Polaris Renewable Energy Inc.

Good day, ladies and gentlemen, and welcome to the Polaris Renewable Energy Incorporated's first quarter 2026 conference call. At this time, all participants are in a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Alba Sestedos, Chief Financial Officer with Polaris Renewable Energy. Mom, the floor is yours.

Thanks, Ali. Good morning, everyone. Thank you for joining us for our 2026 First Quarter Earnings Call for Polaris Renewable Energy, Inc. Before we begin, we would like to remind you that in addition to our press releases issued earlier today, you can find our financial statements and MD&A on both CEDAR Plus and our corporate website at polarisrei.com. Unless noted otherwise, all amounts referred to are denominated in U.S. dollars. We would also like to remind you that comments made during this call may include forward-looking statements within the meaning of applicable Canadian securities legislation regarding the future performance of Polaris Renewable Energy Inc. and its subsidiaries. These statements are current expectations and as such are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include the factors discussed in the company's annual information forum for the year ended December 31st, 2025. On today's call, I will walk through our operating and financial results for the first quarter of 2026. Mark will then provide additional commentary on our Q1 performance and growth initiatives. Following our remarks, we will look forward to taking your questions. Starting with production, overall, the first quarter of 2026 demonstrated the benefits of our diversified portfolio, despite temporary external factors affecting production during the quarter. While consolidated production decreased 5% year-over-year, due primarily to scheduled major maintenance in Nicaragua and elevated containment in the Dominican Republic, The broader portfolio continued to perform well, with a strong hydrology in Peru, a stable production in Ecuador and Panama, and a full quarter contribution from Puerto Rico, helping offset a portion of this impact. Importantly, these temporary factors did not materially affect the company's financial flexibility, liquidity position, or our ability to continue advancing strategic growth initiatives. In Nicaragua, Unit 3 underwent Plan B annual maintenance during February, which resulted in 17 days of downtime. Plan availability outside the maintenance period remains strong. In the Dominican Republic, curtailment averaged 42% during the quarter, compared to an average 7% curtailment in the same period last year, materially impacting realized generation. While curtailment has moderated quarter to quarter, in Q2, the timing of normalization remains uncertain. In Peru, hydroelectric production increased year-over-year due to improved hydrological conditions and resource availability. During March, Peru also experienced temporary energy shortages, which resulted in elevated spot market pricing and positive benefit canchaio following fulfillment of its annual PPA obligations. In addition, Puerto Rico contributed a full quarter of operating results during Q1 2026, compared to only one month of contribution following the acquisition in the comparative period last year. adding 12,698 MWh to the consolidated production during the quarter. In Ecuador and Panama, production remained generally consistent with the comparative period last year, reflecting stable hydrological and solar resource availability as well as continuous strong plant performance. Moving on to financials, from a financial perspective, revenue for the quarter was 19.8 million, down 3% from 20.3 million in Q1 2025. Adjusted EBITDA was 13.5 million compared to 15 million in the comparative period, reflecting the lower production levels and revenue discussed earlier and the cost impacting from integrating our Puerto Rican operations. Direct cost across the rest of the operations remain in line with 2025 levels. Cash flow from operating activities was 8.5 million, and we ended the quarter with 97.5 million of total cash, including restricted cash up from 93.2 million a year in 2025. Our balance sheet remains strong, and we continue to maintain financial flexibility and focus on execution and advancing the pipeline for long-term value creation. I would also like to highlight that we continue to prioritize shareholder returns. We have already announced that we will be paying a quarterly dividend on May 22nd of 15 cents per share to shareholders of record on May 13th. With that, I will turn the call over to Mark. Thank you.

Thanks, Alba. So just a few minor comments on operations. As Alba mentioned, we completed the major maintenance, planned maintenance at San Jacinto on a pure sort of days of downtime that would have cost about eight thousand megawatt hours. But given that we need to close a whole bunch of wells, Some of those take, when you reopen them, but they take a little bit longer to actually reach their pre-maintenance capacity levels. So when we look at the quarter, I would say, given that that process, not for all the wells, but for a couple of the wells, it ends up being that instead of sort of 8,000 negative megawatt hours per quarter, it's closer to 12 to 13,000. So I think the actual, call it maintenance cost in the quarter was about, let's say 12 and a half thousand megawatt hours approximately. And then the wells have definitely recovered to their pre-maintenance capacity levels. And they're at sort of levels that are as per our expectations going into the year. And the Dominican curtailment was somewhat higher than anticipated. We think it was about 7,000 megawatt hours estimate. This will be stronger in their winter months. It has come down in April and continues to come down here in May, so we expect that to continue. We are targeting an annual number of 40 to 45,000 megawatt hours for the year. Given that, continuing to improve next year and the following, given the plans to put large-scale SATA in place in the next 18 to 24 months in the country. So that was a negative, although it was somewhat offset by the hydros in both Peru and Ecuador, which performed really, really well in the quarter. So we're happy about that. Based on those comments, I would say, though, for full year consolidated production guidance, down slightly to about 760 to 770 gigawatt hours. In terms of the growth, on the last call I mentioned, we had signed an LOI on this very small solar project. It continues to move. Unfortunately, the vendor just wasn't legally ready to move the documentation phase. We've finished our technicals, diligence, so we're ready to go. But the ball is in their court, so we are confident it's moving forward. Not likely to close until Q3. The big one that we're all waiting for is the ASAP approval. PREPA board in Puerto Rico did approve the project on Feb 19th, which we've been waiting for for a long time. We are still awaiting approval from the FOMB, which is the last approval needed. Once they approve it, it does go back to PREPA for signature, but that's not an approval at that point. So this really is the last approval. I know this is taking longer than what everybody wants. We do not think that there is a problem with it. There is no issue. There are just some other things that are happening that are taking FOMB's attention right now. And so we are optimistic we will receive it prior to the end of this quarter. In Puerto Rico, we are also participating in an RFP that is where our final proposal is actually due this Monday. So that is an even larger project. It's solar plus best. The process is moving relatively quickly. We think it will move quicker than the ASAP process, given that it's the infrastructure, the P3 group that is driving this. Once we submit the final proposal on Monday, we will have notification as to whether we're, I think, call it being chosen in late June, so end of Q2, with contracting targeted for Q3. So that would be quite soon. And those would be the two main things that we're working on in Puerto Rico. We do have other conversations with developers going, but I would say our priority really is obviously ASAP, but also this RFP, if we're able to have success in that. And then in terms of the other main market we're focusing on right now is Mexico. We have approximately 300 to 400 megawatts of solar projects in a current, technically not a bid process, but let's call it that. It's a bid process that will be concluded very early, key three. So we are moving forward on that, which is a reasonable amount of megawatts for us. We also have approximately three to three fifty megawatts of projects that are going to be in a subsequent process that is going to be on the tail end of that, but not by much time. We think that can likely wrap up in Q3, sorry, at the end of Q3. So the first 3 to 400 will have line of sight beginning of Q3, the next 300 end of Q3, and then I would say in addition to these two processes, we have, and projects, we have another 200 megawatts of solar and a large storage-only project that we will be moving forward throughout the year, and with those, we would be aiming to achieve contracts early 2027. So nothing to announce yet, although I don't think it's that long before we will have some announcements from Mexico. So we have high expectations for news on that front in the near term. And I think with if we achieve ASAP in the short term here and Mexico, although it's taken longer than we want, I think you will see the path forward for the next two, three years will be much more defined and everyone will know where we're driving at, what the capital requirements are, what the uses of capital that we have on the balance sheet are, and sort of what the projected EBITDA numbers are going to be for the next three or four years. So with that, I'll open it up for questions.

Thank you. At this time we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question key and you may press star 2 if you wish to remove your question from the key. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Nick Boychuk with ATB Cormac. Your line is live.

Thanks, Mark. Good morning. In Puerto Rico, can we get a little bit of an update on the battery energy storage procurement process, specifically costs, construction, and just your thoughts on how that might then play out into some of these other battery energy storage opportunities?

Yeah, so we are in continual... conversations with the groups, or really two key ones, that were in the procurement process. Given the lithium prices, we do know that the costs are going to go up somewhat. I think it'll be in the, when you look at the total project cost though, I don't think it's going to be super material, so there will be some increase in the capex. I would say maybe five to $8 million. And so we were at sort of 60 to 65. So I think it's going to go up for sure. I'm not worried about timelines though. It's really, I think it's just a cost issue right now. I think timelines are still very good. So delivery within nine months kind of thing.

Okay. So we're still on track for call it an H2 full production in 2027 and ASAP. Yeah. Okay. Regarding the Dominican curtailment, you mentioned that storage could be added there. How much storage would that market need in order to address this issue? And are you getting any signs from them on how they want to address that? Is it going to be a similar program to ASAP or something a little bit different?

Yeah, I think it'll be a very similar program to ASAP. We've been in consultation with them for over a year now on it. I think it's just a It's very much a SATA-type contract where they're the ones doing the dispatch at specific nodes. I think we have discussed what they have, I would say, not published, but discussed is about 400 to 500 megawatts. I think that that's in the right range. I think 400 to 600 is the right number. And if you look at... If you take, let's just say 400 megawatts times four hours. So four hours is the right number too. So 1600 megawatt hours times that by maybe 150, 200. You know, you're talking about to call it resolve the issues on the island. It's sort of 200 to $300 million CapEx issue, which is not that big in the grand scheme of things. So they are, we're still waiting for the final, call it, bid process. And they held a meeting a month and a half ago. They kind of gave those guidelines as to what they're looking for and that they will come out with the final numbers shortly. So I think in the next month we'll know exactly whether it's 400, 500, 600, four hours, what the timelines they're looking for. But that will get announced, I think, very shortly. And then we'll know exactly what those numbers are and I do think we will look to participate in that because I do think that'll resolve the situation on the ground.

Okay, excellent, thanks.

But if you think if they come out, let's say they come out by the end of June or something at the latest, realistically, let's say that's a three-month process, right, to run it. I think you could have something in Q4 of next year, maybe it's Q1 of the following year. But so in terms of whether we're sort of really call it participating slash winning in that process, just vis-a-vis our current production, we would see retailment this year, less retailment next year, given just the overall demand growth. But then some reversion to normal the following year.

Okay, that makes sense. In Mexico, you mentioned there's those three different bid processes. I think the total is very close to about a gigawatt of solar plus a little bit of battery storage. I just want to confirm, those are all independent projects, right? In the first bucket, you mentioned 300 to 400. Nothing slips into the subsequent two processes. These are independent one gigawatt of opportunities to you? Yes, and it's

I should have maybe highlighted that, but it's an important point, which is that if the way that they're doing things there is they actually call them convocatorias, where people get invited. You have to be pre-cleared, get invited, and they're running them sequentially. If one of your projects doesn't move forward or you decide you don't want to continue moving it forward in, let's say, the first, the most current one, nothing prevents you from going into the next one. or the next one. So it's not as if they just then fall off forever. And given, call it, the need for power there, the demand pull, and the reserve margins are at sort of all-time lows there, their needs for procuring power are very high. So obviously we'd like a lot sooner than later, but I don't think that... you know, if you don't want our 100 megawatt project doesn't sort of go forward in the current one, that doesn't mean it falls off completely.

Okay, got it. Even though it's three processes, they're not going to be that far behind one another.

Does that have an indication for you? We're talking one quarter, you know, this one's called, all happening this quarter the next one's going to happen the next quarter and the next one's probably the following quarter so it should it should really roll out quite quickly okay if i guess on that timing and that speed does that have an implication or change in how you're thinking about financing a gigawatt of solar a little bit but i would say that um First, it's cash on the balance sheet, which we continue to build cash. Second, I think we are quite confident that we have more capital available on the fixed income side based on what we did a year and a half ago. I would also say, though, that for Mexico, there's for sure more project finance there if we wanted to tap that. These are good long-term contracts. There's a lot of banks that very willing to lend there. And I would also say that to the extent that you kind of use up those sources and you're saying, oh, well, do you need equity? We'd look to do that, but I would say if Polaris share price is anywhere near where it is today, we would more likely look to having a local equity partner for Mexico only. But there is a lot of, I would call it, equity capital, infrastructure capital in Mexico that I think is very interested in sort of partnering with the Canadian public company on these projects. So I think we've got several options. But it would, you know, even going to the equity side is because it's all happening quite quickly, right? And ours has been that this stuff hasn't been happening quick enough for us. So if it really does get to that, you know, it's cash first, more debt, because our total balance sheet is still very conservative, right? So then more debt, and then if it's happening so fast it requires equity, you know, we would look at several, we would have several options, in my opinion.

Okay, that's awesome. I appreciate the call, Aaron. Thanks, Nick.

Thank you. Our next question is coming from Baltaj Sudhu with National Bank of Canada. Your line is live.

Hey, good morning. Just a couple from me. So on the curtailment of the DR, that increased significantly here in Q1. Could you just share or elaborate some views on where that kicked out relative to your expectations for the year? And that revised guidance downward, is that stemming totally from the curtailment, updated curtailment projections? Or are there any other elements that we should be considering?

Yeah, that's all. That's only from curtailment. The plant technically, operationally is totally fine. We were expecting... high in January. It's very much an air-conditioned load, and it's winter, so believe it or not, if it's 27 degrees high there versus 33, it does make a big difference on the load. So we were expecting January to be high, February was lower, but then March was higher than everybody was expecting because They were running several tests for some, call it thermal units, that they needed to run for 30 days. So the renewables were curtailed at a higher level. It has dropped since then. So I think we're gonna be in the 10 to 12,000 a quarter for this quarter, next quarter, and then by December, it'll start to creep up again. So I think we're running sort of 30% to 40% curtailment this year, maybe 5%, 10% lower than that next year based on just overall load growth. And as I mentioned earlier, to the extent they go and contract with SATA, which I think they will, it should be much lower, call it in 2028, and normalizing thereafter.

Great. So if you get batteries online relatively at scale in 2028, it should revert back to normalized values. If not, be minimal, if anything.

Yeah, I would say if it hasn't, it should be in the 5% to 10% range.

Great. Awesome, and then for the PR or RP, could you just elaborate on how the economics on an IRR thesis looked there, and what could COD look like for targeting Q3, I think was what you had mentioned in the preparatory remarks?

I think the first one is sort of target IRRs. I would say, well, I mean, it is a competitive process, so I need to be somewhat guarded, but... Yeah, what I would say is most people, what I would say is I think competitive market there is call it unlevered of 12, you know, plus maybe a bit with levered of, you know, 17 and a half to 22 and a half. I think that's what we've seen and what we think most participants view the market as there. So, you know, the ASAP is going to be a bit higher, we think, because we already have an interconnect that, you know, that's a big reason why they wanted to do ASAP. But for new connections, it's more in the range I just said.

And then just given, you know, the organic development opportunities that we're seeing in your growth pipeline, if you were to Rank these on a priority basis or no ranking. How would you kind of classify them? Should they all be available as of right now?

Good question. Obviously, the ASAP is number one that we're waiting on. And then I would actually put the things we're doing in Mexico as number two, or at least the first one. And then I would put right on its tails, though, the RFP in Puerto Rico. And then... and then more Mexico, and then I would say the DR-SATA after that. And then after that, it's M&A. I think we have the small one. I would just say that based on what we're looking at, we do think that the development of the solar and or the best or the solar and the best is just a higher return than some of the M&A we've looked at, which has come down in valuation, but not enough, not close enough.

Do you see that spread in valuation continuing to compress, or do you see kind of, from your mark, that it's come down? Do you think it could come down a little bit more? Is it going to stabilize out where the market dynamics are playing out?

That's a great question. I don't see it coming down that much. I think it already did. The issue for us is it just didn't come down quite enough for us. So I think the issue is more about us necessarily than them. A lot of these projects, you have high net worth owners, right, that might have $10 or $20 or $30 million in a project. And their proxy is a bit more, they compare that to owning long bonds, right? So if they think that they can still get a 10% return in a solar hydro project, It's not, I think, you know, that's not great, but if they're comparing it to just buying UST bills or long bonds, then so I find that they're a bit sticky. They're stickier than you would think. So whereas I'm actually more confident if we actually start putting some runs on the board here in terms of these growth projects that we will sort of, we will reduce the gap, not by them coming down, but by us going up. And I think for that to start to look, call it attractive to us, we're not talking three points. I think it's about one to one and a half to get back to where some M&A is accretive.

Well, that's great, Collin.

Thank you, Mark.

Thanks.

Thank you. As a reminder, ladies and gentlemen, if you have any questions, please press star 1 on your keypad. Our next question is coming from Patrick O'Donnell with Brooklyn Capital. Your line is live.

Hey, good morning. Thanks for taking my call. I had two parts around the Mexico opportunities. The first part is how would you compare the project development process in Mexico to other jurisdictions that you're working in, in terms of navigating the government permitting regulations, finding contracting partners, and their willingness to work with outside or international companies?

On an actual dollar basis, it's lower. Let me rephrase that. On a per megawatt basis, it's lower. The projects are bigger. Maybe the dollars are somewhat higher, but on an actual unitary basis, they're lower. And I would also say because of the demand poll, at least what we're seeing is it's moving. The bigger issue that we experience is time. And some of the other markets that we're currently in, the time is much longer, whereas the government side is really engaged in Mexico. And is it Crazy fast, no, but it is moving at a reasonable clip there, whereas in some of the other jurisdictions, the development timelines are much longer.

Got it. That's great to hear.

I would also say that on an international, sorry, I think there was also this international question. I would say that at least we sense, I mean, we're biased, but we do, the sense we're getting is that at least Canada's in a, call it a good spot, as a foreign investor right now in Mexico.

Yeah, so they seem pretty friendly with these kind of international company partnerships establishing kind of long-term infrastructure in their country. Yes, that's very much the sense we're getting. That's great to hear. My next question is on those opportunities, what are the typical offtake terms that you're seeing from these projects in terms of like the term and if there's anything you could share on pricing.

Well, the key ones that I can share would be get a good tenor, so call it 20-year plus or minus, but up to 25, so good length, can do U.S. dollars, which is really important for us. So we definitely are, you know, I think our overall, call it credit profile, contract profile would actually improve significantly. And I can't really comment on pricing, but I would say we're seeing – we think it's going to be at returns that are attractive and are not going to be sort of bid down to, you know, call it below acceptable levels.

Got it. And for these size of projects, are you kind of feeding into, like, national utility infrastructure? Do you have to have specific – off-takers like industrial customers? I guess how do you, what's kind of the makeup of the off-takers?

You can do either, but our goal right now is just the grid scale. The main government entity there is called CFE. So we're really gunning for that for now. There are conversations that we're having with some, where you do direct to industrial buyers. Sometimes that's behind the fence. They could even contract with you directly at a grid scale, but we are having those. That's not our number one goal right now. I do think that that's an opportunity there, just again, given the demand need, and you have a lot of industrial consumers really wanting it. But it's always a bit trickier in terms of credit and doing project finance on those. I wouldn't say that that's our priority right now.

Okay. Thank you. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of our question and answer session and therefore our call. This will conclude today's conference and you may disconnect your lines at this time. And we thank you for your participation.