Polaris Renewable Energy Inc

F:N4T

Earnings Call Transcript 2023-Q2

[Operator]

Greetings. Welcome to the Polaris Renewable Energy Inc., Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to your host, Anthony Jelic, CFO at Polaris Renewable Energy. You may begin.

[Anthony Jelic, Chief Financial Officer]

Thanks, Holly. Good morning, everyone, and welcome to the 2022 Q2 earnings call for Polaris Renewable Energy. In addition to our press release issued earlier today, you can find our financial statements and MD&A on both SEDAR and our corporate website at polarisrei.com. Unless noted otherwise, all amounts referred to are denominated in U.S. dollars.

I'd 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 Renewable Energy 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 operations. These risks and uncertainties include the factors discussed in the company's annual information form for the year ended December 31, 2022.

I'm joined this morning as always by Marc Murnaghan. At this time, I'll walk you through our financial highlights.

Power generation: During a three-month end to June 30, 2023, quarterly consolidated power production was 211,765 MWh megawatt-hours higher than the 163,119 MWh consolidated power production for the three months ended June 30, 2022.

Due to additional production from the binary unit in Nicaragua, as well as the Dominican Republic and Ecuador facilities acquired in 2022, coupled with Vista Hermosa Solar Park in Panama beginning operations in this quarter.

For Nicaragua, the increase in production is a result of additional production from the binary unit, partly offset by expected declines in production from the steam fields. Consolidated production in Peru for the three months ended June 30, 2023 was marginally higher than the comparative period last year, due to somewhat better hydrology across the country for the quarter.

For the Dominican Republic, the Canoa 1 facility produced 13,398 megawatt-hours in the three months ended June 30, 2023.

For Ecuador, the San Jose de Minas facility produced 11,323 megawatt-hours in the three months ended June 30, 2023. Generally as in Peru, we have seen better hydrology than in the prior year.

Revenue: Total revenue was $20.8 million during the three months ended June 30, 2023, compared to $15.2 million in the same period last year. This increase was the combined result of a 30% increase in production, contributed by the company's facilities, coupled with an increase in the effective PPA prices applied to our three Peruvian facilities.

Net earnings: Earnings were $4.6 million for the three months ended June 30, 2023, compared to a loss of $1.5 million for the same period last year. This increase was driven by higher operating margins, coupled with higher deferred income tax recovery, partly offset by higher finance costs during 2022.

Adjusted EBITDA: Adjusted EBITDA was $15.4 million for the three months ended June 30 compared to $11.2 million for the same period in 2022, principally as a result of higher operating margins already discussed.

Cash generation: Net cash from operating activities for the three months ended June 30 of $10.3 million, is lower than the $14.2 million for the same period last year, mainly due to higher receivable balances and lower payables held at June 30, 2023 compared to 2022.

Net cash used in investing activities for the three months ended June 30 was $1.4 million, compared to $32.4 million spent in the same period last year, due to funding of construction of the Binary Unit in Nicaragua and the Vista Hermosa Solar Park in Panama, and also the funding of the acquisition of Canoa 1 in the Dominican Republic.

Net cash used in financing activities for the three months ended June 30 of $7.6 million, compared to $5.7 million net cash used in financing activities in the same period last year. In 2022 the company refinanced PENSA senior debt and paid $9.5 million in issuance costs.

And finally, dividend: I'd like to highlight that we've already announced we'll be paying a quarterly dividend on August 25th of $0.15 per share to shareholders of record on August 14th.

With that, I'll turn the call over to Marc, who will elaborate on current business matters as well as on our quarter-end results. Thank you.

[Marc Murnaghan, Chief Executive Officer]

Thanks, Anthony. So, first, some comments on the production performance in the quarter. I would say on a consolidated basis, it was in-line a little ahead. So we're very happy about that. Hitting the budgets and our own internal projections, Peru was a little bit higher, DR was a little bit lower, but net-net, we were very happy with the overall production and continue to remain on track into this quarter. As people know, we commissioned the binary unit at the end of 2022, and it continues to operate well, high availability, so very happy about that.

The other project that we commissioned and constructed on our own was the Vista Hermosa Solar Park in Panama that was put into service in Q2, and we've had just over three months now, and that production is right on track with what we are budgeting, so we are very happy with that.

So all-in-all, hitting sort of our long-term average estimates of production in the quarter and year-to-date, and in fact, Nica was up a little bit quarter-over-quarter because of some of the work we did on the injection system. So Nica was up a bit quarter-over-quarter, which is great.

We did get a little bump in the pricing in Peru, so starting May 1, 8 de Agosto, which is our biggest plant there, had the price adjusted, which we had always expected. But it happened, and so we had a price in the $40, in the 40’s which is now running at $61.

So expected, but obviously that helps, and that's going to be the number going forward, so that really helps in terms of obviously the top line, but also given that we took over the operation of all the plants in Peru. Our costs are down a bit, so nice margin expansion in Peru, and we expect that to continue.

In terms of the quarter, the cash generation, as Anthony mentioned, cash from operations of about $10.3 million. The uses of that, the largest use was $4.4 million in debt repayment, so we continue to pay down debt, $3.2 million in the quarterly dividend, with CapEx of around ballpark $1.5 million, so not a huge number. I'll get into some of those CapEx items in a second here, but that actually nets out to an increase of just over $1 million in the cash position, so we ended the quarter on a consolidated cash position of about $41 million, so that's up, debt's down.

So the balance sheet improving, and depending on your target for this year, but we are running sort of close to that. Our target of about $60 million of EBITDA for the year, so that would put us at net debt to EBITDA of around 2.3x, which we think is a very conservative balance sheet, and is something that we're going to look at going forward. But that leaves us a lot of cushion, and I think room to grow the balance sheet there.

In terms of the projects that we're currently executing, right now it's all at, I call it a current project optimizations, but these are the highest return on capital we're going to get. We are doing the battery project in Peru, which is the smallest. That's only a $500,000 of CapEx project, but that's set to start in September. So we look forward to that, which would be our first battery project, so we're excited about that.

The well optimizations, I'd say the biggest short-term project we're working on are the well optimizations in Nicaragua, which are starting next week. The process for that is, there's two wells that we're looking to clean out effectively, its 4-2 and 6-3. The first one, the process is you cool it down first, and then you start to circulate your solution through there.

That only takes about a week, but then you need to let it heat up, so we should have a sense of success on these two wells, call it mid-September, plus or minus. It's hard to predict exactly how long it takes for the well to heat up, but it could be from three, four, five weeks, and then you can flow them again.

So we're quite optimistic about the results of this, and hopefully they can come online a little bit in September in the current quarter, but more so in Q4 and going forward. Just worth noting that these wells, it means for the current quarter they are out for about four weeks, and the sum of the two wells is about three megawatts. So we do have about a month of three megawatts out for the current quarter.

And then lastly, the other project that we are executing is in Ecuador, which is the tying in effectively another stream into the intake, and that is ongoing and should be ready I would say by end of Q1, 2024, and that we would look to increase production there by about 20% to 25%. And so those are the current projects.

In terms of Canoa 2, we did announce this is a new project, although it's an expansion of the current Canoa 1, we signed the PPA in May. We have most of the development ready to go. We have done some very small things on site, but the big one is we are working on finalizing the interconnection agreement before we start the big construction, and we are aiming to finalize that this quarter, get that done, and if we can do that, then we can really start the construction in earnest and to try to have that in service by back half of next year.

And then – but on Canoa and in the same spirit as the other projects. We do have room under the current PPA to deliver more energy, and we are working on that as we speak, and we'll have more to update people on the next quarterly call. But that again would be very high return on capital, and with not a lot of capital, that we think we could add some panels potentially as there is room, and it's a very good contract.

So if we can do that, we will likely do that before we even get to Canoa 2. I can't comment on the size, but there would be a very high return, and I guess for me the big message here is that whether it's the well optimizations in Nicaragua, the additional stream in Ecuador or optimizing Canoa 1, what we really are trying to do here is make sure that – call it high return, lower risk projects.

Current operating projects really do generate higher returns than sort of new development projects, and so we want to make sure that those – that we maximize those and that they have to be sort of top priority, so that we can hopefully meet or beat people's expectations, their own expectations next year, but using less capital in a time where capital is more expensive. With interest rates, obviously the cost of growth has gone up, so we are making sure that we really focus on the lower hanging fruit, call it.

And just a comment, two more comments. One is we still are working on several M&A files. Nothing obviously to announce, but I think that this higher interest rate environment is starting to take hold in certain areas. Some people obviously have fixed loans, but there are a lot of projects we see that have floating rate loans, and so this is – the longer the rates stay higher, I think that just means sellers are coming to the realization that this isn't sort of a really short-term phenomenon, and so we are having a lot more conversations on that front, which could get interesting.

And then lastly, it was not in the disclosure, but the board did approve that we will institute a normal course issuer bid, at least just have it. It is still subject – it would be subject to TSX approval. So we don't have that, but we'll work to getting that in the next two weeks, and then there would be a separate announcement there.

We just think that it's prudent to have that option in place. We still – we think that there's very good return in our shares, and if depending on where the market moves, I think it's always good to have that arrow in the quiver, because if there's obviously a great return on our share price, then I think it makes sense to take advantage of that as well, given that we are building some cash here, and the net debt to EBITDA is quite low.

So with that, we can open it up for questions.

[Operator]

[Operator Instructions]

Your first question for today is coming from Nick Boychuk with Cormark Securities.

[Nick Boychuk, Cormark Securities]

Thanks. Good morning, Marc. Can you walk us through a little bit more detail on the Dominican Republic, specifically what you're seeing from the regulator and how additional growth might be coming online and also what that means for battery energy storage potential?

[Marc Murnaghan, Chief Executive Officer]

Yes, so we are trying to do several things all at the same time here, I'd say to get Canoa 2 the agreement in place. I think there's been a – this is taking a little bit longer than we wanted, because there is a lot of solar projects and they have certain capacity limitations. We think they could accept the project, but they are just trying to work through all the scenarios.

We have also talked to them about adding storage to Canoa 1, and even adding more panels, so just increasing Canoa 1 right now before we can go into Canoa 2. So they are very open to that. They want to bring on a lot of the lower-cost renewables. We think that at that site alone we could double or triple what we have, if not more, with storage, and so they are very interested in doing it.

I would say it's taking a little bit longer than we want, but the long-term is that everything for sure is pointing towards, I would say, another project of similar to what we have now, but more – and then call it a third, which would have some combination of solar and storage. It's hard to know exactly which one is coming first.

We might add more capacity and panels in the next six to nine months on Canoa 1. And then once we do that, we will likely add some storage on top of that, maybe in 12 months. So we're pushing ahead as fast as we can, because they do need the energy, but we are trying to make sure that it's delivered sort of in the shoulder times, and we think there's a return even if we have to cap the capacity.

So for us, likely the highest return would be just adding more solar panels and waiting on the storage maybe to 12 months. So that's what we're looking at, and I just, I hope to give a lot more specifics on the next quarterly call in terms of how we roll that out, because it really is sort of three things. It's just more panels, then its more panels for a second phase, and then storage. And the question is, does the storage come as sort of the second part of that or the third? And that's what we're still trying to figure out.

But all in all, we would see that on that site alone there should be a tripling, if not quadrupling, of the EBITDA capacity. It's just how fast can we push it, that's all.

[Nick Boychuk, Cormark Securities]

Got it. Thanks. That's good color. Next is, can we shift to Panama? I'm curious, the MD&A mentions that the merchant power price in the market right now is about $144.50 per megawatt hour. How does the contracted market compare, and what would it take for you to make that shift to sign the contract?

[Marc Murnaghan, Chief Executive Officer]

Yes, just to be clear, so that number was – I think that was May. I think we were averaging lower than that, but we're still above 100. The dry season lasted a little bit longer than normal in Panama. So just, we did time it well to start.

But you're – where are you going to get contracts? It's going to be lower. You're going to be, I think, in the 70 to 80 range. So we're still assessing it, but the fact that we don't have any debt on that, the fact that we do think that spot prices will remain high at least for the next six to 12 months, we're not sort of rushing out to contract.

So I wouldn't expect us to sign anything in the next three to six months there, because in fact there was actually a – the operator put out basically a ruling saying that they couldn't use as much of the – they have two big dams there. So because the level of dams went down much lower than they wanted to, they are not going to dispatch as much from those hydros in the rainy season, which is what we're in now, so – and that's going to last for the next 12 months.

Realistically, the spot market is where you want to be in the next 12 months, given that. So we'll stay there and I would say, so don't expect contracts there. Maybe it's early next year that we might do something.

[Nick Boychuk, Cormark Securities]

Okay. Got it. And then staying in Panama, can you comment a little bit on where some of the organic growth initiatives for things like Chutzpah Hydro [ph] and Panama solar [ph] 4 and 5?

[Marc Murnaghan, Chief Executive Officer]

Yes, they are there, I would say. And we have even more in terms of opportunities on both hydro and even more so on solar. And we are – but we're not ready to hit the go button on those just yet, because the boring cost is high. And so – I mean, the good news is panels really do continue to come down, at least at the size range that we're looking at. And so the quotes we've been receiving are really good. But we're – I guess we're just sort of waiting.

So the pipeline itself has gotten bigger, but I'm not so sure we're going to hit the go button on any of those in the next three months here.

[Nick Boychuk, Cormark Securities]

Got it. Thank you.

[Operator]

Your next question is coming from David Quezada with Raymond James.

[David Quezada, Raymond James]

Thanks. Good morning Marc. Maybe a question, just going back to your comments around M&A, it sounds like pricing expectations in that market maybe are coming down, but have lagged a bit. I mean, it seems like things have already come down materially in North America. I'm just curious, how do you – like obviously cost of capital is higher too. But how do you handicap your advantage versus other players in that market? Would you say that since your cost of capital is better and maybe prices will continue to come down, that M&A could become increasingly interesting as those price expectations adjust?

[Marc Murnaghan, Chief Executive Officer]

Yes, I think we do have a cost of capital advantage. The issue is that most of the assets we're looking at, I don't – they're in a size range of, let's say, an EV of $50 million to up to $250 million. There still is, I would say, a lack of competition in that size range. So it's a little bit less from my perspective about competition from strategic players, than it is just about the owners, call it expectations on what is a reasonable return for them. That's really what this comes down to. I don't see a lot of competition. It's just a bit of a timing game.

[David Quezada, Raymond James]

Okay, great. That's good color. Thanks. And then, just like – or sorry, on the – you mentioned panel prices continue to come down. Can you confirm if you – I guess you haven't yet secured panels for the extension at Canoa or Canoa 2. Is that basically you're just going to kind of monitor the market and see how prices trend before you decide to do that?

[Marc Murnaghan, Chief Executive Officer]

Yes. And I would say so far it's worked, because we were – I'd say they are down almost another 10% or 15% from when we signed the PPA. And so all things are pointing to – so, would I do something now – I'd say we're getting close to that, to doing that. But so far it's worked in terms of waiting to secure that, as it's gotten a lot better. I would see us in the – before the end of the year, will we do something on panels, be it for Canoa 2 or something in Panama or even Canoa 1? Yes, I would. It's very attractive right now on that side.

[David Quezada, Raymond James]

Okay, excellent. And then, maybe just one more for me, one that's maybe a little bit outside the box here. I see that there was a recent auction for capacity, renewable capacity in Guatemala. I'm just curious if you monitored that process, and if that is a market that you might consider in the future?

[Marc Murnaghan, Chief Executive Officer]

So, the second part, yes, absolutely. We would look at Guatemala. We think it's actually a good market. The U.S. dollars relatively stable, so we would. We did not participate really in that. We monitored a bit, but I would say to the extent we could do things in Guatemala, I absolutely would. And we have looked at two or three different sort of partnership opportunities with groups that have projects there, similar to what we did in Panama. We just didn't sort of move those forward, really because last year we kind of had a lot on the go with the three new jurisdictions, and now we've sort of digested, I'd say, integrated, digested, and have a list I would say of things to do in those countries. But we also have a short list of a few other jurisdictions that we do want to have a look at, and Guatemala is on that, for sure.

[David Quezada, Raymond James]

Okay, excellent. Thanks a lot Marc. I'll turn it over.

[Operator]

Your next question for today is coming from Rupert Merer at National Bank.

[Rupert Merer, National Bank]

Hi. Good morning.

[Marc Murnaghan, Chief Executive Officer]

Hi, Rupert.

[Rupert Merer, National Bank]

If I could go back to Canoa 2 again, Dominican Republic, can you talk to us about your financing plans for that project?

[Marc Murnaghan, Chief Executive Officer]

Yes, so that one would be a traditional project finance. We actually have a lot of interest on that. It's a 15-year contract. We're talking to people about 15-year loans. Interestingly, the rates that we're seeing on project loans for the longer loans have come up, but not nearly as much as the short end of the curve. So our current loan at Canoa is seven and a quarter – seven, sorry, seven. I think it would be maybe 100 to 150 basis points higher than that, but a lot of interest still in that.

Just doing a traditional project finance, and we think that's a better way to go right now, given where rates are in the short end. But I don't see that as an issue in terms of being able to secure that.

[Rupert Merer, National Bank]

And with the – [Cross Talk]

[Marc Murnaghan, Chief Executive Officer]

And they call it a Pan amortizing loan in the like 12 to 15 year time period term.

[Rupert Merer, National Bank]

With the cost of panels coming down, if you were going to build 25 megawatts, what sort of CapEx do you think you could hit on that project today?

[Marc Murnaghan, Chief Executive Officer]

You'd be low – I mean low 20’s.

[Rupert Merer, National Bank]

Low 20’s, okay.

[Marc Murnaghan, Chief Executive Officer]

$1 million, ‘22 to ‘23.

[Rupert Merer, National Bank]

And then looking at your high return optimization projects, you've got the well rehab going soon. What happens after that? Have you identified the next step in well enhancement and how good could those next optimizations be relative to the one you're going to start next week?

[Marc Murnaghan, Chief Executive Officer]

I'd say that we have two more that we've identified in the field. And maybe they are not as – obviously, we're starting with what we think are the best. Principally being 4-2, really in terms of the data we're seeing should be the best target and then you move sort of down the list.

I'd say we easily have two more that would be considered good targets. And we sort of see how this – the process goes on the first two. And if they go well, then given that it's not – you know our budget on this is running. It's lower than we initially thought. It's probably around $800,000 to $900,000 for the two wells. And with the potential that we're targeting, obviously – well, let's say $2 million to $5 million in total. That's about $2 million to $4 million extra in revenue a year. So we wouldn't wait around that long.

And most of the equipment is in-country, actually that we're using. So yes, I don't think we would wait two or three years if we have reasonable success, and given that it's not a high-CapEx item, could it be a next-year item? Yes, for sure.

[Rupert Merer, National Bank]

Great. And then just a quick follow-up on that. So with the number of megawatts coming offline, that shouldn't have any impact on the binary, I imagine. Binary, you expect to be running still at full capacity?

[Marc Murnaghan, Chief Executive Officer]

Yes, maybe – well, that's a good point. Maybe like 0.2, I'd have to get back to you on that. It's not going to be very noticeable, but there is a little bit of brine, not from 4-2, but there is a bit of brine coming from 6-3 that will be offline for, call it a month.

[Rupert Merer, National Bank]

All right, very good. I'll leave it there. Thank you.

[Marc Murnaghan, Chief Executive Officer]

Okay. Thanks, Reuben.

[Operator]

Your next question is coming from Naji Baydoun with IA Capital Markets.

[Naji Baydoun, IA Capital Markets]

Hi. Good morning. I wanted to go back to your comment about sort of the leverage profile and being comfortable growing the balance sheet. I'm just wondering if you can give us a bit more of a sense of what your sort of comfort level would be and what are some of the – I guess what's the excess capacity that you would be willing to take on to finance new projects?

[Marc Murnaghan, Chief Executive Officer]

Well, yes, it's sort of sub 2.5 net. We would be – I think something 3.5 to 4 on a consolidated basis is an appropriate level for us. I mean, we are so contracted and with good length on our contracts that we for sure could have more debt. And I think when I go north of 4 – no, 3.5 to 4 seems like the right number.

However, what I would say is, you get more into should we do a project finance loan for Canoa 2 or should you do some type of corporate bond or – and that, it becomes more a debate, as to what's the right structure and there's just a difference. For instance, if we can borrow at 8% for Canoa 2, people are borrowing way higher than that on the short end of the spectrum right now.

And so my view is unless we see the combination of two things, which is some new projects that we really like that have, call it 15% plus IRRs – and I can fund Canoa 2, the equity part out of our current cash flow. We can fund these optimization projects out of our current cash flow. So I would rather do an 8% project loan than go do a bond at realistically double-digit percentages in this market.

So the limiting factor in terms of where we get to, you know the short-term rates do have an impact on that, but the good news is we don't need to push it right now. So I would prefer to borrow at 8% on the project side. And in the next six to 12 months, we see where the short end goes. And if it improves at all, then we could for sure look to do something.

But we're sort of the mind that given that we can do all of this and Canoa 2 with what we have, and even have some extra cash flow, I would rather just continue to do that and let's just see where the short end goes. And then if that sort of improves, then we do have lots of room for sure to do more. I just don't expect it in the next three to six months.

[Naji Baydoun, IA Capital Markets]

Understood. And that makes sense. And sort of leading into the question more broadly about capital allocation, especially here with what you mentioned about the NCIB, I guess capacity to take on more leverage to finance growth. Do you want to put in the NCIB to have that optionality? But I guess from a capital allocation framework, is your preference today for potentially obviously growth first, but maybe buybacks over dividend increases?

[Marc Murnaghan, Chief Executive Officer]

Yes, yes. In terms of where's the capital allocation, I would say, if just purely if we're saying, okay, let's compare a dividend increase versus NCIB right now, I would say maintain the dividend, but do NCIB instead of dividend increases, because that gives us the optionality, because we do see the potential that there could be a lot of growth. But if the cost of that growth remains high, we can use the NCIB in the short term to – because I think that would be a good use of capital. But then if rates really come down, we can add more projects and I would rather have the dividend where it is and then we can use capital in new projects at higher returns, right.

So I think that's why the NCIB, that's why we would do that now instead of dividend increases. And we continue to pay down debt, we continue to pay a dividend, and NCIB is just another way to give capital back to shareholders. So I think it's also good to add something into the mix as opposed to just doing a dividend increase.

And then in terms of growth, it has to – for me, the growth, where we rank that, it really depends on the return of that growth. And so the point on the optimizations is that the returns on those are so far above, I would say our cost to capital, that we want to do all of those.

I'd say Canoa 2 is for sure above our cost of capital, the return that we see, but we for sure want to do that. And to the extent we can land on, let's say, an acquisition or a new project that are above that, we for sure want to do that. And the dividend increase may not help that, whereas an NCIB has the flexibility to, I guess, live on either side of that equation.

[Naji Baydoun, IA Capital Markets]

Understood. And the $60 million of run rate that you referenced earlier, I think that's more of sort of a number for this year. But when you factor in these optimizations, maybe Canoa 2, it starts to get much higher than that. Do you have sort of a short to medium-term target, let's say, in the next couple of years, just based on the optimization and maybe Canoa 2 and one or two other projects?

[Marc Murnaghan, Chief Executive Officer]

I have one in my head. I'm not going to – the issue is that these, the well optimizations, really we'll know in a month. And so, I'm going to sort of reserve what maybe a range – I mean, there's a range. I said we said 2 to 5 megawatts, that's almost $2 million to $5 million. But then you know perhaps just another $800,000 – $800,000, $900,000. The battery crew is not a lot. It's a couple of hundred thousand. But the Canoa 1 optimization which we're still wrestling down a little bit here, and I think we will have that wrestled down in the next few months, that could be a big number in that as well. And then to Rupert's point, if we do have success in these well optimizations, we likely might do another one.

Yes. I mean, you can start to add up a reasonable amount of EBITDA there with low CapEx and call it when we report Q3. We'll obviously have an update on the well, but the well optimizations, Canoa 1. And so, I'm a little bit – I just don't want to give a range yet, but we will.

[Naji Baydoun, IA Capital Markets]

I know. Understood. That's fair. And I guess more updates in the next few months as we look through these things, but thanks for answering my questions. That’s all I have today.

[Operator]

Thank you. Your next question for today is coming from Ahmad Saath at Beacon Securities.

[Ahmad Saath, Beacon Securities]

Hey, guys. Congrats on a solid quarter. I guess most of my questions have been asked. Maybe just a clarification on the timeline for Canoa 2. It sounds like we shouldn't expect any contribution in 2024 numbers. Did I get that right?

[Marc Murnaghan, Chief Executive Officer]

For safety, I would say that's correct. Yes. Based on where we are right now, assuming we nail it down the next three months, you've got a 12-month, 12 to 15-month construction, so yes, I would say that's correct. To go back to what Naji was getting at, I hope to be able to offset that with a couple other things here, in terms of both Canoa 1 improvements and the optimization. But in terms of when would Canoa 2 come online, yes, I think a model from a modeling perspective, 2025.

[Ahmad Saath, Beacon Securities]

Perfect. Thanks. And on what are you working on in the Dominican? Is that going to be material enough that you guys plan to press release it separately or we're just going to have to wait for the quarter results to hear about what you guys are doing there in terms of maybe adding capacity?

[Marc Murnaghan, Chief Executive Officer]

I may not understand the question, but I would say, obviously anything on Canoa 2 would be press releasable. I think in terms of – if it was your question sort of, would we press release something if we're doing optimization on Canoa 1? Is that what your question is?

[Ahmad Saath, Beacon Securities]

Well, both. I guess you answered the first part, but I guess Canoa 1 would not be that material to press releases on its own, I imagine.

[Marc Murnaghan, Chief Executive Officer]

I don't think it would be. I think that we would be giving sort of guidance next quarter in terms of what a rollout might look like. Essentially, what should people put in their numbers for next year as opposed to what they are right now. But I don't think that's really a press release.

[Ahmad Saath, Beacon Securities]

Yes, fair enough. I appreciate that.

[Marc Murnaghan, Chief Executive Officer]

Unless it's so material, but I don't – at this point, I would say no.

[Ahmad Saath, Beacon Securities]

Thanks. Much appreciated guys. Congrats again.

[Operator]

Your next question is coming from Devin Schilling at PI Financial.

[Devin Schilling, PI Financial]

Hi, guys. Nice quarter here. Just a quick housekeeping item here for me today. Just looking at your G&A expense, it was down quite nicely this quarter. Just wondering if there's anything one-time here or is this the new run rate we should be going with going forward?

[Marc Murnaghan, Chief Executive Officer]

I'm not sure. When you say down Devin, I don't know if we have that in ours, because where do you see that? We have it going up. The trick for us is that last year, the first – well, the same period, whether it's three or six months last year, we didn't have the acquisitions in. So it's hard to actually compare on a year-over-year basis.

[Devin Schilling, PI Financial]

Okay. Yes, sorry. [Cross Talk] I can follow up on that.

[Marc Murnaghan, Chief Executive Officer]

Q3 and Q4 of last year, when we did have those in, we're kind of flattish to those numbers. That's how we are looking at them.

[Devin Schilling, PI Financial]

Okay. Yes. No, that's my mistake here. All good. Thanks, guys.

[Marc Murnaghan, Chief Executive Officer]

Okay. Yes. But flat yes, and so we're very happy with where the G&A numbers are.

[Operator]

There are no further questions in queue.

[Marc Murnaghan, Chief Executive Officer]

Okay. Thanks everyone.

[Operator]

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.