Transcript of
Polaris Renewable Energy, Inc.
Polaris Renewable Energy, Inc. First Quarter 2024 Conference Call
May 02, 2024
Participants
Anton Jelic - Chief Financial Officer, Polaris Renewable Energy, Inc.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Analysts
Nicholas Boychuk - Cormark Securities
David Quezada - Raymond James
Rupert Merer - National Bank Financial
Ahmad Shaath - Beacon Securities
Presentation
Operator
Greetings. Welcome to the Polaris Renewable Energy Incorporated First Quarter 2024
Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer
session will follow the formal presentation. [Operator Instructions] Please note this conference is
being recorded. I will now turn the conference over to your host, Anton Jelic. You may begin.
Anton Jelic - Chief Financial Officer, Polaris Renewable Energy, Inc.
Thanks Mike. Good morning, everyone, and welcome to the 2024 Q1 quarterly earnings call for
Polaris Renewable Energy. In addition to our press releases issued earlier today, you can find our
financial statements and MD&A on both SEDAR+ and our corporate website at PolarisREI.com.
Unless noted otherwise, all amounts referred to are denominated in U.S. dollars. As well, I'd like
to remind you that comments made during this call may include forward-looking statements
within the meaning of applicable Canadian Securities Legislation regarding the future
performance of Polaris Renewable Energy and its subsidiaries.
These statements are current expectations and as such, are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from current expectations. These
risks and uncertainties include the factors discussed in the company's Annual Information Form
for the year ended December 31, 2023. As always, I'm joined this morning by Marc Murnaghan,
CEO of Polaris. At this time, I'll walk everyone through our financial highlights. Power
Generation; during the three months ended March 31, 2024, power production was 213,434
megawatt hours compared to 217,613 megawatt hours and the three months ended last year. For
Nicaragua in the first quarter of 2024, production was 117,972 megawatt hours lower compared
to the same period last year at 125,930 megawatt hours.
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Moving on to consolidated production in Peru for the three months ended March 31 was also
slightly lower at 64,578 megawatt hours than the comparative period last year, which totaled
66,334 megawatt hours. At our Dominican Republic Canoa 1 Solar facility, we produced 14,530
megawatt hours in the three months ended March 31. This is lower than the first quarter of 2023
due to lower irradiance. For Ecuador in the first quarter of 2024, average production of 10,223
megawatt hours was similar to production in the comparative period last year.
And then finally, in Panama, Vista Hermosa Solar Park production of 6,130 megawatt hours was
greater than management expectations with no comparative to 2023, given the facility went COD
in Q2 2023. Revenue; revenue was $20.6 million during the three months ended March 31
compared to $20.1 million in the same period last year. Net earnings; net earnings attributable to
owners was $4.3 million for the quarter compared to $4.7 million for the same period last year.
Adjusted EBITDA; adjusted EBITDA increased to $15.7 million for the three months ended
March 31 compared to $15.3 million for the same period in 2023. Cash generation; net cash from
operating activities for the three months ended March 31 of $8.7 million, lower than the $10.1
million for the same period last year, mainly due to lower cash for [indiscernible] Peru as
expected due to recognition of unearned revenue. Net cash used in investing activities for the
three months ended March 31 was $1.3 million compared to $3 million in the same period of
2023.
While the cash usage in the current quarter relates to the Canoa 1 optimization project, cash
usage in investing activities in the same period last year for disbursements were linked to
construction of the binary unit in Nicaragua and the Vista Hermosa Solar Park in Panama. Net
cash used in financing activities for the three months ended March 31 of $6.5 million is in line
with net cash used in finance activities reported last year. Dividend; finally, I'd like to highlight
that we have already announced, we'll be paying a quarterly dividend on May 24 of $0.15 per
share to shareholders of record on May 13.
With that, I'll turn the call over to Marc who'll elaborate on our quarterly results as well as on our
current business matters. Thank you.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Thanks, Anton. Yes, so for the quarter, on a consolidated basis, production and revenues were in
line with our budget -- and costs came in slightly below budget. The big one being in Nicaragua,
just to give some numbers on a monthly basis. So we were 51.6 average megawatts in January,
and then we were up to 54.6 in Feb and March was 55.7. So a noted improvement from Jan to
Feb and March based on, call it, changing the injection strategy and scheme from what we had
going into November and December last year. So we did get the expected improvements.
And I would say that the levels in February-March are levels that we would expect to see for the
remainder of the year. Although it is worth mentioning that as expected or planned in April, we
did the major maintenance on one of our turbines, which was fine. It was executed on time and
there were no issues whatsoever with the turbines, which is great. But that does represent a
downtime of about 15, 16 days in April as expected, so that does have an impact on the current
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quarter. Peru was essentially in line on a total production basis despite the outage at Canchayllo,
which will be back online later this week.
And DR was a little bit lower, but Panama was a bit higher. So I would say the kind of solar was
-- on a combined basis was in line with the budget. And Panama in terms of revenues was a bit
higher just because spot prices were again higher than expected, and we would -- we do think
that those higher prices are likely to continue in Q2 and Q3, but come back down to a more
longer-term number in Q4 of this year. In terms of the growth projects, the Canoa, the
optimization is going according to schedule. Most of the CapEx has been spent with the bulk of
it actually having been spent in Q4 last year.
It was about 1% to 1.5% was done in Q1 of this year, not much left to go on that, and that is
going according to schedule. We would expect that to be done by July. In terms of the larger
expansion with the solar plus batteries, we did receive approval to amend the environmental
permit in the quarter, Q1. So that's great. And then about four weeks ago after we had that in
hand, we submitted the approval or submitted for approval to amend the concession to include
batteries which we don't expect any issues with that given that the regulator is pushing for
storage on the island.
And once we have that, we are ready to go with adding with -- adding panels and storage, such
that we can just provide more energy under the current Canoa 1 contract. I think it's worth
mentioning that the cap costs that we are seeing at this point in time continue to look very good -
- panels, on the solar panel side, they continue to be excellent and at least initial quotations on
the battery side look very good. So we're happy with where that sits. We just need to call it --
place the orders. So we were thinking about two to three months to get the approval on the
concession and then after that, we can get moving on the project.
I did mention last time that we had signed an LOI on an acquisition. That's a big part of the
strategy. We are in an exclusivity period as we speak, and it's moving very quickly. We hope to
have something on that in the very short term in terms of announcing that and explaining what
we're doing. I would say it very much ties into the strategy of shifting the focus from just straight
renewable projects to renewables plus storage. That's a big focus and the acquisition very much
is in line with that focus going forward.
And so I really think that it will tie things together in terms of the strategy, but also the capital
allocation plan. And that plan in terms of capital usage will become much more evident in the
short, medium and even longer term. So we are -- given what we're doing at Canoa, but also this
acquisition, I think we're putting the strategic pieces together to shift the focus and really
increase, I would say, the opportunity set for us as a company. And financially, we are well-
positioned to go after this, given our cash position and reasonably low leverage at this time. I
have discussed the possibility to change that in terms of some parent co-financing or green bond
financing.
The plan at this point would be to look to do something in September, October timeframe as the
repayment for the San Jacinto loan is really Jan of '25. So we would look to do something, call it,
end of Q3 or early Q4 this year, where a use of proceeds would be to repay that loan as well as
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likely providing capital for the growth projects, including the Dominican with a particular focus
on the Dominican.
So with that, if we can execute that even in the very short-term, there's significant torque and
leverage to our cash flow per share because we don't need to raise any equity to do this, and it
really has a big impact on the -- both the operating cash flow and the free cash flow per share
that we can generate, which will give us leverage to do more things, which would be increased
growth and/or potentially increase dividends and/or potentially increase share buybacks, which
we did do some last year. So I think if we can execute on that, we will have many more arrows in
our quiver to do all the things we want to do, and that should take place in the back half of this
year.
So with that, I will open it up for questions.
Operator
At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our
first questioner is Nicholas Boychuk from Cormark Securities.
Q: Thanks. Good morning, Marc. First thing on the cost profile. I think it's kind of an interesting
dynamic that you're still seeing less inflation than your North American peers. Can you kind of
walk through that dynamic? Why is it you're seeing that? And how should we be thinking about
it moving forward if it is going to persist?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. So I would say if we split it up into two components, one is operating, I'll deal with that first
and the second cap costs. So on the operating side, I think there's always some efficiencies that
we're able to generate in terms of generating more megawatt hours without call it, adding staff. I
think we're also able to do more projects with the current staff we have. So that's one dynamic.
But I would also just say that I think from an overall labor inflation, we just haven't seen that
pressure in the markets we're in or nearly the same amount of pressure on that side of things that
people are seeing in North America. So I think that's very good for us, obviously. And then on
the cap cost side, it's worth bringing that into the conversation as well because we're focused, at
least in the short term here on the solar side as well as storage. And even though those are not
being manufactured sort of where we are, you're just seeing that the -- call it the increased
volumes globally are having a really big deflationary impact on the capital cost.
So we are seeing that as well, which I think is really important so that the projects in DR that
we're looking at, everything is coming in below what we had estimated on the capital -- on the
equipment side of things. And then I would say that it's a much smaller component, but the labor
side of those projects is, call it, coming -- is in line with what our expectations are.
Q: Okay, got it. That makes sense. Thanks. Switching to growth here. Obviously, it's good to
hear with these acquisitions. But in the investor deck, we've also now got a new project with a
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connection 10-megawatt solar expansion opportunity in Nicaragua, $6 million cost, $1.2 million
EBITDA pickup. That seems highly attractive on a [indiscernible] basis. Can you kind of walk
us through what that opportunity is, how it's going to get operational by Q2 '25 and kind of talk
us through that?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes, so that's -- that one specifically is we're repurposing some panels that we're going to have
post the program in the Dominican. I can tell you even that cap cost number is highly
conservative given that. So we're really -- the CapEx for that project is just -- is some inverters
and racking really. And so the issues in Nicaragua, we have a recent amount of parasitic load. So
we can do a behind-the-fence project there.
And essentially, anything it generates is you're saving the parasitic energy, which is the same as
generally more, quite frankly. That's a $111 a megawatt hour price, which is a very good price.
So that's the idea. And it's not really a greenfield project because we have the site, we have the
land, we have the interconnect. So that just seems like a sort of an obvious home for the panels,
and it should be even better than those economics that we're presenting.
Q: Okay, that's great. I will get back in queue.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Thanks, Nick.
Operator
We now hear from David Quezada with Raymond James.
Q: Thanks. good morning. Maybe a first question just on the environment, Marc, you were
discussing in terms of solar panels and just how attractive the costs are for them today. Is there
any opportunity for you to maybe capitalize on that situation more broadly, like pre-buying
panels for future projects? I'm just curious if you think that that low cost of panels is something
that's going to stick around for a while or is it sort of a temporary situation brought on by global
oversupply?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes, I don't think we have the balance sheet to really do that, David to, in a way, speculate on it.
And I would say that, that thought definitely occurred to me 18 months ago, two years ago, 12
months ago, six months ago. And if we hadn't done it then, we would have been wrong, at least
up until now. So I guess my view also is that yes, you're going to have these short term -- I think
we are living a bit of a short term benefit from our perspective given the tariffs in the U.S.
But I also think when you just look at the total gigawatts installed globally every year that
number is going up and up and up. And so I think in the longer term, it's -- that volume is going
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to drive things. So I just think we're better to ride that curve practically as well as the practicality
of we have an acquisition that's a great use of proceeds, probably better we do that than speculate
-- as tempting though, I take your point, it is tempting to do that. But I don't think we would.
Q: Great. No, that's fair enough. I appreciate those comments. And then maybe just a question
more broadly and certainly appreciate the comments around the upcoming M&A. That sounds
exciting. But I'm just curious, like is it a fair way to characterize it that when you think about
building versus buying assets that you've got your attractive PPAs in the Dominican and so it
makes sense for you to build new projects there. But outside of that, maybe it is such a buyer's
market for operational assets or things that are closer to operational that you might just opt for
that, just given the multiples you're seeing there? Is that -- would you agree with that?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. What I would say -- the not yet operational, call it, shovel ready or close to shovel ready,
we probably are seeing more opportunities there than ever. And in terms of return opportunities,
it's probably the best just because most, call it, bigger companies or infrastructure funds are
chewing on their own pipelines. And in this sort of rate environment, nobody is really -- they're
more trying to decide what of their portfolio they're going to go with as opposed to really
expanding it other than maybe Brookfield. Most people are not getting around all of their own.
And so we are seeing a lot of, I would call it, late-stage development projects that are on the
market right now, and I don't think there really is a home for these things.
So we are seeing, I'd say, almost a bigger increase in that than we are in, call it, operating
projects. And I think the multiples on operating projects has come down, but not as much, just
given that a lot of good projects, if they have a long-term PPA and they're appropriately, call it,
levered, but not too much. The multiples have come down, but they're not in a forced sale
position, whereas they call it the late stage development, a lot of those are forced, are being
forced. So I think for us, the opportunity set that we have on that front, though is very big, it is, I
would say, share price dependent.
So as we -- at the current share price, we have some opportunities that actually work for
operating assets, believe it or not, that are accretive. But it's not huge at this share price, which is
why we're going to try to execute the plan we have, call it, with our own equity. However, if we
get a bit of traction on the share price, the opportunity set really starts to grow exponentially, call
it with every dollar in the share price. So at 15, 16, 17 [ph], there's a lot of operational assets out
there now that weren't out there a year ago. So that can work at those prices for us. So when
we're always looking at those, we have a huge funnel. It becomes -- it's a good project and can
we do it at a price that works for us?
Q: Okay. Awesome. Thanks. Appreciate those comments. And then maybe just one last one for
me, if I could. Once you get the concession for the batteries at Canoa, what would you say is the
remaining uncertainty just related to that project? Like what would you call out maybe some key
milestones beyond that, whether it'd be final approvals or construction milestones or anything?
And just where you see the sort of like buckets for uncertainty once it is implied?
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Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes, that's the -- that really the next one is the big one. And then after that, it would be, okay,
what's the lead time? It's really then you're putting down payments on the panels and the
batteries. And what's your -- who are you choosing? What's your lead time? But based on what
we're seeing at least at this point in time, lead times are totally reasonable on both of those. So
call it, six months type of thing potentially. So if that -- if the lead time dynamic change
significantly, to me, that would be -- I don't see that happening. But I guess that would be the --
that would technically be a risk out there.
Q: Perfect. Thanks gentlemen.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Okay. Thanks, David.
Operator
We now hear from Rupert Merer with National Bank.
Q: Hi, good morning.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Hi, Rupert.
Q: Just following up on David's question on the M&A. If you look at the deal that you're
contemplating today, would you characterize that as an acquisition of operating assets or is it
operating assets plus development pipeline?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
So it's operating assets. And it has -- I would say, it has growth opportunities on the site that are -
- that do need some development work, but we think that there's growth on the site for sure. But
it's -- that would be growing and already operating asset.
Q: And does it give you access to a new region one where you don't have capabilities today?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes, yes. Sorry, it is a new -- it would be a new jurisdiction. I would say that we're not per se,
looking for specific new jurisdictions, but we quite like this one. I think we can handle for sure,
one more. With this profile, we can handle it. It's not a huge, I would say, integration issue. And
more importantly, I think it's a market -- let's just say that the dynamic that exists in the
Dominican, which is a high fossil fuel based market that has a high marginal cost of power and
hence it's a market where solar plus storage, we think, works.
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I would say that dynamic is replicated in this other market, which makes it strategically very
attractive to us. So what we're trying to do in the Dominican in addition, call it to, what we're
doing at Canoa is we are seeing these other late-stage development projects that we think we can
potentially strike a deal, add them into our own sort of pipeline. But in a way that mirrors what
we're doing at Canoa. I would say that this acquisition hopefully is a mirror image of what I've
described that we're doing. So could be sort of foundational for -- in addition with Dominican is
sort of the basis of where we're going to grow at least in the short, medium term here.
Q: Okay, great. And with your financing plan, it sounds like you have enough capacity on your
cash on the balance sheet and your potential for adding leverage. You have enough capacity to
manage this M&A and your organic growth. Does it leave any room for future M&A at that
point or is that where you think that your -- maybe your future M&A will be dependent on
market conditions.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. I think that's a fair way of putting it. I think we could get an acquisition then we can -- we
can do what we're doing in the DR, all of it realistically with some form of debt or refi. We
would have room to do more, probably some more of our own development, Rupert, but to do
some of the larger, call it, operational asset acquisitions. Realistically, that would have to come
with some equity.
Q: Okay, great. And then going back to San Jacinto, I think I may have missed one of the
comments you had there. Was it -- you had one of the units down for the first couple of weeks of
-- was that just regular maintenance? And can you talk to us about the strategy going forward
with San Jacinto? What's the plan this year? Where do you go from the 55 in March? And what's
your next well enhancement program?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
So we have two turbines. The plan right now is we do -- it's a two to three week maintenance on
one turbine every 18 months, okay? So I think the best way to model it is sort of -- it's an 18-day
with the budget. I think we did it in 16, 15 or 16. Everything was fine. And then so the next one
will be around October of next year, okay? And then it would be 18 months. So the -- there
would be a year's period -- calendar year where we don't do it.
And everything that we've seen is the turbines have been totally fine. So maybe we could go
there every two years. But let's just assume it's every 18 months for the next little while. I don't --
given the investments -- we actually think by doing what we've been doing recently in terms of
changing the injection scheme could yield some improvements in the overall output. That will
really be the focus this year to see if we can do that.
There's for sure no guarantees on that, but that's really a -- call it, no CapEx plan to see if we can
improve the empathy in the field and improve the output. And given that we did the binary unit
in 2022, which was a reasonable CapEx amount, I really think for the next three to five years,
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we're not going to be doing a significant well program. And it's really the -- let's harvest the cash
flows and invest them elsewhere in the next three to five years, potentially year four, five from
now, you could look at doing something, but I really think it's that far out.
Q: Great, thank you. I'll get back into queue.
Operator
Our next questioner is Ahmad Shaath with Beacon Securities.
Q: Hi, good morning guys. Congrats on a solid quarter. I guess most of my questions are
answered, but any more color on the cost profile, given the strong performance in Q1 or any one-
offs in Q1 that we should not really extrapolate into the remainder of the year next year?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. I think a good question. I should have mentioned that. So we will have some -- it's not
going to be flat from here on out for the rest of the year. But I think Q2 will be even potentially a
little bit lower; Q3, Q4 a bit higher. But the average for the year, I'd say Q1 is representative. So
it's not as if there was one or two one-time items in Q1 and then we're going to bump back up
and be even higher. So a little bit less Q2, a little bit higher in Q3 and Q4. But for the year, it's a
reasonable number to call it annualize that, plus or minus a couple of percent.
Q: That's great. And I'm not sure if I missed it. You guys mentioned it, what type of assets are
we looking at the imminent M&A opportunity? Are you at liberty to disclose that?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
No. It's in a renewable sector, that's all I can say.
Q: Fair enough, fair enough. Thanks for my questions. Congrats on a solid quarter.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Okay, thanks.
Operator
We now hear from Patrick O'Donnell [ph].
Q: Hello, good morning guys. I'm a retail private investor. I've been following the story for a few
years. Just had two questions. In terms of broader shareholder appeal of Polaris, I think there's
some strong concern about the political corruption credit risk and just say, Nicaragua, for
example, biggest asset. I guess what can you say about these risks and how you've gotten
comfortable with them?
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Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. So in terms of the credit, I would say, this project in its current form really started in 2013,
but in a much smaller scale, was producing five megawatts to 10 megawatts since 2007, 2008.
And so more than a 15-year operating history and has received north of, call it, $750 million in
payments without fail. So I would say that the credit history, which is now is reasonable, we're
not talking two, three or five years. We're north of a decade here, has been very good. So I guess
what we tend to do is point to that.
And the thesis has been borne out, which is that this is a key service. So in these developing
countries, the electricity sector is actually on a relative basis is at the top and it's more important
than it would be in North America. So the governments need this -- the electricity sector to the
function, and I would say that has been borne out in the track record, and it's not just in
Nicaragua that I just mentioned, but it's in all of these markets. The payment history is very good
and because I think it's the power sector. So I would really just point to that, that you can have
political noise, but the electricity sector is very quiet, and it really pays the bills.
Q: Got you. And one clarification on that is in terms of a risk of a government repossessing the
asset or just kind of reneging on the agreements that you have in place? I mean what could you
say about that type of risk or are they just not well-positioned to operate a plant like in
Nicaragua?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. I'd say it's more that separated because in terms of the two that you mentioned, the first one
we are possessing I'd say we really don't think that is -- you haven't seen that in this sector. One,
they would scare up all future investment forever in a sector that they really need, but it also
doesn't really generate much for them. And these plants, unlike let's say, a mine or in oil and gas.
This is just a product that's consumed locally. It's not a "natural resource" or national resource
that is then exported.
So there's no sort of political even benefit. It's pure political cost, and it doesn't generate U.S.
hard currency like those other asset classes do. So they don't really look at these like a renewable
asset in the same way. Where I'd say the second risk that you mentioned is typically -- that's
where we would see the risk -- it's more, okay, you've got a great contract, but they just want to
come and pay you a lesser price. So your risk then how do you mitigate that is you need to look
at where your contract price is relative to their alternative sources of power. And we are in
markets.
So Nicaragua to give you an example, we're at $111 a megawatt hour. They still have about 50%
of their grid is fossil fuel-driven and they don't have nat-gas yet, so they have a lot of oil and
diesel power generation and that comes at about $150 to $180. So a big premium to where we're
at. So we're providing them with -- I think we're in the second quartile, most likely in terms of
the cost curve. So we're providing them with baseload power that's cheaper than their
alternatives.
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So we're not, in our minds, a target. It's the same thing in the Dominican. We're below -- we're
well below their alternatives. And I would say in Peru and Ecuador we're right in the middle with
our high growth of their average cost, but we're so small that no government is going to take a
look. We don't think, at our eight-megawatt and 20-megawatt projects and say, let's rewrite those
contracts. So I think we're really well-positioned relative to that given our contract prices on
average are below their marginal cost of energy.
Anton Jelic - Chief Financial Officer, Polaris Renewable Energy, Inc.
And Patrick, just to add, our social programs are very good, and they're important to the local
communities. And I think the government has also recognized that.
Q: Okay, terrific. Yes, that's great context and feedback on that. A second question was at
current share price and the growth plan that you guys are executing on. Anything you can say
about why more insiders might not be taking an advantage of the growth opportunity. I know
there's been some insider buying. But any thoughts you can share on that? I mean, you're not a
mind reader, but just looking at that from kind of a broader shareholder perspective.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes, I mean I bought stock recently. I might buy more. I mean just -- we also go in long blackout
period, I would say. So that's -- we're now finally coming out of one. But then when you have
acquisitions, it actually is quite harder too because the blackout period gets extended. So when
it's hard, but I would say there has been insider buying. And from -- I would say I really can only
speak to myself, firstly, I have quite a large position. I've invested a lot of capital, and I actually
have been doing more. So that's probably all I can say on that.
Q: Okay, all right. Thank you.
Operator
[Operator Instructions]. We hear once more from Rupert Merer.
Q: Hi, just a follow-up on power prices. I see Peru -- sorry, it was Panama, $126 a megawatt
hour. You're still spot there, I believe. Do you see any opportunities for locking in contracts at a
higher price today given the dynamic of that market or what's the outlook for contracting in the
future?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Well, so they are -- they have announced, call it, Q3, Q4, they'll be doing a 500 megawatt tender
process for renewables only, which includes some existing as well as new plants. So we fully
intend on bidding into that, the $64,000 question is what do we think the clearing price is going
to be for that? It's not $126, I'd tell you that. We're hearing stuff in the 70% to 80% range. I mean
-- and when we originally, I would say, built the plant, we were targeting something with the 7%
on it in terms of the right number to get our return.
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And so we will bid something, we might bid maybe half the plant. So yes, I think there
absolutely is an opportunity, we will be bidding in later this year, and we'll see where we get to.
But the market is for sure, not going to -- at least on the contract market, the market is not going
to be as high as where the spot market is right now. We rightly do it, it would really be if we felt
that we wanted to basically take some equity out of that project and recycle it somewhere
because that's what a contract would enable it.
That's what it would enable us to do. But so it is also somewhat dependent on, for instance, if we
did more of a corporate level bond. I don't know if the need would be as strong as if we stayed
on the -- let's just keep doing project finance to grow the business, in which case we would be
more eager to get a contract, we could likely take $5 million to $7 million of equity, maybe even
more out of the project because we did equity fund that entirely.
Q: Right. Makes sense. Could you bid any growth projects into Panama?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes. Yes, in fact, we're -- we have a list of both developers and other operators in the country
that want to bid some other projects with us in that -- in the call. And it will come down to, yes at
certain prices we would love to do more there. So we will be. We're just trying to finalize exactly
what it is we will be bidding this quarter.
Q: Great. And then finally, Canchayllo. So you had a minor land slide there. Are there any costs
associated with that other than downtime? And is it covered by insurance?
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
Yes, it would be that the costs are below our deductible. So it's because the cost to repair, we
think are in the $60,000 to $75,000 range. We have $250,000 deductible so. And believe it or
not, the actual sort of business interruption insurance, it's a two-month deductible. But even then,
one of the reasons it's not that expensive, the way that the contracts work there, Rupert, is that
once you get to your committed energy amount, anything above and beyond that is you sell at the
spot market up until April 30, which is when their power year ends.
But April, generally because it's still reasonably the rainy season there, the spot market is low. So
that facility had already reached its committed energy early in March. And so everything passed,
everything from the end of March through the end of March to April would have been spot
market sales, and those were at above $30. So it's not a huge impact to us financially.
Q: Okay, excellent. Thanks for the color.
Marc Murnaghan - Chief Executive Officer, Polaris Renewable Energy, Inc.
The spot rates on average was over $70, but it's very related to the dry season and the rainy
season in that country.
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Q: Perfect. I'll leave it there. Thanks, Marc.