Boralex Inc

TSX:BLX

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to Boralex, Inc. Third Quarter 2021 Results Conference Call. [Operator Instructions] Also note that the call is being recorded Friday, November 12, 2021. And now I would like to turn the conference over to Stephane Milot. Please go ahead.

[Stéphane Milot, Senior Director of Investors Relations]

Thank you, operator. So good morning, everyone. Welcome to Boralex' Third Quarter Results Conference Call. So joining me today from our head office here in Montreal. I have Patrick Decostre, our President and Chief Executive Officer, and Bruno Guilmette, Vice President and Chief Financial Officer; and other members of our management and finance teams. Mr. Decostre will begin with comments about the highlights of the quarter. Afterwards, Mr. Guilmette will carry on with financials 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 security regulators, which can materially change our estimated results. So these documents are all available for consultation at sedar.com. In our webcast presentation, the disclosed results are presented both under IFRS basis, which we now consolidated and on a combined basis. So unless otherwise stated, all comments made in this presentation will refer to combined basis figures. The press release, the MD&A and 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. Mr. Decostre will now start with his comments. So please go ahead, Decostre.

[Patrick Decostre, President, CEO & Director]

Thank you, Stephane, Bonjour, good morning, everyone. I am pleased to present to you our third quarter results today. One of the highlights of the quarter was the continued growth in operating income and EBITDA in spite of the lower-than-expected [indiscernible] conditions. The submission of solar projects totaling 800 megawatts in the Tier 1 New York State RFP and the addition of 103 megawatts to the preliminary phase of our pipeline are also important elements of the quarter. One last highlight of the quarter was the closing of our first sustainable financing through the renewal and extension of our corporate credit facility and letter of credit facility totaling $525 million. In terms of market conditions in Canada and the U.S. for sure, the proposed U.S. energy infrastructure plan was followed very closely by the industry. This plan was finally approved by Senate and will be an important driver of future growth of the renewable industry in the U.S. In the coming months, we are expecting results from the Tier 1 RFP in New York State and more information on the 300-megawatt wind RFP and 450 renewable energy RFP in Québec. The selection of Hydro-Quebec export line to New York City in the Tier 4 RFP should also be positive for the overall renewable energy development in Quebec in the coming years. Moving to France now. Notwithstanding the political debate, RTE, the French transmission system operator recently issued 6 different production mix scenario for 2050 and all of them are highly promising for renewable energy. The most conservative scenario with the highest nuclear capacity projection refers to a solar production 7x higher than today and onshore wind productions 2.5x higher. The 100% renewable and most ambitious scenario indicates a solar production 21x higher than today and onshore wind production 4x higher. Final point for France, we are planning to submit our bid in the next request for proposal plan in the coming weeks. I'll now review the main variance in our portfolio of projects. We added 4 wind projects and 2 solar projects in France to the preliminary phase, representing a total of 103 megawatts, including the optimization of Wind Projects. Projects in the pipeline continue to progress with 45 megawatts of projects moving to mid-stage and 680 megawatts of projects moving to advanced stage. In total, we are now developing a portfolio of wind and solar projects of 3.1 gigawatt and 193 megawatts of storage projects. Let's review change to the growth fast now. Two wind projects in France moved to the secured phase, adding 34 megawatts to the growth path, including the optimization of the [indiscernible] repowering project. Projects under construction are progressing well with 3 projects totaling 30-megawatt to be commissioned as planned in the 4 quarters of this year. We have now 664 megawatts in the growth path, 521 megawatts in the secured stage and 143 megawatts in the under construction and ready-to-build phase. In total, when adding the growth path to our existing production capacity, potential capacity is 3.1 gigawatts. In conclusion, as you can see on Slide 12, we are pursuing the execution of our strategic plan and are making good progress on all 4 strategic orientations. This completes my part. I would 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 a review of the progress made in light of our new 2025 corporate objectives. Total capacity increased slightly in the third quarter with the commissioning of our wind farm extension plan distributor on August 1, 2021, and now reaches 2.5 gigawatt. Our last 12 months EBITDA continued to increase, thanks to our acquisitions and commissioning, but the AFFO slightly decreased due to the increase in project repayment and distributions to noncontrolling shareholders. Our reinvestment ratio stands at 53%, in line with our 50% to 70% target. About our CSR strategy, we continue to make good progress on the environment, society and governance aspects. We are finalizing the assessment of our carbon footprint. We have reviewed our calculation methodology for CO2 avoided and are putting together a more formal plan for managing end of life assets. We also launched a training on indigenous culture with a participation rate of 97% so far. We set specific diversity targets, as indicated on the slide, notably for the percentage of women in management positions and new hires. Finally, we have increased our participation in different referential like S&P and CDP and as mentioned by Patrick, we closed our first sustainable financing. Taking a look at our debt objective now, our corporate debt to total debt ratio remained stable compared to the previous quarter. We are working towards our objective to obtain an investment-grade rating and increase the proportion of corporate debt. I will now cover the financial results for the quarter, starting with production. Wind production in Canada was 6% lower than our anticipated production and 5% higher than in the same quarter last year, driven mainly by acquisition. Comparable production was 10% lower than last year as wind conditions were weaker in the second half of the quarter and compared to a strong third quarter in 2020. In France, wind production was 15% lower than anticipated and in line with the same quarter last year as growth coming from commissioning compensated for the decrease in comparable production. Wind conditions were also weaker in the second half of the quarter in France. Overall, total wind production for the quarter combining Canada and France was 10% lower than the anticipated production and 3% higher than last year. Turning to hydro now. It was a very strong quarter for our U.S. assets with production 81% higher than anticipated production and almost 3x the production generated in the same quarter last year. This more than compensated for the weakness in Canadian hydro and resulted in total production for the hydro sector at 21% higher than anticipated and 42% higher than in the same quarter last year. Finally, production from our U.S. solar acquisition was 10% below anticipated production caused by a mix of less favorable sun conditions and some maintenance work. In summary, total production for the quarter was 7% lower than anticipated and 22% higher than last year. Third quarter revenues were up 8% compared to last year, mostly due to the increase coming from the hydro and solar segment. For the third quarter of 2021, operating income was up 7%. EBITDA was $93 million compared to $83 million for the same quarter of 2020, a 12% increase. We generated $47 million of net cash flows related to operating activities compared to $70 million in the same quarter last year. Cash flows from operations was $66 million in the third quarter, a $3 million increase over the same quarter last year. AFFO was $21 million compared to $26 million in the third quarter last year due to the slight increase in debt repayment and distributions to noncontrolling shareholders. Our financial position remains solid with our net debt to total market capital ratio of 46% on September 30, 2021, compared to 41% on December 31, 2020. In conclusion, again, this quarter, we reported strong growth in operating income and EBITDA in spite of unfavorable wind conditions, we are making constant progress in the execution of our all strategic orientations and 2025 corporate objectives. The results of the 800 megawatt solar projects submitted in New York State, request for proposals are expected by year-end. We are in an excellent financial position to pursue growth organically and through accretive M&A. and we are pursuing the work to optimize the capital structure and improve our financial flexibility. Thank you for your attention. We are now ready to take your questions.

[Operator]

[Operator Instructions] And your first question will be from Nelson Ng at RBC.

[Nelson Ng, Analyst]

My first question -- my first question is related to cost escalation, which has been very typical -- very topical recently. You obviously have about 200 megawatts of New York solar projects under advanced development. And I believe the 200 megawatts needs to be completed around 2023. Can you just talk about pricing, how much -- or what portion of those projects in terms of the cost has been locked in? And just a general color on cost, labor tightness, schedule and things like that.

[Patrick Decostre, President, CEO & Director]

Yes. What I can tell you, Nelson, is on -- specifically on days project, we have an update some weeks ago with the team about all the different variable that change and an update of the global portfolio model. And we are still in an area where these projects are interesting for Boralex. The FID has not been taken already, but we are finalizing the things and looking to what happens. On one of these projects, there was cliff date by the end of 2022, but we just get the extension. So to your point, we're flexible and today, we're still in the right waters.

[Nelson Ng, Analyst]

So just to clarify, so one of them had an end date of 2022 and you have gone an extension? And then are the rest at the end of 2023 and there -- you could potentially get an extension on those on as well, if needed?

[Patrick Decostre, President, CEO & Director]

Yes. And the one we get an extension is a 20-megawatt project. And so I'm confident that we will find the time to to settle the things and to take the FID in the next -- in the time line that we -- where it's possible to build and to do the project.

[Nelson Ng, Analyst]

Okay. My next question just relates to France. Obviously, there's a pretty good pipeline in France and there's plans for a lot more wind and solar. Can you talk about -- I think last time you mentioned that you would roughly bid about 100 megawatts per year into RFPs in France? Is that still the case? And then the second part of the question is in terms of funding growth. I believe, one potential option you're looking at is to sell a minority stake in the French business. But can you just touch on both questions?

[Patrick Decostre, President, CEO & Director]

Yes. On the first question, this is indeed the short-term, say, target is 100-plus megawatt per year. That's the French target globally. And on the second part, we are evaluating -- we have started a process, and it's an alternative to other financing globally as a corporation, we have to look to the different alternatives. So we have -- we will decide on the partner on the basis of essentially 3 things. The first is the value. The second is the governance and the fit -- the last one is the fit with the team to be sure that we will continue to be nimble and align on the long term and create value for Boralex on the long term.

[Operator]

Your next question will be from David Quezada at Raymond James.

[David Quezada, Vice President & Equity Research Analyst]

A question just, I believe at your Investor Day, you talked about potentially expanding and diversifying within Europe through M&A. Just curious in today's higher power price environment in Europe? How is your view of M&A in the regions that you mentioned elsewhere in Europe? How has that evolved since then?

[Patrick Decostre, President, CEO & Director]

Thank you, David, for the question. We're analyzing different opportunities whether it be in Europe or North America. We also want to continue to be disciplined, as you mentioned, it's a competitive environment out there, and we'll select according to our investment criteria. So plan has not changed. M&A is a complement to our internally generated growth or organic growth. So we'll continue to be disciplined on that front, but we're looking at different opportunities in France, specifically in Europe and France and potentially some other countries.

[David Quezada, Vice President & Equity Research Analyst]

Okay. Great. Maybe just one other one for me. Just with some of the PPA expires you have over '23/'24. And again, I guess, referring to the higher power price environment we're seeing today. Is there any potential to renegotiate those earlier?

[Patrick Decostre, President, CEO & Director]

No, we should wait for the expiration of the existing PPA. What is interesting is due to the present high price in Europe. There is a lot of interest from corporation to buy green electricity on the long term to protect them on the price. So that's stronger than 2 years ago. And I think it will last for a certain period because no people understand that when you are exposed to gas and CO2 price, which is the marginal electricity cost drivers, you're not protected. So that's very interesting. And we have even now some demand for greenfield project PPA to sign for with new assets with the additionality, and we're discussing these kind of things, too, so which creates another alternative for in the future.

[Operator]

Next question will be from Rupert Merer at National Bank.

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

Following up on the French market. So looking at your pipeline, it looks like you have about 133 megawatts advanced stage and 687 mid-stage. And I understand you're targeting about 100 megawatts per year. But if you see an acceleration in the market, either through RFPs or through say, potential greenfield development directly for corporate offtakes. How quickly can you accelerate those mid-stage assets and get them into construction?

[Patrick Decostre, President, CEO & Director]

Yes. Essentially -- Rupert, essentially in France, as you know, the -- what is limited is the authorization the number of authorization to build and to operate. So as you also know, we are, I think, quite successful on this in obtaining authorization and because we are -- we do the right process for consultation when we apply. So yes, there is interest from the market in terms of economics. And I don't know exactly how the global authorization process could be change in the future because maybe the government and they have already done something. There was some declaration some weeks ago with Barbara Pompili, the minister to explain how she wants us as an industry to develop projects. And Nicolas was there because Nicolas, as you know, is the Chair of the Wind Energy Association in France. So we are really involved in this. I cannot promise that it will accelerate I can tell you that we're working hard on that to have a constant flux of project in France. And what is good is with the RTE scenario, we have no longer-term view after 2030 with very important project and construction. So that's my view.

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

Okay. And then following up on Nelson's question earlier about inflation. You gave us some good color on the first 200 megawatts of solar you have in New York and thoughts on the impact of inflation on those projects. What about the 800 megawatts that you bid into New York recently? Can you talk about your strategy in bidding those 800 megawatts and what contingencies you may have for the rising costs on those projects? And actually, what I say, the rest of the pipeline look like your 500 megawatts, let's say, of ready-to-build projects?

[Patrick Decostre, President, CEO & Director]

Yes. The point is the risk today is not inflation is the volatility of the price and not to be squeezed between the defined price and the cost of construction, which changed. So in this situation, first of all, we have to take quicker decision when the decision -- when the [indiscernible] align, we don't have 2 months to take a decision today. We have generates 2 weeks, and that's how we can do with existing projects. And that was part of my answer to Nelson is we need to be sure that the planet or line for the 200 megawatt, and then we will take the decision and go full steam ahead at that time. For the other project, the 800 megawatt, obviously, we have taken into account the last information about the cost and some risk about this inflation risk. And I think it's in the price that we bid. So generally speaking, we will not be taken by surprise because it's already in the price that we bid. And just on the project as I already mentioned, and which is also our strategy in France, when we bid different projects in the bid, we have a ladder of the of the return and of the price. And so we don't want to be competitive on 100% or if we are competitive on the 100%, we should be very happy to be competitive. So the last project has a return which is higher than the previous one. And this is also creating a portfolio of projects in terms of return and in time.

[Operator]

And next question will be from Sean Steuart at TD Securities.

[Sean Steuart, Research Analyst]

Patrick, you touched on Quebec and the opportunities for future procurements and RFPs there. And I wonder if you can comment on what your prospective pipeline beyond the Apuiat development looks like in the province? And scale that you might be able to bid into future RFPs in Quebec as we go ahead?

[Patrick Decostre, President, CEO & Director]

Yes. The first point I didn't mention in the speech is the fact that 10 days ago or 11 days ago, the government HQ has filed as -- the update of their electricity supply for the next -- for 2029, and this has increased from what the provide 2 years ago by 6.5 terawatt hour. So this is due to the greening of the Quebec industry. This is due to the will of the government and the action from the government to bring new economic sector here like biofuel, hydrogen, battery factories, data center, blockchain and all those things, which create demand and the fact that Quebec wants also to switch vehicle to electric vehicles. So just that's the general situation. And on our side, we have nurtured all our projects even after 2018 and continue to work on their development and it's a public information that on Seigneurie de Beaupré. We are developing a 800-megawatt project. This is under the process of consultation locally. And so we have this project, and we have extension of other projects. So we have an interesting pipeline for the future in Quebec on our side.

[Sean Steuart, Research Analyst]

Thanks for that detail. Second question, you've touched on France specifically in New York. Wondering if you can comment on the broader prospective pipeline in the U.S. I suppose California is the focus? And outside of France and Europe, any particular projects or areas that are more advanced relative to the rest? And how should we think about the prospective pipeline there?

[Patrick Decostre, President, CEO & Director]

Yes. In California, we have applied for 100-megawatt storage. We have another part of storage in the pipeline, which is in New York state. This is greenfield development in these 2 states. In California, what I see for today and what we see is not an energy production, greenfield development. It's an optimization of the project in place with storage, and we are working on other states in the U.S. that I will not say disclosed today, where -- which are similar to the state of New York 2-3 years ago, meaning thinking about changing their low and with important population and a need for green electricity. So essentially, to start greenfield development there also. That's what we are doing. As Bruno mentioned, we are also evaluating different M&A opportunity and stay disciplined on that. And if we find something, which is interesting and good and accretive -- like in the past, we will go ahead -- If not, we will continue to end.

[Operator]

Your next question will come from Mark Jarvi at CIBC.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Just a question on the RFP submissions in New York. Are you able to kind of give us a sort of time line for the earliest potential commissioning? And then sort of like time lines for the sort of longer dated commissions? Are these projects that will be somewhere between 2024, 2027 or any other sort of bookends on the timing of those projects?

[Patrick Decostre, President, CEO & Director]

Essentially, Mark -- essentially, I think as the -- we have, first of all, to wait about the decision, which will be at the end of this year, beginning of next year. And yes, it will be probably a 2026 or 2027, but I don't know. We should have an idea of the volume first and we should -- and at that time, we will be able to be more specific about the year when we think this will be connected.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

But it couldn't be any sooner than that? Like these are projects that get slot in, in 2024 or 2025, you don't think?

[Patrick Decostre, President, CEO & Director]

No. That's the project we discussed earlier, the 200-megawatt essentially the date without changing coming back to the Nelson question without changing anything to date are for one project is 2023, thanks to the extension and the 2 -- the other projects are 2024 without any extension. And I think the fact that we get an extension on a small project, it's -- it shows that NYSERDA is willing to have the production one day or another and not to squeeze us between -- and so we think -- we all think that inflation is temporary, so we can manage that and the counterpart is understanding this. So I think it's good.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Makes sense. And then going back to the corporate PPA market in France. To date, your contract is a bit shorter. You brought up the comment about maybe being able to go some interest on greenfield projects. Are you seeing enough that you think within the next couple of years, you could maybe do like a 15-year corporate PPA and bypass the RFP process?

[Patrick Decostre, President, CEO & Director]

Yes. It depends -- I think 3 things. The first is -- if a project is meet the criteria of an RFP with EDF. The first priority is to bid the project in the RFP. But if the competition is too important and if taking into account that we don't have the same counterparty risk. Generally speaking, there is no -- if you go for any cooperation, the counterparty risk is generally higher than EDF guaranteed by the French state and then we need to have a higher return and on a higher price for electricity. So that's where we are. But yes, it could be an important alternative for us on the long term. And I think it's important to have 1 foot in each to be able to have alternatives because if the market is closed for any reason like we have seen in different markets and for any reason in some years, the French state decided to temporarily stop RFP, then we have the alternative. And I think in terms of risk management is the right way to go.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Makes sense. And then Bruno, for you, remains steps, I guess, what are the main steps to get the investment-grade credit rating and timing on that? And then second, if you do go to the path of longer-term corporate PPAs, how does that pulled in? Or how do your lenders when you guys have that sort of portfolio financing approach in France, treat those contracts?

[Bruno Guilmette, CFO & VP]

Well, first of all, good morning Mark. Essentially on the credit rating working hard on that front. As you know, it's a 2025 target. We certainly are hopeful to achieve it as soon as we can. But we'll certainly disclose the progress at the right time on that, but we're certainly getting organized to do that as soon as we can. On the corporate PPAs, we believe there's a financing market for the corporate in France. There's a financing market that is willing to consider those types of new customers, new offtakers. And I mean we're having those kinds of discussions. As you know, we've signed corporate PPAs in the past. These were not for greenfield assets, but we certainly believe they are entertaining discussions on financing those types of contracts, which would be fairly innovative in the market, but there are some existing a small number, but there are some existing precedents.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

But just to clarify, Bruno, under your existing agreements you have, could these projects fit into that? Or would it have to be sort of outside that sort of larger financing vehicle you've set up in France?

[Bruno Guilmette, CFO & VP]

We would likely go with separate new financings for those corporate PPAs.

[Operator]

Next question will be from Naji Baydoun at IA Capital Markets.

[Naji Baydoun, Senior Equity Research Analyst]

I just wanted to start with New York. Maybe if you can give us some color on the expectations for your bidding strategy there. I guess I'm just trying to understand the trade-off between bidding the entire 800 megawatts all at once or in different sort of stages or tranches throughout different processes?

[Patrick Decostre, President, CEO & Director]

Naji, essentially as I mentioned, there is projects which are, say, really optimized there is projects, which are in the optimization and then -- and there is a project which are a little bit more earlier in this. And so it's good to bid and to -- when you meet the criteria of bidding, I think it's a good discipline to do it. And you do not if some projects are not advanced and accepted or meet the clearing price then you continue to optimize them and you bid them the year after. So I think essentially, it's that. And so with the projects which are less optimized today, we have an expected return, which is higher and cover the difference. So we can -- and we have more contingency everywhere. So we know that we will be happy if we are selected. And this -- the consequence of that is that what I call the levelized REC cost, which is the cost of the REC on top of the the expected curve for electricity price that NYSERDA is taking is different, and we know that the clearing levelized rate cost will be somewhere in between our project on our, yes.

[Naji Baydoun, Senior Equity Research Analyst]

Okay. Okay. Understood. So what's sort of a diversification and risk sitting around the risk between the project. Just on M&A as well. You talked in the past about structuring your activities differently and maybe take a different approach to acquisitions. Can you maybe just talk about what initiatives you're undertaking to achieve this goal? And maybe how that's affected the way you analyze or look at deals or approach your M&A strategy.

[Bruno Guilmette, CFO & VP]

On the M&A front, we hope that we're always improving and getting more sophisticated. Really, it's about our portfolio strategy. So we know we have a fairly good view on our organic development on our pipeline, and we want to complement that with M&A, as I said previously. So we look at different financial criteria , but we also look at strategic factors, as mentioned that could bring either into a new territory having the appropriate team that complements our existing workforce and so on and so forth. So there's a few elements. There's a few criteria that we consider and we believe that on some acquisitions, we'll be quite competitive also because of our strengths, where we can optimize some assets as we were doing in California, and we can add on to the strategy that the previous owner had. So in terms of being more sophisticated, we also look at who is the owner, what type of partnerships we could have on that asset and so on and so forth.

[Operator]

And your next question will be from Andrew Kuske at Credit Suisse.

[Andrew M. Kuske]

I guess it's a broad question. When you think about your pipeline of opportunities, which you continue to grow, -- Do you feel you're at the stage where really what you're delivering at the end of the day are really the high-graded opportunities and you have a number of other things that you could do is they're providing, they would provide sufficient returns, but your balance sheet constrained or there's other constraints that effectively hold you back from doing those. So maybe if you could just frame that to start.

[Bruno Guilmette, CFO & VP]

I guess it's one way to look at it, Andrew. In terms of constraints for sure, balance sheet is one, although we believe that we have different sources of financing. Our balance sheet is strong. We have different sources of financing. Where we've mentioned partnerships as 1. On the debt front, we're working hard towards diversifying our toolbox on different types of financings. And then from an equity perspective, we try to be disciplined on issuing new equity. But certainly, we do need to prioritize. We have opportunities on, I mean, at least 3 or 4 different countries. But so far, I can't say it's been a very serious constraint other than M&A. And as I said, the key elements that we need to prioritize are the add-ons on M&A front.

[Andrew M. Kuske]

Okay. That's helpful. And then maybe just thinking about it at operational level, whether you're thinking about just existing expansions of assets or opportunities or M&A. Could you maybe just give us a bit of a refresh on how you approach your maintenance activities around a bunch of the units you have, whether it's relying on OEMs, internalization where you're doing it yourself. How do you sort of think about that process and the opportunity set that, that could present in certain M&A?

[Patrick Decostre, President, CEO & Director]

Yes, we're agnostic about relying on OEM or internalized. We are not agnostic on risk reward of the situation. So typically in Quebec and in -- essentially in Quebec, not yet because for contract maintenance contract constraint in Ontario and BC. But in Quebec, we are presently internalizing with a lot of success, the maintenance. And when I see a lot of success is we are choosing the right people in to come with us. They are highly motivated. I make a round trip around all our site in Quebec during the last months. And I can tell you that our people on the field are really motivated to do it better and to optimize. And we are successful also on the cost part and the production part because it's not just because we are reducing the cost of the maintenance, it's also because we are increasing the production and the energy availability of the turbine. In France, we have just made the opposite move in June by signing with Vestas, a very interesting contract, long-term contract for maintenance, where they are taking more risk and when we make the evaluation of where we are and when they -- what they proposed to us, it was really interesting to go the other side and externalize the maintenance again with Vestas. I think the move we did in the past in -- starting in 2007, but many times in France to internalize was also something, which pushed the turbine suppliers to organize themselves to propose something different to their customers. So just to say that when we externalize the costs are interesting in the risk are also interesting. So having said that, on an acquisition, it really depends of our analysis during the due diligence on CRE. We didn't put money on the internalization of the maintenance, the solar assets. but it was a potential upside, and we're still working on this because the existing contract is interesting. And if we want to make better in a new country finally, it's a question we have to look to. But I see some optimization again on CRE on energy availability. How to do demand and not just to reduce the cost and maintain the cost but to have the right availability. So it's a complex thing, but we're analyzing every point of it.

[Andrew M. Kuske]

That's very helpful color. And so I guess just in context, your ability to be either internalized or external, you get this sort of duality that you have experience on the internal side, and that probably gets you better price tension from the external side. So you have a bit of the best of both worlds, which then drives your return framework more than anything else.

[Patrick Decostre, President, CEO & Director]

Yes. I think we're not an easy client for maintenance people, but we are a good partner to them because as you mentioned, our people have a lot of skills an idea and then it makes things more interesting. And I think that's good for us, and I think that's good for the OEM. For the moment, with Enercon in Canada, it's clear that we're doing better on our doing it ourselves. So it's the trend.

[Operator]

Next question will be from Ben Pham at BMO.

[Benjamin Pham, Analyst]

Following on some of your comments around noncore asset sales and moving through the process and I'm wondering what is the primary financial metric you guys are going to look at in assessing success? Like is it EBITDA, it free cash flow per share accretion is it NPV? What are you looking at when you would do the relative analysis?

[Bruno Guilmette, CFO & VP]

We're very much focused on free discretionary cash flows per share. It's an important criteria for us, but also the long-term value creation for our shareholders. So it's cash flows, but certainly, we do monitor long-term IRRs on each and every one of our opportunities.

[Benjamin Pham, Analyst]

Okay. And can I then add to that? Because I know Bruno, like in the past, you mentioned maybe not to focus on the EBITDA build multiple as much for secured projects look at levered IRR. So as -- Is this really a situation you can -- maybe you can sell an asset at 9x EBITDA, just on a number when you're building at 11x. So you would do that as long as it's free cash flow accretive on a levered basis?

[Bruno Guilmette, CFO & VP]

Sorry, I don't think I got your question completely, Ben.

[Benjamin Pham, Analyst]

Yes, sure. So my question really is, let's say you're you're building assets at 10x EBITDA or so, like that $5.5 billion or so. And when you look at asset monetizations, like are you willing to sell an asset below that number on an unlevered basis, i.e. you're selling at, say, 8 to 9x. I'm not saying this is a number, and you're willing to do that, like our headline doesn't look great. But when you do on a levered basis, just how you structured the debt, it's still accretive to your free cash, like would you be willing to do that?

[Bruno Guilmette, CFO & VP]

I mean, essentially, you're asking if we're willing to look at selling. Well, first of all, all of our partnerships are based on an accretive value. Multiples -- the issue with multiples is you're not taking into account, for example, duration of contracts. So I mean the way we look at selling our assets is long-term value creation to our shareholders, not on a multiple basis because multiples don't tell the whole story. I guess that's probably what I said in the past. So it's really aimed at are we going to add value to our shareholders long term. And I mean, when I look at all of our assets so far, the value today is certainly higher than what we've built it for. So that issue hasn't risen yet.

[Benjamin Pham, Analyst]

Okay. That's great. And then maybe on French elections on the news headlines. So you -- are you considering maybe you need to -- when you bid into the next couple of rounds, is there a political risk premium that you need to consider in your bidding behavior?

[Bruno Guilmette, CFO & VP]

Which market are you talking about?

[Benjamin Pham, Analyst]

No, this is in France.

[Patrick Decostre, President, CEO & Director]

Yes. I don't think we're taking any political risk. The point is -- the -- if you look to the French election situation, Macron has to play with 50% on renewable and 50% on nuclear the nuclear has more challenge than renewable to to be -- to restart the industry, and I'm not speaking about -- only about social acceptability, cost and delay. I'm speaking about also interesting people talent to go back to the nuclear industry and to start studies and all those things. So there is a lot of challenge on this site, and it has to play with that because there is a lot of people working in this business in France. And yes, you have the extreme rights, which are always speaking more loudly than the others, and they are speaking against wind industry, but they would not make it at the end because they would not win the election, I'm confident about this. And so we -- I think it's my 5th or 6th election presidential and extend in France since I start with Boralex. So we are used to that. And that's also something which is important. When I mentioned that Nicolas was Barbara Pompili, when she announced the 10 measure for easing development and have a an acceptable wind development. We are quite close in terms of the message we can bring to the majority and the PM and the PR about wind development. So Boralex is really, I think, one of the -- obviously, there is EDF and NG, which are partly or totally state-owned company, but we are the challenger since years now, and we are well positioned to understand what is behind. I'm not sure that all international investors are understanding that in France and how it be because when you read the newspapers, it's not what you see.

[Operator]

[Operator Instructions] And your next question will be from Matt Taylor at Tudor Pickering.

[Matthew Taylor, Director of Midstream Research]

I just wanted to follow on to Ben's questions on divestitures there. I wanted to hear your thoughts on your hydro portfolio. U.S. side seems to be performing quite well. I get that there's ebbs and flows there, but with no growth in the pipeline, what strategic value do those assets provide Boralex. And can they be viewed as noncore and trying and looking to fund your 2025 growth plan?

[Patrick Decostre, President, CEO & Director]

Yes. Essentially, I think just to go back to Matt, to your question and to Ben's question, I think divesting is really something and not just divesting, portfolio management is something we have to -- which is more complex than a multiple or just a financial decision. Indeed, we have to take into account, if you look to -- should we have sold our U.S. assets the last quarter would have been totally different. So I think that when I'm speaking, hydro U.S. assets. So I think the diversification is important in terms of revenue pattern. Today, our hydro assets are really optimized. And I think it's not like the cogen in France or the biomass, which is completely different business than hydro, wind and solar. Hydro is managed from distantly and so if we have an opportunity, it could be, I don't -- again, I'm agnostic about this, but we have to take into account different factors in the decision on the short term and on the long term. And I think that's how we do it.

[Matthew Taylor, Director of Midstream Research]

Is there some strategic value there, too, as you mentioned the Quebec government is more supportive and looking at not just renewable power, but different technologies, does do those assets and could give you an opportunity to be involved and customers that want hydrogen or various other pieces that that we should be thinking about or the market should be thinking about in terms of -- you've mentioned some RFPs that are coming up in Quebec, is there some strategic value of these hydro assets?

[Patrick Decostre, President, CEO & Director]

Not specifically, I think. I think what comes from our hydro -- from our assets in Quebec and our presence here, it's, again, the knowledge of of the way the government is planning the next 10 years. We -- like I mentioned for France, obviously, we understand it quite correctly, I think in Quebec, and we have a good view of what is the plan, what is what everybody says to the media and what will be somewhere the most realistic scenario, and we are working around this on our greenfield developments. The hydro assets sometimes is very good. For example, when we start in the U.S., in New York State, we start really, if you look geographically, we start really the first project around the area where we have hydro assets. Now we -- and it was important in terms of reputation and then we have no turn for larger projects in other part of the state of New York. But the first step was really built on our reputation as the good hydro player there and a good reputation. So we have to take that into account, too.

[Matthew Taylor, Director of Midstream Research]

Okay. That's great. And the last one I have, can you frame whether or not this export line to New York City gets built here, how that changes your view on what your cadence might look like? You've been sanctioning or at least securing more renewable projects in Quebec over time?

[Patrick Decostre, President, CEO & Director]

It's for sure. It was -- since 4, 5 years, even before Sophie Brochu, the goal of Hydro-Quebec was to use is what they call their available energy to export to different market, the Atlantic Massachusetts and New York City now they have signed the last they have agreed the last or be selected for the last block of this strategy. So I think it's very good because this will create new needs in Quebec. And when you look to the balance between production and demand in Quebec, they need new electricity, new power -- new energy and new power, which is good. And they don't have any energy available, for example, if -- when there are another province or state need more electricity, if, for example, Ontario needs some electricity for their a period when they will stop picking and there is no more electricity available in Quebec. There was 1 year ago or even some months ago, but now it's dedicated to New York. So it means we need to build something either in Ontario or in Quebec in my example. So I think that's good for the old industry.

[Operator]

Thank you. And at this time, gentlemen, we have no further questions. Please proceed.

[Stéphane Milot, Senior Director of Investors Relations]

Well, thanks a lot, operator, and thanks, everyone, for your attention. A lot of good questions on this call. We're past the hour already. So if you have any additional questions, please call me at [phone]. I'll make sure we quickly answer your questions. Our next call to announce fourth quarter and year-end results will be on Wednesday, February 23, 2022, so already there. So I hope you all remain healthy have a great day and quality time with your families during the upcoming Christmas vacation. Yes, we're almost there, ready for karaoke. Thank you. Bye.

[Operator]

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time we ask that you please disconnect