Boralex Inc

TSX:BLX

Earnings Call Transcript 2018-Q2

[Operator]

Good morning. My name is Simon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Boralex Inc. Second Quarter Results Conference Call. [Operator Instructions] [Foreign Language] Mr. Jasmin, you may begin your conference.

[Marc Jasmin, Director of Investor Relations]

Thank you, operator. Good morning, ladies and gentlemen. Welcome to Boralex's second quarter results conference call. Joining me today are Mr. Patrick Lemaire, President and Chief Executive Officer; Mr. Jean-Francois Thibodeau, Vice President and Chief Financial Officer; Mr. Guy D'Aoust, Vice President, Finance; Mrs. Melanie Fiset, Corporate Controller; and Mr. Pascal Hurtubise, Vice President and Chief Legal Officer. Mr. Lemaire will begin with his comments. And afterwards, Mr. Thibodeau will carry on with some financial highlights.During this call, we will discuss historical as well as forward-looking matters. When we talk about the future, there are a variety of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. These documents are all available for consultation at sedar.com.In our webcast, the disclosed results are presented both under IFRS and on a combined basis. The particularities of combined basis have been explained previously as well as the reason why we use it. This being said, unless otherwise stated, most comments made in this presentation will be on a combined basis. The press release, the MD&A, the consolidated financial statements and a copy of today's presentation are all posted on the Boralex website at boralex.com. If you wish to receive a copy of either of these documents, please do not hesitate contacting us.Finally, take note that we will only take questions from sell-side financial analysts who currently have an active coverage on Boralex. Mr. Lemaire will now start this conference. Patrick?

[Patrick Lemaire, President, CEO & Director]

Thank you, Marc. Good morning, everyone.For the second quarter, while results are not up to our expectation, Boralex still reports increased quarterly production, revenues from energy sales and EBITDA, driven for the most part by assets, which were either acquired or commissioned during the last 12 months. Overall, these factors more than compensated for the weaker contribution of existing Ontario and French wind operations and U.S. and Quebec hydro.Over and above, we were active on the M&A front as we completed our announced 2 important acquisitions, which, together, will add 364-megawatt or 25% to our capacity compared to where we stood at the beginning of the year.First, in France, we completed the acquisition of the shares of Kallista-related entities, representing a portfolio of assets comprised of 163 megawatt of operating assets, 158 megawatt of projects under development and a 10-megawatt project under construction.Second, in Canada, we've announced the acquisition from Invenergy of 5 wind sites, totaling a net capacity of 201 megawatts, which is expected to close before the end of August. I take this opportunity to confirm that the transaction will cover the 5 wind sites, as all the other partners have notified that they will waive their right of first offer.These transactions are strategic for Boralex as they reinforce our position as an industry leader in both side of the Atlantic.At the development level, we believe that increasing scale is important as it provides additional negotiation -- negotiating power with suppliers in the context of ongoing consolidations throughout the industry's value creation chain. At the operation level, as we've mentioned in the past, we see an opportunity in gradually bringing in-house our maintenance activities. As we gain increased scale, we believe this will translate into better machine availability and drive higher margin. I point out that we've already relatively -- we are already relatively advanced with respect to this process in France, and that in late March, we took a significant first step in this direction in North America by taking over all maintenance operations of our 90-megawatt Thames River site in Ontario.From a financial standpoint, to support these transactions and also to strengthen our balance sheet, we've issued a total of 12.8 million of subscription receipts, including the full exercise of the over-allotment option for gross proceeds of $259 million. These receipts will convert into common shares upon closing of the Invenergy acquisition expected later this month.Additionally, in July, we drew the remaining $100 million available on the $300 million sub debt issued in March of this year. These -- the proceeds were immediately applied against our revolving credit facility. I thank our debt and equity investor for their support as I share their optimism with respect to these transactions.We expect that the recent acquisition will lead to mid-single-digit accretion in 2019, gradually increasing to high single-digit in or about 2022.Also, given the confidence in the corporation outlook, the board has conditionally approved a 4.8% dividend increase from $0.63 to $0.66 a year upon the closing of the Invenergy transaction, which would be the second increase of the year for a total of 10%.I will now comment on our growth path on Slide 5. There is 1 addition this quarter, namely our first-ever repowering project, the Cham Longe I site, which will see its capacity grow from 18 megawatt to 35 megawatt along with a 15-year contract extension to 2035. We've already started preliminary work on the site and the new repowered site is expected to be up and running in the first half of 2020. The Santerre project was pushed out to 2020 from 2019 because of a delay required for its interconnection. Note that this delay has no financial consequences. On a final note, our current growth path of identified projects stands at 244 megawatts, including 213 megawatt to be commissioned before the end of 2019, which means that upon closing of the Invenergy acquisition, we will have achieved our previously stated end of 2020 goal of 2,000 megawatt one year faster than anticipated. I will be back later for closing remarks and the question period after Jean-François has discussed further our results and financial situation. Jean-François?

[Jean-François Thibodeau]

Thank you, Patrick. Good morning, everyone. As usual, I will only comment on quarterly numbers, although year-to-date figures have been provided in the presentation for your convenience.Starting on Slide 8, with the quarterly summary. The quarterly production figures on a combined basis translated into a 2% increase, along with a 5% increase in revenues, relatively stable and a decrease in cash flows from operations. Accordingly, revenues came in at $110 million and EBITDA stood at $68 million, representing margins of 62%. As for cash flows from operations, the total of $26 million compared with $46 million last year. I will explain later on the call the main reasons for this variation.The quarterly basic net loss attributable to Boralex shareholders stand at $28 million or $0.36 per share, which compared to a net loss of $2 million or $0.03 per share in 2017. The increase in net loss between the 2 periods is primarily due to lower-than-expected production volume at existing facilities, a $7 million in acquisition costs related to the Kallista and Invenergy transaction and an exceptional $12 million in impairment losses related mainly to the Cham Longe I wind farm repowering and to the cancellation of the Otter Creek power purchase agreement in Ontario. You should, however, take note that when we made the IRR calculations for the repowering at Cham Longe, we took into consideration all lost cash flows from the original project and that the marginal return remains in the double-digit range, thus creating additional long-term value for our shareholders. As you can see on Slide 10, the wind and thermal sectors both performed better on a year-over-year basis while the hydro and corporate sectors were both lower. As for solar sector, it remained relatively unchanged. I will later provide further details on individual segments.Moving forward to Slide 12, with an analysis of the quarterly $1 million positive EBITDA, variance at the bottom of the page. First, on the positive side. The commissioning and acquisition of new assets provided an additional $4 million EBITDA contribution. However, when netting the lower volume of $7 million with the $4 million higher compensation received from IESO as for Invenergy, we mostly offset the contribution of the new assets.Moving to Slide 14, with the revenue of the wind segment. Considering the newly acquired or commissioned assets, global wind production increased by 3%. In Canada, it was 6% lower, while in France, it was 20% higher. On a comparable basis, excluding the contribution of newly commissioned sites, production was 5% lower year-over-year. In Canada, it was 6% lower, while in France, it was 3% lower. If we look at it from the perspective of wind factors, expectation were for a 29% capacity factor in Canada and a 24% in France for a blended 27%. In reality, the overall blended capacity factor came in at 22%, considering Canada achieved 28% while France achieved a 17% factor. In dollar terms, the contribution of the newly commissioned sites had a favorable impact on revenues and EBITDA of $6 million and $4 million, respectively. These numbers were mainly driven by the 87 megawatts commissioned in France in the second half of 2017.To conclude, in view of the above mentioned items, revenues increased by 9% to $88 million while EBITDA increased by 10% from $62 million to $68 million, representing margins of 77%.Moving on to hydro on Slide 16. This quarter's overall production was 16% lower compared to last year. It was 5% higher in Canada and 29% lower in the U.S. In comparison with historical average, blended production was 8% lower, 3% lower in Canada and 12% lower in the U.S. As a result and also considering that the contract prices of [indiscernible] Hudson Falls facility decreased by 20% year-over-year, quarterly revenues decreased from $19 million to $14 million and EBITDA from $15 million to $10 million. As for margins, they stood at 70% compared to 78% last year.We have no specific comments on the thermal and solar sectors. However, we've provided additional details on Page 22 and 23 of the appendix section.Now on the corporate sector at the top of Slide 17. The development expenses totaled $2 million, down from $3 million last year. Administrative expenses within the corporate sector stood at $7 million compared with $6 million in Q2 2017 and reflects, among others, the company growth. Finally, other expenses increased from $1 million to $3 million, partly explained by the recent relocation of our Montréal offices. Considering all of the above items, corporate EBITDA came in at negative $12 million in comparison to a negative $10 million last year. I will now discuss cash flow generation and our financial position as seen on Slides 18 to 20. Take note these figures refer to IFRS numbers.Quarterly cash flows from operations before changes in noncash items came in at $21 million, down from $44 million in 2017. The difference is essentially explained by a $3 million decrease in distribution received from our joint ventures but is reflecting only a timing difference, a $9 million increase in paid financing costs and $7 million of additional fees associated with our latest acquisitions. Noncash working capital items representing cash inflow of $31 million derived for the most part by a decrease in receivables relating to seasonal factors, partially offset by a decrease in payables. During the quarter, we spent a total amount of $162 million on investing activity. However, while we invested approximately $200 million for the acquisition of Kallista, this amount is split in 2 in the cash flow statement: $100 million in the investment activities net of cash acquired and $86 million in the financing activity. Also, please note that a preliminary purchase price allocation is found in Note 4 of the interim financial statement filed this morning.Over and above, we spent a $4 million milestone payment relating to the Ecoterra portfolio acquired in 2015, spent $55 million in CapEx and invested $6 million in reserved cash, which was partially offset by $3 million of other factors.Financing activities provided a net amount of $129 million. More specifically, we drew another $214 million on the revolver, which was partly reimbursed in July with the net proceeds from the issuance of an additional $100 million of sub debt, as mentioned earlier. We also incurred $59 million of new project-related debt. We made regular payments of $31 million on project debt as well as payments of $5 million for sales tax-related bridge loans. Finally, we paid $12 million in dividends to our shareholders, another $4 million to project-level noncontrolling shareholders and $7 million to cash settle a hedge.This being said, on an IFRS basis, cash stood at $159 million at the end of the quarter, in addition to $51 million in restricted cash. For the $244 million of projects identified in our growth path on Slide 5, we expect to spend another $365 million in property, plant and equipment for the remainder of 2018 and 2019. These investments will be financed by additional debt drawdowns of approximately $305 million and an estimated $6 million of project-related equity. For the remainder of 2018, we expect to invest approximately $200 million in property, plant and equipment, finance with approximately $45 million of equity and $155 million of project-related debt. For 2019, we expect to invest approximately $165 million, financed with approximately $15 million of project-level equity and $150 million of project-related debt. As for the remainder of 2018, project debt reimbursements should amount to approximately $82 million. And for the next 12 months, it should amount to roughly $183 million.Now on our payout ratio of the last 12-month period, it stands at 65%, slightly outside our target ratio of 40% to 60% of discretionary cash flows.Thank you for your attention. I will now turn the conference over to Patrick for a few closing remarks before the question period. Patrick?

[Patrick Lemaire, President, CEO & Director]

To conclude, I would like to state that while we continue increasing our production, revenue and EBITDA and that we still have a sizeable portfolio of projects that can be brought to market in the future over and above our already identified growth path. With increased scale coming from our recent acquisition, we believe we're reaching an interesting critical mass that will enhance our competitiveness. And as such, we will continue focusing on driving shareholder value through our development and operational initiatives.Considering our growth opportunities, our recently trimmed balance sheet, the conservative payout ratio policy and the ongoing support of our equity and debt investors, we truly feel we are in position to provide our shareholders with an excellent value proposition going forward.Thank you for your attention. Operator, we will now take questions from the participants.

[Operator]

[Operator Instructions] [Foreign Language] Your first question comes from the line of Nelson Ng with RBC Capital Markets.

[Nelson Ng, Analyst]

Just a quick question on the Cham Longe repowering. Are you essentially looking at a number of -- so I guess, the first part of the question is, I presume that project has prequalified for the higher tariff. And I guess, the second part is, are you essentially looking at a number of repowering sites and trying to like prequalify them for the higher tariff?

[Patrick Lemaire, President, CEO & Director]

Yes. Some are already prequalified for the cash flow -- contract for difference 2016. But it's a question of arbitrage, right? It's not all the sites that can be repowered, so we need to do the economics of a repowering. If it's beneficial compared to our forecast of merchant market, then it's a project that we will put in our pipeline. So every project that follows environmental -- newer environmental rules because there are some projects that -- we have turbines that are within the 500 meter from any houses. So these ones, for sure, we won't repower. We will move along and -- till the turbines are, let's say, cannot be operable anymore. So that's why that's not all the projects. We have some in the acquisition of Kallista. We have a few projects that do have the same 2016 contract with difference. So like I mentioned at the beginning, it's an arbitrage thing that -- between going with the merchant and repowering when environmentally it's feasible.

[Nelson Ng, Analyst]

So like for that project specifically, you're using the same towers, right? So essentially, you're replacing the same turbine with something that's twice the capacity?

[Patrick Lemaire, President, CEO & Director]

No, no. It's -- we're changing everything. So we're stripping everything down and putting new towers, new turbines with more capacity.

[Nelson Ng, Analyst]

So how much do you actually save if you're essentially tearing everything down? So relative to like a cost of a new project, is it going to be like 80% to 90% of the new project and the benefit is just more about faster permitting?

[Patrick Lemaire, President, CEO & Director]

Yes. Faster permitting is one issue and also, let's say, local approval. Because we've seen turbines for 15 years, so it's not an issue over there to repower. And on the BoP on that, it's not that much. For sure, all the civil works, the roads and things like this, there are some savings. But when you go from, let's say, 18 megawatts to 35 megawatts, so there needs to be improvement to the substation and things like this. So I don't have the exact figure to tell you it's either 90% or 80% of new cost of the project or answer in another way, we're saving 10%, 15% of the total cost. It's not that much.

[Nelson Ng, Analyst]

Okay, got it. And then just switching gears a bit. In Ontario, in terms of the Otter Creek project, I believe that was, I guess, RES was the main developer. But did you have to kind of buy into the project? And did you have to, I guess, take any write-downs as a result of the contract cancellation?

[Patrick Lemaire, President, CEO & Director]

Yes, yes. It was mentioned -- for Otter Creek, your question is on Otter Creek?

[Nelson Ng, Analyst]

Yes, yes, that's right.

[Patrick Lemaire, President, CEO & Director]

Yes. There was about $5 million -- $4 million or $5 million...

[Jean-François Thibodeau]

$4 million.

[Patrick Lemaire, President, CEO & Director]

$4 million that was taken because these are -- let's say, the value that we estimate we won't be able to get back. Those were mainly development expenses that we had incurred as we speak. So...

[Nelson Ng, Analyst]

Okay. And then just one last question before I get back in the queue. So I guess, bigger picture in Ontario, like have you had any discussions with the government about, I guess, reopening or revisiting any of your existing contracts for wind facilities in the province?

[Patrick Lemaire, President, CEO & Director]

No, we have not been contacted by the government. But one thing we're making sure and we have reviewed every one of our, let's say, PPA to see if we have pending issues that -- and none of them have pending issues that could, let's say, open the door to terminate the contract. And some don't have that termination contract, let's say, a clause in their initial contracts. So the only thing that we have is environmental follow-up on that and noise for individual turbines here and there, which is not -- is nothing critical. So...

[Operator]

Your next question comes from the line of Rupert Merer with National Bank.

[Rupert M. Merer, Managing Director and Research Analyst]

So your results were a little below the long-term average today, and the stock seems to be off a bit. I think there may be concern in the market about the miss that you had in France for a few quarters. Just wondering if you could comment on the long-term average numbers you use in France, what your comfort level is for those numbers, how they're set, how often you review them, et cetera.

[Patrick Lemaire, President, CEO & Director]

Yes. I think the only one thing, Rupert, that -- the concern that we have -- our board has that concern. So they are questioning us and also asked that we see -- we had a 1 good quarter, and I'm not shy of the numbers. We had 1 quarter above the -- our forecast in the last 8 quarters or 9 quarters. So -- and it was last quarter. It was Q1 of this year. So -- and during the second quarter, what we've done, we've made some studies or we looked over, let's say, the past history, where the wind is going. We even went to climate scientists, French climate scientists to tell us if is this a trend of the future. And for them, all the variation that we had, which are, let's say, below our forecast is within the normal range of wind variations. The only problem is we've been getting it in the -- for the last 2 years and even a little more if we include this quarter. So you don't foresee except things like 0.1% or 0.3% of the climate change could add -- could make to the average wind. So it's -- there's no -- I wish I could answer your question more clearly for you guys and for ourselves also. But we've seen in the past and when we look at the history, there have been some period of 2 or 3 years with very low wind in a row, and it comes back after that. So it's only that it's been happening -- we've been living this since the last 2 years and a little more.

[Jean-François Thibodeau]

And I would like to add 2 points on that. When we -- we used 2 or more firms to evaluate the wind because that project doesn't have only 1 wind assessment. Usually, we have 3. We -- and most of the time, in the big, big, big [ maturity ], we use the lower number of these to take into account a certain [ risk ]. That's one factor that explains why. Okay, the next factor is also when we budget our numbers, we take -- for the projects that have more than usually 5 years, we don't take anymore the P50. We take the average that has been realized over a certain period to reduce a little bit this uncertainty, which has been. So those are 2. So as Patrick is mentioning, we do not control the volatility or the variability of the wind. But we make sure that we are as conservative as possible when we make our investments.

[Patrick Lemaire, President, CEO & Director]

And just to add one more comment on what happened in the last quarter. In my comments, I mentioned that Ontario wind and French wind was below expectation and U.S. and Quebec hydro were below expectation. Now it's only the Québec wind and the Santerre, so which is not that critical for -- except for the Québec wind. But Santerre is not critical for Boralex or it can improve on the result [indiscernible]. So it will -- we had , let's say, a tough quarter coming from Mother Nature. There's no major problem on the operations side that we have low availability of our equipment. It's nothing like this. It's all Mother Nature. And she --it's not the perfect storm. I cannot say the perfect storm because of when there's a perfect storm, there's always wind. So it's something else that happened to us.

[Rupert M. Merer, Managing Director and Research Analyst]

You can't control Mother Nature, but I suppose you can control the technology that you install. And looking at the repowering of Cham Longe or the new projects that you're building, are the turbines expected to have a higher capacity factor than the ones you have in the field already because they're taller towers or improved aerodynamics?

[Patrick Lemaire, President, CEO & Director]

Oh, for sure, for sure. The capacity factor increased by -- we can see 30%, 40% that the capacity factor can increase from 1 turbine to another, going from 70-meter blades to 120-meter blades. But this is one environmental issue that can you go as high as this that we need to get approved when we think about repowering in France. If you've got a permit for the tip of the blade when it's up, it's 100 meter, you need to ask for a new permit to go to, let's say, 120 meters because -- so this is all the environmental thing. And I'm answering more than your question. But the answer is yes, the capacity factor will increase. But it will be impacted by lower wind regime if same thing happens as the last quarter. So it's going to be similar effects.

[Operator]

Your next question comes from the line of Sean Steuart with TD Securities.

[Sean Steuart, Research Analyst]

A couple of questions. On the Q1 call, you indicated about 125 megawatts of eligible product -- projects still in line for the feed-in premium. Is that still the right number to go with in terms of...

[Patrick Lemaire, President, CEO & Director]

Yes, yes. We still have a little above 100 megawatt because we've excluded Moulin de Lohan. So we need to add it all. So that's why we have around 100 megawatts. And not to forget, I hope that by the end of the year, beginning of next year, Moulin de Lohan will come back in the growth path, so.

[Sean Steuart, Research Analyst]

Understood. My next question is on land sales. You agreed to sell some of the land that you'd bought in France for EUR 30 million. Where is Boralex with respect to selling the Scottish land that you acquired in that transaction? And will that cover the remainder of the bridge facility that was in place?

[Jean-François Thibodeau]

Yes. It's an ongoing process. The difference between French and the Scottish land is we don't sell the Scottish land as a whole. It's all small pieces of land that we're selling all together. And basically, yes, it's supposed to cover the -- materially the loan, and nothing material to expect negative.

[Operator]

Your next question comes from the line of David Quezada with Raymond James.

[David Quezada, Equity Analyst]

My first question here is just on the topic that you mentioned of bringing some of the maintenance at your facilities in-house. Wondering if there's any context you can provide on the magnitude of the margin lift you think you could get. And if there are any other, I guess, hurdles to that in terms of contracts you might have in place?

[Jean-François Thibodeau]

For the contracts that we have in place, there's always some sunset date, I could say, and of the maintenance contract of the agreement with the turbine manufacturer. And on the first part of the question, if you could repeat, [indiscernible] value?

[David Quezada, Equity Analyst]

Yes. Or any kind of quantification on the margin lift you're looking for there.

[Jean-François Thibodeau]

Well, something -- you could look at something in the neighborhood of -- in terms of margins, let's say, for a site that you've taken over, something in the margin of 5% margin improvement in [ any part ]. Obviously, this depends on many, many factors. But it's something definitely between 5% and 10%.

[David Quezada, Equity Analyst]

I guess, my only other question is just -- I apologize if you already addressed this. But on the Otter Creek project, is there any recourse there to government for the funds that you, I guess, have already spent, have to forgo?

[Patrick Lemaire, President, CEO & Director]

The Otter Creek project is, for us, is in -- we've filed it for us to present it in the future RFPs in Ontario or future opportunities in Ontario. That's what it is for us now. And we're going to try to get as much as we can back from either the government through their calculation that they have and also deposit that we've made to Hydro One for interconnections. So this is why the $4 million write-off because we have little more spend than this, but we're going to get money back from these 2 sources. So.

[Operator]

Your next question comes from the line of Ben Pham with BMO.

[Benjamin Pham, Analyst]

So it seems like you don't seem too concerned about the wind conditions, the weakness in the quarter that tends to normalize over the long term. And I generally agree that we've seen that. And obviously, the Otter Creek unfortunate situation, nothing in your control, so you've basically used that project cancellation to trim your guidance down on EBITDA. So my question really is -- I mean, it's only really been a month since you've raised your EBITDA guidance. So -- and it seems like you have some pretty positive comments in France. And you could just easily buy an asset and back for that $10 million change. So what really changed here that in just a month's time to really move well ahead of 2020 on the guidance?

[Jean-François Thibodeau]

The guidance has been changed mainly to reflect the Otter Creek project because our guidance is backed by the growth path. We've added Cham Longe and we've removed -- so there's nothing material. The EBITDA of Otter Creek was public. You can look at the MD&A. So we haven't made any material change. We have to take into consideration that Otter Creek will not be there and we have to take into consideration that. So I don't see that as a major change on our guidance. And for us, we're still positive because nothing, no information in our -- we don't have in our possession any information, as Patrick has mentioned, that should entail to reduce our guidance by X percent because of low wind. We need something to prove that. We've always been -- that it's a run rate based on either [ 50-50 ] for the new parts or the average production on the other part. So I'm not sure I catch exactly your question, but it's purely factual, the reduction in guidance.

[Benjamin Pham, Analyst]

I appreciate it. It's just -- it looks kind of bad. It's just been a month since you've rolled that out. And like I said, nothing beyond your control, but it seems like you have 2 to 3 years to make it up pretty easily. So I just -- I guess, it's just -- I totally hear that you've got it based on your secured path. But did you really need to move with the change, I guess, that's really what I'm really trying to get at.

[Jean-François Thibodeau]

The point is we have to move it. Yes, we could. It's a function of what I've told you. It's a function of the growth path, yes, because we have levers there. Yes, we could, but we're trying to be fair. And the guidance is backed by the numbers on the -- backed by the growth path. We could have left -- let's say, there, for example, we could have left Moulin de Lohan, and it's not there. We cannot leave a number like that. And then someday you'll tell us why have you left it there? And you removed it later. And so I better -- we're better -- we're in better position to be factual and in line with the growth path than keeping numbers that might materialize in a couple of years. So not the way we work.

[Patrick Lemaire, President, CEO & Director]

Yes. We have not changed the way that we do our forecast. So it's been like this for years that we only do our estimation on the actual projects that are on the growth path. So we -- so this is -- by removing some and adding some, this is what changes the forecast.

[Benjamin Pham, Analyst]

Okay. And then can I check on -- I'm pretty sure Moulin is not in your numbers at all at this stage. And when that was -- you had issues of that, you had [ trajectory ] reflected that in your guidance at the time.

[Patrick Lemaire, President, CEO & Director]

Yes. We've removed -- we probably removed it because it's been over a year now. So we've removed it from our growth path. And since there was -- they had more projects -- other projects were authorized and started construction. So -- and this is why you probably see some changes, some -- like I said, some got in and some got out. So -- and we hate to get some -- some got out, so get out. So it's been twice in 2 years, Moulin last year and Otter Creek this year.

[Operator]

Your next question comes from the line of Mark Jarvi with CIBC Capital Markets.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

I wanted to go back to the wind conditions in France and [ look at it ] from a different perspective. Are your lenders doing anything differently, being more conservative on coverage ratios given how results have trended? Or are they keeping things still based on your wind studies in the past?

[Jean-François Thibodeau]

When you do a project there on a wind site, it's done at the P90 level. So bankers become very concerned when they don't see the P90 and we do become concerned, yes. And you don't look at it only on a monthly or on a quarterly basis. You look at it on a yearly basis. Let's not forget Q1 was pretty good, also in Q2. So for a banker, so far, obviously, you have to watch when the production is done, are you going to meet your ratio, obviously. But the ratios are usually done on a P90 basis, so which reduce the uncertainty to cover that. And as an example, the difference between a P50 and a P90 is something in the neighborhood of 12%, 13%, 14%. So you have to be on a yearly basis down by 12, 13, 14 basis just to achieve your P90. And at that point, you still achieve your typically -- unless there's other stuff, everything being equal, your ratio. So obviously, they look at it as we do, but nothing is of concern so far.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

So just -- so they're not really changing their metrics and still viewing this as normal fluctuations from their perspective?

[Jean-François Thibodeau]

Yes, yes, yes.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. And then maybe if we go to the Invenergy transaction. They do have some other assets in Canada, have a relationship through your large controlling shareholder as well. Is there other opportunities there? And whether or not -- the 2 of you guys work together, whether or not it's on development activities or Boralex being a home for operating assets over time?

[Patrick Lemaire, President, CEO & Director]

We need to create value for the shareholders. We'll look at different -- all the opportunities. So yes, we have discussion with them to look at assets. But that's not specifically Invenergy though. So it's been a year. So we've done something with la Caisse in the last year, like the Invenergy thing. And no -- yes, we've done something with la Caisse. They were already there. So we took over Invenergy. And so if there are other opportunities to do things like this or else, we'll be glad. But it's going to need to be accretive for our shareholders.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. Understood. And then maybe just going back to France RFPs. There's still a demand from your wind assets. You've got some prequalified projects. Wondering what you guys think in terms of opportunities in terms of securing new contracts through the RFPs over the next year or 2?

[Patrick Lemaire, President, CEO & Director]

Yes. We're -- let's say, the ball is moving in France so -- because they don't know where to go, as we speak, or we don't know where they're going on the, let's say, different criteria to be allowed or approved to bid in an RFP. So they've done an initial one. They've done the second one that, let's say, their requirement on the permitting was different, was, let's say, a more developed project. And I think they were satisfied with the amount of project that were submitted. So we'll see in the next RFP where they're going to be, and then we'll be able to tell you guys. Because if they ask, let's say -- I'm exaggerating, but if they ask that we want the projects to be fully permitted, they're going to get only a few projects. But if they have no criteria, they'll get thousands of megawatts or have many hundreds of megawatt. So they are -- we know they're looking what is the level of permitting or development, let's say, process, where it stands to be -- to qualify to submit. So we'll know this in the months to come for the next RFP, which is supposed to be in December. So only then, will we know how many projects can be submitted from us.

[Operator]

Your next question come from the line of Jeremy Rosenfield with Industrial Alliance.

[Jeremy Rosenfield, Equity Research Analyst]

Just one follow-up question on the repowering for Cham, but also the repowering for some other assets within the portfolio more broadly. What's the opportunity to sort of recycle capital or to raise additional debt on the repowered assets, if you're able to obtain new longer-term contracts? Is there an opportunity to take out equity from some of those projects and then be able to use that equity to invest elsewhere?

[Jean-François Thibodeau]

On the repowering project, you have to look at it almost on the new project, unless it comes -- these projects come at the end of the life of the -- typically, they come at the end of the life of the original project, so there's no more debt on that. So you cannot really draw a lot of cash from -- as an equity. And then it's almost -- as you start a new project because -- so depending on the timing of when we start the repowering, obviously, it has to create value overall. Your -- the answer could be yes. The answer is more likely than not, not going to be a lot because you don't want to create just a write-off for the sake of creating write-off. So usually, you do it at the end -- you time this with the end of the original contract on which you don't have any more debt. So the equity, you're going to have to put in the new project. But you'll have to put your equity also on -- but the new project, the new repowering should have the same kind of structure -- debt structure of something like 75% to 80% debt because those are backed by long-term contract. And usually, if the -- yes, so it's either 15 or 20 years, depending on the tariff scheme. So that's -- I don't know if it answers your question, but...

[Operator]

[Operator Instructions] Your next question comes from the line of Nelson Ng with RBC Capital Markets.

[Nelson Ng, Analyst]

I just want to quickly ask. Did you guys participate in the, I guess, French solar RFP, where they awarded 720 megawatts?

[Patrick Lemaire, President, CEO & Director]

Not the last one. We had no projects in the last one. But remember, that we got one last year, which -- the Cruis project, which is 15 megawatts. So we didn't have projects ready for this participation.

[Nelson Ng, Analyst]

Okay. And then just another kind of bigger-picture question in terms of, I guess, development returns versus acquiring like operating assets and the return expectations. So I think based on previous conversations, like getting the premium tariff, you would earn a, call it, double-digit return. And then when you competitively bid, it's kind of like, high single digits. But then I guess, like with your last 2 acquisitions of, I guess, operating portfolios, would you say they were mid to high single digits in terms of your returns? Is that kind of how you look at it from a return spectrum?

[Jean-François Thibodeau]

The acquisitions, our investment criteria has not changed. We -- in today's world, you have to bid in the single digits. I won't go -- we had something like -- it is in the high single digit. Obviously, like in [ many ] case, and we've said it, if you refer to our statement, you know the accretion increases because we take -- we should take over some maintenance or reduce costs through synergies and maintenance and everything. So our -- yes, our investment criteria are always the same. Don't forget in the repowering world, I told you that even net of all the cash flows were -- we've lost, we're still going to make in the double-digit region for the Cham Longe project. So we don't know the others. But it gives you an idea that we haven't changed our guideline in terms of investment criteria. And I can tell you, we've refused some projects really recently because they were not meeting our -- those investments, and we're still committed to achieve what we said we would do.

[Nelson Ng, Analyst]

I guess, from an operating -- like in terms of acquiring operating projects, I guess, you need a certain angle or some -- like you'd need to be able to find meaningful synergies before it kind of meets your return threshold? Is that fair to say?

[Patrick Lemaire, President, CEO & Director]

Yes, yes. For sure that when there's -- we see value in the operation and things like this and synergies, this is like -- we say internally and the parent return for the seller is not the return of Boralex. It's always where we see value being created by synergies and operations. So -- and for the Kallista project, there is this synergy gain on the operation. And also, we've put some value on the pipeline that we're buying, like[indiscernible] there was no pipeline for the Invenergy ones.

[Operator]

There are no further questions at this time. [Foreign Language] Presenters, back to you.

[Marc Jasmin, Director of Investor Relations]

Thank you for your attention. A recording of the webcast is available until August 17. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. [Foreign Language]