Sachin Shah - CEO Wyatt Hartley - CFO.

Sean Steuart - TD Securities Rob Hope - Scotiabank Nelson Ng - RBC Capital Markets Andrew Kuske - Credit Suisse Mark Jarvi - CIBC Capital Markets Rupert Merer - National Bank Jonathan Reeder - Wells Fargo.

Good morning. My name is Crystal and I will be your operator today. At this time, I would like to welcome everyone to the BEP First Quarter 2018 Earnings Call and Webcast. [Operator Instructions] Thank you. I would now turn the webcast over to your host Sachin Shah, CEO. Please go ahead..

Thank you, Operator. Good morning everyone and thank you for joining us for our first quarter 2018 conference call. Before we begin, I'd like to remind you that a copy of our news release, investor supplement, and letter to shareholders can be found on our website. I also want to remind you that we may make forward-looking statements on this call.

These statements are subject to known and unknown risks, and our future results may differ materially. For more information, you're encouraged to review our regulatory filings available on SEDAR, EDGAR, and on our website.

Over the last five years, we've added 10,500 megawatts of capacity, 635 facilities, a 1000 people and six new geographies to our portfolio.

We've invested almost $2.5 billion of debt-to-equity capital and to be able to grow at this scale requires an organization with substantial expertise and one that prioritizes operational excellence so that acquired assets and people can deliver targeted underwritten returns.

When we make investments, we spent considerable time developing business plans that allow us to make the operations more efficient, drive robust health, safety, security and environmental programs, look for contracting and development opportunities, and stabilize the asset level capital structure to reduce financial risk while enhancing operating margins.

Accordingly, we are able to provide you regular updates on our business that demonstrate ongoing value creation initiatives that are not predicated on growth. And given the scale of the business, we are starting to realize increasing benefits of these efforts in our financial results.

As a result, we are well positioned to deliver FFO per unit growth over the next five years at the high-end of our 5% to 9% annual distribution range without reliance on rising power prices or acquisitions.

This comes from inflation escalations in our contracts, margin expansion efforts through a revenue growth and cost reduction initiatives, and building out our development pipeline at premium returns. Looking ahead, we continue to focus on executing our key priorities which include advancing the development pipeline and enhancing those cash flows.

We also continue to assess acquisition opportunities always looking for investments in markets where capital is scarce and where we can add value through our operating expertise. We expect the combination of the changing power grid and the rising rate environment to create significant opportunities for value-oriented investors like ourselves.

As a result, we are taking a selective approach to our acquisition program while continuing to position our investment strategy and balance sheet such that we can capitalize on periods of stress to buy high-quality assets at the low replacement cost. With that, I'll now turn over the call to Wyatt Hartley, our CFO.

Wyatt?.

Thank you, Sachin and good morning everyone. For the quarter we reported FFO of $193 million or $0.62 per unit representing year-over-year growth of 13% per unit. The business continued to perform well across all regions, and recent growth initiatives are contributing as expected.

During the first quarter, our hydroelectric segment delivered $208 million of FFO as generation and availability remained strong across our fleet. Overall generation was 6% above the long-term average primarily on the back of our North American facilities where consistent with prior year generation was particularly strong.

Pricing across our portfolio benefited from inflation indexation of our contracts, as well as improved power prices in Brazil driving our average realized pricing up 6% compared to last year. Our power marketing teams continue to actively pursue opportunities to sell energy, capacity and related products at a premium to current market prices.

We successfully cleared all our eligible capacity into the recent capacity auction in New England, secured new power purchase agreement for our existing assets in Brazil, and continued to add duration at our Colombian business by signing several new long-term contracts this quarter including one new 10-year contract.

Lastly, we continue to advance our development pipeline substantially commissioning a 28 megawatt hydro facility in Brazil and progressing construction on an additional 49 megawatts in Brazil. Combined, these development projects should contribute annual FFO of $14 million once commissioned.

Our wind segment delivered $37 million of FFO in the first quarter due to the contributions from our investment in TerraForm Power and TerraForm Global. On a same-store basis, our business performed ahead of prior year as generation across our wind fleet was in-line with the prior year.

Our operations benefited from a high degree of diversification, as well as the 50 megawatts of new win capacity that we commissioned in Europe in 2017. We continue to leverage our marketing expertise in Brazil and we contracted existing facility in the free market at much higher prices than the current regulated market.

This initiative is expected to contribute approximately $6 million to FFO in 2018. We also received regulatory approval to increase the interconnection capacity from our newly acquired Brazilian wind farms which should result in an incremental $2 million to FFO annually.

We continue to progress 47 megawatts of wind development projects in Ireland and Scotland which in aggregate are expected to contribute $6 million to FFO on an annualized basis once online.

Q1 represented the first full quarter of contributions from our newly acquired solar facilities from TerraForm Power and TerraForm Global contributing $10 million to FFO. The facilities have been performing well with high availability and generation in-line with expectations.

This quarter we also announced that we have established a 50-50 joint venture with China's largest warehouse operator to develop rooftop solar on their logistics facilities in the country.

Through this partnership, we are targeting to develop and operate 300 megawatts of capacity over the next three years and based on our estimates of GLP's rooftop space, we believe there is a broader 1 gigawatt development pipeline.

This partnership represents an opportunity to expand our footprint in China in a measured way, as well as grow our capabilities in the commercial and industrial distributed generation sector.

Our storage facilities delivered $5 million of FFO during the first quarter which is ahead of prior year following the acquisition of our First Hydro pumped storage facilities in the U.K. and improved capacity pricing at our Bear Swamp facility in New England.

First Hydro continue to have strong availability particularly during the period of very cold weather in March highlighting the value of these facility as essential providers that scale backup generation and ancillary services.

We are leveraging our deep operating expertise to work with our partner to optimize revenues through asset operations, dispatch and trading which should augment performance over time.

We also progressed an upgrade to the capacity of our Bear Swamp pump storage facility by 60 megawatts to a total of 660 megawatts to improve its system efficiencies and enhance operating cash flows. As part of this process, we secured a seven-year contract for the capacity of this upgrade and expect to commission the project in 2021.

The expansion should deliver returns of greater than 20%. Our balance sheet remains strong with $1.7 billion of available liquidity at quarter end and we continue to maintain access to diverse sources of capital.

So overall markets are currently more volatile than they have been, we continue to see very strong demand for renewable power assets globally and particularly strong bids for contracted renewable assets. As a result, we may look to opportunistically sell mature or non-core assets and then redeploy this capital and core markets at attractive returns.

As with our sale of the two Irish wind farms last year, the strategy of redeploying recycled capital from mature or non-core derisked assets into new value-based opportunities is one that we expect to execute on going forward. We took advantage of strong market conditions early in the quarter and raised over $1.5 billion in the capital market.

This included $1.3 billion of nonrecourse financings which extended the average duration of our nonrecourse debt to 10.3 years and reduced our average cost of nonrecourse debt to 5.8%. One of our principal priorities when we acquire a new business is to derisk the balance sheet.

As such during the quarter, Isagen issued 750 billion pesos or approximately U.S.$260 million of long-term nonamortizing that in the local market. This extended the average term of Isagen's debt to seven years and reduced the cost of debt by over 40 basis point. By TerraForm Global we issued $400 million of eight year notes at approximately 6%.

Along with cash on the balance sheet, proceeds were used to repay TerraForm Global's existing $760 million of high coupon notes. This financing has resulted in annual interest savings of approximately $50 million in a more stable long-term capital structure for TerraForm Global.

We have always focused on maintaining a strong investment-grade balance sheet with ample liquidity to ensure downside protection, preservation of capital and stable cash flows through economic cycles.

By underwriting with a focus on financing our projects for long-term fixed rate debt, the current rising interest rate environment does not affect the expected returns on our investments. Additionally following our recent financings, we have no material maturities in the near-term.

We also have minimal interest rate exposure having locked-in low long-term rates over the last several years. Accordingly today only 13% of our debt is floating rate of which less than 6% is in North America and Europe. As such our business is very well protected from a rising rate environment.

As a reference, a 300 basis points increase in interest rates would impact our FFO by less than 3%. Although markets are volatile, we have built up a highly stable business with the ability to fund our growth through current available liquidity and internally generated cash flows. That concludes our formal remarks.

Thank you for joining us this morning. We'd be pleased to take your questions at this time.

Operator?.

[Operator Instructions] Your first question comes from the line of Sean Steuart. Please go ahead. Your line is open..

Couple of questions to start.

Sachin your comments with respect to the distribution growth range and being more comfortable that you'll be able to deliver at the high end of the 5% to 9% range, any specific context you can provide on that wording, that seems to be new wording this quarter specific growth initiatives that are driving that confidence, any more context there?.

Sure. And just to clarify what I said was that our FFO growth rate will be at the high-end of the range which it has been for the last five years. I mean we've grown our FFO per share over the last five years at around the 9% clip, and we continue to see that also over the next five years largely based on the levers we have in the business.

I wouldn't translate that into distribution growth Sean that was not the intention of that comment.

Obviously, we continue to chip away to make sure our payout ratio is more stable and more solid and so some of that FFO per share growth will just retain in the business to further build financial stability and financial flexibility in addition to our liquidity and our investment grade balance sheet, and obviously much of it will get paid out to shareholders as distributions consistent with what we've done in the past..

Thanks for that context. Next question Australia, you guys look to that market when you first launched the LP years back, at the time you found it a tough market to answer.

Can you give us a little context on the initial stake in [Isagen] energy and the broader opportunities that you see in Australia?.

You're right. I think if you went back - I guess it’s now seven years ago when we launched the LP, renewables as a broad asset class I would say in many markets including Australia we're still not advanced or mature, didn't really have significant government support.

The large utilities in the country were not necessarily supportive of renewables and so it made a very difficult market to see the prospects for scale. And if you look not a lot of companies have really come out of that market and have been able to put significant amount of capital to work in the renewable space.

So, from our perspective, it was a market in the long term that we thought we would enter but we were in no rush and we just felt it was better opportunities around the world.

Today I'd say with the combination of all the regulatory and maybe political support changing over the last five years where renewables are now seen as really critical to helping them offset some of their exposure to high gas prices and helping them continue to build out the electrical grid that whole debate is gone.

Now people see renewables there its really part of the solution which is important for us. We need to have that win at our back and then if we look at the opportunity in particular with Isagen, today we just a shareholder. We’re not, we have no other really relationship with the company, we’re not actively engaged with them in any way.

We see it as a decent platform for us to invest in, but it was a value investment opportunity.

They had traded down from their last capital raise and we thought putting a little bit of money into the opportunity gave us some optionality, but at the end it's just a shareholding and if it doesn't work out, we’ll sell the shares and if it does work out and it turns in something more than great.

There is potentially an opportunity there, but that that was really it, there is no longer term thing here with the company..

Your next question comes from the line of Rob Hope. Please go ahead. Your line is open..

The JV for solar on warehouses in China, could you provide maybe some goalposts of how quickly you could be putting capital to work there and potentially what the ultimate price to be?.

The first part of your question was cut off, but I think we got it I think your question is on the JV in China with the pace of capital deployment and with just a little bit of explanation around it I think you’re getting at..

Correct..

So, look GLP is a formidable owner of our warehouse facilities and service provider to corporate's around the world who have logistics need.

And so we given our renewable expertise and fair real estate, we just thought it was a very unique ability to partner where two sides can bring entirely different skills to bear and drive what could be potentially significant growth in the region.

I think at this stage we see ourselves being able to deploy call it 300 megawatts or so in the next three or four years and out of 50-50 JV, and with an appropriate level of financing you're probably looking at somewhere in the range of 75 million to 100 million of capital deployment over the next three years.

And remember this is through our private fund where [Beth] is a investor in this. So I don't want to overstate the impact of that its small, but I think it's actually a really measured way for us to gain exposure to this new country to better understand the contract structures, to make sure comfortable with the credit and the financial markets.

And if you think long-term and if your long-term oriented shareholder, than what it does it gives us potentially great franchise in one of those most significant growth markets in the world and a market in the country that deeply needs renewables in light of its issues around pollution and coal.

So this is really a long long-duration bet for us and one where given the scale and importance of China in the global economy today, we think it’s worth investing the time in..

And then just turning over to Colombia, good to see the 10 year contract there.

Can you provide some sizing of the contracts and pricing and did you have to give up a little bit on pricing for the 10 year term in that market?.

Yes, so I’d start with - the contract to date are still quite small. What we're seeing in the country as we go out and speak to local distribution companies and utilities. No one has really talked to them about 10 year contracts.

And so it’s intriguing to them and they do value price certainty and ultimately we are prepared in that market to give up a little bit on the front end to get duration, but really the back end nobody knows and with appropriate escalation levels which we’re not going to disclose we think we're actually building value relative to what we underwrote.

So these are good contracts, they secure the cash flows, they increase margins in excess of what we underwrote over time.

However the contracts are still small today and as we layer them in over the next few years the real benefit we’re going to get out of this is also to lengthen the term of the financing structure in that market and drive asset level financing on a commensurate term basis and you saw today's prepared remarks we've already started to benefit from that by being able to raise capital in the country, push the debt out to now seven years and really lock in the current low rate environment in that country..

Your next question comes from the line of Nelson Ng. Please go ahead. Your line is open..

Quick question on Brazil.

I think this is one of the quarters where we saw above average generation, are the reservoir levels like back to the long-term average, have they fully recovered from the trough?.

No, they haven’t Nelson its Sachin here. They haven't they are creeping up. They are in the range of 40% just in excess of 40% of where they should be. It will take a long time for that to completely recover just given how long and how attractive the trough was.

But if you remember, we have a number of run in the river facilities and you do get different precipitation patterns in the country. So we benefited from just strong hydrology in our facilities but we also really benefited from strong wind. And that's been a big driver of the results as well.

But I see the bigger point setting aside the short-term quarterly variation and generation, the bigger point is that still a market where as we started to see GDP stabilize and start to recover albeit slowly and we started to see power demand finally start to recover and come back through the trough.

They really need to diversify away from hydrology because of how difficult a trough period could be in that country and that's presenting amazing opportunities for us to invest into with wind and solar, because those are the two main technologies that are driving growth in the country today and are largely being supported because they need to diversify away from hydropower.

So, I’d say it does two things for us one it gives us a great avenue for growth but two, it makes the scarcity value of the hydros we own that’s much more valuable and in the future if we ever wanted to monetize some of that we think there's great upside in those assets..

And just a follow-up on that, I think in the past you were able to move some of the generation from future quarters earlier to take advantage of high power prices.

Did you do any of that in Q1?.

We did not, no..

And then just moving on to my next question.

In terms of cost savings initiatives, are there any opportunities to kind of bundle your wind facilities under a larger O&M contract similar to what TerraForm is doing to save on costs or have you already done that in the past?.

Yes, so we already do that for example in the in Europe all of our facilities in Ireland and Portugal are already under long-term OEM service agreements. I’d say the difference - in TerraForm we obviously looked at doing that an executed on that - the team executed there.

But if you recall in TerraForm, much of that work was already being done by contractors the company didn't have a lot of people. And so they were already operating at a cost that we felt was high relative to industry standards and bring in a long-term service provider made a lot of logical sense.

I’d say in our business the only place where we don't have that is North America and the realities we run our fleet probably today at a healthy enough discount to where our long-term service provider could offer us that it doesn't make sense.

But obviously we will always look at that and the good news is we have so many good data point around the world that we can always evaluate that opportunity. If it presents a substantial increase in cash flows without compromising the operating risk of the business..

This one last question also relates to TerraForm, in terms of their upcoming funding needs and also like Brookfield's 400 million equity backstop. I presume Brookfield wants to maintain their - I guess 51% interest but could potentially provide up to 400 million.

Could you just talk about I guess Brookfield renewable's commitment within that fed investment funding structure?.

So again we made our investments in TerraForm through our private fund of which Brookfield Renewable is almost 30% investor. So the 400 million back stop is consistent with that and I would say so one on the Brookfield Renewable prospective we intend to at a minimum maintain our ownership interest in both our fund and then indirectly in TerraForm.

And then on the funding plans for TerraForm I know they had their call yesterday and obviously we just felt that providing that certainty to the business as the sponsor and the controlling shareholder was good for the company.

It demonstrates our view of value, irrespective of where the stock trades in the marketplace and demonstrates the benefits to shareholders of having a long-term aligned sponsor and shareholder who has meaningful capital sitting next to other shareholders on an equal basis.

And so people can read from that whatever they want, but ultimately we think that’s a real positive thing to be able to support the company and to show that over the long term we believe there is meaningful value at the price that we are willing back stop that..

Your next question comes from the line of [Dan San]. Please go ahead. Your line is open..

I had a question about your pricing conditions in the quarter I’m wondering did that benefit you guys in a big way and also what’s striving to back stop expansion opportunity..

It’s Sachin again, you cut out in the first part of the question, which market are you asking about pricing..

It’s the U.S.

Northeast market?.

The U.S. market..

On your contractor business?.

So first of all the answer on the Merchant Power prices really there was no meaningful uptick in power prices other than a couple of weeks in January, but two weeks is not going to drive meaningful value in the business.

So do we sell power into that yes, but then I would argue that power prices are actually on average we’re probably lower in the Northeast markets then they traditionally been. So the answer broadly speaking as power prices are still very low.

There are function of cheap gas and really weak power demand and as you can see over the last five years we spent considerable time diversifying the business away from that. We retain all the option value if power prices ever do go up, but it’s not something that really should meaningfully drive the business up or down over the medium term.

In terms of Bear Swamp with capacity still being a highly valued product in the Northeast and in particularly New England and for new build capacity being able to secure contracts really off the back of that.

We were able to commercialize the additional 60 megawatts on Bear Swamp and as Wyatt said in his prepared remarks based on the capacity contracts that we believe we can secure and the capital cost of the expansion we are targeting a return on that investment of approximately 20% in U.S. dollars, which is a great outcome.

You don’t see too many development opportunities like that in the U.S. today. So it’s obviously very, very value accretive to shareholders..

On that maybe - the earlier question about the FFO guidance that you’ve highlighted. Would you say that you guys provided a breakout of what was driving FFO growth last year.

Would you say that the development pipeline is looking much more robust than what you saw last September because it seems like development was driving about 3% or 5% FFO growth and maybe your – could be heading up upper in the higher range now..

No, it’s not anymore robust than it would have been last year. Development is an important part of our growth, but if you look at us relative to many other power companies its actually fairly small like. We don’t have a - what I’d call a large scale backlog of development projects that we run. We generally have been pretty conservative.

We fully fund our projects before. We commence them or commit them. We generally build small hydro. We don’t take on very large hydro projects. We generally are doing things that in sort of that under 50 megawatt range or we do smaller wind development around the world and again we don’t do anything on spec. We need a contract.

We needed to be fully funded.

So we are what I’d call – on the lower end of the risk scale as a developer, but we have a very good pipeline one that can be commercialize and so typically what we always have ongoing is a program of kind of 40 or 50 million FFO contribution from development if you look forward over the next few years and today we have that.

But if no more it’s no more valuable or more advanced today than it was a year ago and I would say that all of the levers that we presented a year ago at our Investor Day and in various calls where we have a healthy and diverse set of margin expansion opportunities, whether it be cost reduction, inflation escalation, development or origination all of that still applies today and no one lever has changed in particular it’s pretty consistent by design..

Your next question comes from the line of Andrew Kuske. Please go ahead. Your line is open..

I think the question is probably for Wyatt. And maybe if could just give a little bit of quantification of the FX impact under price realizations in particular in Brazil and Colombia when I look at average revenue per megawatt hour this year versus last year and some color around that versus the inflation indexation..

So Andrew what I would say is FX year-on-year in Brazil hasn’t been a meaningful driver of our realized price in U.S. dollar. And in Colombia it’s been a bit of a tailwind for us, but again not a meaningful driver.

So the majority of what you would have seen in the realizing pricing increases in both of those markets would have been in the underlying fundamental markets..

And then maybe just on Bear Swamp. I know you’ve guided to the 3 million of incremental FFO upon completion of the expansion just for clarity that’s net to you on your expectations for an annualize basis..

Yes that’s correct..

And then so basically taking the 20% returns that you’re assuming on that project does that effectively gets the capital cost?.

Yes correct..

Any other optimizations, I know Bear Swamp are bit different than a lot of your other facilities in the portfolio, but are there any other optimization opportunities that have that kind of return potential?.

In North America it’s pretty limited Andrew. I’d say where we have the most expansion opportunities are we do have some in through TerraForm where we have the opportunity to install batteries and certain very high PPA Princeton Market to provide some stabilization services to the PPA counter party and so we’re in discussions around that.

I’d say in Europe we have still a very good developments pipeline where we continue to commercialize projects and we have Flex on the size of those projects.

And then Brazil has always been a good development market, but really in North America I’d say on the hydro side it’s pretty limited today and it’s not necessarily limited technically although there are some limitations there. It’s that without the prospect of a PPA or a contract it’s difficult to justify the capital cost.

So still I think a lot of this is predicated on pricing and as long as pricing stays fairly muted it will limit the ability to expand some of those projects that we have in North America..

So that just as a follow-up. So the Bear Swamps situation obviously is small quantum of dollars being deployed but it’s the uniqueness of the contractual framework and the certainty in that market that made that project really go ahead..

Yes. And just a high degree of capacity it could provide it and so capacity is such a valuable product today, that if you have something that can deliver that capacity you can still get contracts for that..

That’s great..

As opposed to just for energy yes, absolutely..

Your next question comes from the line of Mark Jarvi. Please go ahead your line is open..

I just wanted to revisit the pricing lift in Brazil and the revenue numbers year-over-year look stronger, but looking it didn’t really translate as much down to the EBITDA level where margins are bit lower.

Maybe you can talk about why you couldn’t get same lift on EBITDA or any cost compression there?.

I mean what I would say that’s really just a function of timing of our operating expense and that's just based on the year we’re projecting around the same cost as last year. And so it's really just a function of timing and so over the year you’ll see that benefit fall through the bottom line..

And then maybe a similar question on the Canadian hydro operations where revenue was kind of flat year-over-year but EBITDA is down maybe what happened there?.

I’ll note once again, it all comes down to timing in North America we’re actually progressing a lot of our cost saving initiatives. And then also incrementally last year did benefit from a one-time recovery related to some property taxes it was around 10 million.

So once you factor that in and there is a little bit of time, but once you factor that in operating costs are actually down meaningfully year-on-year and that’s to do the benefit of our cost initiatives..

And then I was wondering if you could give your thoughts on sort of early stages of impact on U.S.

tax reform whether or not it's regular utility is being tailed in credit metrics and some assets for sale or why smaller developers finding tightness in the tax equity market whether or not that’s you see this creating more opportunities in the last couple years?.

We're definitely seeing an opportunities with developers. We got a number of developers approach us on the back of tax reform for exactly the reason you described which is the tax equity markets are not as lucrative anymore. And also many yield oriented investors are a little bit skittish with rising rates. So they're not as aggressive in their bids.

So I’d say we’re definitely seeing a pickup in or maybe I wouldn’t say a pickup but a more healthy balance on development and maybe hopefully a little bit more disciplined being demonstrated by developers on their growth. And also on the returns that they are trying to commercialize and we’re definitely seeing them come to us with needs for capital.

Our view is still that market has room to cool off even further. Returns are still pretty low in the development market and we’re going to be patient but we’re definitely seeing for the first time a change in that trajectory..

And then if I may - in the last couple of years it’s been more sort of larger transaction portfolio of corporate talking to how you just frame that, are you seeing more opportunities for sort of smaller assets - individual assets to pick off there?.

Yes, absolutely as a result of that. We don't buy design just target large transactions, we look at everything. So you're absolutely right, we've seen again commensurate with the small developer move we've seen opportunities to pick off little assets here and there.

And if we can do that and we can do that for the right values but that’s great way to put capital to work. And so we’re looking at a number of opportunities in the U.S. around that theme and that dynamic..

Your next question comes from the line of Rupert Merer. Please go ahead. Your line is open..

Just circling back to the 5% to 9% FFO growth target again, you talked a little about your development initiatives. I think on the cost savings you typically target 2% to 4% for your margin expansion. And you’ve talked a little about the fact that we’re seeing some cost savings in North America.

Just wondering if you could give us some color on how that plan is progressing and what needs to fall into place for the next few years or where you're targeting additional cost cutting in the next few years?.

Well look, as our business is scaled up in every market we've gone around the world when we've added scale, we found that we can do more with our existing teams then just adding some of the parts together. So there's always been value we could create.

Some of that simply comes from the fact that what we've added is in the same regions as where we already had existing operations. Some of it comes from the fact that we’ve used technology in the business through our system control centers and through our SCADA systems to optimize the day-to-day operations of our facilities.

And some of that comes from the fact that we have very, very strong corporate team that runs our North American fleet, that has 20 years of experience integrating assets in their markets and it does in the very highly efficient manner.

So, I’d say much of it just comes from really nuts and bolts you buy something and you just don’t need as many people.

And some of it comes from technology enhancements where you buy something that was previously being run in a very manual way and you can plug it into your SCADA systems, your operating centers and you can run it more effectively but with the benefit of technology in your existing team.

And you can unwind some of the localized manual operating processes that are there at the asset levels. So those are the big things we then obviously often benefit from the fact that we’re investment-grade and much of our industry peers are not.

And so when we buy things, we can often refinance debt after a few years of owning the assets like we did with TerraForm Power and TerraForm Global where we just bring a lower cost of capital to Bear.

So that's a huge advantage for us and in particular in the renewables space, if you look at yield codes and IPPs, I mean there's very, very few that have strong balance sheets.

And so it's a real advantage for us and on the development side I’d say North America is not but my earlier comments not a huge development market, but when we buy things in other parts of the word development is big area of focus for us..

So looking at that pace of margin expansion 2% to 4%, you expected to be pretty evenly spread out over the next five years, you have quite concrete plans going out that far for cost reduction?.

Yes, so I could tell you that we have a significant program underway in North America and Colombia. In Europe our plan is meaningful for Europe but our business in Europe isn't so meaningful that it will have a big impact to the bottom line.

The stuff that we've recently bought in India and China, again there is optimization opportunities that we see, but really you should look to the bigger businesses that we have because that's where you see obviously the most incremental opportunity and it comes in large part because we’re integrating assets in all of these markets and we’re finding ways to cut costs..

And then secondly looking at the opportunity to recycle assets, you were talking before about the fact that the returns on some early stage development maybe going up. We of course are seeing rising yields in North America which seems to be depressing valuation on public assets.

Are you seeing that translate into the price of assets in North American market outside of the public valuations.

So in other words is this still a good market for you to sell assets in North America or you think North America is going to become - North America will become more of a market for buying assets?.

We're definitely not seeing in the private market. There's still - the bid is very, very strong rising rate is really not impacted it at all. In fact I would argue the opposite. The private market has gotten harder and there's more and more capital chasing these assets.

And financial investors, pension plans, asset managers or all continue to be very, very aggressive driven by different motivations but I don't see at this stage any decline in demand for low risk operating assets that are well run and that have a strong visibility on their cash flow over a long period of time.

And so I think even as rates go up people will still want that and we’re going to sell into that market because we just think it's the right thing to do, to redeploy into opportunities that we source ourselves..

And just a follow-up to that and some transactions recently seemed being driven in part by tax planning with an opportunity to redeploy capital into tax-advantaged assets is that something you can take advantage of?.

Probably less so than some organizations I mean - in North America at least we benefited for a number of years from substantial tax loss pools. So it’s probably not as lucrative a trade for us but I would argue though that the transactions we've seen continues to still be motivated not so much by tax but people's desire for yield.

And many people are building out their renewable capabilities as they see it as an emerging asset class with a very long runway for growth. And in order to get into that business to paying up. So we continue to see it for still other more fundamental reasons than simply tax planning..

[Operator Instructions] Your next question comes from the line of Jonathan Reeder. Please go ahead. Your line is open..

One quick question from me, I think you’ve alluded to it throughout the Q&A, but just want to verify that the targets still on the FFO unit growth rate is 6% to 11% is that accurate?.

Yes, that’s accurate..

And we have no further questions in the queue. At this time, I will turn the call back over to the presenters..

Okay. Thank you everyone for joining us today. We look forward to giving you updates on a regular basis and at a minimum we will talk to you in our Q2 conference call in 2018. Thanks everyone. Take care..

This does conclude today's conference call. Thank you for your participation. And you may now disconnect..