Polaris Renewable Energy Inc. (PIF) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for joining us today. My name is Jaime Guillen, and I am the Chairman of the Board of Polaris Infrastructure. And I will act as Chairman of this annual and special meeting. On behalf of the Board, I wish to express my thanks to those shareholders who have submitted their proxies in advance of today's meeting. As this meeting is being held virtually via live webcast, we think it's important to set out a few rules for the orderly conduct of the meeting. First, questions in respect of a motion can be submitted by a registered shareholder or duly appointed proxy holder using the instant messaging service of the Lumi platform. Second, when asking a question, please indicate your name and which entity you represent, if any. And finally, questions will only be addressed during the question period at the end of the meeting, provided that questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting session itself. For the purposes of the meeting today, voting on all matters will be conducted by a single electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after presentation of all business items. Only registered shareholders and duly appointed proxy holders of the company are permitted to participate in the voting. When you are asked to vote, please enter your vote on the Lumi platform. Voting will stay open for the entire duration of the formal part of the meeting. Please note that if you have voted in advance of the meeting and do not wish to revoke your previously submitted proxies, then you do not need to do anything during the meeting. We will now proceed with the formal portion of today's meeting. I will move each item, and I have been advised by Mr. Murnaghan, a duly appointed proxy holder in attendance today, that he would be prepared to second each of the motions I so move. Accordingly, unless there are any objections, I will take such motions as seconded with no further action needed. In terms of the matters being brought before the meeting, I have been advised that the company has elected to withdraw the resolution to reapprove the Omnibus long-term incentive plan and unallocated awards thereunder. As a consequence, such resolution will not be put forward for a vote in this meeting. I will remind you that only holders of common shares as of the record date for this meeting, being the close of business of May 7, 2020, or their duly appointed proxies are entitled to vote at this meeting. I now call to order this annual and special meeting of the shareholders. In accordance with our articles, I will preside as Chair of this meeting. I would like to present the panelists and participants of this meeting. First, Marc Murnaghan, President and CEO of Polaris Infrastructure; as well as Anton Jelic, CFO of Polaris Infrastructure. With the consent of the meeting, I would like to ask Anton Jelic to act as secretary of the meeting. I would similarly ask AST Trust Company via its representative, Helen Kim, to act as scrutineer for this meeting and to report on the number of common shares at this meeting, to tabulate the votes on any ballot or poll taken at this meeting and to report to me as the Chair of the meeting. If there is no objection to the appointment of Anton Jelic or AST Trust Company of Canada, I will proceed. The notice calling this meeting of shareholders was dated May 15, 2020, and was made available to all shareholders in accordance with the Business Corporation Act of British Columbia and National Instrument 54-101. The purpose of today's meeting is set out in the notice of meeting. We have received an affidavit of mailing from our transfer agent indicating that the notice and access materials were properly mailed to the company's shareholders of record as of May 7, 2020. Accordingly, unless there is an objection, I will dispense with the reading of the notice of the meeting. The notice and access materials were mailed to shareholders on May 15, 2020. Copies of the notice of meeting, management information circular and form of proxy are available under the company's profile on SEDAR and the company's website. I direct that a company of these materials, together with proof of mailing, be attached by the secretary to the minutes of this meeting. Pursuant to the articles of the company, quorum for the transaction of business at this meeting is 2 persons who are or who represent by proxy shareholders in the aggregate hold at least 25% of the issued shares entitled to be voted at the meeting. The scrutineer's report provided to me show that there are 50 shareholders holding 8,201,266 common shares represented at this meeting today. This represents 52.22% of the 15,706,299 common shares issued and outstanding as of the record date. I, therefore, declare that a quorum is present for this meeting. I direct the secretary of the meeting to attach a copy of the scrutineer's final report on attendance to the minutes of this meeting. For the purposes of the meeting today, voting on all matters will be conducted by a single electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all such business items. When you are asked to vote, please enter your vote on the Lumi platform. Voting will stay open for the duration -- sorry, for the entire duration of the formal part of the meeting. After you have registered your votes for all business items of today's meeting, the scrutineer will complete the votes in respect of each business item -- will compile the votes in respect of each business item. As noted earlier, to further expedite the formal part of the meeting, I will take all motions as seconded. Just as a reminder, if you have completed a proxy in advance of the meeting and prior to the proxy cutoff time, your vote has already been tabulated according to your instructions. If you voted in advance of the meeting and you do not wish to revoke your previously submitted proxies, then you do not need to do anything during the course of this meeting. Voting is now open on all resolutions. As due notice has been given in accordance with our governing statute and articles and quorum being present, I now declare this meeting to be constituted for the transaction of business for which it has been called. During the course of this meeting, reference may be made to the matters discussed in the management information circular. If you are unclear as to the meaning of certain terms, please refer to the circular or ask for a clarification at the appropriate time. The first item of business is the presentation of the audited consolidated financial statements of the company for the fiscal year ended December 31, 2019, together with the auditor's report thereon. These materials have been made available to shareholders and are available on the company's website and under the company's profile on SEDAR. These financial statements are presented to the meeting, but no other action is required with respect to them. I will entertain questions with respect to the financial statements of the company in the general question period at the end. Moving on to the next item of business, which is the resolutions. As set out in the management information circular, it is proposed that each of the following 5 individuals serve as a Director of the company until the next Annual Meeting of Shareholders or until his or her successor is elected or appointed. First, Jaime Guillen, myself; second, James Lawless; third, Marc Murnaghan; fourth, Margot Naudie; and fifth, Marcela Paredes de Vásquez. As no nominations were received by the company in accordance with our advanced notice policy, I declare the nominations closed. The form of proxy for voting on the election of directors sets out each proposed nominee separately and allows shareholders to vote on each director individually. Is there any discussion on the motion?

Mr. Chair, we don't have any questions for now.

Thank you, Mr. Secretary. As there are no discussion, I will continue. As mentioned at the beginning of this meeting, voting today will be conducted by a single electronic ballot. We will, therefore, continue with the next item of business, which is the appointment of the company's auditors, and you will be prompted to vote on the election of each director after the presentation of all business items for this meeting. So I will now move to the next item of business. Moving to the next item of business. We will proceed with the appointment of our auditor and the authorization of the directors to fix the auditors' remuneration for the 2020 fiscal year. Is there any discussion on the motion?

Mr. Chair, we don't have any questions for now.

Thank you, Mr. Secretary. The motion is now on the floor. You will be prompted to vote on the appointment of the auditors after the presentation of all business items for this meeting. I will therefore move to the next item of business. As previously noted, I have been advised that the company has withdrawn the resolution to reapprove the Omnibus long-term incentive plan and the unallocated awards thereunder. Therefore, we will not be voting on such resolution at this meeting. As mentioned previously, voting today will be conducted by a single electronic ballot. You will now be prompted to register your vote in respect of each of today's business items for this meeting. Please register your votes by accessing the voting page when prompted and pressing on the for or withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of PricewaterhouseCoopers LLP as the company's auditors. After 1 minute, the electronic balloting will close and the voting page will disappear and your votes will automatically be submitted. It is now 10:13. You will have 1 minute until 10:14 to submit your votes. [Voting]

Thank you for waiting. I have received the scrutineer's report and confirm the following: number one, each of the nominees have been elected as directors of the company to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed. Number two, the appointment of PricewaterhouseCoopers LLP as the auditors of the company has been approved, and the Board of Directors of the company has been authorized to fix their remuneration. I direct that the results of the poll for the election of the directors be included in the minutes of this meeting, announced in a press release in accordance with the policies of the Toronto Stock Exchange and filed on SEDAR. This completes the formal matters of business to be conducted today. Is there any other business that should properly come before this meeting? If there is no further business to be brought before this meeting, I move and second that the formal portion of today's meeting be concluded. As the formal business of the meeting of shareholders of the company has now been completed, I would like to turn over the floor to Marc Murnaghan, President and CEO of Polaris Infrastructure, to provide a presentation on the company, following which we will hold a brief question-and-answer period after his remarks. Marc?

Thank you, Jaime. I'm going to give a very quick, call it, 5- to 10-minute overview in terms of the key highlights. So the first one I did want to address is, obviously, the COVID situation globally and how that and how that has not impacted us. I am proud to say we did take serious measures very early on in both Nicaragua and Peru and in terms of electively closing down head office, but at the plants, taking serious measures to even quarantine operators and social distancing measures. And I can say that up until now we have not had any cases of any employees, including staff operators get sick. So that's good. That's great. And so those measures seem to have worked. And also importantly, that -- given that we are a key service -- considered a key service in both countries, it's been important for the governments that we do continue to maintain continuous operations, which we have done. So the operations from that perspective have remained unaffected and running as per normal from a production perspective. So that is the comment on COVID. I did -- before I got into some specifics about the company is I did want to just mention sort of ESG or sort of environmental, social and governance. And before, call it, early in the year, late last year, before the COVID situation really emerged in the western countries and the markets took a hit and our shares took a hit, but before that, they have been rising steadily. And I think part of that -- a good part of it was the fact that we put the 2 plants in Peru into operation at the end of last year. So the 8-megawatt was put in end of November and the 20-megawatt was put into service at the end of December. So Q1 of this year really was the first quarter with those plants in operations. So that was a big milestone for us for sure. And I also think that the -- some of the marketing that we have done as a company and even just inbound interest from funds that had a growing interest in ESG companies, so the fact that we're renewable. We do have great social programs. And I mentioned something on the governance side very shortly here, but all of that, we are very good for any funds that are interested in investing in ESG-compliant companies. And so that was definitely growing. I would say that, as we sit here today, I don't see that actually as having changed in that we -- there still is a lot of interest in the sector coming out of this. So we're very happy about that. And hopefully, we can continue to garner interest with that, call it, additional -- those additional pockets of capital. And on the governance side, I am very proud to welcome Margot Naudie to the Board of Directors. Margot has a very good and long track record in the capital markets. And so I think that she can help with that. Given her experience, she worked at TD Asset Management and CPP, Marret, so -- among others, so knows the markets very well and I think can help the company make sure that we do continue to present a very good ESG profile to tap into the larger pools of capital, which, as we continue to grow, is going to be very important to us, especially given that it's a capital-intensive industry. However, it's also an industry that a lot of, call it, larger institutions really like given the nature of the assets and the consistent free cash flow. So again, very much -- we're very pleased to welcome Margot to the Board. From an operational perspective, as I did mention earlier, Nicaragua, San Jacinto, the plant there continues to run unaffected. The only comment I would make is that we will be -- every year, we do maintenance on one of the turbines. We have had to postpone that. That is not a serious issue for us because we generally have a significant amount of flex in that in terms of when we do it. So as of now, it's looking like we will do it in October and November this year. But other than that, the op of the plant continues unaffected and operating well. Peru, we have 3 plants there. Canchayllo, which is 5 megawatts, and that's been running very well and as per normal. 8 de Agosto is a 20-megawatt one, which we put into service end of the year. For the first sort of month or two, we -- it took us a little while to ramp up to full capacity. But I feel like, in March and April, we got a lot of the kinks worked out of the system, and we're now sort of -- the plant is running quite well. The only issue is now we're starting into the drier season. So from May to, call it, October, you're going to have less water, which is typical. But I do think that from a, call it, a commissioning perspective, even though we were in the end of December, it does take a little bit of time to iron everything out, and I think we're there. El Carmen is the 8-megawatt, and we did -- which we already press released, we did have an outage event end of February, and we are in the process of putting that back into service. If it wasn't for COVID, we would have likely had it back in service last month or, for sure, beginning of this month. It's -- as of now, it's looking more like middle of July. Second or third week of July is the targeted date given that, from a personnel perspective, it's -- there's been a lot of restrictions in terms of travel in country, having to quarantine technicians for 14 days. So that definitely impacted our time line. But we do -- as we sit here today, we think the principal part of that is behind us. And so we would look to, as I said, second or third week of July to get that back in service. We've had sort of 2 announcements recently. I'll deal with the first one, which is the Brookfield financing. When we did do the Peru deal, the way it was restructured was such that we would put up the equity to finish the El Carmen and 8 de Agosto plants, which we did. But that -- the way we restructured it was that it would be at in-service date, given the 20-year contracts, you would consider that to be under-levered for those types of assets. So we had always planned one to take out some of our equity that we put in and sort of rightsize the capital structure. So we always had planned that. And then the combination of a very good partner in Brookfield that clearly knows the asset class, clearly has deep pockets to grow. So I think we do have -- there's a potential for a long-term relationship because a lot of the things we're looking at in our pipeline are similar to what we did in Peru in terms of small to midsized hydro projects, where we can go in and potentially acquire operating ones, but also finish in-development ones. And that we think is of an interest to them. So to accomplish both of those objectives made a lot of sense. And so we're very, very pleased to have closed that with the name such as Brookfield. So -- and it gives us a bit of dry powder, obviously, now to look for other… [Technical Difficulty]

My apologies, but Marc was having some technical difficulties. But I would just simply continue. I think the company has made great progress in terms of progressing the operational status of the Peru projects. They were able to reach a deal with Brookfield on some additional financing, which not only provided funding for the company for its growth, but also to build a relationship with one of the major infrastructure players in the market, which is Brookfield. And with part of that funding, the company has now moved to look at other opportunities for growth, including the one that was announced yesterday in Panama. It's one of several opportunities the company is exploring, and I would like to commend Marc, Anton and then the rest of the Polaris team for continuing to look for growth for the company and also, importantly, for being able to react and implement procedures early on during the COVID situation such that to this date we have not had any issues or any incidents, in part because they are in under special procedures and taking precautions with not only the employees, but even their families, just to reduce the risk to the entire Polaris community and employees. So I think those were about the end -- the extent of Marc's comments, so I will move on to the next item of business. The next item of business is questions and answers. [Operator Instructions] We will now give attendees a brief moment to type in their questions, if there are any. I will just wait a few seconds to see if there's any questions It doesn't seem like we have any questions. There being no further questions or business, we are now concluding the question-and-answer portion of this meeting. So on behalf of the management, our Board of Directors and our employees, I would like to take the opportunity to thank everyone for attending the meeting today. I would like to thank all of our shareholders for their commitment and continued support, and we look forward to your attendance again next year at the Polaris AGM. Thank you very much.