Good morning, ladies and gentlemen, welcome to the Boralex Q4 of 2022 financial results conference call. Please note that all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session in which the financial analysts, shareholders, and investors will be invited to ask their questions by pressing star 1 and 1 on their telephone keypad. Please also note that the conference is being recorded. For webcast participants, you may also ask questions during the conference, but they will be answered by email after the call. Finally, media representatives are invited to contact Camilla Vertua from Boralex, her contact information is provided at the end of the quarterly press release. I would like to turn over the conference to Mr. Stéphane Milot , Senior Director, Investor Relations for Boralex. Please go ahead, sir.
Thank you, operator. Good morning, everyone. Welcome to Boralex Q4 and year-end results conference call. Joining me today on the call is Patrick Decostre, our President and Chief Executive Officer, Bruno Guilmette, our Executive Vice President and Chief Financial Officer, and other members of our management and finance teams. Mr. Decostre will begin with comments about the market conditions and the highlights of the quarter. Afterward, Mr. Guilmette will carry on with financial highlights, and then we will be available to answer your questions. As you know, during this call, we will discuss historical as well as forward-looking information. When talking about the future, there are a variety of risk factors that have been listed on the different filings with securities regulators, which can materially change our estimated results. These documents are all available for consultation at SEDAR.
In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis. When talking about the results, we generally refer to combined numbers, and when referring to cash flow and balance sheet, we generally refer to consolidated numbers. Please note that combined is non-GAAP financial measures and does not have standardized meaning under IFRS. Accordingly, combined may not be comparable to similarly named measure used by other companies. For more details, see the non-IFRS another financial measure section in our MD&A. The press release, the MD&A and the consolidated financial statement, as well as the annual report and a copy of today's presentations are all posted on our website at boralex.com under the investor section, as well as our CSR report, which has been also published today.
If you wish to receive a copy of these documents, so please contact me. Mr. Decostre will now start with his comments. Please go ahead, Patrick.
Thank you, Stephane. Good morning, everyone. It's a pleasure for me to present our results and achievement for the Q4 and fiscal year 2022. 2022 has been a very active year for Boralex. I'm very proud to say we surpassed the 3 GW of production capacity this year, while growing our AFFO by 34% in the Q4 and 27% in fiscal year 2022. We ended the year with an AFFO per share of CAD 1.63, a 27% increase over 2021. Our dividend payout ratio was 41%, meaning we reinvested 59% of our AFFO into growth project. At the very end of the year, we closed a significant transaction in the U.S., adding 447 MW to our capacity, also bringing promising upside for Boralex while diversifying our wind resources.
Our teams showed agility, innovation, and vision in the extraordinary market conditions associated with the energy crisis in Europe, as well as inflation and global supply chain pressure. As a result, we succeeded in optimizing revenues by the early termination of the short remaining term contracts, allowing us to benefit from higher selling prices. We also commissioned certain assets earlier than expected and negotiated a number of contract with electricity consuming companies, allowing us to optimize our revenues, projects, and operating assets. These actions resulted in a CAD 15 million addition to discretionary cash flows generated in 2022, a 9% increase over 2021. We also continued to add projects to our pipeline in the 4 quarters with the addition of solar and wind project totaling 137 MW to the preliminary phase of our pipeline.
Looking ahead, we are in a very solid position to pursue our growth with close to CAD 500 million available in available cash flow and authorized financing in the ratio of net debt to total capitalization of 40%. We also have a very solid pipelines of project in development and construction, which now stands at 5.5 GW. This is 2.5 GW higher and an increase of 81% over fiscal year 2020, the reference year for our 2025 strategic plan. Before covering market condition, I would like to highlight our achievement in the past 4 years for some key metrics. First, our installed capacity went from 1.9 GW in 2018 to 3 GW at the end of 2022, a 12% CAGR.
As mentioned before, our pipeline of projects increased significantly and more than doubled in the past four years. This growth was achieved while maintaining our debt level almost flat at CAD 3.3 billion. Our AFFO and AFFO per share grew by a CAGR of 30% and 22% respectively during this period. I'm very proud of these results and would like to take this opportunity to thank all Boralex employees for their commitment and hard work during these years. As you can see, your efforts really paid off. I won't go in all the details of the market's condition, but in general, I would say that for all markets in which we operate and developed, favorable programs are being discussed or put in place similar to the IRA in the U.S.
In Canada, discussions are ongoing about an investment tax credit of up to 30% per, for investment in clean technologies, with a focus on net zero technologies, battery storage solutions, and clean hydrogen. In France, the law to accelerate the development of renewable energy has been reviewed by the Senate and the Parliament and should be approved in the coming weeks. This will be followed this year with the publication of the triannual plan, setting the rules and RFP request for the coming years, the famous PPE. In the UK, England focused mostly on solar and new outlook for onshore wind farms. Scotland focused mostly on onshore wind power. It has released an onshore wind policy statement at the end of 2022, in which the Scottish government sets on an offshore wind capacity target of at least 20 GW by 2030.
This will represent an additional 11 GW of capacity by the end of the decade, as Scotland currently has about 9 GW of operational onshore wind. I will now rapidly review the main variances in our portfolio of project and growth paths. The 8 MW decrease in the early stage was due to the addition of new wind and solar projects totaling 137 MW in Europe. Change to the expected capacity of 9 wind projects and 6 solar projects in Europe for 18 MW favorable impact. These increases were offset by the progression of 4 wind and 4 solar power projects in Europe to the mid-stage phase, totaling 163 MW. The 37 MW increase in the advanced stage resulted from the progression in Europe of 3 wind projects from the mid to the advanced stage.
In total, our pipeline now comprises projects totaling 4.1 GW of wind and solar projects and 820 MW of storage project. In storage, we submitted our bid for 380 MW in the Ontario RFP on February 16. Let's review the change to the growth paths now. No project progressed to the secured stage, but 3 projects from the secured stage transition to the ready-to-build phase. These projects are the 100 MW net wind project of Apuiat in Quebec, the 29 MW wind project, Moulin Blanc, and the 21 MW wind project, Bois de Saint-Aubert in France. These projects, totaling 150 MW, are expected to be commissioned in 2024.
I won't cover in detail the progress made in our four strategic direction, as I have already talked about the major highlights, but you can find all the details in the slide of the webcast and in our MD&A. This complete my part. I will now let Bruno cover the financial position in more detail, and we'll be back later for the question period. Bruno?
Thank you, Patrick. Good morning, everyone. I will start with a review of the progress made in light of our 2025 corporate objectives. As mentioned by Patrick, we made good progress on the installed capacity by surpassing the 3 GW mark. The EBITDA and reinvestment ratio are progressing according to plan, while we had a strong AFFO increase of 27% in 2022. About our CSR strategy, we continued to make good progress on the environment, social, and governance fronts, as presented on slide 16. In 2022, we updated and published our environmental mission. We surpassed our 2022 target of women in management position and increased the target for female representation on the board of directors from 30 to 40%.
Currently, women represent 45% of our board members. We created the position of Senior Vice President, Enterprise Risk Management and Corporate Social Responsibility, with the goal of integrating ESG with risk management. For more detailed information, including data on CO₂ emissions and work done in relation to the climate changes and the TCFD initiative, I invite you to read our 2022 CSR report, which has been published earlier this morning. On our corporate objectives, our balance sheet remains very solid, with close to CAD 500 million in available cash and authorized financing facilities to continue implementing our growth plan. Our net debt to total cap ratio stands at 40%, down from 48% last year. 90% of our debt is project debt, with no recourse on Boralex and fixed interest rates. I will now cover the financial results for the quarter, starting with production.
Total wind production for the quarter, combining Canada and France, was in line with the anticipated production and 16% higher than last year. Total production for the hydro sector was 12% lower than anticipated and 21% lower than last year. The decrease is mainly attributable to US Hydro due to unfavorable weather conditions. Production from solar assets was 3% lower than anticipated, but 10% higher than the same quarter last year. Total production for the quarter was only slightly lower at 2% than anticipated, but 9% higher than last year. Q4 combined revenues were up 63% compared to last year, mostly due to high electricity prices in France, for which a large portion had to be put aside as a reserve to reimburse revenues above the price gap.
Combined, EBITDA increased by 6% in the Q4 and operating income decreased by CAD 68 million or 82% due to the recognition of a non-cash asset impairment charge on our US Solar assets, a charge relating only to increased interest rates in our annual depreciation test. Please note that the CAD 12 million increase in corporate expenses is related to increase in the workforce related to the growth of the corporation and non-recurring costs in regards to the management model update. On a consolidated basis, we have generated CAD 189 million of consolidated net cash flows related to operating activities, compared to CAD 81 million in the Q4 last year. Cash flows from operations was CAD 141 million in the Q4, a CAD 25 million increase over the same quarter last year.
AFFO was CAD 77 million compared to CAD 58 million in the same quarter last year. The increase comes from the EBITDA increase, the decrease in interest paid, and early repayment of project debt in recent quarters. Our financial position is very solid, with our net debt to total market cap ratio of 40%. I would like to briefly cover one last element before the conclusion. When looking at our Q4 results, please note that three elements affected some of our financial measures without having a material impact on our EBITDA and cash flows. The first element is an impairment of assets for our US Solar operations, given sudden significant increase in discount rate when performing our year-end impairment test. This element affected our operating income but had no impact on our cash flow. The second element was the announcement of the threshold for the feed-in premium contracts.
As expected, when we released our Q3 results, this level was not higher than our contract price, hence we did not have to take additional retroactive charges relating to this on top of the Q3 charge. Our prudent approach served us well. Finally, the market price cap of EUR 100 plus 10% of the difference between selling price and 100 became official in France at year-end. As expected, we accounted for an operating charge during the quarter, which largely offset revenues generated by the assets affected by the cap. In conclusion, fiscal year 2022 and the Q4 were strong periods in which we pursued a disciplined execution of our plan. We increased production capacity by 21%, surpassing the 3 GW mark. We added 137 MW to the preliminary phase of the project pipeline in the Q4.
Our pipeline of projects and development and construction now stands at 5.5 GW. We generated discretionary cash flows of CAD 167 million for the year-end December, 2022, a 27% increase over 2021. We continue to have a strong financial position.
Thank you for your attention. We are now ready to take your questions.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, you can please press star one and one again. Once again, it's star one and one, if you have any questions or comment, then wait for your name to be announced. We are now going to proceed with our first question. The questions come from the line of David Quezada Please ask your question. Your line is opened.
Thanks. Morning, everyone. Maybe if I could just start, in France and just on the topic of a potential accelerated permitting timeline. Is there any color you can provide on how that could benefit the projects in your pipeline or what the benefit could be for you there?
Good morning, David. The law has gone through the Senate and the Parliament and the Commission on January 10, and the final adoption will be in the next weeks in the French process. I cannot give a clear, say, direction to say how much it will accelerate. Definitively, France need more renewable and wants to have, say, less red tape. That's the take. I think the PPE, the Programmation pluriannuelle de l'énergie will be an important step because it will define exactly the pace and the volume of the RFP for the next years.
I think what we already see clearly and is that local administration are more diligent than ever in France when we have to, say, adapt something on the project. I think, and this is the most important point, it's good to have a law, but it's important that on the ground, it's accelerating, and we already see some signal like this, and we will push hard to that it impacts the significant project that we have in our pipeline.
Excellent. Thanks for that, Patrick. Maybe just one more for me. When you look, when you look across your footprint, and maybe specifically if we could touch on Limekiln, do you see any changes to the budget for any project or anything that you would point to as being affected by higher costs?
By higher costs? Yeah. The point is, you have seen that Limekiln was in our growth path since I think 2020. We had to adapt ourselves to different point. We obtained the extension agreement. We obtained larger turbine, you know, bigger rotor agreement. We have not taken any too-stretch assumptions. We have taken our final investment decision, and we are very comfortable with the return, which is on the high side of the 8%-10% expected return. That's the thing. It's the same on the Apuiat project in Quebec. We have been able to negotiate a contract with the turbine supplier and with...
for the BOP, and it's actual cost. We had room in to optimize the project between the time beginning of 2021 when we signed the contract with Hydro-Québec and today. We are also on the high side of this return frame.
That's great color. Appreciate it. I'll turn it over.
Thank you.
We're now going to proceed with our next question. The questions come from the line of Rupert Murrell from NBC. Please ask your question. Hello, Rupert. Your line is open.
Hey, Rupert. You're there?
Your line is open.
Yeah, we can go with the next one. Oh, you're there?
Yeah, sorry about that. I'm a rookie apparently. Looking at your US Solar pipeline. You've, you took some write-downs in the quarter, in New York. I know you've got some opportunities for perhaps repricing some of those projects. Can you give us some color on how that process is evolving?
Just to mention, Rupert, we did not take write-downs in New York. The write-down, the depreciation is only on our US Solar acquisition done in 2021, because on the annual test, we are using higher interest rates, and that's the only reason. It's not performance related, and it's only on US Solar acquisition completed in 2021, so California and some other states. Yeah. On the New York project specifically, we are making good progress on the cost and site optimization.
we are, like the whole industry, in discussion with NYSERDA. I am confident that this would be positive because they will have In one way or another, take into account the inflation. The RFP with NYSERDA is on, you know, we have to bid on April 16 for the 2022 RFP that has been postponed in 2023. After opening all the offer, they will have a clear view of what is a fair price for a project today with today's cost, including IRA and all those things. At that time, I presume they will act to help all the industry to take final investment decision and start building.
Rupert, just Hi, this is Stephane. Rupert, just wanted to add on the impairment question about there's also another thing to consider is that because we have a limited amount of assets in the US, the parameter to do the testing, because there's not a lot of assets, is quite small. That also triggers like when you get a high, like Bruno mentioned, a sudden increase in interest rates. It has no impact on future cash flow we were looking at for this business. You know, this is strictly an accounting measure, no cash impact either. If ever the rates are going down, this accounting charge could go down also. Thank you.
Okay, great. No, thank you. Bruno, on your liquidity, you mentioned you have CAD 500 million. Forecasting your growth out the next few years, how long is your runway now to be able to fund investments before you need more equity? Are you still looking at M&A, which of course may shorten that runway somewhat?
Yeah, we're always, Rupert, thank you for your question. We're always looking at many opportunities, whether it is in Europe and/or the US, as per our strategic plan, in the regions that we've talked about in the past. This is certainly a volatile environment, which can be good for potentially for M&A value. Valuations are moving around, hopefully, yes, it's going to create opportunities. I mean, putting aside unknown M&A for your question on runway and the cash, we believe that certainly for this year, we're pretty well financed. We have a few large projects that are going to begin construction over the course of the year.
That's taken into account in our projection. We'll see what happens on the M&A side.
All right. Thanks for color. I'll leave it there.
We are now going to proceed with our next question. The question's come from the line of Sean Steuart from TD Securities. Please ask your question.
Thank you. Good morning. Just following up on the last question, Bruno. Any broader thoughts on asset recycling opportunities? You timed the sell down in France a year ago very well. Is there still strong interest from private buyers, enough that you might consider additional asset sell downs to bolster the funding position?
Sure, Sean. There's always good interest for the types of assets that we own and the team, the people that we have to operate and develop these assets. It's really our decision to look at where we believe we've created value and where we believe that we could share some of the future potential upside and at the right price, at the right time. We try to essentially look at the portfolio and once we see potential for that to happen, I mean, we're gonna look at, we're gonna look at the possibilities in the portfolio.
Essentially we want to develop value and then, have us joined by our minority financial investors, as we've done in France. We believe there are other places in the portfolio we could do that, but it's not for the immediate future.
Okay, thanks for that detail. Patrick, a question for you with respect to Quebec. Beyond the three projects with Énergir and Hydro-Québec, can you comment on your longer term pipeline in the province? I guess the timeline for those projects coming to fruition, and if the turnover at the top of Hydro-Québec has any bearing on that timeline.
We start by the end. The strategic plan of Hydro-Québec has not changed by the change at the top, and clearly the division of Quebec government is very strong and positive on the wind development. Remind you that Quebec needs to add 100 terawatt hour before 2050, which means a 50% increase, 50 increase of the present production. Last Tuesday, the Energy Minister Pierre Fitzgibbon announced that in the coming years the capacity, his intention was to double the capacity in Quebec from 4 gigawatt to 8 gigawatt and to quadruple to 16 gigawatt by 2040, 2050.
It's clear that the government will say, order Hydro-Québec to start new RFP in the next months. It's also clear that on our pipeline we have from our experience of Apuiat project and Senio Hidebo Pre project and, say, contract negotiation in the last 2 years, we have restart strongly to make Greenfield development in Quebec, and that we will be ready to bid in this, in this RFP.
Thanks very much for that detail. That's all I have.
Thank you, Sean.
We are now going to proceed with our next question. The question has come from the line of Mark Jarvi from CIBC. Please ask your question.
Morning, everyone. Just coming back to the New York Solar projects and following up on your comments, Patrick, once you get a revised price with NYSERDA, how soon can you move to construction? Are those projects nearly fully permitted, and are you close enough on procurement that you can move to construction in a pretty timely fashion?
The team is working very hard to optimize the, say, the existing 200 megawatt project. We have optimized layout, we have optimized inverter, we have optimized everything we can. At the same time, we are working on, say, the development and optimization of the 540 megawatt, and we're working hard on bidding new projects. We have a quite clear view of the cost of construction today and the speed of construction and how to optimize that. I think what I hope is that NYSERDA will do that at the same time than the federal government will implement the real tax credit rules, the IRS rules.
We will be able to take our decision very quickly.
Maybe, Mark, also to add on that, for the 200 MW, we have all authorization to go. It's really a question of getting the right economics to start.
Okay. All right. It's up to your decision once you have some price certainty and you guys get to make the clarify, you can move pretty quickly to construction.
Yes.
Yeah. Okay. Coming back to the projects with Énergir and Hydro-Québec. Obviously Hydro-Québec's doing a, sort of a, pause on the procurement to think about planning and siting. Does that change at all those projects which have been done on a bilateral basis? Does it change the timelines at all? Or do you still feel like those projects can move ahead in a timely fashion? Maybe just update us in terms of where you are on negotiations of a PPA price.
This project has been fully negotiated. It's 3 400 megawatt project. We are working hard to obtain the environmental authorization, and we're working hard on local consultation and everything to be approved. We are also working hard with in the follow up of Apuiat the order of turbines and BOP. We are working hard to optimize cost of the project. The intention of Hydro-Québec to sign these 3 contract was specifically to say it correctly, to accelerate their energy supply to them without having to wait for RFP and the government. It's clear that they need energy quicker than 2027, which will be probably the date for the next RFP.
You know, to put in line for the next RFP that will come. No delay on this project.
And so
Sorry. The critical path is obtaining authorization finally.
When do you think you'll get environmental authorization and when could you make, I guess, a final investment decision on those projects?
That's why we are already working hard to negotiate the cost, working hard to optimize the cost because it's a big project, so optimize roads, platform, everything. It's an important optimization, and the team did it on the first three, four phases of Senio Hidebo Pre project. We know the place, but the critical path is really today the environmental authorization.
Is that expected to be completed by the end of this year?
Yeah, it's Yes and no. Yes. Yes, if everything goes perfectly well. No, it could be beginning of next year if it's a little bit more, say, difficult. I do not expect that, but we're working hard to make our decision this year, but I cannot promise this to you today.
No. Understood. Okay. The last question for me is just, obviously, there's been price caps in France, power prices come down a little bit. I'm just curious to see, you know, where the corporate PPA market is now, relative to what maybe six months ago or 12 months ago, sort of updated you in terms of what pricing might be able to clear, for 10 years or longer.
Yeah. PPA market really depend of the duration of the PPA. We have typically extend one of the PPA we signed some years ago with a company at a price which is over EUR 100 megawatt-hour. This is a 3-year extension. If you want to go to a longer term, I would say the price today, the negotiation is over EUR 80, between EUR 80 to 90 megawatt-hour for 10 years. This is things we are negotiating presently for specifically new assets. That's one thing.
There is a lot of demand because we have choices because really companies have who have a vision of the supply and demand of the power market in Europe, they clearly understand that the price will not go down, they want to secure their electricity, they know that there is not so much projects today which are able to sell their electricity because they are all contracted.
Okay. Thanks for the time today.
Okay.
We are now going to proceed with our next question. The question comes from the line of Nelson Ng from RBC Capital Markets. Please ask your question.
Great. Thanks. Just have a few quick questions. You obviously have a lot of developments in France over the next few years. I just want to clarify, in terms of project costs and inflation, are you seeing costs flatten out or come down in the later years, as you kind of look to cost out these projects or are project costs... Or is inflation just normalizing or is it coming down? Can you just comment on, like, if you build something in 2023, 2024 versus 2025?
Yeah. Yeah. Maybe one thing is inflation in France, you have two things in a project. You have the turbine themselves, and this is affected by the global international market. presently, the cost of turbine are still really acceptable because the IRA is not yet in place. this will definitely put a pressure on the cost of turbine for the future. for the balance of plant, I don't see so much difference than years ago in France because, you know, the French economy is going okay, but it's not going like North America economy. the pressure on workforce is not on service, and workforce is not the same. The inflation in Europe is specifically due to energy cost and not salaries and workforce.
It's completely different. It's also, I think, a different situation when you compare to what happened in offshore, because the risk that we have taken in typically contingencies in our budget are really in line with what happened. We have many projects that have been put in service or still in construction in France, and we are on time and on budget on all this project. This year, we will put in service 56 MW in France, and I do not expect to have a big any risk on the budget because construction are going well and it's going the right direction.
Great news. Just to clarify the receiving 18 months of merchant power price once projects are completed, how far does that go in terms of like if you have projects completed in 2024, do they also get the 18-month exposure or upside?
It's a very good question. Presently, this 18 months is an exemption, sorry, on the finance law for 2023, which put a price cap. Okay? If a project is started in 2022 or 2023 and affected by the price cap, it is no exempted by the law. This is what we accept six months ago, and this is in the law of December 30. What it means is that if there is no extension of the price cap in 2024 and further, the exemption will stay and will remain, and we will have this possibility. That's one thing.
Just to take the opportunity of your question, on the 1st of January, we have 163 megawatt, which will be in this 18 months for 2023 and some, a part of 2024, 6 months in 2024, typically for 90 of these 160 megawatts, 63. We will put in service 12 megawatts in S one and 44 megawatts in S two, and this will also benefit from the high price. I think this is important because price in Europe is still. in France, is still between 100 and 50, around 100 EUR megawatt-hour. Price for next year, when you look to forward price for 2024, it's quoted 170 EUR megawatt-hour.
The market is not seeing the price going down in 2024, which is normal when you look to nuclear refurbishment in France, nuclear important work and even the gas situation at north of EUR 50 megawatt hour in gas.
Okay. Thanks for the color. Just one last quick question. In terms of the secured projects, the French projects in the secured bucket, like, are those more likely going into 2024 or more likely into 2025 in terms of the completion date?
Yeah, it depends project by project, and it will, because on some of these project. No, on all of these project, I'm sorry, we have already the authorization, but these authorization are challenged in front of the court. We won all our trial during the last 5, 10 years, probably. I'm quite confident, I don't like to say that, but I'm quite confident that we will win also this project. That's why we put them in this. Again, the French courts are aware that they have also to accelerate their work on authorizing wind or solar project for, you know, due to the energy crisis.
Even if they remain independent from the government, they are not crazy. They understand that it's the interest of, say, the society and France to accelerate this.
Okay. Some of those projects were just kind a held up in the court process.
Yeah, it really depends. If they are, say, if. I don't have the date in mind. I cannot answer directly. We can come back to you if you want. If we have the audience in S1, we will be able to connect in 2024. If we have the audience in S2, probably it will go and slip to 2025. It will not slip further than that.
Okay. Thanks for that. I'll leave it there.
We are now going to proceed with our next question. The question's come from the line of Ben Pham from BMO. Please ask the question.
Hi. Thanks. Good morning. wanted to ask on your recent US acquisition, some assets that you picked up in Texas and surrounding areas, what is your near term and maybe longer term, goals with that acquisition?
Yeah. The first point is if it accelerate our exposure in the U.S. market like we mentioned in our strategic plan, it's the very near term, it's good cashflow, a very reasonable evaluation. I think we negotiate for more than 1 year, 15 months with EDF on this project. This project are in very good shape also technically. That's the near term goal. The second part is, we have not start, and I will not announce that today, that we start the organic development in Texas and New Mexico. It's a strong market with interesting demographic and demand growth.
Potentially it could be something where on the long term, not today, we will decide to make build up around this project or continue to like to have this exposure. One thing which was not part of the goal, but which is a good bilateral benefit of the project, is that we are partnered with Axium in this project, and Axium is sometimes or many times a competitor to buy assets. We have also conversation with them to be sometime partner of other M&A and leverage their cost of capital, private cost of capital, and our operational excellence and skills. There are different aspect.
Last but not least, to enter the U.S. market, you know, when you go to a tax equity provider, the first question is, "Are you a 10 gig guy?" Today we are north of 1 gig guy, so we start having a conversation with these people. When we had just 200 megawatt in operation, it was, we were less interesting to these people. I think this is also an important bilateral benefits of this project.
Okay, thanks. Can you remind me, does this your targets, I know you mentioned diversification? You had percentages for the US, this transaction. Does that get you closer? Is it seems like there's more to go in the US?
On the long term, as we said in our strategic plan, is to make the U.S. our number one market. This is part of the plan.
Quite a way to go, still.
Yeah.
Our growth to the U.S., both in wind and solar.
Yeah. The target, I think for 2030 is 45% of our installed capacity in the US, but 45% of 10 gigawatt. It means we need to quadruple our exposure in the US in the next 8 years. We'll work on that.
Okay. Got it. Maybe in France, you know, a lot of changes with price caps and rules and whatnot that may come off, that may not come off, but if you just kind of see what happened in the last 6 months or so, with pricing, would you have done what you've done with early retirements if you knew what you knew today on how the price caps materialized?
Yeah, sure. It's, there is two things. Yes, the answer is yes. If I knew the price cap at that time, we have maybe in the contract we signed with the other counterparty, we could have, say, do something, an improvement. We're still very happy with the situation because the project, the 326 megawatt, which we on which we send early termination, the average price was EUR 95 a megawatt hour. Okay. EUR 95 a megawatt hour due to inflation and because it's old assets. In Q4, we were selling this electricity north of EUR 500 a megawatt hour.
It means that after price cap, 10% of 400 plus 100 means EUR 140 a megawatt hour, which is still a very good price despite all my frustration. For this year, it's north of EUR 100 after price cap, the blended price for this 326 megawatt. I'm still happy with what I did and what the team did could have been really different. Yes, that's the. I think it shows the agility of our team and how we were prepared to different scenario because we start to have a trading, aggregating team. Which I start that with a single guy in, I think 2017. We were prepared to do this big move, which will create.
which has created a lot of value, and which will create a lot of value for this year and next year. Again, I think it was Nelson question. We don't know today if there will be a price cap or not in 2024 and further. That's also something which is interesting. And also another thing that we have done is we have accelerate by roughly five months Moulin de la Lan project, 65 MW, and by 2, 3 months, I think, Mont de Bazage project, which is 25 MW. On this part, we have been also agile to be exposed to the 18 months, which is in different things. It shows how much we are on the ball on these things.
Okay. That's great. Thank you.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Andrew Kuske from Credit Suisse. Please ask your question.
Thanks. Good morning. I guess the question is for Patrick, and it's really where are you seeing the greatest pressure points in developing projects? Is it, you know, on the OEM side for getting equipment and the pricing of that equipment, EPC, and companies actually building it, or is it on the regulatory side with, you know, land approvals and transmission interconnections? I guess what are your biggest concerns at this point?
Uh.
For Patrick.
I think Yeah. I will answer, Stephan. On the very short term. He wants to take my job.
No. I was just saying that it's a different dynamic at too.
Yeah. Yeah.
Go ahead.
I think on the short term, on the very short term, what is important for existing project is the question of the cost is. It's working on that. I also already comment on this. I think we have room of optimization, and we have taken. Say it's net. It's 100 megawatt output, but it's 200 megawatt final investment decision last quarter. We have taken Lincoln decision, and we're building another 56 megawatt in France. I'm quite confident we are on the right side. We have to leverage also the 1.2 gigawatt project we have in Quebec to negotiate the cost. Very short term, the cost is something.
I think on the medium term, and this depend from one market to the other, is the grid connection, you know, transmission. This will affect every market one day or another. On the grid and on the transmission system in almost every market in the world, or at least the western world are at their limits. The government has to invest lots of money on this. When I say lots of money, it's probably billions, but it's the only way to make the energy transition, so it doesn't rely on Boralex.
What rely on our side is to find the place where there is still capacity to connect project or to find a place and lobby to have new capacity somewhere and be ready to connect the project in 2027, 2028 where the capacity will be in at that time.
Okay, appreciate that. The second question, you know, Patrick, you mentioned earlier on just the importance of having a certain scale, to deal with certain players in the tax equity market from a counterparty basis. You've had very explicit megawatt targets in the market of what you want to achieve, and you're well on your way with that. When do you anticipate, you know, that megawatt target shifting into maybe return targets, whether it be ROE, ROCE some other, you know, capital metric? Maybe it's a question for you, Patrick, and also for Bruno.
Andrew, could you repeat the question? When do we expect?
To transition from megawatt targets to maybe return targets, like hitting a target return on your whole project portfolio and being more explicit about the return expectations.
We have in a way return targets because we're putting not only megawatt targets on our 2025 plan, but also AFFO. To us it is a return target. It's firstly a return target. I mean, we won't do, as we've said in the past, we won't do megawatts just to do megawatts. We want to make sure that we continue our disciplined approach and growing profitably. I know, I mean, we've talked about our return target by project, which is which continues to be 8 to 10% on a levered basis. Clearly, we're seeing that we're competitive, but in a right way. We win some projects and we lose some other projects.
We continue to be in the market, but from a different types of targets, I mean, for now, we believe that we're focused on the right numbers.
Yeah. Just maybe a comment and specific, which is, which is important, and I'm, I know that we discussed that with investors. I'm not sure that we discussed that with analysts. The 50% of the short term incentives of every employee in Boralex is to beat the highest free cash flow per share that has been achieved in the past. That's what we have done for the last 20 years, I think it's to, it's to go the right, this the right direction. It gives a lot of discipline to us when it's time to take investment decision. We're not looking to megawatt. We're not looking to EBITDA.
We're looking to AFFO and AFFO per share, and this is on what we are incentivized. I think it gives a lot of discipline to the team.
That's great. Appreciate the color. Thank you.
Thank you.
We are now going to take our next question. The question's come from the line of Naji Baydoun from iA Capital Markets. Please ask your question.
Hi, good morning. Just wanted to ask a few questions on Limekiln. I think you signed the turbine agreements already and projects expected to be commissioned sometime late next year. Can you just give us an update on the timing to sign announce the corporate PPA and get the financing completed?
Yeah, next quarter is what we are, that's our target to sign both. We need to say sign both at the same time because it's important to be safe back-to-back on the negotiation of these two contract. That's what we are planning.
Okay. Okay. That's great. Just on, you mentioned Limekiln and Apuiat, obviously two different projects in different markets, but those would be kind of at the higher end of your return targets. Where do you see in what markets today do you also see the opportunities to kind of get better returns? Is it more on bilaterally negotiated projects in Quebec? Is it more on corporate PPAs in France? Just wondering if you can comment on where kind of you see the best risk reward on organic growth today.
What I can tell you is that we have this list, since we have a counterparty on the other side, I will not, sorry, comment on where it is. I think we're really say all the project that we do are, say we do it in the same with the same discipline and, yeah, and its too sensitive information. Sorry.
Okay. Just even directionally in what types of markets or regions, can't provide any more color?
We've said in the past, I mean, supply and demand in France, I mean, still offers good potential because it's difficult to develop a project in France. We've said in the past that we can still enjoy good returns. It's an important market for us. It's just a question of supply and demand. I mean, we're certainly looking to different regions and different types of opportunities like that.
Okay. Okay, got it. Just on that last note, you mentioned still being active on M&A. Is the focus though in the short term more U.S. scale, or is it near European markets?
Essentially what we're looking is, the U.S. is certainly a market we are looking because of the size of transactions. It depend of the generation of AFFO, because I don't want to do. We prefer to do, say, 1 or 2 transactions and not 4 or 5. That's one thing. The U.S. is interesting on this side. Typically, France is not, you know, the market where we are already, like France and Quebec and Ontario is not the things where we are targeting and actively looking to that. There could be some diversification in Europe within strategic plan, it really depend of.
What is also really important, it's to really clearly understand the market if we are entering a new market. That's also an important criteria on my side to go for any M&A transaction.
Okay. That's very clear. Thank you.
Okay. Thank you.
We're now going to take our last question. The question's come from the line of Nicholas Boychuk from Cormark Securities. Please go ahead.
Thank you. Good morning. Just gonna quickly come back to the French power dynamic right now. I just want to understand, like, if I have this correct, if you're selling power on the merchant market at EUR 500 per megawatt-hour, do you immediately receive that revenue, and then immediately distribute the 90% of EUR 400 back to the regulator? I'm just trying to understand the mechanics of the platform.
Yeah. The way the price cap is functioning in France is that, yes, we get the price from the counterpart. Counterpart could be a utility PPA like we have or selling to the market. Then we have to make the calculation of... We have a kind of, we take out the EUR 100, then we calculate the difference between the EUR 100 and the price at which we are selling the electricity. We take 10% of that. We can keep that, and the 90%, we give it indeed through... It's collected through an existing tax in France, which is called the added value tax, which is an existing one, and it's just another part of this tax because it's temporary.
So that's the reason why it is in our turnover, but it's already deducted from our EBITDA.
Okay.
It goes into accounts payable.
Okay. Perfect. That makes sense. Thanks. Just very quickly on the Ontario battery energy storage opportunity, is there any update on the 600 megawatts that was bid?
Yeah. We bid 380 on February 16, which was the expedite RFP. There will be another RFP. I don't know if we know already exactly the timeframe, but there will be another one. We have been able to qualify ourselves to this RFP, so we bid the most major project that we have there with some. Because there is a price point, and there is some non-price points, like First Nations support, municipal support, the place of the system itself. We make our evaluation, and this, these non-price points are creating a discount on the price for the price merit order. We evaluate, and we bid two project in the process.
To your question, we are still pursuing the development of a larger portfolio in Ontario for the next RFP because the need of power, not energy, power, is 2.5 GW from the Ontario system, and they need that very quickly. It's an interesting opportunity for us.
Okay. Thank you for the color.
Thank you.
We have no further questions at this time. I'll hand back the conference to you for closing remarks.
Well, thanks everyone for your attention. If you have any additional questions, please call me at 514-212-1045. I'll make sure we quickly answer your questions. Our next conference call to announce Q1 results will be on Wednesday, May 10 at 10:00 A.M., and it'll be followed by our annual general meeting, which will be held the same day at 11:00 A.M. Thanks, everyone. Have a nice day.
Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.