Boralex Inc

TSX:BLX

Earnings Call Analysis

Boralex Q2 2024: Revenue, Projects, and Market Context

Boralex reported strong financial performance in Q2 2024, with EBITDA up 11%, operating income up 21%, and net earnings up 41%. However, production was 8% lower than expected due to unfavorable weather and curtailments in France. The company has 851 MW of projects in various stages, including those in Quebec and Scotland, moving towards completion by year's end. Market conditions remain positive with high demand for renewable energy, promising investment opportunities in Quebec and Ontario, and an increased budget allocation for onshore wind in the U.K. The clean energy tax credit in Canada and strategic optimization of electricity selling prices positively impacted finances.

Strong Financial Performance in H1 2024

Boralex has reported remarkable financial progress in the first half of 2024. Their EBITDA increased by 11%, operating income surged by 21%, and net earnings skyrocketed by 41% compared to the previous year. This significant improvement reflects the effectiveness of their operational strategies and market positioning.

Project Development and Future Potential

Currently, Boralex has 851 megawatts of projects in varying stages of development, from secured to construction. Key projects include Apuiat in Quebec and Limekiln in Scotland, both expected to commission by the end of the year. Notably, they are also initiating construction of two battery projects in Ontario, anticipated to be operational by 2025.

Navigating Market Challenges

Despite strong operational performance, the company faced several headwinds. Production dropped due to unfavorable weather and increased curtailments in France, mainly from negative market electricity prices caused by supply-demand imbalances. Overall, combined revenues fell 12% year-over-year, primarily attributed to lower prices in France.

Cash Flow and Financial Position

Boralex's financial footing remains robust, underpinned by a solid cash reserve of CAD 621 million, marking an increase of CAD 46 million from the previous quarter. The company's net debt to total market capitalization ratio stands at a healthy 42%, showcasing strong financial discipline.

Strategic Enhancements and Project Pipeline

The company has aligned its strategy towards optimizing electricity selling prices and has initiated discussions for securing contracts with Offtakers. Their total pipeline now consists of nearly 6 gigawatts in wind, solar, and storage projects. This diversified portfolio positions Boralex favorably across different markets.

Incentives and Tax Credits

The recent introduction of the clean energy investment tax credit in Canada is set to catalyze growth for Boralex, particularly affecting projects in Quebec and Ontario. Boralex is expecting substantial benefits from tax credits for the Apuiat and other projects, which should enhance returns and reduce capital expenditure reliance.

Positive Outlook in UK Market

With the new UK government's commitment to renewable energy, Boralex stands ready to accelerate its positioning in this market. The lifting of the ban on wind projects and increased budget allocations for onshore wind promise favorable conditions for future project approvals and potentially better pricing.

Optimizing Revenue Generation

Moving forward, Boralex has implemented a pricing strategy to mitigate exposure to fluctuating market prices. In the first two quarters of 2024, they managed to achieve a positive EBITDA variance, driven by effective pricing contract strategies with Ofgtakers.

Acquisitions and Strategic Growth

Boralex is actively pursuing acquisition opportunities within North America and Europe to bolster its footprint. The strategy is focused on acquiring operating assets where they can add significant value. This approach aims to strategically position Boralex for future growth in fast-expanding markets.

Sustainability and ESG Initiatives

Boralex is not only focused on financial returns but also enhancing its corporate social responsibility (CSR) standing. The company has significantly improved its ESG rating, further reinforcing its commitment to sustainable growth and environmental stewardship.

Looking Ahead: Guidance and Market Conditions

The company remains optimistic about future market conditions, with significant upcoming RFPs in both Canada and Europe. They expect an increase in electricity demand in Canada and favorable bidding conditions in the UK. Going forward, Boralex aims to solidify its market leadership by capitalizing on these strategic opportunities.

Earnings Call Transcript 2024-Q2

[Operator]

[Foreign Language] Good morning, ladies and gentlemen, and welcome to the Boralex Second Quarter of 2024 Financial Results Conference Call. Note that all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. Please also note that the conference call is being recorded. For webcast participants, you can also ask questions during the conference, but they will be answered by email after the call.



Finally, media representatives are invited to contact Camille Laventure, Advisor, Public Affairs and External Communications. Her contact information is provided at the end of the quarterly press release.



I would now turn the conference over to Stéphane Milot, Vice President, Investor Relations for Boralex.

[Stéphane Milot, executive]

Thank you, operator and good morning, everyone. Welcome to Boralex Second Quarter Results Conference Call. So, joining me today on the call, Patrick Decostre, our President and Chief Executive Officer; Bruno Guilmette, our Executive Vice President and Chief Financial Officer and other members of our management and finance team. Mr. Decostre will begin with comments about market conditions and the highlights of the quarter. Afterwards, Mr. Guilmette will carry on with financial highlights and then we will be available to answer your questions.



As you know, during this call we will discuss historical as well as forward-looking information. When talking 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 sedarplus.ca.



In our webcast presentation document, the disclosed results are presented both on a consolidated basis and on a combined basis. When talking about the results, we generally refer to combined numbers, and when referring to cash flow and balance sheet, we generally refer to consolidated numbers. Please note that combined is a non-GAAP financial measure, and does not have standardized meaning under IFRS.



Accordingly, combined may not be comparable to similarly named measures used by other companies. For more details, see the non-IFRS and other financial measures section in the MD&A. 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 directly.



Mr. Decostre will now start with his comments. So please go ahead, Patrick.

[Patrick Decostre, executive]

Thank you, Stéphane, and good morning everyone. It's a pleasure for me to present our results and achievements for the second quarter and first half of 2024. I'm very proud of the work of our team have done our team have done since the start of the year. During the first half we increased our EBITDA by 11%, our operating income by 21% and our net earnings by 41%. We have 851 megawatts of project in secured, ready-to-build and construction phases that are progressing as planned. Turbines are being installed in our project Apuiat in Quebec and Limekiln in Scotland, which are getting closer to their expected commissioning date scheduled for the end of the year.



I would also like to point out we started to record accounts receivable for the investment tax credit related to the Apuiat project based on the qualifying property as at the end of the quarter; Bruno will elaborate on this later. Regarding Limekiln, we also closed the financing of the project during the quarter as our first financing in the U.K. In the next few weeks we will start the construction of the Hagersville and Tilbury battery project in Ontario. These two projects are expected to be commissioned in 2025. Our Des Neiges Sud project is also progressing well with commissioning expected in 2026.



In the near-term, our teams have been working on the recent submissions of solar projects under the NYSERDA request for proposals in New York State, and of wind projects under the AR6 Allocation Round 6 request for proposal in the U.K. As you can see, a lot has been accomplished so far this year and there is more to come.



Going forward -- going back to the quarterly results. Production was lower than expected due to unfavorable weather conditions and the increase in curtailments in France, mainly due to negative market electricity prices resulting from an unusually strong imbalance between supply and demand in May and June.



Nevertheless, our business performed well, generating a combined EBITDA of CAD 152 million, up CAD 9 million and an AFFO of CAD 17 million, up CAD 13 million compared to the second quarter of 2023. The impact of the lower production was offset by the positive impact of our strategy to optimize electricity selling prices, and the contribution of commissioning in France.



Regarding markets conditions, the demand for renewable energy in our markets remain high, creating a positive environment for the operation and the development of our activities. In Canada, the clean energy investment tax credit received Royal Assent, and was enacted last June. This will have very positive impact on our project in Quebec and in Ontario. Both markets also represent strong growth potential with a goal by Hydro-Quebec to increase production capacity in Quebec by 10 gigawatt, and the upcoming RFP plan for Ontario. We are very well positioned with a strong competitive edge in both of these markets.



In the United States, the federal government is concerned about the increase of in Chinese production of green product, and is therefore imposing tariffs on important green technologies, including solar panels to protect U.S. Industries. The market remains highly promising and we continue to develop and bid our project. In Europe, the election of the Labour party in the U.K. is very promising, considering the ambition of the new government for accelerating the development of renewable energy. Our goal is to accelerate our development in this market.



Finally, in France, we're still waiting for a new government following the dissolution of the assembly in June. In the meantime, we continue to develop our project for upcoming requests for proposal, and in light of strong demand from corporation for corporate PPAs.



I will now rapidly cover the main variances in our portfolio of project and growth paths. The change in the pipeline was mainly due to the addition of solar and wind project in Europe in early stage, changes to the expected capacity of wind and solar project in Europe and North America, transition of solar and wind project through the pipeline to the mid and advanced stages in Europe. In total, our pipeline of early, mid and advanced stages project now consists of project totaling nearly 6 gigawatts of wind, solar and storage project.



In the second quarter, the growth path represents a capacity of 851 megawatt, down 34 megawatt compared to previous quarter following the commissioning of a 21 megawatt wind project and a 13 megawatt solar project in France. I won't go in the detail through the progress made in our growth and the diversification strategic direction, as I have already talked about the major highlights.



On the customer strategic direction, we signed a three-year PPA with Statkraft in the U.K. for the Limekiln project to secure pricing on a portion of the wind farm production before the start of its 15-year CfD. We also continue to have advanced discussion with different corporations in France as the demand for renewable energy contracted at attractive price remain high.



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, executive]

Thank you, Patrick. Good morning everyone. I will start with a review of the progress made in light of our 2025 corporate objectives. Our balance sheet is solid with CAD 621 million in available cash resources and authorized financing, up CAD 46 million from the previous quarter. In addition, CAD 21 million are accounted for in trade and other receivable, representing nearly one-third of the investment tax credit to be received for the Apuiat project, construction project in Quebec. We are also in negotiation with financial institutions to pre-finance these credits.



From a cash flow perspective, we should therefore receive cash from financing when this is finalized and reimburse this financing when we receive the payment of credits from the government, normally about 12 months to 18 months after commissioning. Please note that from a P&L point of view, on a combined basis, these credits will be amortized over the term of the contract starting from the date of commissioning and presented as other revenues in combined. Total debt remained stable in the second quarter of 2024, with project debt now representing 89% of the total. The reinvestment ratio is in line with our target.



Lastly, on our corporate objectives, we continue to make good progress on our CSR strategy, as presented in our webcast presentation. We improved our position among the best Canadian corporate citizens in the Corporate Knights ranking, climbing from the 21st to the 15th position. We also raised our ESG corporate rating from the Institutional Shareholder Services group of companies, ISS ESG from B- to a B+ with Prime status. For more detailed information, including data on CO2 emissions and work done in relation to climate change and the TCFD initiatives, I invite you to read our latest CSR report, which was published in February 2024.



I will now cover the financial results for the second quarter, starting with production. In North America, total production on a combined basis for the quarter was 2% higher than last year, but 7% lower than anticipated. Production for the hydro sector was 4% lower than last year and 9% lower than anticipated, due to unfavorable weather conditions in Canada. Production from solar assets was 8% lower than the same quarter last year and 25% lower than anticipated, mainly due to curtailment requests in California.



In Europe, total production was 2% lower than last year and 12% lower than anticipated, attributable to unfavorable weather conditions and the increase in curtailments in France. Overall, total production for the quarter was 1% higher than last year, but 8% lower than anticipated. The quarter combined revenues were down 12% compared to last year, mostly due to lower prices in France. As mentioned by Patrick, we continue to make good progress on the EBITDA and AFFO numbers. Our financial position remains very solid with the net debt to total market capital ratio of 42%.



In conclusion, it's a good second quarter for 2024, as we continue the disciplined execution of our strategic plan, delivering on results and numbers. We increased our EBITDA and AFFO compared to 2023. We further increased our financial flexibility, resulting in a solid financial position, and we continue to deliver on our four strategic orientations.



Thank you for your attention. We are now ready to take your questions.

[Operator]

Thank you. [Operator Instructions]. Thank you. We are now going to proceed with our first question. The questions come from the line of Nicholas Boychuk from Cormark Securities. Please ask your question.

[Nicholas Boychuk, analyst]

Thanks. Good morning guys. You mentioned that you're going to be looking to accelerate development of projects in the U.K. Can you just expand a little bit on what your expectations are for this market over the coming years?

[Patrick Decostre, executive]

Yes. Good morning, Nic. Essentially, with the new government, in the first few days of them taking office, they lift the ban on the wind project in England, which was there since almost 10 years, I think. So, this opened lots of potential project in England, first point. The second point, they increase significantly the allocation of the budget for the part of budget dedicated to onshore wind. So, this increased the likelihood of a better price, a cleaning price for the AR6. So this is two signals.



And last week, Rachel Reeves, the Chancellor was in Toronto and I was there, and she just confirmed they will accelerate planning constant for generation onshore and offshore, and also for grid connection, and do whatever they can to accelerate the investment in the grid.



So, I think this is all different possibility of acceleration, and I think it's a great news and we are very exciting. And since we have, I just mentioned, finalized the first financing, finalized the first contracts with Statkraft plus the CfD we obtained one year ago in AR5, I think we're very well positioned to do more of the same in the U.K in the next years.

[Nicholas Boychuk, analyst]

Okay. And that's good color. Can you comment on Infinergy and their resources? What more would you have to add to that team in order to really take advantage of this opportunity? And if you can comment on that, the size of the pipeline.

[Patrick Decostre, executive]

Yes. Someone of my exec team is now dedicated to the U.K. and she's working presently from Montreal, and working with the team there. We have people also coming from the French team and putting more resource there. So, that's we have also hired different people in the U.K. from the outside, and we are also chasing potential M&A and of fully consented project or project in development because I think it's the right time to be in the U.K., and I think with the team we have there, and the rest of the corporation bringing support to them, that's a great opportunity.

[Nicholas Boychuk, analyst]

Excellent. Thanks, Patrick.

[Operator]

We're now going to proceed with our next question. The questions come from the line of Mark Jarvi from CIBC. Please ask your question.

[Mark Jarvi, analyst]

Hey, good morning, everyone. Just following up on the conversation on the U.K., are you able to share -- sorry, how many projects you submitted, and what types of projects you're submitting in the U.K. right now?

[Patrick Decostre, executive]

Yes. We have -- Hi, Mark. We have submitted two projects which are -- were already in our pipeline for aggregated power of 115 megawatt. We have a very disciplined approach of the bid because we will have other possibility next year and the year after to bid this project in the following round. And this will not delay them since there is some grid time of construction. We know when these projects will be connected, but we have no issue of delaying if we win them next year. But -- And as I mentioned, the budget, it's a little bit different than last year. Last year it was -- there was only one part of budget for project and offshore was not in so this -- there is different part for onshore and offshore but the onshore part has been increased significantly by the government. So the clearing price should be higher than what we could have expected in June, so that's also a good news.

[Mark Jarvi, analyst]

Just following up on the expectations of higher clearing price, how would you say return -- the potential for returns are squaring up in the U.K. versus the other markets you're focused on? Are they comparable, better? Maybe…

[Patrick Decostre, executive]

They are better than what we can get in France presently, and projects are larger. Two projects for 115 megawatts is a significant project as you understand compared to France, I mean. And what I see also is that with the mechanism of being able to choose the window to start typically on Limekiln, we will start the CfD beginning of '28, but we have this merchant node which is contracted at a very interesting price, pay as produced contract with Statkraft.



We can benefit from a little bit like the 18 months in France, but in this case it would be 36 months contracted, pay as produced with a high price today. So, this is a good optimization and we have been -- the team of Bruno has been able to negotiate a very attractive financing for that taking into account these 18 years of generation [indiscernible] contract generation.

[Mark Jarvi, analyst]

Coming back to investment tax credit in Canada, you mentioned Apuiat, what about the other projects, the Ontario battery projects, the other wind projects in Quebec to come. Do you have a sense of what percentage of the CapEx you'll be able to receive? Is there anything that you have to give back to the counterparty, and are you able to quantify roughly what you think the total net proceeds from tax credits would be to Boralex?

[Bruno Guilmette, executive]

Generally speaking, Mark, we'll have -- I'm not going to give an exact number right now, but certainly a few hundred millions of overall in the projects that we're building that you're aware of. So that includes Apuiat, Hagersville, Tilbury, Des Neiges and my missing one -- now, I think that's it -- and a future Des Neiges. The key element is for the Apuiat, Hagersville especially and Des Neiges.



When we started negotiations and discussions with the offtaker, we did not -- and when we bid on Hagersville, we did not take into account the ITC in our returns. So that subside on the base case of these projects. In the future, we expect that each sort of counterparty in the discussion and the suppliers and so on, will all take into account the ITC. So we get upside from these early projects where the final project law was not enacted, and therefore, there was risk in the fact that we did not take into account the ITC. So, we did not take the risk of the ITC not being implemented. So it represents an upside, given that it's now been enacted in June. [indiscernible]

[Mark Jarvi, analyst]

I was going to say something like Tilbury and Oxford, which you probably had some clarity that the ITC would be coming through. Is there like a partial recovery of the ITC, with some of it being handed back to the counterparty? I appreciate Hagersville was more advanced, and you probably keep all that. Just wondering about that, the subsequent projects in Ontario and even the wind projects where you secured RFP one in the RFP, most recently.

[Bruno Guilmette, executive]

We get the credit for the eligible expenses. So, that's not -- the question is whether in the different contracts, and that will continue to evolve, but whether we have to give back a portion to the utility, for example, or whether the suppliers will adjust their pricing accordingly, which we've seen in the US, for example. So that's really what I was saying about the future projects where we do get the credit, but eventually it might be more shared amongst the different players in the chain.

[Mark Jarvi, analyst]

When do you think you'd have clarity on those projects in terms of the sharing split.

[Bruno Guilmette, executive]

Well, when we sign -- when we finally sign the different contracts, so it will keep evolving. So, on Tilbury, we took into account when we priced. So obviously, we gave a little bit of it in the pricing, but we do get the credit.

[Mark Jarvi, analyst]

Okay. All right, I'll leave it there for today. Thank you.

[Bruno Guilmette, executive]

I'm not sure if I'm clear. Mark Is that clear? [indiscernible]

[Patrick Decostre, executive]

Just to be very clear, on this project, we are not sharing the credit after the contract are signed and the contract are signed already, so that was -- and it was not an assumption when we bid, except on Tilbury, because we have decided at that time to be a little bit more aggressive in terms of risk. We have been right. But -- and -- but these two project also have very good news in terms of CapEx themselves, battery and BOP compared to the business plan. So, they are really a good return, expected return today.

[Mark Jarvi, analyst]

Understood. Yep, now that makes sense. Thank you.

[Patrick Decostre, executive]

Thank you.

[Operator]

We are now going to proceed with our next question. The questions come from the line of Sean Steuart from TD Cowen. Please ask a question.

[Sean Steuart, analyst]

Thank you. Good morning. A couple of questions. With respect to the progress on optimizing the selling prices in France, can you give us a sense of any expected incremental progress on this front over the next few quarters? Or has most of those gains been crystallized already?

[Patrick Decostre, executive]

Yes. Essentially we have a strategy to fix the price with the offtaker there is when we typically we have two streams of projects under this, we have the early terminated contract of that we early terminate in the fall of 2022, and we signed a contract for all these projects with Export. And we have fixed as much as possible the price at that time for the years, also '25 and '26, when it was possible.



For the 18 months, Merchant nodes we have done that in Q1 last year for the remaining period of the 18 months, and the 18 months will be finished by the end of this year. The first group of projects are subject to the price gap. As you know, the second group of projects are not -- are exempt of the price gap.



So going forward, what we're doing, we're doing exactly the same. We are continuing to fix and define in advance when we think it's opportunistically interesting, the price of the electricity that will be sold to Export, and we have a clear policy of doing that, not to sign too much, and not -- you know, we have a path, example 3 years in advance, we want to have 25% fixed. 2 years in advance, we have to have 50% fixed, and one year in advance, we want to have at least 75% fixed. And we are exactly following this track to be sure we are not overexposed, and we are not doing something which is erratic.

[Stéphane Milot, executive]

Sean, this is Stephane. Sean?

[Sean Steuart, analyst]

Hi, Stephane. [indiscernible] Yes.

[Stéphane Milot, executive]

Just an additional comment on that to show you some kind of trend, like in Q1 of this year, we had a positive variance of CAD 15 million, at the EBITDA level coming from this strategy, Q2 is CAD 11 million, and Q3 and going forward should be going with the lower variances, because just as the fact that we fixed price gradually over time and this price was coming down. So, the effect will be still good in coming quarters, but not as strong as what we've seen in Q1 and Q2 of this year. I don't know if it helps you in terms of -- [indiscernible]

[Sean Steuart, analyst]

No, that's great. Thanks, Stephane for that. [indiscernible]

[Patrick Decostre, executive]

And also, as I mentioned again, we try to be, to avoid, to be exposed to the spot market, because if you look to the last quarter, the wholesale market price average in France was EUR31 megawatt hours, which was very low. But if you want to contract end of this year or next year, the forward product are still around EUR90 a megawatt hour. So, if you have a smart strategy not to be exposed day ahead or weak ahead, when you know the generation, the wind and the status of everything, you have better opportunity to reach a good price, and this is also what we do.

[Sean Steuart, analyst]

That's great. Thanks for that. Second question for Bruno. You referenced the bills of exchange as helping bolster your liquidity position this quarter. I'm just wondering if you can explain the terms for that source versus extra borrowing capacity against your revolvers, maybe a bit more context on that liquidity lever for the company.

[Bruno Guilmette, executive]

Yes. I would -- I guess the example I would use is sort of trade financing. So, it's recorded as short term, but it's a facility that's a separate facility with a French bank, which helps us clearly finance this type of equipment. So, it's in addition to our other sources of financing it's not a restriction on other financing. It's just an addition.

[Sean Steuart, analyst]

Okay. Thanks for that, Bruno. That's all I have. Thanks.

[Patrick Decostre, executive]

Thank you, Sean.

[Bruno Guilmette, executive]

Thank you.

[Operator]

We are now going to proceed with our next question. The questions come from the line of Rupert Merer from NBF. Please ask your question.

[Rupert Merer, analyst]

Hi, good morning everyone. Just to follow up on the RFP activity, I believe you had some bids into New York as well. Can you give us some color on the scale of that opportunity with this round of RFPs and any updates you can give on your strategy going into this round.

[Patrick Decostre, executive]

Yes. Good morning, Rupert. Actually we bid three project for -- to NYSERDA for an aggregate power of 590 megawatt. So, it's larger project than what we bid in the previous RFPs. And this is clearly where we are going because we think it's the best way to have a better levelized cost of energy and be able to bid with a good return at the better price for NYSERDA. So that's where we are.



As you know, there is no news from the previous RFP of the winners, and in between there was all this question of Chinese product and tariff on Chinese imported panel. So, we have taken everything of that into account. And there was also a good news on one side, which is the IRA implementation and the incentive for domestic content. So we have worked a lot and the team has worked a lot on specifically the panel and also the BOP evaluation to be at the good cost. So that's where we are, and we will see what NYSERDA will decide to select with the project we bid.

[Rupert Merer, analyst]

So, in your previous rounds in New York, I believe you had some large projects. How much overlap is there between this 590, and the previous portfolios that you bid, and how much of it would be new?

[Patrick Decostre, executive]

There is just one project which is the smallest of this round that we bid, which was the largest of the previous round that we bid. I don't want to give you more information than that, but just to show you that the overlap is just on one of the three project, and it was just really a strategy to be able to bid at better price.

[Rupert Merer, analyst]

Right. Very good. And then secondly, if we can talk a little about curtailments you saw in the last quarter. I think you saw some in France and some on your solar, I imagine, California. How are you thinking about the curtailments? Are there opportunities to install batteries or look at storage alongside any of your systems, or do you think that others will take care of that for you in the future? How do you see that evolving?

[Patrick Decostre, executive]

Essentially, the cause of the curtailment are quite different. In France it's essentially due to the fact that there is a very, very good hydrogeneration. If you look to French hydrogeneration, I think it's the highest since probably the last 6 or 7 years. It's really high. And the nuclear is there, is back too. So, and the demand was low. So, we experienced twice, just in the quarter, we experienced twice the number of negative price of '23, essentially, in Q2. So, it's a little bit going down in July, but it's still there. But I think it's not -- I'm not sure it will last in France because it's really dependent on hydrology of this year, and the demand will go up. And so that's one thing.



So I'm not convinced that an investment is the right solution for us. The right solution is to sign the right contract like we are doing, pay as produced, and get a compensation, and on many of the contract mechanisms that we have CR-17, the contract won in previous RFP, with -- we see with the [indiscernible] in France and the utility PPE that we have with Export, there is a compensation. On the California situation, it's different, it's just one contract and we have a different interpretation of the contract between us and the offtaker, and we will enforce the contract and to receive the proper payment. And the team is working on this with the offtaker presently. So, it's a little bit different situation.

[Rupert Merer, analyst]

All right, very good. How much have you -- [indiscernible]

[Bruno Guilmette, executive]

So we've recorded the revenues for the French contracts that Patrick mentioned, which are offering compensation, but we have not recorded revenues for the California situation.

[Rupert Merer, analyst]

Perfect. So the curtailment in France is in revenue but not in production, is that right? You are -- [indiscernible]

[Patrick Decostre, executive]

[indiscernible] The compensation is there.

[Bruno Guilmette, executive]

It's not of the compensation. Yes.

[Rupert Merer, analyst]

Very good. Well, thank you very much. I'll leave it there.

[Patrick Decostre, executive]

Thank you.

[Bruno Guilmette, executive]

Thank you.

[Operator]

We are now going to proceed with our next question. The questions come from the line of Benjamin Pham from BMO. Please ask your question.

[Benjamin Pham, analyst]

Hi. Thanks. Good morning. Can you expand on your comments around looking at acquisitions? Is there may be some color on ideal size, technology, strategic priorities? And just what do you think fits it best for Boralex today?

[Bruno Guilmette, executive]

Well, certainly we continue to look carefully at the -- at acquisition opportunities. Our teams are active both in looking at good opportunities in both North America and potentially in Europe. Strategically, we keep focusing on the same markets, especially, I'd say a bit even more on the U.K. and U.S. markets. But we want to find something that's strategic, sizeable and where we can add value. So, it's not dry assets, just to -- but it's good operating assets where we can add value as the Boralex team, and also potentially with a team with development assets that we would not pay too much for.



So ideally, it's sort of a package. And strategically, as I said, a couple of markets that where we have more needs because we're growing a bit faster in the U.S. and the U.K.

[Benjamin Pham, analyst]

And I know you mentioned also acquisitions of potentially just development projects. Could you comment on, is there an increased willingness to pay more for development now than you have in the past?

[Bruno Guilmette, executive]

Well, there's been probably a peak a few years ago already and probably a thrust more recently down. So, likely we're getting back a little bit in terms of value, which is also good for us. But not -- I think not the extent of the excitement we've seen in paying too much in the past. So, I'd say we're still in a comfortable zone in terms of valuation, where we would look at acquisitions. We feel there's still good value to be found, in part to your question, in part in development pipeline valuation.

[Benjamin Pham, analyst]

Okay. And maybe just a cleanup question. The reference to the Canadian ITC projects that were grandfathered, aren't you effectively, since you financed these projects 80-20, aren't you effectively getting your equity back and more? Just the way that you structure, or am I thinking about it differently or -- [indiscernible]

[Bruno Guilmette, executive]

It certainly reduces our equity by a good chunk. There's timing issues, as we mentioned, which we try to bridge with the financing I talked about. So all-in, the lenders are, as you say, are reluctant to finance all of that could be labeled as equity. But it certainly helps quite a bit on the IRR of these projects and the need for equity is reduced significantly.

[Benjamin Pham, analyst]

[indiscernible] Okay. Thank you.

[Bruno Guilmette, executive]

Thank you, Ben.

[Operator]

We are now going to proceed with our next question. The questions come from the line of Jessica Hoyle from Scotiabank. Please ask your question.

[Unknown Analyst]

Great. Thanks so much for taking my question. Maybe just to start, more broadly, can you comment on what you're seeing in the RFP environment? Have you seen some early signs of acceleration just given electric demand is increasing across several of your geographies?

[Patrick Decostre, executive]

Yes. First of all, it's -- there is clearly, there is not yet RFPs, but there is clearly a big program in Quebec for 10 gigawatt plus that would come. We know that this will, Hydro-Quebec will make RFP to select a partner, private partner per project to develop. We don't know exactly how this RFP will be defined. There is discussion between the industry and Hydro-Quebec on this. Essentially it will be on the track record, the skills of the operator in terms of development, operation, maintenance, capability to deploy and experience with them. And we are well positioned since we are their partner of the Des Neiges project. If you look to Ontario, there is an RFP coming next year, the LT2, and again, it will be a significant RFP for generation and generation and storage. So, that is an important point. We are also looking something coming in BC, but we will see where it goes. It's due for mid-September, so that's for Canada, and we are also very well positioned with our relation with First Nations in terms of development in Quebec, Ontario and potentially in BC too.



And you have seen that we just also had a new Board member who is an accountant with a lot of experience and also from Innu origin, so bringing lots of expertise and another view to the Board. In Europe, as just mentioned at the beginning, the increase of the budget from the U.K. government is a big signal to show that they want to accelerate, and there will be an AR7 next year. And it just also confirmed the big investment in the supergrid to bring power from the Northern U.K. to the demand area. So, and there is a bunch of RFP of 0.9 gigawatt coming in France in the fall. So, that's -- there is a lot of things moving.

[Unknown Analyst]

Appreciate that. And then just thinking more about the growth path, could you really look to accelerate development of some early stage projects just to be ready for some future RFPs?

[Bruno Guilmette, executive]

Yes. That's exactly what we are doing in Ontario and Quebec. Takes a little bit more time in France and the U.K., because in France and the U.K., the condition to bid you need to be fully permitted. So you do the development work before, and not after obtaining the contract. In Quebec and Ontario, it's a little bit different. But yes, the team are working a lot and we have had resource since the last years because we were seeing that coming, and I think that's a good news because it's now.

[Unknown Analyst]

Thanks very much.

[Bruno Guilmette, executive]

Thank you.

[Operator]

Thank you. We have no further questions on the phone line. I hand back to you for any web question that you may have. Thank you.

[Patrick Decostre, executive]

Thank you.

[Stéphane Milot, executive]

Alright, thanks a lot everyone for your attention. If you have any additional questions, please call me. As you know, same number, 514-213-1045. I'll make sure I quickly answer your questions before getting on vacation.



So, our next call to announce third quarter results will be on Thursday, November 14 at 11:00 A.M. So have a nice day, everyone, and good vacation for those who are waiting for the quarterly season to go on vacation. Bye everyone.

[Patrick Decostre, executive]

Thank you.

[Bruno Guilmette, executive]

Thank you.

[Stéphane Milot, executive]

Thank you.

[Operator]

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a great day.