Q2 2024 Northland Power Inc Earnings Call
Speaker Change: Welcome to the Northland Power conference call to discuss the second quarter 2024 results.
Speaker Change: As a reminder, this conference is being recorded on Thursday, August 15, 2024 at 10 a.m. Eastern. Conducting this call for Garthlyn Power are John Brace, Executive Chair, and Adam Beaumont, Interim Chief Financial Officer.
Speaker Change: Before we begin,
Speaker Change: Northland's management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward-looking statements that include assumptions and are subject to various risks.
Speaker Change: Actual results may differ materially from management's expected or forecasted results. Please read the forward-looking statements section in yesterday's news release announcing Northland Power's results, and be guided by its contents when making investment decisions or recommendations.
Speaker Change: The release is available at www.northlandpower.com. I will now turn the call over to Mr. John Brace.
John Brace: Thank you very much DeeDee and thank you to all of you for joining us this morning for Northland's 2024 second quarter earnings call.
John Brace: Before we update you on the quarter, I want to first underscore our firm commitment to the health and safety of every Northlander and every person working on our behalf, both on our construction sites and across our operations and offices.
John Brace: With a dedicated team of highly skilled health and safety professionals, Northland continues to stay committed in its pursuit of maintaining our industry-leading health and safety standards.
John Brace: We are pleased that our strong first quarter performance continued into the second quarter of the year.
John Brace: This strong operating performance resulted in an increase in second quarter adjusted EBITDA to $268 million, up approximately $36 million compared to the same quarter of 2023.
Justin: Adjusted free cash flow and free cash flow per share were $0.27 and $0.20 per share respectively in the quarter compared to $0.25 and $0.16 per share during the same period a year ago.
Justin: As reflected in our press release yesterday, we are reaffirming our 2024 financial guidance and outlook, which is tracking to the higher end of the disclosed guidance range, due to our strong operating results so far.
Adam Beaumont: Adam Beaumont, our Interim Chief Financial Officer, will provide more details on financial performance later in the call.
Speaker Change: Moving on to construction updates, we continue to make good progress on both Heilong and Baltic Power, our two large offshore wind projects in Taiwan and Poland, respectively, and Oneida, our battery energy storage project in Canada.
Speaker Change: Construction of High Long continues to advance well with the fabrication of foundations, cables, and onshore and offshore substations. The onshore construction work is advancing well and nearing completion.
Speaker Change: offshore construction activities.
Speaker Change: are progressing this quarter.
Speaker Change: marching the completion of the installation of offshore substation foundation jackets.
Speaker Change: the first offshore substation topside, and continuing with pin pile installations at multiple turbine locations.
Speaker Change: Heilong 2A and 2B pin pile installation is on track and is expected to be completed by the end of the third quarter of this year.
Speaker Change: Prefabrication for the first batch of turbine components, including towers, generators, and nacelles, is progressing well, with multiple parts en route to Taiwan.
Speaker Change: We look forward to the first power being produced in the second half of 2025, with full commercial operations expected by 2027.
Speaker Change: Once operational, Heilong will be one of the largest offshore wind facilities in Asia and provide enough clean energy to power more than one million Taiwanese households.
Speaker Change: Moving to Poland and Baltic Power, the project continues to make progress on the fabrication of onshore and offshore substations, foundations, export cables, multiple turbine components, and inter-array cables.
Speaker Change: Turbine Component Manufacturing and Construction of the Onshore Substation and the Operations and Management Building is well underway.
Speaker Change: that your in-water, on-shore, offshore construction activity is expected to start in early 2025 and full commercial operations are expected in 2026.
Speaker Change: Lastly, an update on the Oneida Battery Energy Storage Project here in Ontario.
Speaker Change: Oneida continues to make great progress, with all battery packs delivered on site and cabling now underway.
Speaker Change: The medium-voltage transformers have been delivered, and high-voltage transformers have arrived in Canada and are expected to arrive at site by the end of the summer. Site grading and stormwater controls are fully complete, and the underground conduit is fully installed.
Speaker Change: Full commercial operation remains on track for 2025.
Speaker Change: We have good momentum on our construction programs and continue to be vigilant, disciplined, and focused on the safe execution of these projects. It will provide a material boost and adjusted EBITDA and cash flow upon completion as scheduled.
Speaker Change: There seems to be a view that we have paused growth on development while focusing only on our construction program. This is far from the reality. We remain active in pursuing growth in our core markets, supported by our strong and dedicated development teams.
Speaker Change: We continue to advance our 9 gigawatt development pipeline. We are focused on moving forward with profitable projects in our core markets and see good opportunities ahead.
Speaker Change: For Onshore Renewables, we remain focused on Alberta, Ontario, and New York.
Speaker Change: For Alberta, we announced that we signed a 15-year bilateral off-take agreement for our 80-megawatt, 2-hour Jurassic Battery Storage Project with the Alberta Schools Commodities Purchasing Consortium.
Speaker Change: This is the first offtake of its kind in Alberta for a battery storage project and is a key milestone in the advancement of Northland's Alberta portfolio.
Speaker Change: We also participated in the latest NYSERDA auction last week and await the results expected this fall. For offshore wind, we are advancing our early stage development projects in Scotland and South Korea.
Speaker Change: Moving on to other significant second quarter results.
Speaker Change: In June, we successfully completed the sale of the 130-megawatt La Lucha solar facility in Mexico. As noted, on our investor day in March, we continue to focus our attention on the markets that we have identified as our core markets.
Speaker Change: We continue to assess asset sale or sell-down opportunities. Clearly, the critical factor in our decision-making will be line-of-sight to redeploy proceeds into opportunities that will provide higher-value accretion to our shareholders.
Speaker Change: In June , Gemini experienced an unplanned outage at one of its two export cables. The in-water cable repair has commenced and completion is expected in September 2024. Insurance proceeds are expected to cover most of the repair costs.
Speaker Change: This event occurred during the lower production season. We were therefore able to redirect the production via the second export cable at the wind park, and the timetable for the repairs means that this event is expected to have limited impact on full year results.
Speaker Change: Now moving on to the CIO search. We are making great progress. The board and I have been thrilled with the caliber of candidates that we've met.
Speaker Change: I am reticent to provide a detailed timeline until commitments are firm out of respect to the candidates whose careers are involved.
Speaker Change: With that, I will turn things over to Adam to give you a more detailed update on the financials.
Adam Beaumont: Thank you, John, and good morning, everyone.
Adam Beaumont: Strong results in the second quarter continued Northland's successful financial performance for the first half of the year.
Adam Beaumont: We generated adjusted EBITDA of over $265 million this quarter, representing a 15% increase compared to last year.
Adam Beaumont: The significant factors for the increase include $10 million of higher operating results at the offshore wind facilities in Europe, primarily due to a higher wind resource at all three facilities.
Adam Beaumont: This was modestly offset by higher unpaid curtailments related to negative prices and grid outages at our German facilities.
Adam Beaumont: There was also a $10 million increase in operating results at IBSA, driven primarily by inflation escalation and appreciation of the Colombian peso.
Adam Beaumont: A $17 million decrease in development expenditures as a result of more focused spending offset by some one-time G&A costs in 2024.
Adam Beaumont: and a $9 million increase from the contribution at our New York onshore wind facilities, which commenced operations in the late 2023.
Adam Beaumont: The key factor partially offsetting the increase of EBITDA was the $23 million of gains that we received from partial asset selldowns in 2023.
Adam Beaumont: With respect to adjusted free cash flow and free cash flow, Northland generated approximately $69 million and $51 million, respectively, which is an increase of 9% and 24% from last year.
Adam Beaumont: This was due to our strong operating results and a $20 million cash gain from the Leloucha sale.
Adam Beaumont: Offsets to the increase were $19 million of higher taxes from higher operating results and $22 million of lower hedge settlements from gains realized last year.
Adam Beaumont: On a per share basis, these figures translated into adjusted free cash flow of $0.27 and free cash flow of $0.20 in the quarter, compared to $0.25 and $0.16 per share from last year.
Adam Beaumont: As John noted earlier, our three construction projects with an estimated total cost of $1.5
John Brace: of $16 billion Canadian dollars continue to progress as planned. Northland, with our partners, have spent $6 billion on these projects so far.
John Brace: In June, we were encouraged to see Canada enact the 30% Clean Technology Investment Tax Credits, or ITCs, which will accelerate clean power development in Canada.
John Brace: This incentive is expected to benefit Canadian developers focusing on large-scale renewable power generation projects, including Northland.
John Brace: For example, Northland and our partners will receive a direct benefit on the Oneida project, which is currently in construction.
John Brace: We expect further benefits for this new legislation, which will support our development activities across Canada for the future as well.
John Brace: Looking at our investment grade balance sheet, Northland continues to be in a strong position with access to approximately $800 million of liquidity. This liquidity is comprised of cash on hand and funds available under our corporate revolving facility.
John Brace: As John noted, we reaffirmed our 2024 financial guidance. Due to strong operating results experienced in the first half of 2024, management is currently projecting the full year financial outlook to be at the higher end of this disclosed guidance range.
Speaker Change: Beyond that, our future looks bright. We see progress on construction, advancing the growth pipeline, which will bring significant long-term contracted cash flow for our business.
Speaker Change: Overall, we are very pleased with the results and the progress for the first half of 2024, and I will now turn the call back over to John for concluding remarks.
John Brace: Thank you, Adam. To wrap up, we have had a solid first half of the year, with both our strategy and long-term guidance remaining strong.
John Brace: We are proud of the continued progress our teams have made across our three projects in construction and remain focused on the safe and successful execution of these projects into commercial operations.
John Brace: As we look ahead, we continue to be excited about the growth opportunities for Northland.
Speaker Change: Contextually, global energy demand is accelerating and is expected to grow at a rate of 4% in each of 2024 and 2025. This demand is driven by multiple tailwinds, including reshoring, electrification of industrial, retail and commercial sectors, and artificial intelligence and data centers.
Speaker Change: Data centers could consume up to 9% of U.S. electricity generation by 2030, compared to 2.5% consumption in 2022.
Speaker Change: With the continued and growing need for a robust supply of reliable and affordable clean energy globally, the opportunity for experienced and established developers like Northland is clear.
Speaker Change: We have a role to play in finding thoughtful solutions to balance short-term energy needs with longer-term vision for a net-zero future.
Hortland: Hortland's diversified energy mix of offshore and onshore wind, solar, storage, and natural gas makes us well positioned to support the stability of energy grids while renewable technologies continue to mature.
Hortland: Given the key priorities for each government and commercial and industrial customers,
Hortland: Being affordability and security of supply, new natural gas-fired power plants, along with renewables, will be required to meet this required load.
Speaker Change: Northland has access to and experience in developing, constructing, and operating a broad array of energy generation technologies, and we are in a great position to help our customers meet their energy needs.
Speaker Change: We are having conversations with data center customers given enormous demand for electricity from this particular group.
Speaker Change: I would also like to remind you that Northland has a 30-year corporate power purchase agreement at Highlawn, which is still one of the largest corporate PPAs in the world.
Speaker Change: This demonstrates our capability to secure long-term power contracts with commercial and industrial players.
Speaker Change: Our construction growth is locked in for the next three years to achieve our 7 to 10% adjusted EBITDA CAGR through 2027.
Speaker Change: With that growth locked in, we are in a strong position that affords us the opportunity to prudently progress the projects in our existing development pipeline in a highly disciplined and selective manner.
Speaker Change: To create continued value for our shareholders, we pursue only the best growth opportunities in front of us, with the right people to bring these opportunities to fruition. In this current environment, we are confident quality opportunities will be available to us.
Speaker Change: Our strong and talented teams have the knowledge, experience, and entrepreneurial mindset that ensures we will remain leaders in originating, developing, constructing, and operating large and complex energy projects.
Speaker Change: We have a bright future ahead of us, and we're excited for all that is to come.
Speaker Change: This concludes our prepared marks. We'd now be happy to take your questions.
Yeedy: Yeedy, would you please open the lines?
Yeedy: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment.
Speaker Change: And our first question comes from Sean Stewart of TD Cowan. Your line is open.
Sean Stewart: Thank you. Good morning. A couple questions.
Sean Stewart: John, wondering if you can give us some more detail on the capacity contract at Jurassic, more detail I suppose on terms and what's needed to move that project towards FID and thoughts on timing for eventual COD as well.
Speaker Change: John, I appreciate your desire to have more detail, but given the confidential nature of the contract, we're not in a position to provide much more detail than we already have at this point in time.
John Brace: In terms of progress forward, you can imagine that we've had very detailed conversations with potential constructors of the project.
John Brace: potential battery suppliers for the project and together with our Jurassic Solar project we will be seeking a minor amendment to our already existing permits for the project.
John Brace: So it's pretty well straightforward development from here, as far as I'm concerned, and into a very appropriate and attractive power contract.
Speaker Change: As far as COD, should we be thinking 2026-2027? Is that realistic?
Speaker Change: I did, I, yes.
Speaker Change: OK.
Speaker Change: Thanks for that and given that the RFPs already happened, any context you can give us on what's been submitted to the NYSERDA process and thoughts on advancing those projects?
Speaker Change: I think I'd just point out to one word I used in the prepared marks, and that is profitable. We are seeking profitable projects.
Speaker Change: We have made what we believe is an attractive offer to NYSERDA and an offer that we would be very happy with if it is accepted. We are optimistic about it, but we'll see what happens when they release the results.
Speaker Change: Beyond that, we are not releasing details on what projects we have submitted.
Speaker Change: Okay, that's all I have for now. I'll get back in the queue.
Speaker Change: Thank you.
Sean Stewart: Thank you, Sean.
Sean Stewart: i
Sean Stewart: Our next question comes from Rupert Marrer of National Bank. Your line is open.
Rupert Marrer: Hi, good morning. Thanks for taking the question. If I can start with with your construction plans, it sounds like construction is progressing well. Looking forward, what keeps you up at night in order to to keep that on track? And what are the, the sort of critical items to get done this year before you head into winter?
Speaker Change: I think it depends which project you're looking at. There's seasonality to the construction of high-long, so we are attempting to achieve a number of things before the winter season closes in.
Speaker Change: However, there continues to be float in the schedule, so we still remain confident that the project will unfold.
Speaker Change: According to its, I'll call it, overall schedule.
Speaker Change: As you can appreciate, for any construction projects, there are things that...
Speaker Change: Our give and take as it unfolds, as one reacts to challenges that come up or takes advantages of opportunities that appear as well. So generally it's going well.
Speaker Change: Baltic really doesn't start major in-water work until next year, so really not much I can add on that, but the out-of-water work is progressing well for the project.
Speaker Change: What keeps me up at light, frankly, is first and foremost, the very first thing I mentioned in my remarks, the health and safety of everyone working on the projects. That is mission number one, without any doubt whatsoever.
Speaker Change: Beyond that, there's always unknowns, so it's the unknown unknowns, but I think the teams and our contractors have proved to be very adept at dealing with those.
Speaker Change: Very good. Thanks. And then if I could follow up on the Jurassic contract. So it sounds like you're moving forward with the battery and not the PV plant, but now you have this contract for the battery. Is that going to support?
Speaker Change: Moving the PV forward as well, is that going to help you to sign a contract on profitable terms?
Speaker Change: I think the I would just look at that maybe it's phase one phase two we happen to have accomplished phase one and we're working on phase two
Speaker Change: Although they are closely located next to each other, one does not depend on the other.
Speaker Change: Okay, and I assume that the ITC was factored into the...
Speaker Change: contract considerations there.
Speaker Change: Sorry, your voice is a little faint. I think you said ITC and the answer is yes.
Speaker Change: And with Oneida and the EITC, do you have any expectations for how much you could receive and when you might be able to?
Speaker Change: to start invoicing for those amounts.
Speaker Change: Yeah, I think, Rupert, that, you know, the ITC is known to be 30% we've disclosed our capital costs, so...
Rupert Marrer: And as you know, and probably well aware, the receipt of that comes after COD, and at that point you file your return, so you can kind of get an understanding of the timeline. So I think that'll factor to get you to that point in time.
Speaker Change: I think one thing obviously for Oneida because we have multiple partners we will obviously be you know it will be shared across the group.
Speaker Change: All right. Very good. I'll leave it there.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Nelson Ng of RBC Capital Markets. Your line is open.
Nelson Ng: Great thanks and good morning everyone. So just a quick follow-up on Jurassic.
Speaker Change: battery or solar project.
Nelson Ng: So, can you provide a bit more background on the Alberta school group in terms of, like, are, like, why they wanted specifically battery storage and, like, are they long wind and solar and needed batteries to bounce things out or?
Speaker Change: Is there an opportunity for them to get involved in Phase 2? I presume Phase 2 is solar panels.
Speaker Change: William.
Speaker Change: The School, or the Boards...
Speaker Change: Alimchandani.
Speaker Change: The consortium, I think, is composed of 43 boards of education that act together, as I say.
Speaker Change: Put it in my mind as basically a purchasing group, and they have been very, from what I understand, I would describe them as
Speaker Change: very active and at the forefront of managing their affairs and their energy needs. They're active in the gas markets, they're active in the electricity markets, and they see battery storage as something to complement their...
Speaker Change: energy demands into the future. So they were a very important, in my mind, forward-thinking group of organizations, and we managed to enter into a mutually beneficial power purchase agreement, or battery storage agreement, I should call it, with them.
Speaker Change: On the...
Speaker Change: Sorry? Yeah, sorry, you're going to talk about phase two?
Speaker Change: I was going to say, on the solar initiative, the Jurassic initiative, it's a little too early to talk about that in terms of...
Speaker Change: Anybody in particular's role in it at this stage, given the confidentiality of the exercise?
Speaker Change: Okay, got it. And then just switching gears a bit, the Gemini, the damage to one of the Gemini export cables, can you provide a bit of color in terms of how that got damaged? Was it maintenance work? Was it an anchor from a ship?
Speaker Change: Are you still...
Speaker Change: I'm kind of exploring what the cause was.
Speaker Change: We are...
Speaker Change: Cable has been retrieved from the bottom of the ocean and the joint that...
Speaker Change: has resulted in a failure, has been cut out.
Speaker Change: And it's being sent away.
Speaker Change: for forensic examination. We should know the results.
Speaker Change: September-ish time frame. In the meantime, the joint is being replaced, obviously, as we speak.
Speaker Change: Our suspicion is that it's related to a prior fault.
Speaker Change: in the fiber-optic cable that is part of the export cable that resulted in a short. The forensic examination will reveal whether that is the true assumption or not.
Speaker Change: Okay, got it. So it wasn't like a physical impact or something, it was just something that failed.
Speaker Change: And then we believe, yeah, we believe it's an insurable failure.
Speaker Change: to be confirmed.
Speaker Change: Okay, and then just staying with offshore wind, so I think in your MD&A you talk about how operating costs were...
Speaker Change: I think 24% higher during the quarter due to higher maintenance. I presume this wasn't related to the cable failure. Is this timing or I'm just thinking...
Speaker Change: Was it timing in terms of more work getting done this year rather than last year? And from a big picture perspective, are maintenance costs typically covered under your long-term O&M contracts with the OEMs?
Speaker Change: Yeah, so just to be clear on the Gemini piece, it's not related to the higher costs are not related there. There was some maintenance periods there that are scheduled that you typically see in this quarter where wind is typically lower.
Speaker Change: In terms of the O&M coverage, so keep in mind that it's different between Gemini and our German projects. For Gemini, we do have the O&M contract.
Speaker Change: with, you know, with their original, I think, Siemens, but on the two German facilities, it's, you know, Northland effectively that's performing a lot of the maintenance services, so it is slightly different from that perspective.
Speaker Change: I think from an availability side of things, the, you know, the...
Speaker Change: All three wind farms have been operating well, and that's why we were able to do this.
Speaker Change: to capture the strong wind over the quarter. And obviously, if you look at the MDNA, you can see on a six month basis, we've hit historical highs.
Speaker Change: Great, thanks for the call Adam. I'll leave it there.
Speaker Change: Our next question comes from Robert Hope of Scotiabank. Your line is open.
Robert Hope: Morning everyone. How are you thinking about monetizing of, you know, existing mature cash flowing assets and in the context of redeploying the proceeds into development assets or other M&A opportunities? You know, that may take some time to generate cash. You know, how do you think about kind of the trade-off there, especially given kind of where payout ratios are?
Speaker Change: Thanks Rob. I think our message has been pretty clear over the past. We're always open to explore sell-downs or sale opportunities where we think
Speaker Change: opportunities will exist.
Speaker Change: that are in the best interest of shareholders.
Speaker Change: There's obviously multiple considerations that we look to. To your point, one of the very strong, important pieces of it for asset recycling overall is that we have an option to redeploy capital in a more accretive way over the future. So thank you.
Speaker Change: And that would be top of mind as we're considering looking at the various options.
Speaker Change: Thank you. And then just looking at the debt side, you know, the MD&A highlighted an administrative breach that was rectified by the time the statements came out. Can you walk us through exactly what that was, as well as kind of whether or not processes or controls have been altered moving forward?
Speaker Change: Absolutely. So I think just to just to point out, like from all intents and purposes, like all our
Speaker Change: You know, we're in line with all our covenants from a financial perspective.
Speaker Change: This was a very non-standard, very administrative item that unfortunately, because we were in breach on June 30th.
Speaker Change: Our auditors have very black-and-white guidance about how we're supposed to account for it. But as you can see in our disclosures, as of today, we are no longer in breach and everything has gone back or we continue to carry forward.
Speaker Change: In terms of controls, yes, we have addressed this, again, very non-standard technical item and we are enhancing controls going forward.
Speaker Change: Thank you.
Speaker Change: Bye.
Speaker Change: Our next question comes from Nick Boychuk of Cormorant Securities. Nick, your line is open.
Pauline Alimchandani: and Pauline Alimchandani.
Nick Boychuk: Thanks, good morning. John, in your prepared remarks, you mentioned obviously that you're still progressing some of the offshore wind projects in Scotland, you've got the ScotWind. Given all the encouraging developments there between AR6 and what they're doing with transmission, can you kind of give us an update on how you're thinking about that market and whether there could be additional opportunities or ways for you to speed up some growth in that area?
Speaker Change: Sorry, I didn't quite capture all you said. The sound quality was a little funny. Could you please repeat it?
Speaker Change: Sorry about that, my apologies. The UK opportunity, you mentioned in your prepared remarks That you know, you're still progressing ScotWind, but with all of the encouraging Developments that we've had there with AR6, that auction, what they're doing with the transmission opportunity Do you have ways where you could either speed up ScotWind? Maybe look to add additional projects or acquire anything else in that market?
Speaker Change: The short answer is yes, but we will be judicious about what we do. As you know each offshore wind project is a major financial commitment to develop it and so we want to be prudent about where we spend our resources on it.
Speaker Change: Okay, thank you. And in that market, sticking with this idea, if that is really becoming an attractive area for growth, could you start to explore potentially onshore or other technologies there, maybe taking battery energy storage, like you're having success in Alberta and Ontario, and exporting those skills to that market?
Speaker Change: At the moment we are not, but it's our responsibility as an organization to seek out the most attractive opportunities. I wouldn't rule that out in the future, but we're not seeking those kinds of things in that market at the moment.
Speaker Change: Okay, understood. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Ben Pham of BMO. Your line is open.
Ben Pham: Hi, thanks.
Ben Pham: Can you remind us on your Canadian development portfolio outside of Alberta where you could be?
Speaker Change: Is there a hint?
Speaker Change: We have battery, solar, and wind opportunities in Alberta that we're pursuing.
Speaker Change: and a number of them already have the fundamental permits that are necessary.
Speaker Change: Okay, so to confirm, you're not interested in other markets outside of Alberta in Canada?
Speaker Change: Oh, I'm sorry, sorry. We are pursuing projects in Ontario as well.
Speaker Change: and we have nascent things in other parts of Canada that are too immature at the moment to talk about.
Speaker Change: Okay, got it.
Speaker Change: And can you comment with this ITC?
Speaker Change: It seems like a pretty good situation for the industry.
Speaker Change: Can you comment, do you think it's going to result in any sort of irrational bidding?
Speaker Change: Or do you think most folks are going to assume that ITC will flow to the non-developer?
Speaker Change: I think from an ITC perspective, as you know and we've iterated before, when we were looking at Oneida, we considered it with and without.
Speaker Change: So I think it definitely will help developers and I think encourage further investment in Canada, which is really the intent.
Speaker Change: And from a bidding perspective, I think the key thing...
Speaker Change: To note is, you know, for Northland, we look at, you know, different forms of securing.
Speaker Change: revenue contracts for example with the recent one that we announced today was a bilateral arrangement so
Speaker Change: I think we want to make sure everybody is comfortable with the returns going forward, but overall it's a good thing for Canada, an investment for developers like us.
Speaker Change: Okay, got it. And maybe to follow up your comments on the data-centered discussions, can you comment, is that more specific to a region? Can you confirm, is it more gas over renewables?
Speaker Change: And does your...
Speaker Change: your Kappa allocation.
Speaker Change: A few years ago, you mentioned that gas was going to come down to 5%. Could that change at all, or is there any change in thought process there?
Speaker Change: Two parts to the answer. We won't go into details about.
Speaker Change: where we're having discussions with data centers. I just view data centers as another part of the potential power purchase or market. Yes, a fast-growing one and one that seems to have great promise, but there are many other places we can sell our electricity as well.
Speaker Change: Thank you. Bye bye.
Speaker Change: Second part.
Speaker Change: So, in terms of the thermal, yeah, I'm sorry. I'm sorry. You know, thermal is, we think, an area of opportunity.
Speaker Change: in the future for us, but we are going to be very judicious about what we do or don't do. We've made commitments to
Speaker Change: particular ESG targets and we're very conscious of the fact that any thermal development must have a very good environmental story that goes with it.
Speaker Change #100: Okay, understood. Thank you
Speaker Change #100: Our next question comes from Mark Jarvie of CIBC. Your line is open.
Mark Jarvie: Yeah, good morning everyone. Just coming back to the the idea of potentially selling assets and redeploying them
Speaker Change #102: into assets that create value.
Mark Jarvie: When you think about that, could that include acquisitions and are you actively looking at operating or late stage development projects or would that be more focused around organic development around the assets and projects you already have right now?
John Brace: I think for the most part, as you know, right now we're focused on the construction pipeline and the markets that John alluded to earlier. Obviously, we're very aware and receiving inbounds of all the opportunities.
Speaker Change #103: right now in North America, but I would say for 2024 our focus is primarily, you know, our development target markets as long as construction execution.
Speaker Change #104: But if I just maybe add
Speaker Change #105: I'm sorry, just to add to that, maybe if...
Speaker Change #106: If you think of capital allocation within the company, we believe that development of projects provides a superior return to our shareholders than as compared to purchasing operating assets.
Speaker Change #106: Okay, that's helpful context, John. And then, making good progress in high-long.
Speaker Change #107: As you work towards the end of this year, you'll come up against the winter buffer, which you put in your...
Speaker Change #108: in your project schedule, have you decided whether or not you'll try to advance through that? Try to push a little bit harder? Do you have the capability, the desire to do that right now?
Speaker Change #109: At the moment, we don't see a need to do that.
Speaker Change #110: and so would not be doing that.
Speaker Change #111: understood. And then I think in the MD&A mentions about, you know, bringing anything you talked about John, the nacelles and the generators and the blades.
Speaker Change #112: to Taiwan. I thought that Siemens would be manufacturing all or some of the components in Taiwan. Is there a change there or pivot or is there just more of like an assembly there and pieces are coming to Taiwan for assembly?
Speaker Change #113: There are local content commitments related to the turbines and related to some of the foundation jackets for the project and we are doing everything we can to make sure that our suppliers stick to those commitments.
Speaker Change #114: Has there been any adjustments? Certainly not. All of the turbines, for example, is meant to be manufactured in Taiwan, even in the first place. But you haven't adjusted? You're sticking to the plan you would have put in place when you reached FIDA a year ago?
Speaker Change #114: Thank you.
Speaker Change #115: Operator, are you...
Speaker Change #116: We've lost the line.
Speaker Change #117: I'm here still. I just asked, has there been any pivot or change in terms of how you're?
Speaker Change #117: Thank you.
Speaker Change #117: And uh...
Speaker Change #117: Operator, can you hear us?
Speaker Change #118: Adam, John, can you hear me? Is Mark still here? Can the last caller hear us?
Speaker Change #118: Thank you.
Speaker Change #118: Operator, can you hear us?
Speaker Change #119: I can hear you now.
Speaker Change #119: Okay.
Speaker Change #118: Can you hear us now? Can you hear us now? I can hear you now.
Speaker Change #120: Okay, sorry about that. Are we live? You are live.
Speaker Change #121: Apologies to everyone listening, something happened with our communications here and we lost the ability to speak out.
Speaker Change #121: for some unknown reason.
Speaker Change #121: Thank you.
Speaker Change #121: I'm showing no further questions at this time. I'd like to turn it back to John Brace for closing remarks.
John Brace: Thank you everyone and apologies again for that interruption and our ability to communicate with you. We'd like to thank you for joining us today. We will hold our next earnings call following the release of our third quarter 2024 results in November. In the meantime, we thank you for your continued support.
DeeDee: You may close the lines now, DeeDee. This concludes today's conference call. Thank you for participating. You may now disconnect.