Brookfield Renewable Partners LP (BEP) 2011 Q3 法說會逐字稿

Hello, this is the Chorus Call Conference Operator. Welcome to the Brookfield Renewable Power Fund 2011 third-quarter results conference call and webcast. As a reminder, all participants are in listen-only mode as the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

At this time, I would like to turn the conference over to Richard Legault, Chief Executive Officer of Brookfield Renewable Power Fund. Please go ahead, Mr. Legault.

Thank you, operator. Good morning, everyone, and thank you for joining us early this morning for our third-quarter conference call. With me on the call is Sachin Shah, our Chief Financial Officer. And before we begin I would like to remind you that a copy of our news release supplemental information and letter to unit holders can be found on our website at www.brpffund.com.

Let me begin by saying we are very pleased with the positive market response to our announcement in September, proposing the combined -- to combine the assets of the Fund with those of Brookfield Renewable Power Inc. We believe that the combination of these two platforms will allow us to build on the Fund's excellent long-term track record of creating value for investors and we expect to be -- that the merged entity, Brookville Renewable Energy Partners -- will rank amongst the best renewable power businesses globally in terms of asset quality, geographic scale, diversification, and access to capital.

BRPI received the approval of its bondholders in October and subject to the approval of the Fund's preferred shareholders and unitholders, we look forward to completing the transaction in the fourth quarter and combining these two platforms into a leading pure play renewable power business.

Results in the third quarter have dramatically improved from the record-breaking dry conditions experienced in the third quarter of 2010. Total generation in the third quarter was 1,355 GW hours as compared to 881 GW hours in the same period last year. With the exception of Ontario, hydrological conditions for the portfolio have returned to more normal levels for the quarter and year to date.

As for Ontario, we have seen significant improvement year over year. Our reservoir levels are 5% above average for this time of year, and we expect the trend to continue.

During the third quarter, we continued to make significant progress on all of our capital projects which remain on scope, schedule and budget. The construction of Comber Wind is nearly complete. All 72 turbines have been installed and the substation has been connected to the transmission grid and energized. Construction of the collector system connecting the turbines to the main substation is nearing completion. Commissioning and testing of the individual turbines is in progress and the project has partially started delivering energy to the power grid. The project is expected to enter commercial operations in the very near term.

I wanted to take the opportunity to note that our Canadian operations team was recently recognized with the President's Bronze Award for Occupational Health and Safety by the Canadian Electrical Association in Ottawa. This recognition underscores our commitment to the promotion of health and safety in our operations and is reflective of the commitment by our employees across the entire organization.

I will now ask Sachin to present the financial and operating results for the quarter.

Thank you, Richard. Net operating cash flow in the third quarter was CAD36.4 million as compared to just CAD0.3 million in the third quarter of 2010. The difference as mentioned earlier is primarily due to significantly improved hydroelectric generation in Ontario and Quebec, relative to last year. In addition, the Fund incurred CAD8 million of expenses related to the announced merger which is included in that income.

The results also reflect a full quarter contribution from the Gosfield Wind farm which was commissioned in the latter part of Q3 last year.

In the first nine months of 2011, the fund has invested CAD12.2 million in sustaining CAPEX and CAD9 million in major maintenance. For the fourth quarter, capital and major maintenance are expected to be CAD14.6 million and CAD2.9 million, respectively, including expenditures for the Comber Wind project.

As Richard mentioned, the construction of Comber is essentially complete and commissioning is expected later this month. We drew CAD136 million on Comber's construction facility in the third quarter.

At quarter end, the fund had CAD185 million of total liquidity consisting of CAD39 million of cash and equivalents and CAD146 million of available committed credit in hydrology reserve facilities. Our liquidity position remains solid and will continue to support the Fund's near-term operating and investment objectives. We also continue to lock in interest rates on near-term financings to take advantage of the current low rate environment.

On a final note, just after quarter end, we refinanced the CAD13 million non-recourse project debt on our Carmichael Falls facility.

That concludes the financial and property discussion for today. Thank you for joining us this morning. Richard and I would be pleased to take your questions at this time. Operator?

(Operator Instructions). Juan Plessis of Canaccord Genuity.

Thank you very much. You mentioned that you expensed CAD8 million of transaction-related costs in the quarter. Are you expecting any more transaction expenses in Q4?

We do have a little bit more coming in, and I would say it's probably in and around just under CAD8 million. But we are still seeing costs come in for the transaction and we would expect to expense those as they come in the fourth quarter.

Thanks for that. I am just wondering if you could share with us what your expected annual maintenance CAPEX would be under the combined assets transaction.

If you look, we have disclosed that in our circular and we would -- our annualized CAPEX reserve that we put out in the circular and that we would expect to run the business is between CAD50 million and CAD60 million annually. It will ebb and flow, but it is in that range.

Great. Thanks very much.

Nelson Ng of RBC Capital Markets.

Good morning, everyone.

Just in terms of [uptight] CAPEX, I guess it seems like it has been kind of deferred through the year. What is the flexibility for it to get deferred further to next year?

Look, as you know we always have flexibility on maintenance CAPEX to a degree within the business and we think we have demonstrated that in the past with timing it sometimes with hydrology levels. That being said, this year it is largely a function of just the timing of projects and there is --. There are a number of small projects that just need to get completed in the fourth quarter but it didn't have anything to do materially with the operations. It was really just the programs that were put in place.

And then just one last question. I guess, assuming that the preferred shareholders approve the transaction later today, and unitholders approve the transaction next week, what are the key remaining hurdles?

Well, I think -- it's Richard. I don't believe there are major hurdles. I think there is obviously a lot of work to do to get the transaction closed. So we expect certainly by the end of November to early December that we -- our timeline is really to close the transaction within that time horizon.

So like I say, the hurdles that we are looking at right now are preferred share approvals and unitholders approvals. And therefore after that, it really is a question of just doing all of the documents and getting all of the requisite closing documents done.

Thanks. Those are all of my questions.

Michael McGowan of BMO Capital Markets.

Good morning. Wanted to ask a question on the generation. Was any of your power held back during the third quarter? I note that generation was built down a little bit from long-term averages, but your reservoir levels seem to be in pretty good shape.

I think in the third quarter, I think typically we look for -- for example, Ontario, I did make a comment on it. When you look at Ontario, we still haven't seen long-term average hydrology come back. So we tend to sort of again call it hedging our bet by stocking up the reservoirs a little bit more so we are 5% above long-term average. And if inflows start to trend more closely to long-term average, then we'll start to draw on that 5%. So the reservoirs allow us the flexibility to mitigate highs and lows, but really there has been no holding back throughout the system.

Other than in a few instances, sometimes inflows come in sort of very intense periods. For example in Quebec, so we may be at maximum levels throughout the system so we have to store the extra water and we have the room to do that.

So everyone that we have today managing hydrology and certainly managing that risk has every intent and certainly is focused on making sure we don't waste any water.

Great. And just a question on the Prince Wind farm. It looks like generation there was probably in the low 18% capacity factor range. Just wondering did you have any outages or unplanned maintenance at that wind farm or was it just low wind speeds?

It was just low wind speed for the quarter.

Okay. Great, those are my questions.

Matthew Akman of Scotia Capital.

Hello. Richard, I have a question on your views and outlook on the Ontario market especially for wind. You guys don't have maybe as big a backlog of development projects for Wind or Energy FIT project as some other companies in Ontario. And now the government is talking about, I think, maybe adjusting fit prices probably in the direction lower.

I'm just wondering in light of that, what you see by way of opportunity and focus there versus, say, US or international?

Okay, let me just comment on Ontario. I think as you know, completing Comber, all of our projects that were in the queue and ready to actually get built, most of our pipeline has been built with Comber being completed this year. So what is left is clearly some very good sites, but sites that require either debottlenecking the transmission system or other investments for us to actually move forward with them.

So they will be built. The question is when. And right now, that would not be the near term.

In wind in Canada, we are much more focused in British Columbia where we have projects that are clearly more advanced and more ready to actually access transmission grids and ultimately are waiting for contracts which we are working on. So I view the Ontario FIT program right now as whether or not the government lowers the FIT price.

It would not have an immediate impact on us, particularly on -- based on what I just told you. Whether they lower it to control the number of -- the quantity of wind that actually gets built in the near to medium term will be more a policy decision on their part. But clearly they can set the price at a point where no projects get built or a price at where some projects get built. We will have to sort of see where they peg that price.

We have been -- you asked about other jurisdictions in the US and other locations. We have been very cautious about wind in other jurisdictions particularly, I think, as you know we are building our first two projects in Brookfield Renewable Power Inc. We are in the US, one is in California, the other one is in New Hampshire. We feel that we have got very good economics on those two projects, simply because I think today is a better environment to build wind because there's more scarcity of capital and there's more scarcity of development opportunities that we actually think are just, again -- I should say it differently, there's not as many people chasing the opportunities that exists.

So we have done better I think by waiting for wind in the US and programs in the US will actually get renewed or not. But I continue to believe that wind and renewables will be part of the landscape in the US. The form of incentive may change, but it will be part of that landscape.

So hopefully I have answered your question fully.

Yes, no, thanks for that. So basically, the potential merger provides you with a bigger platform of projects that have more attractive returns in your view than you might get in Ontario it sounds like.

Clear -- that is the case in our view.

Okay, thanks very much for those answers.

There are no more questions at this time. I will now turn the call back over to Richard Legault for concluding comments.

Well, again, thank you for joining us early this morning and, clearly, we look forward to seeing you at the meetings both today and on the 18th. Thank you very much.

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