Boralex Inc

TSX:BLX

Earnings Call Analysis

Strong Financial Performance and Growth Prospects for Boralex

Boralex had a record year in fiscal 2023 with combined EBITDA reaching $675 million, demonstrating a 22% increase from the previous year. The company's net income was $115 million, with AFFO of $179 million and AFFO per share of $1.75. Boralex added 1.5 gigawatts of projects to its pipeline, totaling 6.8 gigawatts. With $550 million in available cash resources, Boralex is well-positioned for growth. The company is focused on developing projects in North America and expanding its presence in markets with high demand for renewable energy. Boralex's pipeline now includes projects totaling 5.9 gigawatts of wind, solar, and storage projects, setting a strong foundation for future expansion towards its 2025 corporate objectives.

A Record-Breaking Year

Boralex showcased a banner year in 2023, with Combined EBITDA growing robustly by 22% to reach $675 million, net income climbing to $115 million, and AFFO hitting $179 million, yielding an AFFO per share of $1.75. This level of growth and profitability underscores Boralex's adeptness in capitalizing on favorable market conditions and efficient operations.

Robust Financial Health

Signaling financial stability and operational readiness, Boralex reported a solid cash position with $550 million in available resources and authorized financing facilities. This ensures the company has ample financial flexibility to support the execution of its key projects, such as the Apuiat and Limekiln wind projects and the battery storage projects in Ontario, emphasizing its commitment to strategic growth.

Competitive Edge in Core Markets

Further cementing its competitive stature, Boralex won contracts for two projects totaling 315 megawatts in the Hydro Quebec RFP. With bids submitted for additional storage and solar projects in Ontario and New York, Boralex is demonstrating its strong positioning to capitalize on emerging market opportunities and its capacity to fulfill increasing energy demands in these regions.

Sustained Capacity and Revenue Growth

Over five years, Boralex successfully increased its installed capacity from 1.9 gigawatts to 3.1 gigawatts. Equally impressive is the controlled debt level at $3.3 billion and the remarkable compound annual growth rates (CAGRs) for AFFO and AFFO per share with 25% and 19%, respectively.

Renewable Energy Demand Surge

The demand for renewable energy sources continues to rise, driven by governments' commitments to reducing their carbon footprints. This demand is expected to outstrip supply in the short-to-medium term, boding well for Boralex as it awaits legislative advancements in Canada that could foster further growth opportunities.

Solidifying Market Dynamics

With a regulatory price cap increase to EUR 105 per megawatt hour, Boralex stands to gain additional upside through 2024 from short-term contracts signed previously, which offsets the potential impact of current lower merchant prices.

Project Pipeline Expansion

Boralex's project pipeline is robust, encompassing 5.9 gigawatts of wind, solar, and storage projects. This pipeline reflects not only the quantity but also the variety of growth opportunities Boralex is well-positioned to exploit.

Stable Revenues and EBITDA Uptick

Despite stable combined revenues year-over-year, Boralex achieved a 32% increase in EBITDA. This growth can be attributed to new acquisitions in the U.S., increased production, asset commissioning in France, favorable exchange rates, successful capacity revenue contracts, and tight cost controls.

Financial Strategy Outcomes

Boralex's net debt to total market capital ratio was reported at 42%, reflecting a conservative leverage approach. A pivotal commercial strategy in France enabled Boralex to exit contracts and re-contract at favorable terms until 2026, generating an additional $20 million in EBITDA.

Earnings Call Transcript 2023-Q4

[Operator]

[Foreign Language]

Good morning, ladies and gentlemen, and welcome to Boralex Fourth Quarter and Fiscal 2023 Financial Results Conference Call. [Operator Instructions] Also note that the conference is being recorded. For webcast participants, you can also ask questions during the conference, but they will be answered by e-mail after the call.

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

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

[Stéphane Milot, executive]

Well, thank you, operator, and good morning, everyone. So welcome to Boralex Fourth Quarter and Year-end Results Conference Call. So joining me today on the call Patrick Decostre, our President and Chief Executive Officer; Bruno Guilmette, Executive Vice President; and Chief Financial Officer and other members of our management and finance teams.

So 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'll be available to answer your questions. So as you know, during this call, we will discuss historical as well as forward-looking information. So when talking about the future, there is a variety of risk factors that have been listed in our different filings with securities regulators, which can materially change our estimated results. So these documents are available for consultation at sedarplus.ca.

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

So Mr. Decostre will now start with his comments. 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 fourth quarter and fiscal year 2023. 2023 was a record year for Boralex on several parameters. Combined EBITDA of $675 million, up 22% on 2022. Net income of $115 million, AFFO of $179 million and AFFO per share of $1.75.

We also added 1.5 gigawatt of project to our pipeline, now representing 6.8 gigawatts of solar, wind and storage project. In a challenging environment, we demonstrated that our agility, disciplined approach and sound management has consistently proven effective, resulting in improved financial results and making good progress on our strategic plan execution.

Looking ahead, we're in a solid financial position with close to $550 million in available cash resources and authorized financing facilities, providing significant flexibility to fund our growth. This last quarter, we continued to focus on our main projects under construction and ready to build. They are progressing according to plan with our wind project, Apuiat in Quebec and Limekiln in Scotland expected to start operation at the end of 2024 as well as our 2 battery storage projects in Ontario expected to be commissioned in 2025.

In the fourth quarter, we have also been very active in the development of our projects in North America. We're very proud that our 2 projects, our [ Tabaska and Manoir ] totaling 315-megawatt were selected in the Hydro Quebec RFP. It shows both our competitiveness in this market and our ability to work closely with local partners. Our team is working full steam ahead to further develop project in Quebec. Ontario is also a very promising market for Boralex with strong clean energy needs identified in the coming years. Ontario's IESO is projecting energy shortfalls before 2030 and is planning a series of procurements to meet demand. After 2030, Ontario intends to mitigate the growing shortfall by building small modular reactors, SMRs, and refurbishing Pickering B nuclear power station and other measures.

Even under SMRs and Pickering refurbishment scenario with all associated costs and schedule risk, demand gap still exists. We are, therefore, rapidly developing cost-effective solution to meet demand in Ontario. In December, we submitted bids for 525 megawatts of storage projects, and our team is working on the diversified array of wind, solar and storage project to pursue our growth in this region.

Finally, we submitted 240 megawatts of solar projects in New York expedited RFP in January 2024. Results should be announced in April and other -- and another RFP is expected in the fall. Given our experience and the strength of our balance sheet, we're confident that we can successfully complete these various projects, which are well spread over time.

Before covering market's conditions, I would like to highlight our achievement in the past 5 years for some key metrics. First, our installed capacity went from 1.9 gigawatts in 2018 to 3.1 gigawatts at the end of 2023, a 10% CAGR while our pipeline of projects increased significantly and more than doubled in the last 3 years. This growth was achieved while maintaining our debt level almost flat at $3.3 billion. Our AFFO and AFFO per share grew by a CAGR of respectively, 25% and 19% during this 5-year period. I'm very proud of these results, and would like to take this opportunity to thank all Boralex employees for their commitment and hard work during these years.

I also take this opportunity to thank our partners in our different projects. I won't go in all the details of market's conditions. But in general, I would say the demand for renewable energy remains high in all our core markets with strong commitments from the government to reduce their carbon footprint leading to investment in renewable energy sources. Even if some political parties are not highly favorable to the development of renewable energy, one thing is sure. The transition will continue. It's based on strong demand forecast with a clear lack of supply in the short-to-medium term.

In Canada, we still expect legislation around ITC to get final approval sometime in the first half of 2024. In France, we had positive news from the 2024 Budget Act with the price cap raised to EUR 105 per megawatt hour and the level of revenue shared with the government and above this threshold, which is increased to 50% versus 10% in 2022 and 2023. Even if merchant prices are lower than EUR 105 a megawatt hour right now, we still have some upside in 2024 coming from our short-term contracts signed in 2022 for periods between Q4 2022 and 2026.

I will now rapidly review the main variances in our portfolio of projects and growth path. The increase in the early stage was mainly due to, first, the addition of one new wind project and one storage project in North America as well as 2 wind power projects and 5 solar power project in Europe for a total of 454 megawatts. Then the transition to the mid-stage phase of 5 wind projects and 5 solar projects in Europe for a reduction of 126 megawatts. In the mid-stage, the progression of this 126 megawatts of project was offset by the transition to the advanced stage of 3 wind projects in North America and 3 wind projects and 2 solar projects in Europe, for a reduction of 500 megawatts.

In the advanced stage, the change were mainly due to the progression of this 500 megawatt, but also the transition to the secured phase of 1 power -- wind power project in North America for a reduction of 133 megawatts and the inclusion of 2 wind projects in Europe in the under construction stage for a reduction of 29 megawatts. In total, our pipeline now comprises projects totaling 5.9 gigawatts of wind, solar and storage projects.

In the growth path, the secured stage increase was the progression of 1 wind project in North America for an increase of 133 megawatts. The construction and ready-to-build stage increased by 2 megawatts with the progression of the wind project, [indiscernible] and [indiscernible] in France and the commissioning of 2 other wind projects in France, totaling 27 megawatt. I won't cover in detail the progress made in our 4 strategic directions as I have already talked about the major highlights, but you can find all the details in the slide of the webcast and in our MD&A. 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. As mentioned by Patrick, our balance sheet is strong with close to $550 million available cash and authorized financings, which is about $150 million more than in the previous quarter. Total debt remained stable in 2023, with project debt now representing 85%, down from 90% in 2022. The AFFO and reinvestment ratio are progressing according to plan, while combined EBITDA had a strong 22% increase in 2023. Lastly, on our corporate objectives, we continue to make good progress on our CSR strategy as presented on Slide 17 of the webcast.

In 2023, we significantly improved on our CO2 avoided emissions to over 1 million tonnes. We increased our initiatives around health, safety and diversity and continued to improve our governance on different fronts like compensation, ethics and risk management. For more detailed information, I invite you to read our 2023 CSR report, which has been published earlier this morning.

I will now cover the financial results for the quarter, starting with production. Overall, total combined wind production for the quarter, combining Canada, U.S. and France was slightly higher than the anticipated production and 33% higher than the same quarter last year. High availability of wind farms and strong wind conditions in France compensated for less favorable wind conditions in Canada. The total production for the hydro sector was 4% higher than anticipated and 18% higher than the same quarter last year, attributable to favorable weather conditions in the U.S.

Finally, production from solar assets was 3% lower than the same quarter last year and 16% lower than anticipated. In summary, total production for the quarter was 1% higher than anticipated, but 30% higher than the same quarter last year. Fourth quarter combined revenues were stable compared to the same quarter last year, while EBITDA increased by 32%. EBITDA growth was mainly attributable to the U.S. acquisition, higher production and commissioning of assets in France and also to positive euro-CAD exchange rate effect of $9 million in Q4, capacity revenues of $8 million as part of short-term contracts signed in Q4 2022 and tight controls on overall costs.

Operating income amounted to $119 million compared to operating income of $14 million for the same quarter of 2022. This significant increase is mainly attributable to the increase in EBITDA and the decrease in impairment. Net income was $58 million, a $65 million improvement compared to the net loss of $7 million for the same quarter of 2022. On a consolidated basis, AFFO was $90 million compared to $77 million in the same quarter last year. Our financial position remains very solid with the net debt to total market capital ratio of 42%.

Finally, I would like to highlight that overall for the year, we generated an extra $20 million in EBITDA, thanks to our commercial strategy in France by exiting some contracts at the end of 2022 and recontracted the vast majority of this volume at better conditions until 2026. Please note that this amount is net of the inframarginal rents or the price cap formula. This clearly demonstrates we have created value with our exiting assets or exiting contracts in France in 2023.

In conclusion, fiscal year 2023, and the fourth quarter were strong periods, in which we continued our disciplined execution of our plan. We increased combined EBITDA and AFFO compared to 2022. We continue to be very active in the development of new projects in North America with 2 new projects totaling 315-megawatt selected under the Hydro Quebec RFP. We recently submitted bids for 525 megawatts of storage in Ontario and 240 megawatts of solar projects in the New York expedited RFP.

And finally, we maintained a solid financial position with close to $550 million in available cash resources and authorized financing to support our growth. Thank you for your attention. We are now ready to take your questions.

[Operator]

[Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of David Quezada from Raymond James.

[David Quezada, analyst]

Maybe I could just start off with a high-level question here, just thinking about capital allocation and your growth priorities. I know that you've got now quite a few exciting emerging opportunities and come back in Ontario, just wondering how you, I guess, allocate capital between those and other things that you've looked at in the past, like some of your growth projects in the U.S. outside of New York and, I guess, potential M&A. Is there a way that you prioritize those opportunities? Or will it just come down to returns at the end of the day?

[Patrick Decostre, executive]

Yes. David, thank you for the question. Essentially, indeed, Ontario and similarly Quebec arrive as a new interesting market from 2021 strategic plan, so -- and we are able to catch a very interesting rate of return in both of this market. And with long-term contract, Ontario is 22-year contracts, and Quebec is 25 to 30 years contract. So it's a very interesting market. So indeed, yes, we have reallocated some development people. We are -- we have also increased, thanks to our good position. We have also increased a little bit our budget for 2024 in terms of development to continue to invest in the 4 jurisdiction where we are. And last but not least, if we continue to be successful and that's why I expect in this market, we will have to work on the way to finance this project with some potentially capital recycling minority sales like we did in France and also the projects are also, as I mentioned in my speech, well spread in time so we don't have any difficulty to finance them.

[David Quezada, analyst]

Okay. Excellent. And then just maybe thinking about the upcoming RFP in New York for the fall. Just curious how you expect that to shape up? Like is there any sort of guidepost you could provide on the volume of projects that you think you could bid in there just in terms of how advanced the development stage projects you have in the state are?

[Patrick Decostre, executive]

Yes, it's hard to say, it's always difficult to comment before knowing the exact rules of the tender on the expedited RFP, the threshold of development meaning development license, operating license and grid connection was quite high and that was favorable for Boralex because we had advanced project to bid. I also expect somewhere -- but is -- I have no crystal ball, that the next RFP will have also a quite high threshold on authorization and development advancement, and in this case, we would be able to bid somewhere a big part of the contract we obtained in 2021. But again, it's with all the disclaimer of not knowing the new RFP rules.

[Operator]

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

[Rupert Merer, analyst]

If we can start with the changes to the regulation in France, the 2024 Finance Act, can you give us some color on how your contract prices are changing in 2024 on those assets, which you exited the contract roughly where that price will be? And with the change in the regulation, what do you see is the year-over-year impact on your operating performance?

[Patrick Decostre, executive]

Very interesting question. The first point is you can assume that all the power we exited in 2022 has been signed for 2024 at a price higher than the EUR 105. That's the first point. So EUR 5 is there already per megawatt hour. On top of this, I would not comment on the average price, but the fact that we share now 50% over the EUR 105 will have some significant improvement of our AFFO this year. And I would let you see that in the next results of the first quarter, I think, Bruno, I don't want to know if you want to comment more.

[Bruno Guilmette, executive]

The amount I mentioned, I guess, which this is indirectly your question, Rupert, is this today -- this year, in 2022, last year, we had an impact of EUR 20 million and you can see with current prices, we'll have -- current prices are lower. Market prices are lower in '24 -- are expected to be lower in '24 than '23, but the finance law helps us on the flip side by taking less to the government in types of -- in terms of taxes. So we won't be more precise than that, but.

[Rupert Merer, analyst]

All right. I guess we'll have to roll up our sleeves.

[Bruno Guilmette, executive]

That's pretty much it.

[Rupert Merer, analyst]

All right. Well, if I can maybe turn to Quebec and Ontario and the recent RFPs, it seems from looking at those processes, the ones we've had so far, where you've been quite successful. But there hasn't been a huge amount of international competition. Now I wonder if you can comment on maybe what your competitive strengths are and any challenges that international players might have getting a foothold in this market? And do you see any changes in that competitive landscape in the future RFPs here?

[Patrick Decostre, executive]

Yes, that's interesting. There is -- I think there's 2 answers. The first is in Ontario we restart development 2.5 years ago when no one was thinking about development in Ontario. So this gave us quite advantageous position when it was time to bid in February and in December with very good partnership with First Nations and with municipalities. So I think Ontario was more a story of saying, okay, the demand gap is there. the storage and system regulation gap is there. We should invest before even knowing that there would be a tender. So that's one thing. And in Quebec, at the same time, I think we have been also very good locally I think I mentioned on different previous calls that I was confident in Quebec because yes, there was 3 gigawatt of bid, but Boralex was the only one with bid on nodes where there was no competition.

On some notes in Quebec, there was 2 players, even 3 players. So on the note where we bid, there was only Boralex. So this allow us to be a little bit more aggressive in terms of bidding with a price, which is a little bit higher than at the end, the average price of the tender. So that's the first part of my answer is local presence and good vision of the market.

And the second part, indeed, I think lots of international players have opportunity in other markets. And that's because the global energy transition is there, and some American players are playing big project in America. Some European players are playing a big project in Europe. And so we are all quite busy, which is good in terms of competition because it's reducing competition.

[Rupert Merer, analyst]

Do you see that situation changing at all? The next few bidding rounds do you think we'll see more international presence?

[Patrick Decostre, executive]

It's a possibility, but my last comment is there. There is lots of potential project in the U.S. There was lots -- there is -- BC will seems to -- that they will open also they announced something. So there will be also a project in BC. So competition between -- there is a tender coming in the U.K. There is many tenders -- In Germany, if you look to Germany, they were -- they were permitting 1 gigawatt per year. They are now permitting 5 gigawatt per year. So if you are RWE or another German company, you don't go -- you don't have to go in Quebec and to have interest in Quebec and Ontario because you are -- you have a lot of things to do in Germany and in France and in the U.K. and in the U.S. So I have no crystal ball, but I think that competition is -- will be probably less than it was in the past when renewable was highly supported by government.

[Operator]

We are now going to proceed with our next question. And the questions come from the line of Nick Boychuk from Cormark Securities.

[Nicholas Boychuk, analyst]

Can you please provide some color on how your teams are faring at finding new or earlier-stage projects. Patrick, you mentioned that the development sort of cost might increase. What are you seeing in your core markets and technologies? And how is that impacting your outlook to 2030 goals?

[Patrick Decostre, executive]

Yes. Essentially, we are focusing in on 4 say, jurisdictions, Canada, specifically Quebec and Ontario, the state of New York, U.K. and France. So we are not -- we will -- if there is some opportunity elsewhere in the U.S. with a similar potential than New York, like I mentioned in the past, Illinois, we can go. But specifically, we have a lot of work in these 4 jurisdictions.

In terms of technology, we have 380 megawatts under construction in -- in storage, we have 525 pending. So the storage diversification is going very well, and it's interesting revenue. And I think it shows when you look to Ontario, U.K., there would be other opportunities in storage. We need to continue the diversification in solar because I think it's a very interesting diversification, but there's 3 technology plus wind, obviously, would be there, so in this jurisdiction. Long-term contract -- long-term contract, meaning also long-term PPA, commercial PPA like we did in France, we are -- there is a big market for that. And I'm sure that this will come even in jurisdiction like Quebec, we're speaking about long-term corporate PPE even if the law is not yet there. but the law will come. So there is a lot of opportunity for long-term contract, there is jurisdiction and there is technology.

Does it change anything for 2030? Somewhere it confirms that our view of 70% coming from -- of our growth coming from organic growth is reachable and we will continue in this direction because with organic growth, we are creating lots of value for Boralex.

[Nicholas Boychuk, analyst]

Okay. Got it. So comparing it exactly to the 2030 targets, I think rough math, you'd have to add about, call it, just under 3 gigawatts in the U.S. with new solar and about 1 gigawatt of onshore wind in the U.K. Between the New York State and say, Scottish markets, you're comfortable with being able to source the vast majority of that organically?

[Patrick Decostre, executive]

Yes. Globally, the answer is globally, yes. There is more opportunity in Ontario and Quebec than expected. And we are definitely accelerating in the U.K. with the team we bought and integrate 2 years ago and the success we had with Limekiln and we will also concentrate on the -- once the -- at the end of April, we will have the news about the New York RFP like you have seen, NYSERDA is now progressing at the right pace seems to be just a proof to project offshore wind yesterday with a high price. So I think that there are -- this is a good sign that they will continue to approve project onshore too. And that would be really the base of our organic developments in the U.S. for the next years.

[Nicholas Boychuk, analyst]

Got it. And the last for me, just thinking about projects kind of in those markets moving from the earlier to mid- to advanced stages, are you starting to identify any or see any potential bottlenecks or issues like maybe interconnection cues, time lines, delays, supply chain issues, anything that could derail this outlook? Or are you comfortable with how everything sits so far?

[Patrick Decostre, executive]

There is some interconnection issues in the U.S. depends on where it is. And specifically, as I was mentioning in the previous question on the -- our specific project the roughly 1 gigawatt pipeline we have in New York, we have secured interconnection. So I'm confident in that. If we want to go elsewhere and accelerate, yes, there is interconnection cues there. But I'm sure that, again, the states will have to do like in the U.K., like in France, like in Quebec investment plan to reduce this interconnection bottleneck. And on the other side, in Quebec, I think we have been -- and in Ontario, we have been very smart to go where no one was and not to have to fight for interconnection, and we will continue to use this intelligence and understanding of the market to go there.

[Operator]

We are now going to proceed with our next question. And the questions come from the line of Nelson Ng from RBC Capital Markets.

[Nelson Ng, analyst]

Congrats on a strong quarter. So my first question is the 2 battery storage projects in Ontario. I think you mentioned that they will be commissioned in 2025. So I presume you need to start construction pretty soon. Can you just comment on where you are in terms of like raising project financing and things like that on those projects?

[Patrick Decostre, executive]

Yes. First, thank you, Nelson. First point is we have secured the procurement of the battery. We have finalized engineering on the one of the project, and we're working on the other one. And globally, the news are very positive in terms of budget and then in terms of return of this project and for the financing, I will let the floor to Bruno.

[Bruno Guilmette, executive]

Thank you, Patrick. And so to your question on financing, Nelson, we've started working on the financing on the project finance. We expect that in the second part of this year that we'll be able to close the financing on this. We're quite confident. And this also a reminder that these projects are eligible for the ITC, which we expect will be passed in terms of law in the first semester of this year. So generally speaking, this -- the financing of these projects is well underway.

[Nelson Ng, analyst]

Okay. So financial close in the second half of this year, does that mean construction will have to wait until the second half of this year as well?

[Bruno Guilmette, executive]

No, we can start -- we already have the -- on the equity side we have the capacity to invest and to invest the equity needed. And yes, we'll be fine in terms of timing for the financing which is likely in the first part of the second half, if I can say it in a more precise way.

[Nelson Ng, analyst]

Okay. And then just moving on to NYSERDA, the 240 megawatts bid into the expedited process. So I think previously, you had about 740 megawatts of solar that was previously awarded. So technically, you could have bid a lot more than 240 megawatts into the expedited process. I guess, were the restrictions pretty high in terms of being able to construct very soon? Or can you just give a bit more color as to relative to what was previously awarded, how did you arrive at resubmitting 240?

[Patrick Decostre, executive]

Yes. You're right, Nelson, the threshold of advancements of the development of the project was high. And to be transparent, we have advocated that to NYSERDA because we think it's the best way to have a very low attrition risk on the number of projects awarded and finally, the number of project connected. And so this limit us to bid EUR 240 million, but this limit also competition on the tender. So that's where we are. And I -- that's why we have not been able, but we were comfortable with that to bid all the 740, but in the next round, we would be able to bid the 700, the remaining part probably in the next round this year all around next year.

[Nelson Ng, analyst]

Okay. Got it. And then my next question just relates to the fact that you maintained your 2025 targets. And I think you mentioned earlier that 70% of your growth will be organic. So in terms of hitting your 2025 targets, does it rely on any M&A to hit that number?

[Patrick Decostre, executive]

Yes. In 2021, what we said is for the first period of the strategic plan, meaning the 2025 target it will be 50-50 organic and M&A. And after 2025 to 2030, it will be 70% organic, 30% M&A because it was not possible to say move globally to 70% before 2025 due to the delay of development. Where -- what I can say to you is, today, we are really on the right path for the organic cash flow that will come for 2025 from the organic development. And we are still confident, but as I mentioned previously, this will need some M&A, and we will not do M&A at any cost. We would do it only if it's first accretive, secondly creating value on the long term for Boralex and its shareholders. So there is still almost 2 years to do this. And so we are monitoring the market, and we have the possibility, if it's -- if there is an interesting transaction with the condition I just mentioned, we will do it. Otherwise, we will have to say, continue organic development, which is creating a very high return presently.

[Nelson Ng, analyst]

Okay. And then just one last question. You mentioned that you're adding more people into your development team. I think the development costs in 2023 was about $40 million. How much higher do you think 2024 will be? It will be closer to $50 million?

[Bruno Guilmette, executive]

Yes, that's a pretty good estimate, Nelson.

[Patrick Decostre, executive]

And just -- and another point, Nelson, is there is a part of -- as soon as we obtain a contract and -- or some other condition on top of the contract in France, we can capitalize some development costs. So we are also hiring people, but paying them on specific projects, which are secured instead of paying them on project with a little bit higher risk of development. So this is also something I see more development people in the offices, some are capitalized and some are not.

[Operator]

We are now going to proceed with our next question. And the questions come from the line of Mark Jarvi from CIBC.

[Mark Jarvi, analyst]

I wanted to come back to the question Rupert started with around realized pricing in France expectations. Can you just remind us again how many megawatts would be on those hedges that you put in place in 2022. And then I guess the other part would be you were going to be a vehicle merchant post commissioning for 18 months on some assets. But given where spot price is, should we assume that you've now all locked in all your PPAs on recently commissioned assets.

[Patrick Decostre, executive]

Yes. The first point is -- Mark, the first point is, if I'm correct, 326 megawatts were early terminated in 2022. And we have signed exactly at the same time, contract to secure Q4 2022 up to 2026 with the price -- the forward price of this moment. And it's not -- like I mentioned many times, it's no guarantee of volume. So it's not at its new PPA, new utility PPA that we signed with another European -- utility, sorry.

The second point is, in 2023 and 2024, we have these 18 months of new projects, which are the project with a future contract. And indeed, what was impossible last year in Q1 because the law was like 30th or 31st of December 2022, and we have not been able to hedge the price at that time. This year, since it was based on the law of 2022, we have been able during 2023 to hedge a part of the price of the 18 months before the price of the market coming down. So the 18 months contract will contribute a lot in 2024 and see somewhere better compared to actual price than in 2023. So I tried to answer your question to give you the exact price going forward, but it has been well managed by the team there.

[Mark Jarvi, analyst]

Got it. No, that's helpful to put those pieces together for us. And then maybe how do you think about the tax credit in Canada on sanctioned projects versus pending or recently completed bids like the projects in security in Quebec, is there a giveback if the ITC is awarded in Canada to Hydro-Quebec? Are there certain projects where you keep all the upside? Just maybe walk us through sort of which products can get the bigger benefit. And which ones sort of have shared economics with the offtake partner?

[Patrick Decostre, executive]

Yes. The first point is Apuiat, [indiscernible] project in Ontario, we didn't take into account the existence of the ITC at bid time and that when we signed the contract. And we have no claw back or give back clause in the contract. In Tilbury, the smaller project in Ontario, we decided at that time to be a little bit more aggressive saying we gave back at that time already the ITC to the Ontario ISO, the good news is that we expect the ITC will come. I met with Chrystia Freeland some days ago, and she confirmed that it will come in the first half of the year.

And the second point is lithium has gone down. And the cost of the balance of plant also has been really well managed by the team, and I have newer budget with an interesting return, the double-digit return on this project and some room of budget contingency, so derisked project even for Tilbury. For the last tender, we have taken into account the ITC and optimized our price taking that into account and taking into account the specific Quebec rule to, say, transfer back to Hydro-Quebec a significant part of the ITC 75%.

[Mark Jarvi, analyst]

75%. Okay. And the last question for me -- yes. As you look at the U.S. projects, I guess, particularly in New York, updated views on how you think about tax equity, we've seen some transfer deals done to monetize tax credits annually. I know you have the option now maybe on some of those projects picking PTC versus ITC sort of just updated views in terms of how you want to optimize the usage of tax equity in the U.S. going forward?

[Bruno Guilmette, executive]

Yes, Mark, it's Bruno. We certainly have not spent much time in changing our view. So I mean, today, we still have a view. It helps us because it makes it more liquid. It certainly helps the market in general, but we have not looked into the specifics recently of this.

[Operator]

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

[Benjamin Pham, analyst]

I was wondering your thoughts on the CapEx, maybe not the CapEx, but the equipment cost trends, what is the next 3 or 5 years, do you think that the projects you're bidding in today, there's a potential for equipment cost to potentially move lower over time by the time we have secured the equipment?

[Patrick Decostre, executive]

Yes. It's a good question, Ben. We are -- what we are doing essentially is -- we moved from a period where everything was going down to going up very quickly, and we have been able, during the last almost 2 years, if you look to the French market typically or somewhere, this is more confidential information. But if I look to the price we signed in Quebec, for bilateral contract and the price of -- the average price of the new tender and the price that we bid in the tender to transfer to the offtaker a lot of the increase of the cost. So I'm comfortable that we are covered on this. And definitely, we have put higher contingency in our budget while bidding.

What we are doing, in Ontario, that's exactly what we did. We bid in February, we were awarded in May, and we have frozen the price of the battery in December or even November with Tesla. So we secured this, we will do the same on others. What I think is equipment, that's my crystal ball. Equipment will go down, but I'm not convinced that in North America balance of plant will go down, because this is more due to the lack of resource in this business. And that's why we are putting so much emphases on engineering and working on optimizing the project a lot with the team. And this is a part when I was seeing a part of the team of development team has increased and is capitalized is typically these people.

We put lots of emphasis, and we are also working with a specific contract with balance of plant companies to be incentivized both to reduce the cost of balance of plants. So we are sharing this is what we call something like common engineering or sharing the cost of this. So we can reduce and derisk the project on this part of the cost. So that's my view.

I don't know, Bruno, do you have something to add?

[Bruno Guilmette, executive]

Just a bit more on -- I mean, it's important to shorten the period between the time that we bid on the contract and the signing of the suppliers' contracts, as Patrick mentioned, but also the financing, so we're trying to keep that period as short as possible and to reduce the risk of variations between what we modeled in our bid and what we finally realize on. I think we've been successful so far in doing that, which has avoided significant losses on past deals. And we think we have the teams to continue to be successful on that.

[Benjamin Pham, analyst]

Okay. That's good color. And then -- this my second last question is, I know you mentioned you can self-fund your secured growth and whatnot has been the message for some time. Are you able to maybe frame it as how much net megawatts you can self-fund a year? Or how much free cash flow, I guess, we can calculate that ourselves, how much free cash flow you kick out and you can lever up, maybe just to frame a little bit of a different way.

[Bruno Guilmette, executive]

Yes. I think what -- I mean, what we prefer to say at this time is we're well financed this year. We can -- in terms of equity, or different financing tools, project debt. The market is very receptive. We've very good relationships with our lenders. They are -- we have different, we are able to select different forms of different -- the best offer on financing. So project debt side, as I mentioned, the ITC in Canada, we expect to be coming. Partnerships is something that we'll consider -- we'll continue to include and consider more in the future, the recycling of capital is something that we'll continue to work on, and we see in the next -- while we see certainly opportunities in our portfolio to arbitrage value once we've created value to sell down a portion and sometimes even more of some assets.

So with all these tools that we have available on financing, we -- and plus the AFFO that we keep, as you've seen, we put a range of reinvestment ratio of 50% to 70% and we're in that range, and we've been able to maintain that, which means we're producing say, call it, this quarter, 62% of our AFFO is reinvested in the business. So with all these financing available, we're increasingly able to self-finance our growth. But at the moment, equity is still a need in the portfolio and I guess, a solid balance sheet. So at some point, we'll also need to have some equity.

[Operator]

We are now going to proceed with our next question. And the questions come from the line of John Mould from TD Securities.

[John Mould, analyst]

Maybe just going back to your projects, bidding to the NYSERDA RFP, you said earlier they were well spread. Over time, are you able to give us a little more of a sense just in terms of how those CODs are spread out and when they start just to give us a flavor of what your midterm capital needs could look like from those projects, if you are successful in the both of them in the RFP?

[Patrick Decostre, executive]

Thank you, John. Essentially, if we are awarded the contracts since they are well developed and advanced in terms of development, we will be able to start construction quite quickly. So I think if you say -- I'm not convinced 2025 is reachable, but I'm sure that 2025 to 2026 is reachable for this 240 megawatt. And that's where we are. And as Bruno just mentioned, it will be our interest also to go quickly because it's the best way to secure the bid return quickly. And so we have -- our construction team and engineering team is already working hard on this project to be ready as soon as the 22nd of April to, say, go ahead or at least go to the Board in May and accelerating afterwards.

[John Mould, analyst]

Okay. And just to be clear, that's -- that would be like a 2026 COD nonstore construction. Is that correct?

[Patrick Decostre, executive]

Yes, yes, yes, yes.

[John Mould, analyst]

Okay. Great. And then just going back to the project financing for the Ontario storage projects you've got contracted, Bruno, I'm just wondering what share of capital costs for those projects could be debt financed, just given that they do have a merchant component to the revenue model versus the typical fixed price contracts that you would have seen in most of your other project financing in Canada?

[Bruno Guilmette, executive]

It's a good point. We'll -- what we expect and what we certainly are working towards is that a good portion will be -- of the contracted piece will be -- will have a significant or support a significant portion of project debt. And equity and ITC will certainly help fund the more merchant part, so -- but on the contract part, there will be a significant amount of project debt.

On the contracted part, I think we indicated in the past that the contracted part is about 70% overall, which will be quite highly levered.

[Operator]

We have no further questions at this time. I will now hand back to you for closing remarks.

[Stéphane Milot, executive]

All right. So thanks a lot, everyone. And if you have additional questions, don't hesitate, you can give me a call. I'll make sure you -- to quickly answer your questions. So our next conference call to announce first quarter results will be on May 15 at 9:00 a.m. So it's going to be also the same day as our Annual General Meeting of Investors. So looking forward to see you there. Have a good day and a great weekend. Thank you.

[Patrick Decostre, executive]

Thank you.

[Bruno Guilmette, executive]

Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you, and have a good day.