Boralex Inc

TSX:BLX

Earnings Call Transcript 2020-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 2020 Results Conference Call. [Operator Instructions] Mr. Milot, you may begin your conference.

[Stéphane Milot, Director of Investor Relations]

[Foreign Language] So thank you, operator, and good morning, everyone. I would like to welcome you to Boralex Second Quarter Results Conference Call. So joining me today on the line are Patrick Lemaire, our President and Chief Executive Officer; Patrick Decostre, our Vice President and Chief Operating Officer; Bruno Guilmette, our Vice President and Chief Financial Officer; and other members of our management and finance teams. Mr. Lemaire will begin with comments about the highlights of the second quarter. Afterwards, Mr. Decostre will provide comments on the operations and on the development. And Mr. Guilmette will carry on with financial highlights, and then we'll be all available to answer your questions. So as you know, during this call, we will discuss historical as well as forward-looking information. So when talking about the future, there are a variety of risks that have been listed in our different filings with securities regulators, which can materially change our estimated results. So these documents are all available for consultation at sedar.com. In our webcast presentation document, the disclosed results are presented both under IFRS and on a combined basis. Unless otherwise stated, all comments made in this presentation will refer to combined basis figures. So 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 under the Investors section. If you wish to receive a copy of these documents, please contact me whenever you want. So Mr. Lemaire will now start with his comments. So please go ahead, Patrick.

[Patrick Lemaire, President, CEO & Director]

Thank you, Stéphane. Good morning, everyone. I will start by thanking, once again, all our employees for the hard work they continue to provide despite all the elements relating to COVID-19, which is still affecting our daily lives in different ways, depending on the region where we are living in. Once again, this quarter, you really made the difference and allowed us to continue growing our EBITDA and adding projects to our pipeline. Comments were made during the quarter by many governments indicating renewable energy should be a strong component of their economic recovery plan. This major sanitary and economic crisis will probably be the trigger needed to accelerate the energy transition underway. For us, who have been in this business for 30 years, it's the logical path to take. Investing in the different economic -- economies of the world to resume growth while taking care of the health of the planet and all the people living on it. In New York State, Governor Cuomo reaffirmed his objectives to achieve zero emission by 2040, and his desire to accelerate exchanges with Canada. A white paper indicating the need to accelerate the growth in the development of renewable energy to achieve the stated goals was also published by NYSERDA and New York State Department of Public Service. In Québec, Prime Minister Legault indicated that the new projects to be done in the province would be wind projects, which is good news for our 200-megawatt Apuiat project. In France, requests for proposal are continuing and government officials reaffirmed their commitment to the energy transition. All these announcements are really positive and reinforce our conviction that we have chosen the right market in our strategic planning. Turning now to our second quarter results. We experienced mixed wind conditions in the quarter, which resulted in strong production in Canada, which conduct only compensate for the decrease in wind production in France and hydro production in North America. However, we have been able to increase our EBITDA thanks to our Canadian wind operation, the optimization of our service and maintenance costs and the contribution from our Buckingham hydropower station. We have been able to add projects into our pipeline and advance projects within our growth path. During the quarter, we also completed many optimization initiatives, which will bear fruits in quarters. I will now report on progress towards the orientation of our strategic plan, starting with the main element of our growth orientation. Last Saturday, we commissioned our Santerre 15-megawatt wind farm in France. We also added 103 megawatts of projects to our pipeline, and moved 3 projects from secured stage to the ready-to-build stage. In July, we bid our Moulins du Lohan project in France for which we have been able to optimize layout and increase capacity from 51 megawatt to 71 megawatt. On the diversification orientation, we are getting ready to bid projects in the October auction in New York state. On the customer orientation, we signed our second corporate PPA with retailer Auchan in France, which will be fulfilled by 2 wind farms having EDF contract ended. In term of optimization, many initiatives were put forward. Notably, the optimization of maintenance work on wind farms with total production capacity of 412 megawatts or 276 megawatts net to Boralex. Last item on the optimization orientation is the construction underway of the Cham Longe wind farm in France, which is going as planned. We also have 3 repowering projects to be optimizing our growth path. In conclusion, from my part, as mentioned at the beginning, COVID-19 did not significantly affected us thanks to dedication of our employees. Our development activities continue, and we are looking at ways to accelerate the process at different stages. We are also maintaining the disciplined execution of our plan. We have a strong financial position to capture potential accretive opportunities, bringing strong cash flow, maintenance synergy or a strong pipeline of development projects. And finally, we can count on a mobilized management team and the innovation as well as the sharing of best practices between the different parts of our organization. I believe that the COVID-19 pandemic, while forcing people to work remotely and alone in their houses or apartments, have strengthened the relationships and the teamwork among the different services in our company. I will now let Patrick cover our development and operation. I will be back later for the question period. Patrick?

[Patrick Decostre, VP & COO]

Thank you, Patrick. Good morning, everyone. I will go directly into the analysis of our production. As shown on Slide 8 in our presentation document, our Canadian wind operations performed quite well in the second quarter with production -- 10% higher-than-anticipated production and 4% higher than at the same quarter last year. This growth was strong and enough to compensate the decrease in production in France. After 2 exceptionally good quarters in France, the second quarter ended up 11% lower than anticipated production on a comparable basis due to less favorable wind conditions. Production from the commissioning of wind farms was lower than expected due to the slight delay in the commissioning of our Santerre wind farm. Overall, total wind production for the quarter, combining Canada and France, was in line with the anticipated production and 2% higher than last year. Turning to hydro now. The production of the Buckingham power station was 14% higher than the anticipated production following its reopening. Comparable hydro production in Canada and the U.S. was down compared to anticipated production and also compared to last year due to weak hydrology conditions in general. Thermal production was down compared to anticipated production in last year due to a temporary shutdown of the Senneterre station during the seasonally low period of the year. This reduction should be offset in the second part of the year. In summary, total production for the quarter was 5% lower than anticipated production and 4% lower than last year. You can notice so, however, on Slide 9 of our presentation that on a year-to-date basis, total production is 4% higher than the anticipated production and 4% higher than last year thanks to the very strong first quarter. Turning to development now. As you can see on Slide 10, we added 103 megawatts to our portfolio of projects in the second quarter. Projects were added in the early stage for both North America and Europe and some projects progressed from mid-stage to advanced stage in Europe. 45% of projects added were wind projected and 55 solar projects. No project advanced from the portfolio of projects to our growth path, but we are confident some of them could progress in the coming quarters. As mentioned by Patrick, we have bid 71 megawatts in the July tender in France, and we are preparing our bid for the upcoming request for proposal scheduled in October for the New York state solar market. Turning to our growth path now. As mentioned, we added 15 megawatts to our production capacity with the commissioning of our Santerre wind farm in France. Our Blanches Fosses 11-megawatt wind project in France moved into the ready-to-build stage with commissioning expected at the end of the year. 2 repowering projects, Evits et Josaphat and Remise de Reclainville, also moved into the ready-to-build stage with commissioning expected in the first half of 2022. Please note that these 2 projected will -- while adding only 2 megawatts of capacity per project will improve production by more than 60% for the total 14 megawatts of production capacity, each after repowering because of the longer size of the blades and overall improvement in efficiency. These 2 wind farms also secured a 20-years contract with EDF. please note that we have changed the name of these 2 projects to harmonize internal and external reporting. These 2 projects were named Louville repowering 1 and 2 in the first quarter growth path. We are making good progress with the secured project, and are expecting to have some of them moving into the ready-to-build stage in the coming quarters. In conclusion, for my part, we have a good production level for the first 6 months of the year. Our projects are progressing well in our pipeline and growth path. And I am very proud of all the optimization going on at all levels in the organization. We have a strong momentum right now, which is very encouraging for quarters to come. Finally, we are getting ready for the upcoming request for proposals, and are quite optimistic about what we have in the pipelines to bid in day standards. This completes my part. I will now let Bruno cover the financial portion in more detail, and we'll be back later for the question period. Bruno.

[Bruno Guilmette, CFO & VP]

Thank you, Patrick. Good morning, everyone. I will start with the review of the progress made in light of our 2023 financial objectives. Starting with our last 12 months AFFO, which decreased by $20 million from $144 million in the first quarter to $124 million in the second quarter. This decrease is due to a timing effect in the debt reimbursement schedule compared to last year following the refinancing in Europe as well as the difference in the distribution level from joint ventures in Canada. Debt reimbursement in France for 2020 should, however, be equivalent to 2019 for the full year. Our dividend distribution ratio now stands at 50% in the middle of our 40% to 60% target. Our net installed capacity stands at 2,055 megawatts. And with the grow patent pipeline presented earlier by Patrick, we remain confident that we will reach our 2023 goal of 2,000 megawatts, sorry about that. Another important element that I want to bring to your attention this morning. If you follow your press wires, on the optimization front, is the closing we just announced this morning of the refinancing of our Niagara wind farm project for the total refinancing of a total of $805 million, generating $5 million annual recurring benefit and providing the financial flexibility to reduce our corporate credit facility between $65 million and $70 million. Within the last 12 months, we have completed 3 refinancings totaling $2.7 billion. These refinancings have greatly improved our financial flexibility, reducing our corporate credit facility by $258 million and generating total annual recurring savings of $22 million.Getting back to results now. Second quarter revenues followed pretty much the same pattern as production with growth compared to last year coming from the wind and hydro sectors. The increase in hydro revenues is coming from the Yellow Falls power station, which was selling at market price last year. And this year, it's -- the contract became in effect. EBITDA increased from $103 million in the second quarter of last year to $107 million this year. EBITDA for the wind sector was $6 million or 6% higher than last year, and hydro EBITDA increased by $2 million or 16%. Moving to cash flow now. We generated $51 million of IFRS cash flow from operations in the first quarter, down by $4 million compared to the same quarter last year. The FFO decreased by $20 million going from $16 million in the second quarter last year to a negative $4 million this year for the reasons mentioned before, timing effect. As indicated on Slide 18, our financial position remains solid with our net debt to total market cap ratio of 40% on June 30, 2020, compared to 56% on December last year. In conclusion, results in the second quarter showed an increase in EBITDA in spite of a reduction in our total production. We are proud of the momentum created with all the promising optimization initiatives completed and underway. And last point, as mentioned by Patrick, we have a solid balance sheet, are still looking for potential acquisitions or partnerships if they represent added value and are accretive to our shareholders. Thank you for your attention. We are now ready to take your questions. Operator?

[Operator]

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

[Nelson Ng, Analyst]

My first question relates to the repowering. So you have 2 -- so you're working on several repowering facilities. 2 of them due in 2022. I think the investment is about $38 million each with a $3 million EBITDA contribution. Can you just clarify whether the $3 million is the total EBITDA or the incremental EBITDA you expect?

[Bruno Guilmette, CFO & VP]

You want me to take this one?

[Patrick Lemaire, President, CEO & Director]

Yes.

[Bruno Guilmette, CFO & VP]

It's -- $3 million is for the -- it's the total.

[Nelson Ng, Analyst]

Okay. So you're repowering it, I guess, just under 13x EBITDA. All right. Could you just walk us through the decision to, I guess, repower rather than to recontract maybe or sell the power generated under a merchant process or under a corporate PPA? And how you decide to repower versus keeping those facilities running?

[Patrick Lemaire, President, CEO & Director]

Like we've mentioned in the past, we always do arbitration between repowering and to keep it running. So the result of that arbitration or comparison, it was more beneficial to repower these facilities compared to keeping them on the spot market. And the risk of the -- okay, there's always a risk. And for sure, there could have been corporate PPA, but we compare it to the risk of the spot. So...

[Nelson Ng, Analyst]

Okay. And those facilities, are they like 15 to 20 years old or older than that?

[Patrick Decostre, VP & COO]

They will be 15 years old when we will dismantle them and then repower. And we are building the turbine, not exactly at the same position. So we can -- we have optimized the time where we have to shut down, we will have no production on the site because we can do some foundation and access works without touching the existing plant.

[Nelson Ng, Analyst]

Okay. And then the cost of repowering is pretty similar to a new build, right, given that it's mostly new equipment. But at least the permitting time is a lot quicker, right? Is that the way to think about it?

[Patrick Decostre, VP & COO]

Permitting time is quicker. Generally, you have some savings on taxes and electrical connections, especially in this case because, as you have seen, the power has not increased a lot. And on the other side, all this cost of dismantling foundations and reselling turbines to a Spanish company, or it's already interested to site. We now have partners to do this. And we are -- or to say, we know the cost. We don't have any -- we have already experienced with -- thanks to Cham Longe.

[Nelson Ng, Analyst]

Okay. Got it. And then my next question just relates to the optimization of O&M. It looks like you're in-sourcing some O&M contracts or some O&M assets -- some assets and outsourcing or renewing the outsourcing contracts for other assets. Could you just talk about the -- like whether there's a cost difference to that? Whether you're taking a bit more risk in-sourcing? And I think like big picture, like what's the cost savings? And what are the risk differences that you look at?

[Patrick Decostre, VP & COO]

Yes. Indeed, we have actually 3 types of moves during this quarter. One in France, which is a renegotiation of contract with 1 supplier. And in this case, we have compared the fact to internalizing everything to reducing the scope of their contract. And we think that we are, indeed, making more money for the risk we're taking on this contract. In Canada, we have, like in Le Plateau last year and Thames River some years ago, we have decided to internalize and obtain agreement to internalize all the maintenance work within Boralex. So we are obviously saving more money. In terms of risk, it's not more really because it's the day-to-day work maintenance and that is done by us. But we are in a better position to optimize the production of this site. And when we compare both, we think it's the right decision here in Canada. And finally, in France, on the -- some assets coming from the Kallista transaction, we have optimized it to fully internal maintenance. Since we are really -- we are used to this base turbine in Senvion turbine. Senvion has been integrated in Siemens Gamesa, as you know, and we think it was the right way to do. In term of savings, it's -- as like previous webcasts, I'm not disclosing savings. You can see already some savings in the quarter, this quarter in France. And you will see them and it will be reflecting the EBITDA numbers. It's difficult, considering the sensitive nature of agreement with suppliers and partners, to disclose you precise numbers on this.

[Nelson Ng, Analyst]

Okay. That's great. And then just 1 more question before I get back in the queue. In France, in terms of the corporate PPAs, I think once for 5 years, once for 3 years. Could you just comment on the economics of the corporate PPAs compared to, I guess, the merchant power price and compared to the feed-in tariff. Like I presume it's lower than the feed-in tariff price. But how does it compare to the merchant price? And then also 3 years versus 5 years. So like how long are corporates willing to go in terms of the period?

[Patrick Decostre, VP & COO]

Okay. Starting by the duration of the contract. Some cooperations once 3 years and others 5 years. Typically, nobody is going, and we are not interested to go for less than 3 years now. We have other negotiations underway. So this is really the bracket where we think it's good to be. And on the other side, more than 5 years, I'm not sure we will go to this. Typically, we are thinking now to repower, 1 day, the Ally wind farm, Ally-Mercoeur wind farm, where we have a 5 years contract with Orange, as you know. And if we sign for 10 years, we will not be able to repower it. So sometimes, we need to be -- to keep some flexibility when we have the duration. And in terms of price, also in the French market, there is -- there could be some reason for an increase of the price because of the reducing power in nuclear in France, Germany and coal also. So there could be some pressure. So we want to not to go over 5 years for now. In terms of price, when you speak about merchant price, merchant price typically refer to day-ahead price. This price is moving every day and has been affected a lot by -- during the crisis, during the pandemic and the lockdown in France. But if you look to the price for next year, the forward price for 2021. This has gone from, say, EUR 50 to -- I think the lowest was a little bit over EUR 40 and then it came back to a little bit lower than EUR 50 per megawatt hour. So -- and you can -- and we have signed with this corporation just around this price of the 2021 forward price for next year. But again, it's sensitive. It's -- I think it's reasonable for both because you have to compare baseload and payers produced contracts for us. So it's good in terms of risk return for Boralex.

[Nelson Ng, Analyst]

Okay. So it's pretty close to the forward prices, is what you're saying? With...

[Patrick Lemaire, President, CEO & Director]

Yes. And the forward prices, if you look to it, you can see that it does -- really not be affected by the crisis because it's a temporary situation on the day-ahead price.

[Operator]

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

[David Quezada, Equity Analyst]

My first question here just on the upcoming RFP in New York. Wondering if there's any, I guess, qualitative comments you could provide on the number of projects you're looking at? How that's shaping up? And maybe just on that same topic, I understand that the NYSERDA has the RFP, I think, is a 1-year bidding on. But I think the New York Power Authority also has 1, a little bit before that. I'm wondering if that's the 1 that you could also participate in? And if any of your projects could apply to both of those?

[Patrick Lemaire, President, CEO & Director]

Yes. I'll answer that. We will participate to both RFP. So we have projects that would sue the 2 crits that we know up to now of each RFP. So we don't want to disclose how many projects or the amount of megawatts for competitive purposes. So don't want to indicate our -- to our, let's say, other people bidding, what we're going to do during this. So these RFPs. But I tell you that we will participate in both.

[David Quezada, Equity Analyst]

Okay. Great. And then maybe just going back to your comments about a potential restart of wind in Québec or that they're maybe more open to that now. What kind of a time frame do you think ballpark is that? Is that a couple of years out or maybe more like 5 years out?

[Patrick Lemaire, President, CEO & Director]

Okay. There was an article in the [indiscernible] yesterday. And it was mentioning -- it was coming from Hydro-Québec, that they were seeing themselves, the -- let's say, the end of their surplus or the overcapacity that they have, they have been mentioning since a few years, they were seeing 2025 being a challenged year. So if everything goes away, they anticipated consumption to be and also export and all the -- what they're doing now with their power. And so we see, if we think of 2025, we see the RFP probably coming in, let's say, in the 18 months to come. Because if you want to build by 2025, you need to give a -- let's say, you need to give an order to a private producer like we are 2022 at the -- let's say, would be a good date to be up in operation in 2025. So -- but this is all new. It just came out a couple of weeks ago from the Prime Minister Legault. The article came out yesterday. We know that Sophie Brochu, the new President of Hydro-Québec, has been in the news since our eye roll. So it's changing -- he's changing a little bit the scope of what was done before in Hydro-Québec. So -- and we see everything being very positive. So that's my answer.

[Operator]

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

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Maybe just picking up on your comments there, Patrick, with Sophie coming in Hydro-Québec, obviously. Soon as Gaz Métro and you guys had the partnerships around the Seigneurie de Beaupré. Is there any increased thoughts from your perspective or any new updated thoughts around expanding that and maybe exporting wind down to the U.S. market?

[Patrick Lemaire, President, CEO & Director]

We're looking at all avenues. And we've mentioned, let's say, when there was the Massachusetts RFP. We did submit in that RFP with Hydro-Québec. So we've been having good discussions since a while with Hydro-Québec. For sure, Hydro-Québec, one, on a stand-alone basis in that RFP. But there was a different proposal that we're in, and one of them was partly wind from Boralex and partly Hydro. And so just to mention that we have discussion with Hydro-Québec. And with the new team over there, it can only better the discussion or the relation between the two.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. So still a possibility. And then the comments on looking at M&A and saying, be looking for accretive M&A. Maybe just kind of miles again what you define as accretive. Is it on an NPV basis? Is it year 1 free cash flow? And then what else would you guys be thinking about from M&A or partnerships around target of either developing or more operating assets that you're looking at?

[Bruno Guilmette, CFO & VP]

I can take that, Patrick, if you may. Well, mark, I guess the straight answer is we're putting quite a bit of emphasis on free cash flow per share. And for us, that's an important point. And on the -- basically, the yield also, we want to make sure that we get an appropriate yield on that -- on the larger M&A. We clearly have quite a bit of M&A possibilities on the smaller end of the scale with developers and so on. But for larger stuff, there's a clear focus that it's accretive on the free cash flow per share for shareholders.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Is that necessarily day 1 or if there were some development assets that could be maybe over a couple of year period as you bring on assets? Or any other details you can provide around time lines for accretion?

[Bruno Guilmette, CFO & VP]

Well, we certainly wanted to be -- we aim certainly for, hopefully, for a 12- to 18-months accretion.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. And then when you talk about partnerships, is it from a financing perspective that you would really lean on a partnership? Or what other attributes, when you're are thinking about partnerships, that would be key items for you guys to move ahead on?

[Patrick Lemaire, President, CEO & Director]

I can answer that. Partnership could happen in many, many ways. It could be a partnership participation in, partly, into some assets. So in an acquisition or to have a partner to acquire something. So this is the way that we see partnerships. It's -- mainly it's going to -- it's always to help us to have a better, let’s say, a better return on the Boralex and at the financial partner because we could have, in the partnership -- have more, let's say, free cash flow by managing and things like this. And this would better the situation for Boralex return compared to the overall acquisition of a project. So -- because we know on the acquisition end, sometimes the returns are low. So this is why we see ourselves needing partners.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. And then my last question is maybe just around the dividend. You're sort of in the midpoint of your payout ratio range. But maybe less focus from investors from an income perspective in this space and more around growth and you guys have a healthy pipeline. So would you be more leaned towards moving the payout ratio to the lower end of the range? Or any updated perspective on the importance of return of capital for the dividend?

[Bruno Guilmette, CFO & VP]

We're comfortable with our dividend policy at the moment and this payout range. Our projections show that it's working well from our plan perspective to allow us to reinvest money in growth. And the payout ratio seems to be in the right ballpark for shareholders at the moment.

[Operator]

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

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

I wanted to just start on the development activities in France. You mentioned the Moulins du Lohan project, 71 megawatts now as being a bit into a coal. Can you walk us through what happened with that project? Of course, you had a PPA. Previously, there was some pushback on the project. So I imagine you've given up on this previous PPA. Anyway, can you walk us through how we got to where we are today?

[Patrick Lemaire, President, CEO & Director]

Go ahead, Patrick Decostre.

[Patrick Decostre, VP & COO]

Yes, I will do. The first authorization on 51 megawatts, as you remember, has been canceled by the first level of court, reinforced by the second Cour d'appel. And then now we are at the Conseil d'tat, the last level of court in France. Just on the -- and they are looking just on the form of the -- the formality of the Cour d'appel decision. So this is still pending. And -- but we are confident about the fact that the Cour d'appel has done the right job. We have obtained, just by the end of June, the authorization from the authorities possible in France, even if your final decision is pending to improve the size of the turbine and go to 71 megawatt. So this has allowed us to bid in the tender of July, 1st of July, which was a 250-megawatt tender. And then if we win in this tender, we will have 20 years contract again for this project. And the duration, and we have 3 years to build the project after the tender when we are -- when we win it. But the delay is frozen if you have any recourse against the project. So we will hopefully freeze a price for 20 years for this project, whatever are the next court procedures, if any.

[Patrick Lemaire, President, CEO & Director]

Just to add, Rupert, just to add to what Patrick just mentioned, if you -- if we -- we do remember for sure, but this Moulins du Lohan 51 megawatts was under the 2016 program, which has expired being at the maximum capacity of the program. So this is the reason why this one lost its contract. So -- and now we can submit it in the new RFP. Okay?

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

Okay. And can you remind us how much you've invested? I think it was about $60 million, and I believe you had some recourse to recover some of those funds. So when you're looking to bid this into the next call, do you treat that investment as a sunk cost? Or the economics of the next call possibly attractive enough that you'll come out ahead of where you were on that 2016 call?

[Patrick Lemaire, President, CEO & Director]

Well, we did a write-off on that. And correct me, Bruno, if I'm wrong, but at the end of December 2019.

[Bruno Guilmette, CFO & VP]

Partial. Yes, partial write-off.

[Patrick Lemaire, President, CEO & Director]

Yes. And so we'll account the rest of the, let's say, the spendings under this project. So into the, let's say, the economic of the return.

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

Okay. So we should treat that previous investment as of some costs at this point?

[Bruno Guilmette, CFO & VP]

Yes. That was an off portion.

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

Okay. And secondly, on development costs, so they were down a little bit in the quarter. Did this hamper or slow down any of your development activities? And should we expect the development costs to rebound in the coming quarters?

[Patrick Lemaire, President, CEO & Director]

Patrick, the cost?

[Patrick Decostre, VP & COO]

Yes. Essentially, our budget of development is sometimes moving from 1 quarter to the other, taking into account the opportunity. As you imagine, during Q2, it was -- some work was not possible to be done. So there could be -- teams are working hard, so there could be some rebound. But the annual budget will be respected and we are working hard to develop the company.

[Operator]

Your next question comes from the line of John Mould with TD Securities.

[John Mould, Research Analyst]

You mentioned in your news release that you're working on U.S. corporate PPAs. Can you provide a little more color on that effort? Where you're potentially looking beyond New York state? And what the scale of opportunities is that you're considering?

[Patrick Lemaire, President, CEO & Director]

Bruno or Patrick?

[Patrick Decostre, VP & COO]

Yes. Essentially, on corporate PPA, we are concentrating on New York state for the moment. We are looking more for M&A outside the New York state in the U.S. for the moment only. But not for corporate PPA.

[John Mould, Research Analyst]

Okay. And then maybe moving just back to France and the broader competitive environment there. You've got a large early-stage pipeline. France seems to be getting more attention from larger developers, and I'm thinking of [indiscernible] announcement from June. Beyond the regular tenders you're participating, what is the competitive environment look like for securing earlier-stage development opportunities in France right now?

[Patrick Decostre, VP & COO]

Yes. The competition on securing projects, I would say, lands or grid connection has not really changed. The question is more -- the competition is more the fact that small companies or you have probably seen Nordex have sold development pipeline to RWE. Big companies are arriving, but they are not -- stay humble, but they are not managing their team better than us in terms of greenfield developments. And so on this side, there is not a real change of the landscape for the moment. And I think the duration also of development in France will -- it will not change a lot on this side. But it's an impact on the possibility to make partnership with some developers because, obviously, developers -- small developers are informed by the interest of the big companies.

[Patrick Lemaire, President, CEO & Director]

It's not boots on the ground. Development in France is done with the boots on the ground. The big guys, they acquire pipeline. For sure, they acquire a smaller developer, but we still have a team. Our team is still ongoing. And like it was mentioned, we had over 100 megawatts of new projects. So this has been going on for years, and this is the reason why we have over 1,000 megawatts of projects in development, and we're adding over time. So yes, the big guys, they can come in, but we've been -- we have an established team in France that can sign land lease, that can look at the grid to see if there's capacity over there. And for sure, monitor the win where the best win is to sign those land lease. So this is my answer.

[John Mould, Research Analyst]

Okay. No, that's helpful detail. And then maybe just lastly, on your project in Scotland landfill, any updates on progress there in securing offtake agreements?

[Patrick Decostre, VP & COO]

We are working on this. Q2 was not the best moment to do this, but we are still working on this. There is interest, but nothing to say today. We have done some preliminary work on the site to keep the construction planning, and we will work during the next quarter about securing the financing and the partner.

[Operator]

[Operator Instructions] Your next question comes from the line of Naji Baydoun with Industrial Alliance.

[Naji Baydoun, Equity Research Analyst]

Just wondering if you could talk more about the corporate PPA market in France. The deal with Orange is very interesting. They're obviously quite a large corporation. And I think they've established their own clean energy targets. I think it's 50% renewable energy by 2025. I'm just wondering if you can comment on the partnership with Orange, how could that evolve over time?

[Patrick Decostre, VP & COO]

Yes. Essentially, the first step was to sign a PPA with them. They are -- they have defined ambitious targets. They are not the only one in France of -- big renowned corporation doing this. The situation is that there is not a lot of assets available for the moment because everything has been signed 15 years ago with EDF. So a lot of assets are signed. We are one of the -- if you remember, in -- by the end of 2005, Boralex owned 90-megawatt of wind and was the first player, not the first independent player already. So we have -- we are one -- we're the one who is the first one who can sell electricity from existing sites. And this is an interesting thing. The next step will be, indeed, to -- hopefully, one day, offer a new project for these people with a long-term contract, which should not be 5 years in this case to secure financing. There was already 1 tender from my knowledge about this in France. We have not been successful in this, but we -- you see that it's a tendency of the market of big corporation who wants to be greener or on one side, ESG question and on the other side, customers and branding. So we are discussing with all these people, and it's good because the partnership with Orange and also the new contract with the retailer, Auchan, which is very well-known in France, put us on the place as a new name and a new, say, start of a new branding for Boralex in France.

[Naji Baydoun, Equity Research Analyst]

And would you -- like when you're looking at some of these assets that are coming off their PPAs, let's say, over the next few years with Orange. So you would rather have or sign corporate PPAs rather than maybe try to renegotiate or extend contracts with Orange?

[Patrick Decostre, VP & COO]

Yes. There is no possibility to extend the contract or renegotiate with EDX. Really, it's possible to sign with EDX aggregator subsidiary, but not renegotiate contract with the big corporation. So in this case, that's what we have done in the last 3 years. On the first 3 assets, you can sign with aggregators, but we are negotiating presently the next project after Ally-Mercoeur, which is -- it will be beginning of 2021, a new contract that started in 2006. So we're negotiating with an interesting corporation also to secure a corporate PPE with them. And we are, all the time, comparing to the possibility of repowering of the project. When it's -- when repowering is very, very accretive and interesting to us, then we -- it's better to go for repowering because we are securing today 20-years contract. And as Patrick mentioned, we are not exposed to any market risk. So we are playing both games in parallel for any project and looking and screening everything.

[Naji Baydoun, Equity Research Analyst]

Okay. Got it. That's great detail. So not sticking to 1 path or the other. It's kind of by a side-by-side basis, you decide whether to repower or look for corporate PPA, okay.

[Patrick Decostre, VP & COO]

Yes, indeed, and it could evolve in time. It's -- just the market situation or the technology can change or the authorization can also be easier to obtain 1 phase also.

[Naji Baydoun, Equity Research Analyst]

Okay. Maybe just 1 other question. I know you don't have any specific targets for storage in your current strategic objectives. But just wondering if you can give us an update on generally your thoughts on storage and what opportunities you might be seeing in that technology going forward?

[Patrick Decostre, VP & COO]

So generally, on the -- we are working -- we have 1 site in France. We are monitoring the revenue and monitoring how it works. So this is 1 thing. We have another project we're working on 1 other site where we would have subsidies to build a small -- it will be a small project, but also to learn. In New York state, storage as -- on its own is a purely merchant market. And so we don't want to do this. But storage combined with solar projects, we are working on this, also on the small size, especially to learn. But there is -- as you probably have seen that there is an important target on storage in New York for the next year. So we will follow that and learn from the next years and hopefully do something in the future.

[Operator]

There are no further questions at this time. I'll turn the call back over to our presenters.

[Stéphane Milot, Director of Investor Relations]

All right. So thank you, operator, and thank you, everyone, for your attention. If you have any additional questions, please call me at [phone]. I'll make sure we quickly answer your questions. And on that, I would like to say that our next conference call, to announce third quarter results, will be on Wednesday, November 11. I hope you all remain healthy. Have a great day, and see you next quarter.

[Operator]

[Foreign Language] This concludes today's conference call for today. You may now disconnect.