Boralex Inc.

Hello, ladies and gentlemen, and welcome to the telephone conference on the financial results of the fourth quarter and the 2021 BORALEX exercise. Please note that all lines are in listening mode only. At the end of the presentation, there will be a question and answer period during which financial analysts, shareholders and investors will be invited to ask their questions. If you have any questions in the comments, please press star followed by the number 1 on your phone. Please note that this conference is recorded. For the participants in the webcast, you can also ask questions during the conference, but these will be answered by mail after the call. Finally, media representatives who also have questions are invited to contact the Director of Public Affairs and Communications of Boralex, Isabelle Fontaine, at the coordinates indicated at the end of the quarterly communication. Good morning, ladies and gentlemen, and welcome to the Boralex fourth quarter and year-end 2021 financial results conference call. Please note that all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session in which financial analysts, shareholders, and investors will be invited to ask their questions. If you have any questions or comments at that time, please press star followed by one on your telephone. Please also note that the conference is being recorded. For webcast participants, you may also ask questions during the conference, but they will be answered by email after the call. Finally, media representatives are also invited to contact Boralek's Director of Public Affairs and Communications, Isabelle Fontaine. Her contact information is provided at the end of the quarterly press release. I would now like to turn the conference over to Mr. Stephen Miller, Senior Director, Investor Relations for Boralex. Please go ahead.

Merci beaucoup. Thank you, operators. Good morning, everyone. Welcome to Boralex's fourth quarter results conference call. Joining me today from our head office in Montreal, Patrick Dacoste, our President and Chief Executive Officer, Bruno Guilmette, our Vice President and Chief Financial Officer, and other members of our management and finance team. So, Lacoste will begin with comments about market condition and the highlights of the quarter. Afterwards, Mr. Gilmette will carry on with financial highlights and then will be available to answer your questions. As you know, during this call, we will discuss forward-looking and historical information. When talking about the future, there are a variety of risk factors that have been listed in our different filings with security regulators, which can materially change our estimated results. These documents are available for consultation at CDART.com. In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis, unless otherwise necessary. stated, all comments made in this presentation will refer to combined basis figures. Please note that combined is non-GAAP financial measures and do not have standardized meaning under IFRS. Accordingly, combined may not be comparable to similarly named measures used by other companies. So for more details, see the non-IFRS and other financial measures section in the MD&A. The press release, the MD&A, the consolidated financial statement, and a copy of today's presentation are all posted on the VaraLex website at VaraLex.com under the Investors section. So if you wish to receive a copy of these documents, you can also contact me. Mr. Dacasse will now start with his comments, so please go ahead, Patrick.

Merci, Stéphane. Thank you, and good morning, everyone. I am pleased to present to you our fourth quarter results today. Thanks to the integration of acquisition, the commissioning of new wind and solar farms, as well as the positive effect relating to sharp increases in market prices in France, we ended the quarter with a combined EBITDA of 163 million, a 5% increase over the fourth quarter last year. Production was lower than the fourth quarter last year and also lower than anticipated production due to soft wind conditions in France and Canada. Our development teams continue to be very active during the quarter, adding 137 MW of project to our pipeline and advancing three projects totaling 41 MW in construction or ready-to-build phase of our growth path. In terms of market conditions, delays in approval of certain portion of the Build Back Better plan in the U.S. caused a delay in the announcement of the results of the 800 megawatt of project we submitted with NYSERDA in September. We are now expecting results in March for this bid. In Quebec, as announced, a 300 megawatt request for proposal for wind energy and a 480 MW RFP for renewable energy are planned for this year. The process for approval of the Hydro-Québec transportation line to the City of New York is also progressing. As mentioned before, this combined with the Québec Green Plan should be positive for the overall development of renewable energy in Quebec in the coming years. Our 200 MW project is in fact a good sign that wind energy development in Quebec has restarted. Moving to France now. We remain highly confident in the future development of renewable energy. As mentioned before, RTE, the French Transmission System Operator, recently issued six different scenarios for 2050 production mix, and all of them are highly promising for renewable energy. The most conservative scenario refers to a solar production seven times higher than today, as well as onshore wind production 2.5 times higher. The most ambitious scenario indicates a solar production 21 times higher than today and onshore wind production four times higher france is facing important issues with the aging of its nuclear fleet and more specifically recent corrosion issues noticed with some reactor causing temporary shutdowns for instance let's consider for a moment the recent assertion from the chairman of the French Nuclear Safety Authority, the Autorité de Sûreté Nucléaire, or ASN, regarding the lack of margin to support contingencies and the difficulty the nuclear industry will have to achieve even the most conservative RTE scenario of 50% nuke and 50% renewable energy. The ASN chairman also insisted that margins need to be maintained to avoid facing a trade-off between security of supply and facility safety in february 2022 president macron said that he hoped to double the country's renewable energy production by 2030 and increase solar production tenfold as well as double onshore wind power capacity by 2050. as you can see there is plenty of potential in the French market, and let's not lose sight that the market is not an easy one to develop with strong barrier to entry, which is an important competitive edge for an established player like us. I will now review the main variances in our portfolio of projects. We added six wind projects and five solar projects in France to the preliminary phase, representing a total of 137 megawatts plus 23 megawatts for the optimization of wind project. Projects in the pipeline continue to progress with 124 megawatts of project moving to mid-stage and 101 megawatts of project moving to advanced stage. In total, We are now developing a portfolio of wind and solar projects of 3.2 gigawatts and 190 megawatts of storage projects. Let's move now to the review of changes to the growth path. I said previously, two wind projects and one solar project in France totaling 41 megawatts moved to the construction or ready-to-build phase. We know have 647 megawatts in the growth path, 493 megawatts in the secured stage, and 154 megawatts in the under-construction and ready-to-build phase. We also have a 3-megawatt storage project under construction in France. In total, when adding the growth path to our existing production capacity, potential capacity is 3.1 gigawatts. In conclusion, as you can see on slide 12, we're pursuing the execution of our strategic plan and are making good progress on all four strategic orientations. I have talked about growth and diversification, but we also announced the signing of two corporate PPA recently, a 20-year contract with Métro France and a three-year contract with L'Oréal in France. Market conditions are highly favorable for corporate PPA, and we are continuing to see a very strong interest from corporations. In terms of optimization, I would like to highlight that we started the repowering work at our Mont-de-Bézard II project and optimized maintenance for wind operations totaling 161 megawatts in Canada. One last point from my part. Today we published our 2021 CSR report. I invite you to read it. As you will notice, we made very important progress in 2021 with regards to CSR and have a clear path for years to come. I would like to take this opportunity to thank our CSR director, Mihaela Stefanov. Mihaela, rapidly took charges of the CSR strategy and mobilized our entire organization around CSR and ESG criterias. CSR has always been part of Boralec's DNA, but we have drastically increased the pace of change and accountability in the past year. This completes my part. I will now let Bruno cover the financial portion in more detail, and we'll be back later for the question period.

Thank you, Patrick. Good morning, everyone. I will start with a review of the progress made in light of our 2025 corporate objectives. Capacity increased in the fourth quarter with the commissioning of our wind farm, La Grande Borne, on December 1, 2021, Our floating solar farm, Pérole, on December 14th, and our solar farm, Lac-Lé-Des-Champs, on December 23rd. Total capacity now reaches 2.5 gigawatts. Our last 12 months of the DA continued to increase, but the FFO slightly decreased due to lower wind volumes for comparable assets. Our reinvestment ratio stands at 48%, which is slightly lower than our 50% to 70% target because of the aforementioned decrease in AFFO. About our CSR strategy, we continued to make good progress on the environment, society, and governance aspects. We finalized the assessment of our carbon footprint and have set a 2025 target for CO2 avoided. We created a working group to analyze and integrate TCFD recommendations, and held voluntary training sessions on the impacts and conclusions of COP26. We completed our training on Indigenous culture with a strong participation rate of 96% in Canada and 93% for North America. Finally, we completed the revised version of our procurement policy, Taking a look at our debt objective now, our corporate debt to total debt ratio increased slightly compared to the end of 2020. We are pursuing the work toward our objective to obtain an investment grade rating in order to broaden our financing options and increase our flexibility. I will now cover the financial results for the quarter, starting with production. The fourth quarter was challenging due to weak wind conditions in Canada and also in France. Wind production in Canada was 11% lower than our anticipated production and 10% lower than in the same quarter last year. In France, wind production was 17% lower than anticipated and 14% lower than in the same quarter last year. Total wind production for the quarter combining Canada and France was 13% lower than anticipated and 12% lower than last year. Turning to hydro now, it was another strong quarter for U.S. hydro assets with production 23% higher than anticipated production and 85% higher than in the same quarter last year. This is more than compensated for the weakness in Canadian hydro and resulted in total production for the hydro sector 8% higher than anticipated and 20% higher than in the same quarter last year. Finally, production from solar was 11% lower than anticipated due to slight delays in commissioning of new solar plants in France and lower production than anticipated from our US solar assets. In summary, Total production for the quarter was 12% lower than anticipated and 6% lower than last year. Overall for the year, total production was 6% lower than anticipated but 7% higher than in the previous year with growth coming from our U.S. hydro operations, U.S. solar acquisitions, acquisition and Canadian wind acquisition. Fourth quarter revenues were down 6%. compared to last year, mostly due to the decrease coming from the wind and thermal segments. For the fourth quarter of 2021, operating income was up 8% to $82 million, and EBITDA was $163 million, compared to $155 for the same quarter of 2020, a 5% increase. We generated $81 million of net cash flows related to operating activities, compared to 59 million in the same quarter last year. Cash flows from operations were 116 million in the fourth quarter, a 15 million increase over the same quarter of the previous year. AFFO was 58 million compared to 67 million. The decrease is mainly due to lower volumes for comparable assets in the wind power segment. Our financial position remains solid with our net debt to total market capital ratio of 48% on December 31st, 2021, compared to 41% on December 31st, 2020. In conclusion, Q4 EBITDA was higher than in the same quarter last year due to acquisitions, commissioning of new assets, the increase in electricity prices, and our optimization initiatives. In 2021, we invested in our development resources and updated our corporate targets. 2022 will be a year of execution on our four strategic orientations, while many projects underway are expected to materialize. Lastly, our balance sheet remains solid, and we will continue to work to optimize our capital structure and improve our financial flexibility. Thank you for your attention. We are now ready to take your questions.

Thank you. As a reminder, ladies and gentlemen, if you do have any questions or comments, please press star followed by one on your telephone and wait for your name to be announced. If you wish to withdraw your questions, please press the pound or the hash key. Once again, it's star one for any questions or comments at this time. We have a first question coming from the line of Rupert Mayra from National Bank. Please ask your question.

Hey, good morning, everyone. Hi, Rupert. Hi. Morning. I'm wondering if you can give us a little more color on the contract structure in France that enabled the higher realized power price in a quarter. And if you can tell us how many of your contracts are structured in a way that you can see the upside on spot prices.

Yes, sure. During the quarter in France, the market price were around 200 euros per megawatt hour. And with some of our feed-in premium contracts, due to high market price, we are reimbursing money to EDF when the price is over the strike price, which is obviously the case at 200 euros per megawatt hour. We have an installed capacity of 201 megawatts exactly, which is with this kind of contract, where when the cumulative sum of the money we receive from EDF from the beginning of the contract is exactly equal to the cumulative sum we have paid to EDF, we are at a kind of break-even where we don't have to continue to reimburse EDF. And then we are enjoying the high price and benefiting from the high price of electricity. So this is for 201 megawatt. And this is also for 125 megawatt of project under construction.

Okay, so it would have to be the more recent projects than the newer projects that have that contract.

Yeah, exactly. It's some CR16, the CR17, and the CR which come from period 1 to 5 of the RFP in France. So this is a 201 megawatt. And with the under-construction project, as I mentioned, it's 125, and this is 58 megawatt from CR17, because you have to be careful to take the whole power when it's repowering. And for the RFP period 125, it's 67 megawatt. So just to be a simple way to see it, it's under-construction project, The only project which is excluded from this kind of asymmetric contractual difference is Moulin de Loan for 65 megawatts. But all other projects are benefiting from this close.

Great. And future RFPs for the government, do you think they'll have this contract structure? And does that give you potential to see higher returns on future bids?

No, the RFP of last November did not include this clause, so we're not benefiting from that. What is important for the future is two things. The first thing is during Q4... there was this break-even point, tipping point, when the cumulative sum received is equal to the cumulative sum paid. So you can make the math for Q1, for example, and look to the price as of today, the first months and 23rd days in February, and evaluate what it will be And this clause applies roughly from the 1st of January for the contract. So this is one thing. The other thing is when you look to the future, and I will let you do the math, but you can go to European Energy Exchange, which is the exchange market for forward contract in Europe, and see how the market is evaluating the next quarter and evaluate future. the impact on Boralex. And obviously, there is an interesting fact is with our high wind exposure in France, despite the last quarter, the seasonality is in favor because seasonality in production and seasonality in price is in favor of Boralex. And the second point, which is interesting, is that the important interest in corporate PPA with the signal of the price on the market, gives some opportunity we are digging for and hunting for to take advantage of this high price in Europe.

That's going to be my follow-up question, if I may. Looking at those corporate PPAs, are you seeing inflation in the potential pricing in those PPAs, where the corporate PPA should be more attractive than the government PPA?

Yeah, there is clearly an interest. When the price on the market is around €200, and I'm not saying that it will stay at this level, But what I think is that it will not land back to like 40 to 50 euro in the future because the reason of the high price in Europe is not only, you know, the situation with Russia and just the price of the gas. It's the problem on the nuclear fleet. I just mentioned it. You know, production from EDF has gone from on average 400 terawatt hour a year to 300 terawatt-hour this year and next year. This is already announced by EDF. So this puts a lot of pressure on the global system. Germany has closed 4 gigawatts on December 31st, and will close another 4 gigawatts of nuclear on the next December 31st. So all this pressure, the price of CO2, creates an environment when... where the corporations are not looking only to cooperate PPA for ESG and marketing like in the past, but they are looking for that to secure their electricity price on the long term. And so this creates a lot of optionality to us.

Great. Thanks for the comment. I'll leave it there.

Maybe just one comment, Robert, to make sure you model it right from – the effect on the contracts is that you have to really take care of the seasonality, meaning that Q1, Q4 are usually stronger, which means higher production and higher prices, but Q2, Q3, you have to model lower prices forward if you look at this because it's just the seasonality of the business that makes it work like that. You'll see that anyway if you look at the forward prices or forward contracts.

Very good. Thank you.

Thanks.

We have the next question coming from David. Please ask your question.

Thanks. Hi, everyone. My first question here just on wind speeds. Are you able to comment at all? I mean, it sounds like things have gotten better in France so far this period. Could you just comment across your fleet whether or not wind speeds have kind of recovered or how they have been relative to anticipated levels for 1Q?

The question, Bruno, was about the wind speed for Q1, how it looks like versus Q4.

Hi, David. So, as you know, these wind forecasts are long-term averages and... We do not particularly like to comment on a shorter-term basis on a wind forecast. So I guess, as we've said in the past, there's hopefully some data available for you to look at, but we don't give our forecast on a quarterly or before the quarter is over.

Okay, understood. Thank you for that. Maybe just one other one for me. I'm curious if you have any thoughts around the upcoming election in France. It certainly sounds as though in virtually all scenarios it's very supportive. The platform today is very supportive for renewables. Do you see any changes potentially coming about from the election, depending on how that shakes out?

The answer is globally no. You know, But you never know what will happen in an election, specifically since 2016. So I will not comment the result. But what seems to be clear is that if President Macron is re-elected, he will go because this is the industry situation. It's not a question of politics. France needs to somewhere refurbish it. and build some more nuclear because of the aging fleet, and France needs a lot of renewable energy. And in every scenario, when you go to specialists specifically like RTE, RTE is independent from any politics, they are looking to scenarios, as I mentioned, with a high potential energy, for solar and wind and offshore wind, and President Macron confirmed that. So that's what I think will be, and I am confident that this is also within the European framework where there is commitment from France for 2030 and 2035, and this will continue. You know, the European... I cannot remember the name, but it's the 55% of reduction of CO2 from 1990 for target for 2030 is there, and it's a commitment of France.

That's great, Collin. Thank you very much.

And just maybe another point, because I know that there is some noise about this in the market about the nuclear... the fact that nuclear has been recognized like highly efficient natural gas in the European taxonomy as transition energy, not as green energy. This is important, but there is so much challenges on the nuclear fleet on one side, challenges in terms of cost and delay. If somebody... in September, decide to really order new nuclear plants. They will be online in probably 2035 if everything goes well. And I cannot, I will not bet a penny on the cost and the budget. So this is a point. There will be challenges for, to bring HR in this business. You know, a lot of engineers, a lot of specialized technicians like welders. And so I think For us, it's not an issue, and when you look to natural gas, it's a specific close for Germany because the Germans want to close their coal for 2030 instead of 2038 during the Merkel period. But to do that, they need natural gas, and they need highly efficient natural gas, and they will have to switch their new plant from gas to hydrogen one day or another, and it should be green nitrogen. So when you put all that together, lots of opportunity for renewable energy in Europe.

Excellent. Thanks again for that, Patrick.

We have the next questions coming from Nick Boychuk from Cormac Securities. Please ask your question.

Good morning, gentlemen. Thanks for taking the question. I'm wondering if we can get some extra color around the repatriating of the service and maintenance for the Quebec wind assets.

I'm sorry, Nick. I'm not sure I understand. We understand well your question. Could you just repeat it, please?

Sure. So it was interesting to see that you've repatriated the service and maintenance contracts and some of the Quebec wind assets. I think it was something like 160 megawatts. I'm wondering if you can give us a little bit more color on on the decision-making behind that, the impact that it might have on costs, on margins, and whether or not there are other similar assets that you could do such as a switch?

Yeah, sure, Nick. It's really in the optimization orientation of our strategic plan. We have... started, uh, uh, to, to do this in 2019 in, in Quebec with Le Plateau 2020, uh, with, uh, at the end of 2020 for Seigneury de Beaupré and, and it's going very well. So, so we are pursuing our plan when it's possible with, uh, with Emmercon, with the, with the contract we have with them. Uh, we have a close to, to exit the contract and we are taking over their, uh, their service, uh, And it's going really well. We are reducing the cost and we are increasing the energy availability because we are more flexible. We have people on the site which are incentivized on the production and not just on the time-based availability. And during the last months, I'm very happy because in the Enercon contract, there is a lot of inflation close, like in any O&M contract, and we are somewhere protected from that, not totally, but we are protected from some indexes of, say, German industry index, which are going up for like 20%, which is high. But since the cost is reduced on our side and it's internal, it's also a protection on inflation. So it's going well. And, you know, it's better than the budget on this side. It's one of the reasons, you know, the global EBDA is not exactly following the top line, and there is some optimization in cost.

Okay. That's great, Coler. Thank you. On the development cost side, I'm wondering if you could please give us a little bit more, Coler, if you're seeing any increased costs on other projects. partnering or acquiring or sourcing even early stage development opportunities? Some industry participants I've been talking to are suggesting that the valuations and the costs at that earliest stage are increasing. Are you guys seeing that at all?

Yeah, this is clearly something which is a trend in the market because investors, more strategic investors are taking more risk with early stage pipeline this is why we have decided to invest much in our own people and as you have seen we are we're developing 3.1 gigawatt for the moment which is really higher than if you go back three years ago it was it was less than that and we're really monitoring to be sure that every quarter we are adding new real project, not just ideas, and we have the right people on the ground to make the project. We have really increased also the size of the team for greenfield development in the U.S. I don't think I mentioned that three months ago, but we have... starting real development negotiations with landowners and apply for grid connection in two other new states outside the state of New York. When we will achieve some milestone, I will say where it is, but it's a similar place. So we are really investing to avoid to have to pay for the premium on the project when you have to buy it from local small developers.

Okay, that makes sense. And then the last one for me, just on that organic growth machine, I'm wondering if you guys could please give a little bit more color on kind of how projects are moving through the pipeline stages. Obviously, there was the one project this quarter that really jumped through, I think, kind of the difficult stages. And I'm just wondering if you can kind of give us an update on the timelines to get these projects through to operation and if there are any other projects that we don't currently have information on but that could be somewhat soon reach that construction and ready-to-build phase?

Yeah, essentially in the pipeline, we are waiting for two important things. The first is the result of the NYSERDA 2021 As I mentioned, we're expecting that in March. And so this could be an important part. And the second part is also I mentioned we're preparing ourselves to the RFPs in Quebec. It's clear, the government clearly mentioned that after the 300 and the 480 megawatt RFP for 2022. There will be other tender in the future because in Quebec, the province will need an increase of roughly 12% of electricity demand, which is a 20 terawatt hour, which is significant for Quebec. And they have reviewed their policy Their 2019 target in November from the 29 – no, sorry. They have reviewed the 2029 target. from the target they had two years ago, and they have increased it by 6.5 TWh due to the biofuel demand, the hydrogen demand, the battery factories, data center, blockchain, and all the new demand in Quebec. And so this means an environment where we think there will be more RFP. So this is to think... It's independent from us, the planning, but we think that this will be an important move in the pipeline. And in France, it's more a question of, you can see every, I think, every quarter we are announcing one or two projects which are moving to the right direction.

Okay. That's a great call, Patrick. Thank you very much. Thank you.

We have the next questions coming from Sean Stewart from TD Securities. Please answer your question.

Thanks. Good morning, everyone. Patrick, I wanted to follow up on the New York RFP. And I think the indication you provided is that the delays in the Build Back Better legislation are gating factors in moving that forward. You're still indicating an expectation that we'll have results by the end of the first quarter. Can you reconcile those two things? We don't have any context on the legislation moving forward. Can we be confident on that time frame still?

Yes, it's a good question. The first point is when the announcement was moved and announced to the bidders in December, it was because the administration and the government were optimistic for Build Back Better, and they say you don't have to have the positive impact and some, say, windfall profit coming from that. Then you know what happens to Build Back Better. So the situation today is we expect – that the State of the Union speech next week on the 1st of March will give some light on this. Obviously, the U.S. administration is focused more on Eastern Europe for the moment. So, you know, that's still the last information I have from the team is that we are waiting for something in March, but could move. You know, the situation today with the U.S. administration is what it is. And that's how we can reconcile the planning.

And just to add to what Patrick said, the link that we're making is because of what Patrick mentioned between Build Back Better and the bids. NYSERDA could decide to split those. I mean, they could decide that if Build Back Better is delayed further, that they still announce the results or, again, splitting the two elements.

Yeah, and on the politics side, the question on Build Back Better was more on the social aspect and some aspects which are not the support to renewable energy. And so our understanding is that they will split also Build Back Better into different legislation to go ahead with the part which is accepted globally by...

by the population and by the politics and and wait to to negotiate the other part which was the challenge in in december thanks for that detail my second question is with respect to your your french organic development portfolio you mentioned that all of the rte scenarios are shifting more towards solar growth or at least faster solar growth and wind in all the scenarios Just wondering if you can give us a sense, the projects that you have in your early to mid-stage solar pipeline in France, is there a bias to move those up faster than the wind projects, or are you agnostic and certain in the overall portfolio that you have there?

No, as you have probably seen, we have started – to switch not completely to solar, but to increase our development expenses and focus on solar development in France since before June last year, before the new strategic plan. So we have hired different people. Solar is a different challenge in France. Wind, the challenge is specifically social acceptability. and the visual and landscape impact and biodiversity impact management. So this is the challenge on wind. The challenge of solar is more a question of land access, and so it's different people which should be dedicated to this development. So we are investing to accelerate this part, and generally speaking, the delay to develop a solar project in France is shorter than the delay to develop a wind project. So we are working on that. Just to remind you that, yes, if you take, for example, the February 9 speech of President Macron in Belfort at the G facility, he said, yes, he didn't say it like this, but finally he reduced the target of for onshore wind from 50 to 40 gigawatts, but it means that it's still doubling the onshore wind in France. And it increased dramatically the solar part from 50 to 100 gigawatts, which is a good sign. And we have anticipated that in our strategic plan and in our team.

If I could add to that also, Patrick, that... What we've seen in the most recent request for proposal is that still offer cannot meet the demand on onshore wind. So this is still true. There's still scarcity of land in France, and it will remain. So we're very positive about our pipeline, and we intend to continue to grow it and to develop it to construction phases.

That's great detail. Thanks very much. Thank you.

We have the next questions coming from Andrew Cruz from Hayes. Please ask a question.

Thank you. Good morning. I guess the first question is for Patrick, and it just really relates to critical mass in a market. And when you're going forth into a new market area and trying to develop it, What kind of resourcing do you think you need in that market for it really to catch and to really start being able to develop assets and have credibility with corporate buyers and local utilities and really offtake in general?

It's a good question, but there is a different part. To start a real greenfield development a team of five people, three years, it's a good start. When we start New York, we didn't put more than five people. When we are starting two other states, as I mentioned, it's not more than that. In the UK, we have start through a partnership and we will definitely accelerate it because of the environment of price I mentioned. But the team of the developer is roughly 10 people who are developing. So this is for greenfield development. To get a credibility, it's another situation. First to get the possibility to have a team and some operation. I think we have an organization today. I saw clearly the difference in France from 200 to 300 megawatts. When you are in this situation, you can have specialist people on land, but I was alone in France at that time. But typically, if we want to enter Spain or the UK, it will be the French team who will give service like we do in the US from Ontario and Quebec. So it's probably still something acceptable. And then to create the branding in the market, it's another thing. We have a clear brand in Quebec. We have a clear brand in France. In New York, I think we have a good brand in Greenfield. but we need to continue to develop our branding and reputation to sign corporate PPE or to sign contracts if needed. So it's different stages.

That's very helpful, color and context. And given all the irons in the fire that you've got, you're pretty disciplined at that. Maybe if I could turn the question now to Bruno just on Obtaining that investment grade credit rating and just how you see the gating items on the balance sheet is you've got a fairly large opportunity set. And does that investment grade credit rating reinforce your credibility in the market and your ability to develop on a more accelerated basis into the future?

Thank you for the question. Certainly we believe that it's an important milestone to reach, and we're organizing to reach it as soon as we can. As I think I said previously, this is also to reach a balance between corporate debt flexibility and a long-term non-recourse debt on projects. So it's important for us to achieve that balance, to achieve that flexibility, and to get there, to organize to get there. We need to continue to optimize our different sources of financing, and we believe we're close, but we still have some work to do to get there and to continue. For example, on some of our project debt, what it means in the future is we'll likely tone it down a little bit on specific projects and make sure that we have more corporate inflows. There are also steps that we need to take to optimize our corporate debt as currently structured. So these are milestones that we're looking at in terms of also getting cash flows from future assets that are being constructed, as you mentioned, the pipeline. So we've talked about the additional revenues that we're getting in Europe, for example. So I think all these elements taken together, it bodes well for us in the near term to get to that result.

Okay, that's great. Thank you very much.

We have the next questions coming from the line of Ben Pham, private investor. Please ask your question.

Hi, thanks. Ben from BMO Capital Markets. A couple of questions on France. Is there any update on the potential capital recycling?

Yes, so as we've mentioned in the past, we're going to an organized process to get into a partnership with an investor in France with our French operations, both assets and the pipeline. And that process is well advanced, and we're happy to see keen interest in this partnership with Boradex in France. so we'll come back with further details in time, but this process is certainly demonstrating the interest that our French operation has raised with private investors.

Okay, and through your conversations with these potential investors, has that opened up any other maybe incoming opportunities opportunities to maybe recycle other parts of your portfolio?

Certainly, and it's been a strategy really from the get-go, is we create values by developing our assets, by developing our teams. We're doing a similar approach. Patrick mentioned it in the U.S. We believe that that's a good way for Baralex to create value We're also creating value on our operations, obviously, and so on. So it's a question of sequence. It's a question of maturity of assets and markets. So to us, the market in France and our operations there were at the right time, at the right stage for us to do that partnership. we believe that we can create additional value by waiting a little bit on some other regions, for example. But clearly, we've partnered in the past. This process is going well, and we expect to do more partnerships in the future.

Okay, great. And another question I had on France is how do you think about counterparty risk these days with EDF, the share price, the financial implications? Does that change your process on where you allocate capital in France going forward? Do they have any sway on future RFPs in France without all government driven?

An important point, Ben, is EDF is not acting as EDF SA, the corporation. EDF is acting when he is the off-taker of Boralex as the arm of the French state. So the off-taker is the French state. This is by law the role of EDF because of its obligation of public service coming from I think 1992 Is it correct? Yeah, 1999 law or something like this. So it's a long way. When the French market was liberalized, EDF has some advantage of being a public service and some obligation of being a public service when you really act as the arm of the state. And this is exactly how other banks are looking to it, you know, And if you want, on that I can put a penny, because the situation is after the election, the so-called Hercule project, which is a potential split of EDF into the public service part and the nuclear part on one side, and on the other side, the hydro, the renewable, the service, and I don't know where the grid will be, will continue to go ahead. So something which will make possible for the French state to finance new nuclear, and on the other side, and pay for it. And the part of... of, you know, the role of EDF will be clearly defined and is under the law. We are protected. So no risk on this side.

Okay. That's a good reminder. Okay. Thank you, everybody.

Thank you.

We have the next questions coming from Najee Beydoun from IU Capital Markets. Please ask your question.

Hi, good morning. Just wanted to ask about your U.S. strategy. It's been over a year now with the portfolio of solar assets under your belt. Maybe you can just give us a bit more detail on the next steps for Borlax in the markets where you acquired those assets, and if there are any learnings from the corporate PPA progress that you made in France that you can apply to the U.S.? ?

Yeah, our strategy in the U.S. is we continue to develop greenfield projects in the state of New York because we know that there is a yearly RFP generally during the summer. There is one, I think, which is scheduled for August. As I mentioned, we're working on two other states to do the same, states where there is the possibility also to do large-scale development and go through public RFP. On the existing contract, the 2019 contract, We are working hard to, say, align the planet, finalize the development on one side, meaning create an action and all the authorization to build, and also align the planet in terms of return, taking into account the new costs, the new financing situation, and hopefully also the build back better direct pay situation and things like this. So we have to take into account everything. and take a final investment decision on this project. And also, last but not least, we are looking to some disciplined M&A in the U.S. to accelerate our penetration of the U.S. market and or diversification also to solar.

Okay, that's great. So it sounds like... maybe FID this year on existing projects and then exploring a couple of other states outside of New York. And my next question is on M&A. Do you feel any pressure to make any acquisitions to hit your 2025 capacity targets? And maybe a bit more broadly, sort of, is it going to take a corporate debt raise or would you prefer to wait at least for the minority stake sale in France before you... sort of commit to an acquisition?

You mentioned pressure, so I'll just comment on that word. First, there's no pressure to – there's a strategy to get to our numbers. There's a strategy to get to – there's a plan. And timing, especially on M&A, is somewhat unpredictable. M&A is part of the strategy, as Patrick mentioned, so it's not that there's no M&A. We can create value on M&A, but certainly we can't predict the timing. These M&A opportunities need to fit in our criteria, return criteria, et cetera, and they need to fit with our strategy. So it's assets where we can create value, where we can add value with our teams and our skill sets, It's pipeline, and it could be with teams or partnerships with other teams that are in, for example, regions or, as Patrick mentioned, more diversification in solar. So this is really about a strategy. So I mean, it will come when it comes. And if we are through our process on the French process, then we'll have some money available through that. Otherwise, there are other sources of financings we can tap depending on the size of the transaction. Financing, as I mentioned in my presentation, is not really a problem for us at Bilex. In this instance, we are well-funded for our plan.

Thanks for that, Bruno. Just one last quick question for me. If I'm looking at your development pipeline, you have about 60 megawatts of advanced stage projects in Canada and another 500 megawatts in mid-stage. Is that sort of the bulk of the projects you would potentially look to bid into the upcoming RFP in Quebec?

Yeah, it's the project we're developing for the need of Quebec, as I mentioned, the 20 terawatt-hour project. to be added in the next seven years. So if you, you know, it could be this RFP, it could be another one, it could be another opportunity we're working on. But we're very confident that we have the right access to land and the right access to grid connection on some of these projects, which is a competitive edge for us.

Okay. Thank you for the details.

Pleasure. Thank you.

We have the next questions coming from the line of Mark Jarvis from CIBC Capital Markets. Please ask your question.

Thanks. Good morning, everyone. I just wanted to come back to the higher spot prices in France and clarify a couple of things. One, it wasn't clear whether or not there was a component from any merchant exposure or was it all or a vast majority from the contract for differences?

No, it comes... The main... Question. We have very small merchant exposure. It's, I think, 8 megawatts from the first site that we kept in this, and some other. We have also, you know, in one of our corporate PPA contracts, we have potential merchant exposure, but also a possibility to fix the price, to define the price when it's interesting to us. So this is the only pure merchant exposure that we have. On the contract I mentioned, the 201 megawatts, you have to look to this like a floor price. The strike price is finally a floor price. And when you have reimbursed, we have, sorry, not you, we have reimbursed to EDF the same money than we have received from EDF from the first day of the contract, then the floor price is really a floor and there is no more defined price, but we are benefiting from the market price at that time. So it's not a merchant pure exposure, it's an asymmetric merchant exposure kind of floor.

Just one point on that, Marc. I just wanted to add that we've never really talked about that because we were not in this kind of pricing environment, but like the probability of getting this upside was quite low. But, you know, now that we are in this type of pricing environment, this clause for the 201 megawatt contracts that Patrick referred to applies. So this is really something really new because of the pricing environment.

Once you've reimbursed the subsidy, you get the upside, essentially.

Got it. And then just based on that cumulative and hitting that break-even point, does prior underperformance, like weak win for existing assets over the last couple of years, factor in? So my guess to the question is, is the upside in the existing assets the same as the upside in newly commissioned assets, or is there a bit of a difference between those?

The upside of, you know, it applies on the first asset. We have 87 megawatts on assets. CR16, 33 on CR17, and 81 on period 1 to 5 of the request for proposal CR contract. So CR16, we start putting this kind of asset in service in 2019, I think, or 2018 maybe, one in 2018, I think. So it's not old assets. And on these assets, during the period until Q3 2021, we have received money from EDF. So these assets have to clear all the money they receive from EDF with a market price between 45 to 50 euros, say, and a strike price, which is roughly, for the CR16, the strike price was 82 euro a megawatt hour or say roughly 82. So you see the difference in my example is 30 euro. And then during the quarter, the price go to 200 euro a megawatt hour. So the difference is no more 30 euro. The difference is 120 euro. So it takes four times less time with the same production, to go back to the break-even point. You understand my example, I think. And on new assets, the assets that we will commission in the next months, with the good contract I mentioned, it's 125 megawatts, since we will not receive any money from EDF from day one, we will enjoy and we will benefit from the market price from day one.

Got it. Okay. And then just coming back to the question about adding sort of into the construction-ready, build-ready phase, you talked about, you know, potential success in the RFPs, but what about the stuff that's in your secured pipeline? Like this quarter, you added some stuff that was secured into build-ready. Is there anything that, you know, if you got some final permits or authorizations, could move into that phase and be ready for construction and commissioning in 2022? 2023? Or are they more or a little bit longer dated, everything else is in that secured pipeline?

The question is, in the secured stage, how many projects do you think, and the timeline for the secured stage project, is it correct?

Yeah, exactly.

Yeah, okay. So in the secure stage project, essentially we only put in this part project which are in line with our 2025 target. So, for example, APWIT is a 2025 project. If you look to all the solar projects in the U.S., It's all projects which are either 2023 and maybe 2024 for Green Corners. And there is no cliff date on this project. This is also important. And for the French project, I don't have the detail by heart. It essentially depends on the French projects which are in this part. It depends on final authorization or clearing challenges from third parties. and on one or two of these projects, like Bois Ricard and Marseillais. And last but not least, speaking about lime kiln in Scotland, we are presently at the late stage of authorization of the extension of the project in terms of number of turbines and also increasing the size of the turbine. This is something where every developer in Scotland has to go. So we are in this process. And as soon as we have a fully permitted project, we will really start to do the marketing for corporate PPA. And in the present environment, I think we will be able – I'm confident that we will be able to find enough takers for this project. And then we have two years of construction.

Okay. And maybe one final question for Bruno, just in terms of the cost for your – France wind operations, I think they're down year over year in terms of dollars and euros on a constant currency basis. Is that only one time or is that just the benefit of the Vestas contract you signed a couple of quarters ago?

I think it's a general strategy, our general approach to try to optimize our costs. So Vestas is one of these reasons, but certainly we're working through Vestas all the process on the operations, on the administrative costs. So it's part of our strategy of optimization.

Just on that also, Marc, we did a lot of optimization in Canada with our wind assets.

Yes, perfect. Okay, thanks, everyone.

Thank you, Marc.

Right, so do we have a last question?

Yes, we have the last question from the line of Matt Taylor from GATP. Please ask your question.

Yeah, thanks, guys. Sorry, squeaking in here right at the last minute, Stefan. I just wanted to go back to the potential – hey, how are you doing, guys? I just wanted to go back to the sale. I understand it's still – ongoing. But I'm just wondering in terms of funding, I think it'd be helpful just to refresh our memory on funding needs. I'm looking at your disclosure, you have about $287 million or so of capital invest that you still need to invest in that's under construction. And then if 20% of that is only about 60 million bucks, it looks like relatively modest needs, just what's in the project under construction. But if you want to just refresh your view on whether or not this sale is looking to cash up and fund those needs plus the other projects that Patrick was walking through there and the secure growth, or do you have other plans for the proceeds?

Well, the proceeds would clearly go to some, I think everything is linked, right? We talked about the investment grade rating. We talked about different things today, including organic growth and M&A. So the proceeds would likely go to some debt rebalancing. We have some debt which is more expensive that we could pay down. And certainly we expect that we would have money remaining for growth, whether it be funding the pipeline. In the past, I've said that we're good until... late 2022 for funding. And so that's a starting point. And if we get the additional money or once we get it, then, yeah, we can apply this to what I've just said.

Okay, great. Yeah, it's a bit of an all of the above approach is probably the way to think about that, right? A bit of organic, what's in the pipe, the IG and maybe some M&A.

And it would clearly help us reduce our needs for equitiations.

Excellent. Thank you. Thank you very much for taking my question.

Thank you.

There are no further questions at this time. I hand back the conference to you for any closing remarks.

All right. So thank you. And thanks, everyone, for your attention. It's been, I think, our a record call, an hour and 15 minutes, so we appreciate all the good questions and the interest in Boralex. So if you have additional questions, please call me. It's the same number, 514-213-1045. I'll make sure we quickly answer your questions. So our next call to announce first quarter results will be on Wednesday, May 11. I hope you all remain healthy. Have a nice day ahead, and Enjoy upcoming spring vacations as much as we will do. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.