Brookfield Renewable Partners L.P Investor Day Webcast. Transcript. Date: Wednesday, September 27, Sachin Shah, Chief Executive Officer

Transcription

1 2017 Investor Day Webcast Transcript Date: Wednesday, September 27, 2017 Time: Speakers: 2:15 PM ET Sachin Shah, Chief Executive Officer Brookfield Renewable Partners L.P. Nick Goodman, Chief Financial Officer Brookfield Renewable Partners L.P.

2 1 SACHIN SHAH: Good afternoon, everyone. Thank you for joining us today, and thank you for staying for this presentation, as well. Myself and my partner, Nick Goodman, we re going to spend 45 minutes or so going through our renewable power business and walking through similar themes to what you ve heard today, where we ve come from as an organization, where we intend to spend our time creating value in the existing business we have, and, more importantly, where are we going in the future. I ll just start with a bit of a recap of the business that we have today, to give perspective to those who might be new to the story, and those who are, obviously, long-time investors and would have seen this. Today, we have $26 billion of renewable power assets spread out around the globe, on four different continents soon to be four different continents, we have one transaction that s pending. We produce enough power to provide power to approximately 11 million homes, and that s 100% carbon-free, and we think that s an important trend for the future; it s one of the key drivers of growth in our sector, and our breadth and our scale positions us really well in this space to continue to grow. What s unique about our business today is that over 80% of our assets are perpetual hydro assets with a 100-year lifecycle, embedded storage capabilities similar to what s in a battery, and are fully carbon-free, making us giving us an asset base that s very different than many of our competitors in this space. We launched the business in 1999, as a public vehicle in Canada. It s since become dual-listed in the New York Stock Exchange, and so we ve converted all of our numbers into U.S. dollars, but our slowand-steady approach to building, buying and operating very high-quality assets that are completely carbon-free has generated a 16% total annualized return over that period. Shareholders who came into our stock in 1999 would have had their capital compound at that clip, if you assume reinvestment of dividends, as well. What has allowed us to generate that level of return, that level of consistency, I d say, in particular, in a sector that s had many train wrecks if you look at renewables generally on this continent, there s been many companies that have just struggled in this space, and there s been policies and government support, and so what has allowed us to really differentiate ourselves? I ll walk quickly through some of the factors that we think differentiate us and allow us to position the business for continued long-term growth.

3 2 First, we pride ourselves in being value investors. We buy assets, first and foremost, that are high quality, that we believe will last the test of time and avoid distress during cyclical down periods, from a power price perspective or credit perspective, and we obviously have been able to do that on a number of occasions. I ve highlighted four here, really, over the last five years, four periods where we ve taken specific positions in our sector that would be in deep contrast to what many of our peers are doing. First and foremost, in 2012 to 2016 range, this is really post-financial crisis in the U.S., a significant amount of capital was now starting to re-emerge and invest in the U.S. renewable power sector, but largely in wind and solar. Wind and solar was being supported by strong subsidies, and there were significant financial investors, candidly, moving into that space on the back of subsidies and long-term PPAs, and what we found was that it presented a unique period where very little capital was actually going into hydro assets, an asset class we obviously knew well, but, most importantly, one that we believe, if you can buy hydro assets for value when you have 100 years in front of you to generate returns, you can store the water, you can modulate the power, you can deliver peak power, it s a very unique opportunity, and that window was open for about four years, where we were buying these assets anywhere between 10 and 12 times on an EBITDA multiple basis. To put that into perspective, in the last two years we ve seen these assets trade over 20 times in the U.S., in the markets that we re in. That gives you an indication of why we re not currently buying hydro, but it also gives you an indication of the value of what we had bought during that period, and we were able to put $3 billion to work during that period. Move to 2014, the credit crisis in Europe, many countries were caught up in that, the PIGS, everybody will remember that term. Ireland, in particular, was a region or a jurisdiction that was facing significant financial distress. We did not have a business in Europe at the time. We thought this would be a unique opportunity to establish a beachhead on the continent. Why is it important for us? Obviously, 500 million people on the continent, and probably today, even still, the largest supporter of renewable development and proliferation of carbon-free technology on the planet. For us to be there and then be able to have an operating capability to be able to have assets that are generating cash flow, and then use that to further expand on the continent, was very important. We bought 300 megawatts of wind farms from the Irish government, with a large development pipeline. Today, we ve doubled the size of that business just through development. To put that in perspective, today, if you go into Europe and

4 3 you re looking to acquire contracted wind or solar projects on the continent, you re generally going to earn 6% returns. It s the financial investors who are looking at this as an alternative to fixed income. Because we were able to buy this during a period of distress, the Irish government needed capital to repay EU and IMF debt, we were able to buy this at a going-in 11%, 12% return, and all of the followon development that we ve been doing, in euros, has been done at about mid-teens. We ve started to now, for the first time, recycle some of that capital and just sold our first wind farm this year, one of the Irish wind farms that we built, at approximately a 35% IRR. You can see the power of making investments at the right time in an area that we feel quite comfortable with and then moving our expertise and having a new beachhead from which to grow upon. Isagen, which we just acquired last year, I d say it s very similar to what we did in the U.S., just in Latin America. What makes this transaction unique was it was a government privatization. Isagen is the third largest generator in the country of Colombia, a country with 50 million people. To put it into perspective, it has 15,000 megawatts of installed capacity for 50 million people, so a very undersupplied, under-serviced market. For all the Canadian people in the room, that would be the equivalent of the Alberta power grid in Colombia, but servicing 50 million people. Twice the population of Canada, but a very, very small power grid. We obviously have a very bullish long-term outlook on Colombia as a power market. We also think it has very strong GDP growth prospects and it s a country with a stable democracy, a good rule of law, a strong respect for capital, so all the tenets that we like in a region. But, more importantly, we were fortunate enough to make that investment on the back of a 45% decline in the currency. The currency, at its peak in, call it 2012, 13 and 14, was trading at 1.4 times to the U.S. dollar. When we went and made that investment, it had collapsed on the back of oil price declines globally to about 3.3 times. We went in, not only able to buy a critical infrastructure asset in the country, one with a dominant market position, it also has significant development capabilities, but we have the wind at our back from a currency perspective. Then, lastly, two transactions that are currently pending they re signed, but not closed are the TerraForm yieldcos. These would be the yeildcos that were under the SunEdison estate, that recently filed for bankruptcy back in Again, from our perspective if I bring you right back to 2012, when I said many investors in the U.S. were chasing wind and solar simply from a financial perspective, trying to buy low-risk assets and bidding these assets down to mid-single-digit returns, the yieldcos and the sponsors were really a big factor. Pension plans were in that, but there was a large of

5 4 financial investors really driving value. It made it difficult, first and foremost, for ourselves to participate, but, maybe importantly, and this is what you see as a broad theme in the Brookfield group, is in spite of it being a difficult asset class, we pay attention and we recognize when valuations start to get out of whack versus long-term fundamentals. This was a period where, when we saw a sign of distress, because we were following what was going on in the sector, we were following all the yieldcos, we understood the values they were paying, and we understood that it was unsustainable, really, the levels at which these assets had been bid up to, and all of their funding largely coming from debt being an unsustainable position, we were able to act very quickly, take a large public equity stake in the yieldcos, and ultimately set ourselves up to be successful when both of them were sold in a liquidation, effectively, through the bankruptcy process. We often get asked the question about what does our operating capabilities present in an investment. We play up the fact that we are strong operators, we have an operating history, it s how we got into this business, but it s hard for our investors, and we get it. You re looking from the outside in, and it s hard for people to tangibly understand, when you have operating skill sets, what does that bring, and people always want to break it down into, Does it add 200 basis points to your return? Does it add 300? and I would say it s case-by-case, first and foremost. Sometimes it adds value, but, more importantly, it often protects the downside. Often, it s actually our ability to de-risk investments and de-risk situations, and that ability to go into a situation that s perceived as highly risky by financial investors or organizations that don t have the depth that we have, means that you can move into a situation with less competition, de-risk the situation, and then, with that less competition, effectively, grab a better return. That being said, I thought we d give you a few examples. In the U.S. hydros, albeit that we bought them in a very weak price environment, even in that price environment, we ve been able to increase revenues by about 20% to 25% relative to this low base that we re at. The reason we re able to do that is we can sell ancillary products, we have an energy marketing capability, we can combine our assets together and sell combined products to regulators and to ISOs or markets in the Northeast United States, and that allows us to just be different than the average single asset owner who s trying to maximize revenues in their business.

6 5 In Ireland, as I mentioned, we ve developed over 170 megawatts of projects to date. On top of the 300 that we bought in, we ve built another 170 at mid-teens euro returns. We re also selling some of our green attributes into the U.K. across an interconnector that we control. This is, again, sourcing a new ancillary revenue stream that the prior owners weren t tapping into. In Colombia, we ve started to reduce costs, we started to advance development, and, most importantly, we are bringing the ideas and the frameworks that we have from North America around long-term contracts and importing them into this market, and we have the credibility, the reputation and the track record to be taken seriously when we go to counterparties and to the government and say, A long-term market here makes and here s why. It s good for consumers, it s good for the distributors. It brings lower cost of capital into the region. We just signed our first 10-year contract in the country and we would expect that over time we would lengthen the term of the contracts out. When we walked into this business, the average duration of a contract was two years. Imagine how difficult it is to finance what is a critical infrastructure asset in a county with two-year contracts underpinning it. If we can lengthen the term out, we can lengthen the duration of the debt, we can put more debt against the assets, we can bring the costs down and grow the margins, this asset will be worth a tremendous amount over time, and in addition, we can develop projects out of the pipeline. Then, lastly, TerraForm. What made us unique in TerraForm wasn t the fact that we timed it well and we re a strong sponsor, we have a good balance sheet that we could pursue this, but this was a company that was in such rapid growth mode, both of the yieldcos, that they had effectively outsourced everything in their business to third parties. They outsourced the operations, the maintenance, their health and safety programs, their regulatory programs. Every major function from an operating perspective had been outsourced. They even outsourced their corporate functions, their finance, their accounting, their tax planning, it was all done by third-party consultants. When the parent imploded, the company was left with no leadership and no plan, and a bunch of consulting contracts that ultimate nobody could really renew or nobody could build around, and so that left the sponsor in a really weak position, because it s hard to sell a business when you don t have that internal capability, nobody feels they re buying a franchise. What we brought to the table is the ability to come into these businesses and build out all the operating capabilities, built out all the corporate capabilities, and stabilize the situation, first and foremost, from a plant and equipment perspective, and then start to optimize cash flows by bringing

7 6 costs down, selling the power more optimally, selling the renewable energy credits into wholesale markets. Our business plan here, we believe, will generate significant value for shareholders. We believe it will grow the distributions well. Obviously, all of this is out there in the public domain and you can read about it in a proxy for a vote that s going to happen imminently. The other, I d say, major theme across the group, and you see it here as well, is discipline from a funding perspective and from a balance sheet perspective. We re one of the few investors, operators, owners in the power space today that has an investment grade balance sheet, and that s I mean, if you look at the IPPs in the U.S., you look at the yieldcos, and you look at many of the private infrastructure managers, virtually all of them are using sub-investment grade capital structures, or power prices have pushed them into a sub-investment grade situation. It s very difficult to navigate through. Covenants become tough. Having financial flexibility in a business like ours is paramount. You can t pursue growth the way you want to. From our perspective, we have an investment-grade balance sheet. For 17 years, we ve consistently grown our distribution, we hedge our currencies and our interest rates, we take an investment grade approach to financing all of our assets on a nonrecourse basis, and we recycle capital on an opportunistic basis. We keep it very simple. I know that sounds obvious and very simple, but if you look at our sector, it s obviously not simple and it s obviously not something that everyone else follows. I d say the most important underpinning of our success, though, has been our ability to adapt as an organization. We do not get wedded to a single idea or a single technology or a single jurisdiction. We pride ourselves on looking outwardly, looking at all regions around the world, and making thoughtful decisions about which markets are opening up, where capital is scarce, and where trends and technology are moving, such that we can start to participate in growth across that spectrum. When we started in 1999, we were really concentrated in one region, the U.S. Northeast and Canada, and so we had hydro assets, really, in two markets, but effectively one region. As we move through the 2000s, we added Brazil to our business. We have a long history in Brazil as an organization, so it was a natural place for us to start to build out. It s an important market for us, very under-supplied power and a significant development and growth opportunity. You get to the mid-2000s, we started to add some storage to our business through a pumped storage acquisition in New England. We also started to dabble in wind, and I say dabble because, as a new technology, we always take our time,

8 7 we re more measured in our approach to it, but we started to develop wind projects in regions that we felt were safe and where could generate an attractive return. You fast-forward to today, what we ve been able to do in the business is not only expand from North America and Brazil, but move into Europe, as I said. We now have toehold investments in India and China, which I ll speak to later on, but we re also invested now in solar, in wind, we have batteries in our portfolio, it s small and it s a nascent part of the business, but one that we believe has a very, very strong outlook, and so we are spreading ourselves across the technology stack, and geographically we re spreading our business, to be able to be a fully integrated power company on a global basis. Maybe just to reiterate, and I ll call Nick up to walk through cash flow growth and our balance sheet, we think there s three things that really drive this business and have really led to our ability to generate today what exceeds our long-term targets of 12% to 15% returns on a per share basis. We maintain one of the lowest risk balance sheets in the sector and a conservative financing position. We generate significant cash flow from our assets and we pride our ability to use our operating capabilities and our operating people to surface value from our assets, and we think that that allows to compound cash flow and grow value over time. Lastly, we continuously adapt to the marketplace, broadening out the business, focusing in markets where there s some sort of scarcity situation, and using that as a way to diversify both technologically and geographically. With that, I ll hand it over to Nick. NICK GOODMAN: Thanks, Sachin. Good afternoon, everyone. I m going to focus on the first two themes from the slide, which is really looking at the low-risk balance sheet that we ve structured in our business and how we ve gone about really building our business and positioning it, in our minds, as the lowest risk investment proposition in our sector. And then, secondly, looking at the organic cash flow levers that we have in our business and how we ve really embedded the business with additional levers in light of the recent growth and new assets that we ve added to the business. Before we get there, we have our first polling question, a little bit of a leading question, but the question is: do balance sheet health and credit ratings matter in relation to your investment criteria,

9 8 when you re looking at us in the context of our peer set? I ll maybe give a minute for people to answer. Yes, of course. That s the answer we were expecting. The reason we asked the question is that, absolutely, in our minds, this should be a key consideration when you re looking at investment criteria. We often hear from people maybe just go back to the slides. We often from people that they like our business, they like the assets that we ve added, they appreciate that we have delivered the longest track record of growing our distributions, we ve delivered very strong returns over time, they like our asset base, the fact that we have perpetual assets. But what we often hear is that they feel, with our growth in emerging markets, which represents maybe about 30% of our business today, with our exposure to merchant energy in the U.S. Northeast, they feel that our business represents a higher risk proposition compared to some of the Canadian IPPs or the U.S. renewable companies. We would argue the complete opposite. Touching on how Sachin talked about how we ve grown the business, and a consistent theme you ve heard today from other presenters, if you look at the quality of the assets we ve bought, how and when we ve bought them, the underlying corporate balance sheet that we have at BREP level and the capital structure we have the whole way through our business, we would actually argue, if you look at all those things together, we actually represent the lowest risk proposition in the sector. We ve put up in this slide what we do and what we don t do, and in this I ll focus on, really, on what we do, and what we do is we invest counter-cyclically. In our mind, that doesn t mean we take undue risks when we re making investments. We invest in technologies that are proven and we know and understand. We invest in geographies that have a strong support for private sector investment, they have a strong respect for capital, and specifically to the energy sector, they have supply/demand fundamentals that give us the confidence that our assets will deliver strong values over the long term. You can look at what we ve bought and when we ve bought it. Again, we touched on this earlier in the presentation, but look to what we bought when we entered Ireland, how we entered Brazil, how we entered Colombia. We entered at a point when there was no competition, there was scarcity of capital. We entered at low points in the currency, which gives you strong downside protection on your cash flows. We ve embedded the business with very high-quality assets, but we ve entered at a low

10 9 point, in different points of cycle, so low point in currency or low point in energy prices, embedding the business with a strong downside protection. I ll touch specifically on merchant hydro in the U.S., because we often hear that if you re buying merchant hydro in the U.S., that s a very different risk proposition than a company that s buying predominantly contracted assets, wind and solar in the same markets. I would say that if we had been buying merchant hydro in the U.S. when power prices were $80, that is an investment that has significant downside risk to it. But when you re buying merchant hydro in the U.S. Northeast at a very low point in the price cycle, where you ve got the operating expertise to not only sustain your cash flows, but to grow cash flows, as we touched on earlier, that s a very different risk proposition. You re buying an asset with very strong downside protection of capital, with significant levers to grow your cash flow over time, and you re also buying perpetual assets, and we always touch on this, but, again, a refresher from last year, that represents an asset that generates a very strong return on capital. It reduces the pressure to redeploy capital every year to maintain your asset base and gives you a very strong base to run a long and successful public company. What else do we do? We pair the investment thesis with conservative leverage. We recently got upgraded at the BEP level to BBB plus from BBB flat, which is the strongest rating in the sector now, and even as we go all the way through the structure, our mentality is we don t look to extract returns from leverage, we extract returns from operating expertise. That means all the way through the capital structure our debt is either investment grade rated or has investment grade metrics. A recent example would be in our merchant hydro in the U.S. Northeast, we just financed, on a 15-year interest-only basis, one of our merchant hydro plants with a BBB flat rating from S&P. For sure, we could have raised additional leverage, but we take conservative leverage, so that we know these assets will continue to generate strong cash flow and they re built to be successful through the cycle. We also seek to buy assets, portfolios or companies that have embedded levers in them. We buy them on day one, the cash flows that we buy on day one are accretive, but we have these levers to grow cash flow contribution over time, and I ll touch on them later in the presentation. Again, we ve been buying assets that are predominantly perpetual. Even our pro forma in our business, pro forma for the TerraForm transaction, still more than 80% of our asset base will be hydro, which, again, represents a perpetual asset. This approach has been absolutely critical to our business and it s the

11 10 way in which we ve built it to be long term and sustainable, and deliver successful returns to our shareholders. Just recapping very quickly on a theme from last year I won t spend much time on it because we did dig quite deep into it last year, but just a refresher. With more than 80% of our asset base in hydro, our cash flows do represent a very, very high component; 95% of our cash flows represent a return on capital. I think the key point here is this really reduces the pressure on our business to have to redeploy capital every year to maintain the asset base, and it provides you with a very sustainable distribution. With this contrarian approach to growth, we ve really built a very strong asset base that s been underpinned by a very stable balance sheet and it s delivered very strong returns over a prolonged period of time. I think the returns would be one of the longest, if not the longest, in our peer set, and it s all been done with a very solid investment grade balance sheet. While, historically, our business has delivered these returns, and it s delivered them through interest rate cycles, through power price cycles, through FX fluctuation, it s our view that in the current climate of low interest rates, of plentiful available credit, the market seems to have disconnected or pays less attention to risk and return. We have the strongest credit rating, I ve touched on the longest track record, yet, if you look at where we trade in the market versus the peer average, from a yield perspective, we trade at a discount. The reason, I said earlier, that we often get told why we trade at that discount, is they think that we represent a higher risk proposition than our peer set, and hopefully now the reason as to why we would strongly dispute this. The reason I would just focus on is that when you look at our peers, and people say, Well, your peers are buying contracted assets in developed markets, you, as an investor at the public company level, you re not buying those investments, you re buying the corporate balance sheet. When you buy into BEP, you re not buying into specific assets in Brazil or Colombia, you re buying into a company that s globally diversified, its de-risked, that s built with strong capital perpetuals, through the capital stack that provides strong access to cash flow through the cycle. So you have to look at the overall picture and realize that a BBB+ balance sheet represents a very different risk proposition to a BB balance sheet, even if the nature of the assets can be quite different.

12 11 I just want to spend a bit of time touching on, before we move on to our organic cash flow levers, just why is investment grade so important, and the first point is really the most important point. The most important benefit of maintaining your investment grade balance sheet is that you re safeguarding your business. You re protecting your access to cash flow through the cycle, be it rising interest rates, adverse effects, low power prices. In our business, if you have periods of adverse hydrology, you re ensuring that your business always has access to its cash flow. You don t have undue cash traps due to structure. You never find that you reach the end of a financing and you may have refinance risk. You conservatively leverage your balance sheet, that you never create a liquidity event, and you never have an issue where you can t get access to your project level cash flow. Further to this, we actively manage interest rate and FX exposure. On the interest rate side, most of our debt would be fixed rate debt. To the extent that if there was a 100-basis-point rise in interest rates, the next impact on our FFO would be just $2 million a year. On the FX side, we actively hedge FX in Canadian dollar and euro, where it makes sense. We would argue that the Colombian peso and the Brazilian real are to expensive from a hedging perspective. That means we have about a 50% correlation to moves in the U.S. dollar. A 10% move in the U.S. dollar across the board would have about a 5% impact on our FFO. Lastly, concentration risk and, again, this is something that I think the rating agencies take strong comfort from. As we ve grown the business, we ve diversified by technology, by geography and by power markets, we ve obviously reduced the concentration and exposure to any one sub-market. What this has enabled us to do, is it s enabled us to build a very robust business that generates strong cash flow through the cycle and is providing us a very strong base for future growth. Just moving on to focus on organic cash flow growth in our business and before I do this, just a quick relook at the map. The reason we put this up, again, is just a reminder. As we ve grown we ve added, obviously, the business in Colombia recently we now have fully integrated operating businesses in North America, in Colombia, Brazil and Europe, and each of these businesses has the capability and the ability to grow cash flows through the cycle. They have many levers within their business and we ve drawn on those levers to really contribute to the FFO growth of our business, and I ll spend some time just touching on what these levers are.

13 12 The levers, three main levers, embedded inflation escalation and I ll dig a bit deeper into each one of these. We have margin expansion, that would break down into revenue growth and cost reduction, and we have our advanced development pipeline. All this put together, it has the potential to grow FFO by 6% to 11%. But, really, what we re saying is this is what gives us the confidence to put annual distribution growth guidance out there of 5% to 9%. Focusing on inflation, you can see on this graph that, really, the key inflation in our business comes from Brazil, North America and Colombia. In Brazil and Colombia, we have 100% pass-through of inflation to our PPAs. In North America, our contracts are a varied mix. We have some that are fixed price, some that are a fraction of CPI. The net effect is that we have about a 30% annual contribution from inflation, 30% indexed inflation. We ve put up the estimated long-term inflation impacts. The punch line is that we think inflation in our business, based on these metrics, could deliver about $10 million a year to our FFO. You can see at the bottom the expected FFO margin of these businesses. Brazil would be the highest, because it has the lowest leveraged balance sheet in our group, and Colombia with the lowest and we ll touch on this in a bit previously government-owned. There s definitely opportunities within that business to drive margins, and that will mainly come from cost reduction and capital structure changes, and that represents, obviously, another one of our key levers. Moving on to re-contracting. This is, obviously, the first pillar of our margin expansion, is revenue growth. I m going to start with the downside protection, because, again, when we speak to investors, one of the questions that we get asked recently is if you look five years out, and we have a couple of significant contracts that will be expiring in our business over the next five years. One of them would be a contract we have in Quebec and another would be in New England. They re both about 1.5 terawatt hours a year. If you look at both of those contracts, one is at about US$55 and one would be about US$40. We ve put the current contract prices up here on the left, and on the right, we ve put the current market prices. The current market price in the U.S. would represent the all-in price for products in that market, so it would energy, plus capacity, plus ancillaries. What that implies is about a net energy price that you d be looking for of about $35 in today s market. If you take those assumptions, you can see that in our business and our re-contracting risk in North America, there s a probably net neutral impact of roughly zero. We don t see any real downside risk in our business from maturing contracts over the next five years in North America. All of this ignores the ability of these assets, as they mature, to re-contract, to participate in state level RFPs, participate in corporate contracting, or to even outperform the market price.

14 13 In Brazil and Colombia, we have the current contracted prices up there, and the current market price, that s our expectation of the price that we should be able to deliver as these contracts mature, based on current market conditions. All in all, you add that together, that s about $44 million contribution to FFO over the next five years, which breaks down to about 1% to 2% contribution a year. I would also just point out that all of this analysis completely ignores the 2.5 terawatt hours of merchant generation we have in the U.S. Northeast. So, 2.5 terawatt hours, just being able to enhance that revenue by $10 a megawatt hour, would be $25 million to our bottom line, and obviously we re working hard to add value there. Looking at our business and the second element of margin expansion, would just be looking at the ability to drive efficiencies. As our businesses grow and as the scale grows in each market, there s always the ability to drive efficiencies and drive down the cost per megawatt hour to boost our FFO contribution. Just targeted cost reduction that we have, just driving costs down by $2.00 a megawatt hour in our business would contribute $50 million to FFO. We have various opportunities across the business. Colombia, I touched on initially, but if you look at Colombia, Colombia today would have an EBITDA margin of about 55% to 60%. The rest of our businesses would have an EBITDA margin north of 70%. There s low-hanging fruit in that business. There s extensive use of contractors, of third-party consultants. There s ability to optimize the capital structure. There s real tangible things we can do in that business to drive the EBITDA margin and drive the contribution from that business. The rest of our businesses have set the same target and there s equal efficiencies that can be driven in those businesses. As we grow, we can look to drive the FFO margin and really contribute strongly to FFO. The last leg of our organic cash flow growth really comes from our development pipeline. We have a very strong track record in our business of taking a patient approach to development. We re very patient. We wait for the right price, right price signal to build, so that we can ensure we re delivering the right risk-adjusted return from a development perspective. If you look at what we ve done in the last five years, we ve added about 725 megawatts to our asset base. That would have contributed about $75 million to FFO. If you look forward five years currently, we have a global development pipeline of about 7,000 megawatts. That varies from very early stage to currently under construction. We would estimate that where we see the markets and our ability to push forward development and build out, we think we can deliver about another 1,000 megawatts over the next five years. If you look

15 14 at the projects that we have in the pipeline, the ones we think we can push forward, that will contribute about $125 million to FFO, about 3% to 5% annual contribution in growth. We think about 600 megawatts are likely deliverable over the next three years and the balancing 400 would be delivered four to five years from then. If you put all that together, you look at the various elements of organic cash flow growth that we have in the business, you can see that that will drive growth that should support our annual distribution growth target of 5% to 9%. Hopefully, this has given again, we often hear that, We d like to see a little bit of a breakdown of where you see your operating levers, where you see the growth coming. Hopefully, this gives people a little bit of insight into where we re driving the business, the targets we set ourselves, and the organic cash flow growth that we re targeting. Just to summarize before I hand back to Sachin, we have the lowest risk profile offering in the space, I think a BBB+ that s unrivaled amongst Canadian IPPs and U.S. renewable companies, we have a clear path to surfacing value from our existing operations, and all of that should serve well to allow us to continue to deliver our targeted distribution growth. SACHIN SHAH: Thank you, Nick. I ll spend a few minutes here, before we open it up for questions, just to talk about where is the business going forward. Nick and I both talked about where we ve come from and, really, what I d call the meat-and-potatoes of the business, really, the cash flow growth and just what can we do with the existing assets and the existing business we have, but I d like to spend a little bit of time on what else are we focused on as the market evolves and as this move to decarbonize the global economy drives through every major industrial economy in the world. To quickly recap, though, just by sticking to what we do today, we think over the next five years we can invest comfortably $3 billion to $3.5 billion of equity capital in hydro, wind, solar, the assets that we know well and that we have operating capabilities in. We think we can deploy in the range of $700 million into our development pipeline and build another 1,000 megawatts out. This is very important, because this is done at 20% returns and just generates a premium opportunity to put capital to work, with no competition, of course. If we do all of that well, we feel pretty confident we can grow our distribution at 5% to 9%, support our 12% to 15% compounding capital target, and none of this requires any departure from the current strategy or any changes to the business.

16 15 That being said, as I mentioned at the outset, we are in the midst of a real transformation in the energy markets with decarbonisation, with thermal assets out of favour, with coal plants shutting down, and, really, I d say we re seeing this everywhere, whether it s emerging markets or developed markets. In developed markets, you re seeing well supplied markets with lots of energy, where nobody worries about energy supply, but really a shift to try to decarbonize quickly, and government support. In developed economics, it s twofold. You see markets that don t have enough power, that are just struggling to keep up with demand, and then, ultimately, now dealing with pollution in major industrial centres in China and India, and so then having to deal with the fallout of that pollution to the quality of living of their citizens, and ultimately, then, pushing back to decarbonize again. There s a clear theme that s moving through the world and what it s leading to is tremendous growth opportunities. We re very excited about that, because it hits right to the heart with our business. Maybe with that, I ll open up to a polling question. Which technology do you feel is best positioned to prosper looking forward, if you had to look forward for the next 20 years? Obviously, solar and batteries is going to be a big theme, and we would completely agree with that, and maybe I ll just bring it back but what s interesting about this is there s no clear winner, and I think what it s showing, and what s probably fair, from a commentary perspective, is that everyone recognizes you can t just do it all with one technology. There will be no one technology winner. Why? Because energy markets need diversity, they need new technologies to store power, they can t rely on one resource. In the old days, they couldn t rely only on coal or gas. In the future, they can t rely only on solar or wind. Diversity will be really important, storage will become increasingly important because of intermittent renewable technologies, and creating an organization that can ultimately invest in all of the different facets of the energy market will position us for real success in the future and will allow us to open up our investible universe, and will allow us to, again, deploy capital, operate assets where we see scarcity and opportunity, and will continue to allow us to take a very value-based, contrarian approach to this sector, so that we can build out for multiple decades to come. If we look at what s evolving in our market, hydro would have been, I d say, the original stake in the ground of carbon-free power and one that s been around for 100 years and one that will be around for another 100 years, but over the last 10 years we ve seen the development and the proliferation of solar, of wind, of offshore wind now you re seeing in Europe, and for the first time in the U.S., offshore wind opportunities. We re seeing it in Taiwan and off the coast of various countries in Asia. We re

17 16 seeing distributed generation. This would be localized community solar, C&I solar, residential solar. We re seeing demand management, and what that really is helping companies with efficiency measures, reducing peak demand, and ultimately being a solutions provider, where you provide both generation, backup generation and storage, but then work with an offtake to help create more efficiency from a billing perspective. All of these things are starting to evolve and it s really all just happened in the last five years. Where are we today as a business? We obviously have a strong footprint in hydro, we have a great onshore wind business, one that we largely developed ourselves, and we are in storage, through pumped storage, but not through batteries yet in a meaningful way. We have the capabilities in three of these areas. We are pursuing these TerraForm transactions, as I ve mentioned. If we re successful in closing them, we will then be fully scaled in utilities solar and distributed generation. What all of this is lending itself to is that our investible universe is growing tremendously and we think in the long run the winners in this space will need deep operating expertise. As costs continue to come down, as competition grows, ability to extract higher margin out of these assets and out of these technologies will drive further and further growth, and being able to play across the supply chain will also drive further growth. Why this is important, is if you look at the amount of investment dollars going into this sector around the world, $325 billion is currently invested annually just in our core markets, into renewables, but what s most important, bringing you back to the slides from before, is that out of that $325 billion, $155 billion is in sectors that we currently are not investing in, in that solar, distributed generation, offshore wind, demand management side of the business. The opportunity for us to just carve out a new investible universe that we aren t currently looking at today, is very meaningful, and we re in the early stage of this cycle. We think that the opportunity set is growing, we think our investible universe is growing, and we think we can really broaden out the business if we do this in a thoughtful way, and none of this impacts the next five years of just the bread-and-butter of what we deliver, which we can do with our existing business and our existing operating levers. What s also quite important is, if you look at the investment that s going in today, virtually all of it is coming from the private sector. Governments around the world are not funding this $300 billion of capital that s going into funding the renewable development. It s very private sector-driven. It s driven there are pension plans and other state-owned entities that are included in this, but it s not a

18 17 programmatic, centralized government investment scheme, like you would have seen 50 years ago around major utilities in the United States. It s private sector-driven, and, clearly, the government has stepped aside and is looking for private capital to make those investments. What are we prioritizing? Really, much of the same that we ve prioritized over the last 17 years. First and foremost, we need to have sector expertise and we need to build that across multiple technologies. We ve done a good job in hydro, wind, solar, and now we re starting to expand that capability and when we say sector expertise, we mean the ability not only to invest, but to operate, to develop, to manage the revenue profile. Distributed generation is an important one, we think that will be an important area of growth for us over the next five years, and then geographic expansion. Again, we ve grown in Latin America, we continue to invest in North America, we have established a foothold in Europe, and we think Asia will be very important, India and China, in particular, for obvious reasons. Our approach will be to establish scalable platforms, start with small investments in these regions or in these technologies, and then look to consolidate the industry, look to do tuck-ins, and look to make acquisitions of operating businesses. We need local operating expertise to manage revenue, to manage regulatory, to manage development capabilities and to operate the assets on a local basis, and then we need follow-on investment. I ll spend a little bit of time just on distributed generation and on the markets in India and China, just to give you perspective, before we wrap it up and open it up for questions. First, distributed generation, I m only going to speak specifically about the United States. What is driving distributed generation? Maybe, before I even say what s driving it, what is distributed generation. Distributed generation, as I said before, can be residential rooftop solar, could be C&I, commercial & industrial solar, or community solar. Where we re going to focus more of our efforts is really on the C&I, the commercial/industrial, and the reason is commercial/industrial solar applications today are effectively utility-scale solar servicing industrial customers directly, as opposed to today, we do utility-scale wind and solar, we route our power through a utility and the utility services the customer. This is just bypassing the utility. We think that the opportunity set is enormous, because the drivers of this are really reliable supply and lower costs. And costs, in particular, in solar at the C&I scale have come down rapidly, they ve come down by over 30% since A lot of you may have

19 18 heard the term grid parity. We are now at that inflection point where solar has parity relative to other technologies, meaning that you could build a solar plant on a utility scale at the same cost as a gas plant that you would build, and that s an important event, because it means that now economic decisions are driving development, as opposed to subsidies and government policies. The next stage of this will be storage, and if storage gets solved, it means that the proliferation of this technology will grow even further, and we think there s a huge opportunity for distributed generation in the United States. We ve also seen 150% growth in capacity, and that s really been driven by government support and policies that are incentivizing consumers to go directly to DG customers and buy solar installations. But, maybe most importantly, is today it s still made up of very, very small players. It s a highly fragmented market. No single DG C&I owner today owns more that 7.5% of market share. It s highly fragmented, it s a large market, it s one that s growing at a rapid pace, but it s still very, very much held in small developer hands. We think this is important, because bolted onto our TerraForm transaction, we would be one of the top five owners of DG in the United States. Within TerraForm Power, there is a DG business that would be one of the top five in the United States and we think that there s not only a consolidation opportunity here, but there s a significant growth opportunity. From that perspective, we would look at this as a scaled opportunity for us to grow the business out in the future. We think that, realistically, over the next five years, on a measured basis, through consolidation, through origination and through development, we can invest circa $500 million into this sector in the United States. I ll talk a little bit about India. As you know, India has one of the world s largest populations, a very old democracy, strong growth prospects, 5% to 6% GDP growth. What do we like about this market? Setting aside all the macro reasons that it has a great story behind it, it also has a very young population. The median age in the country is 29. Over half the population is under the age 25. It has the wind at its back, from a growth perspective, from entry into the labour force perspective, but more importantly, from a power perspective, this is a country with a 1.5 billion people and 300,000 megawatts of installed capacity. Even if you don t know what that means, to put that into perspective, the United States, with 300 million people, has a million megawatts of installed capacity, so three times the power grid in the United States for one-fifth of the population. You can see that, to improve the standard of living in this country, there is immense growth that s going to take multiple decades, and we think that the investment opportunities are unique and, in particular, will be significant. There s

20 19 also very strong government support. Why? One, to electrify, 25% of the population today still has no access to electricity, but, secondly, 70% of their generation comes from coal, largely imported, and when you talk about quality of life and pollution, it s a real problem in India and pollution is a key area that the government is trying to fix, no different than what I mentioned about China in my earlier remarks. There s significant growth, there s significant policy support at the government level, and the states and the utilities are working to clean up their balance sheets and drive investment. What have we done so far in India? We ve largely been patient, because what we see in India is also what everybody else sees, and it means that asset values in our sector have really traded up to levels that we haven t been able to take advantage of yet. However, we ve recently acquired almost 300 megawatts of wind and solar in the country. We ve signed this acquisition, we haven t close it yet. This will give us a team on the ground, it ll give us a scaled platform from which to build upon, and it ll represent our entry point into India, and once we have that, we then intend to follow the same approach that we followed in Europe when we set up shop there and in Brazil when we set up shop there, pursue an acquisition and development-oriented program with local operating expertise and invest across the cycle. The other really strong, I d say, investment area in India is that it has a lot of domestic hydro resources. Although we re in wind and solar, which is largely where most of the foreign direct investment has gone, we do see a unique opportunity to acquire small hydro in the country, and we think we bring a very unique expertise to bear in that regard, relative to many of our competitors. China is a little bit different. Nobody would say that today that China is under-supplied of power. It s a very well-supplied market. They ve really been able to build out their power sector over the last 20 years. The difference in China is, I d say, there s really two big differences. One is the pollution point I made. About 65% to 70% of power comes from domestic coal resources in the country and pollution is a real issue in major urban centres like Shanghai. But, the other issue is that much of the power that s built in the country is far away from demand and from where people live. One of the things that we re seeing if you think about where most of the people live in the country, it s in the east and the south of the country, and much of the bulk power sources are coming in across transmission lines in the north and the west of country downward.

21 20 One of the things that we are observing in China right now is a real drive to help reduce the reliance on coal, use solar as a resource. They obviously want solar not just for pollution reasons, but it s a strategic industry in the country. Most of the solar panels that you buy around the world are manufactured in China, so it s support for a domestic industry. We think that there is a niche market that s really not being participated in today by the large state-owned entities, where you can go to smaller C&I customers, as I mentioned, and build out distributed solar. We have set up a small team in China. It s early days. This will be a five-year project, where we look to make small installations and build off of a footprint that we have. You can see here the growth rate for solar in China has been tremendous, but it s obviously starting at a very low base. What we have today is a very small solar footprint and a wind footprint, a team in China, and so we ll have an asset base to start with, but we ve also hired a local team, who will then help us advance our distributed solar capabilities in the country. Maybe with that, before we move to the questions, I ll just recap. Obviously, we have a very long track record, but I d say that s irrelevant for the next 20 years. Now, it s about what we have to do with this business to grow it at the same level that we ve been growing for the last 20 years. We think that to do that, having the lowest risk balance sheet in the sector will be paramount. Sticking to our knitting in terms of our financing capabilities, our operating capabilities and our ability to surface cash flow, will ensure that we are set up for success and we are compounding your capital at a pace that we ve set out as a target; 5% to 9%, we think is wholly achievable. Our investible universe is growing immensely, and so we re setting up the business for the next 20 years, such that we can participate in that growth and be ready to capitalize on new investment opportunities and new geographies, and at the end of it all, we continue to remain singularly focused on 12% to 15% share growth on a per share basis, to be able to compound over a long period of time. With that, I ll open it up for questions, if there are any. There s a question. Sean? SEAN STEUART: Thanks. Sean Steuart from TD Securities. Sachin, I want to talk about your development pipeline. You talk about 1,000 megawatts over the next five years. Can your reference the expected returns you have for those projects in the context of general return pressure across the asset classes? More

22 21 of the procurements are transitioning to competitive bidding processes. How do you contrast your returns versus what you re seeing in the industry in general? SACHIN SHAH: Sure. The question is we often say our development assets represent premium return opportunities relative to M&A opportunities in our space, so I think it s relatively what type of returns are we targeting on development. I think it differs in each region we re in. The two biggest regions we have for development today are Latin America and Europe. In Latin America, we would generally target somewhere in the 20% kind of 19% to 22% range, but 20%, just to keep it really simple, as development returns, which we think are achievable, and that s been our track record in that market. In Europe, we re targeting mid-teens, about 15%, and we ve also been able to achieve that with much of the growth we ve had in Ireland, in Scotland, and, more broadly, on the continent. That would be the returns in those regions. I think, if we were to look at North America, we haven t done any recent development. We developed a lot of wind projects in 2012 to 2015 in North American, and, again, our returns would have been similar to Europe. We would have targeted about 15% in the U.S. and Canada during that period. There s a question over there. FEMALE SPEAKER: Hi, Sachin. I just wanted to follow up on your strategic investments, like M&A, third-party M&A. You re looking at C&I investments in solar. That s going to be international, though, not in the U.S.? Just given the size, too, if you looked in the U.S., would you look at projects? I think your slide was saying you d start with projects first, but just more colour would be great. SACHIN SHAH: Yes, our focus the question was where are we going I think the question was where are we going to focus our efforts on C&I distributed solar, from a geographic perspective. First and foremost, we see the immediate opportunity in the U.S., and we see it because there s been a lot of small development that s occurred in the U.S. in a very fragmented way over the last four to five years, because of cost declines, because of policies that are supportive of this, and as cost declines further and as battery development expands, the U.S. market will be ripe for DG solar. We like DG solar on the C&I level because you can build it in scale it s not so small, like residential, where you have to

23 22 have thousands of customers, that s just not our business where you can build it on a utility scale and service customers and effectively bypass the utility. We like it for that reason. The U.S. will be our focus. When it comes to China, it s really more going to be a bit of R&D for the next few years. We re not going to rapidly expand in this area. We don t see that embedded opportunity to rapidly expand, but we ve hired a team to take incremental steps to learn, and if it takes us even five years before making a single investment in China, we re okay with that. We just see the opportunity in that market very long term is immense, could outpace the United States, and we want to have the capabilities and the expertise, such that we re ready to do that. Maybe I ll just move to an ipad question. Does China fit within the framework of respect for private capital and how do you measure geopolitical risk? First, in terms of China as a market respect for capital, foreign companies have been investing in China for over 40 years now, they ve clearly opened up their economy, and we believe that respect for capital in China is something that we believe exists, and exists with strong protections, and that foreign investment is treated quite well in the country, and you ve seen that across multiple sectors, not just on the infrastructure side, but obviously on the manufacturing side, on the technology side, and we think that ll only continue to improve as the economy in China opens up. That being said, we have today real estate investments in the country, but we ve been measured and careful in terms of how much we grow in China. As I said, we ve made our first investment in the country. We haven t closed it yet. It s protected by PPAs. We have received regulatory approvals from the Chinese regulator. In fact, we ve only been treated immensely well going into the country. They re quite excited by the fact that foreign investment will continue to push electrification of the country. If you think about it, electricity is the backbone of any global economy that wants to develop, and so having more sources of capital, having more competition will bring costs down long term, and that drives further economic growth. Our view is, both from a macro perspective in terms of attracting investment, the country is highly committed to it, but also from an industry perspective, the country is highly committed to bringing in more foreign direct investment into the market, such that competition grows.

24 23 A question right here in the front. MALE SPEAKER: (Inaudible) SACHIN SHAH: That dynamic, yes. Yes, it s a great question. I ll repeat the question. Right now, what s going on in the U.S., and this just happened last week, where there s a move to slap tariffs on imported solar panels coming in from China into the U.S. This is all part of the new regime in place that s really trying to protect domestic industry and trying to protect U.S. manufacturers of solar. There s been a large push in the country on both sides to either support this or not support this, and the question is what implications will tariffs have. Look, in our view, two things have happened. One is costs have come down, not because tariffs have gone away, but because manufacturing scale, first and foremost, came into this sector about six or seven years ago on the back of subsidies, and as you start to scale up manufacturing process, even without R&D and improvement in technology, costs came down. The second thing that happened was then technological advances came in and panels are not capturing more sunlight, they re actually able to absorb more sun, invertors are more reliable, racking systems that move with the sun are better and more productive today than they were five years ago, there s less O&M issues, and balance of plant costs have come because more and more people are now installing these facilities. We ve seen cost reductions across the value chain that had nothing to do with tariffs or import duties. That being said, if import duties and tariffs come in, we think the demand is there and that other jurisdictions will set up shop to ultimately build out solar and fill that void. I would argue, though, our business stepping back from the short-term dynamic our business has always benefited when subsidies have gone away. Subsidies attract capital that really should not be in that sector. They attract financial investors, they attract pension plans. They attract people who are not strategics in this space and who can actually drive costs down and provide services to customers. Whereas, we re an owner/operator, and whenever we ve had to play in a space with lots of subsidies or government support, that drives an allocation of capital, we ve really not succeeded. It lends itself to a low cost of capital type shoot-out. If import duties are put in or subsidies start to go away, we think that actually resonates better for us, because when you have operating capabilities, you have the

25 24 ability to bring your cost structure down over time through efficiency, through your own origination and development, and that means there ll be less competition, but there ll also be great margin opportunities for us. For our business, we think it actually represents a growth opportunity. Any other questions? Yes, there s a question right up there. NELSON NG: Can you touch on it s Nelson Ng from RBC Capital Markets. Can you touch a bit on offshore wind? At one of the previous charts, you mentioned that s one of the areas you re not currently involved in. Now that subsidies are quickly reducing, particularly in Europe, what s your approach there? Are you mainly just looking for the right opportunity or are you still shying away from the technology? SACHIN SHAH: The question is on offshore wind, is this a technology we want to pursue now that subsidies have largely gone away in Europe. The most recent option had zero subsidies. Dong committed to building by 2022, with zero subsidies in offshore wind. Is this a technology that we are open to? First and foremost, technologically, we re fine with offshore wind. We re not worried that it s still in sort of an early R&D stage. We think the technology has largely been proven out. To be candid, the technology is the same as onshore, it s just of a scale that s bigger. Some of the issues are more on the operating side. You have poles that are being bolted to the ocean floor, deep into the ocean, so just more complexity from an operating perspective, and underwater cables, which represent a little bit more risk from an ongoing capital perspective. But, setting aside those, because we think they re all manageable, we think offshore wind is a good technology, that s certainly one that s going to grow significantly in Europe, potentially in Asia. The U.S. has had more regulatory constraints around it, but we think those are starting to fall away. On the actual cost side and the return side, that s where I think we d still like to be patient in this asset class. Although the first auction with zero subsidies was awarded, it s really a giant bet, that by the time it has to be built, costs will keep coming down at a trajectory that they had been coming down for the last five years. That s just not our business. We never really rush into technologies as a first mover and we re comfortable the slide that I put up about how much capital is being invested in this sector we re very comfortable if we re a little bit late to the party, but there ll be plenty of opportunity to buy as a second owner, to buy future development opportunities and sites, ultimately, to get more

26 25 comfortable that costs have levelized and stabilized, like they now have in solar and onshore wind, and at that point in time we ll find the right opportunity, and, look, along the way, there might be some distress opportunities, and if that s a way we can enter that space, even better. There s a question right there in front of Nelson. BEN PHAM: It s Ben Pham, BMO Capital Markets. A couple years ago, Sachin, you mentioned probably your first investment with hydro, being an enormous opportunity for investment, and that s obviously been an area you ve dominated for years. Are you still focused on hydro, that s the question, and, really, secondly, why the emphasis on broadening your opportunity set by geography? Has something changed in the last few years in terms of research and thoughts on competitive dynamics? Thanks. SACHIN SHAH: The question is are we still bullish on hydro and why have we broadened out, effectively. First and foremost, we re absolutely bullish on hydro and if we can continue to buy hydro at the values that we were able to buy in the last few years, we would. Maybe we re the victims of our own success a little bit on hydro. As I mentioned earlier, we saw three scaled hydro opportunities just in the last 24 months trade in the United States at multiples that were in the range of 20 times. One of them was 18/19, one of them was 25, and one of them was bang on 20. What we re seeing is just a really strong level of competition in that space that s driving valuations up. I think it s great for the assets that we own. It may not be reflected in our stock price, but certainly in the private sector, these assets are being valued at levels that we just haven t seen, and it means that it s validating our thesis of the last 20 years of why these are great assets, and why, in a carbon-free world that needs storage and needs modulated power, these are the perfect type of assets to be able to deliver that. We re still bullish on hydro, but we re value investors and there will be further opportunities to buy them. There s no rush, we don t need to buy every hydro that comes onto the market. Then, the second part of your question is, if we re still bullish on hydro, why are we broadening out. We re broadening out, I think, because we ve always done that. We ve always recognized that supply stacks in any any major, I d say, service delivery business or infrastructure delivery business has multiple avenues to deliver that service, and power is no different. It s always traditionally had nuclear, coal, gas, hydro, and it s really only in the last 10 years that you ve seen wind, solar, and now the

27 26 other technologies I mentioned, really starting develop as new asset classes, and when you have operating expertise we ve got over 2,000 people who run our plants every day. They re engineers who don t just know how to run hydro, but they know how to service our wind farms, they know how to manage our solar fleets. That skill set is wholly transferrable. When you have relationships with utilities and end-use customers to sell your power, again, that skill set is wholly transferrable. When you sell power into open wholesale markets, like we do across the United States and into Europe, again, that s not a skill set that s unique to hydro, it s a skill set that cuts across all of these technologies. The only reason we didn t go into the thermal technologies was we never felt that the inflated fuel costs was a competitive advantage. We always liked hydro because you had no fuel costs and you were the lowest cost producer in the stack. There are now more emerging technologies that also have zero fuel costs, that we feel that we can optimize with our operating skill sets, that we can expand from a development capability and that we can grow value over time. For us, it s very natural, no different than when we entered into wind back in Entering into solar now, offshore wind in the future, distributed generation, those are all natural adjacent businesses to our core expertise. One more question, I m getting told. I ll take an ipad question. There is no ipad question. Maybe with that, I ll just end it. Okay, there s one more question right there. Yes? MARK JARVI: Mark Jarvi from CIBC. I m just wondering there s some large procurement opportunities going on in the U.S. Northeast. I know you guys are looking at some of those, participating. I was just wondering what is your strategy. When you think upside versus downside protection risk, in terms of are those is the strategy to go in to create a lift and generate more FFO, or is it more about cash flow stability and duration? SACHIN SHAH: That s a good question. The question was there have been recently three RFPs, one major RFP, but two smaller RFPs, in the United States. New England, NYPA and LIPA have all announced procurement programs, and maybe I could even Quebec that has a five-year program to procure power and capacity. So what s happening? The dynamic first, just to explain it, is that as power prices in the wholesale markets have been low and a lot of wind and solar has been built outside of

28 27 these markets, what s happened is it s created more risk on the system because there isn t appropriate storage. First and foremost, we think that s great for our hydros, we think that s great for our pumped storage facilities, because storage as a product, capacity as a product is becoming more and more valuable long term, just to put a bit of a framework around it. But, now what s happening is these regions are out there saying, We need those products. We need reliable 24/7 supply with storage and backup capability, and because of that, they re expanding their definition of what includes that. It used to be they wanted gas. Now they re saying, We also want hydro. We also want wind. We also want solar. Wind and solar, they always wanted. I d say the wind, for our business. Now, they want hydro. That s an acknowledgement of the thesis that we ve had for a while, which is that hydro will become increasingly important as this dynamic plays out in these sectors. Your question about are we participating and what s our strategy, so the answer is, yes, in two of the three we re participating. They are the two where we have a competitive advantage. In two of the three we are participating. We re participating in a large Massachusetts RFP as the big one, and one of the smaller ones. Our strategy, really, is to be able to surface value that we believe represents a reasonable return on our investment. We re fortunate enough that we ve bought all of these assets at a very, very low cycle in the marketplace. As Nick said when he was up here, we bought these assets when power prices were in the $30 to $40 range, energy only, and so we ve got a lot of cushion in terms of what we can offer up to the market, but at the same time we also recognize that the longer you go in terms of contracting opportunity, you are giving up upside if you lock yourself in. What we re doing is we re making multiple bids in. These aren t public, so I can t say what they are, but we re participating in auctions, we re putting in multiple bids with different durations, five years, seven years, 15 years and 20 years, and we re participating in all four of those different duration RFPs, with different price and escalation features. We think that we bring a fairly unique product, but we also recognize there s competition in these markets. Maybe with that, hopefully, I was able to answer to your questions. If not, we can obviously catch up afterwards, and thank you for your time.