Good day. Thank you for standing by, and welcome to the Polaris Infrastructure, Inc First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, press star zero. I would now like to hand the call over to your host, Anton Jelic. Please go ahead. Thanks, Valeta. Good morning, everyone, and welcome to the 2021 first quarter earnings call for Polaris Infrastructure Inc. In addition to the press releases issued earlier today, you can find our financial statements and MD&A on both SEDAR and shortly on our website. Unless noted otherwise, all amounts referred to are denominated in U.S. dollars. I'd like to remind you, as always, that comments made during the call may include forward-looking statements within the meaning of applicable Canadian securities legislation regarding the future performance of Polaris. 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 31st of 2020. I'm joined this morning by Marc Murnaghan, Chief Executive Officer. Now, I enter the quarterly highlights. Power generation. Consolidated power generation for the three months ending March 31st, 2021 and 2020 were 180,984 MWh and 183,332 MWh respectively. These production figures are net of all plant downtime, both planned and unplanned. With respect to Nicaragua, we saw total of 119,854 MWh in the first quarter of 2021 versus 135,344 MWh a year ago. In Peru, total megawatt hours for three months ending March 31st, 2021 were 61,130 MWh versus 47,988 MWh in the same three months last year. Revenue. The company generated $15.7 million in revenue from energy sales for the three months ending March 31st, lower compared to the same period in 2020. This quarter was the first full quarter under the amended power purchase agreement price in respect of San Jacinto in Nicaragua, which was the largest contributor to our decline in revenue. The lower PPA price was part of the broader negotiation with the government, which included an extension of the concession period and inclusion of a binary unit. Lower production at San Jacinto was offset by higher production from our hydroelectric facilities in Peru. Net earnings. The net loss attributable to owners was $0.9 million for the three months ending March 31st, compared to $4.4 million in earnings for the same period in 2020. The decrease was attributed mainly to lower revenue and higher general and administrative costs and other non-cash losses resulting from the mark-to-market accounting adjustment on certain liabilities from our 21% share price increase during the three months ending March 31st. Adjusted EBITDA. Adjusted EBITDA was $11.9 million for the period ending March 31st compared to $17 million for the same period in 2020. Cash generation. Net cash from operating activities for the three months ending March 31st of $17.1 million increased by $8.2 million from the same period in 2020, mainly due to a favorable change in non-cash working capital due to the accounts receivable collection during the period and lower interest paid, partly offset by lower revenue and higher costs compared to the same period in 2020. Net cash used in investing activities decreased to $0.6 million from $2 million in the same period in 2020, largely due to the decrease in spending related to the construction of the Generación Andina facilities at El Carmen and 8 de Agosto. Net cash from financing activities for the period ending March 31st of net $31.4 million increased compared to $6.7 million in financing reported in the same period in 2020. The increase, of course, was driven predominantly by net proceeds of $38.2 million, given the private offering that closed during the quarter. Dividend. Finally, I would also like to highlight that we do intend on paying our 21st consecutive quarterly dividend on May 28th of $0.15 per share to shareholders of record on May 17th. This continues the board and management's commitment to regular positive distributions to shareholders, coupled with a continuing emphasis on attractively valued accretive acquisitions. With that, I will turn the call over to Marc, who will elaborate on current business matters as well as on our quarter-end results. Thank you. Thanks, Anton. A few comments before we turn it over to questions. First one I want to make is just, it's not clear in the numbers, I just want to discuss the pricing in Peru. It was a good quarter in terms of production, less of a contribution to EBITDA than it otherwise would have been just because of the way that the PPAs work there, which is that if you're running below your committed energy. There is a price penalty, which we had in Q1. Without that, EBITDA and revenue for Peru would have contributed an extra $700,000-$800,000. This is not something that is permanent in the sense that for El Carmen, that was due to the outage incident last year, which we are being covered for from an insurance perspective. That's not something that you can run through the P&L. Also the 8 de Agosto is something that we did expect, given that when we purchased the company and the contracts, the committed energy under that contract we knew was high. We are able to reduce that committed energy by up to 15%, which we will do. You can't apply for the reduction until two years after COD, which would be December of this year. We will apply for it. It is a contractual right, so we will get it, and expect that the higher price gets applied starting in 2023, which will have a positive impact for Peru. Wanted to mention that. The second thing I'll mention is the strong cash position. We did raise equity, which is a big contributor to that, obviously. The other thing is that the accounts receivable in Nicaragua came down nicely, so we received. This was part of the, call it the extension of the contract, terminating the old, having a new one. Any receivables left on the old were paid in the quarter. That really helped our cash position as well. There was a small asset sale, a small number. There's even a few more of those on the books that we are still looking at doing. They're not huge numbers, but let's call it latent asset value that we are looking to monetize and put even more cash on the balance sheet. It took a long time, but we recently finalized the insurance settlement on El Carmen, which should bring in about another $1 million onto the balance sheet this quarter. Point is that we are very well cashed up to execute on all the key initiatives that we have on the go. The first one being the binary unit, which we sent tender letters out mid-April to all the equipment manufacturers. When we started the year, we were looking at, call it a 7 MW-10 MW binary unit, but we had to run a bunch of chemical tests on the brine, which we did, to assess as to how much, how big you can go on the binary unit. The good news is that those were as good as could be expected. We went out with a 10 MW binary unit package. That's going to be the number we're looking at, and that does make a big difference on the numbers going forward. We're very happy with that. The schedule on this is that we are expecting to have firm proposals from the equipment manufacturers by the end of this month. Within, call it four to six weeks, so end of June or first thing in July, we will sign a contract, choose the equipment supplier, and lock in the prices and the budget. We'll make sure that that is communicated to the market. Once we get to that, it is, call it an 18-month construction process, but the numbers we think will be very firm. If it's 10 MW, we're going to be looking at, call it $8.5 million - $9 million in, call it cash flow and revenue generation off of the binary unit. The second is Chuspa, and that is Peru. We had slight delays because of COVID. Things are looking very good there now in terms of the case count. The construction's been open now for quite some time, and we expect it to stay that way. We're aiming for within four to six weeks, having signed the SPA and mobilizing it and launching construction on that project. That'll get us, call it the third jurisdiction, and using some of the equity capital for that project. Those are moving ahead and very much in the short term here. Now that still leaves us with a reasonable amount of excess cash sitting on the balance sheet. On the M&A front, which we are working on, we have, call it more irons in the fire than we've ever had. We are working on that. There's a lot of opportunities in, call it existing jurisdictions that we're in, primarily Peru, but also Panama. We're really hoping to add something so that we're doing more than just the Chuspa project. We have a lot of opportunities in Panama that we're looking at and a few other jurisdictions. We're in the process now of trying to have something, call it, this time next quarter. When we report, the aim would be to have something by then on that front. The other big initiative that we're working on, which would make a real big difference for the company in terms of the cash flow generation, is the refinance front. We have a lot of different options that we're looking at. There's, call it, five or six interesting ways to do the refinancing at San Jacinto, given that we are in a period of, we have an 18-year contract that we're amortizing over eight years, and in fact, the next four years are the heaviest part. There's a huge benefit to us to doing a refinancing, given the ESG, call it momentum. There's a lot of different groups looking at doing something on both a, call it, project specific basis, but we also have groups that are talking about doing a more global HoldCo refinancing. That is one of the biggest initiatives we have that we're working on as a company. The global refinance would take a bit more time. I think that that's sort of a three to six-month timeframe. Everything is pointing to us having at least a few good options on that front within that timeframe. That is, call it, the fourth big initiative. The last one, which is worth mentioning, is just that we had mentioned that we are looking to do a sale of some carbon credits. We're just finalizing the process at San Jacinto. We already have carbon credit sales at Canchayllo in Peru, but we're also starting, or not starting, we should have the other two facilities accredited within the year. We are making sure that all of our facilities could generate some form of carbon credit revenue. In the last, call it two months, we see a lot of inbound interest in those. We do have some vintage credits, which will not garner, call it, top dollar in the market, but there is latent value, and this is something that we just keep seeing sort of some inbounds and extra interest in that. We are more confident than ever that we can at least do something on that front. Even if the dollar numbers at the start of it are, call it in the $100,000, $200,000, $300,000 range, which is not material, it would be for a very small% of our credits. We think the bigger picture could be material for the company if the world continues to move in that direction. With that, where we're aiming as a company is, when you include the binary unit in Chuspa, executing with the capital we have on hand, we're looking at, call it, $40 million-$45 million of operating cash flow, as a company, and that does not include an acquisition. I think we can obviously improve that to even higher numbers if we're able to put the excess cash to work in an acquisition. I think those are very good numbers as to where we're heading. To the extent we are able to execute the refi, that could help that a little bit. Also free up even more cash flow, and I think at that point in time, we've maintained the dividend where it is for a while now, and I would suggest that I don't think the dividend growth strategy is going to be the main focus given the diversification, but I do think we would like to get back to some dividend increases. It would likely be on the backs of a refi because that has a really big impact on the free cash flow generation. That's where we're aiming. With that, I'll pass it over for questions. At this time, if you would like to ask a question, press star and the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. There is a question from the line of David Quezada with Raymond James. Thanks. Morning, guys. Maybe a quick question on the Peruvian currency. I know that it's weakened quite a bit recently. I'm wondering if you have any exposure there on the operating side. I know that your contracts are in USD. Is there any change to the operating expenses there because of the move in the currency? Yeah, no, because we effectively are a U.S. dollar contract and U.S. dollar expenses locally. We don't really see any impact on that. Okay, fair enough. Marc, I'm just wondering if you can comment on, there's some commentary in the MD&A just around changes you made to the injection strategy in 2018 and the, I guess a little bit of greater decline in the output in the near term, but it's better for the long term. Just any color you can provide maybe on the quantum there. I certainly appreciate this wouldn't be a near-term thing, but when could you look at resuming drilling there, in terms of a timeframe? Yeah. We had a well, it was called 11-2. We have about 1,500 tons an hour of brine. We drilled 11-2 in 2018, and it takes about 1,000 tons an hour of the brine. It's a well that is in the north of the field. We run these chemical tracers to see if what goes in your injection wells comes back up through your production wells. That well has effectively no connection with the field. We get advice from two different technical advisors, one from New Zealand principally, and one from Iceland. The advice was, you should use as much outfield injection, because what that does is it limits any temperature decreases in the core part of the field. That it's better to, in the long run, to maintain high, we call it enthalpy, but call it high temperature in the field. What you can lose in that is that you're producing a little less from your recycled water as opposed to just the natural recharge. There can be times when you do that and you actually get what they call boiling, you can improve the production. That hasn't happened, but the advice is to keep with this kind of a strategy, because even if you end up with call it less of your produced water being produced, you have somewhat higher declines in the short term, in the long run, it will be much better because of the declines will go down. We have just updated the numerical model based on this with Jacobs. I do think we'll end up putting a version of that online. To give you an example, we would do declines of 3% a year. Sort of 3% a year, every year for the life of the contract, let's say. What the new numbers that we're getting were sort of 4% this year based on where we ended last year. Okay. 4% this year, 3% next year, 2.4%, 2%, 1.5%, and going down to around 1% a year. If you actually look further ahead, you're in a much better spot six, seven years from now, even though, call it end of last year and now we are slightly lower than what we were hoping, but in the long run, it's going to be better. That's the advice and that's the plan. Awesome. That's great color. Thanks for that. Maybe just one other one. I believe you maybe touched on this in your comments, just the potential for other non-core asset sales. Do you think that you could ever see, or would you consider selling Casita? I believe, in the past we've talked about, I believe some equipment that you had in the U.S. that you're not using. Is there any potential to sell that or make use of it somehow? The answer would be yes, we would. We would for sure do something like that. Up until last year, there wasn't a lot of interest in that turbine. We actually are seeing more interest in geothermal globally. That's a geothermal specific turbine. Not to dive too deeply into that, but I think there were more contracts in the U.S. awarded in geothermal last year than there have been in like a decade. We just need people to be doing projects, and then I think that's going to get interesting. Yeah, we still own that and there's a chance we would sell it. I would say nothing's active on it right now. Things like Casita, and I would say even our western section, may not be a sale, but there could be partnership opportunities whereby there are companies that are looking to do geothermal projects in the region. Potentially a deal where somebody comes in and puts up some more of the risk capital. Right? I would see there less of a selling for cash, although that still is a possibility. Maybe taking back a carried interest and having other people with bigger balance sheets do some of the heavy lifting on the drilling. That would be a different way to sort of extraction value. Okay, great. Thanks for that, Marc. Appreciate it. That's all I had for now. Thanks, David. Your next question comes from the line of Ahmad Shaath with Beacon Securities. Good morning, guys. A couple questions for me. First maybe, if you have any more color on the M&A discussions and how has that progressed since our last call. Were there any changes in certain jurisdictions or any changes in the types of assets you're looking at? I would say not in the type of assets we're looking at. In terms of jurisdictions, we probably are casting the net a little bit wider. In terms of jurisdictions, although what we are doing for sure is, call it the perceived political risk threshold would still have to be lower than Nicaragua. We are looking at more jurisdictions that fall within that. To just cast the net wider because there are transactions we could literally sign up tomorrow. We still think the return profile is a little bit low for us for what we can get. We don't want to jump at the first transaction, and then there's a few, as I said, that we could do right now. With more opportunities, more jurisdictions, we'll get something that really fits strategically, which we have, we think, but that also fits the return profile. That's really where we're at. We actually continue to see them, the new ones filling in the pipeline. As I said, I think, we have a goal of, call it three months here in mind, and we'll see where we get to. That's great. That's very helpful. Maybe, you guys are working on a bunch of initiatives, at least on the corporate side, in terms of acquisitions, refinancing, and development of Panama. In the back of your mind, do you have a priority list in terms of execution, which ones you would like to get going before the others? Would you have a preference? Do you want to get the refinancing first, and that will make you in a better position to execute another M&A transactions? How do you think about that? Yeah, it's a good question. I think that we can't thread the needle on everything. I would suggest that what we have right now, even with Chuspa in there, and given that we have Peru, sort of more of a global refinancing, is interesting to people. Would it be more interesting if we had another acquisition, let's say more Panama or even Peru? For sure it would be. I think what we're not going to do is wait for that, because I do think what we have, and the interest is enough that we can move forward with the global refi because that's a long process anyway. That is a three to six month process, which we started. To the extent something hits on the M&A front, it can only help that process. In other words, I don't think that it would slow it down. I think it would only help it. You could fit it into that process along the way. That's great. Maybe last one, a housekeeping item here. I think if I heard you correctly, is it safe to assume the decline rates for the new numerical model, at least for the short term, around 4% this year off last year and 3% for the next year at San Jacinto? Yeah. We literally got this on Monday. In some form, we will have to update what's out there, and we will be doing that. That's great. Thanks a lot, Marc. Just to be clear, that is a no reinvestment scenario. Got you. I think one of the things that's important to realize is that sometimes it's hard to kind of go down the decline curve, but I can tell you that your actual free cash flow generation is obviously higher in that scenario. We are generating significant free cash flow, even with these declines. That we as a company are making the decision that it's better to take that and use it for the diversification than to increase. We could probably drill another well or two. We think it's better to wait, probably more like four or five years to do that. We could drill a well or two, and we would get a bump in short-term capacity. We just think it's a better way to go, is to be harvesting that, and using that for diversification. That's great. I appreciate the call, Marc, and I'll jump back in the queue. Your next question comes from the line of Mac Whale with Cormark Securities. Hi, Marc. You suggested the dividend increase strategy is around doing the refi. If you just did the reamortization, was it sufficient enough to allow for an increase under that scenario? Yeah, it could be. Yeah. I think the reason why I'm suggesting the refinancing is that, I would call it more reprofiling, but within the existing term of the loan that we have right now, the eight years. You are, which is definitely on the table. You're more sort of playing around at the edges. If you're not really changing the eight years to something more like 12-15 years, there's just less to work with, that's all. I wouldn't say it's out of the question, but when you look at the numbers on doing a 15-year amortization compared to an eight-year, you are effectively doubling, or halving what your principal payments are. You would just have much more to work with, that's all. Okay. If you went down the route of reprofiling, would you push out? Would you let that lie for a couple of years since you went to the bother of it before you would do a refi? Does one push out the other? Initially we sort of thought that, but I would just say no now. I would say it's not. We're going to try to do the refi now. Yeah. Do it in a parallel path, for sure. Yeah, okay. Yeah. On the carbon credit, you talked about seeing some revenues this year, and that's based on $1, because it's the backdated one, the inventory. Is that right? Yeah. Okay. Yeah. We have that one contracted 2012, 2013. I would say that we've had interest in those at price levels higher than that now. Just in the last month, before we were talking $0.50-$0.80. It's probably maybe double that already. Just the level of inbound sort of suggests that I think more people in the voluntary market. Again, we're in the voluntary market, right? We're not in the compliance market. You're just sort of seeing these signals that if that number's already doubled in the last month, something's going on. Yeah. Does the accreditation process allow the credit? Is it the same process for them to be valid for compliance market, or is that a whole other thing? No. Is that something you do? It's all- Or is it something- It's all on us. Okay. Interestingly, I would suggest that it's. For instance, any of the acquisitions that we look at, I haven't seen a single one of them that has actually done. They all could have. Okay. They all could have, because they would have fit into the UN's business mechanism that we have. It takes a reasonable amount of money, a lot of time. The validation and verification process is probably a year and a half minimum to do it. You're actually supposed to do it before you hit COD. There's ways to do it after, it gets harder and harder. I would just suggest that on the one hand, it is a bit of a headache for the companies like us to do it, I also think it limits supply. Yeah, for sure. Okay. On the one hand, for instance, if we were, again, looking at buying an asset that has an operating plant, it would be very hard retroactively to get anything on those. A lot of the things we were looking at have some expansion, whether it's doing some solar and some hydro in Panama. We could apply there. I think we'll continue to make that part of the strategy, and the more that we do this, I think the better we'll get at that validation, verification process, and whereas these single project owners just won't be able to do that. I'm hoping, this part I don't, but I do think with all of these companies that are going to have the carbon neutral pledges, they're likely going to be doing it more through the voluntary markets than they would be through the, everybody talks about the European, the compliance ones, which is basically polluters trading credits. Right? People, they call it the companies doing their own. I think they're going to have to do more of it in voluntary markets. Okay. That makes sense because you're trying to make that market more restrictive in Europe, right? That the pricing actually matches something realistic. You have to make a decision between investing in an asset versus just buying credits, right? That's been notoriously badly done in Europe. It would make sense if they tighten it, that they would then the next game plan would be, well, let's just buy some voluntary ones, right? Yeah. I'm hoping that that has upward pressure on price. This is where the process itself needs to be, in a way, very hard to do so that those buyers feel comfortable- Yeah That they're true credits. Right? Yeah. It's part of what they're buying, that it's valid. Yeah. Okay. Just last question. Just remind us of the difference between the pricing, say, post 2023 in Peru. Once you change the commitment level, just remind us what the difference, what the differential is in the pricing. Now, there's 8 de Agosto, we'll go back to the $53.90. That assumes there's no inflator. There is an inflator, by the way, in that one. It works, it has to go up every 5% with CPI, which it might actually have done that by then. Assuming no, it will go to $53.90 and El Carmen will go to $55.90. Then the quarter, we were only receiving, I believe, was $39.30 on 8 de Agosto and something like $43 for El Carmen. Yeah. It was a big pricing hit because it was good volumes in the quarter for the plants. Just remind me. That is a right of ours. That is not something you apply for and hope to get it. It is a right we have. They just make you wait two years. Okay. What was the genesis of that underproduction? Was it a resource issue or was it a technical issue on the plant? I'll split them. El Carmen was the technical issue because we had the outage, and it was out for, it should've been about two months, but because of COVID, it was four months. On that plant, and we don't know for sure, but we don't think that that one is something that we will apply for. In other words, we think that its committed energy is doable based on what we see. 8 de Agosto is a different story in that it's 140,000 MWh a year. We think that the long-term production capability, and we always did think that it was going to be between 115,000 MWh and 125,000 MWh. Okay. No matter that they're both the resource and just assuming very high availability, that we would be applying, and we would likely do the full 15%, which would get that 140,000 MWh down to 119,000 MWh. Okay. Last year, I think, where we see the resource right now is that it actually is doable based on Q1. We have, call it 5% - 10% more small improvements. The only thing that would prevent us from getting there, I would suggest that rather than doing the 119,000 MWh, it might be 110,000 MWh-115,000 MWh, is just because at times when the resource is so strong, it comes with branches from trees and there's just these different systems of filtering that out and getting rid of it so you maintain high availability. We're making a few tweaks here and there. That's what was partly the issue last year as well, most of which has been dealt with. Okay, great. That's all of my questions. Thanks. Thanks, Mac. Your next question comes from the line of Naji Baydoun with iA Capital Markets. Hi, good morning. Just wanted to start off by the follow-up on David's question on additional non-core asset sales. Are you considering maybe any of the development prospects that you have in Peru? Are those on the chopping block, or you'd still prefer to keep those in-house and maybe develop them over time? I would suggest that those are keepers for us in the sense that long term we see good marketing in Peru. The development costs to get a project to a PPA and bankable is much less than a geothermal project. One of the reasons why we would consider partnering on some of the geothermal is to get yourself to bankability, could take $30 million-$50 million, which is a bit big for our size of company. Whereas the Peru, it's not that. Our preference would be to keep the Peru hydro in-house. I was also referring to, for instance, we did make a small investment in a, actually, a Canadian developer of some biomass projects, which we still think is quite interesting. That's something that would be on the order of $500,000 that we might look to sell that. Little bits and pieces, again, nothing hugely material. A few things and all of that to say that it does help our cash position, which should help us execute on the M&A strategy. Okay, good. I would even say, sorry, I would even say that calling carbon a non-core asset is probably not the right thing to do, but to the extent that you can put a little bit of cash on your balance sheet by selling a small amount, is something new for us, and I think it does somewhat fall in that category. Okay. Got it. Appreciate that. Just going back to the binary unit. I understand, I guess you've locked down the size. In terms of the tenders that are out there, have you locked down sort of the costs? Can you provide any more details on that front? Is it in line with your previous expectations, or have the numbers moved around? We really won't know until the end of this month when we get the letters. We have been assuming some cost increases. At this point in time, all we can say is, given with the increase in size, we think it's going to be closer to the $22 million-$25 million. That's what we have right now, but until we get those firm proposals, there's really nothing else. We can't do anything else until then. That's really when we're going to have more certainty. Okay. Got it. Just one last follow-up or question from me. I noticed the corporate costs have been trending a little bit higher the last couple of quarters. Just wondering if you can talk about, is that sort of the run rates we should expect going forward? There was some one-time legal costs in the G&A. I think in the quarter that we're not going to have, then we do have, I would call, some increases on the insurance side, which will be permanent. Those actually weren't in the quarter. Net-net, I think it is better just to assume these costs now going forward. We've had very minor, to execute on the strategy, we have probably an extra two bodies at the corporate level, which is a very small sort of add. Between that and the insurance, I think we are going to be running around this level, and we'll do what we can to reduce it, but I think it's better to run it as is, as in this quarter. Okay. Appreciate that. Thank you very much. Again, in order to ask a question, press star one on your telephone keypad. Press star one to ask a question. There are no other questions. Okay, thank you. I'll turn the call back over to the host. Thank you everyone for joining us today. Have a good day. Thank you. This concludes today's conference call. You may now disconnect.