Please note this conference is being recorded. I will now turn the conference over to your hosts, Anton and Marc. The floor is yours.
Thank you. Good morning, everyone, and welcome to our first quarter earnings call for Polaris Renewable Energy. In addition to our press releases issued earlier today, you can find our financial statements, MD&A, on both SEDAR+ and on our corporate website at polarisrei.com. Unless noted otherwise, all amounts referred to are denominated in US dollars. I'd also like to remind you that comments made during this call may include forward-looking statements within the meaning of applicable Canadian securities legislation regarding the future performance of Polaris and its subsidiaries.
These statements are current expectations and, as such, are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include the factors discussed in the company's annual information form for the year ended December 31, 2024. I am joined this morning, as always, by Marc.
At this time, I will walk through our financial highlights. Power generation: consolidated power production for the quarter was 216,344 MWh versus 213,434 MWh for the same period in 2024. For Nicaragua, in the first quarter of 2025, production was 114,424 MWh , marginally lower compared to the same period last year. Consolidated production in Peru for the three months ended March 31 was in line with the comparative period in 2024.
At our Dominican Republic Canoa I solar facility, we produced 16,083 MWh in the three months ended March 31, compared to 14,530 MWh in the same period last year. For Ecuador, in the first quarter of 2025, average production of 11,999 MWh eclipsed the same period last year, which totaled 10,223 MWh . In Panama, Vista Hermosa Solar Park production of 5,433 MWh was marginally lower than the same period last year at 6,130 MWh .
Finally, production for Punta Lima since March 3, 2025, the acquisition date, was 3,558 MWh . Revenue for the quarter was $20.3 million during the three months ending March 31, compared to $20.6 million last year. Net earnings: there was a net loss for the quarter, $10.4 million, owing principally to one-time finance costs incurred around the paydown of four loans compared to net earnings of $4.4 million in Q1 2024. Adjusted EBITDA: adjusted EBITDA was $15 million for the quarter compared to $5.7 million for the same period last year. Cash generation: net cash from operating activities for the quarter was $11.8 million, higher than the $8.7 million for the same period last year. Net cash used in investing activities for the three months ending March 31 was $14.7 million compared to $1.3 million for the same period in 2024.
Principal use of funds was around the acquisition of Punta Lima Wind Farm in Puerto Rico. Finally, net cash used in finance activities for the quarter ended March 31 is higher than the comparative period last year, reflecting the early debt payments of the four credit facilities totaling $120.6 million, including $114 million of principal and $6.4 million of accrued interest and prepayment penalties. Finally, dividends. I'd like to highlight that we have already announced we will be paying a quarterly dividend on May 23 of $0.15 share to shareholders of record on May 12. With that, I'll turn the call over to Marc, who will elaborate on Polaris's first quarter results as well as on current business matters.
Okay. I'll just comment first, starting on Nicaragua from an operations perspective. In terms of the steam units, they were flat to actually slightly up quarter over quarter. Whereas the binary unit was down, I would say that there was some unplanned downtime, which resulted in approximately 1,200-1,500 MWh less. The change from Q4 to Q1 was 100% related to binary unit downtime, not a resource issue. Those issues resolved, and we do not expect them to continue for the remainder of the year. For Peru, similar issues, I would say that, again, the resource in Peru has been very strong. We're in the rainy season. It continues, and resource was very good. We did have some unplanned downtime at Ocho de Agosto to fix some bearings.
Just given the resource was actually stronger than normal, it just came with a lot of sort of, well, sediment or more than sediment in the intake. That was about 4,000 MWh effect on Ocho de Agosto . Again, resource quite strong. I would say the rest of the production for the group was in line. Some was up, some was down. The DR was up given the panel replacement program. Ecuador was a little bit higher. Panel was a little bit lower. That is all purely resource-driven. The comments on Punta Lima would just be that it was only 28 days of consolidation in the numbers. There is really not much to read into that. I would say that the actual production of the facility in Q1 was 16,150 MWh , which would have been slightly above budget for the quarter. Obviously, we did not consolidate it.
Q1 was tracking actually a little bit higher than what budget is based on what we were targeting for that facility, which is great. In terms of the balance sheet, there was a lot of noise in the quarter just because of the repayment. We raised the bond in Q4, but we repaid all of the debt in Q1. I'd just say the most important thing is that we've ended up now with debt of about $225 million is the important number and cash on hand of $91 million. We are well cashed up to grow the business. Very strong balance sheet. Really where we focused, I would say right now, the number one focus is the ESA battery program in Puerto Rico.
It's by far and away at the top of the list for us in terms of our return profile and in terms of quality of contract profile. I had mentioned on the last call that we would have an update, and we continue to progress. I would say that the targeted signing on their end that they've put down is mid-June. I'll say 60-75 days because they always take a little bit longer than we want. We're doing weekly calls with them. We are back and forth on contract drafts.
My hope is that by sort of our Q2, we have signed the contract and can report and give, I would say, a few more specifics on the actual, call it CapEx and return. The high-level sketch is that what we're aiming for right now is an 80 MW battery times four hours.
The way that the payment stream works is it's $16,000 per MW of capacity per month. That is assuming you get an ITC credit, which we do believe we will still get that. That would take your, so the gross CapEx, the way it works is we're estimating right now about $70 million, but that's before any ITC grants, which are likely going to be in the $15 million-$20 million range. That is, call it a net CapEx of $50 million. We definitely have cash on hand to fund that. If we did sign at the end of or in June, end of sort of second quarter, we could still see realistically a 12-month timeframe to COD. That's the timing we're looking at.
When you run through the math, you'll see that in terms of, oh, it's also worth mentioning that several of the key cost items for that are actually paid for by the off-taker, the biggest one being insurance. The revenue line is going to be very close to the EBITDA line as given that we already have an operating facility there. We do think that the EBITDA margin should be very high, especially when your insurance cost is a pass-through to the off-taker. Really, I would say in terms of our capital right now, the plan would be to earmark it for that, and we'll know in the next two months. Again, when you do sort of the numbers, net CapEx of $50 million, if we're looking at that's assuming ITC should be about $15 million of EBITDA on that.
It's a 20-year contract and it's pure capacity payment. We definitely like that a lot. We do, as always, have a pipeline of acquisitions. I would say the return profile on those has improved in these markets. However, I would still say the gap between what we think we're looking at with the ASAP program and what we think we can get on these operating acquisitions is still big enough that it dictates that we're going to prioritize the ASAP. However, we can definitely switch gears if for whatever reason those ratios get tighter. I would also say that we do think with the bond that we could tap into more capital for an acquisition of, call it operating assets, which pretty much everything we're looking at on that side are operating assets on the acquisition side.
I think in terms of increasing the size of the bond, as long as it's for, call it operating assets, I think that'd be a good use of proceeds. I think we could look to that. I do see a combination of those two things as being very feasible in the next 6-9 months. That's really going to be the focus on growth in the next 6-12 months. Lastly, I'll mention that in the quarter, we purchased 26,000 shares on the NCIB. Year to date, we're at 38,000. I think we've done sort of 90,000 since we started. Small numbers, but we're going to continue to chip away at these prices. Targeting, I would say, anywhere from $1.5 million-$2 million a year would be really what we're looking for.
Now, if the shares, I would say if they went down, we would increase that number in terms of putting more capital to work. I do not think we are going to go too much given, I would say, the opportunities that we have facing us. We want to make sure that we have enough capital to execute on those opportunities. With that, we can open it up for questions.
Thank you very much. We'll be conducting our question and answer session. If you would like to ask a question, you can do so by pressing star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Thank you very much. Your first question is coming from Rupert Merer of National Bank. Rupert, your line is live.
Hi. Good morning, gentlemen.
Morning.
Morning.
I can start with Puerto Rico. Given that a lot of the cash I have on the balance sheet has come from debt, we need to understand then that that net CapEx of $50 million, you would not look to put any more debt on that asset at this time?
Correct. Not at this time, no.
Okay. Can you walk us through how tariffs or any trade restrictions are going to impact investment in Puerto Rico or how it might create some uncertainty for that project?
Yeah. If it was today, for sure. Likely there's going to be some tariffs. I would say if you were to split the CapEx, when we look at it, about 70% plus or minus, I don't know, 5% is the containers with the batteries. The bulk of your CapEx, but not all of it, but say take 70%. That would be tariff now. It's going to have a tariff or likely to. On $70 million, let's take $50 million of the $70 million, would call it is at risk for the most part. Even some of the $20 million is, but we think we can maneuver on the $20 million in terms of the balance of plant and find, call it local suppliers. On the $50 million, you really are looking at China, I would say.
The conversations we're having, though, are about including essentially a pass-through clause on the, let's call it 70% of the pass or sort of the CapEx. I would suggest that the signals and the conversations are very good in terms of their need for this product. Two weeks ago, there was a massive blackout there. They're having issues with their old generating units. All signs are saying that they want, need the product. They're willing to essentially take on the tariff risk to get this going. We don't have that sort of sign in the contract yet, but it's for sure being added. From a return profile, we don't see any changes. The only issue then becomes what's the capital requirement to get to the finish line. That's where we're at.
I would hope and expect that by the time we're getting to sort of putting anything on a boat, that there is a little bit more clarity as to exactly what we're looking at.
Are there any tariff scenarios where the project would not go forward, say, tariffs over 100%? I know it's a fairly dynamic situation, but does this go ahead in any case?
In any case, I would say no, but I'll give you some numbers. The $16,000 per MW per month, right? Let's just call that a zero tariff world, although there was already some tariffs in that number, but just to keep it simple, call that the zero tariff world. Again, assume the 70%. If there was a 100% tariff, right, that $16,000 would go basically to about $25,000-$26,000. I can tell you that 12-18 months ago, they approved several battery projects with that price, with the $26,000 price.
The reason is when they did their math, battery prices were just that much higher. In other words, they've come down that much. We don't have sort of what a price yet as to what's their top, but they were willing to accept $26,000 12-18 months ago. I do think that 100% tariff, we're still in the market.
Okay. Just a follow-up then on battery costs. Battery costs have come down. You have some markets like the Dominican that would not have tariffs. How is your Canoa II plan shaping up is? The economics on that must look pretty good. I know you had some curtailments there recently. Does that project still go forward? Is that still a priority?
I would tell you we are absolutely reinforcing to them that we offered them a proposal, call it six weeks ago, in terms of what we would do in terms of a price for the energy, call it the extra energy that we would be willing to only supply between, let's say, 6:00 and 12:00 P.M. at night. As of two weeks ago, we have reiterated to them that we're more than likely going to be able to do better than that based on the tariff situation, everything that's happening. We do think that we can sharpen that.
We're just trying to get the economic response on that. That's what we're waiting for. Everything for sure points to batteries and exactly what we're doing. I think they just want to make sure that they don't set any precedents with us that they're not going to apply to the whole market.
Okay. Very good. I'll leave it there. Thank you.
Thanks.
Thank you very much. Your next question is coming from Nick Boychuk of Cormark Securities. Nick, your line is live.
Thanks. Morning, guys. In Puerto Rico, I know obviously, Marc, you're taking advantage of the existing interconnect, but with returns so robust on these battery energy storage projects, are you finding opportunities or looking at ways to add more than just this one project?
Yeah. I would say we have quite a list of interested parties. It runs the spectrum of a developer that's got a site that is ideal for another battery project to some battery projects, believe it or not, that are already approved, but they're looking for the capital, as well as a couple of operating projects with great PPAs that are looking. I would say that with, yeah, it's all of the above there for sure.
Okay. If we're thinking of the development of the existing asset, these others, and to Rupert's question about the incremental debt, what would be the upper range of the leverage profile you'd be comfortable going towards?
I think now the nice thing in Puerto Rico is with all of those contracts, given us the capacity payments, i.e., there's no resource risk on our side, just pure operations. I would say if we're layering in that, you could probably get me from four times debt to EBITDA of maybe four and a half. That would be if it wasn't those type of contracts, I would say we'd be looking at sort of four times is the right number. I think with that contract profile, you could probably push that up to four and a half.
Okay. Got it. Given that robust return profile and the fact that it is no technology risk, capacity payment, is there an opportunity or a reason to look at technologies other than traditional lithium battery energy storage solutions? Could you start to look at other things like compressed air, concentrated solar, anything else?
Yes. I would say the blackout that they had there two weeks ago, the compressed air would have been actually a very welcome technology because of the sort of spinning reserve that they provide the grid. It would have helped them out. I would still say we're on the cusp of bankability for some of these things, but we're not there yet.
Okay. Got it. Thank you.
In the medium term, for sure. I would say that that is, I do not think it is going to be 100% lithium, but in the next 12 months, I think it will be 100% lithium.
Okay. Makes sense. Appreciate it.
Thank you very much. Your next question is coming from Daniel Magder of Raymond James. Daniel, your line is live.
Morning, everyone. Marc, you mentioned the drop in Q1 being related to the binary unit. Just wondering when we can expect the binary unit to be back up to full capacity.
Yeah, it is. Yeah, we performed some maintenance back when we did major maintenance on the turbines, the steam turbines last year, but we had to do more, which was not planned. It is done. We took the downtime, and that was the big cause for the, call it, the discrepancy between sort of Q4 numbers and Q1 numbers. That is done.
Got it. You mentioned in the past that as far as returns to shareholders are concerned, it seemed like the dividend was your preferred method. I guess given the activity on the NCIB this quarter, has your thinking shifted, or are there plans to use both tools?
I would say it really isn't that it's shifted as much. The better way to enunciate it is that returning capital to shareholders is the ways in which we do, I would say, is share price dependent. We didn't think that after closing with Delangle, but more importantly, getting the bond done, that our shares would be where they are. At these, what we think are depressed values, to us, it makes more sense to pick up some stock than great investment, whereas increasing a dividend, that just doesn't seem like you're going to get paid for it. Yeah, it's price dependent, I would say. Here, I would say, assuming we're anywhere near this band, then it's more NCIB and not dividend increases.
Got it. That's helpful. Thanks, James.
Thank you.
Thank you very much. Just a reminder that if there are any remaining questions, you can press star one on your phone keypad now. Our next question is coming from Patrick O'Donnell, who's a private investor. Patrick, your line is live.
Great. Thank you. Good morning, everybody. Thanks for taking my questions. In terms of operational risk, how do you guys go about diligencing or developing the ops team for potential acquisitions?
We operate all of our plants. From an operations perspective, we have, I think, over 100 employees that are dedicated to operations. They are always involved in the diligence. Just as an aside for Punta Lima, though, it is a little different in that Vestas, which is a turbine manufacturer, does have the operations there for the turbines themselves. Between the turbines and, call it, the interconnect, i.e., balance the plant, that is us. That plant is, I would say, much less in terms of our own operational sort of staffing and resourcing that we need to do. It is that operational team that is, I would say, involved in the daily operations diligence.
Whereas in terms of, I would say, resource, that tends to be outsourced to engineering firms that we get to help us with that. Legal, it's always speak locally with counsel.
Okay. Yeah, that's helpful. Yeah, I'm referring more to kind of the operations and maintenance team on the ground once the plant is operational. It sounds like PR is really Vestas contract maintenance. In terms of other potential acquisitions, I mean, do you plan to sort of acquire the staff, or do you typically bring in new people that would run the plant?
It is going to be a combination, but our model is, to the extent we can, operational staff are employees of the company. In the wind projects, do tend to have more of an outsource, at least for the turbines. For the other generation types, solar, hydro, geo, we are going to want to have our own employees running that. Whether we assume all the current employees or whether we put some of our own in or a mix, it all depends. It depends on how we think the quality of the staff is, clearly.
Does Vestas have any sort of performance alignment in their agreement?
Yeah. Yeah, they have bonuses that are based, but it's based on actual delivery production. And there's penalties based on if the availability is lower than certain thresholds.
Okay. Great. I guess with an expanding portfolio, new jurisdictions that you're acquiring and looking at, what's the biggest challenge for you to managing multiple assets abroad? How do you go about?
Yeah. I would say it's probably not what you'd expect. I would say the operational side of it is not the hardest part of it because we find that we have a lot of that experience, and we don't have issues finding qualified people in these markets. It's a relatively good-paying job. I would say, believe it or not, just on the accounting and payables side, which is a little bit more of a head office burden, that's not complicated, I would say. That's just how much staffing you need. Probably the more complicated thing is just that every single country we operate in, the regulatory framework is different. That's the harder part.
Okay. Yeah, matter of figuring out what that is and navigating that. Once you do, then kind of.
When I mentioned local legal counsel, there are always several firms that have relationships with the government entities. They focus on the energy sector. You need them because they understand all of the rules and how different they are. That is really critical. It is all doable, I would say.
Got it. Final question on the NCIB daily buyback volumes. Any reason why they're so low, like buying 200 shares or even 500 or 1,000? I mean, it almost seems cost-prohibitive to buy at such a low volume. Anything you can say about that?
I wouldn't say it's cost-prohibitive, but it's pretty easy to pick up stock, whether it's 500 or 1,000. I just think we're targeting, as I said, just a couple of million dollars, which is about 1,000 shares a day, maybe a little bit higher. For a small company like ours and with a project like the battery at Punta Lima, that's $70 million, the ITC comes on the back of that. You don't get that upfront. If there are tariffs, you could have an extra $10 million-$30 million. That's well in excess of 20% IRR unlevered. You start going crazy on the NCIB, then we need to come back and raise capital. To me, that just doesn't make sense, not in these markets.
Sure. Yeah. I guess my question to clarify was, you know, the price per share is at a point where you want to buy back. Why wouldn't you buy more shares at a time per day, knowing, yeah, you're going to buy 20,000 shares at this price?
Yeah. Exactly.
That daily volume limit?
Yeah. I would just suggest that every time somebody's worried they can't pick up an amount of stock, they always can. We would rather be in the market every day than literally do it in two days or three days and be done with it. I think us having, even if it's small, but having something in the market every day is a better way to go. I mean, we could debate this, but that's just what we're going to do.
Okay. Thanks for the response. That's all I got.
Thank you.
Thank you very much. We appear to have reached the end of our question and answer session. I'll now hand back over to Anton and Mark for any closing comments.
Just thanks, everyone, for joining today. Have a great day.
Thank you very much. That does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.