Boralex Inc.

Bonjour, Mesdames et Messieurs, et bienvenue à la conférence téléphonique portant sur les résultats financiers du troisième trimestre et du deuxième trimestre de Bourg-Alex. Veuillez noter que toutes les lignes sont en mode d'écoute uniquement. À la fin de la présentation, il y aura une période de questions-réponses au cours de laquelle les analystes financiers, actionnaires et investisseurs seront invités à poser leurs questions en appuyant sur étoile 1 et 1 sur votre téléphone. Veuillez également noter que cette conférence est enregistrée. 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, the representatives of the media who have questions are invited to contact Camille Laverture directly, external communications advisor at the indicated coordinates at the end of the quarterly communique. I would now like to pass the floor to Mr. Stéphane Milot, Chief Director of Relations with Boralex Investors. Good morning, ladies and gentlemen, and welcome to the Boralex third quarter of 2023 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 the financial analysts, shareholders, and investors will be invited to ask their questions. To ask a question, please slowly press star 1 and then 1 on your telephone. Also note that the call is being recorded. For webcast participants, you can also ask questions during the conference, but they will be answered by email after the call. Finally, media representatives are invited to contact Camille Laverture, advisor at Xenocommunications. Her contact information is provided at the end of the quarterly press release. I would now like to turn the conference over to Mr. Stéphane Milot, Senior Director, Investor Relations for Boralex. Please go ahead.

Thank you, operator, and good morning, everyone. So welcome to Bar-LX third quarter resource conference call. Joining me today on the call, Patrick Dacoste, our president and chief executive officer, Bruno Guilmette, executive vice president and chief financial officer, and other members of our management and finance team. So Mr. Dacoste will begin with comments about market conditions and the highlights of the quarter. Afterwards, Mr. Guilmette will carry on with financials highlights, and then we'll be available to answer your questions. As you know, during this call, we will discuss historical as well as forward-looking information. So 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. So these documents are all available for consultation at cdar.com. In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis. Unless otherwise stated, all comments made in this presentation will refer to combined basis figures. So please note that combined is non-GAAP financial measure and does not have standardized meaning under IFRS. Accordingly, combined may not be comparable to similarly named measure used by other companies. So for more details, see the non-IFRS and other financial measures sections in the MD&E. So the press release, the MD&E, the consolidated financial statements, and a copy of today's presentation are all posted on the Bodex website at bodex.com on the investor section. So if you wish to receive a copy of these documents, please contact me. So Mr. Dacoste will now start with his comments. Please go ahead, Bodex.

Thank you, Stéphane, and good morning, everyone. It's a pleasure for me to present our results and achievement for the third quarter. As you have noticed, we continue to vigorously execute on our growth and diversification strategy during the quarter. 600 megawatts of storage project in preparation for the upcoming request for proposals next January in Ontario and 111 megawatts of wind and solar project in France were added to our pipeline. 139 MW of projects, including our Lime Kiln wind project in Scotland, transitioned into the construction or ready-to-build phase of our growth path, with commissioning expected for 2024. This proves we have invested at the right time in the expansion of our development teams, with recent and expected changes in regulations to further accelerate the development of renewable projects, we are expecting to continue delivering strong growth additions to our pipeline and growth paths. Please note that our third quarter results include a provision relating to the adoption on August 16 of a new 2022 Supplementary Budget Act in France regarding additional revenues recognized for certain feed-in premium since the start of the fiscal year. A provision was therefore recorded of which 28 million relates to revenue generated in the first half of 2022. This provision largely explained the decrease of our quarterly ABDA. However, for the nine months period ending September 30, our ABDA grew slightly reaching 379 million compared to 372 million in the same period last year. Production in the quarter was down compared to last year and to anticipated production mainly due to difficult wind conditions in France as well as unfavorable conditions in hydro and solar in the U.S. Looking ahead, we are in a very solid position to pursue our growth with over nine hundred million in available cash and authorized financing. We will also benefit from new contract sign to optimize our revenue starting in the fourth quarter this year. Market conditions continued to rapidly evolve by region during the quarter. In August, the United States announced its most ambitious climate bill, putting the country on track to achieve a 40% reduction in emissions by the end of the decade. The bill includes $370 billion in grants and tax incentives and aims to increase investments in renewable energy, electrification of the economy, and clean energy generation in the United States to help reduce inflationary pressures. In Canada, the federal government announced that the Department of Finance would engage with experts to establish an investment tax credit of up to 30% for investment in clean technologies with a focus on net zero technologies, battery storage solution, and clean hydrogen. The credit would be available as of the day of budget 2023 and no longer in effect at the start of 2035, subject to a phase-out starting in 2032. The full economic statement is an affirmative response to the United States IRA, specifically the decision to make the 30% credit refundable. The adoption of these provisions will increase interest in renewable and storage across Canada. The credits would likely have a significant impact on our project already under contract. SBX, DENESH, and APRIT will also increasing The opportunity for other projects like Ontario Storage, corporate PPAs as province and large consumers realize the credit will reduce the cost of renewable energy. In Quebec, Premier Legault was re-elected on October 3, 2022. His party has committed itself to adding 3 gigawatts of wind power on top of the RFP of 300 megawatts underway and on the 1 gigawatt gigawatts announced recently. In Ontario, the Independent Electricity System Operator will be called upon to develop procurement mechanisms to meet the new needs for power confirmed for the years from 2025 onwards. RFPs are expected to be launched soon. In France, we are waiting to get the latest details of the various measures to accelerate renewable energy development. This information, the information we have at this point are the following. First, concerning the cap on merchant electricity price, France is looking at a cap of 180 euro per megawatt hour as was proposed by the EU with the possibility to establish different caps by technology. It is not clear at this point how this cap would apply and which type of contract it would cover. We should get more clarity in the coming weeks. For the moment, the proposed legislation indicates this gap would apply starting from December 1st, 2022 until the end of 2023. Second, we are still waiting to get the price threshold on which revenue sharing will apply for the feed-in premium contract. As you have noticed in our financial results, As the price threshold is not known, we had to estimate it as well as the implementation guidance of the new law. Finally, we are also waiting to get more information on the application of the 18 months period before activating a contract after the commissioning of a new plant. In the United Kingdom, the policy of decarbonizing the electricity mix by 2035 and the desire to resolve the energy crisis, particularly by increasing energy production, are favourable to the development of renewable energy, mainly solar power in England and onshore wind power in Scotland. I will now rapidly review the main variances in our portfolio of projects and growth paths. The 47 MW in the early stage came from the addition of a new wind project and four new solar projects totaling 111 MW in Europe. The increase of the expected capacity of two wind projects and five solar projects in Europe for a total of 71 MW. These increases were partly offset by the discontinuation of certain projects and the transition of projects to the mid-stage phase. Projects in the mid and advanced stages continue to progress with some adjustment between phases and no material changes to report. In total, our pipeline now comprise project totaling 3.9 gigawatts of wind and solar project and 792 megawatts of storage project, including the addition of 600 of storage project in the third quarter. Let's review changing changes to the growth path now. Three projects from the secured stage transition to the ready to build phase. These projects are 13 megawatt solar project of Chris and the 20 megawatt wind project of Elfo in France as well as the 106 megawatt wind project Lime Kiln in Scotland. These three projects will benefit from long-term corporate contract with commercial counterparties. The first two projects are expected to be commissioned in the first half of 2024, while Lime Kiln is expected to be commissioned in the second half of 2024. Finally, the Bougainville Repowering project was commissioned during the quarter, bringing our total installed capacity to 2.5 GW. I won't cover in detail the progress made in our four strategic directions, as I have already talked about the major points, but please note we continue to optimize maintenance during the quarter. 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. Bruno.

Thank you, Patrick. Good morning, everyone. I will start with a review of the progress made in light of our 2025 corporate objectives. Progress made on our EBITDA and AFFO was affected this quarter by the recognition of the provision on French revenues mentioned earlier by Patrick. Our progress should resume next quarter. Our reinvestment ratio stands at 54%, which is in line with our 50 to 70% target. About our CSR strategy, we continued to make good progress on the environment social and governance fronts as presented on slide 15. our balance sheet is very solid with more than 900 million in available cash and authorized financing facilities to continue implementing our plan for growth i will now cover the financial results for the quarter starting with production Wind production in Canada was slightly lower than anticipated, but 4% higher than in the same quarter last year. In France, where wind conditions were particularly difficult this quarter, given the important heat wave, wind production was 21% lower than anticipated and 6% lower than the same quarter last year. Overall, total wind production for the quarter, combining Canada and France, was 11% lower than the anticipated but in line with last year. Turning to hydro now. Canadian hydro's production was 5% higher than anticipated and 20% higher than last year. In the U.S., production was 16% lower than anticipated and 58% lower than the same quarter last year. Hydro conditions were particularly difficult this quarter compared to very strong conditions in the same quarter last year. Total production for the hydro sector was 2% lower than anticipated and 22% lower than last year. Finally, production from solar assets was 13% lower than anticipated, but 4% higher than the same quarter last year. In summary, Total production for the quarter was 10% lower than anticipated and 6% lower than last year. Third quarter combined revenues were down 17% compared to last year, mostly due to the recognition of a 28 million provision on French revenues regarding the first six months of the fiscal year and to lower production levels. The reduction in revenues resulted in a 38 million decrease in operating income and 30 million decrease in EBITDA. Please note that the increase in corporate costs is related to the growth of the workforce and higher external advisors costs to support our development. On a consolidated basis, we have generated $90 million of consolidated net cash flows related to operating activities compared to $47 million in the third quarter last year. Cash flows from operations was $40 million in the third quarter, a $26 million decrease over the same quarter last year. AFFO was $1 million compared to $21 million in the same quarter last year. This decreases due to the recognition of the provision for the feed-in premium contracts mentioned earlier. Our financial position is very solid with our net debt to total market capital ratio of 35% on September 30, 2022, compared to 48% on December 31, 2021. In conclusion, The decrease in the third quarter EBITDA is attributable to the provision recorded following the adoption of the 2022 Supplementary Budget Act in France. We continued to make constant progress in the project pipeline and to transition projects in the ready to build phase. We have significantly accelerated our development in the energy storage. and we are in a strong financial position to finance our disciplined role. Finally, the evolution of our finance management model will allow us to be even more agile and closer to our key markets. Thank you for your attention. We are now ready to take your questions.

Thank you. As a reminder, to ask a question, you will need to slowly press star one and then one on your telephone and wait for your name to be announced. Once again, it's star one and then one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. We are now going to proceed with our first question. And it's from the line of Nelson Ng from RBC Capital Market. Please ask your question. Your line is open.

Great, thanks, and good morning, everyone. My first question relates to France. Can you just run us through, again, the various buckets of exposure to the merchant power price? Obviously, the big uncertainty you have now is that 200 megawatts or 201 megawatts, and then I think starting in October, you have close to 300 megawatts of projects you've cancelled, and then you also have projects that you'll be completing this year, but can you just run us through some of those buckets?

Yeah, good morning, Nelson. The first one, as you mentioned, is 201. This is CFD contract, and this is the one that will be affected and for which we have taken the provision, the mentioned provision. Then we have 326 megawatts, which is early termination of contract for which we have signed a contract with a utility to sell the electricity at higher price for Q4 next year and 2024, not 100%, but something like 90% and 80% for 2024. So this is contracted. and the remaining is purely merchant. And then we evaluate that today the purely merchant due to project under-commissioning is roughly 5% of total installed capacity of Boralex. 123 megawatts total merchant. So that's our exposure to the market.

So it's the 201, it's the 126, and then is that 123 part of the 126? Or 123 is in addition to the 126? There are three buckets. The 201, 326, and 123. And within the 326,

There is roughly a 10-person going to a 20-person, which is merchant-exposed yet today. And there is a 90, respectively, an 80% for 2024, which is already contracted with a counterparty at a higher price than we contracted that when we received the confirmation letter during the summer and September. Okay.

okay so if i may just want to add a comment on that just make sure we we are good for the 201 okay this is the volume for which we took the provision in q3 so you should expect that in q4 we'll do the same as we did in q3 so meaning that we will record register the revenues but we will reverse it immediately immediately after unless we get the threshold you know published by the french government so there's no upside there for the 326 this is as patrick mentioned volume we exited for and we recontracted just to be clear on that right now there's a law in france a proposed law suggesting that this would be capped at 180 euro per megawatt hour with the possibility to modify the 180 up or down by technology up to 80 euro up or 80 euro down okay this will start according again to the proposed law on december 1st And then the third bucket, the 123 megawatt, this is pure merchant volume that we have. It's a combination, it's mainly in France for the recently commissioned asset, but also a small portion of U.S. hydro. Good?

Okay, good. And then just on that 326 megawatts, where it looks, you mentioned that it's 80 to 90% contracted. So... Like, are you contracting at rates that are above the 180, so you'll get capped out? Or are you trying to, like, blend and extend and trying to kind of reduce the power price but extend the term?

Today, it's contracted at higher price than 180. Okay, so it's higher price for short term. Yeah, for the next five quarter, it's higher price.

That's why I mentioned, Nelson, that this volume starts, you know, like in 1st of October. But the law, the proposed law in France is 180 euro cap starting December 1st. to the end of 2023 so that's that's what's proposed so before that should be good and we okay this law is this is currently in revision by this the Senate in it and we're waiting to hear more from that yeah could could be okay quick because

Just again, it's very specific, but the government, the French government used at the Assemblée Nationale the fast track system. This fast track doesn't exist for the Senate, so it's under review by the Senate Commission. Then by the Senate, then if there is difference, there would be a mixed commission between Senate and Assemblée Nationale. So like, I don't know, three, four weeks maximum.

Okay, and then just one last question here. So is there any, is there a risk that, like is there any overlap between the 201 megawatts revenue sharing versus the price cap? Like could those 201 megawatts be potentially hit by the price cap starting in December and then also be subject to some additional sharing with the government?

No, I don't think so. I don't see any possibility that there is a double risk on this.

Okay, got it. I've taken up a lot of your time. I still have a number of questions, but I'll get back in the queue. Thank you.

Thank you, Nelson. Thanks, Nelson.

We are now going to proceed with our next question. The next questions come from the line of David Quisada from Raymond James. Please ask a question. Your line is open.

Thanks. Morning, everyone. Maybe I can start just with one quick confirmation. I believe you said of the 326 megawatts in the early termination bucket, the contract that you signed starts effective October 1st, 23, so Q4 23, and extends for five quarters to the end of 2024, and that was 90% of that 326 contract? No, no, no, 1st of October 23.

2022. It already starts. I see. And when I was saying that the five quarters, it's including Q4 2022. We have signed, we have also defined 80% block, defined the price for 80% of the expected production in 2024, but it's under the 180 euro cap, potential cap. And I remind you, it's pay as produced contract. That's also important.

Excellent. Okay, great. Thanks for that confirmation. And then maybe just on the provision and I guess the potential threshold price, is it fair to say you basically took kind of the most conservative stance you could with reversing basically all of the excess revenues or taking provision for all of the excess revenues and How much variability do you see in the potential threshold price? Do you think that there's a chance that some of that provision would get taken out eventually?

David, thank you for the question. Yes, we have taken or reversed all the revenues for that bucket, the 201 megawatt that Patrick mentioned. We've taken the the most conservative approach. We don't think there's a lot of upside related to that position given this was presented by the government. It's sort of going back to the intent of the contract, the initial contract, so we believe that we're conservative but at the same point also not far from even though we're still waiting to hear what this additional adjustment price will be.

Okay, fair enough. Thank you for that. And maybe just one last one for me on France. When you think about potential improvements or, I guess, acceleration of the permitting process, and I realize maybe you don't have all the details yet, but I'm just curious, what would you be hoping for? How much... How much quicker could projects start to be permitted compared to where they are now?

Typically, there are not yet a decree or something, a paper, but there was what they call a circulaire, so a letter from the Minister of Environment to the préfet, the people who are issuing documents. to say that all the administration should be quicker and take that into account. There was also a new decree saying that we're putting some limit in term of the delay of instruction by the court when there is a recourse. They also suppress in the past, there was two potential recourse at the beginning. You have two months to make a recourse directly to the prefect and two months to go through the court. No, you have to go to the court directly. So this is eliminating a two-month delay, which was used by every opponent to file at the last day of the period. So what I expect is they really need energy very quickly. So they really need to accelerate. There was also a letter last Friday from the minister to say if we can reduce curtailment of production due to noise or any other concealment, we should do it during the winter because we really need power. So it shows you how much France is needing energy. So I cannot say you a precise delay reduction, but for sure all the civil servants will be aligned and understand that they will serve the country by accelerating the things. And on the other side, the value for the end customer in France is really important because the contribution of wind evaluated for next year is minus 13 billion euro reduction cost for the end customer of his invoice and almost 2.75 billion euro from solar. So this is a real clear tipping point also in the mind of the people in the street, and politicians should follow that.

That's great, Collier. Thanks, Patrick. I'll turn it over.

We are now going to take our next question. It's from the line of Nicola Bojcic from Cormac Securities. Please answer your question.

Thank you. Just first on France, a little bit of additional clarification. The 25% of PPAs that you early canceled this quarter, does that now represent all of the contracts that are exposed to the FIP dynamic, or are there other existing projects that might have this playthrough in the Q4 results?

Just to clarify, the 25% you're referring is 25% of production, of French production, is that what you're referring to? So that's 326 megawatts of capacity.

Yeah, the ones that you early terminated for this quarter.

Does that represent all the contracts? Yeah, okay, we're talking about the same thing. Just wanted to make sure we're talking about the same.

And these contracts are, we have, when we received the termination confirmation from EDF, which was the main counterpart, between beginning of August and September, we have taken like of position, but it's not exactly position because, as I mentioned, it's not volume guarantee, but we have fixed the price for 90% of the expected production in Q4 this year and next year. So this is no more exposed to the variation of the market today, but this has taken the benefit of the high price of the forward market and the of August and September.

And this is also all the volume that we were expecting to terminate early. There's no additional volume at this point.

No. Okay, perfect. That's helpful. Thank you. The additional measures that were announced by the French government as well regarding the 18-month window for selling power at spot rates after signing new PPAs inflation protectors, and then also the ability to potentially increase capacity by 40%. Can you please walk through what those might imply for your near-term French developments? What can we read through on additional capacity or improvements to contracts for those?

Yeah, essentially the first, which is not, again, it's a, It's a confirmation by the minister, but it's not yet in any law, but it will come, is the 18 months. This is the very quick impact because we have built and put in service during the last months Clé des Champs, Louville, Bougainville. This was a different project. We are building Moulin de Loan, Mont de Bézard, Préverange, Marseillais and Caumont, and all these projects will benefit from these 18 months. So this is what will be exposed in the future months through the market. And we do not... What is discussed presently is that these 18 months will be an exception to the 180 euro per megawatt hour cap. Because the idea, you know, the philosophy of the French government is to say, okay, we don't want that the existing assets are benefiting too much from the market. You have to do your business plan from what you expect when you take your investment decision. But for future projects, they are really incentivizes to accelerate the installation and further the development of projects. Typically, we have worked with Vestas to accelerate Moulin de Laurent and Mont de Bézard. It will be a question of potentially one quarter of acceleration, but one quarter with the high price, and if it's not capped, will be a lot of money on this project, and this is a way to to partner with the supplier and have a little bit more exposure when is the right time to have merchant exposure.

Excellent. That makes sense. And the potential to increase the capacity by 40%. Am I right to think that you could?

Yeah, that's a more tricky one because you have You have to take into account the potential technology increasing. We have, you know, and then you have to take into account the environmental impact assessment because in France it's not possible, for example, to put the plates which are five meters longer without or, you know, if it's significant, I don't know if five meters is probably not the right example, but if you need to typically increase the tip height of the turbine, or make something which is significant, it's not easy. So for this precisely, we are waiting from the government details of the new regulation that they will put in place. But I think they will do something. And I think my point on that and my intuition on that is, the letter sent last Friday from the minister to EDF to say, please try to decurtail any potential wind turbine in France because we really need energy and power for the winter which is coming.

Okay, understood. And switching gears to Ontario, can we please get a little bit extra color on the battery energy storage opportunity, specifically how you source those 600 megawatts, what the plan is to develop them, and roughly what your expectations are in terms of production revenue, contract type, et cetera?

Yeah. Actually, we restart development in Ontario 18 months to two years ago because we were expecting that one day or another there would be a need of power and there will be in the near future a need of energy too. So we start working around the project we have and in the municipality we already know and with the indigenous community we already know in Ontario. So we have, the point is we have identified the place in the Ontario system grid where storage is the most needed. And then IESO published a list to say to the competitors, the contenders, this is the place where we need to be. And Boralex was, I have to say that our people has done the right work before because we have the right land to bid. This is 20 plus years contract. It's not yet totally defined. Could be from 20 to 23 years with the ISO, essentially capacity payment. So a very stable contract. And there will be some merchant value also, but I will not go into these details because this is potentially a little bit too commercially sensitive if I give you figures. Competition will be high, but the good point is that we have the right land really next to the right substation. So this is one point. We can do point with municipality support. We can do point with indigenous community. And on top of this, I think, and the information from the federal government, and we'll have to think how we will take that into account because the bid is due for end of January from the information I have today. So we'll have to think about the way the 30% tax credit will apply to this project.

Excellent. That's very helpful. Thanks, gentlemen.

We are now going to proceed with our next question, and it's from the line of Rupert Marev from National Bank. Please ask your question.

Hi. Good morning. Following up with another question on Canada, you mentioned the APUET project there, and it could benefit from the Canadian tax credits. Can you give us a sense on how that project is progressing? What do the economics look like with inflation and interest rate increases? Maybe how the tax credits could help and how soon you might be able to move this to construction?

Yes, so the project is progressing well. We have still good returns on the project. We are advancing in our discussions and contractual negotiations with different suppliers. And, yes, clearly there's been inflation since we first talked about the project, but we have been able, given our agreement with... Yeah, given our agreement with... Sorry, Rupert. Given our agreement with HQ and our turbine supplier, we've been able to increase the size of the turbines and increase production, so maintaining healthy returns on that. We don't have enough details on the 30% today to know exactly how it could benefit on this project, but we're hopeful it will. But at this time, I think we'll just hold our or calculations until we have more details from the government.

Great, thanks. And then secondly, back to France. I realize there's more information coming soon on the French government policy, but what do you think we could see on upcoming RFPs for wind and solar in terms of the size of those RFPs and where pricing could land relative to the last few calls?

Yeah, that's a very good question. And that's one of the reasons I mentioned in my speech that two of the projects that will go to the growth we are moving to ready to build, Chris and Elfo, are contract with a corporation, corporate PPA. I think we have to see the RFP, governmental RFP, as, I don't know if it's the worst case, but something like this, because there is so much demand from commercial counterparty for long-term PPA at higher price than what is the case. So we are switching some project to the corporate PPA. And the main question in France is not the size of the RFP, it's the number of projects authorized. So this is really where the government will really implement an acceleration of the process of authorization, coming back to the David question, I think, and this is where they can accelerate development. The price will not go back to €60 for a long period, that's my guess, due to inflation, due to also the demand supply and demand of balance or unbalance between the number of new projects ready to build and the demand from corporations because corporations are ready to sign because they have like a big wake-up call with the present situation and they say we don't want to have this when the new fossil fuel crisis will come in I don't know many years we don't want to be exposed to that and then we want to sign a contract with Renewables. So that's typically where we are in France and in the UK presently.

So permitting is still the main hurdle to getting projects built. How about supply chain? Is that easing up now? Are you getting access to the equipment that you need?

Yeah, presently it does not change really from the last quarters. As I mentioned, When we take our investment decision, we have to go quickly. What we are doing is typically when we are signing a contract with a turbine supplier, we put like a 10-person down payment at risk before finalizing some other points. In the past, we were waiting the financial close of everything. No, we are taking a little bit more risk, but I think it's the right way to go for Boralex. It's not a big risk. And then we are able to freeze the price and the delay specifically. So we have some contracts under negotiation to close them quickly in November or December and not be exposed to any new change. So the investment phases for the project will not change.

Great, thanks for the call.

We are now going to proceed with our next question. And the question comes from the right of Mark from CIBC. Please answer your question.

Thanks. Good morning, everyone. Just on the feed-in premium contract, the 201 megawatts, that supplementary budget act, is that for the whole duration of the contract, or does it have a finite time where the I guess the pricing sharing cap expires?

No, there is no limit. That's for the duration of the contract.

Got it. And then coming back to the APUET project and the projects you plan to do with Hydro-Quebec and Energear, I know it's early days on the tax credit, but given you've already got some ideas on the contract price and probably debt capacity, Is it possible that the equity contribution for Borlax would be very minimal and the returns would even be higher here with these tax credits?

If it's applicable to these projects, it will certainly help the return. That I can say for sure.

Is there anything in the contracts that would... Yes, sorry, go ahead, Bruno. Go ahead. I was just going to say, is there anything in the contracts... where you would have to share that or there would be a price adjustment in the PPA term given the sort of tax credit benefits to you?

No, there's no such provision.

Okay. And then just now with the Inflation Reduction Act passed in the U.S., just updated views on on the New York solar projects in terms of how those are shaping up, domestic content requirements and your eligibility here to capture all the ITC and expectations for returns on those projects?

Yeah, we're clearly continue to optimize this project and there is clear conversation not only from us but from all the the awarded parties for a modification of the offtake price with NYSERDA. It's clearly easier with corporations than with the government body in terms of moving ahead quickly. But the conversation is with... We're speaking about gigawatts we're discussing with NYSERDA. So I think Boralex would be in this. And so we're discussing with... panel suppliers to be sure that we uh when when when the price will be adapted on the off-taker side we are able to to close on the other side and and we are waiting for the final so the implementation of the ira also this is this is an important subject to uh to finalize this project but i'm very that's something confident that we will we will finalize them one day or another But we need the new implementation of the IRA and we need something from NYSERDA. The good news is that the governor is re-elected in New York, so that's also something important.

And with the expectation that that would be sorted out next year and therefore a number of those projects would come into the secured project list in 2023? Not for commissioning, but just, yeah, yeah.

Yeah, yeah, the answer is yes. You know, the investment decisions, I expect that we would take them in the next 12 months.

Got it. Thanks, Patrick. Thanks, Bruno. Thank you.

Okay, Mark.

We are now going to proceed with the next question, and the questions come from the line of Sean Stewart from TD Securities. Please ask your question.

Thank you. Good morning. A couple of follow-up questions. With respect to the Ontario storage opportunity, is the intent to bid all 600 megawatts into this January RFP, or do you have visibility on how future RFPs are going to unfold? Any context you can give us on the bidding strategy there and where you envision returns for these projects with an ITC bidding versus traditional renewables? return opportunities.

What they call the expedited RFP is for, there is two points. There is a 600 megawatt non-battery storage and a 900 megawatt battery storage, plus anything left from the first 600. So it's a little bit complex. And today there is a maximum of 600 megawatts awarded by any proponent. This is the reason why we limit our pipeline to 602, because I don't want to... But the answer is yes, there will certainly be other RFP for storage in Ontario in the future. There will be also RFP for energy. that would be needed. In terms of the detail of our bidding strategy, I will not give more details today, but we are working seriously on this project on every point of the rules to make it.

Okay, thanks for that detail. And back to France. On the 326 megawatts, with early termination. You're opting for this shorter duration solution with some outsized price terms. What's the thinking on the longer term approach there once the shorter term approach you've taken expires? Do you look at locking in longer term economics As this unfolds, do you wait for this contract to expire? How has the thinking evolved there?

Yeah, we have one day's first period will end up and we have the possibility within our contract to be protected for 2025 and 2026. We have not. define high percentage or, or, or fixed high percentage because the, the curve of the electricity price was in, in, in, in, in backwardation too much from our review. So we, we are, we, we remain exposed for this project, but we can, we can, we have different options. We can sell them to the same counterparty. Uh, we can also, uh, you know sign a long-term ppe with with any corporation that will come to us and we have many demands as i mentioned and we can keep also a little bit more market exposure so so this will be really looking to the global boralex portfolio and and and also some some of this project uh have repowering opportunity to uh this is not put on the back burner too much we are continuing to have the possibility to repower to really increase the size of this plant and i think i think that will be also an interesting opportunity if we can we have we have one side where we have 39 megawatt and we have applied for 80 megawatt This is just an example, but on some project, repowering can be really significant. And I think in the context of France, which is really needing, requesting a lot of power for the next 10 to 15 years, and there is no possibility that nuclear will bring that. So I think the easement of the rules of authorization will help us also for repowering. So different options.

Maybe I'll just – just as a reminder, the contracts of the 326 megawatts we're talking about, just a reminder that these were four years or less maturities in those contracts. These are the only ones we terminated. We still have a number of contracts out there. What this demonstrates is the ability for us to have options in terms of depending on the outcome of different – different amendments so that the government is putting forward. We'll see in the future whether we have other contracts that we could also decide to terminate or not. But the point is we have flexibility and options and we have other contracts where we could see if it makes sense. And the only ones we terminated were those contracts coming to maturity in the next three or four years.

That's great detail. Thanks very much, Bruno and Patrick. That's all I have.

We are now going to proceed with our next question. And the next questions come from the line of Ben Pham from BMO. Please ask a question.

Hi, thanks. Back to that 326 megawatts, did you have to pay down the project debt in Q4, or has it been pushed out given the new one-year contract?

So your question relates to the contracts terminated?

That's right.

No. essentially are sharing some of the economics with the lenders when we finalize those economics. So sharing in terms of additional payments or reducing the debt. So it's going to be, depending on the outcome, it's going to be a portion that's going to be reducing the leverage.

Okay, got it. And then... In your presentation, you also have the corporate credit rating still in progress. Anything notable to last quarter on that progress?

We're still working towards that. As we mentioned, it's a 2025 objective. We have, as I mentioned, a strong financial position. We're looking at also opportunities on the M&A front, and we have large projects that are coming, as we mentioned. So we're putting all of this in the context of today's world and deciding where are the best opportunities. But we're confident that we'll be able to reach that investment grade rating. And as I mentioned in the past, not to the detriment of our growth, but we're confident we can achieve both growth and the investment grade rating.

Okay, thank you, Bruno.

We are now going to proceed with our next question. The questions come from the land of Najib Aydin from iCapital Markets. Please ask your question.

Hi, good morning. Just on the yet-to-be-determined price threshold in France, maybe you can just help us a bit more there. I know you said there might not be a lot of upside and unlikely that you'll reverse these provisions, but what was the realized pricing on a year-to-date basis that's easiest? And then how do you compare that maybe to the price cap or what you expect the threshold to be?

Just the philosophy of the French government behind this is to say when you have taken your investment decision, you probably expect that the price curve will not go over the strike price of the contractual difference for a long period. So that's true. And so they say, as I mentioned, they want to incentivize new projects and they don't want to give windfall profit to existing projects. And so that's the reason why when we read that in detail, we say, okay, we cannot expect to have 150 or 200 euro per megawatt hour threshold. We will potentially have something which may be higher than the contract price, but not so much. So this is where the upside is not so important, and this is the reason why we have taken this prudent position. And maybe, Bruno, you want to add something on that.

We essentially rolled back to very close, if not at the contract price in our assumptions. It's based on Patrick's comment.

Maybe just a point to add also on that is that we made some sensitivity analysis. And if, for example, the price or the threshold is slightly higher, let's say below the 100, the variance is not that big either. So you should not expect a big amount there if there is one.

Okay, got it. I just wanted to ask on Lime Kiln, so I guess you've taken FID on the project as positive to see. I'm just wondering if you can give us a bit more details on the contracts that have allowed you to move forward with Lime Kiln and any details on counterparties or, you know, tenor or anything of that sort would be helpful.

Yeah, it's... Utility PPA is not really a corporate PPA, so it means that it's with a big company. I will not give you more details today when it will be finally signed, but we have signed something which is enough to go ahead for us. It's a contract which is pay as produced, long-term, so it will be possible to finance the project through this contract. there is a part of the price which is the majority of the price three-quarter of the price would be fixed and there would be possibility to have a merchant part and we have options to fix it so this will also open possibility to make upside but also protect us if we want and it's a It's a company with the credit rating, which is easy to finance the project after that. So that's the reason why we go ahead. And the side is every planning condition has been, the word used in the UK is discharge. Connection is on the way to be available in 2024, which is, very important for project in the very north of Scotland. And we are finalizing the last conversation with the different turbine suppliers. We have acceptable offers on this site, and we will be also protected from inflation because we want to close that in the next weeks.

Okay, that's great to hear. We'll look forward to more details on that soon. Just one last question from me. If you can give us a bit more updates on the outlook for M&A. As you've said, you have capacity to make acquisitions and you've been looking at some deals. Maybe just an update on how many deals you've looked at, what's come across your desk, what's most interesting for you today? And just very, very briefly, you still expect to announce FID on the DENESH projects in Quebec next year? Thanks.

DENESH.

So I'll start with the first question in M&A, and I'll let Patrick answer on DENESH. So on M&A, we're seeing a good number of opportunities, both in North America and Europe. We're looking at a few serious ones on both sides. Maintaining our return expectations that we've given in the past, it's actually – I mean, this volatile environment is creating more opportunities, I think, and valuations are starting to be a bit more reasonable. So I think it bodes well, given our cash position, for us to – to make accretive acquisitions, and also to look at development portfolios in the near future.

And on Denege, maybe some information. The work with turbine suppliers is progressing. It's a project which creates a lot of interest from turbine suppliers, which is good news. trying also to work to create value on the project because, as you know, it's a very windy side, but it's a very icy side sometimes, but we know the site very well, so we are working to optimize the right turbine for every place within the site. The work also with Hydro-Québec as a counterparty, as the off-taker of electricity, is also going well. So that's also, they are really highly motivated to buy the electricity and to continue. And within that, the consultation of the different stakeholders, including indigenous community in this area, municipalities are progressing in the right way too. So it's also something which is going well. A lot of work, but it's going well.

Thank you very much. Appreciate that detail.

Thank you.

We are now going to proceed with our next question. It's from the line of Nelson Ning from RBC Capital Markets. Please go ahead.

Great, thanks. I just had a quick follow-up on the question that Mark Jarvie asked. In terms of the discussions with NYSERDA on some of these solar projects, Can you just clarify – does this relate to the 180 or 200 megawatts of solar that you have in the secured projects? And are you essentially looking for some type of an upward adjustment to the contract price next year before you can hit FID and move forward with those projects?

Yeah, the answer is yes. A lot of and many players are discussing with NYSERDA because due to inflation and the constraint on panels also, projects are less, they are not uneconomic, but they are not reaching the right threshold today. And so we need two things is the implementation of the IRA. And on the other side is that NYSERDA take into account an increase of an adaptation due to inflation potentially between the bid time or the award time and today. So that's where they want to go. You know, there was an election yesterday, so nothing was really possible before that. The line is open. The conversation is not just with Boralex. And so I'm also confident, as I mentioned to Mark's question, that the investment decision will be taken next year.

Okay. And then just one last question, big picture, given that rates have moved up. Like when you bid these projects or bid on future projects, have you moved your, I guess, required return up by, call it 2%, given the interest rate move higher? Or are you targeting, I think in the past you were looking at 8% or 8% or 9% ROE, but has that moved up in line with inflation or interest rates?

Our general indication stays the same. It was 8% to 10%. Essentially, we believe we can maintain those returns, and we are adjusting our guidelines in terms of inflation, so we certainly are taking into account those additional costs, those additional interest costs, for example, and generally building costs in our modeling, but essentially are maintaining our equity returns the same. So we're not increasing the risk premium, but we're adjusting for costs.

Okay, got it. Thanks. I'll leave it there.

We have no further questions at this time. I'll now hand back the conference to Mr. Stefan Miller for closing remarks.

Thank you, operator, and thanks, everyone, for all your good questions and for your attention. So if you have any additional questions, please call me at 514-213-1045, and I'll make sure to quickly answer your questions. So our next conference call will be on Thursday, February 23 of 2020. to have 2023 at 11 a.m. to announce full year results and fourth quarter results. Thank you. Have a nice day. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.