Good morning, ladies and gentlemen, welcome to Boralex second quarter of 2023 financial results conference call. Note that all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session in which financial analysts, shareholders, and investors will be invited to ask their questions. To ask a question during the session, you will need to press star one and one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Note that the call is being recorded. For webcast participants, you can also ask your questions during the conference, they will be answered by email after the call. Media representatives are invited to contact Camille Aventure, Advisor, Public Affairs and External Communications at Boralex.
Her contact information is provided at the end of the quarterly press release. I would now like to turn the conference over to Stéphane Milot, Vice President, Investor Relations for Boralex. Please go ahead.
Well, thank you, operator, and good morning, everyone. Welcome to Boralex, second quarter results conference call. Joining me today on the call, 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. Decostre will begin with comments about market conditions and the highlights of the quarter. Afterwards, Mr. Guilmette will carry on with financial highlights, and then we'll 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 in our different filings with securities regulators, which can materially change our estimated results. These documents are all available for consultation at sedarplus.ca.
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 the combined is non-GAAP financial measure and does not have standardized meaning under IFRS. Accordingly, combined may not, may not be comparable to similarly, name measures used by other companies. For more details, see the non-IFRS and other financial measures section in the MD&A. The press release, the MD&A, the consolidated financial statements, and a copy of today's presentations are all posted on the Boralex website at boralex.com, under the Investor sections. If you wish to receive a copy of this document, please contact me. Mr.
Decoste will now start with with his comments, please go ahead, Patrick.
Thank you, Stefan. Good morning, everyone. It's a pleasure for me to present our results and achievements for the second quarter. Before going over the highlights of the quarter, I would like to reiterate our strong confidence in the future of our sector. There has been a lot of negative press in the past few months about some parts of our industry, notably the offshore wind sector. Many projects were stopped in this sector because of the important issues with selling price and supply chain. As an integrated developer and operator of onshore wind, solar, hydro, and storage technologies, we're not going through some of these issues in the same magnitude. We experience very limited impact on our operations and development activities. Yes, we're facing some challenge. We have been able, through our agility and innovative approach, to overcome them.
All our projects under construction are delivering the expected returns. We expect the same for upcoming projects. We will continue to develop our business and be a strong contributor to the energy transition. We are more than ever confident we will execute our plan with discipline in markets we know well and are able to adapt rapidly. Going back to the highlights. In the second quarter, our teams continued to make significant progress in our growth and diversification strategy while pursuing our financial discipline. Our balance sheet remains strong, with over CAD 300 million in cash resources and authorized financing facilities, providing significant flexibility to fund our growth. 369 MW of projects were added to our pipeline in the quarter, now representing over 6.2 GW of capacity.
We were also selected for 380 MW of storage projects under the Ontario RFP and for 40 MW of wind project in France's latest wind RFP. Total production increased by 28% in the second quarter compared to 2022. We benefited from contributions from the integration of wind farms we acquired in the U.S., the commissioning of assets and comparable production in France. This helped offset the impact of unfavorable weather conditions in North America in June. Our business continued to perform well, generating an EBITDA of CAD 143 million, up CAD 10 million or 7% over 2022. Reflecting the contribution from the U.S. acquisition and commissioning of assets in France, which more than compensated the decrease relating to lower production of our Canadian wind farms.
Please note that the comparable figure in the second quarter of 2022 included a CAD 14 million positive effect coming from certain feed-in premium contract in France, which was taken out in the third quarter of 2022 after the enactment of the Supplementary Budget Act. In general, demand for renewable energy in our markets remain high, creating a positive environment for the operation and the development of our activities. Favorable programs are being discussed or put in place, in particular, the ITC in Canada, which is similar to the IRA in the U.S. Legislative measures were recently published, we are expecting the new law to come into effect by the end of the year. Also, many requests for proposals are planned in the next 6 months.
Hydro-Québec RFP for 1.5 GW, Ontario second request for proposal for energy storage and capacity. The NYSERDA solicitation in the state of New York. In France, a 500 MW technology-neutral tender and two 925 MW onshore wind tenders are also expected. U.K. also restart their RFP program for wind solar. I will now rapidly review the main variances in our portfolio of project and growth paths. The change in the early stage was mainly due to three factors. First, the addition of two new wind projects, seven new solar project, and one storage project in Europe, and one wind project and one storage project in North America for a total of 369 megawatt.
Second, the progression of 2 storage energy, two energy storage projects, sorry, that were selected in the Ontario RFP to the secure stage for a reduction of 380 MW. Lastly, the progression of 2 wind project, 2 solar project, and 1 storage project in Europe to the midstage phase for a reduction of 64 MW. In the midstage, the progression of the 64 MW of project were offset by the change in the expected capacity of 1 wind project in Europe for a decrease of 10 MW, and the progression of 1 wind project in Europe to the advanced stage phase for a reduction of 52 MW. In total, our pipeline now comprises project totaling 5.3 GW of wind, solar, and storage project.
In the growth path, the secured stage increase with the progression of two energy storage projects selected in the Ontario RFP, totaling 380 MW. In the U.S., we continue to work on the optimization of our solar project and are expecting feedback from NYSERDA in the coming months. In France, the capacity of projects under construction decreased by 32 MW due to the commissioning of two wind farms and a storage unit. I won't cover in detail the progress made in our growth and diversification strategic direction, as I already talked about the major highlights. On the customer strategic direction, we continue to have discussions with numerous corporations in France as the demand for renewable energy contracted at attractive price remained high.
In terms of optimization, we internalized the service and maintenance of six U.S. solar power station with a total installed capacity of 200 MW. This complete my part. I will now let Bruno cover the financial portion 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 earlier by Patrick, our balance sheet remains solid, with more than CAD 300 million in available cash and authorized financing. We continue to make good progress on the EBITDA and FFO when taking into account the CAD 14 million effect mentioned by Patrick earlier. The reinvestment ratio is in line with our target at 53%. About our CSR strategy, we continued our efforts on the environment, social, and governance fronts, as presented on Slide 16. Among the highlights of the quarter, Boralex was recently awarded an EcoVadis gold medal for the second year in a row.
For more detailed information, including data on CO2 emissions and work done in relation to climate change and the TCFD initiative, I invite you to read our third CSR report, which was published in February. I will now cover the financial results for the second quarter, starting with production. Overall, total wind production for the quarter, combining Canada, the U.S., and France, was 42% higher than last year, but 6% lower than anticipated. Good conditions in April and May did not compensate completely for unfavorable conditions in June, especially in North America. Total production for the hydro sector was 3% lower than last year and 8% lower than anticipated. Both markets, Canada and the U.S., had unfavorable weather conditions.
Finally, production from solar assets was 12% lower than the same quarter last year and 18% lower than anticipated, mainly due to a curtailment request on the Five Points Solar Farm in California. In summary, total production for the quarter was 28% higher than last year and 8% lower than anticipated. Second quarter combined revenues were up 28% compared to last year, mostly due to the integration of our acquisition in the U.S., the commissioning of assets in France, as well as high prices of electricity in France. EBITDA increased by 7% in the second quarter, and operating income increased by 6%. Please note that the $6 million increase in corporate and general expenses is related to an increase in the workforce related to the growth of the corporation.
AFFO was CAD 3 million, compared to CAD 13 million in the same quarter last year. As mentioned by Patrick, the second quarter of 2022 included a positive CAD 14 million effect related to feed-in premium contracts. Excluding this amount, AFFO this quarter would have increased quarter-over-quarter by CAD 4 million. Our financial position is solid, with our net debt to total market capital ratio of 40%, in line with the ratio at the end of 2022. In conclusion, we continued the disciplined execution of our strategic plan in the second quarter of 2023. We made good progress along our four strategic orientations. We continued to grow and diversify by adding 369 MW of wind, solar, and storage projects to our pipeline, which reached over 6.2 GW of capacity.
The market environment continues to be highly favorable to development activities, with several requests for proposals ongoing in our markets. EBITDA and operating income increased compared to the second quarter of 2022. Finally, we maintain a solid financial position with more than $300 million in available cash and authorized financing. Thank you very much for your attention. We're now ready to take your questions.
Merci. 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, please press star one and one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Sean Steuart from TD Securities. Please go ahead, sir. Your line is open.
Sean?
Oh, can we switch to-
Sorry about that.
Oh, oh.
Sorry. Sorry, guys.
Yeah.
I want to start with a question on your, your balance sheet. Wondering if you can qualify the comfort with your existing available liquidity, given the, the growth path going forward, and if you can go through options to bolster balance sheet flexibility going forward, between asset recycling or other financing options.
Thank you, Sean. So qualifying, our balance sheet position is solid. We're in a good position to continue to fund our growth. We have options, as we've had in the past. We generate cash. We have additional leverage possible on different fronts, either corporately or at the project level. We're in a good position for the next year to continue to fund our growth without without an equity raise. Not, notwithstanding, not taking into account large M&A, obviously, as I always put as a qualifier.
Any, any thoughts to further asset sales down the road? Appreciate, you're not going to issue equity now, but looking out a year from now, if, if valuations aren't cooperating, can you speak to potential for further asset sales?
As, as you know, we've, we've looked at the past as, either, selling assets, but also, and, and more so more often or more often, partnering with, with, people like other investors, other financial investors, as we've did we did in, in France. These are options that we continue to, to look at. We continue to consider, different parts of our portfolio as potential partnerships, with, with other investors. We have good assets at, at good valuations, but, we're looking for the right conditions, size and right valuations to, to enter into a transaction. It's not, it's not lack of, lack of demand, but it's, it's mostly our at our option, when we feel it's the right time.
That's, that's a possibility, an additional possibility on the financing front, yes.
Okay. Thanks, Bruno. Next question. New York Solar projects, can you give us an idea of what is being done there to advance those projects, discussions with respect to, I, I guess, PPA amendments? What's the path forward for those projects?
Yeah. Hi, Sean, it's Patrick. The Alliance for Clean Energy has put a request in front of the Public Service Commission to provide an inflation adjustment from the time of the award to the time of I think COD. Now it's expected that in their October session, the PSC will come back with their decision on that, which is, to my understanding, supported by NYSERDA, but it's a PSC decision. This is where we are, and in the same time, what we're doing is we're working with suppliers to optimize as much as possible the project that we have, and to be ready to take the decision when it will, the planets will align.
Understood. Okay, thanks very much, Patrick. That's all I have.
Thank you, Sean.
Thank you. We will now take our next question. Please stand by. Your next question comes from the line of Nelson Ng from RBC Capital Markets. Please go ahead.
Great, thanks, and congrats on a pretty good quarter. Just a big picture question on your 2025 target of hitting 4.4 GW of capacity and about, call it $250 million of discretionary cash flows. Like, obviously, you can hit the numbers by simply doing M&A, but from an organic growth perspective, it doesn't look that easy to achieve, particularly on the discretionary cash flow side. Can you just talk about M&A versus development and also the, I guess, the importance of hitting your 2025 target?
Yeah, we are. Thank you, sorry, Nelson, it's Patrick. We are executing our plan. We are focusing specifically on the project that will create cash flow in 2025. All the team is concentrated on that. I think we are also concentrating on expenses and all the things to achieve this target. The M&A market today, yes, it seems that it's becoming more a buyer's market, it's not where we want it yet. We will continue to execute, and yeah, nothing, nothing more to say today.
Okay, thanks. You mentioned, focus on the cost side. On G&A, I think you were about at CAD 32 million this quarter. That's about 23% higher than last year. Do you expect your G&A to continue to trend a bit higher, or are you trying to manage G&A lower in the coming year? Like, obviously, you have a number of upcoming bids to focus on, but can you just talk about, yeah, about your, your G&A trend and whether that's something you're, you're trying to manage lower or not?
Yeah, well, on the G&A front. Thank you, Nelson. On the G&A front, we, we will surely, we had a bump, which is we consider temporary, and we're working towards getting this in, in terms of percentage, relative percentage, getting this back in line. We don't expect continuing growth in percentage.
Okay, got it. Thanks. I'll leave it there.
Thank you.
Thank you. We will now take our next question. Please stand by. Your next question comes from the line of Nicholas Boychuk from Cormark Securities. Please go ahead, your line is open.
Thanks. Good morning, guys. Just a, a follow-on to Nelson's question there regarding the 2025 growth path. Regarding the opportunity to expand in Europe, there's a comment in the MD&A that suggests that work's ongoing there to determine where new markets might be best to expand. Can you, can you comment on that work and whether the partnership with EIP has any impact on the trajectory for you guys into the Nordics or any other markets there?
Yeah, good morning, Nicholas. In Europe, we will definitely concentrate on France and the U.K. for the next two, three years. I think it's the best market. There is a lot of opportunity in the U.K., and we have a significant pipeline in France, producing a project, I would say, every quarters. You have also seen that the price, the average price of the last tender in France was north of EUR 85 megawatt hour. It's also a good signal. It's 42% higher than it was in 2020, this is good for the inflation of the cost. We're continuing these two market presently.
Understood, thanks. Speaking about the U.K. opportunity, can you comment at all on what you're seeing in the local market right now from a supply chain standpoint, to get the Limekiln developed on time and within budget, and what that might mean for future growth in the market?
Sorry, could you just repeat your question, Nick? It's Patrick, I did not get all the parts of the question.
No, that's no problem. Within the U.K., how robust is the supply chain in order for you to get new onshore wind projects developed, specifically the Limekiln? Do you have everything-
Okay.
you need to get everything developed on time and on budget?
Yeah, we are, we are, we have ordered our turbine for Limekiln by the end of last year. I'm happy when I'm seeing the increase of, of cost from the suppliers, so this is going in the right, say, direction. On the, on the balance of plant, we are good, good, you know, we are almost, almost finalizing the contract for the balance of plant of the project. So no issue on, on this side. There is one smaller project that will so be authorized in the next 6 months, probably. Then we will, say, continue probably to work with the same bunch of suppliers. I think... I do not expect problem in the, the next project in the UK, presently.
Excellent, thank you. Then if I can just-
Maybe, maybe another comment on the U.K.. You have seen all the question from the, the offshore wind. That was one of my comment at the beginning. There is roughly 7.4 GW of project that have got a price of GBP 3 7 a MWh. At the last RFP in the U.K., they are all, almost all, except one, I think 800 MW, stopped presently and frozen and will have to rebid in new tenders. This open many opportunity for new onshore project. That shows also to the government that being diversified is not only good for IPPs, but it's also good for systems and government.
Got it. That's some excellent color. Thanks, Patrick. The last, if I can sneak one in, is just on the corporate PPA market. It seems as though you're seeing a lot of opportunities there to get attractive pricing from corporates. Is that gonna become a much more prevalent use of refinancings and also new contracts for assets that are under development?
Yeah, it's opportunity for sure in the U.K., there is opportunity in France. We have signed some in France that will be announced in the fall, specifically for marketing question of our customers. But it's a, it's interesting price for us, and it's a good return for the project that will be built with that, or when it's renewed, it's a, it's interesting price. In the U.K., we're less known than in France, so we're starting with that, but we have had some negotiation conversation with different potential counterparties. There is also the option, as I mentioned, there is a new RFP, presently in the U.K., so I'm not comments, but it's another option for our project, to get an interesting, an interesting price.
Because the RFP for wind has been reopened for onshore wind, so that's also something interesting for our project.
Okay, excellent. Thank you very much.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Rupert Merer from National Bank. Please go ahead, your line is open.
Hi, good morning, everyone. On your, your US wind assets, you've had those for a couple of quarters now. How, how are they performing relative to your expectations? With what you've learned, what are your thoughts on expanding that platform?
I'm sorry, Rupert, we had the difficulties to hear you. You sounded weak. Can you just repeat the question?
No, I catch it.
Yeah.
The Rupert, sorry. Sorry, yeah, Stefan. The resource was lower in the wind resource in Texas for our assets was lower during the quarter, and the price was also lower on the two, the two project we, which are merchant there. We have been affected, but it. You cannot draw any conclusion on the long term. We're still confident with the assets we built and the project and that we have there.
... we're, we're seeing in Texas right now, very strong power prices this month in particular. I know you have some uncontracted exposure there, some spot exposure. How, how do you manage that asset? Are you selling spot or you selling in the, the day ahead markets? Are you seeing all the, the upside, capturing the upside we're seeing in that spot market?
Yeah, we are exposed on, on, on, on two assets, but essentially one is, you know, you have to remind that before the flip date of this asset was the tax equity. We are not, we are not really affected, upwards or downwards, because of the tax equity contract that we have on these assets. Not going to detail presently, but I think it's another sign that it's, you know, all the markets where we are, the price are going in the right direction on the long term. I think before 2025 on these assets, essentially the cash flow is up or down, is going to mainly to the tax equity.
I see. Given all, all that you know about this market and the experience you've had so far, what are your, your thoughts on organic growth in that market or, or future M&A? Basically, any, any opportunity to grow that platform.
Not presently, because as I answered to Nelson, we are really focused on the main project that will deliver cash flow for 2025 in the jurisdiction that we know. France, U.K., New York, Quebec, and Ontario. We will not start something there. I know that there is lots of things moving, specifically in storage there, it's not the same storage in Ontario. In Ontario, we have up to 22 years contract for capacity. You cannot find that in Texas.
In terms of risk reward, yes, you can make development, but presently, I prefer to put our efforts in Quebec, Ontario, and all the places where we can get long-term contract, then, and New York, it's still interesting, than than in Texas and start something.
I'll get back in the queue. Thank you.
Thank you.
Thank you. We will now take our next question. Please stand by. The next question comes from the line of David Quezada from Raymond James. Please go ahead, your line is open.
Thanks. Morning, everyone. Maybe first question here, just going back to France. I know that it's kind of been a long-running source of speculation when things could get sped up from a permitting perspective. Have you seen any progress on that? I guess maybe on a related note, do you think that the number of new projects coming online in France is sufficiently slow, that it's creating a shortfall? Does that, does that cause you to expect pricing to continue to trend higher there?
Yeah, I think. Thank you, David. There is a clear mindset from the government. There is a law of acceleration. We see some changes locally, because as I mentioned many times in the past, it's good to have a framework from the government. It's important, too, to have something locally, because the administration who is permitting the project is local. We see some changes there. When I'm looking to the fact that there will be two tender for 925 MW in September and one in December, just for wind, and another neutral tender for wind and solar in October, it's probably a little bit too much for the number of authorization available in France.
A good news also, the last tender was, we will be able to give you the exact figures, but it was, it was oversubscribed, but over-allocated, too. The power expected by the government, the, the, the award more contract than, than they ask at the beginning. It's, again, it's showing that, the, you know, the system need more electricity in France. So I think we are-- there is an interesting equilibrium there between the fact that there's a lot of demand, there will be more authorization, and this will certainly create more value in our, you know, from our organic pipeline in France.
Okay, excellent! Thanks for that, Patrick. That's great color. Maybe just one more for me. I'm just curious, if you have any thoughts or a view on negotiations around the Renewable Energy Directive in Europe. I understand there's, you know, some of those discussions are playing out now.
could you be more precise on what you're referring to? Yeah. The general point on European, you know, framework is, you know, there is no country, no electric system in Europe who is oversupplied in the next years. There is a queue, a backlog of permitting in every country that has to be, you know, settled and accelerate. I think, again, that's, that's, that's two good news for us. There is no other competition from, you know, nuclear would be in 12 years, 15 years, I don't know. There is no, there is a lot of opportunity coming from this.
When, when you see, for example, the big tender in Germany when the big oil and gas company are betting to put EUR 12 billion-EUR 13 billion on the table just to be authorized to produce offshore, and they're not doing that for no return. They're doing that to make money, so their expectations is high price for the long term in Europe. I think that's good news.
Appreciate the call. Thanks. I'll, I'll turn it over.
Okay, thank you.
Thank you. We'll now take our next question. Please stand by. Next question comes from the line of Mark Jarvi from CIBC. Please go ahead. Your line is open.
Thanks. Good morning, everyone. Bruno, you mentioned earlier you do have other options, you know, for funding beyond, you know, retained cash and, and leverage, including partnerships and, and sell downs. How, how would you say valuations compare between a partial stake sale, like you did last year in France versus outright sale portfolio assets? Is there, is there a meaningful difference in valuations on those types of transactions right now?
you mean between a minority position and control or full, full, full sale?
Yeah, exactly. Yep.
Well, I, as you know, we tend to concentrate a little bit more on, on partnerships, so selling minority positions. If I look at the valuation we got, in France, it was certainly well valued, even though it was a minority position. I think there's, there are some types of partners that value the what we can bring as an operator, as a manager of the asset, and, and therefore, they're willing to pay a fairly sizable minority position valuation. In general, when we look as, as a buyer, as potential M&A transactions, we see valuations tend to be slowly reducing as a potential buyer.
I think we'll, we'll continue to apply our discipline approach to see if it's a better time for us to buy or to sell. Again, on the, on the sell down, if we are interested in selling down partnerships, then, we'll wait for the right, the right time and the right, the right assets for, for us to, to enter into a partnership. Those have to be at the right valuation. We won't do it if, if it's not the right valuation. On the buy side, it potentially offers a bit more opportunities today than it did a year ago.
You're not giving anything up by selling down a minority stake? Like, you can still get a, a comparable multiple or maybe even a, a slight premium, depending on the, the buyer's perspective.
That's what we would look to do.
Got it. Okay. I think previously you guys mentioned.
Sorry.
Yep.
We believe.
Go ahead, Bruno.
That's what we did in, in France. That we believe that's what we did in France.
Yep, certainly. I think previously you'd mentioned, or we saw it with the Des Neiges projects, a bilateral negotiation, plus through the RFP. Do you have a sort of updated view in terms of the most likely path to get a new contracts in Quebec going forward? I guess for certain projects, can you do both paths at the same time? Can you try to do bilateral at the same time, bid those projects in the RFP to sort of hedge your bet in terms of those two pathways to getting the contracts?
It's, we're all smiling here because it's a very interesting question, but it's a very strategic question. Like in every market, Mark, we are working on the different opportunity to have a diversified portfolio of the way of commercializing our energy. So it could be, you know, we did indeed, let's say, 1.4 GW of bilateral in Quebec. Probably in the future, there would be opportunity. There would certainly be a tender. There was one in September. You know, it seems that another one would be announced by the end of the year for next year. We are always looking to all the opportunity and it depend on the customers and the government.
There's nothing that prohibits you from trying to negotiate while at the same time putting up a, a project into an RFP?
Not to my knowledge, no.
Okay. Then, what's your updated views in terms of the price caps in France? We saw the European Union look to stop those, what's your expectation in France in terms of how long the price cap stays and whether or not they would renew it for 2024?
Yeah, there is a. The European Union seems to be clear. Germany, as to my knowledge, extend a little bit to the end of the next winter, because the winter is the more important part, and they are still thinking that the winter could be, say, at risk. We will see what's the French government is discussing. To my knowledge, there is no discussion today. You never know in the finance law what could happen. We're not doing our budget on this base because we think it's the way to be disciplined, but we will see what happens.
Okay. Thanks, Patrick. Thanks, Bruno.
Thank you.
Bye-bye.
Thank you. We will now take our next question. Please stand by. Your next question comes from the line of Ben from BMO. Please go ahead, your line is open.
Hey, good morning. On your expected returns, can you remind us, what those are? Is that that 8%-10%?
Yeah, we, in terms of our expected returns, we've certainly seen a creep up in the market into a cost of equity, and we have adjusted accordingly, our returns. I say that we are at the higher end of our bracket, so we're around 10%-ish on our cost of equity today. That's what we model when we look at projects. That's what we authorize in terms of projects. We believe this adjustment is fair, given the adjustment we've seen in the market. The projects that are going at the moment are meeting those guidelines.
Just as a, as a side note, our projects and construction are, are seeing very little variance from, from, from their budgets, so it's important to, to note that as well. So...
You're, I mean, that's, that's good to hear. Can you maybe touch on, you mentioned your returns have been somewhat protected. Is that more a function of you locking in EPC contracts ahead of inflation kicking in the last few years?
Yeah, there is, there is many, many way. The first is roughly, we are deploying CAD 1.1 billion presently, in all the construction that we have. The cost overrun is CAD 11 million, so it's, it's one person. It's, very, you know, in a, in a context where everything is going up, it's, it's, it's, it's... It answers your question. The second point is, on many projects, on the return part, we have been able to adapt through the, the example of the 18 months in France, the example of the new tender. I mentioned the tender, where the price, is now CAD 85.
The average price of the last tender in France is EUR 85.3 megawatt hour, but it's indexed, also, this price is indexed between the award and, I think, the COD. We are, as I mentioned also, we're discussing. We have not started New York because we don't have the indexation yet, you need to work on different plan. Limekiln, if you remember, we didn't go for the first project. We wait to have the extension authorized. We are all the time working on different plans to optimize, and we also increase the size of the turbine in Limekiln. We do that also in Apuiat. All this with the budget, which is protected because we have signed at the right time, with good contract.
On the other side, we have improved our return from the time we took the decision, so it go north of the expectations of today for Boralex. Said another way, if we have to take the decision today with all the figures we have today, with the same, with the today's expected return, we would say yes again for all the projects that are under, under construction.
Okay. And then on the, the storage projects you added in Ontario, the 380 megawatts, could you comment on potential CapEx for those projects? Is the timing similar to peers at 2025 in service?
Yeah, we would be in service in 2025. We are, say, running because there is, the contract is, end in 2047, and all the time we gain before, 2025, we get, we will get the same price, so we can have a longer contract at the end. There is some bonus system in it, so. We're working with different suppliers and hopefully come to a final investment decision, or at least a decision to freeze the price of the equipment by before the end of this year.
That's why, when Nelson asked his question, I said, "Okay, we concentrate really on some project to be sure that we deliver this project in term of execution," and that's typically what we're doing on, with this Ontario project. The news on, on the price are on, say, on the green side for us, presently, so we continue to discuss with suppliers. There is, there is lots of interest from suppliers, there is good competition, and there is good, say, how to say, industrialized country suppliers who are providing good offers.
Okay, we'll get a CapEx figure upon FID?
Yeah, yeah, I will come back when, when everything will be settled with the suppliers and be more-
Okay.
open on that probably. Okay?
Okay, maybe just one last thing. Just can you, maybe a little bit early on this process, but some of your peers at the storage, on the tax credits that they're planning to benefit from, they're planning to include that in EBITDA and free cash flow in the first year. Can you comment, are you planning to do something similar with the accounting of those tax credits?
Ben, we're not, we're not there yet. We, I mean, we'll, we'll see when we get more details on the ITC from the government.
Thank you.
All right. Thank you.
Thank you.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Andrew Kuske from Credit Suisse. Please go ahead. Your line is open.
Thanks. Good morning. There's some commentary in the MD&A on, you know, your sales teams trying to tap into a wider customer base. Maybe if you could just give us some color on the positioning that they take with the corporate community to try to attract PPAs, and just how they're distinct, and the Boralex position is distinct from, say, some of your competitors?
Essentially, you know, we are, we have, we have the assets. First of all, there is not so much assets available without contract, ready to sell electricity in France. The second point is, as Bruno mentioned, we have the EcoVadis, first, a silver medal and now 2 gold medal, which is important because it's well-renowned in France, and this was, we start that after we sign a contract in 2019 with Orange. So Orange is a big, a big known company. So, we have an internal team with that somewhere we start in 2017, the first guy in this team was 2017 when I was in France.
So in this team, we have people who are chasing for corporate PPA, modeling all the, the price of electricity for the next months, and working on the tender, when we, we make a bid on an RFP from the government. Finally, who are negotiating all the utility PPA for the 18 months, you know, before starting contract or selling electricity or the early termination. In the same team, we have the intelligence to understand really what are our options. I think on the pricing, this is good, and on the branding, we have also just hire somebody to improve our branding. She will work in public affairs and marketing, specifically based in France, with a lot of experience doing that.
I think it's also a way to differentiate ourselves. Like every suppliers, we have to listen to the need of our customers. We just signed a contract for a customers who was, how to say, asking for many project, and we say, "Okay, we have one wind project, another wind project, and a solar project." They say, "Okay, we buy when they will be finally authorized, we, we would buy all the electricity for 20 years from these three projects." We, we had a very interesting negotiation with this customer. We will disclose a little bit more in the fall about that.
appreciate that color as it relates to France, where you've built up, you know, a very good business and a very good niche. How did the same concept apply and translate into the U.S., where it's just a much bigger market and a bigger market opportunity?
Yeah, we, in our development, you know, we don't need that presently in term of corporation in New York, because we're still relying on the CFD. We, yes, we will have, and we hire, a person, to work more on selling on the market, to be sure that we have the right price for the merchant exposure. You know, when I say merchant is a part of the project and covered by the CFD contract on the other side. It's not merchant as a whole, but you have to sell the electricity on the market. We are developing this. That's exactly how we started in France.
If we go in other and we're developing in Illinois and Pennsylvania, if there, there is some interest to sign with corporation, my understanding is there would be RFP from the state. If there is any need, we would, you know, follow the same path. That's exactly what we're doing in the U.K. also presently. We need to have many options on the table. All the team, French, U.K., and U.S. team, are working together to share this intelligence and this, the way of working and sometimes the algorithm also.
Appreciate that. Then, just finally, you repatriated a service contract, in the quarter, and you've historically had a pretty balanced approach of using OEMs or third parties and then doing some work yourselves. What motivated the decision on the 200 MW of solar to repatriate that in-house?
Yeah, since the beginning, we're, we are doing that to reduce the margin of, of the suppliers in the OEM. In this case, and specifically in the solar business in the US, there was not only one margin, there was at least two, because there was in the, in the supply chain of, of, of the service, there was two, two parties. When we take over this kind of project, we're reducing cost, definitely. Also we will, hopefully, and this is the target, we will improve the availability of the project, because when you have too much suppliers, sometimes it's difficult. You know, there are typically for inverters, they're not building the right spare parts inventories. We can do that easily, and that's what we have done in wind and in solar, in France.
We will do that in the U.S., and I'm confident that this will reduce the cost and improve the availability of the assets.
Okay, thank you very much.
Thank you.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Naji Baydoun from iA Capital Markets. Your line is open. Please go ahead.
Hi, good morning. I just want to start in, in the U.S., and get your thoughts on key learnings, and some of the markets that you're focusing on, whether it be New York or other jurisdictions, in the past couple of years. Any thoughts about maybe a path that you see to accelerating development in, in some of those markets?
Our approach is still always the same. We look at the supply and demand on the market where we are developing. In the state of New York, I am very happy of the decision we took four, five years ago to go there because it's the right decision. The state, the city, they all confirmed that they wants to go for net zero one day, which is not far away, which is 2040. This means a lot of power, a lot of demand for our product. In between, there is some, some difficulties, but that's our job to manage them. That's the reason why we have decided to start development in Illinois and Pennsylvania.
When you look to this market, there is a lack of supply in some years, so there would be demand for our product, and that's the way we're doing that. The last point, which is very important, is the ability to find reasonably long-term contract, because it's important for us to be contracted, to sell our electricity.
Yeah, and, maybe just on France, I know it's been delayed a bit, but any expectations or updated views on, on the PPA that we're, we're waiting for?
Views of? we missed-
The, PPAs. The, the new, Multiannual-
Yeah. Yeah, yeah, there is, there is lots of demand on PPAs in France because, you know, and there is many reason. The first reason is the price of electricity of the last winter and the last summer really hit many corporations. So, and, and, and the people also start to be affected because the government has stopped the, the, the, the tariff shield. People, the consciousness of the fact that the system needs more electricity is there. The second point is they, they want more renewable, and the fact that any renewable producing in France will somewhere in France or elsewhere in Europe, reduce burning fossil fuel.
There is a lot of demand for cooperation and and many people who are themselves selling to the end customers. That's clear. We have renewed some contract with a very attractive price that we, we signed three years ago. We have renewed a contract, was very interesting price for us. Because, because people. You know, nobody wants to say, "Okay, I was buying green electricity for the last three, four, five years, and now I'm going back to buying the electricity on the market with a part of fossil fuel or nuclear electricity." No, no one wants to do that. When you have signed something, the probability to renew with the customers is very high if you have done a good job, and that's what our team is doing.
And what about the Multiannual Energy Plan? We, we've been waiting for an update on that for a little bit. Any thoughts or your expectations on what might change versus the last view that was presented?
You mean in France, huh?
Yes, correct.
Yeah, yeah. It's, it's underway. There is a consultation. For sure, there is a— You know, the French government, it's good news, do not oppose the fact that to, to restart building nuclear plants and at the same time, building renewable, because they will need both. So I think it's always a time of explanations also. So it's important in term of social acceptability of the project. So I'm, I'm very confident that again, it will improve the value of our pipeline of projects in the next, the next years.
Thank you.
Thank you. There are no further questions. Speakers, please continue.
There are no further question, you mean?
There are no further questions at this time.
Okay. Thank you. Well, well, thanks, everyone. I hope that this call helped everyone understand, I think that the strength of our model and the fact that being an integrated player is paying off, and the discipline we are- we've been showing again. Should continue to expect that from us. If you have any, any additional questions, please call me at 514-213-1045. I will make sure to quickly answer your questions. We'll announce third quarter, as usual, in, in Nove- next, upcoming November. We'll provide the date later, or about a month before the call. Have a nice day, everyone, and good vacation for those who, like me, have not yet, had this opportunity.
we'll talk again soon. Thanks a lot.
Thank you.
Thank you.
Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.