate that and then maybe another broad question.
How are you seeing system operators.
Have you seen any changes in system operators or transmission interconnection.
Rules, just given the significant increase in renewables.
Pipeline across the globe.
Just kind of referencing the Alberta announcements from yesterday, and whether or not we could see some system operators pause to the more orderly.
Investment in renewables in the system.
Certainly so we'll make three comments on that.
<unk>.
The first is.
Yeah.
There seems to be.
A lot of heightened interest on.
Grid engineered connection timing and how that impacts development in the last six or 12 or 18 months.
We would respectfully suggest that.
Securing grid connection has been a critical component of developing renewables for the last 10 years, and therefore, well it might be getting more.
Airtime in the news more recently identifying which projects have grid connection where they sit in the grid Q has always been part of our development process and always something we take into account when buying development pipeline.
It would have been almost ridiculous for our renewables developer to not see some of this grid connection.
Congestion coming it should've been baked into everyones underwriting, it's certainly been baked into ours.
Second point I would make is.
Every project around the world in order to get built needs land permits grid connection and once you have those three things that needs financing offtake and equipment and construction EPC.
We encourage anything around the world that expedites, the bringing forward of any of those necessarily requirements of development to bring projects forward. So we greatly encourage some of the things that we're seeing around the world to make interconnection processes more efficient.
And connect more projects quicker.
Think we will be a net beneficiary of that and someone that can move quickly to take advantage of any of those changes.
Thank you.
Our next question comes from the line of David Quezada with Raymond James.
Thanks, Good morning, everyone.
Maybe just starting with a question just related to M&A I guess com.
Commentary around that.
Certainly it feels like a good environment for you guys in terms of there being potentially some attractive targets.
I'm just wondering with the three transactions that you've kind of got in the queue. So far do you need to see those close before you could pursue anything else or do you still feel like that you'd be open to it.
Attractive deal if it arose.
I want to be abundantly clear, we would not wait for those transactions to close if we saw an attractive deal today, we would do it without hesitation.
Part of our motivation around some of the significant up financing activity we've done.
Here to date and our.
Our first equity offering is to put ourselves in a position to be opportunistic in this market and we think that's something that has proven to play very well for us quite recently and we will continue to play well for us.
<unk> forward.
We see this as a very robust market, where we can do accretive transactions and maybe to be more helpful. I'll split it into two buckets given the significant demand we're seeing.
For corporate clients.
Contracts for Green power Ppas, we continue to see very attractive risk return dynamics in developers. So we certainly arent going to take our foot off the gas in terms of the growth. We are pursuing in that segment because the investments we've done to date are.
<unk> well if not ahead of underwriting and we think the tailwind we're going to get stronger. The one thing that is changing where our access to capital and our ability to be opportunistic is going to be helpful is in.
Looking at opportunities to buy either operating assets or looking at public to privates.
Those are both areas of the market, where we've been a little quieter over the last two to three years, but we see them increasingly coming into the strike zone.
And if we see attractive opportunities, we won't hesitate to execute.
That's great color. Thanks, Glenn I appreciate that and maybe just one more for me.
Any comment that you would make.
On what Youre seeing in the supply chain be it for solar panels of turbines.
Key equipment components, Yeah, great question and.
There is not actually an easy answer for that because I would say that the direction of different.
<unk>.
Our equipment.
It's it's quite all over the map.
I would say the solar panel supply chain around the world is improving dramatically.
Cost for solar panels are going down very significantly around the world.
There is increased global capacity that has come online.
This is not only <unk>.
<unk> prices, but it is reducing shipping and lead times.
There is one caveat to that which is in the U S where some of the ongoing investigations and tariff discussions have muted some of those dynamics, but even in the U S. We've seen panel prices decline quite significantly year to date, so that solar panels.
In wind.
The wind OEM market I would say is challenging right now.
We are seeing some shortages.
Across the global supply chain similar to what we saw in solar maybe two years ago and again I think this marketplace to those who are well equipped to use their scale and their operating expertise to manage through those dynamics.
As wind equipment procurement is getting more expensive and lead times.
I would say are not shrinking.
And then the last one that I would highlight which is very top of mind to us and something that we are taking into account.
In all of our development underwriting and business plans is transformers.
<unk> farmers are increasingly becoming one of the longer lead time items. That's fine you just need to bake that into our into your underwriting and that's what we've done.
In all our development plans we have.
Excellent I appreciate that corner alternate over.
Our next question comes from the line of Andrew <unk> with Credit Suisse.
Thanks, Good morning.
The question focuses on the building versus buying.
Historically, you've done a lot of buying maybe less building, but in fairness you have built.
Have the conditions really changed and then I think this came in the prepared remarks of the 18 gigs I think over the next three years you plan on building or are you really on a step function change on the building side.
Versus the buying but its still looking opportunistically to buyer.
Great question.
The way I would position it is we have historically.
<unk>.
Looking back we were probably about 90% operating 10% development and we are seeing increasing opportunities to.
Secure very attractive risk adjusted returns on the development side that could see that percentage increase but to be clear.
It's not going to become the majority of our business I would say, even if we are seeing a significant increase in our development activities. The vast majority of of our recurring cash flows and profits.
Probably north of 80% is going to continue to come from operating assets that being said, we appreciate you highlighting it.
We are seeing very significant growth in our development activities 1000 megawatts in 2021 3500 megawatts in 2022 5000 megawatts. This year 18000 megawatts over the next three years I think that the level of activity that we're very comfortable with.
Given the growth of our business and the number of development portfolio companies. We've acquired over the last three or five years. So development is becoming an increasing portion of our business.
But I would say our operating portfolio is still going to be the bulk of our business for the foreseeable future.
I appreciate that and then maybe just.
Failing with those comments.
The return profile, you've talked about the 12% to 15% on a longer term basis remains unchanged.
But is there maybe a greater tilt to that.
Going in it might be more modest, but then in the Bakken, it's more robust or just any thoughts you have on additional color you can provide.
Yes, it's great question.
I E.
12% to 15, I would say, we feel feel very comfortable with it.
We still on a blended basis, absolutely expect to be in that range.
The only thing I would almost.
Want to convey is I think at certain points in time when markets were really robustly would have said.
Long term contracted.
Operating assets or maybe 10% to 12 and construction assets are 12% to 15 and development assets or high teens returns, but in the market that we're seeing today, where you can be very opportunistic I would say, we're seeing opportunities to buy operating contracted renewables.
In that 12% to 15% range.
Which obviously is the net is a fantastic risk adjusted returns so.
Given the opportunity set that we are in maybe I'd answer your question by saying I don't think the spectrum is changing but I think may be the floor is rising.
Okay I appreciate the color. Thank you.
As a reminder to ask a question. Please press star one one on your Touchtone telephone.
Our next question comes from Nigel <unk> with <unk> capital markets.
Okay.
Yeah.
Hi, good morning.
I just wanted to go back to the.
Sort of corporate power market dynamics I think.
Youre, saying in your letter that there are potentially higher returns some of them the corporate bank projects. Some contracts can you maybe talk about.
Sort of the tradeoffs between corporate groups government contracts and how you see that evolving over time.
Hi, <unk>.
C C.
No.
I might take an extra minute just to to go from a higher level to explain how we have always pursued this.
If you really go back maybe six or seven years.
We took the view that we really wanted to build a best in class corporate power marketing capability within Brookfield renewable.
And.
In doing so.
What we wanted to avoid is running around the world chasing government tariffs that could in fact get removed with a change in government or a change in policy and we always felt that the corporate demand dynamics would be increasing in terms of the momentum and would be a lot more.
Enduring.
Overtime, and we largely think that has played out with the benefit of hindsight.
Candidly, we were probably a half step too early we tried to build that corporate power marketing capability, probably two years before the market was ready, but what that has led to now four or five years. Later is we really do truly have one of the best corporate power marketing capabilities globally.
And the way, we see the demand for Green power procurement around the world is the trend line is unequivocally being driven by corporate not only are the largest and fastest growing corporates around the world driving that momentum, but we're increasingly seeing a broader number of corporates look.
<unk> to procure green power. So our corporate demand is setting the trend line. What we would say is government policy is determining the ebb and flow around that trend line and the nice thing. We have right. Now is both are going in our favor corporate demand is accelerating very intensely.
And government policy is is just an additional tailwind through programs like IRA and similar programs, we're seeing around the world.
<unk>.
The reason why.
So if thats, where we see long term demand the reason why we think.
This is very very good for returns is two things one.
Building renewables and developing renewables into.
Long term corporate off takers is a bit more involved of a process you need more in house capabilities, but therefore can generate higher returns, it's a lot more difficult.
But more rewarding to build into corporate ppas than it was to build into a government feed in tariff system that you may have seen three or five years ago, and then secondly.
Corporate demand, we would say is much more resilient.
It tends to be long term in nature. This is being driven by the $5 10, or 15 year strategic visions of this these companies.
As opposed to the four five year government cycles of an elected party.
And therefore, we see this shift to a corporate pole as opposed to a government push is very positive for our industry in terms of one demand.
And to ensuring that returns stay at an attractive level for.
The medium to long term.
I guess.
Youre seeing sort of a better trade offs.
Corporations governments, because just to build on that like historically some of the puts and takes for that with.
Sort of government contracts, you would have sort of a hybrid.
Counterparty credit quality counterparty longer term contracts, but you are saying, maybe some of that now flow into the corporate market.
Because of that complexity.
You mentioned, maybe maybe potentially better returns.
Yeah, and I would say that.
Who are our biggest customers around the world. These are the largest highest quality strongest credit party.
Sorry strongest.
Credit counter party.
Entities that you could have.
Some of these institutions have higher ratings than some of the government backed contracts around the world. So I wouldn't we would be.
Very quick to suggest we haven't given anything away in terms of credit counterparty risk.
Okay, that's very helpful.
A couple of other follow up questions on the new transition from just wondering if it came out.
Just talk about what are some of the target opportunities that you think.
Second transition funds could be pursuing and then similarly to the first one you may be leaning more towards.
Newer forms of decarbonization transition of testing for carbon capture.
Certainly so Brookfield asset management.
Launched fundraising for its second global transition fund.
In Q2.
I would say that as expected the reception has been very very positive and our strategy is resonating very well with investors and.
What it does for Brookfield renewable is it contains continues to give us that large scale institutional capital to invest alongside of allowing us to pursue the largest and most attractive.
Opportunities, where we see less competition, so we see <unk> as a huge benefit.
To best going forward.
In terms of what the fund will target.
100% consistent with what <unk> targeted when we looked at <unk> one.
The biggest component of that fund with clean energy renewables developers. The second biggest component of that fund was powered transfer transformations building out renewables within existing utilities.
And the third biggest component of that fund was investments and other clean energy technologies.
Nuclear really it was only about 20% of the fund that was in new Decarbonization solutions and I would say thats, probably a similar balance that we expect going forward.
Okay. That's great and then maybe just one last quick question.
Similar to sort of the Duke transaction, we're seeing a number of utilities also looking to maybe simplify the structure.
Separate some assets.
I guess this would play.
Very well into Europe .
Your capabilities on the M&A side are you sort of looking at more of these.
More complex deals.
In the Americas.
Absolutely I would say one of the benefits of our platform today is.
And given our scale and in particular, our growth over the last two or three years.
We're very fortunate where wed like to think that we see almost every opportunity in the market and from that position are able to.
Focus our time and resources on the ones, where we see the best risk adjusted returns and ones, where we see we are able to bring something differentiated that allows us to.
Be successful and generate a.
A return above what perhaps other market participants could achieve so.
I would say there is a dynamic around the world today, where there are some sellers who for a variety of reasons are looking to get off high quality assets.
We're looking at a number of those and we will look to execute the ones that we're most well positioned.
Thank you.
Okay.
That concludes today's question and answer session I would like to turn the call back to <unk> for closing remarks.
Thank you everyone for joining today's call and for your ongoing interest and support in Brookfield renewable we look forward to speaking to everyone at our Investor Day on September 21, and then updating on our results throughout the remainder of the year. Thank you and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
Okay.
Okay.
[music].
Okay.
Yes.