Boralex Inc. (BLX) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by and welcome to the Boralex announcement conference call. [Operator Instructions] Please be advised, today's conference is being recorded. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Stéphane Milot. Thank you. Please go ahead. [Foreign Language]

Well, thank you, operator. [Foreign Language]. Good morning, everyone, and welcome to Boralex's conference call regarding this morning's announcement. So joining me on the line are Patrick Lemaire, President and Chief Executive Officer; and Patrick Decostre, Vice President and Chief Operating Officer; and we have also Bruno Guilmette, our Vice President and CFO; and as well as all members of our executive team. So Mr. Lemaire and -- will start the call with some comments, and then we will all be available to answer your questions. As you know, during this call, we will discuss critical as well as forward-looking information. In talking about the future, there are a variety of risk factors that have been listed in our different filings with security regulators, which can materially change our estimated results. So these documents are all available for consultation at sedar.com. So on that, Mr. Lemaire will now start with his comments. So please go ahead, Patrick.

Thank you, Stéphane. Good morning, everyone. As many of you know -- as many of you on the line surely know, this is a very special moment for me today. Boralex was not only a work for me but the realization of my passion for a successful entrepreneurship and the execution of the vision my father had 30 years ago. This transition with Patrick Decostre has been well planned and is probably not a surprise for many of you. I am sure Boralex will reach new heights under Patrick's leadership and will continue to be a fun and stimulating company to work for in years to come. I'm leaving with the feeling of having accomplished great things over the past 14 years with our wonderful management team and all our dedicated employees. 14 years ago, Boralex had 300 employees, a production capacity of 333 megawatts, generated $43 million of EBITDA and had a market cap of $312 million. At that time, our production capacity was less than 30% contracted with the bulk of our production coming from U.S. biomass sold at merchant price. We now have more than 500 employees, a production capacity of over 2,000 megawatts, $492 million of EBITDA and a $4.1 billion market cap. We also made an important turnaround of our biomass assets to finally sell these assets at a good price and invest in hydro and wind development during this period. With this strategy, we significantly reduced the cash flow generation risk of Boralex, which now accounts on 97% of its production capacity under long-term contracts. I would like to first thank all our employees, their families and all our business partners for their contribution over this period. We should all be proud of what we have accomplished. To you on the line, I'd like to thank you for your contribution to Boralex's role throughout my years as CEO. Our relationship was transparent and respectful, 2 core values I deeply weigh in the business relation, although I didn't always agree with your analysis of Boralex over the years. And the last but not the least, my sincere thanks to all present and past members of our Board of Directors for their continuous support during my tenure. A few words about Patrick before passing him the mic. Patrick has been with Boralex for more than 19 years. He has built our French operation from scratch to the #1 independent producer in the wind industry in France. Patrick is a man of action and results, a team player with a solid and diversified experience in the renewables industry, a deep understanding of the energy transition underway and very strong interpersonal skills. Patrick is also a man caring for the well-being of all our employees and of the environment we are living in. That's why he is getting so much involved in the development and positioning of our ESG strategy. Finally, Patrick is a family man and proud father and husband, who did not hesitate to move to Montreal with all the family to take the CEO challenge since last year and the CEO position as announced today. I am convinced you will all agree with me that our Board of Directors, after a thoughtful transition process, selected the right person to lead this company starting December 1. Patrick will not be alone as he will be supported by a very strong management team with diverse and complementary expertise. I am very proud of this team, and I believe our shareholders will be in very good hands for years to come as this team is also quite young. I wish you all the best, Patrick, and you know you can always count on me if you need. Finally, I will never thank enough all our employees for their contribution during those 14 years. Together, we have made the Boralex of today. Thank you. I will now ask Patrick Decostre to say a few words. Patrick?

Well, thank you, Patrick, for these nice words. Good morning, everyone. I would like to take this opportunity to thank you, Patrick, for those wonderful 14 years at the helm of Boralex. It has been an honor and a pure pleasure building this company with you. We went through so many challenges over the years, but you have always been a strong, comprehensive and focused leader to help us constantly overcome these challenges in a respectful and fun environment. As you mentioned, Boralex is definitely not the same -- of the same size today than it was 14 years ago. So the corporation still has dedicated employees and a strong and highly complementary management team with a unique culture and the same set of values, thanks to your leadership over this period. We kept our agility even if Boralex is now 10x bigger than when you arrived, and that speaks a lot about your accomplishment over this period. I wish you all the best with your many personal project, and I am also very happy you have accepted to stay on the Board of Directors of Boralex. Your unparalleled expertise in the energy sector and markets, your deep understanding of our shareholders' and investors' expectations as well as your knowledge in exemplary governance rules will bring a lot of value-added to the Board's work. As Patrick mentioned, this transition was well planned and will not, therefore, bring important changes to our strategic plan. I would like to take this opportunity to thank all our employees and colleagues who offered me their support in this transition period. I would also like to thank our Board of Directors for their support. A few words about the near future now. We reported many achievements since the announcement of our plan in June 2019, and we will continue to focus on the execution of this plan. Our financial objectives remain the same, but increasing efforts would be asked to our teams in order to accelerate our growth. There are talks of important measures to come to accelerate the energy transition in the regions we operate in. And we need to grab our fair share of these opportunities, both through organic growth but also through accretive acquisition. As you know, our objective, however, is not to grow at any price. Our objective is to generate profitable growth and reinforce our culture of optimization while growing. Our compensation is well aligned with shareholders since 75% of top management annual bonus is based on AFFO per share. Finally, we will put more emphasis on ESG going forward as we see the growing importance for our different stakeholders. At Boralex, we always had a balanced approach toward ESG, not focusing only on the E being a renewable energy company. We have consulted many stakeholders this summer, and we are currently elaborating a formal ESG plan, which will be communicated at the beginning of next year through a stand-alone ESG report as part of our year-end reporting documentation. In the meantime, we continue to improve our reporting and communication toward ESG and reinforce the element we are already doing well. This gives you a small ID of our focus for the coming quarters. We will provide more information on upcoming quarterly calls and meeting with investors. Thanks a lot for your attention. We are now ready to take questions.

[Operator Instructions] [Foreign Language] Your first question comes from Rupert Merer from National Bank.

First, to Patrick Lemaire, congratulations on all you've achieved and all the best in your retirement.

Thank you. Thank you, Rupert.

For Patrick Decostre, congratulations to you, too, on the new role. I imagine there are some functions you're giving up as COO. Can you talk about who will take those functions from you and what the, say, the upcoming management team looks like?

Actually, the -- my position, my present position as COO will not be fulfilled in the near future. We have decided with the Board and the management team. We have organized ourselves, and we're working to -- because we were working, both Patrick and myself, during the last 18 months, but we will organize ourselves to continue to work like we were before I arrived here in Quebec. And it's part of the optimization of the organization of the management team. And we have -- the executive team and the management team, we have 2 teams. It's working well, so we will pursue in this direction.

[Operator Instructions] Your next question comes from Sean Steuart from TD Securities.

And congratulations to both Patricks on the transition. A couple of questions on, I guess, specific initiatives, maybe front-running some questions we would normally ask on the quarterly call. But any updates you can give us on New York, both with respect to the 180 megawatts of solar in place and where things stand with future RFPs, timing and expected progression there?

Yes. First, the second part of the question, there was the NYPA RFP in September. There is the NYSERDA RFP exactly today, I think, in 45 minutes. So we have the possibility to bid on both RFPs with the same project. And at the end, if we are chosen on both, we have -- we will be able to decide which one we will pursue as a contract. What I said generally is we bid the same order of magnitude in terms of power than last year. And speaking about last year contract, you probably know that there are discussions after the white paper issue during the summer and the load issue last week that there will be a conversion of the fixed RECs contracting to indexed RECs contracts. So these discussions are still going for all the industry, and we will inform you when we have a, say, significant achievement on that. We are confident that this transition, its conversion will arrive in the next months.

Your next question comes from Naji Baydoun from Industrial Alliance Securities.

Just a question for Patrick Decostre. Patrick, having successfully developed and grown the European operations of Boralex, can you just give us your thoughts on what you believe is the recipe for success going forward for the company, particularly as you're expanding into new markets? Are there any tools that you would like to add to your toolbox to make sure you're going to be successful in your current strategic plan?

Yes, that's a long question. I will try to answer shortly, but to be the most -- yes, I have experience of the development in France and I have also experienced of trying to do development in other countries in Europe for Boralex, in Italy, in Spain and even in Poland, we have gone to offshore in Denmark, as you know, and we have a successful but starting business in the U.K. So the most important point is renewable energy development is a local business. It's a business which is -- you really have to be -- to have boots on the ground to develop and to understand the culture of development, the culture of the communities where you are doing things. And this is typically what we have done also in North America and what we have done the last 18 months, 24 months in New York State. And we will pursue in this direction. And also, as we mentioned, both Patrick and myself, we have a strong team, experienced team, and we know each other very well. We have 2, I cannot say new people, with Bruno and Nicolas arriving 2 years ago with us, but I can tell you that with all the job we have done in these 2 years, they are fully integrated, and the team is working well. So I think this is the -- my recipe for the future, and I think it was also the recipe of Patrick in the past.

Thanks for that. And to Patrick Lemaire, [Foreign Language].

[Foreign Language]

Your next question comes from Mark Jarvi from CIBC Capital Markets.

First of all, congratulations to both Patricks. One is the retirement for you, Patrick Lemaire, and great choice for you, Patrick Decostre, just welcome to the CEO role. You made the comment, Patrick Decostre, about the commitment and remain focused on 2023 goals, but also wanting to accelerate growth. Should we assume that sometime in the next year as you settle into the CEO chair that you'd want to put out a new set of targets and refresh that -- the new vision? Or do you expect just to run with the current targets to 2023, and at that point, provide us a new set of growth ambition?

Thank you, Mark. The next -- clearly, the next months and maybe the next year, we will definitely continue to work with the target we have and we will see along the way if it's -- if there is any reason to think. Because when you are in the middle of your strategic plan, there are -- things can move in one way or another. Typically, if you look to the Quebec market, 2 years ago, we were expecting a project at the end of the planning with the Apuiat project and you have seen the announcement of the [indiscernible] in July, and things are moving for the moment. So there are these positive move and there are also possibly some other difficulty with the COVID. So we will have a mid-plan assessment. And we will see where we are, and we will inform the market at that time.

And then when you make the comment about accelerating growth and your openness to accretive acquisitions, do you think that's the primary way to accelerate growth? Or do you see within the next 3 years, from the organic and development side, a path to bring forward projects, like you said, maybe in Quebec, but also in other regions?

We will work on both. There are some -- there are more opportunities in terms of acquisition. That's why -- that's one point. And there are also some opportunities in terms of organic growth. And we will continue with our team in France and in North America to work on organic growth because this is one way to be sure that -- acquisition is more opportunistic because you have to wait for the market being there. Organic growth, you are more in control of your development. So I think both is the better way to continue.

We have no further questions. I turn the call back over to the presenters for closing remarks.

All right. Sorry for that. Thanks a lot, everyone, and thanks for all being part of this call. I would like also today to say congratulations to both of you, Patrick. And I invite all of you to be part of our next conference call where we'll discuss the third quarter results. That will be on Wednesday, November 11. I hope you all remain healthy and have a great day. So thanks a lot. Bye.

Bye, everyone.

This concludes today's conference call. You may now disconnect. [Foreign Language]