© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
[Foreign Language]Good morning, ladies and gentlemen, and welcome to the Boralex Fourth Quarter and Year-End 2021 Financial Results Conference Call. [Operator Instructions] Please also note that the conference is being recorded. For webcast participants, you may also ask questions during the conference, but they will be answered by e-mail after the call. Finally, media representatives are also invited to contact Boralex Director of Public Affairs and Communications, Isabelle Fontaine. Her contact information is provided at the end of the quarterly press release. Final information is provided at the end of the quarterly press release.I would now like to turn the conference over to Mr. Stephane Milot, Senior Director, Investor Relations for Boralex. Please go ahead.
[Foreign Language]Thank you, operator. So good morning, everyone. Welcome to Boralex' Fourth Quarter Results Conference Call. So joining me today from our head office in Montreal, Patrick Decostre, our President and Chief Executive Officer; Bruno Guilmette, our Vice President and Chief Financial Officer; and other members of our management and finance team.Mr. Decostre will begin with comments about market conditions and the highlights of the quarter. Afterwards, Mr. Guilmette will be -- sorry, 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 forward-looking and historical information. When talking about the future, there are a variety of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. So, these documents are available for consultation at sedar.com.In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis. Unless otherwise stated, all comments made in this presentation will refer to combined basis figures. Please note that combined is non-GAAP financial measures and do not have standardized meaning under IFRS. Accordingly, combined may not be comparable to similarly named measures used by other companies. So for more details, see the non-IFRS and other financial measures section in the MD&A.The press release, the MD&A, the consolidated financial statement and a copy of today's presentation are all posted on the Boralex website at boralex.com under the Investors section. So if you wish to receive a copy of these documents, you can also contact me. So, Mr. Decostre will now start with his comments.So please go ahead, Decostre.
Stephane, thank you and good morning, everyone.I'm pleased to present you our fourth quarter results today. Thanks to the integration of acquisition, the commissioning of new wind and solar farms, as well as the positive effect relating to sharp increases in market prices in France, we ended the quarter with a combined EBITDA of CAD163 million, a 5% increase over the fourth quarter last year.Production was lower than the fourth quarter last year and also lower than anticipated production due to soft wind conditions in France and Canada. Our development teams continue to be very active during the quarter, adding 137 megawatts of projects to our pipeline and advancing three projects totaling 41 megawatts in construction at ready-to-build phase of our growth path.In terms of market conditions, delays in approval of certain portion of the Build Back Better plan in the US caused a delay in the announcement of the results of the 800 megawatt of projects we submitted with NYSERDA in September. We are now expecting results in March for this bid. In Quebec, as announced, a 300-megawatt request for proposal for wind energy and 480 megawatt RFP for renewable energy are planned for this year.The process for approval of the Hydro-Quebec transportation line to the City of New York is also progressing. As mentioned before, this combined with the Quebec Green Plan should be positive for the overall development of renewable energy in Quebec in the coming years. Our 200 megawatt approved project is in fact a good sign that wind energy development in Quebec has restarted.Moving to France now. We remain highly confident in the future development of renewable energy. As mentioned before, RTE, the French transmission system operator, recently issued six different scenarios for 2050 production mix. And all of them are highly promising for renewable energy. The most conservative scenario refers to a solar production 7x higher than today, as well as onshore wind production 2.5x higher.The most ambitious scenario indicates a solar production 21x higher than today an onshore wind production 4x higher. France is facing important issues with the aging of its nuclear fleet. And more specifically, recent corrosion issues noticed with some reactor causing temporary shutdowns. For instance, let's consider for a moment the recent assertion from the Chairman of the French Nuclear Safety Authority, The Autorite de surete nucleaire or ASN.Regarding the lack of margin to support contingencies and the difficulty the nuclear industry will have to achieve even the most conservative RTE scenario of 50% nuke and 50% renewable energy. The ASN Chairman also insisted that margins need to be maintained to avoid facing a trade-off between security of supply and facility safety.In February 2022, President Biden said that he hope to double the country's renewable energy production by 2030 and increase solar production 10-fold, as well as double onshore wind power capacity by 2050. As you can see, there is plenty of potential in the French market. And let's not lose sight that the market is not an easy one to develop with strong barrier to entry, which is an important competitive edge for an established player like us.I would now review the main variances in our portfolio of projects. We added six wind power -- wind projects and five solar projects in France to the preliminary phase, representing a total of 137 megawatt, plus 23 megawatt for the optimization of wind project. Projects in the pipeline continue to progress with 124 megawatts of projects moving to mid-stage and 101 megawatts of project moving to advanced stage. In total, we are now developing a portfolio of wind and solar projects of 3.2 and 190 megawatts of storage project.Let's move now to the review of changes to the growth path. As said previously, two wind projects and one solar project in France totaling 41 megawatts moved to the construction or ready-to-build phase. We now have 647 megawatts in the growth path. 493 megawatts in the secured stage and 154 megawatts in the under construction or in ready-to-build phase. We also have a 3 megawatts storage project under construction in France. In total, when adding the growth path to our existing production capacity, potential capacity is 3.1 gigawatts.In conclusion, as you can see on Slide 12, we are pursuing the execution of our strategic plan and are making good progress on all four strategic orientations. I have talked about growth and diversification, but we also announced the signing of two corporate PPA recently, a 20-year contract with METRO France and a three-year contract with L'Oreal in France. Market conditions are highly favorable for corporate PPAs, and we are continuing to see a very strong interest from corporations. In terms of our optimization, I would like to highlight that we started the repowering work at our Mont de Bezard 2 project and optimized maintenance for wind operations totaling 161 megawatts in Canada.One last point from my part. Today, we published our 2021 CSR Report. I invite you to read it. As you will notice, we made very important progress in 2021 with regards to CSR and have a clear path for years to come. I would like to take this opportunity to thank our CSR Director, Mihaela Stefanov. Mihaela rapidly took charges of the CSR strategy and mobilized our entire organization around CSR and ESG criteria. CSR has always been part of Boralex DNA, but we have been drastically increased -- we have drastically increased the pace of change and accountability in the past year.This completes my part. I will now let Bruno cover the financial portion in more detail. And we'll be back later for the question period.
Thank you, Patrick. Good morning, everyone.I will start with a review of the progress made in light of our 2025 corporate objectives. Capacity increased in the fourth quarter with decommissioning of our wind farm La Grande Borne on December 1, 2021, our floating solar farm, Peyrolles on December 14 and our solar farm, La Cle des Champs on December 23. Total capacity now reaches 2.5 gigawatts. Our last 12 months EBITDA continue to increase, but the AFFO slightly decreased due to lower wind volumes for comparable assets.Our reinvestment ratio stands at 48%, which is slightly lower than our 50% to 70% target because of the aforementioned decrease in AFFO. About our CSR strategy, we continued to make good progress on the environment, society and governance aspects. We finalized the assessment of our carbon footprint and have set a 2025 target for CO2 avoided. We created a working group to analyze and integrate TCFD recommendations and held voluntary training sessions on the impacts and conclusions of COP26. We completed our training on indigenous culture with a strong participation rate of 96% in Canada and 93% for North America. Finally, we completed the revised version of our procurement policy.Taking a look at our debt objective now. Our corporate debt to total debt ratio increased slightly compared to the end of 2020. We are pursuing the work toward our objective to obtain an investment-grade rating in order to broaden our financing options and increase our flexibility.I will now cover the financial results for the quarter, starting with production. The fourth quarter was challenging due to weak wind conditions in Canada and also in France. Wind production in Canada was 11% lower than our anticipated production and 10% lower than in the same quarter last year. In France, wind production was 17% lower than anticipated and 14% lower than the same quarter last year. Overall, total wind production for the quarter, combining Canada and France was 13% lower than anticipated and 12% lower than last year.Turning to hydro now. It was another strong quarter for our US hydro assets with production 23% higher than anticipated production and 85% higher than in the same quarter last year. This more than compensated for the weakness in Canadian hydro and resulted in total production for the hydro sector, 8% higher than anticipated and 20% higher than in the same quarter last year. Finally, production from solar was 11% lower than anticipated due to slight delays in commissioning of new solar plants in France and lower production than anticipated from our US solar assets.In summary, total production for the quarter was [ almost ] 12% lower than anticipated and 6% lower than last year. Overall for the year, total production was 6% lower than anticipated, but 7% higher than in the previous year with growth coming from our US hydro operations, US solar acquisition and Canadian wind acquisition. Fourth quarter revenues were down 6% compared to last year, mostly due to the decrease coming from the wind and thermal segments. For the fourth quarter of 2021, operating income was up 8% to CAD82 million and EBITDA was CAD163 million compared to CAD155 for the same quarter of 2020, a 5% increase.We generated CAD81 million of net cash flows related to operating activities compared to CAD59 million in the same quarter last year. Cash flows from operations were CAD116 million in the fourth quarter, a CAD15 million increase over the same quarter of the previous year. AFFO was CAD58 million compared to CAD67 million. The decrease is mainly due to lower volumes for comparable assets in the wind power segment.Our financial position remains solid with our net debt to total market capital ratio of 48% on December 31, 2021, compared to 41% on December 31, 2020.In conclusion, Q4 EBITDA was higher than in the same quarter last year due to acquisitions, commissioning of new assets, the increase in electricity prices and our optimization initiatives. In 2021, we invested in our development resources and updated our corporate targets. 2022 will be a year of execution on our four strategic orientations, while many projects underway are expected to materialize.Lastly, our balance sheet remains solid, and we will continue to work to optimize our capital structure and improve our financial flexibility. Thank you for your attention. We are now ready to take your questions.
[Operator Instructions] We have a first question coming from the line of Rupert Merer from National Bank.
Wondering if you can give us a little more color on the contract structure in France that enabled the higher realized power price in the quarter. And if you can tell us how many of your contracts are structured in a way that you can see the upside on spot prices?
Yes. Sure. During the quarter, in France, the market price were around EUR200 per megawatt hour. And with the -- some of our feed-in premium contracts due to high market price, we are reimbursing money to EDF over -- when the price is over the strike price, which is obviously the case at EUR200 per megawatt hour. We have an installed capacity of 201Megawatts exactly, which is with this kind of contract, where -- when the cumulative sum of the money we received from EDF from the beginning of the contract is exactly equal to the cumulative sum we have paid to EDF. We are at a kind of breakeven where we don't -- we don't have to continue to reimburse EDF and then we are enjoying the high price and benefitting from the high price of electricity. So this is for 201 megawatts, and this is also for 125 megawatts of projects under construction.
Okay. The more recent projects than the newer projects that have that contract.
Yes, exactly. It's some CR 16, the CR 17 and the CR, which come from period one to five of the RFP in France. So, this is the 201 megawatt. And with the under construction project, as I mentioned, it's 125 and this is 58 megawatt from CR 17 because you have to be careful to take the whole power when it's repowering and for the RFP period one to five, it's 67 megawatts. So just to be -- a simple way to see it, in under construction project, the only project which is excluded from this kind of asymmetric contractual difference is Moulins du Lohan for 65 megawatts, but all other projects are benefiting from this close.
Great. And future RFPs for the government, do you think they'll have this contract structure? And does that give you a potential to see higher returns on future bids?
No. The future -- the RFP of last November did not include this close. So, we're not benefiting from that. What is important for the future is two things. The first thing is during Q4, we -- there was this breakeven point, tipping point when the cumulative sum received is equal to the cumulative sum paid. So, you can make the math for Q1, for example, and look to the price as of today, the first month and 23 days in February and evaluate what it will be and this close apply roughly from the 1st of January for the contract. So, this is one thing.The other thing is when you look to the future, and I will let you do the math, but you can go to European Energy Exchange, which is the exchange market for forward contract in Europe and see how the market is evaluating the next quarter and evaluate the impact on Boralex. And obviously, there is an interesting fact with our high-wind exposure in France. Despite the last quarter, the seasonality is in favor because seasonality in production and seasonality in price is in favor of Boralex. And the second point, which is interesting is that the important interest in corporate PPA with the signal of the price on the market give some opportunity we are [deeming] for and [inching] for to take advantage of this high price in Europe.
That was going to be my follow-up question, if I may. Looking at those corporate PPAs, are you seeing inflation in potential pricing in those PPAs, where the corporate PPA should be more attractive than the government PPA?
Yes. There is clearly an interest. When the price on the market is around EUR200 -- and I'm not saying that it will stay at this level. But what I think is that it will not land back to like EUR40 to EUR50 in the future because the reason of the high price in Europe is not only the situation with Russia and just the price of the gas. It's the problem on the nuclear fleet. I just mentioned it. Production from EDF has gone from, on average, 400 terawatts hour a year to 300 terawatts hour this year and next year. This is already announced by EDF. So, this puts a lot of pressure on the global system. Germany has closed 4 gigawatts on the December 31, and will close another 4 gigawatts of nuclear on the next December 31. So all this pressure, the price of CO2 create an environment when -- where the corporation are not looking only to corporate PPA for ESG and marketing like in the past, but they are looking for that to secure their electricity price on the long term. And so this creates a lot of optionality to us.
Maybe just one comment, Rupert, to make sure you model it right from the effect on the contracts is that you have to really take care of the seasonality like, meaning that Q1, Q4 are usually stronger, which means higher production and higher prices. But Q2, Q3, you have to model lower prices forward if you look at this because it's just the seasonality of the business that makes it work like that. So, you'll see that anyway if you look at the forward prices or forward contracts.
We have the next question coming from David Quezada from Raymond James.
My first question here, just on wind speeds. Are you able to comment at all -- I mean, it sounds like things have gotten better in France so far this period. Could you just comment across your fleet, whether or not wind speeds have kind of recovered or how they have been relative to anticipated levels for 1Q?
The question, Bruno, was about wind speed for Q1. Now it looks like, like versus Q4.
David, so as you know, these wind forecasts are long-term averages and we do not particularly like to comment on a shorter-term basis on a wind forecast. So I guess, as we've said in the past, there's hopefully some data available for you to look at, but we don't give our forecasts on a quarterly -- or before the quarter is over.
Okay. Understood. Maybe just one other one for me. Curious if you have any thoughts around the upcoming election in France. Certainly, it sounds as though in virtually all scenarios it's very supportive. The platform today is very supportive for renewables. Do you see any changes potentially coming about from the election, depending on how that shakes out?
The answer is globally no. But you never know what will happen in an election, specifically since 2016. So, I will not comment the result, but what is -- what seems to be clear is that if President Macron is reelected, he will go because this is the industry situation. It's not a question of politics. It's France need to somewhere refurbished and build some more nuclear because of the aging fleet and France need a lot of renewable energy. And in every scenario, when you go to specialists specifically like RTE, RTE is independent from any politics. They are looking to scenario, as I mentioned, with a high potential for solar and wind and offshore wind and President Macron confirmed that. So, that's what I think will be. And I am confident that this is also within the European framework, where there is commitment from France to -- for 2030 and 2035. And this will continue. The European, I cannot remember the name, but it's -- the 55% of reduction of CO2 from 1990 target for 2030 is there and it's a commitment of France.
That's great color.
And just maybe another point it's -- because I know that there is some noise about this in the market about the nuclear -- the fact that nuclear has been recognized like a highly efficient natural gas in European taxonomy as transition energy, not as green energy. This is important, but there is so much challenges on the nuclear fleet on one side, challenges in terms of cost and delay. If somebody in September decide to really order new nuclear plant, they would be online in probably 2035, if everything goes well, and I would not bet a penny on the cost and the budget. So, this is a point. There will be challenges for -- to bring HR in this business, lot of engineers, lot of specialized technicians like weathers.And so, I think, for us, it's not an issue. And when you look to natural gas, it's a specific clause for Germany because the Germans wants to close their call for 2030 instead of 2038 during the Merkel period. But to do that, they need natural gas and they need highly efficient natural gas, and they will have to switch their new plant from gas to hydrogen one day or another, and it should be green hydrogen. So when you put all that together, lots of opportunity for renewable energy in Europe.
We have the next question coming from Nick Boychuk from Cormark Securities.
I'm wondering if we can get some extra color around the repatriation of the service and maintenance for the Quebec wind assets.
I'm sorry, Nick, I'm not sure I understand -- we understand well your question. Could you just repeat it, please?
Sure. So it was interesting to see that you've repatriated the service and maintenance contracts and some of the Quebec wind assets, I think was something like 160 megawatts. I'm wondering if you can give us a little bit more color on the decision-making behind that, the impact that it might have on costs, on margins and whether or not there are other similar assets that you could do such as [ wind ]?
Yes. Sure, Nick. It's really in the optimization orientation of our strategic plan. We have started to do this in 2019 in Quebec with Le Plateau in 2020 with -- at the end of 2020 for Seigneurie de Beaupre and it's going very well. So, we are pursuing our plan when it's possible with ENERCON, with the contract we have with them. We have a close to exit the contract, and we are taking over their service. And it's going really well. We are reducing the costs, and we are increasing the energy availability because we are more flexible, we have people on the site, which are incentivized on the production and not just on the time-based availability.And during the last months, I'm very happy because in the ENERCON contract, there is a lot of inflation close like in any O&M contract, and we are somewhere protected from that, not totally, but we are protected from some indexes of, say, German industry index, which are going up for -- like 20%, which is high. But since the cost is reduced on our side and it's internal, we are -- it's also a protection on inflation. So it's going well and it's better than the budget on this side. It's one of the reasons the global EBITDA is not exactly following the top line and there is some optimization in costs.
Okay. That's great color. On the development cost side, I'm wondering if you could please give us a little bit more color if you're seeing any increased costs on either partnering or acquiring or sourcing early-stage development opportunities? Some industry participants I've been talking to were suggesting that the valuations and the costs of that earlier stage are increasing. Are you guys seeing that at all?
Yes. This is clearly something, which is a trend in the market because investors -- more strategic investors are taking more risks with early-stage pipeline. This is why we have decided to invest much in our own people. And as you have seen, we are developing 3.1 gigawatts for the moment, which is really higher than if you go back three years ago, it was less than that. And we're really monitoring to be sure that every quarter, we are adding new real projects, not just [IDs], and we have the right people on the ground to make the project. We have really increased also the size of the team for greenfield development in the US.I don't think I mentioned that three months ago, but we have starting real development negotiations with landowners and apply for grid connection in two other new states outside the State of New York. When we will achieve some milestone, I will say where it is, but it's similar place. So, we are really investing to avoid to have to pay for the premium on the project when you have to buy it from local, small developers.
Okay. Got it. That makes sense. And then the last one for me, just on that organic growth machine. I'm wondering if you guys could please give a little bit more color on kind of how projects are moving through the pipeline stages. Obviously, there was the one project this quarter that really jumped through, I think, kind of the typical stages. I'm just wondering if you can kind of give us an update on the time lines to get these projects through to operation. And if there are any other projects that you don't currently have information on, but that could somewhat soon reach that construction ready-to-build phase. I'm just wondering if you can give us an update on the timelines to get these projects through to operation. And if there are any other projects that you don't currently have information on, but that could somewhat soon reach that construction or ready-to-build phase?
Yes, essentially in the pipeline on the [indiscernible], we are waiting for 2 important things. The first is the result of the NYSERDA 2021 tender. As I mentioned, we're expecting that in March. And so this is -- this could be an important part. And the second part is also I mentioned, we are preparing ourselves to the RFPs in Quebec. It's clear -- the government clearly mentioned that after the 300 megawatt and the 480 megawatt RFP for 2022, there will be other tender in the future because in Quebec the province will need an increase of roughly 12% of electricity demand, which is a 20 terawatt hour, which is significant for Quebec, and they have reviewed their 2019 target in November -- no, sorry, they have reviewed the 2029 target from the target they had 2 years ago, and they have increased it by 6.5 terawatt due to the biofuel demand, the hydrogen demand, the battery factories, data center, blockchain and all the new demand in Quebec. And so this means an environment where we think there will be more RFP. So this is to think it's independent from master planning, but we think that this will be important move in the pipeline. And in France, it's more a question of you can see every -- I think every quarters we are announcing one or two projects which are moving to the right direction.
Okay. That's great color, Patrick.
We have the next questions coming from Sean Steuart from TD Securities.
Patrick, I wanted to follow up on the New York RFP and I think the indication you provided is that the delays in the Build Back Better legislation are a gating factor to moving that forward. You're still indicating an expectation that we'll have results by the end of the first quarter. Can you reconcile those two things? If we don't have any context on the legislation moving forward, can we be confident on that timeframe still?
Yes, it's a good question. The first point is when it was -- when the announcement was [ moved ] and announced to the bidders in December, it was because the administration and the government were optimistic for Build Back Better and they said, you don't have to have the positive impact and some, say, windfall profit coming from that. Then what happens to Build Back Better? What is -- so the situation today is we expect that the State of the Union speech next week on the 1st of March will give some light on this. Obviously, the U.S. administration is focused more on Eastern Europe for the moment. So that's still the last information I have from the team is that we are waiting for something in March but could move. The situation today with the U.S. administration is what it is, and that's how we can reconcile the planning.
And just to add to what Patrick said, the link that we're making is because of what Patrick mentioned between Build Back Better and the bids. NYSERDA could decide to split those. They could decide that if Build Back Better is delayed further that they still announce the results are again splitting the 2 elements.
Yes. And on the politics side, the question on Build Back Better was more on the social aspect and some aspects which are not the support to renewable energy. And so our understanding is that they will split also Build Back Better into different legislation to go ahead with the part which is accepted globally by the population and by the politics and wait to negotiate the other part, which was the challenge in December.
Thanks for that detail. My second question is with respect to your French organic development portfolio. You mentioned that all of the RTE scenarios are shifting more towards solar growth or at least faster solar growth than wind in all of the scenarios. Just wondering if you can give us a sense, the projects that you have in your early-to-mid stage solar pipeline in France, is there a bias to move those up faster than the wind projects? Or are you agnostic and [ certain ] in the overall portfolio that you have there?
No. As you have probably seen, we have started to switch not completely to solar, but to increase our development expenses and focus on solar development in France since -- before June this last year, before the new strategic plan. So we have hired different people. Solar is a different challenge in France. Wind, the challenge is specifically social acceptability and the visual and landscape impact and biodiversity impacts management. So this is the challenge on wind. The challenge on solar is more a question of land access. And so it's different people which should be dedicated to this development. So we are investing to accelerate this part. And generally speaking, the delay to develop a solar project in France is shorter than the delay to develop a wind project. So we are working on that.Just to remind you that, yes, if you take, for example, the February 9 speech of President Macron in Belfort at the GE facility. He said, yes, -- he didn't say like this, but finally, he reduced the target for onshore wind from 50 to 40 gigawatts, but it means that it's still doubling the onshore wind in France and he increased dramatically the solar part from 50 to 100 gigawatt, which is a good sign. And we have anticipated that in our strategic plan and in our team.
If I could add to that also, Patrick, that what we've seen in the last -- most recent Request for Proposal is that still offer cannot meet the demand on onshore wind. So this is still true. There's still scarcity of land in France, and it will remain. So we're very positive about our pipeline, and we intend to continue to grow it and to develop it to construction phases.
That's great detail.
We have the next question coming from [ Andrew Cruz from Hayes ].
I guess the first question is for Patrick. And it just really relates to critical mass in the market. And when you're going forth into a new market area and trying to develop it, what kind of resourcing do you think you need in that market for it really to catch and to really start being able to develop assets and have credibility with corporate buyers and local utilities and really offtake in general.
Yes, it's a good question, but there is different part. To start a real greenfield development, a team of 5 people, 3 years, it's a good start. If you start -- when we started New York, we didn't put more than 5 people. When we are starting to other states, as I mentioned, it's not more than that. In the U.K. we have started through a partnership, and we will definitely accelerate it because of the environment of price I mentioned. So we're -- but the team of the developer is roughly 10 people who are developing.So this is for greenfield development for [indiscernible]. To get a credibility it's another situation. First, you get the possibility to have a team and some operation. I think we have an organization today -- I saw clearly the difference in France from 200 to 300 megawatts. When you are in this situation, you can have specialist people on land. But I was alone in France at that time. But typically, if we want to enter Spain or the U.K., it will be the French team who will give service like we do in the U.S. from Ontario and Quebec. So it's probably still something acceptable.And then to create the branding in the market it's another thing. We have a clear brand in Quebec. We have a clear brand in France. In New York, I think we have a good brand in greenfield, but we need to continue to develop our branding and reputation to sign corporate [ TPO ] to sign contract if needed. So it's different stages.
Okay. That's very helpful color and context. And given all the irons in the fire that you've got, you're pretty disciplined at that. Maybe if I could turn the question now to Bruno just on obtaining that investment-grade credit rating and just how you see the gating items on the balance sheet as you've got a fairly large opportunity set. And does that investment-grade credit rating reinforce your credibility in the market and your ability to develop on a more accelerated basis into the future?
Thank you for the question. Certainly, we believe that it's an important milestone to reach, and we're organizing to reach it as soon as we can. As I think I said previously, this is also to reach a balance between corporate debt flexibility and a long-term nonrecourse debt on projects. So it's important for us to achieve that balance, to achieve that flexibility, and to get there -- to organize to get there, we need to continue to optimize our different sources of financings. And we believe we're close, but we have -- we still have some work to do to get there and to -- for example, on some of our project depth, what it means in the future is we'll likely tone it down a little bit on specific projects and make sure that we have more corporate inflows. There are also steps that we need to take to optimize our corporate debt as currently structured. So these are milestones that we're looking at in terms of also getting cash flows from future assets that are being constructed, as you mentioned, in the pipeline. So we've talked about the additional revenues that we're getting in Europe, for example. So I think all these elements, taken together, it bodes well for us in the near term to get to that result.
We have the next question coming from the line of Ben Pham, Private Investor.
Ben from BMO Capital Markets. A couple questions on France. Is there any update on the potential capital recycling?
Yes. So we -- as we've mentioned in the past, we're going through an organized process to get into a partnership with an investor in France with our French operations, both assets and the pipeline. And that process is well advanced, and we're happy to see keen interest in this partnership with Boralex in France. So we'll come back with further details in time, but this process is certainly demonstrating the interest that our French operations has raised in the market with private investors.
Okay. And then through your conversations with these potential investors, has that opened up any other maybe incoming opportunities to maybe recycle other parts of your portfolio?
Well, certainly, what -- and it's been the strategy really from the get-go is we create values by developing our assets, by developing our teams. We're doing a similar approach, Patrick mentioned it, in the U.S. We believe that that's where a good way for Boralex to create value. We're also creating value on our operations, obviously, and so on. But -- so it's a question of sequence. It's a question of maturity of assets and markets. So to us, the market in France and our operations there were at the right time at the right stage for us to do that partnership. We believe that we can create additional value by waiting a little bit on some other regions, for example. But clearly, we've partnered in the past, this is a process that is going well, and we expect to do more partnerships in the future.
Okay. Great. And one other question I had on France is, how do you think about counterparty risk these days with EDF, the share price, the financial implications? Does that change your process on where you allocate capital in France going forward? Do they have any sway on future RFPs in France or is that all government driven?
Yes. An important point, Ben, is EDF is not acting as the corporation. EDF is acting when he is the offtaker of Boralex as the arm of the French state. So the offtaker is the French state. This is by low the role of EDF because of its obligation of public service coming from, I think, 1999, is it correct? Yes, 1999 law or something like this. So it's a long way -- when the French market was liberalized, EDF had some advantage of being a public service and some obligation of being a public service when he really act as the arm of the state. And this is exactly how other banks are looking to it. And if you want on that, I can put a penny, because the situation is after the election, the so-called Hercules Project, which is a potential split of EDF into the public service part and the nuclear part on one side. And on the other side, the hydro, the renewable, the service, and I don't know where the grid will be will continue to go ahead. So something which will make possible for the French state to finance new nuclear and on the other side -- and pay for it. And the part of -- the role of EDF will be clearly defined and it's under the law, we are protected. So no risk on this side.
Okay. That's a good reminder.
We have the next question coming from Naji Baydoun from IA Capital Markets.
Just wanted to ask about your U.S. strategy. It's been over a year now with the portfolio of solar assets under your belt. Maybe you can just give us a bit more detail on the next steps for Boralex in the markets where you acquired those assets, and if there are any learnings from the corporate PPA progress that you made in France that you can apply to the U.S.
Yes. Our strategy in the U.S. is we continue to develop greenfield project in the state of New York because we know that there is a yearly RFP generally during the summer. There is one, I think, in -- which is scheduled for August. As I mentioned, we are working on 2 other states to do the same, states where there is the possibility also to do large-scale development and go through public RFP.On the existing contracts, the 2019 contract, we are working hard to align the [ plant ], finalize the development on one side, meaning [indiscernible] and all the authorization to build and also align the [ plant ] in terms of return, taking into account the new costs, the new financing situation and hopefully, also the Build Back Better direct pay situation and things like this. So we have to take into account everything and take a final investment decision on this project. And also, last but not least, we are looking to some disciplined M&A in the U.S. to accelerate our penetration of the U.S. market and/or diversification also to solar.
Okay. That's great. It sounds like maybe FID this year on the existing projects and then exploring a couple of other states outside of New York. And my next question is on M&A. Do you feel any pressure to make any acquisitions to hit your 2025 capacity targets? And maybe a bit more broadly, is it going to take a corporate debt raise, or would you prefer to wait at least for the [ minority stakeholder ] in France before you commit to an acquisition?
You mentioned pressure, so I'll just comment on that word. First, there is no pressure to -- there's a strategy to get to our numbers. There's a strategy to get to -- there's a plan and timing, especially on M&A is somewhat unpredictable. M&A is part of the strategy, as Patrick mentioned. So it's not that there's no M&A. We can create value on M&A. But certainly, we can't predict the timing. These M&A opportunities need to fit in our criterias -- return criteria, etc., and they need to fit with our strategy. So it's assets where we can create value, where we can add value with our teams and our skill sets. It's pipeline, and it could be with teams or partnerships with other teams that are in, for example, regions or as Patrick mentioned, more diversification in solar. So this is really about a strategy. So M&A will come when it comes. And if we are through our process on French process, then we'll have some money available to that. And otherwise, there are other sources of financings we can tap depending on the size of the transaction. Financing, as I mentioned in my presentation, is not really a problem for us at Boralex. In this instance, we are well funded to for our plan.
Okay. Just a last quick question for me. If I'm looking at your development pipeline, you have about 60 megawatts of advanced-stage projects in Canada and another 500 megawatts in mid-stage. Is that the bulk of the projects you would potentially look to bid into the upcoming RFP in Quebec?
Yes. It's the project we're developing for the need of Quebec, as I mentioned, 20 terawatt hour to be added in the next 7 years. So if you -- it could be this RFP, it could be another one, it could be another opportunity we are working on. But we are very confident that we have the right access to land and the right access to grid connection on some of these projects, which is a competitive edge for us.
We have the next question coming from the line of Mark Jarvi from CIBC Capital Markets.
Just wanted to come back to the higher spot prices in France and clarify a couple things. One, wasn't clear whether or not there was a component from a merchant exposure, or was it all or vast majority from the [ contract for differences ]?
No, it comes -- the main question, we have very small merchant exposure. It's, I think, 8 megawatts from the first site Avignonet that we kept in this, and some other -- we have also in our -- in one of our corporate PPA contract, we have a potential merchant exposure, but also a possibility to fix the price, to define the price when it's interesting to us. So this is the only pure merchant exposure that we have. On the contract I mentioned, 201 megawatt, you have to look to this like a floor price. The strike price is finally a floor price. And when you have reimbursed -- we have, sorry, not you. We have reimbursed to EDF the same money that we have received from EDF from the first day of the contract, then the floor price is really a floor and there is no more defined price, but we are benefiting from the market price at that time. So it's not a merchant pure exposure. It's an asymmetric merchant exposure floor.
Just one point on that, Mark. I just wanted to add up. We've never really talked about that because we were not in this pricing environment, but like the probability of getting this upside was quite low. But now that we are in these types of pricing environment, this class for the 201-megawatt contract that Patrick referred to applies now. So this is really something really new because of the pricing environment.
Once you've reimbursed the subsidy, you get the upside essentially.
Got it. And then just based on that cumulative and hitting that break-even point, has prior underperformers like [ weak wind ] for existing assets over the last couple years factor in. So I guess the question is, is the upside in the existing assets the same as the upside in newly-commissioned assets, or is there a bit of a difference between those?
The upside of -- it apply on the first asset, we have 87 megawatts on [ CR 16 ], 33% on CRS 17 and 1 on period 1 to 5 of the request for proposal CR contract. So CR-16, we start putting this assets in service in 2019, I think, because 2018 may be some -- one in 2018, I think. And then -- so it's not all the asset. And on these assets during the period until Q3 2021, we have received money from EDS. So these assets have to clear all the money they receive from EDF with a market price between EUR45 to EUR50 a and a strike price, which is roughly -- for the CR 16, the strike price was EUR82 a megawatt hour or say, roughly 82%. So you see the difference in my example is EUR30. And then during the quarter, the price go to EUR200 a megawatt hour. So the difference is no more EUR30. The difference is EUR120. So it takes 4x less with the same production to go back to the breakeven point. You understand my example? And on new asset, the asset that we will commission in the next months with the good contract I mentioned is 125 megawatts. Since we have not -- we will not receive any money from EDF from day 1, we will enjoy and we will benefit from the market price from day 1.
Got it. Okay. And then just coming back to the question about adding into the construction-ready build-ready phase. You talked about potentially success in the RFP. But what about the stuff that's in your secured pipeline? Like this quarter you added some stuff that was secured in the build-ready. Is there anything that if you got some final permits or authorizations, can move into that phase and be ready for construction and commissioning in 2023? Or are they more a little bit longer-dated, everything else is in that secured pipeline?
Question is in the secured stage how many projects you think and the timeline for the secured stage project, is it correct?
Yes, exactly.
Yes. Okay. So in the secured stage project, essentially, we only put in this part project which are in line with our 2025 target. So, for example, Apuiat is a 2024 -- 2025 project. If you look to all the solar projects in the U.S., it's all projects which are either 2023 and maybe 2024 for Green Corners. And there is no [ fixed ] date on this project. This is also important. And for the French project, I don't have the detail by heart. It essentially depends on the French project which are in this part. It depends on final authorization or clearing challenges from third party and on 1 or 2 of these projects like Bois Ricard and Marcille. And last but not least, speaking about Limekiln in Scotland, we are presently at the late-stage of authorization of the extension of the project in terms of number of turbine and also increasing the size of the turbine. This is something where every developer in Scotland has to go. So we are in this process. And as soon as we have fully permitted project, we will really start to do the marketing for corporate PPA. And in the present environment, I think we will be able -- I'm confident that we will be able to find an offtaker for this project. And then we have 2 years of construction.
Okay. And maybe one final question for Bruno. Just in terms of the cost for your France wind operations, I think they're down year-over-year in terms of dollars and euros on a constant currency basis. Is there any onetime or is that just the benefit of the Vestas contract you signed a couple quarters ago?
I think it's a general strategy -- our general approach to optimize our cost. So Vestas is one of these reasons. But certainly, we're working through all the process on the operations, on the administrative costs. So it's part of our strategy of optimization. Just on that also, Mark, we did a lot of optimization in Canada, too, with our wind assets. Right. So do we have a last question or...
Yes. We have the last question from the line of Matt Taylor from Tudor, Pickering.
Sorry, squeaking in here right at the last minute, Stephane. Just wanted to go back to the sale. Understand it's still ongoing. But I'm just wondering in terms of funding, I think it would be helpful just to refresh our memory on funding needs. Because I'm looking at your disclosure, you have about CAD287 million or so of capital that you'd still need to invest in that's under construction. And then if 20% of that is only about CAD60 million, it looks like relatively modest needs just what's in the project under construction. But if you want to just refresh our view on whether or not this sale is looking to cash up and fund those needs plus the other projects that Patrick was walking through there in the secured growth? Or do you have other plans for the proceeds?
Well, the proceeds would clearly go to some -- I think everything is linked, right? We talked about the investment-grade rating. We talked about different things today, including organic growth and M&A. So the proceeds would likely go to some debt rebalancing. We have some debt, which is more expensive that we could pay down. And certainly, we expect that we would have money remaining for growth, whether it be funding the pipeline. In the past, I've said that we're good until late 2022 for funding. And so that's a starting point. And if we get the additional money or once we get it, then yes, we can apply this to what I've just said.
Okay, great. Yes, it's a bit of an all-of-the-above approach is probably the way to think about that, right? A bit of organic what's in the pipe, [ the IG ] and maybe some M&A?
Yes. And it would clearly help us reduce our needs for equity issuance.
Excellent.
There are no further questions at this time. I hand back the conference to you for any closing remarks.
All right. So thank you, and thanks, everyone, for your attention. It's been, I think, a record call, an hour and 15 minutes. So we appreciate all the good questions and the interest in Boralex. So if you have additional questions, please call me, and it's the same number, 514-213-1045. I'll make sure we quickly answer your questions. So our next call to announce first quarter results will be on Wednesday, May 11. Hope you all remain healthy. Have a nice day ahead and enjoy upcoming spring vacations as much as we will do. Thank you.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.