Altius Renewable Royalties Corp

TSX:ARR

Earnings Call Transcript 2022-Q1

[Operator]

Good day, everyone, and thank you for standing by. Welcome to the Altius Renewable Royalties First Quarter of 2022 Financial Results Conference Call. [Operator Instructions] And please be advised that today's conference is being recorded.

I would now like to hand the conference over to our speaker today, Ms. Flora Wood, Investor Relations. Thank you. You may begin.

[Flora Wood, executive]

Thank you, Delfin. Good morning, everyone, and welcome to our Q1 call. Our press release and filings were released yesterday after the close, along with the new investment announcement, and both of these are available on the website. This event is being webcast live and you'll be able to access a replay of the webcast, along with the presentation slides that are on the website at arr.energy.

Brian Dalton, CEO of ARR; and Frank Getman, CEO of Great Bay Renewables, are both speakers on the call. And in the Q&A, we'll also have Ben Lewis, CFO of ARR, available for questions. The forward-looking statement on Slide 2 applies to everything we say in our opening and during the Q&A.

And with that, I'll turn over to Brian for his opening remarks.

[Brian Dalton, executive]

Thank you, Flora. Thank you, operator, and thanks to everyone for joining us today. As usual, I'll keep my remarks fairly brief before introducing Frank Getman, the CEO of GBR operating business. And he will review the quarterly performance and outlook for the sector generally and our investment opportunities more specifically.

It was another positive quarter for ARR and another key milestone was reached, that being the achievement of first positive cash flow at the operating JV level. And the number of our producing royalties grew to 6 during the quarter. As the year progresses, we are expecting additional announcements regarding construction progress that will bring clear visibility and continuation of this growth trajectory.

I can also attest that the GBR team was extremely busy during the quarter in developing new relationships and advancing a variety of royalty investment opportunities. These included for both operational-level assets as well as new developer relationships.

Regarding the latter, we announced last night that we are providing royalty financing to the U.S. development division of newly-formed Bluestar Energy. This investment shares similarities with our other prior investments in TGE and Apex but also some differences that we think are appropriate to how the market has been evolving. And it also recognized the pedigree and track record of the Bluestar founders and team, which ranks amongst the most successful in the sector over the past decade or so.

Bluestar is a start-up and its initial project portfolio is actively in the process of being assembled. The list can be considered earlier stage in that regard than the prior developer financing structures. We did, however, gain sufficient comfort in our due diligence that the knowledge base and relationships of the team will easily translate into a sufficient number of projects, and likely well beyond, fulfill our investment goals.

Another difference is that our base return is not capped by the achievement of defined hurdle rate in this case. The number of defined megawatts we are due does provide our previously stated return threshold based upon current price assumptions. However, to the extent that these vary, our returns will as well. We have been clear in our stated belief that renewable power prices have strong tailwinds related to both overall demand factors and also because of marginal cost pressures across the entire power generation complex. We, therefore, see more potential for base case upside with this investment than our prior developer deal and think it makes for a nice mix within the overall diversified portfolio.

Final difference is that we added a small component of equity participation to the direct royalty financing. This obviously recognizes the increasing attractiveness of quality development pipeline within the overall renewable sector as more players seek to gain entry. You do know, for example, how lucrative equity participation in Apex would have been if we had, had it at the time of our royalty financing. We also really like, in this case, gaining exposure and visibility into the broader ambition of Bluestar and see the corporate participation, including a Board seat, as potentially leading to additional investment opportunities, potentially to expanding our royalty offering more internationally.

With that, I'll turn things over to Frank for some remarks before opening things up for Q&A.

[Frank Getman, executive]

Great. Thank you, Brian. I guess, first, I'd just note that we continue to make great progress in building our company with continued revenue growth and first quarter positive cash flow at Great Bay and the exciting news on Bluestar and new investment opportunities.

A few comments about the revenue growth and first quarter positive cash flow at Great Bay. I'd note that this -- we achieved positive cash flow at Great Bay in Q1, which was well ahead of expectations we had at the time of our IPO 14 months ago.

We now have 6 producing royalties, including first revenue from 2 of those projects in Q1: the Prospero 2 wind project, owned by Longroad Energy and WEC Energy's Jayhawk Wind project. Revenue from Jayhawk was nominal in Q1 due to the ramp-up of operations after coming online in December 2021 and the timing of revenue recognition for ARR.

This might be a good place for a quick note on revenue recognition. We recognize revenue when a project receives payment on its production, not when the project generates the megawatt hours and recognizes revenue at the project level. We don't recognize revenue until the project actually gets paid, creating a bit of a lag between generation and operations when we recognize revenue on any specific project.

In summary, it was a solid quarter for our operating assets with slightly lower overall production being largely offset by higher merchant power prices. Revenue continues to grow, and we expect that to continue over the coming months and quarters. We remain comfortable with the revenue guidance of $4.5 million to $5.5 million for 2022 from our current operating royalties. And we expect additional projects within our royalty portfolio to reach commercial operations later this year and further contribute to our revenue growth profile.

We continue to see strong demand for renewables projects. And we're hopeful to see additional project sales from TGE as the year progresses based upon the strong demand, resulting in new additions to our royalty portfolio.

I'd like to turn now to provide a few comments on the current state of the renewables market in the United States. There remains an insatiable demand for shovel-ready renewables projects. Virtually everyone in the industry -- in every industry is seeking to reduce their carbon footprint. Continued strong demand from commercial industrial buyers of renewable energy, the Amazon and Googles and Microsofts of the world as everyone has been trying to achieve their own ESG goals and mandates through corporate PPAs or, in some cases, direct investment in projects. And there is strong investor demand across the board.

Yet despite the strong demand for renewables, the industry faces some serious headwinds. The 2 I would note are interconnection backlog in several regions of the country, particularly PJM and SPP. Probably -- this is probably the single-biggest issue facing the industry.

It's really a two-pronged issue, both with delays in processing applications. And secondly, the interconnection costs are coming in higher than anticipated in some cases. Then also, supply chain constraints and physically getting access to solar panels and batteries, with solar panels out of China being a particular issue.

So the backdrop or the conclusion from the current state of the market is that for the foreseeable future, the global renewables market will be long dollars and short projects. The implications of this are affecting how we're thinking about how we deploy our capital. As I mentioned on last quarter's call, we're deploying what I'm calling a barbell approach, where we're looking to move to earlier-stage development projects and then also operating projects where we're helping supplant project equity at the project level.

Developers with large pipelines, who previously needed capital to advance their pipeline, are being pursued by larger, strategic and institutional investors who are willing to pay top dollar to basically buy their pipeline at an early stage. Institutional and strategic investors used to buy projects. Well, now they're looking more and more to buy entire pipeline of projects. This fairly recent change in the competitive landscape has made deals with developers with established and sizable pipelines, which is where we started, more difficult to source and less attractive for Great Bay.

Last quarter, I shared with you that Great Bay's response will be to seek earlier-stage partnerships with good developers, who don't yet have a large pipeline and partner with them to help them build that pipeline of projects on which we will receive royalties. It's a similar concept to our TGE and Apex deals in that we're looking at pre-production projects, just a bit earlier. It's not too dissimilar to Brian's very successful project generation business he's used at -- with Altius and base metals to essentially create their own royalties. We want to be part of the capital that goes into building out the project pipelines to help feed the beef, so to speak, and meet the incredible demand for new projects.

A few comments about our newest deal with Bluestar Energy Capital and Nova Clean Energy. We're extremely pleased to report that, we announced this last night, that we closed one of those earlier-stage partnerships in the barbell, a $32.5 million investment into what we believe can become the next great global renewables platform. The company is Bluestar Energy Capital, founded by Declan Flanagan. Declan is the former CEO of Orsted Onshore and Lincoln Clean Energy and one of the most highly recognized and successful leaders in renewables and the global energy transition. Renewables development is a people business, and Declan has one of the best track records in the industry. He's building a great team, and we're excited to be part of this exciting opportunity.

A few comments about our investment. Our total investment commitment is $32.5 million, with a significant majority of that investment going into Nova Clean Energy, which is the North American renewables development subsidiary of Bluestar. Our investment is staged with an initial investment of $8 million. We'll invest capital as Nova scales its business over the next couple of years.

Bluestar's North American renewables development activity will be conducted through Nova, and we will receive royalties on 1.5 gigawatts of renewable energy projects commercialized by Nova as well as a minority equity ownership in Nova that Brian mentioned. While Nova may seek out opportunistic acquisitions of projects, which would accelerate the time line, our base assumption is that the 1.5 gigawatts will come from greenfield development, which will take several years to mature. The royalties we'll receive provide a solid base return on our investment into Nova, consistent with the return thresholds we've discussed previously.

The equity ownership was important to us because we've seen firsthand that institutional and large strategic investors will pay top dollar for a quality project pipeline. It would have been terrific if we don't even -- had owned a small equity position in Apex, given their transaction with Ares.

Great Bay is also investing alongside another institutional investor for a minority equity stake in Bluestar. The identity of that disclosure -- of that institutional investor will, at some point, be disclosed when Declan believes that's appropriate. And in their -- we'll have some exposure to Bluestar's international activities because Declan is building up a global renewables platform. So in addition to the royalties and equity ownership we will receive on Bluestar's North American business through our investment in Nova, Great Bay will have some exposure to international activities through its minority equity ownership in Bluestar.

We've always said there's no reason that our royalty model wouldn't work in international markets, but that we would need the right partner to pursue any international investments. While there can be absolutely no promises, we're hopeful that this relationship with Bluestar will flourish and grow to potential opportunities for Great Bay to deploy royalty capital in international markets.

To sum up, this is an incredibly exciting opportunity to get in on the ground floor, to back a leader and team with a proven track record and be part of what we hope will become the next great global renewables platform. We're highly confident that we'll receive our 1.5 gigawatts in royalties and believe our equity participation could have meaningful value.

But I don't want to get ahead of ourselves. We're going to do what we always do: focus first on being a great partner and helping others to be successful and grow. That's how we'll get opportunities to deploy additional capital and grow our royalty business alongside that. We've obviously just closed the Bluestar deal but we remain incredibly busy. We're confident we'll be able to continue to deploy capital throughout 2022 on both ends of the barbell, earlier-stage developers and direct investment into operating projects.

A few comments on the other end of the barbell, investing into operating projects. We still have a number of conversations underway and continue to believe that represents a significant investment opportunity, especially as projects leave more of the offtake, subject to market prices, which reduces the amount of debt capacity they can put on the project and results on a larger project equity check. Rate-based royalty financing is a terrific substitute that is accretive to the project owners for part of that larger equity check.

I would mention that industry-wide, there are fewer projects, especially solar projects, getting into construction in 2022 than would have been projected, say, 12 months ago due to supply chain constraints and interconnection delays. These projects will still get built, but the time lines have been pushed out a bit.

In many ways, the mounting pressures in the industry from supply chain disruptions and interconnection delays and the movement toward more merchant exposure creates opportunity for flexible, innovative capital like ours. In every deal we do, we're looking to build long-term relationships where these partners hopefully look to Great Bay for their financing needs again and again.

This isn't a short-term trade for us. We're offering permanent, flexible, nondilutive partner-like capital. I think this is a big part of what differentiates us in the market and is fueling our growth and adoption.

That's it for my update. I'll turn it back to you, Brian.

[Brian Dalton, executive]

Thank you, Frank. My only comment, I probably should have led with this when I introduced you, is that when Frank mentioned the numbers, he's speaking from the GBR perspective, 100% GBR, which ARR is a 50% shareholder. I just wanted to make sure everyone's clear on that.

And let's open the floor to questions, please.

[Operator]

[Operator Instructions] And our first question is with Mr. David Quezada from Raymond James.

[David Quezada, analyst]

Congrats on the new investment there. My first question, just related to the Bluestar investment. Wondering if you could just talk about or maybe confirm a time line, an expected time line for full investment and when you would receive royalties. Sounds like 2 to 3 years maybe to build out that development portfolio, and then maybe -- I'm assuming another 1, 1.5 years before you see the first royalties. Is that the right ballpark?

[Frank Getman, executive]

Yes. That's right, David.

[David Quezada, analyst]

Okay, great. And then just on return expectations, I appreciate your comments that it would be in that -- your historical 8% to 12% range. Do you expect a bias towards the high end of that range, just given that it is a little bit earlier stage than what you've looked at in the past?

[Frank Getman, executive]

I think the way that we think about it is to be -- okay. Go ahead, Brian.

[Brian Dalton, executive]

Well, I mean, again, I mentioned in my remarks, there is a difference there. With the TGE and Apex deals, we defined return hurdles that sort of capped out when the investment was complete, at least on a base case. There's obviously optionality beyond that. In this case, what we don't know and don't have, we have net total number of megawatts. In the other deals, those are estimates based on where the market is, too.

In this case, what we don't know is how the pricing will work, whether it's PPA or market-based. So we have a bias obviously, towards higher prices going forward. So to the extent that, that happens, yes, returns could be materially higher. But it's just a little bit of an adjustment in terms of the whole risk-reward profile [indiscernible] there is notionally anyway because there is an established pipeline today of more risk in the investment, although we think it's more than offset by the people. But it's -- the real different here is that we're more exposed to improving prices as the market's evolving [indiscernible] in our portfolio.

[Frank Getman, executive]

I would just add that I think it's appropriate in the -- with the equity kicker as well, to your point that it's earlier stage in the return thresholds. That I think if you think about that base return, that's how we're viewing the capital we're putting into Nova and the royalties we're going to get. I think because it is, it's entirely appropriate that we have this equity kicker because it's at an earlier-stage investment, which -- who knows what that could become worth? But that's how we're thinking about it because it is earlier stage. So I think your instincts are correct.

[David Quezada, analyst]

Okay, perfect. And then just one more for me, if I could. Curious, just surrounding your comments around institutional buyers for development portfolios. Do you have a framework in place for the eventuality of a buyout of your royalty with -- under the Nova investment?

[Frank Getman, executive]

There's no -- Nova is being set up as a separate and independent company from Bluestar so that it's a North American focus. So that if there was an opportunity down the line to -- someone came along and definitely decided he wanted to sell that business, it would be set up so that you could do that. But there's no buyout provision for the royalties.

[Brian Dalton, executive]

We live, we learn.

[Operator]

Our next question is with Nicholas Boychuk from Cormark Securities.

[Nicholas Boychuk, analyst]

On the Bluestar, wondering if you can kind of comment on the contributions. I know you're starting with the $8 million. But what are the catalysts for you to contribute additional dollars as they develop the portfolio?

[Frank Getman, executive]

It's really as the business scales and as the need for -- as the opportunities present themselves and need for development capital based upon the teams, the greenfield activities. Or it could be if there was a particular attractive, opportunistic acquisition that came along, then we would provide the capital. I think it's reasonable to assume the deployment is going to be over the next couple of years, 2 to 3 years, and then we'd be harvesting the royalties after that. But there's nothing -- there's no specific catalysts for the call. And Bluestar will be contributing capital as well, so it's not like it's being funded just by Great Bay.

[Brian Dalton, executive]

I should point out that if it is [indiscernible] it would have been under the Apex and the TGE agreements. Not milestone-based, but in this case, it's matching capital with its [ parent ], so that's the protection.

[Nicholas Boychuk, analyst]

And as you look at the track record, can you guys comment on what Declan brings specifically? I understand with Orsted Onshore, obviously, wind projects are probably a specialty. Their asset was in Texas. What's the rough profile or region of projects you're expecting to get royalties on from this partnership?

[Frank Getman, executive]

I think it's going to be across the United States for Nova so I don't think there's any particular region. I think he's going to look where there's less log jams and less -- and more ability to get things done. In places where there are difficulties, maybe there's opportunities in those.

I've heard him comment that a little disruption and difficulty in the market isn't necessarily a bad thing when you're looking to deploy capital and grow business. And he has -- he's wind and solar both with Lincoln Clean Energy. He has the knowledge and experience across all of the various technologies. And his team, he's building out a top team.

[Brian Dalton, executive]

This is more anecdotal in my conversations with him. I'd put it this way. For some developers, I think some of the headwinds that are out there with interconnect and everything else can be really, really problematic and stall their growth and get them in trouble if things delay too long one way or the other.

But by personality and just the nature of the entrepreneurship here, I really came away feeling like challenges that are out there in the broader sector right now and some of the difficulty others will face as results are truly the opportunity that we're seeing here. Because that ability and access to capital, network and depth of knowledge to, I think, really take advantage of some of those situations, not something really you put your -- quantify it all, but a strong sense that, as Frank said, very much equals opportunity as far as Declan Flanagan is concerned.

[Nicholas Boychuk, analyst]

And then last on TGE. As you guys approach the last, I think it's about $8.5 million that you still owe into them, they commented on what their outlook is, what they're thinking for future development and whether they'd want to continue to re-up the partnership. Or how is that looking?

[Frank Getman, executive]

There's been -- obviously, we don't have any specific agreements in place. I'll just comment that, that continues to be a very strong relationship, and I believe that management there is very happy and are seeing the benefit of our capital and our partnership. And we're hoping that, that will continue.

[Operator]

Our next question is with John Mould of TD Securities.

[John Mould, analyst]

Maybe just going back to the Bluestar announcement and this bigger question in the interconnection challenges that you've been talking about for a while now, Frank. I'm just wondering when looking at how you structured the deal in terms of funding milestones, your return anticipations and time line expectations, how did you weigh what you're seeing out there in terms of interconnection challenges in the market more broadly with those considerations when you finalized the terms of the arrangement?

[Frank Getman, executive]

Well, we didn't have -- there's nothing specific in the agreement about interconnection delays and the impact on timing of investment. I think it's -- there's a strong alignment in -- between Declan's investment and ownership in this vehicle. He's the majority shareholder at Bluestar and investing significant -- his own capital.

And I think that the -- it gets back to what Brian was saying. He's going to be opportunistic. They're going to find opportunities, whether it's out in the West or whether it be other opportunities where they can either get around, over or through these -- some of these challenges. I know he had some creative ideas he's going to pursue that wouldn't be appropriate to discuss in a public venue.

[John Mould, analyst]

Sure, okay. No, fair enough. That's helpful context. And then maybe just going to the split between Bluestar and Nova. And you explained why Nova is set up separately. And maybe just focusing more on what might sit at Bluestar instead of Nova. What are you hopeful -- what are your hopes in terms of the time lines for Bluestar's evolution? And you've referenced this global platform in the context of the arrangement. What are you hoping for there? And when do you think we could expect to see more progress at that level?

[Frank Getman, executive]

Well, the bulk of our investment, $25 million of the $32.5 million is going to be contributed investments in Nova. So that's the vast majority of our investment. Bluestar is the vehicle which he's using to pursue, whether it be Asia Pacific or Europe or other markets. And we will -- we have a Board seat at Bluestar, and we have an equity participation, a minority equity participation at Bluestar.

But I think that the bulk of our investment in this deal, obviously, into Nova, whether the relationship results in other opportunities where we can invest additional capital into new opportunities that Declan pursues at Bluestar, that's to be seen. But I think the way to think about it is this is largely a North American investment, but that we do have some participation at the Bluestar level to start to get exposure to international markets.

[Brian Dalton, executive]

[indiscernible] me again to the Bluestar Group that as they're identifying opportunities in other markets, that we are more than open to participating and contributing capital, joining in that. So that means we've made that well -- we made them well aware of our appetite there. And we're willing to look at opportunities with that offer, if you will, has been quite well. But as Frank said earlier, certainly no promises here. The bulk of this investment is focused on the North American part of the platform. But again, the relationship that we hope will blossom into much, much more.

[Frank Getman, executive]

The same reasons that Longroad, Northleaf and TGE and Apex and others find our nondilutive capital would be the same way he would find it attractive to use elsewhere. He would be able to leverage his Bluestar equity investment if he brought royalty capital alongside with it. So it's the same concept of why we're getting traction elsewhere. It's just we have this specific relationship now that we may be able to deploy capital.

[John Mould, analyst]

Okay, great. And then maybe just looking at a few of the projects in the pipeline of the creative royalties, specifically the projects with Leeward. Saw they signed a solar module supply agreement for a bunch of non-identified projects with First Solar. So that should help them get around some of the challenges we've seen. Does that give you -- I guess the increased confidence is maybe overstating it, but continued confidence in the time line for some of their -- some of those projects, that end of 2023 time line for beginning operations?

[Frank Getman, executive]

Yes. Look, Leeward is a quality sponsor with plenty of capital behind them, and they're going to get these projects built. The thing I love about the TGE structure, is that if it's delayed for a few months -- because we don't have any control over that. But if it is, we're protected. That just means that TGE will have to give us some additional royalties. So it doesn't impact our returns on our TGE investment really at all. So -- but I'm highly confident that those projects -- like I said, Leeward is a very high-quality sponsor with capital and access to suppliers and the like, and I think that those projects are in good hands.

[Operator]

Our next question is with Louka Nadeau of National Bank.

[Louka Nadeau, analyst]

Congrats on the deal. I'd like to know how we should think about the equity interest. So are we more looking at something under 10% or we should see it more as 25%? And also, could you talk about the size, maybe the global development pipelines, the Bluestar one?

[Frank Getman, executive]

There's -- we can't go into more detail on the equity ownership at this point. Declan's still building out his company, and it's really not ours to disclose at this point. But the -- and there is no pipeline at Bluestar at this point. I know that he's actively engaged in conversations with folks. But again, this is a -- this is largely a start-up so there is no pipeline at Bluestar to speak of today.

[Brian Dalton, executive]

Louka, as far as the broader equity ownership in the business goes, I imagine Bluestar will have more to say on that in due course, including identifying the institutional, family office investor, those kinds of things, but we don't want to jump ahead of anything in terms of the broader launch.

[Louka Nadeau, analyst]

Good. And this might be like a difficult question to answer, given that you're -- a lot of discussions and stuff like this. But do you have any target capital deployment for 2022? So how much you could deploy by the end of the year? And also on the $200 million base shelf prospectus, would that just be used if ever you need funds quickly? Or could you use it to fund projects in the long term?

[Brian Dalton, executive]

The base shelf was really just put in place to have it there in case -- the way this business works, deals can come along quickly. And we have a number of relationships that have blossomed to that point, where we're kind of on standby on a whole number of things where we could get a quick call and say, "Hey, can you write this check?" And so it's just another tool in our toolbox as far as capital availability goes, and it's probably something we'll just always keep it alive going forward.

[Louka Nadeau, analyst]

Good. So it would not be used to like fund the project and then funds would always be pulled from that? It would just be used in case you need it now, and then you would like probably get other funds to fund the project after like to repay?

[Brian Dalton, executive]

It's just for expeditiousness if we need to raise capital quickly at any point. Obviously, if you don't have it in place, there's as a much longer regulatory road to go and could actually jeopardize deals. So we just felt it was prudent to have it in place basically. And we'll keep it alive, I expect, for a long time.

[Operator]

[Operator Instructions] And our next question is from Masa Song, Laurentian Bank.

[Masa Song, analyst]

Again, congratulations on the investment. Just looking at the numbers here, like the expected generation -- generating from the royalties on the 1.5 gigawatts. And also, I think that alone will put this Nova project over 40% of the entire portfolio. And also with that early stage, I think you touched on this a bit more, but -- earlier. But would this -- how should we think about the return or the royalty from this royalty standpoint? Because that will be, once this gets developed, it will be more than like close to, I guess, 50% of the entire portfolio.

[Brian Dalton, executive]

Keep in mind the 8% to 12% band that we've talked about, that one we -- what we have here is megawatts approved. We have [indiscernible] for prices going forward that are basically what the consensus out there right now. And if you take that volume times or prices, it generates return within that band. But again, in this case, there is more variability. If prices are lower, the return will be lower, but our bias is towards higher prices. And if that plays out, the returns could be significantly above the stated hurdle band.

But it's different than TGE and Apex in that regard. And I think that's important to bear in mind and start to think about our own ambitions around more price exposure. And just, as Frank said, we love the TGE structure and how it protects us in that regard. But we also like this and on a combination basis, I think it makes a really neat portfolio for a royalty company, in particular, around optionality.

Because again, the price forces that are in play right now are pretty powerful. Obviously, demand for renewable energy is insatiable, but there are challenges out there that are putting pressures on the marginal cost of generation, whether it's raw materials or the natural gas prices. Generally speaking, we really like how inflation is developing generally and particularly within the sector and what that ultimately should result in, in terms of prices. So we're really excited to have this exposure in this case.

Obviously, we get the royalty side, either top line revenue-based royalties, so full exposure to any future better prices, but without that downside pressure from higher cost to generate.

[Frank Getman, executive]

And on the megawatts, if I could just add, we currently have 16 royalties and 3,500 -- on projects totaling over 3,500 megawatts. That's today without the Bluestar deal. With this 1.5 gigawatts, or that 3.5 gigawatts, so the 1.5 gigawatts, by the time that these royalties vest to us is going to be several years out that these projects come into fruition. So my hope is just that at that time, we will have many more megawatts under royalty.

[Brian Dalton, executive]

Yes. Well, we'll get more just from the TGE transaction as it stands. And then obviously, we're hoping for further deployment. So Frank is exactly right.

[Masa Song, analyst]

Awesome. Yes, that's really helpful. And just last one for me. As you also mentioned that additional royalty assets are expected to reach commercial operations later this year. And is there an internal threshold that your team is forecasting on top of the current $4.5 million to $5.5 million revenue guidance?

[Frank Getman, executive]

No. I mean we obviously monitor but it's -- those -- we have no control over those construction time lines and the like. So I think it's not really -- we haven't stated anything publicly about that. Obviously, we monitor it internally but we haven't seen anything publicly about revenue expectations from new projects coming online.

[Brian Dalton, executive]

We obviously have hope for a back-end weighted ramp-up there. But there's also delays and issues. That would in turn make us more than be cognizant of those challenges as well. So again, I think we're comfortable with the guidance that's out there, and we'd be really happy if something would move along quicker than that guidance accounts for, but please don't count on it.

[Operator]

Our next question is with Nicholas Boychuk of Cormark Securities.

[Nicholas Boychuk, analyst]

Just want to really quickly come back to the comment made on the future Bluestar royalties. So to my understanding, the reason you're going to get potential greater upside is because you've got a fixed royalty set in place. You guys have already agreed to a percentage royalty on the top line of those future projects. Is that fair to assume and the right way to think about it?

[Frank Getman, executive]

Correct, correct. It's agreed upon. And then the number of gigawatts that, that would attach to at one point in time.

[Nicholas Boychuk, analyst]

And is that in line with the [indiscernible]

[Frank Getman, executive]

But the upside too is -- yes, I think that's kind of I think what we were alluding to, is that if you look at the $25 million -- based upon our current estimates of value, which as Brian points out, prices could be higher, they could be lower. But we feel comfortable with that investment return and the investment into Nova in return for those royalties. And then we have the equity participation, or both the minority participation at both Nova and Bluestar.

[Brian Dalton, executive]

I think as we get into actually announcing projects, we'll start to disclose actual royalty rates. But it should be very straightforward using the return hurdle and megawatts to get to average numbers. And yes, it will be in line with other developers.

[Operator]

And our next question is with Louka Nadeau from National Bank.

[Louka Nadeau, analyst]

I'd like to know my next question would be on the new projects with Nova. Are some of them already bidding into RFPs? Or is this upcoming? And like are there any milestones that we could start tracking to know how the development of the portfolio is going?

[Frank Getman, executive]

No. This is a greenfield development company.

[Operator]

And at this point, I'm not showing any further questions on the queue. I would like to turn the call over to Ms. Flora Wood. Please continue.

[Flora Wood, executive]

Thank you, Delfin, and want to thank everybody for joining the call and for the Q&A session. We'll look forward to speaking with you soon on the Q2 call. Thank you.

[Brian Dalton, executive]

Thank you.

[Operator]

And this concludes today's conference call. Thank you, everyone. You may now disconnect.