Boralex Inc

TSX:BLX

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to Boralex, Inc.'s Fourth Quarter 2020 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I'd now like to hand the conference over to your first speaker today, Stéphane Milot, Senior Director, Investor Relations. Thank you. Please go ahead, sir.[Foreign Language]

[Stéphane Milot, Director of Investor Relations]

Merci. Well, thank you, operator, and good morning, everyone. So welcome to Boralex Fourth Quarter and Year-end Results Conference Call. So joining me on the line today are Patrick Decostre, our President and Chief Executive Officer; Bruno Guilmette, our Vice President and Chief Financial Officer; and other members of our management and finance teams. So Mr. Decostre will begin with comments about the highlights of the quarter and the year. Afterwards, Mr. Guilmette will carry on with the financial highlights, and then we'll be available to answer your questions. So 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 has 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. The press release, the MD&A, the consolidated financial statements. A copy of today's presentation, our annual report and our new CSR report are all posted on the Boralex website, at boralex.com, under the Investors section. So I wish you received -- if you wish, sorry, to receive a copy of these documents, please contact me directly, make the pleasure for me to send this to you. So Mr. Decostre will now start with his comments. So please go ahead, Patrick.

[Patrick Decostre, President, CEO & Director]

Thank you, Stéphane. Good morning, everyone. I am pleased to present to you our fourth quarter and year-end results today. For my first call as President and CEO, I'm very proud of all what our management team and employees have been able to achieve in spite of the numerous challenges COVID-19 brought in the past year. We have a group of highly motivated people who really made the difference this year. I would like to thank all of them for the extra efforts they have put in to enable us to rapidly progress in the execution of our strategic plan towards our growth objectives. The fourth quarter was another strong quarter for our overall production with a 5% increase over an already strong fourth quarter last year and 7% above anticipated production. Our Canadian operations performed particularly well with comparable wind production up 10% over 2019 and 8% above anticipated production. Combined EBITDA for the quarter are in line with expectations and comparable to last year's overall results of the same period excluding a gain on the sale of a land in Scotland and other unusual items recorded in the fourth quarter of 2019.We have been very active in the fourth quarter with the announcement of 2 acquisitions, adding 304 and 54 megawatts to our installed capacity and $66 million to our annualized EBITDA. This acquisition will be accretive to earnings immediately, while the solar parks acquired in early 2021 will provide a growth expansion platform for the renewable energy market in California. We commissioned 3 wind farms in France in the quarter: Blanches Fosses, Seuil de Bapaume and Cham Longe, our first repowering project. These wind farms added 45 megawatt to our capacity and $11 million to our annualized EBITDA. We have been adding 8 projects and optimized existing projects in our pipeline for a total of 177 megawatts in the fourth quarter. We also added 300 megawatt to the secured stage of our growth path with the signature of the Apuiat contract, the signature of REX for our 180-megawatt U.S. solar project and the acquisition of a 20-megawatt solar project at the beginning of 2021.On Slide 5 of the presentation, you can see the movement in our installed capacity, growth path and pipeline since the release of our third quarter results in last November. Please note that we are currently evaluating if project Apuiat will be consolidated. If consolidated, then 100% of the 200-megawatt capacity will be added to our installed capacity. But for the moment, only 50% or 100 megawatt of the capacity was added to the secured phase of our growth path, representing our ownership participation.Moving to the presentation of our growth path. As you can see on Slide 6, with the addition of projects under construction, ready to build and secured, we plan to be at 2,999 megawatts of installed capacity, almost 200 megawatts over our 2023 objective. Please note, however, that some projects, like Apuiat, will only be commissioned in 2024.I won't go over all our achievements with regard to our 4 strategic orientation on Slide 7, as I already covered many of them in the introduction. But I would like to highlight all the work done in terms of financial and operational optimization, again this year, as well as the signature of 2 corporate PPA effective January 2021.I would now like to take some time to talk about the progress made with regards to our CSR ESG initiatives. In the last quarter, we finalized the first version of our corporate social responsibility strategy, CSR, and produce our first standalone CSR report, which is available today on our website. I'm very proud of all the hard work done by our internal team supported by industry experts. This report represents the beginning of a rigorous process and will definitely continue to evolve. The strategy and report were built considering ISO 26000 approach, taking into account the input of our stakeholders through a materiality metrics on the different CSR topics as presented on Slide 9.We also use GRI and United Nations sustainability objective to establish our reporting, as shown on Slide 10, which represent an extract from the summary table included in our report. As mentioned in the third quarter call, we valued, including CSR, into our strategic plan on a timely fashion, making it as important as our financial objectives. The output of all the work done is an action plan split into 3 main pillars and 10 priorities, as shown on Slide 12. First pillar focused on issues relating to leading through example. The second pillar focused on making renewable energy in a sustainable and renewable manner, and the third pillar is about respect for our people, our planet and our community.In 2021, we are starting the work on each of these 10 priorities on which we plan to improve and set specific goals in coming years. However, we will put further emphasis on 3 of these priorities, which are diversity and equal opportunities, reduction of greenhouse gas emission and health and safety. Progress with regards to CSR will be reported on a quarterly basis, just as we do our -- for our strategic plan, so stay tuned for more to come. In conclusion, 2020 was a remarkable year in which we have been able to rapidly adapt ourselves to the COVID-19 situation and continue to deliver growth as well as strong profitable results. We made very good progress on all 4 directions of our strategic plan as well as on the 3 financial objectives. Taking into consideration our progress as well as recent positive changes in the renewable industry, we are currently working on an update of our strategic plan, which will be unveiled this summer.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 Guilmette, CFO & VP]

Thank you, Patrick. Good morning, everyone. I will start with a review of the very good progress made in light of our 2023 financial objectives. At $146 million, our AFFO for the year 2020 was $26 million or 22% higher than that of 2019. The growth in EBITDA resulting from strong wind conditions, combined with the savings generated by the operating and financial optimization initiatives completed during the year, drove this increase in AFFO. Our dividend distribution ratio now stands at 45%, still in line with our 40% to 60% target. As of today, our net installed capacity stands at 2,455 megawatts, which is getting closer to our 2023 objective, as mentioned earlier by Patrick.Now moving to the analysis of our fourth quarter, as shown on Slide 16, in our presentation document, our Canadian wind operations performed quite well again this quarter with comparable production 8% higher than anticipated production and 10% higher compared to the same quarter last year. In France, conditions were less favorable with comparable production, 4% lower than the very strong quarter of 2019. Comparable production was, however, 8% higher than anticipated production. Overall, wind production for the quarter, combining Canada and France, was 10% higher than the anticipated production and 8% higher than last year.Turning to hydro now. The Canadian production was 16% higher than anticipated and 34% higher than last year due to very favorable hydro conditions during the quarter. Conditions were, however, more difficult in the U.S. where we had production 32% lower than anticipated and 43% lower than the fourth quarter last year. Overall, the hydro segment reported production 9% lower than anticipated production and 12% lower than last year.In summary, for the fourth quarter, total production for the quarter was 7% higher than anticipated production and 5% higher than last year, given the strong proportion of wind in our mix. Fourth quarter revenues followed pretty much the same pattern as production with growth compared to last year, coming mainly from the wind sector. For the fourth quarter of 2020, EBITDA was $155 million compared to $165 million from the same quarter in 2019. Excluding the gain on the sale of land in Scotland and other unusual items recorded in the fourth quarter of 2019, so last year, EBITDA was in line with last year. Net earnings were $36 million in the fourth quarter compared to a net loss of $15 million last year, a very nice increase. This positive change is coming from a lower amortization charge as a result of an increase of the estimated residual life of certain components of wind assets, lower financing costs as well as a lower impairment charge in the fourth quarter of 2020.Moving to cash flows now. We generated $101 million of IFRS cash flows from operations in the fourth quarter compared to $119 million in the same quarter last year. AFFO at $67 million was comparable to the $68 million in the fourth quarter last year. As the reduction in cash flows from operations was compensated by 2019 nonrecurring adjusting items. So we had a special distribution from the LPN project following its refinancing in December 2019, that's not in the operating cash flows of this year. As indicated on Slide 20, our financial positions remain strong with our net debt to total market capital ratio of 41% on December 31, 2020, compared to 56% on December 31, 2019. In conclusion, all financial indicators are positive this quarter, thanks to all of our teams across the company. We continue to register growth in financial results through the acquisition path as well as the organic growth. We made significant progress in the execution of our strategic plan. Financial markets recognize the value of our industry and that of our company, Boralex. And we're noticing an acceleration of the renewable energy transition and growing opportunities for organic growth and acquisitions. Finally, we are in a very strong financial position to pursue our growth and seize opportunities with our disciplined approach. Thank you for your attention. We are now ready to take your questions.

[Operator]

[Operator Instructions] [Foreign Language] Your first question comes from Rupert Merer from National Bank.

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

So you have a progress on development in the quarter. I was wondering if you could comment on the pace of development that you can maintain in your target markets in terms of the number of megawatts you can bring forward? And is this changing? Are you able to increase your development capacity with more staff or maybe developing larger projects? What should we expect going forward?

[Patrick Decostre, President, CEO & Director]

I think one of the point, Rupert, is we have some good sign coming from Québec during the last quarter and beginning of 2021. So this typically will increase, say, the pace of development there -- here, I should say. In New York, we have also some good sign of the commitment from Governor Cuomo, and the volume is again there. So we will try to maintain our target of 150 megawatt to 250 megawatt bid every year. And in France, there the target is, I would say, between 75 megawatt to 125 megawatt, depending on the year. As I already mentioned, in France, there are some elections coming. So it's all the time some period where you don't know exactly where it will go, but it's just short-term situation. On a long-term basis, we continue to develop. And I think what is important in this quarter is that we have had a project in the preliminary phase of our pipeline. And again, that's not easy considering the COVID situation, but we did it for almost 200 megawatts. So I think that's the situation.

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

Is it possible to increase that rate of development? And if so, what...

[Patrick Decostre, President, CEO & Director]

I think in Québec and in the U.S., the answer is yes. In France, for the next 2 years, I don't think so. But on a long-term basis, the volume is still there in France, too.

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

So if we can look at Québec, you mentioned some positive signals in that market. I was wondering if you could talk about your pipeline in Québec and where you could see opportunities in the future, for example, if you have still have that capacity expansion at the Seigneurie de Beaupré. Do you feel like you have a good pipeline in Québec? And will it be competitive? Any color you can give on that?

[Patrick Decostre, President, CEO & Director]

Yes. We have still, I'd say, material capacity on Seigneurie de Beaupré. We have other projects or potential extension of project in Québec. We have not put on hold completely these developments. So they are ready to be for the next round of RFP. And maybe you heard the energy minister yesterday disclosing some intention of: first, extending the existing contract; and also the starting RFP, which is small, but which will be launched quickly end of 2021, beginning of next year of 200 to 500 megawatts. And then there will be other round of RFP, as mentioned by the minister in some weeks ago. So we have project to play in these RFPs.

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

Just as a quick follow-up to the Québec news yesterday. There was some discussion about recontracting, as you say, building new projects and maybe repowering. Do you think that your projects could be repowered in the future in Québec? Do you have access to land rights if repowering is attractive?

[Patrick Decostre, President, CEO & Director]

I think in Québec, we have only ENERCON turbines, which are very high-quality turbines. They are in really good shape after 7, 8 years of operations. So we really think the best way to go is to continue to optimize the cost of operation and production of these turbines and not repower them. But we have -- to answer your question, we have land for new projects, and it's not the necessity of repowering.

[Operator]

Your next question comes from Nelson Ng from RBC Capital Markets.

[Nelson Ng, Analyst]

Congratulations on a good year. My first question just relates to -- you talked about California. Can you -- and given that most of the solar facilities you acquired are in California, can -- is that going to be the focus in California, like solar and potentially batteries? Are you looking at doing wind in California? And finally, on California, are there any kind of -- like, how close are you to potentially bidding on projects in California? I know it's still pretty early days for you guys.

[Patrick Decostre, President, CEO & Director]

Yes, indeed, Nelson, it's -- we are early in the process. We just closed the acquisition at the beginning of February, as you know. So we will provide more information during the year. We are indeed hunting and looking for opportunities and understanding better the market, solar and storage specifically, but wind is not excluded.

[Nelson Ng, Analyst]

Okay. Got it. And then just moving on to New York. In terms of the NYSERDA auction, so you were quite successful last year, but this year, you didn't get any capacity allocated. Did you get a chance to kind of review your bidding strategy compared to potentially how the market did? And do you -- like, what's your sense on your bid relative to the market?

[Patrick Decostre, President, CEO & Director]

It's a good question. The bid was done in a very -- if you remember, it was done in October and September for NYPA. And at that time, the view of the uncertainty around the future of ITC was there, and we have decided to be conservative on this bid, given this uncertainty. So we will rebid this project in the next NYSERDA auction that will come in September from our information for Tier-1. But we don't think that our projects have fundamental inefficiency or are not competitive for any fundamentals. It's a question of assumptions in the bid. Some of the players have been more aggressive and -- but we are thinking our discipline is more important.

[Nelson Ng, Analyst]

Okay. That's good to hear. And then in terms of this year, your -- in terms of projects under construction are ready to be built, there's about 47 megawatts. Can you just talk about whether any of the secured -- I presume the secured projects, none of those projects will be at 2021 project in terms of completion, right? And on that, can you talk about your CapEx expectations for the year and your financing and liquidity position as well?

[Patrick Decostre, President, CEO & Director]

Yes. For the project side, we do not expect to have other projects to be able to connect other projects under -- which has to start construction this year. We have some for next year -- for next year, sorry, and we have some in the secured project, which have the condition to go to the last stage of under construction, and we're working hard. Essentially, it's a question of optimization of the grid connection, and this is working well. And on the CapEx, I will let Bruno give you the figures.

[Bruno Guilmette, CFO & VP]

Yes. So just on the financing question, our -- essentially our -- we have more than $300 million available on our credit facility at the moment. So there's no issue on that front. And just looking to full up the investment plan. So I have the overall investment plans. I'm just trying to see for 2021, in terms of total CapEx, it's a little bit under $100 million or so.

[Nelson Ng, Analyst]

Okay. Perfect.

[Bruno Guilmette, CFO & VP]

And it's close to somewhere between 20%, 25% equity.

[Nelson Ng, Analyst]

Okay. And then just one last question before I get back in the queue. Can you remind me what years the 200 megawatts of solar in New York are supposed to be commissioned?

[Patrick Decostre, President, CEO & Director]

2023 for the project; and 2020 for the 120 megawatts project; and 2022 for the 4, 20 megawatts projects. I restart, you have 4 projects which are connected to the distribution network of 20 megawatts. This will be connected next year. And the bigger project of 120 megawatts will be connected in 2023.

[Operator]

Your next question comes from David Quezada from Raymond James.

[David Quezada, Equity Analyst]

My first question here, I guess with the Sky High asset, the acquisition of that asset, you acquired basically a mature construction stage project. I'm wondering if that was kind of a unique opportunity? Or if you see other opportunities like that in New York, and I guess even in California in the U.S. where you could acquire an asset that's a bit more developed.

[Patrick Decostre, President, CEO & Director]

No, we're looking for opportunities, but this one was possibly specific because the seller has just one project of this side -- this size, sorry. And -- but we will continue to look at it. It's interesting because it's a very similar project to all the other 20-megawatt project that we have. And so we will build the project in the same -- with the same group of projects with some savings.

[David Quezada, Equity Analyst]

Okay. Great. And then maybe just one more question on Canada. I'm just curious how you see maybe over the next few years, the Canadian market developing as carbon tax goes higher and presumably the value of REX also goes higher. Curious if you consider a merchant development. I know that you're typically stuck with contracted assets in the past, but wondering how your thoughts might change as the value of those recs goes higher.

[Patrick Decostre, President, CEO & Director]

Our -- clearly, our focus in Canada for the next years is Québec. There is room of development here, and we have project. Ontario is more uncertain, I would say, for the moment. We may arise, but it will depend of political decisions and political vision of the future of the electricity system in Ontario considering the nuclear refurbishing costs and all those things.And BC, I think, is to say, I leave probably even more uncertain from our view, but we will drill into the 3 markets within the review of our strategic plan, but that's my view as of today, David.

[Operator]

Your next question comes from Mark Jarvi from CIBC Capital Markets.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

There's some commentary in the MD&A. I think in the press release about demand from New York State for more wind or even hydropower from Québec. And I'm just curious, when you think about things like the Tier-4, the RFP in New York, does that require the addition of new transmission or existing capacity for exports from Québec into the U.S. Northeast.

[Patrick Decostre, President, CEO & Director]

The Tier-4 program is there to promote renewable coming directly into the city of New York. So generally speaking, Mark, you need the new line. There are different projects of lines. There are some -- a real project, which is the GP line, the Champlain Hudson Power Express from Québec. There are some other projects which are real projects and there are some ideas. So I think this is -- this -- you should use new lines. Otherwise, you will not be able to bring something new over your baseline of production into New York City.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. And then obviously, there's a lot of discussion in Canada about the Atlantic Loop concept project and maybe moving some renewable power from Québec into the Maritimes. Have you had any discussions with Hydro-Québec or anything in terms of whether or not there might be an opportunity for wind to be involved in any of that potential exports to Maritime.

[Patrick Decostre, President, CEO & Director]

No, we have no discussion about this with Hydro-Québec, but if you propose to do, we will.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Fair enough.

[Patrick Decostre, President, CEO & Director]

We have no. We have no.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. And then just coming back to the recent acquisitions in the U.S. and the solar side of things, do you still need to build operating scale and a footprint to continue to build out your development pipeline? Or do you think what you've done so far is sufficient, and therefore, whatever you do more on the U.S. side for solars on the development side as opposed to operating asset acquisitions?

[Patrick Decostre, President, CEO & Director]

Yes. Obviously, it depends on the value you create and if it's possible to create more value in the right time, the organic development is very interesting. On M&A, we are continuing to look to opportunity. It depends of the risk/reward of each project. The CRE project are very interesting in terms of indeed having a new footprint and having a long-term contract. So we will look to this. There are some projects we think are not creating value because they are totally derisked, but there are some interesting opportunity we're looking for the moment.

[Mark Thomas Jarvi, Director of Institutional Equity Research]

Okay. And then a question for Bruno, a bit more detailed. In terms of the higher corporate and eliminations in the quarter, and obviously, it looks like, some of it's comments around maybe internalizing some of the maintenance work, some of the wind farms in Québec. And obviously, the margins -- EBITDA margins on the wind segment is quite strong. So can you just help maybe explain how costs are maybe being allocated between the corporate level and actually the segment level?

[Bruno Guilmette, CFO & VP]

So I'm not sure, Mark, I'm going to answer exactly your question. The higher maintenance costs are due to a couple of things. A small portion is related to taking over maintenance because we added debt. So costs that are built early to start the new operation. That's a little bit of the amount in Canada. There is also an amount in France that's related to essentially good performance in France over the last year or so, including the fourth quarter of 2019. So there's a bigger chunk in France because the assets have performed over the average. So a little bit of extra maintenance, but also, and it's important also some premiums to operators when we're not operating because they've exceeded the baseline. So -- and all of these were accounted in the fourth quarter.

[Operator]

Your next question comes from Sean Steuart from TD Securities.

[Sean Steuart, Research Analyst]

Just one question for me that hasn't been addressed. On Aquist, specifically, it looks like the contract price is down 17% from the initial structure, presumably equipment and other capital costs have also fallen. Can you comment on how you expect returns from that project to compare to what would initially have been anticipated in 2018?

[Patrick Decostre, President, CEO & Director]

It's a good question, but essentially, we have been able to -- through different optimization. The first one is 30 years contract. Second one, you mentioned equipment, and also, we have some financial optimization on financing of the project, which are underway. So we had been able to protect and to maintain our return as it was 3 years ago.

[Operator]

Your next question comes from Ben Pham from BMO.

[Benjamin Pham, Analyst]

I want to touch on your 2023 guidance a bit more in listening to some of the commentary around the timing of the secured project, your response to Nelson's question on the solar timing. As you look at your project backlog now secured in that chart you have, do you have visibility to 2,800 megawatts at this stage? Or are you more in that 2,600, 2,700 megawatts and you need to secure more?

[Patrick Decostre, President, CEO & Director]

Well, I'm not sure...

[Bruno Guilmette, CFO & VP]

What we know, for sure, if I may answer this one that right now we just secured with that we're at 2,999 megawatt or 3 gigawatt. And it's 200 above. And we know already that the Atria project will be done in 2024, so commission in 2024. So there's 100 that we know that will be commissioned in 2024. Some of the projects in the secured phase will also be done in 2024. And some like it's hard to tell at this point. It's kind of end of 2023 or beginning of 2024. So hard to tell exactly where we're going to end, depending on what will happen in the next few quarters when we'll get more visibility on these secured guidance, as where we are at this point.So then we'll take that into account in our review that I think we mentioned that we're going to see, including in our review what we're doing internally. We're going to see how we position the targets, whether we keep the 2023 or whether we extend the visibility on these -- especially on these types of targets. Over the course of the next few months, we'll be coming back with more information on that.

[Benjamin Pham, Analyst]

Yes. No, that's good. And not to suggest your growth is not good, you've done a fantastic job getting the capacities up. I just wanted to see where you sit today. And I also wanted to check is, is the 2,800 megawatts still translate to the 140 megawatts, 150 megawatts. Because you guys already are around that this year. I mean, you normalized for the production, but is -- are you in a situation where maybe you don't hit the megawatts, maybe the free cash flow outlook is much better than what you thought your last Investor Day?

[Patrick Decostre, President, CEO & Director]

There's a couple of things you need to consider. I mean, it's -- we forecast the 140 megawatts to 150 megawatts, based on average long-term wind conditions. I say wind, but essentially resource conditions, so long-term averages. We are seeing certainly, since the last quarter of 2019, better conditions than average. So your question needs to be in sort of related to averages versus exceeding averages. So in the last year or so and a little bit more, we've exceeded averages. So I mean, the 2,800 versus 140 megawatts, 150 megawatts was based on those averages. If we keep overperforming and then we've obviously done a few optimization initiatives, completed that were not expected, we're seeing a bit more growth in some markets. That's why I said we're looking at all this sort of -- all these changes in the situation since our plan of 2018, 2019, and we're going to come back to market because there's a few things that have changed as you just pointed out.

[Benjamin Pham, Analyst]

Okay. And maybe in your summary release, not thought I want to get ahead of that. I mean, it's -- I'm thinking it sounds like you're trying to figure out what your new target is, whether it's 24, 25. But is there anything you think about around really just the size of the projects you're looking at? I mean, are you maybe contemplating 20 megawatts, that's too small for you when you're up to 3 gigawatts versus 2 gigawatts a couple of years ago? Is there maybe something just beyond the thought process that you put out a couple of years ago?

[Patrick Decostre, President, CEO & Director]

Yes, that's a good question. The point is, there is -- technically, there are some thresholds of going from distribution project to transmission grid project. And obviously, we are happy when we do transmission grid project, which are -- should be of a significant size, I would say, in France, it should be typically around 30, 40 megawatt. This is really the minimum. In the U.S., as you have seen, we have 120 megawatts, and in Québec, it's even more. So -- but there is a niche. There is an interesting place for developing project just under the threshold because the cost is the right one, and generally, the procedures for grid connection and sometimes like in New York, the procedures for authorization are simpler, and then I'm not sure that we have to kill this. We have to optimize the way we do this project. And definitely, if we can avoid to do, say, smaller projects, which are not at the limit of this threshold, we will because otherwise, if we had to do too much project, but that's my answer.

[Operator]

Your next question comes from Andrew Kuske from Credit Suisse.

[Andrew M. Kuske]

You've been involved with various partners in the past, and I'm just curious as to your thoughts on the balancing act of having partners with, say, future development projects or even selling partial interest in existing projects or existing assets you have versus the complexity that, that can bring to the financials.

[Patrick Decostre, President, CEO & Director]

The first point is, we are thinking, and we have been thinking since our strategic plan was released 2 years ago to have partners in our project in New York to have a flip of a part of the project. This is a typical market practice. So we will continue this way. We have also partners like the first nations that bring great value for social acceptability of the project and developments. And for your question, we will analyze the points in the -- again, in the strategic plan review because it's a balance, as you said, between complexity and efficiency, and on one side, the value created by somebody having a lower cost of capital. So we're thinking -- we are open to that, but it should be interesting for the company and not creating too much complexity.

[Andrew M. Kuske]

Okay. And then maybe a follow-on question really just relates to the U.S. market presence. And if you go back many years ago and when you started to move out of your core market in Québec, sort of systematically belt the presence in various markets and then expanded your generation capability into those areas. If you look at the U.S. right now and just some of the recent activities that you've done there, what are you missing from a staffing standpoint or just a critical mass?

[Patrick Decostre, President, CEO & Director]

I think in New York State, we are just -- I'm not sure we are missing something. We are just missing -- we just started 2 years ago. So I think from 2 years ago, I'm very happy where we are because we have 200 megawatts of project, which are secured there. For -- so do we need more staff, as I mentioned, to Rupert question. There could be some increase, thanks to Cuomo goals and objectives for 2030. And we are starting to look around in California after the acquisition, which just closed 20 days ago. So we will continue to work on that. And again, it's one of the question of our strategic plan and maybe the markets which are adjacent to the place where we know have assets could be of interest.

[Operator]

Your next question comes from Naji Baydoun from IA Capital Markets.

[Naji Baydoun, Equity Research Analyst]

Just wanted to get a bit more color on the potential for Boralex through the Tier-4 program in New York. Can you maybe just comment on how you're thinking about participating in the upcoming solicitation this year? Are there any specific projects in your current development pipeline that will qualify for the Tier-4 program?

[Patrick Decostre, President, CEO & Director]

The program is dedicated to renewable energy coming directly to New York City. So you need to have a line. And as I mentioned earlier, we are analyzing what is possible for the Tier-4, but also there will be Tier-1 program tender during the year in September. So we have to look to the different opportunity we have, and we will come back to the market when this will be analyzed.

[Naji Baydoun, Equity Research Analyst]

Okay. So maybe a bit too soon then. Maybe then just a comment on the progress that you're making in France and specifically the loss around of onshore wind auctions. I think you were awarded a pretty large project, larger than usual in size. Maybe just comment on that project, and if you have any updates on the Moulins du Lohan project as well.

[Patrick Decostre, President, CEO & Director]

Yes. It was 68 project. We have the possibility also to increase -- to modify by 10% if we have any optimization on the project in the future. So it's good because it was the last round with known rules. The rules will change, and this is underway, but the volume will be there. As you know, it will be a 1.85 gigawatt per year. And on Moulins du Lohan, the procedure is nothing new. We're still waiting for the, let's say, the French Supreme Court, the consolidated data for decision on the project during the first half of the year. And as soon as we have information, we will disclose the information.

[Naji Baydoun, Equity Research Analyst]

And I guess just a follow-up. Do you expect to bid more of these larger projects going forward in France, either in wind or in solar? Or to your earlier comments, the focus is still on potentially smaller projects?

[Patrick Decostre, President, CEO & Director]

I think it's a 68 project in France is a project over 50 megawatts are, generally speaking, exceptions in France. This is -- on one side, you can say, "Okay, it's too small." On the other side, this is why the price is maintained. If you -- the maximum price of the last tender was a little bit over EUR 60 megawatt hour, which is still an interesting price after 6 rounds of RFP. So the price is maintained, and that's good news for investors. So we will continue to try to optimize all the projects we have to increase the size of the turbine and the power of the turbine. But generally speaking, the number of the turbine, it's more difficult to have project with a -- like this project, which is 16, 17 turbine project, which is generally the exception.

[Operator]

Your last question will come from Nelson Ng from RBC Capital Markets.

[Nelson Ng, Analyst]

Just a quick follow-up for me. So on the development side, obviously, it sounds like you've been more active in more regions, even in 2020. But when I look at the development spend in the discretionary cash flow calculation table, it looks like 2020 actually reduced to -- like the development reduced to $23 million, down from $24 million in 2019. I was just wondering whether that's due to -- like, whether that's COVID related in anyway in terms of the ability to get things done? And do you expect development spend to really kind of ramp up this year and next year?

[Patrick Decostre, President, CEO & Director]

Yes. I think it's probably partially COVID related, indeed, because there was some delay in development, so sometimes some delay of starting studies of environmental study or the study which are cost for development. I hope with all the thinking -- I'm not hope we will spend more money, but I hope -- I think we will have more projects this year, thanks to the restart of the Québec market and our development. So I think it's not a material question to say the machine is slowing down. I'm not sure it's just 2020 extraordinary year.

[Bruno Guilmette, CFO & VP]

There's also -- if I can add, there was also a focus clearly on a fairly large acquisition in California, which took a bit of time part of the team. So these are the 2 main reasons, but the -- there's more money for development that's in the budget for now.

[Nelson Ng, Analyst]

Okay. So we should see a decent increase this year?

[Bruno Guilmette, CFO & VP]

Yes.

[Operator]

We have no further questions. I'd like to turn the call back over to presenters for closing remarks.

[Patrick Decostre, President, CEO & Director]

All right. Thanks, everyone, for your attention. If you have any additional questions, so please call me at the [phone]. and I'll make sure we quickly answer your questions. So our next conference call to announce first quarter results will be on Wednesday, May 5, and we will also hold our virtual AGM that same day. So I hope you all remain healthy. Have a great day, everyone.

[Operator]

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