Earnings Call: Q2 2019

Jul 31, 2019

Good day, ladies and gentlemen, and welcome to the Brookfield Renewable Partners 2nd Quarter 2019 Results Conference Call and Webcast. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Sashin Chok, Chief Executive Officer of Brookfield Renewable Partners. Sir, you may begin. Thank you, operator. Good morning, everyone, and thank you for joining us for our Q2 2019 conference call. Before we begin, I'd like to remind you that a copy of our news release, investor supplement and letter to unitholders can be found on our website. I also want to remind you that we may make forward looking statements on this call. These statements are subject to known and unknown risks, and our future results may differ materially. For more information, you're encouraged to review our regulatory filings available on SEDAR, EDGAR and on our website. Our business performed well in the Q2 of 2019, supported by strong performance at our operating businesses and contributions from recent acquisitions. We advanced our strategic priorities during the quarter, employing capital in a number of transactions while maintaining a robust balance sheet and access to capital. Of note, we generated FFO per unit of $0.74 a share, a 35% increase over the prior year. We announced our investment in a joint venture of global solar developer with over 6,500 Megawatts utility scale PV solar for approximately $500,000,000 or $125,000,000 net to PEP, which we expect to close in the Q4. We closed the acquisition of 210 megawatts of operating wind in India and the first CAD350 million tranche of our CAD750 million investment into an Alberta renewables portfolio. We announced the acquisition of a 3 22 Megawatt distributed generation portfolio in the U. S. Through Terra Power, nearly doubling our DG footprint and providing significant opportunities to drive incremental cash flow growth through operational and commercial synergies. And we ended the quarter with over $2,500,000,000 of available liquidity to raise approximately $275,000,000 in incremental liquidity, the closing of the sale of certain of our South African NIM facilities as well as strategic up financing and other liquidity initiatives. Finally, we reduced our FFO payout ratio on an annualized basis to approximately 85%. Our fifty-fifty joint venture with KKR to own one of the largest solar developers globally with an experienced management team, best in class contracting capabilities and a proven track record of developing assets at premium returns. The portfolio comprises approximately 2 75 Megawatts of operating solar, 1400 Megawatts Solar Under Construction and a broader 4,800 Megawatt Development Pipeline, which should provide significant growth optionality over the long term. Over the next 5 years, the plan for the business is to develop 500 to 800 megawatts of new solar capacity annually in the existing pipeline and to look for additional development opportunities in the global solar market. This growth will complement our existing pipeline of development projects that today include over 600 megawatts of advanced stage wind, hydro and solar and approximately 130 megawatts of assets under construction. We expect to close the investment in the Q4 of 2019. Additionally, subsequent to quarter end, we announced through TerraForm Power that we entered into an agreement to acquire for approximately $720,000,000 a scale distributed generation business in the U. S. Totaling 3 20 megawatts of recently constructed fully contracted capacity underpinned by 17 year average remaining day term with credit for the offtake. This investment will nearly double our DG footprint, making us one of the largest such portfolios in the U. S. And providing significant opportunities to drive incremental cash flow growth through operational and commercial synergy. The investment is immediately accretive and requires no incremental capital as we expect to fund the transaction in TerraForm through project level financings and asset sales. This transaction extends TerraForm's contract profile, reduces its portfolio resource variability and improves its organic cash flow growth. We expect the transaction to close in the Q3 of 2019. Finally, we continue to execute on our capital recycling program during the quarter, completing the sale of 4 of the 6 projects in our South African portfolio, proceeds of $108,000,000 or $33,000,000 net to BEP. We also advanced the sales of the final two projects in our South African portfolio and other non core portfolios in Thailand and Malaysia. We expect these asset sales to close in 2019 for total proceeds of approximately $180,000,000 or $55,000,000 in net cash flow. I'll now turn over the call to Wyatt to discuss our operating and financial position. Thank you, Sachin, and good morning, everyone. During the second quarter, we generated FFO of $230,000,000 up from $172,000,000 in the prior year as the business benefited from contributions from recent acquisitions and operational improvements driving cash flow growth. We also continue to benefit from diversity of our portfolio as strong generation from our North American hydroelectric fleet more than offset a period of relative weak increases. In the second quarter, our hydroelectric segment generated FFO of $226,000,000 Portfolio saw strong generation in North America at 15% above the long term average and strong pricing income. We continue to advance our contracting initiatives across our business to focus on commercial and industrial products. In South America, we remain focused on extending our contract term, signing 14 PPAs in Colombia and Brazil for a total of over 1200 gigawatt hours per year. As a result of these initiatives, in Colombia, approximately 30% of our contracts now have terms greater than 5 years versus time in 2016 when we acquired the business. In North America, we continue to benefit from a 17 year average contract term and no material maturities in both these projects. Our wind and solar segments generated a combined 60 $6,000,000 of FFO, up 32% relative to the same period in 2018 as we benefited from acquisitions and contributions recently commissioned projects as well as our cost saving initiatives. We also added 25 megawatts to our global rooftop solar portfolio, including commissioning 10 megawatts for our joint venture GLP in China and closing the first phase of a 15 megawatt acquisition in the U. S. Northeast. Our storage and other operations segment performed well, generating $7,000,000 of FFO during the second quarter as the growing intermittency of global electricity grid continues to increase the scarcity value of utility scale removal storage. We ended the quarter with over $2,500,000,000 of available liquidity. In addition, we continue to prioritize investment grade balance sheet, are rated BBB positive by SP, which we believe gives us significant financial flexibility and provides investors with a lower overall risk profile. Lastly, we remain focused on terming out our debt at low rates and hedging our cash flows from currency fluctuations and the cost of economic improvement. During the quarter, we extended the term of debt in our Colombian subsidiary for approximately 10 years by issuing ARS 1,100,000,000,000 of bonds in local markets. This was one of the largest financings ever completed in Colombia and given the high quality nature of our portfolio, was significantly oversubscribed. At TerraForm Power, we progressed up financings of select assets in the portfolio and used the proceeds to be paid credit. Looking ahead, we continue to focus on executing on our key priorities, including maintaining a robust balance sheet, access to a diverse source of capital, enhancing cash flows from our existing business and assessing acquisition opportunities. As always, we remain focused on delivering to our unitholders long term total returns of 12% to 15% on a per unit basis. We thank you for your continued support, and we look forward to updating you on our progress in that regard. That concludes our formal remarks. Thank you for joining us this morning. We'd be pleased to take your questions at this time. Operator? Thank And our first question comes from Sean Steuart with TD Securities. Your line is now open. Thanks. Good morning, everyone. Few questions. The 500 megawatts to 800 megawatts per year for the Xelio portfolio that you're planning on developing. I think the prospective pipeline is across a wide array of geographies. Can you give us a sense of where the midterm focus will be in terms of geographies? And then I think you guys typically reference 17% to 20% levered IRRs for Greenfield Development. Where do these projects fit in that spectrum? Sure. Hi, Hishan, it's Sachin. I'd start with just geographies in near to mid term. The bulk of their pipeline is in Iberia, the United States and parts of Latin America. And what I would say which is why we liked it because we have a presence in the market. Obviously, we think it's just logical to continue to expand broadly into Europe to further in Latin America, Colombia, Brazil, even Chile long term. And then the U. S. Is displaced. So that's how I round out sort of mid term priorities. From a return perspective, remember, they have operating under construction and pipeline assets. So you're absolutely right on pipeline assets. We target high teens returns back in U. S. Dollars and nominal fee depending on regions you would translate it for the information differentials. For operating assets and under construction assets, I'd say we would be targeting somewhere in that low double digit type of term. So if you look at the bulk of the portfolio in the near term, it's really bidding the under construction assets, which we would say we could do that low double digit U. S. Dollar return. And then the pipeline would expect building out at high teens return. And then obviously, a key part of our strategy with the business would be capital efficiency. And what we mean by that is making sure that cycle your assets, selling down projects, so that we can take capital to better Okay. Thanks for that detail. Question for Wyatt. You guys referenced the up financing activities at TerraForm and in Colombia. Can you give us a sense of line of sight you have on further midterm potential up financing? Thanks, John. I think that generally a way to think about it is if you look back to kind of 2013, we've done around $1,000,000,000 of financing expenses in that 5 to 6 period. If you look forward over the next 5 years, we think we have the same amount of debt capacity to be raised from an financing perspective. And it's really spread out throughout the world. Brazil, where we definitely have traditionally, we haven't relied on the capital markets at region. Lending conditions in that market have gone better. Rates have gone down significantly. Most banks in the country are running around a 5%, 5% and 10% base rate in that country. So that makes borrowing in that country economically prudent. And so given our portfolio there is large government leverage, that creates about $300,000,000 to $400,000,000 of that portfolio. But it really is of that kind of $1,000,000,000 of forward over the next 5 years, it really is better around the world. And it's all done at an investment grade basis, so still to succeed or financing? Okay. Thanks, Wyatt. I will get back in the queue. Thank you. And our next question comes from Rob Hope with Scotiabank. Your line is now open. Good morning, everyone. First question is on X Elio as well. I would say this is a bit of a step out just given how large of a development pipeline is included here. Does this signify that you're seeing better opportunities on the development side versus the acquisition side on relative to M and A right now. I think what we're seeing on the development side is, the last sort of 7 to 10 years on development, really been about capturing, reducing construction costs as panel costs have declined, incurred cost of in cost on the wind side of it. So really, investors or developers were successful in the past. We're really just betting that overall costs continue to decline and that decline would then work that its way into their return. Therefore, they were bidding into projects at prices that were lower than you could otherwise build something at that moment in time, but that you were making was that build cost declined by the time you actually project. I think what we're seeing now is quite a bit of an inflection point in industry where costs are largely flat, in some instances tariffs and subsidies, overall cost structure is actually increasing on the margins. And therefore, development looking forward, and I'd say for the next decade, takes a different skill set. It takes a strong operational focus so that you can operate the plants at the highest margins possible and most efficiently. It takes a strong capital discipline. So it requires investors who have strong access to capital and who are disciplined about capital recycling or effectively bringing the lowest cost of capital there to the project. And I think, therefore, it plays more to our strengths as an investor rather than making that cost will decline by the time we get results. So I just think the whole industry is at a bit of an inflection point. And I think, therefore, we see the next decade for us being more development being a more attractive part of our business. Wrapping that all up though, I would say that if the last 10 years we've done sort of 10% of our growth in development, not at all suggesting it's going to be 50%, but I do think that it can go to 20% of our growth in development and 80 percent could be M and A or 75%, 25%, whatever split you want to describe in that range. And therefore, just think that investing in portfolios like Xelio makes a lot of sense for us at this stage. All right. I appreciate that color. And then switching over to the M and A side, we've been seeing your liquidity move up through 2019 so far and we're seeing some assets for sale in Portugal and Spain. Can you just give us an update on kind of opportunities in the state of the market on the M and A side? Sure. It's still highly competitive as always. And there's lots of capital chasing deals. And I think our playbook hasn't changed. We tend to look at for opportunities where we can bring our operational acumen there, where there might be a capital scarcity, where we see follow on cash flow growth that we can deliver by optimizing the asset base. And I think in a low rate environment where there is a lot of capital and a lot of investors who like the asset class, we just continue to be aggressive about being different and trying to see different types of transactions. It doesn't mean we won't enter into auctions. It doesn't mean we want sometimes win a highly competitive auction, but we have to have an angle that's unique. And I think the DG portfolio that we acquired through TerraForm is a good example. Auction privacy fitter. But given the scale of the business we have today, the people we have and our ability to reduce costs, secure new services with those existing customers and to grow that platform, it gave us a competitive advantage to be able to successfully All right. Thank you for that. I'll hop back in the queue. Thank you. And our next question comes from Nelson Ng with RBC Capital Markets. Your line is now open. Great, thanks. A quick question on Colombia. So you mentioned that 30% of the contracts have a term greater than 5 years. Like big picture, what's your, I guess, shorter and longer term target for contract term? And I guess, do you have to balance, like is there a balance in terms of do you have to give up a bit on price to get a longer contract? Nelson, it's Sachin. So I would say, look, when we bought the business, virtually every contract ever signed was 1 to 2 periods of integration and a long term contract market did not exist in Central. Our thesis at the time was that particularly utilities and discounts would actually like certainty of a long duration contract because it was useful to the rate base and it allowed them to plan their own cost structure over a very long time. We thought industrials might like it as well, but we weren't 100% sure. What we did know though is that we had the skill set to bring it to the market, and we had a good team there in Colombia to execute on that strategy. And I'd say now that we're 3 years in, you've seen that thesis play out. You've seen customers really like the certainty of long contract to help that hydrology has been really volatile in the country. It's helped that gas has not been readily available in the country. And it's helped that GDP continues to grow and power demand continues to grow. So I think all of those things have worked in our favor. The economics, I would say, are not as black and white as you're suggesting. We signed many contracts 2 years ago when there was a shortage of water at significant premiums to the current market price because candidly people were nervous about availability of water and demand growth, and therefore, we're just looking for certainty. I'd say, but overall, as a trend, we value duration more than we value short term cost. As with duration, you can match fund the asset, you can get a lower cost of capital and you can drive a higher return to shareholders. And therefore, you will always forego a little bit of income on the front end if we can drive more capital efficiency and a better return. And you should just think of it that way. Okay. So just to clarify, so over time, you would expect that 30% of contracts greater than a 5 year term to just gradually increase, but there's no kind of sweet spot in terms of where you want that 30% to be? Yes. Look, we're not we are not proposing that we could increase it beyond 70%. And there's reasons for that in terms of just our own management and reservoirs and having some optionality available to deliver highly valued storable power in a scarce market. So I think you should expect us not to go beyond 70%. But from that 30% we're at today, we would comfortably move that up to 50% Okay, got it. And then while we're still in South America, a quick question on Brazil. You had 3 pretty good quarters in a row of, I think, slightly above average generation. Could you just comment on the reservoir levels? Like I presume they're still below average, but have been improving. But can you just give a bit more color there? Yes. Your observations are absolutely comprised reservoir levels still below long term average of the century just given that's the drought years ago. But they're improving. Our demand has been largely flat, which has allowed the recovery to occur faster than that if the economy was running itself. And I'd say we're just seeing, as a result of those factors, seeing our overall generation activity at overall. Okay, thanks. I'll get back in the queue. Thank you. And our next question comes from Rupert Merer with National Bank Financial. Your line is now open. Good morning. Looking at the M and A landscape and your strategy on M and A, are you looking at any assets that are outside of renewable energy today? Not in any direct way. I'd say we are always paying attention to new technologies in what I call the decarbonization space. And we're always looking at ways that can help companies solve for decarbonization of their existing infrastructure business. But at the end of the day, from a bulk investment perspective, today, we continue to be focused on generation. Great. Thanks. And then moving over to the wind results in the quarter. You had some softness in North American wind and you mentioned that some of the softness was from maintenance outages in the U. S. Can you talk about the results in the quarter? How much of the weakness was from a low resource and how much was from outages that you referenced in the U. S? And how much of that came from curtailments? And I think we typically are seeing curtailments in Canada these days. Yes. Thanks, Rivers. It's Wyatt here. So on the maintenance point, I think the reference here is towards our TerraForm portfolio where, as you likely know, they're transitioning to an O and M contract with GE. There were And so that was really isolated this quarter. And so that was really isolated this quarter, putting that portfolio in place and benefit O and M contract going forward significant cost savings that it provides and as well production guarantees are being guaranteed by contract as well. In terms of overall resource, I would say you've seen this across the sector. Generally, North American PIM was down. But really, that really shows why we've been focused on diversifying our business in respect of diversifying outside of North America, Europe, South America as well as diversifying across technologies and solar hydro. And we think that by layering in that diversification of our portfolio, we're really well protected And I assume you're seeing some curtailment on your Canadian assets. How do you account for that curtailment? Is the number that you present your actual generation? Or is it what you're compensated for with compensated curtailment? Yes. Rupert, we haven't seen over a material amount of Hello? Hi. You guys hear us? Yes, it did cut out though. Okay. I think sorry, we cut out there as well. Think what you may have missed is we have not experienced material level of curtailment in our Ontario fleet of assets this All right. Very good. Thanks very much. Thank you. And our next question comes from Moses Sutton with Barclays. Your line is now open. Thanks for taking my questions and congrats on the strong quarter. Brazil has been mentioned, but hydro performance in North America has been well above the LTA for 3 quarters now. We calculate 8% capacity factor higher than the LTA. Any visibility into expectations into 2H? Some of this been due to how you've been managing operationally? Or is it more or exclusively due to just hydrology conditions? Moses, it's Sachin. Look, I'd love to take credit or our team would love to take credit for operational changes. The reality is, we've been in hydro for 30 years, and we've noticed for a long, long period of time is that, above and below long term average cycles are long. So you could have a couple of years of below, you could have years above, in particular, our assets that are fed through Great Lakes. We've always seen longer dated cycles in those. It's why we make the point not to adjust our guidance or in fact, adjust our dividend based on variability of the resource. And I know we've had a good run recently with above average. But just a few years ago, we were below and people would get down about that. So I would say, we've been in this long enough to know that we plan our business on very long cycles. We measure water inflows, electricity generation, reservoir levels and sufficient in a really detailed way. And over the last 30 years, we feel really strongly that our long term average is a good reliable indicator of future earnings power for the business. And yes, on the margins, obviously, we manage the operations around things like storage, reservoir levels, outflows and regulatory strength. But in the end, simplification really has been impacted, leading to in the last few years. That's very helpful. And then any color on the strong Canada hydro pricing, dollar per megawatt hours up double digits year over year. And then looking into toward the rest of the year, on a USD basis, would you still expect high 60s per megawatt hour? Yes. Look, some of that is because we're benefiting from contractual increases in PPAs in Canada at well above the inflation rate. So we had a 3% increase per year in contracts in Ontario on our hydro fleet. So therefore, if you take that combined with currency movement, it's showing up as a meaningful increase in the per megawatt hour revenue that we're earning. But I would say for the most part, our business in Canada is fully contracted. We don't have merchant exposure. We are we have contract term comfortably over the next 10 years in Canada. And therefore, we don't expect to see a lot of variability in that market. And any increases will come from contractual escalations. That's very helpful. And last for me before I jump in the queue. Can you quantify the above LTA performance in terms of its contribution to FFO? We calculate about $30,000,000 or so. I'm just wondering if you could throw a number out there. Maybe what we can do is, Wyatt or somebody from our team call you out all the exact horizon. That'll be helpful. I'll jump in the queue. Thanks. Thank you. And our next question comes from Ben Pham with BMO. Your line is now open. Okay. Thanks. Good morning. When you guys think about adjusting this long term average, I know last few years it's been below, now it's above. And so there's a little bit of normalization to think about. And then you add in the acquisitions you've done and then this 500 to 800 Megawatt pipeline. Are you directionally heading towards the upper end of your 6% to 11% growth rate the next 5 years? So first of all, I would say a few things. Just conceptually, the 6 to 11 has nothing to do with meteorology or variability of wind, solar, hydro, we always assume and plan that long term average. And if we're below, then that's a miss in the year. And if we're above, that's found money and we don't pay it out. So I want to make sure that principle is clear. And then as it relates to the 6% to 11%, where I think a year ago or 2 years ago, we gave some visibility that the next 4 to 5 years, we had very strong conviction that we would grow FFO per share at that rate in light of cost reductions, new contracts, development that we had, absolutely, it's our job to keep replenishing that and build that out over time. So when you see us make investments like we made with Xelio, the build out that we've been doing with TerraForm, the PAs that we're signing, cost reduction initiatives that have Latin America, the build out of our business in India. It's absolutely with the view of growing or maintaining that 6% to 11% FFO growth rate as we make the investment, but then we have a business plan that we carry out to actually drive cash flow growth. So what we want to make sure investors understand is that our objective to invest capital accretively on day 1, but more importantly is to surface value from those investments over time because of the strong depth of our operational capabilities. And that is when we find investments that allow us to both buy for value but also extract value over time, they tend to over perform even our 12% to 15% churn threshold. So that's a long way of answering yes. Of course, we're trying to continue to build out the runway of that 6% to 11% growth. Okay. I was just going through just you have in that plan, you had said you only need 1,000 megawatts of development and you're already moving 200 megs and then you had this 500 to 800 megawatts and that doesn't even consider acquisitions you've done and will be doing going forward. So it just looks like you've really solidified that target that you highlighted last Investor Day. On the payout ratio then, you also had a target of 80% FFO by 2022. You're pointing to 75% this year and absolutely agree if you got to adjust for long term average. But doesn't look like you're heading ahead of plan on the payout ratio? Yes. So just to be clear, we pointed to 0.85 percent annualized. I think 75% came from somebody's research and have been credit sufficed. So I think it was Andrew's research that said 75% this year. But we put out 85% on an annualized basis. Yes, we are tracking ahead. Look, on the payout ratio, I think and I've talked to many of you and Clive talked to many of you, we have strongest balance sheet in the sector, have significant amount of liquidity, very strong sponsor, a lot of shares in the company. And we have one of the most diverse sources of access to capital relative to any peer in the industry. So we've never been overly worried about payout ratio, whether it was 98% or now 85%. We've always been comfortable that we have the financial flexibility to maneuver. However, we got a lot of feedback and we expect that feedback that we need to bring it down and we need to make sure that the investor community feels comfortable with it. So we've been bringing it down and we've been doing it simply by surfacing value in our existing assets. So we're at 85%. We're far ahead of the 2022 target that you've put out. It's good. I think it's being reflected now. People are taking interest in the stock, which is also good. And I think we see a really credible path to getting into the 70s within that same time period. Once we're in the 70s, again, I think buying that with all of the other things we've said, we have really, really strong firepower. And then just to clarify, we're 75% payout on an FFO basis year to date. So we do have a seasoned business. So we said on a like annualized basis or a basis, we're 85 percent. Okay. That's great. Thanks, everybody. Thank you. And our next question comes from Andrew Kuske with Credit Suisse. Your line is now open. Thank you. Good morning. You've managed to buy or in the process of buying your pretty big solar pipeline of opportunities. So if you should go ahead and actually start building some of the solar facilities, do you anticipate a bit of return enhancement versus some of the facilities you built in the past, such as wind and hydro that just frankly take longer to build? And with the solar, should you build them, you have a faster capital recycling trajectory. Is that true? Am I thinking about that the right way? Yes, you're hitting the nail. That's exactly right. If you build things, The procurement side of it is the supply chain side of it is really deep today. So you can get inverters, panels, connection structure very quickly. And there's a bit of a flat supply side from in person. So I think coming back to a little bit of that earlier, is we bring capital discipline and capital efficiency to this business that I think is valued by our partner and by the management team there. And just think that would be a really data to grow elements to this as opposed to betting on price. Would you care to quantify the return enhancement? Sure. I mean, look, if we're building at U. S. Dollars at anywhere from let's just use our 12% to 15% Let's assume we get every project right, and so we'll have some 18s and we'll have some 10s. Let's say we're blending around that 12% to 15 and we're monetizing and that's in U. S. Dollars. Typically today, you're monetizing these same projects at 7 to 8 to the financial investor. So if you think about the opportunity for Grecian, and let's just say you're not monetizing 100%, but you're monetizing partial interest, that could be anywhere from 4 to 700 basis points of accretion for every dollar you invest in a very quick time frame, which is you can build and rotate very quickly. So it's highly, highly accretive business. We run it well and it's probably the expertise. That's helpful. And then maybe just a different track for the second question and it really relates to the changes we saw in Alberta and I cognizant it's not even been a week since the government announced the intention of an energy only market versus the prior government moving towards the capacity market. How do you think about that in relation to your underwriting of the portfolio purchase you have there or the investment you have with TransAlta? Yes, good question. Look, I think and everyone can see this. You see energy only markets in America, you see capacity markets in Canada. And in the end, deregulated markets are meant to provide a price signal to incentivize new supply to come. I think what we've seen traditionally is markets, particularly in the U. S. And East, strong capacity bid or strong capacity options, really incentivize typically incentivize gas fired condition. And when you have a strong energy market, you get a bit of a tilting towards for renewable investments because they don't qualify for capacity payments. You can't build a wind and solar farm today and bid it into a capacity. You get no rating credit capacity. So I think you project that dynamic onto Alberta as just a base case work assumption. And from there, say, okay, well, what does that mean? Potentially means a bit more intermittency in that market as well as out. And it means that assets where you have embedded storage could have more underwritten value. And then if you take that to our underwriting, why do we like that hydro portfolio as it has a significant storage capability and has significant ability to provide stabilization services to the grid, all of which become valuable either in the near term or in the long term as thermal out of the supply stack has we're. And so I don't want to speak on the company's behalf, but I think that's a framework from which within which to think about it. And I think from our perspective, it's for us, it's a net puzzle. Okay. That's great. Thank you. Thank you. Our next question comes from Mark Jarvi with CIBC Capital Markets. Your line is now open. Thanks. Good morning. I want to go back to Xelio and the development opportunities. How do you guys see about securing offtake and types of contracts for those development projects? And maybe talk about any expertise on origination that, that team might bring that Brookfield doesn't have existing? Yes, that's a great question. That is what we like about the management team. They have a long history of signing PAs, of securing customer relationships and securing all of the permitting and interconnection requirements of solar development. We have that in our organization, but I would say this management team, very strong, has shown a track record of being able to do it in a way that creates value on a simple buy and fold maturity basis. And we think that we can obviously leverage that team and provide assistance where needed with our own existing operators and our access to capital that can only make teams' ability to serve value of long term better. So we're really happy with the team. Our partner, KKR, has been in this investment for a number of years already. So we feel like we have a like minded partner from a value creation perspective. And we feel like we had a good ability to meet with both our partner and the management team diligent, get comfortable that the direct track record is being created on this year. Okay. And then, do you get is there a belief that storage is going to be increasingly key to building out that solar pipeline and the type of contracts you'll be looking to procure? No. We're not banking on batteries or storage as part of our underwriting thesis. Obviously, storage is needed around the world and batteries are one option for storage. But they're still far away, still expensive. There still isn't a global leader when it comes to electricity battery production. You're starting to see the auto manufacturers get into this in a big way for their own businesses, but you're not seeing what we saw in wind and solar or manufacturing specifically focused on the electricity supply side starts to get created. So I think we're not betting on it and it's part of our Okay. And maybe just pivoting to pump storage in the U. S. I know you guys had some projects sort of quietly in the background, you haven't been too vocal about it. What do you guys see in terms of the current prospects for that, whether it's permitting or support by FERC? Or where do you guys see opportunities? Or is it still a bit of a ways off? Yes. We have a handful of pump storage sites, the bulk of which are in and these small scale storage sites. We have some expansion opportunities in the West Coast East, one of which is our Bear Swamp facility that we're actually in the middle of pursuing currently and close to delivering and in Ontario, kind of the Fund storage is one of those where, because of the cost to build, you need a PPA. And I'd say at this stage, still don't see a willingness from utilities or regulators to provide necessary compensation to deliver it. And if you don't have a PPA, you need either you need existing embedded infrastructure like we have in Meersuant, where it's just expansion, combined with the capacity market like you have in England, that can make the economics work. So doing it in New England, doing it with Airswan, but I would say the other projects are still on hold and just for patients, we think, are valuable. Okay. Thanks guys. Thank you. And our next question comes from Frederic Bastien with Raymond James. Your line is now open. Hi, good morning guys. Your pipeline of opportunity seems to have grown exponentially in the past 12 months, at least to me, which I guess is a good problem to have. But just wondering how you reconcile the opportunity to invest in certain assets versus others and probably more importantly, the size of the equity check that you decide to write against these assets? Hi, Frederic. Thanks for the question. Yes, look, I think your observations are bang on. We spent the last 6 or 7 years trying to globalize the business, broaden out from a technology perspective so that we could be in exactly position we're in today, which is having many, many opportunities to parse through such that we pick the best opportunity. What makes an opportunity best, I'd say we start from a risk reward perspective on opportunities where you see the highest potential return, lowest risk. And risk is both from development, from a geographic perspective, a currency perspective. And return is what we can surface from those assets by buying well and then operating well. And so we that is our criteria. We also have strengths, even if we see very, very meaningful emerging market opportunities that would skew the nature of the business, we're going to be very careful about. We've said to investors and to our analysts that we want to keep the bulk of our investments in North America and Europe, and we want to have 25% to 30% of sort of emerging market exposure, and we want to have more countries in that emerging market bucket. So we select there. We're not changing that strategy or that. So that's the overlay when we look at how to pick an investment. But in the end, it's about risk of importance and what we feel most accretively to our investors. From an access to capital perspective, we've also prioritized keeping our balance sheet strong. Again, having a BBB high balance sheet is unique, but it's not just a flag that we can play. It also gives us tremendous financial flexibility. As Wyatt said earlier, we have ample up financing opportunities in Brazil, in our various wind and solar farms where our financing structures are much shorter dated than our term and in our hydro portfolios where we have contracts rolling over and refinancings coming up where we can up finance the business. So today, I would say we probably have close to a $1,000,000,000 of up financing opportunities. We have significant asset recycling opportunities. And all of that is the function of keeping a strong balance sheet and having extra flexibility. So I don't think the strategy is going to change and we'll just continue to grow the business in the product. Thanks. And as of July 31, which technologies do you believe present bep with the best risk reward opportunities? That's a good question. Look, hydro is still, I'd say, when you find hydro for value, it is still an incredibly stable source of cash flow that typically grows over time in value and the intrinsic value of business really supports the underlying intrinsic value of the business and the perpetual nature of it is a nice match to our perpetual equity that we issue. Wind and solar, I'd say now that the costs have come down, are really good asset classes. They have a meaningful amount of growth in front of them. Technology has gone a lot better. Costs are there now that they don't need subsidies, which is always something we're afraid about. So I'd say those 3 technologies, which are now considered all power technologies, are really strong. They underpin our growth. And we said at an Investor Day maybe a year ago that if world moves to 25% viewables in the markets where we're an investor, it is somewhere in the range of $5,000,000,000,000 to $6,000,000,000,000 of growth opportunities for this asset class and this sector. We are a very, very small piece of that. We think we're a meaningful piece and we think our business has incredible runway of growth for the next decade, just given what's happening on the planet from supply transitioning to Great. Thank you so much. Thanks, Frederic. Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Sachin Shah for any closing remarks. Okay. Well, thank you, everyone, again for your support and your continuing interest in the company. Wish you all a great balance of summer, and we'll talk to you at the end of the Q3 for our next quarterly update. Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program and you may all disconnect. Everyone have a wonderful day.