Boralex Inc.

Bonjour Mesdames et Messieurs et bienvenue à la conférence téléphonique portant sur les résultats financiers du premier trimestre 2024 de Boralex. Veuillez noter que toutes les lignes sont en mode d'écoute seulement. 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 étoiles 1 et 1 sur leur téléphone. Veuillez également noter que cette conférence est enregistrée. Pour les participants à la webdiffusion, vous pouvez également poser des questions au cours de cette conférence, mais celles-ci obtiendront réponse par courriel après l'appel. Enfin, les représentants des médias qui ont des questions sont invités à contacter directement Camille L'Aventure, conseillère affaires publiques et communications externes, aux coordonnées indiquées à la fin du communiqué trimestriel. J'aimerais maintenant passer la parole à Stéphane Milot, vice-président relations avec les investisseurs de Boralex. Good morning ladies and gentlemen and welcome to Boralec's first quarter of 2024 financial results conference call. 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 by pressing star 1 and 1 on the telephone. Also note that this call is being recorded. For webcast participants, you can also ask questions during this conference, but they will be answered by email after the call. Finally, media representatives are invited to contact Camille L'Aventure, Advisor, Public Affairs and External Communications. Her contact information is provided at the end of the quarterly press release. And I would like to turn the conference over to Stéphane Millot, Vice President, Investor Relations for Boralex. Please go ahead.

Well, thank you, operator, and good morning, everyone. So, welcome to Borrellec's first quarter results conference call. Joining me today on the call, Patrick Dacoste, President and Chief Executive Officer, Bruno Guilmette, Executive Vice President and Chief Financial Officer, and other members of our management and finance teams. So, Mr. Dacoste will begin with comments about market conditions and the highlights of the quarter. Afterwards, Mr. Guilmette will carry on with financial 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. When talking about the future, there are a variety of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. These documents are all available for consultation at cdarplus.ca. In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis. When talking about the results, we generally refer to combined numbers, and when referring to cash flow and balance sheet, we generally refer to consolidated numbers. So please note that combined is a non-GAAP financial measure and does not have standardized meaning under IFRS. Accordingly, combined may not be comparable to similarly named measures used by other companies. For more details, see the non-IFRS and other financial measures section in the MD&A. So the press release, the MD&A, the consolidated financial statements, and a copy of today's presentations are all posted on the Boralex website at boralex.com under the investor section. If you wish to receive a copy of this document, please contact me directly. So Mr. Dacasse will now start with his comments. Please go ahead, Patrick.

Thank you, Stéphane, and good morning, everyone. It's a pleasure for me to present our results and achievements for the first quarter. Boralex had a good start to the year, delivering strong growth overall while continuing the disciplined development of our project. Combined EBITDA for the first quarter was 218 million, up 28 million or 14% over the same quarter last year. We benefited from strong production of wind farms and hydroelectric assets in North America, the commissioning of new assets in France, and our strategy to optimize electricity selling prices in France. Net earnings was 73 million, up 62% compared to the first quarter of 2023. And the AFFO under IFRS was 78 million, up 16%. We continue to strengthen our balance sheet with 575 million in available cash resources and authorized financing, providing significant flexibility to fund our future growth. On the development side, our teams continued to make significant progress in our growth and diversification strategy. Our main project under construction and ready to build progress according to the plan. With our wind project operating in Quebec and Lime King in Scotland, expected to start operating at the end of 2024, as well as our first two battery storage projects in Ontario, Eggersville and Tilbury, expected to be commissioned in 2025. Finally, 239 megawatts of projects were added to our pipeline in the quarter, now representing over 6.7 gigawatts of capacity. Regarding market conditions, I would say the demand for renewable energy remains high, in all our core markets with strong commitments from the government to reduce their carbon footprints and strong demand from corporation too in canada the government has scheduled the adoption of the itc for june 2024 this will have a very positive impact on our project in quebec and in ontario i'm also very pleased to highlight our most recent win announced last week of 125 megawatt storage project in ontario in a very short period of time we became the leader of this technology in ontario and in canada as well we're very proud of our team and there is more to come after our success in the recent rfps Our teams are already preparing responses to upcoming tender in Quebec and in Ontario. In the United States, NYSERDA announced the conclusion of the expedited RFP, but did not publish the list of companies selected. The projects that won are expected to be disclosed as contract or signed. NYSERDA, however, indicated to Boralex that the project it had submitted totaling 240 MW were not selected. Next solicitation is expected to be launched in May 2024. Boralex will review the request for information document and will establish its strategy for this request for proposals. In Europe, our team are also working on the upcoming RFPs in France and in the UK. I will now rapidly cover the main variances in our portfolio of projects and growth paths. The change in the pipeline was mainly due to the addition of solar and storage projects in North America in the early stage, the addition of solar and wind projects in Europe in the early stage, and the transition from the early stage to the advanced stage of storage projects totaling 525 MW in North America. In total, our pipeline in early, mid and advanced stages projects now comprises projects totaling 5.8 GW of wind, solar and storage projects. There were not a lot of change in our growth path during the first quarter, except the commissioning of a 21 MW wind project in France. I won't go in detail through the progress made in our growth and diversification strategic direction, as I have already talked about the major highlights. on the customer strategic direction we continue to have advanced discussion with different corporations in france as the demand for renewable energy contracted at attractive price remains high this complete my part i will 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. As mentioned earlier by Patrick, our balance sheet is solid with $575 million in available cash resources and authorized financing. Total debt remains stable in the first quarter of 2024 with project debt representing 85% of the total. We continue to make good progress on the EBITDA and EFFO front. The reinvestment ratio is in line with our target. Lastly, on our corporate objectives, we continue to make good progress on our CSR strategy as presented on slide 17. We are also preparing for CSRD and ISSB regulations and have just started our double materiality analysis. For more detailed information, including data on CO2 emissions and work done in relation to climate change and the TCFD initiative, I invite you to read our fourth CSR report, which was published in February. I will now cover the financial results for the first quarter, starting with production. Overall, total wind production for the quarter, combining Canada, the US and France, was 4% higher than last year, but 2% lower than anticipated. Total production for the hydro sector was 9% higher than last year and 27% higher than anticipated. Both markets, Canada and US, had favorable weather conditions. Finally, production from solar assets was 19% lower than the same quarter last year, 22% lower than anticipated. mainly due to curtailment at the Five Points solar farm in California. In summary, total production for the quarter was 3% higher than last year, but 1% lower than anticipated. The quarter combined revenues were down 11% compared to last year, mostly due to lower merchant prices in France. EBITDA increased by 14% in the first quarter and operating income increased by 31%. As mentioned by Patrick, the growth came from higher production in North America, new assets commissioned in France, and the positive effect of our commercialization strategy in France. On this last point, please note that the major contributor was the price effect of newly commissioned assets, Moulin du Loin, which benefited from higher selling price in the first quarter of this year compared to the first quarter of last year, thanks to our commercialization strategy. To a lesser extent, assets impacted by the French price gap had a small positive contribution to EBITDA. On a consolidated basis, EFFO was 78 million compared to 66 million in the same quarter last year. Our financial position remains very solid with a net debt to total market capital ratio of 44%. In conclusion, it's a good first quarter for 2024 as we continue the disciplined execution of our strategic plan. We increased combined EBITDA, net earnings, and EFFO compared to 2023. We maintain a solid financial position with $575 million in available cash resources and authorized financing to support our growth. And finally, we made good progress along our four strategic orientations. Thank you for your attention. We are now ready to take your questions.

Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone to ask a question. And to withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A roster. This will take a few moments.

Thank you.

Operator?

We are now going to proceed with our first question.

And the questions come from the line of Nelson Ning from RBC Capital Markets. Please ask your question.

Great. Thanks, and good morning, everyone. First question relates to New York. Just a quick question. Was the NYSERDA expedited bid where you submitted 240 megawatts, was that

purely based on price uh yeah the answer is yes it was there was there was uh sorry good morning nelson first uh the answer is yes uh and uh we don't know exactly what was the the last uh accepted say price by nasa and we will know that when it would be uh when it would be uh you know published uh And as I mentioned in my speech, we are waiting to see what will be the rules for the next tender and to decide our strategy of bid for this one.

Okay. So I guess regardless of the strategy, does it imply that you would need a lower price in the next round? And then I guess the other question is, Historically, has RFPs had a big non-financial component to make the bids more competitive?

What we will do is we will remain disciplined in the way we will bid. I am obviously disappointed not being selected, but I'm not disappointed to have respected our our limit of return and acceptable return for Boralex. And we have many opportunities in our targeted geographies, Quebec, Ontario, France, the UK, and NYSERDA obviously, but if NYSERDA, if the price in New York remains lower than the one we think we should get to have an acceptable return, uh we will we will review our strategy what i think too is on the the different project we bid last time there was one uh say large project of 140 megawatt but there was also some smaller project of 20 megawatt i have more question of the 20 megawatt project than on the other one But definitely we will see what will be the competition for the next stage. NYSERDA has reconfirmed their objective of 70% of renewable energy in 2030. So they need to have projects online for this time. And our projects are able to do it. There is also lots of... They are ready to build. and there are also lots of difficulty on the offshore side. So they have not a lot of alternative to catch their 70% in 2030.

I see, that's great color. And then just shifting to Ontario, so you have two projects that are, or two battery storage projects that are due to be commissioned next year, and a third one in, I think, 27 or 28. can you just provide a bit of an update on your battery procurement strategy? And, and also are you kind of factoring in any economies of scale for whether it's construction or operations of the facilities?

Yeah, essentially on the, on the Eggersville and Tilbury, we have secured all the procurement, meaning, batteries and balance of plant. Batteries have been contracted with Tesla. So we are going for, I would say, number one technologically and number one in knowledge of the Ontario system and rules. So there is no risk on this side. Balance of plant has been contracted too at price which are totally in line with our budget. So that's why I'm confident we will reach the expected return on these projects when they will be connected next year. Yes, there will certainly be economies of scale with Oxford, since Oxford is not far away from Ayersville. It's the same First Nation partner, the same area for operation, and it's in the area of Niagara Peninsula where we already operate. a large wind farm as you know of 230 megawatt so yes there is more to come and we are preparing for the LT2 to continue on Ontario for the LT2 procurement the next RFP that will come for production for different production and say hybrid projects.

Okay and just one last question you mentioned that it's everything's kind of on budget can you provide a bit more color on like the rough project costs for the two battery storage projects?

It's pretty much in line with what we've said in the past, Nelson.

So, if I recall, we were... It's looking... For the two Ontario projects, we're about $800 million.

Exactly. Yeah. Great. Thank you very much. I'll get back to you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Mark Jarvie from CIBC. Please ask your question.

Good morning, everyone. Coming back to the bids in New York, was there anything in terms of supply chain costs, tax equity assumptions that made you bid more conservatively and will impact sort of how you bid in the next potential RFPs?

No.

I'm not, I'm not, I'm not sure that we, we have taken to see conservative assumptions. Uh, when I'm looking to, you know, accepted price by Nasr da last year, uh, in offshore, which are public, uh, last year in, uh, in, uh, solar, which are also public. I think we have, you know, uh, the right strategy. We need to have more details of the results to be able to really understand why we have not been selected. But definitely the balance of plant is quite expensive in New York when you compare to other jurisdictions. My comment on smaller project There are some fixed costs, typically grid connection costs, even if it's in low voltage, which is also, there is no economies of scale on this. So there are some small points, but we need more analysis to answer definitely your question, Mark.

Okay. And then with the new tariffs announced from the Biden administration this week, solar panels from China, how does that impact in terms of how you're thinking about sourcing solar panels?

equipment in the U.S.? That's potentially one answer to your first question, that we have looked to be protected from this type of risk in our last bid. So we have anticipated that such action was forthcoming from the U.S. government, and we have identified domestic production, but it's definitely not the cost of Chinese, so I don't know. I think our team is up to date on this, and this is also something that may be an uncertainty on the NYSERDA previews bit.

Understood. Last question for me, just updated outlook for M&A. Any updated view in terms of geographies, asset types, or even size of deals where you're finding maybe a sweet spot to be able to optionistically buy assets? And is the focus sort of on combination of operating development pipelines, operating, or more on a development side?

Hi, Mark. The ideal target would certainly be a mix of operating assets, which we can improve on with our experience. good pipeline of projects. Currently, we see those pipelines as a more attractive valuation and some team and expertise, especially where we're developing a bit more either, for example, US, UK. We have less people on the ground compared to Canada and France. So that would be the ideal target. The M&A market, in our view, is interesting. There's probably more sellers than buyers at the moment, which means that potentially attractive valuations, and we keep a close eye on the market. Having said that, we do not need to make an acquisition if it's not strategic and if it's not at a right return. So we'll just... continue to look for the right target.

Have you made any binding offers on any portfolios and missed out?

We're not going to disclose our non-events or non-announced. Thank you.

I guess my question would be, do you have a sense of where clearing prices are today on processes in terms of where you think return hurdles are right now to get a successful bid?

We certainly continue to talk to people in our core markets and so we have a good idea on the market pulse.

And is that at a level that's comparable to organic returns or slightly lower given maybe there's less risk on development and you're buying some operating cash flowing assets?

We continue to believe that organic development offers a premium. It's essentially a risk premium, and we're good at taking those kinds of risks. So we continue to favor in general our organic development and allocate more dollars towards that. And we see a lot of opportunities on the organic side.

Sounds good. Thanks for the time this morning.

Thanks, Mark.

Thank you. We are now going to take our next question. And the questions come from the line of Robert Hope from Scotiabank. Please ask your question. Your line is opened.

Good morning, everyone. I want to go back to the battery conversation. I guess more broadly, how do you think about Borlex's competitive advantage or key point of differentiation in standalone storage assets similar to what you just did in Ontario?

Yeah, thank you, Robert. The first point is... We start redeveloping in Ontario before all others, and we started probably two years before to analyze where the system will need something. And when I say something, we discuss about is it battery storage, is it a hybrid site, or is it production? And so we identified our battery storage portfolio before the others, make the partnership with the First Nations, make the partnership with the municipality. And so that's one thing. And that's important because there is some non-price point in these RFPs. The second point is I think we have worked also a lot on the modelization of the revenue of the 30% which are not covered by the contract of the 22-year contract with the ISO. And I think this is a second one. We have analyzed a project in Ontario which is well known before and so we have gone into all the models before the RFP. And I think last but not least, the way we are doing our partnership with First Nations is something which gives us a real advantage on the Ontario project.

All right, thanks for that. And then maybe just taking a look at the development pipeline, as it seems like overall demand is kind of pivoting upwards across many jurisdictions. Where do you think you need to add some development projects and can you just walk us through just the amount of projects that you could be adding to the development pipeline?

I think essentially starting in Canada, since we have been very successful in Quebec and in Ontario, we are working hard to have new projects for the next RFP. There will be, but when you're successful, by definition, you empty a little bit your funnel of projects. So we are working on this, and I'm confident. Potentially, there will be other places in Canada, but I will not go further today, but where we're thinking that the condition could be of interest. In Europe specifically, we are pushing hard in the UK. We just promote a person, Julie Cusson, who was on my executive team to supervise and lead the UK development operation, all the UK team to accelerate there. It's a large market. There is a lot of need of electricity. the the nuclear fleet in the uk the old agr nuclear fleet gas cooled reactor will be closed in probably 2027 and and the new uh reactor will be there just in 2030 2032 so there is lots of room for new production uh and uh and uh and finally uh you know france i'm not we would not invest more than what we're investing today. We have a good pipeline. We're there since 20 years. And finally, in the UK, we will continue, say, our disciplined approach, analyze NYSERDA RFP proposal for the next round, and see how much we have to invest in the US for the next year. Thank you. I'll hop back in the queue.

Thank you.

Thank you. We are now going to proceed with our next question. The questions come from the line of Rupert Merrill from NBS. Please ask your question.

Hi. Good morning, everyone. So we've seen results of RFP processes in Ontario, Quebec, and New York. You've had Some projects are being accepted in Quebec and Ontario, and of course some that have not in Ontario and New York. Just wondering if you can comment on your return targets in those markets, if they are at about the same level, and if you will adjust your return targets at all in the future based on results that you've seen.

Yeah, we keep monitoring that, Rupert.

Clearly, we consider overall the potential returns we can see in our different markets. Looking at Ontario, we've been successful on what we wanted, and it's normal that we'll win our fair share of projects, but we've been able to continue to do that, which means that our return expectations are generally competitive and at the same time very much reflects our disciplined approach. So they'll be 10% plus and in certain cases they'll be even more than 12%. So we're comfortable with the returns in Ontario and Quebec. We continue to be comfortable with the returns we see in Europe. And as Patrick mentioned, the New York projects were not successful, and we're analyzing that. It's fairly recent. We're analyzing that with the team to see what all the RFP winners made those kinds of returns. At the end of the day, we want to make sure that we offer competitive projects which we can build, and it's important for us.

So looking at your... Sorry, go ahead.

No, no, no. But generally speaking, the demand is stronger than ever in our business. And so we can be more selective and disciplined. And so we have, as Bruno said in between, is that we have a ladder of expected return when we are able to bid

many projects at the same time so they are we are working hard to be ready to have projects for the next bit because we have been so successful great and so based on the information you have with bids into those markets it it seems like the canadian market is a little less competitive than the us market today are are you seeing that in in your returns are you able to get better returns here? Is there less competition in Canada? And does that inform your future strategy or where you want to allocate capital?

Yeah, we, it's our view today.

Uh, I think, uh, Normally, in the textbook, what it said is when a market is less competitive, it doesn't last forever. So we need to remain really good in development. But yes, today, the Canadian market is a little bit less competitive because it's complex to make partnership with municipality, First Nations countries. And definitely the U.S. market attracted more international investors in the past. So I think the volume of the U.S. market attracted more people. But I don't think it will last forever. So we need to continue to be very good. And I'm very confident in the capacity of our team to do this.

Great. Thank you. I'll leave it there. Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Nicola Boychuk from Comac Securities. Please answer your question.

Thanks. Good morning, everyone. Coming back to the battery energy storage angle, Patrick, I think you mentioned that the batteries for the initial projects are going to be secured by Tesla. Can you comment on the depth of the supply chain that you're seeing? Is Tesla now identified as the primary opportunity that you would want to deal with? Or if you were to put say, a bid out to buy more batteries, this would be a very competitive market with potentially costs declining a lot over the coming years.

Our experience on the RFP of procurement was that there was lots of interest for our project because there are significant in terms of power, the size, and also in terms of hours. It's four hours, not two hours, so it's double the size of the number of batteries. So we had a quite, say, customer-oriented RFP, and we have been able to negotiate. So I think, again, I don't I have no clue for the future exactly, but my understanding is that in the recent time, the battery supply chain is strong, specifically in North America. We don't have the same issue that we can have on solar panels in the US, so that's good news. And commercially, it was not easy, but it was... a very correct negotiation.

Okay. And if you're thinking of the duration there, you mentioned four hours, is there a key tipping point where you would maybe start to explore other alternatives, other types of technologies other than lithium?

The four hours in that case is part of the rules of the RFP. So it really depends on the need of the electricity system. In Ontario, that was four hours. It will depend on the RFP rules. And we will not go on the other side. Boralex will not develop a battery project where it's not significantly contracted like we have in Ontario. I think the Ontario business is a very good one. We have our fair share of it and we are very prudent on the business model on which we finance our battery storage project.

And that perfectly leads to the next question about the similarities or differences between the battery energy storage markets that you're seeing elsewhere. I think in Europe and France, you've got some battery energy storage projects in the early and mid-stage. Can you comment on the similarities and the differences between the Ontario versus, say, French or any other European market?

Yeah, but, you know, without going into all the technical details, but the The European system is synchronized from south of Portugal to the east of Poland. So it makes the system more reliable and there is less demand because there is more interconnection in a bigger system than when you look to, say, Ontario or Quebec or the UK. So you can have... local demand like we have in in brittany or like can happen in northern uk or southern uk because you know you have a smaller system and you have to transport the electricity so it's really a question which is very very technical to analyze where you want to connect and typically the two small project we have in france have been financed through completely different way we are supporting the frequency regulation of the grid. On one side, we bought it at a very cheap price because it was an R&D project, and we bought it at the end of the program for, I think, 1 20th of the initial price. It was very early. It was almost 10 years ago that we did this. And in Brittany, we have been supported because we have the system on voltage regulation on top of frequency regulation. So it's a completely different system. So it's very important to analyze this. And typically, we're analyzing to put battery storage on a project in Texas, but it's completely different. And we're just analyzing the things because the model is less... how to say, predictable, the business model is less predictable than the Ontario one. Understood.

Thanks so much for the call, Patrick. Thank you.

Thank you. We are now going to proceed with our next question. The questions come from Rolando John Malt from TD Securities. Please ask your question.

Good morning. Thanks. Bruno, maybe just starting with, you know, the equity needs of the company. Can you maybe just speak to, you know, how far out you're looking at this point before you may need external equity, just given that you don't have now, you know, having not won in the NYSERDA RFPs, you don't have what might have been an accelerated, you know, U.S. solar build. I think you've been talking about those projects potentially being online in, you know, certainly early 2026. So, you know, can you give us a sense of where that stands at this point?

Yeah, thank you. Clearly, we're well positioned from a balance sheet perspective and from a financing perspective. We're looking at this at the moment. We're certainly looking 18 months ahead without a need to issue equity. We continue to look at potentially continuing to do recycling of capital, recycling of assets. sell-down in either non-strategic or just sell-down of minorities to financial partners. So we have different options. The market for project finance is quite strong. We're advancing very well on the financing of our Limekin project and battery storage. So overall, if I look 18 months down the road, we're very well financed. And if I look even beyond that, as I said, with the other opportunities we have in the portfolio, we can continue to finance. It will really depend on the next RFPs. As you know, we have many RFPs coming in our different markets. So it will really depend if we continue like that. But certainly, and the ITC, which is touch wood, the ITC should be finalized at the Canadian federal level before the end of May or early June. So with all of these different optionalities for financing, we're comfortable.

on the equity side.

Okay. That's a, that's great context. And maybe just, you know, following up on your, your comments on capital recycling, just given that, that, you know, that equity need horizon, you know, seems to have been at least consistent, if not kind of pushed out a little bit, you know, does that reduce the, the focus on capital recycling or the need for it? Or are you really looking at that also in an opportunistic basis? And if you see the right transaction coming along, you might move ahead with one, even though your equity needs aren't immediate.

It's both opportunistic and the lowest cost to finance. So we'll look at our different opportunities, whether it be asset recycling, whether it be Corporate debt, whether it be project finance, we always look to measures and we're looking and we're actually active on a few refinancings. So we're always looking to find ways to finance within our portfolio first, if it makes sense, again, from a timing perspective, as I think you're alluding to, just making sure it's the right time. So having options, which we do, is great. Having options on the financing side is great. We have those options because we look ahead and try to plan for our future needs. We do factor in a few projects that we expect to win, which at the moment is generally quite good.

Thanks for all that color. And then maybe just one on U.S. growth. Patrick, more broadly, you just mentioned that you were in the early stages of analyzing batteries in ERCOT. Beyond your New York efforts, could you maybe give us a sense of right now where you're seeing the best opportunities to spend development dollars in the U.S. and what might be the next market or areas of the country that are the most interesting markets for Borlex right now?

But yeah, essentially we are looking to the optimization of our assets in Texas and New Mexico. There are lots of demand for, there is new demand coming there. It could go from the buzzword of AI and data center, but also ethanol or other things, which are coming from low electricity costs. price. We have assets. We need to optimize them. We can repower them. So we're working around this. And so that's the first things outside of New York. And we have also look, as I mentioned previously, to other to other states, Pennsylvania and Illinois. But on the other side, there is so much interesting business to do in Canada, in Quebec and Ontario. then we are looking to allocate our development resource, cost, cash and people to today's jurisdiction more than we expect two years ago. So that's where we are today with the US. And definitely if we have, as Bruno mentioned, an opportunity on M&A, which is interesting because it brings organic teams development that we are looking to that precisely in the US too.

Okay. Those are my questions. Thank you very much. Thank you. Thank you.

As a reminder, to ask a question, please press star one and one on your telephone and wait for your name to be announced. Once again, it's star one and one on your telephone, and wait for your name to be announced if you have any questions or comments. We are now going to proceed with our next question. The questions come from the line of Ben Pham from BMO. Please ask your question.

Hi, thanks for the morning. Thanks for the update. Maybe just to start off, could you share your overall thoughts on the data center opportunity? I know you mentioned New Mexico. Talk about maybe your positioning, your assets outside of New Mexico for that. And can you also remind us what assets are uncontracted either today or coming off contract in the next few years?

Yeah, essentially when I look to our asset base, we have indeed one asset in New Mexico and one asset in Texas, in ERCOT, where we have this possibility. There is not only data center, there is other demand indeed. And when I look to assets which are also available for the future, brownfield assets in France, we have more demand from, say, traditional industry like materials, commodities, supermarket, IT, telecom, then data center in France presently because there is this switch of the the high-intensive energy demand to make it green, which is also a big driver of the demand. And when, you know, even in, for example, in Quebec, there is also lots of energy-intensive, like steel production, aluminium production, and there are more drivers of the demand for the long term, which is, I think, good also. And it's not just the data center and AI. I think Texas, for us, since we have this footprint, it's a place where there could be opportunity. And if we learn on this opportunity, then it can be bigger for the future. But I want to be sure that it's not just attendance and that is just something which will you know last for long-term like like all other big industry and then your your French uncontracted that that's mostly a 350 megawatts yeah it's essentially because when we if you remember we took the decision in 2020 to to early terminate contract, which normally naturally would end up to 2026. So there was contract with an end and an end in all in between. So, and we recontract up to 2026, this, this, this, these assets. So we have roughly the S 350 megawatt that will be available from 2026 and after. to sell the electricity. And we're discussing with many corporations because there is a lot of demand and there is not so much assets on the market available. And also teams skilled like ours to be able to make the right contract for the IPP and the customer.

Okay, got it. And maybe just to continue on that thought and In Quebec, last month, IBM announced a chip plant, and I know you have some relationships with IBM. I'm just wondering, with something like that, just from a market share perspective, is that something more someone like a power company could take advantage of? Is it always maybe more towards a utility like Hydro-Quebec?

Today, by law, it's not permitted in Quebec to do direct agreement. So yes, IBM is one of our customers in France and there could be interest elsewhere in the world. We have that with other customers already. My understanding is that there could be change in the law because there is a new law that will come into force probably by the end of the year. It's not yet clear. how much it will be allowed to do a direct agreement with customers. What is clear is that Quebec economy globally will need more power and maybe a way to finance them directly through private investors is to have this kind of direct agreement. So definitely, if we are able to supply power to IBM in Quebec, thanks to our relation in France, we would go for that and vice versa.

Okay, good. And maybe the last one is on your guidance and you have the 2025, how are you thinking about the timing of perhaps refreshing that or even extending the timeframe?

Essentially, what we are doing is we are already working, you know, because environment has changed a lot from 2021. Lots more opportunity, different situation of the supply chain, different situation with RFPs and jurisdiction in 2021. Typically, Canada was almost not on the map for development. So we are working on this. I don't know yet when we will come to the market because we have to work on this and refine and improve where we want to go. But we are already working on this.

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

We have no further questions at this time. I will now hand back to you for closing remarks. Thank you.

All right, so thank you, everyone, for your attention. If you have additional questions, please call me at 514-213-1045. I'll make sure we quickly answer your questions. So our next call to announce third quarter results will be on Wednesday, August 14th. at 11 a.m have a nice day everyone a great summer with exciting vacation and parish noir thank you this concludes today's conference call thank you all for participating you may now disconnect your line thank you Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Bonjour Mesdames et Messieurs et bienvenue à la conférence téléphonique portant sur les résultats financiers du premier trimestre 2024 de Boralex. Veuillez noter que toutes les lignes sont en mode d'écoute seulement. 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 étoiles 1 et 1 sur leur téléphone. Veuillez également noter que cette conférence est enregistrée. Pour les participants à la webdiffusion, vous pouvez également poser des questions au cours de cette conférence, mais celles-ci obtiendront réponse par courriel après l'appel. Enfin, les représentants des médias qui ont des questions sont invités à contacter directement Camille L'Aventure, conseillère affaires publiques et communications externes, aux coordonnées indiquées à la fin du communiqué trimestriel. J'aimerais maintenant passer la parole à Stéphane Milot, vice-président relations avec les investisseurs de Boralex. Good morning, ladies and gentlemen, and welcome to Boralec's first quarter of 2024 financial results conference call. 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 by pressing star 1 and 1 on the telephone. Also note that this call is being recorded. For webcast participants, you can also ask questions during this conference, but they will be answered by email after the call. Finally, media representatives are invited to contact Camille L'Aventure, Advisor, Public Affairs and External Communications. Her contact information is provided at the end of the quarterly press release. And I would like to turn the conference over to Stéphane Millot, Vice President, Investor Relations for Boralex. Please go ahead.

Well, thank you, operator, and good morning, everyone. So, welcome to Borrellec's first quarter results conference call. Joining me today on the call, Patrick Dacoste, President and Chief Executive Officer, Bruno Guilmette, Executive Vice President and Chief Financial Officer, and other members of our management and finance teams. So, Mr. Dacoste will begin with comments about market conditions and the highlights of the quarter. Afterwards, Mr. Guilmette will carry on with financial 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. When talking about the future, there are a variety of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. These documents are all available for consultation at cdarplus.ca. In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis. When talking about the results, we generally refer to combined numbers, and when referring to cash flow and balance sheet, we generally refer to consolidated numbers. So please note that combined is a non-GAAP financial measure and does not have standardized meaning under IFRS. Accordingly, combined may not be comparable to similarly named measures used by other companies. For more details, see the non-IFRS and other financial measures section in the MD&A. So the press release, the MD&A, the consolidated financial statements, and a copy of today's presentations are all posted on the Boralex website at boralex.com under the investor section. If you wish to receive a copy of this document, please contact me directly. So Mr. Dacos will now start with his comments. Please go ahead, Patrick.

Thank you, Stéphane, and good morning, everyone. It's a pleasure for me to present our results and achievements for the first quarter. Boralex had a good start to the year, delivering strong growth overall while continuing the disciplined development of our project. Combined EBITDA for the first quarter was 218 million, up 28 million or 14% over the same quarter last year. We benefited from strong production of wind farms and hydroelectric assets in North America, the commissioning of new assets in France, and our strategy to optimize electricity selling prices in France. Net earnings was 73 million, up 62% compared to the first quarter of 2023. And the AFFO under IFRS was 78 million up 16 percent we continue to strengthen our balance sheet with 575 million in available cash resources and authorized financing providing significant flexibility to fund our future growth on the development side our teams continued to make significant progress in our growth and diversification strategy. Our main project under construction and ready to build progress according to the plan. With our wind project operating in Quebec and Lime King in Scotland, expected to start operating at the end of 2024, as well as our first two battery storage projects in Ontario, Eggersville and Tilbury, expected to be commissioned in 2025. Finally, 239 megawatts of projects were added to our pipeline in the quarter, now representing over 6.7 gigawatts of capacity. Regarding market conditions, I would say the demand for renewable energy remains high, in all our core markets with strong commitments from the government to reduce their carbon footprints and strong demand from corporation too in canada the government has scheduled the adoption of the itc for june 2024 this will have a very positive impact on our project in quebec and in ontario i'm also very pleased to highlight Our most recent win announced last week of 125 megawatts storage project in Ontario. In a very short period of time, we became the leader of this technology in Ontario and in Canada as well. We're very proud of our team and there is more to come. After our success in the recent RFPs, our teams are already preparing responses to upcoming tender in Quebec and in Ontario. In the United States, NYSERDA announced the conclusion of the expedited RFP but did not publish the list of companies selected. The projects that won are expected to be disclosed as contract or signed. NYSERDA, however, indicated to Boralex that the project it had submitted totaling 240 MW were not selected. Next solicitation is expected to be launched in May 2024. Boralex will review the request for information document and will establish its strategy for this request for proposals. In Europe, our team are also working on the upcoming RFPs in France and in the UK. I will now rapidly cover the main variances in our portfolio of projects and growth paths. The change in the pipeline was mainly due to the addition of solar and storage projects in North America in the early stage, the addition of solar and wind projects in Europe in the early stage, and the transition from the early stage to the advanced stage of storage project totaling 525 megawatts in North America. In total, our pipeline in early, mid and advanced stages project now comprises project totaling 5.8 gigawatts of wind, solar and storage projects. There were not a lot of change in our growth path during the first quarter, except the commissioning of a 21 megawatt wind project in France. I won't go in detail through the progress made in our growth and diversification strategic direction, as I have already talked about the major highlights. on the customer strategic direction we continue to have advanced discussion with different corporations in france as the demand for renewable energy contracted at attractive price remains high this complete my part i will 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. As mentioned earlier by Patrick, our balance sheet is solid with $575 million in available cash resources and authorized financing. Total debt remains stable in the first quarter of 2024 with project debt representing 85% of the total. We continue to make good progress on the EBITDA and EFFO front. The reinvestment ratio is in line with our target. Lastly, on our corporate objectives, we continue to make good progress on our CSR strategy as presented on slide 17. We are also preparing for CSRD and ISSB regulations and have just started our double materiality analysis. For more detailed information, including data on CO2 emissions and work done in relation to climate change and the TCFD initiative, I invite you to read our fourth CSR report, which was published in February. I will now cover the financial results for the first quarter, starting with production. Overall, total wind production for the quarter combining Canada, the U.S., and France was 4% higher than last year, but 2% lower than anticipated. Total production for the hydro sector was 9% higher than last year and 27% higher than anticipated. Both markets, Canada and US, had favorable weather conditions. Finally, production from solar assets was 19% lower than the same quarter last year, 22% lower than anticipated. mainly due to curtailment at the Five Points solar farm in California. In summary, total production for the quarter was 3% higher than last year, but 1% lower than anticipated. The quarter combined revenues were down 11% compared to last year, mostly due to lower merchant prices in France. EBITDA increased by 14% in the first quarter and operating income increased by 31%. As mentioned by Patrick, the growth came from higher production in North America, new assets commissioned in France, and the positive effect of our commercialization strategy in France. On this last point, please note that the major contributor was the price effect of newly commissioned assets, Moulin du Loin, which benefited from higher selling price in the first quarter of this year compared to the first quarter of last year, thanks to our commercialization strategy. To a lesser extent, assets impacted by the French price gap had a small positive contribution to EBITDA. On a consolidated basis, EFFO was 78 million compared to 66 million in the same quarter last year. Our financial position remains very solid with a net debt to total market capital ratio of 44%. In conclusion, it's a good first quarter for 2024 as we continue the disciplined execution of our strategic plan. We increased combined EBITDA, net earnings, and EFFO compared to 2023. We maintain a solid financial position with $575 million in available cash resources and authorized financing to support our growth. And finally, we made good progress along our four strategic orientations. Thank you for your attention. We are now ready to take your questions.

Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone to ask a question. And to withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A roster. This will take a few moments.

Thank you.

Operator?

We are now going to proceed with our first question.

And the questions come from the line of Nelson Ning from RBC Capital Markets. Please ask your question.

Great, thanks, and good morning, everyone. First question relates to New York. Just a quick question. Was the NYSERDA expedited bid where you submitted 240 megawatts, was that purely based on price?

Yeah, the answer is yes. It was there was there was a sorry. Good morning, Nelson. First, the answer is yes. And we don't know exactly what was the last accepted, say, price by NYSERDA. And we will know that when it would be when it would be, you know, published. And as I mentioned in my speech, we're waiting to see what will be the rules for the next tender and to decide our strategy of bid for this one.

Okay. So I guess regardless of the strategy, does it imply that you would need a lower price in the next round? And then I guess the other question is, Historically, has RFPs had a big non-financial component to make the bids more competitive?

What we will do is we will remain disciplined in the way we will bid. I am obviously disappointed not being selected, but I'm not disappointed to have respected our our limit of return, an acceptable return for Boralex. And we have many opportunities in our targeted geographies, Quebec, Ontario, France, the UK, and NYSERDA, obviously. But if NYSERDA, if the price in New York remains lower than the one we think we should get to have an acceptable return, We will review our strategy. What I think, too, is on the different projects we did last time, there was one, say, large project of 140 megawatt, but there was also some smaller project of 20 megawatt. I have more questions of the 20 megawatt project than on the other one. But definitely we will see what will be the competition for the next state. And NYSERDA has reconfirmed their objective of 70% of renewable energy in 2030. So they need to have project online for this time. And our project are able to do it. There is also lots of... They are ready to build. And... And there are also lots of difficulty on the offshore side. So they have not a lot of alternative to catch their 70% in 2030.

I see. That's great color. And then just shifting to Ontario, so you have two projects that are, or two battery storage projects that are due to be commissioned next year, and a third one in, I think, 27 or 28. Can you just provide a bit of an update on your battery procurement strategy and also are you kind of factoring in any economies of scale for whether it's construction or operations of the facilities?

Yeah, essentially on Eggersville and Tilbury, we have secured all the procurement, meaning batteries and balance of plant. Batteries have been contracted with Tesla. So we are going for, I would say, number one technologically and number one in knowledge of the Ontario system and rules. So there is no risk on this side. Balance of plant has been contracted too at price which are totally in line with our budget. so so that's why i'm confident we will we will reach the the expected return on this project when they will be connected next year yes there will certainly be economies of scale with uh with oxford since oxford is not far away from ayersville is the same first nation partner is the same area for operation and it's in the area of niagara peninsula where we already operate a large wind farm as you know of 230 megawatt so yes there is more to come and we are preparing for the LT2 to continue on Ontario for the LT2 procurement the next RFP that will come for production for different production and say hybrid projects.

Okay and just one last question you mentioned that it's everything's kind of on budget can you provide a bit more color on like the rough project costs for the two battery storage projects?

It's pretty much in line with what we've said in the past, Nelson.

So, if I recall, we were... It's looking at... For the two Ontario projects, we're about $800 million.

Exactly.

Yeah.

Great.

Thank you very much. I'll get back to you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Mark Jarvie from CIBC. Please ask your question.

Good morning, everyone. Coming back to the bids in New York, was there anything in terms of supply chain costs, tax equity assumptions that made you bid more conservatively and will impact sort of how you bid in the next potential RFPs?

No.

I'm not sure that we have taken two, say, conservative assumptions. When I'm looking to, you know, accepted price by Narserda last year in offshore, which are public, last year in solar, which are also public, I think we have, you know... the right strategy. We need to have more details of the results to be able to really understand why we have not been selected. But definitely the balance of plant is quite expensive in New York when you compare to other jurisdictions. My comment on smaller project There are some fixed costs, typically grid connection costs, even if it's in low voltage, which is also, there is no economies of scale on this. So there are some small points, but we need more analysis to answer definitely your question, Mark.

Okay. And then with the new tariffs announced from the Biden administration this week, solar panels from China, how does that impact in terms of how you're thinking about sourcing solar panels?

equipment in the U.S.? That's potentially one answer to your first question, that we have looked to be protected from this type of risk in our last bid. So we have anticipated that such action was forthcoming from the U.S. government, and we have identified domestic production but it's definitely not the cost of Chinese so I don't know I think we are we are you know our team is is up to date on this and this is also something that may be an uncertainty on the on the nicer that previous bit understood last question for me just updated outlook for M&A

Any updated view in terms of geographies, asset types, or even size of deals where you're finding maybe a sweet spot to be able to optionistically buy assets? And is the focus sort of on combination of operating development pipelines, operating, or more on a development side?

Hi, Mark. The ideal target would certainly be a mix of operating assets, which we can improve on with our experience. good pipeline of projects. Currently, we see those pipelines as a more attractive valuation and some team and expertise, especially where we're developing a bit more either, for example, US, UK. We have less people on the ground compared to Canada and France. So that would be the ideal target. The M&A market, in our view, is interesting. There's probably more sellers than buyers at the moment, which means that potentially attractive valuations and we keep a close eye on the market. Having said that, we do not need to make an acquisition if it's not strategic and if it's not at a right return. So we'll just continue to look for the right target.

Have you made any binding offers on any portfolios and missed out?

We're not going to disclose our non-events or non-announced. Thank you.

I guess my question would be, do you have a sense of where clearing prices are today on processes in terms of where you think return hurdles are right now to get a successful bid?

We certainly continue to talk to people in our core markets and so we have a good idea on the market pulse.

And is that at a level that's comparable to organic returns or slightly lower given maybe there's less risk on development and you're buying some operating cash flowing assets?

We continue to believe that organic development offers a premium. It's a essentially a risk premium and we're good at taking those kinds of risks. So we continue to favor in general our organic development and allocate more dollars towards that. And we see a lot of opportunities on the organic side.

Sounds good. Thanks for the time this morning.

Thanks, Mark.

Thank you. We are now going to take our next question. And the questions come from the line of Robert Hope from Scotiabank. Please ask your question. Your line is opened.

Good morning, everyone. I want to go back to the battery conversation. I guess more broadly, how do you think about Borlex's competitive advantage or key point of differentiation in standalone storage assets similar to what you just did in Ontario?

Yeah, thank you, Robert. The first point is... We start redeveloping in Ontario before all others, and we started probably two years before to analyze where the system will need something. And when I say something, we discuss about is it battery storage, is it a hybrid site, or is it production? And so we identified our battery storage portfolio before the others, make the partnership with the First Nations, make the partnership with the municipality. And so that's one thing. And that's important because there is some non-price points in these RFPs. The second point is I think we have worked also a lot on the modernization of the revenue of the 30% which are not covered by the contract of the 22-year contract with the ISO. And I think this is a second one. We have analyzed a project in Ontario which is well known before and so we have gone into all the models before the RFP. And I think last but not least, the way we are doing our partnership with First Nations is something which gives us a real advantage on the Ontario project.

All right, thanks for that. And then maybe just taking a look at the development pipeline, as it seems like overall demand is kind of pivoting upwards across many jurisdictions. Where do you think you need to add some development projects? Can you just walk us through the amount of projects that you could be adding to the development pipeline?

I think, essentially, starting in Canada, since we have been very successful in Quebec and in Ontario, we are working hard to have new projects for the next RFP. There will be, but when you're successful, by definition, you empty a little bit your funnel of projects. So we are working on this, and I'm confident. Potentially, there will be other places in Canada, but I will not go further today, but where we're thinking that the condition could be of interest. In Europe specifically, we are pushing hard in the UK. We just promote a person, Julie Cusson, who was on my executive team to supervise and lead the UK development operation, all the UK team to accelerate there. It's a large market. There is a lot of need of electricity. The nuclear fleet in the UK, the old AGR, nuclear fleet gas-cooled reactor, will be closed in probably 2027, and the new reactor will be there just in 2030, 2032. So there is lots of room for new production. And finally, you know, France, I'm not, we would not, invest more than what we're investing today. We have a good pipeline. We're there since 20 years. And finally, in the UK, we will continue, say, our disciplined approach, analyze NYSERDA RFP proposal for the next round, and see how much we have to invest in the US for the next year. Thank you. I'll hop back in the queue.

Thank you.

Thank you. We are now going to proceed with our next question. The questions come from the line of Rupert Merrill from NBS. Please ask your question.

Hi. Good morning, everyone. So we've seen results of RFP processes in Ontario, Quebec, and New York. Some projects have been accepted in Quebec and Ontario, and of course some that have not in Ontario and New York. Just wondering if you can comment on your return targets in those markets, if they are at about the same level, and if you will adjust your return targets at all in the future based on results that you've seen.

Yeah, we keep monitoring that, Rupert.

Clearly, we consider overall the potential returns we can see in our different markets. Looking at Ontario, we've been successful on what we wanted, and it's normal that we'll win our fair share of projects, but we've been able to continue to do that, which means that our return expectations are generally competitive and at the same time very much reflects our disciplined approach. So they'll be 10% plus and in certain cases they'll be even more than 12%. So we're comfortable with the returns in Ontario and Quebec. We continue to be comfortable with the returns we see in Europe. And as Patrick mentioned, the New York projects were not successful, and we're analyzing that. It's fairly recent. We're analyzing that with the team to see what all the RFP winners made those kinds of returns. At the end of the day, we want to make sure that we offer competitive projects which we can build, and it's important for us.

So looking at your... Sorry, go ahead.

No, no, no. But generally speaking, the demand is stronger than ever in our business. And so we can be more selective and disciplined. And so we have, as Bruno said in between, is that we have a ladder of expected return when we are able to bid

many projects at the same time so they are we are working hard to be ready to have projects for the next bit because we have been so successful great and so based on the information you have with bids into those markets it it seems like the canadian market is a little less competitive than the us market today are are you seeing that in in your returns are you able to get better returns here? Is there less competition in Canada? Does that inform your future strategy of where you want to allocate capital?

It's how we're viewed today.

I think normally in the textbook what it said is when a market is less competitive it doesn't last forever so we need to be to remain uh really good and in development and but yes today the canadian market is a little bit less competitive because it's it's it's it's complex to make partnership with municipality first nations And definitely the U.S. market attracted more international investors in the past. So I think the volume of the U.S. market attracted more people. But I don't think it will last forever. So we need to continue to be very good. And I'm very confident in the capacity of our team to do this.

Great. Thank you. I'll leave it there. Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Nicola Boychuk from Comac Securities. Please answer your question.

Thanks. Good morning, everyone. Coming back to the battery energy storage angle, Patrick, I think you mentioned that the batteries for the initial projects are going to be secured by Tesla. Can you comment on the depth of the supply chain that you're seeing? Is Tesla now identified as the primary opportunity that you would want to deal with? Or if you were to put say a bid out to buy more batteries, this would be a very competitive market with potentially cost declining a lot over the coming years.

Our experience on the RFP of procurement was that there was lots of interest for our project because there are significant in terms of power, the size, and also in terms of hours. It's four hours, not two hours. So it's double the size of the number of batteries. So we had a quite, say, customer-oriented RFP, and we have been able to negotiate. So I think, again, I... I have no clue for the future exactly, but my understanding is that in the recent time, the battery supply chain is strong, specifically in North America. We don't have the same issue that we can have on solar panels in the US, so that's good news. And commercially, it was not easy, but it was... a very correct negotiation.

Okay. And if you're thinking of the duration there, you mentioned four hours, is there a key tipping point where you would maybe start to explore other alternatives, other types of technologies other than lithium?

The four hours in that case is part of the rules of the RFP. So it really depends on the need of the electricity system. In Ontario, that was four hours. It will depend on the RFP rules. And we will not go on the other side. Boralex will not develop a battery project where it's not significantly contracted like we have in Ontario. I think the Ontario... Business is a very good one. We have our fair share of it. And we are very prudent on the business model on which we finance our battery storage project.

Got it. And that perfectly leads to the next question about the similarities or differences between the battery energy storage markets that you're seeing elsewhere. I think in Europe and France, you've got some battery energy storage projects in the early and mid-stage markets. Can you comment on the similarities and the differences between the Ontario versus, say, French or any other European market?

Yeah, but without going into all the technical details, but the European system is synchronized from south of Portugal to the east of Poland, so it makes the system more reliable and there is less demand for because there is more interconnection in a bigger system than when you look to, say, Ontario or Quebec or the UK. So you can have local demand like we have in Brittany, or like can happen in Northern UK or Southern UK, because you have a smaller system and you have to transport the electricity. So it's really a question which is very, very technical to analyze where you want to connect. And typically the two small project we have in France have been financed through completely different way We are supporting the frequency Regulation of the grid on one side We bought it at a very cheap price because it was an R&D project and we we bought it at the end of the of the program For I think one 120th of the initial price. It was very early. It was almost 10 years ago that we did this. And in Brittany, we have been supported because we have the system on voltage regulation on top of frequency regulation. So it's a completely different system. So it's very important to analyze this. And typically, we're analyzing to put battery storage on a project in Texas, but it's completely different. And we're just analyzing the things because the model is less...

uh less uh how to say predictable uh the business model is less predictable than the ontario one understood thanks so much for the color patrick thank you thank you we are now going to proceed with our next question the questions come from the land of john mold from tv securities please ask your question

Good morning. Thanks. Bruno, maybe just starting with the equity needs of the company, can you maybe just speak to how far out you're looking at this point before you may need external equity, just given that you don't have now, having not won in the NYSERDA RFPs, you don't have what might have been an accelerated I think you've been talking about those projects potentially being online in certainly early 2026. So, can you give us a sense of where that stands at this point?

Yeah, thank you.

Clearly, we're well positioned from a balance sheet perspective and from a financing perspective. We're looking at this at the moment, we're certainly looking 18 months ahead without a need to issue equity. We continue to look at potentially continuing to do recycling of capital, recycling of assets, sell down in either non-strategic or just sell down of minorities to financial partners. So we have different options. The market for project finance is quite strong. We're advancing very well on the financing of our Limekin project and the battery storage. So overall, if I look at 18 months down the road, we're very well financed. And if I look even beyond that, as I said, with the other opportunities we have in the portfolio, we can continue to finance. It will really depend on the next RFPs. As you know, we have many RFPs coming in our different markets. So it will really depend if we continue like that. But certainly, and the ITC, which has touched a touch wood, the ITC should be finalized at the Canadian federal level before the end of May or early June. So with all of these different optionalities for financing, we're comfortable on the equity side.

Okay, that's great context. Maybe just following up on your comments on capital recycling, just given that that That equity need horizon seems to have been at least consistent, if not kind of pushed out a little bit. Does that reduce the focus on capital recycling or the need for it? Or are you really looking at that also in an opportunistic basis? And if you see the right transaction coming along, you might move ahead with one, even though your equity needs aren't immediate.

It's both opportunistic and the lowest cost to finance. So we'll look at our different opportunities, whether it be asset recycling, whether it be corporate debt, whether it be project finance. We always look to measures and we're actually active on a few refinancings. So we're We're always looking to find ways to finance within our portfolio first, if it makes sense, again, from a timing perspective, as I think you're alluding to, just making sure it's the right time. So having options, which we do, is great. Having options on the financing side is great. And we're not, I mean, we have those options because we look ahead and try to plan for our future needs. And we do factor in a few projects that we expect to win, which at the moment is generally quite good.

Thanks for all that color. And then maybe just one on U.S. growth. Patrick, more broadly, you just mentioned that you were in the early stages of analyzing Batteries in ERCOT, beyond your New York efforts, could you maybe give us a sense of right now where you're seeing the best opportunities to spend development dollars in the U.S. and what might be the next market or areas of the country that are the most interesting markets for Borlex right now?

Essentially, we are looking to The optimization of our assets in Texas and New Mexico. There is new demand coming there. It could go from the buzzword of AI and data center, but also ethanol or other things, which are coming from low electricity price. We have assets. We need to optimize them. We can repower them. So we're working around this. And so that's the first things outside of New York. And we have also, Luke, as I mentioned previously, two other states, Pennsylvania and Illinois. But on the other side, there is so much interesting business to do in Canada, in Quebec and Ontario, then we are looking to allocate our development resource cost, cash and people to today's jurisdiction more than we expect two years ago. So that's where we are today with the US. And definitely if we have, as Bruno mentioned, an opportunity on M&A, which is interesting because it brings

organic teams development that we will we are looking to that precisely in the US too okay those are my questions thank you very much thank you thank you as a reminder to ask a question please press star 1 and 1 on your telephone and wait for your name to be announced once again it's star 1 and 1 on your telephone and and wait for your name to be announced if you have any questions or comments. We are now going to proceed with our next question. The questions come from the line of Ben Pham from BMO. Please ask your question.

Hi. Thanks for the update. Maybe just to start off, could you share your overall thoughts on the data center opportunity? I know you mentioned New Mexico. Talk about maybe your positioning, your assets outside of New Mexico for that. And can you also remind us what assets are uncontracted either today or coming off contract in the next few years?

Yeah, essentially when I look to our asset base, we have indeed one asset in New Mexico and one asset in Texas, in Urquhart. where we have this possibility. There is not only data center, there is other demand indeed. And when I look to assets which are also available for the future, brownfield assets in France, we have more demand from, say, traditional industry firms like materials, commodities, supermarket, IT, telecom, than data center in France presently because there is this switch of the high intensive energy demand to make it green, which is also a big driver of the demand. And when, you know, Even in, for example, in Quebec, there is also a lot of energy intensive like steel production, aluminum production, and there are more drivers of the demand for the long term, which is, I think, good also. And it's not just the data center and AI. I think Texas, for us, since we have this footprint, it's a place where there could be opportunity. And if it brings, if we learn on this opportunity, then it can be bigger for the future. But I want to be sure that it's not just attendance and that it's just something which will, you know, last for the long-term, like all other big industry.

And then your French uncontracted, that's mostly at 350 megawatts?

Yeah, it's essentially because when we... If you remember, we took the decision in 2022 to early terminate contract, which normally naturally would end up to 2026. So there was contract with an end all in between. And we re-contract up to 2026 these assets. So we have roughly, yes, 350 megawatts that will be available from 2026 and after to sell the electricity. And we're discussing with many corporations because there is a lot of demand and there is not so much assets on the market available. And also teams... skilled like ours to be able to make the right contract for the IPP and the customer.

Okay, got it. And maybe just to continue on that thought, in Quebec, last month, IBM announced a chip plant, and I know you have some relationships with IBM. I'm just wondering, with something like that, is that just from a market share perspective, is that something more someone like a power company could take advantage of? Is it always maybe more towards a utility like Hydro-Québec?

Today, by law, it's not permitted in Quebec to do direct agreement. So yes, IBM is one of our customers in France and there could be interest elsewhere in the world. We have that with other customers already. My understanding is is that there could be change in the law because there is a new law that will come into force probably by the end of the year. It's not yet clear how much it will be allowed to do a direct agreement with customers. What is clear is that Quebec economy globally will need more power and maybe a way to finance them directly through private investors is to have this kind of direct agreement. So definitely if we are able to supply power to IBM in Quebec, thanks to our relation in France, we would go for that and vice versa.

Okay, good. And maybe the last one is on your guidance and You have the 2025. How are you thinking about the timing of perhaps refreshing that or even extending the timeframe?

Essentially, what we are doing is we are already working, you know, because environment has changed a lot from 2021. Lots more opportunity, different situation of the supply chain, different situation with RFPs and jurisdiction in 2021. Typically, Canada was almost not on the map for development. So we are working on this. I don't know yet when we will come to the market because we have to work on this and refine and improve where we want to go. But we are already working on this.

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

We have no further questions at this time. I will now hand back to you for closing remarks. Thank you.

All right, so thank you, everyone, for your attention. If you have additional questions, please call me at 514-213-1045. I'll make sure we quickly answer your questions. So our next call to announce third quarter results will be on Wednesday, August 14th. at 11 a.m have a nice day everyone a great summer with exciting vacation and parish noir thank you this concludes today's conference call thank you all for participating you may now disconnect your line thank you