Hello, this is the Chorus Call conference operator. Welcome to the Brookfield Renewable Energy Partners' second quarter conference call and webcast. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Richard Legault, Chief Executive Officer of Brookfield Renewable Energy Partners. Please go ahead, Mr. Legault.

Thank you, operator. Good morning, everyone, and thank you for joining us this morning for our second quarter conference call. With me on the call is Sachin Shah, our Chief Financial Officer. Before we begin, I would like to remind you that a copy of our news release, investor supplement and letter to unitholders can be found on our website at www.brookfieldrenewable.com. I'm sure you are all aware of the unusually warm and dry conditions across much of North America over the last couple of months. As a result, lower levels of rainfall and reduced inflows in a number of our watersheds lead to generation in the quarter that was well below the long-term average, and Sachin will cover this in more detail as part of his comments on the quarterly results. That said, it has been a very successful quarter in which we've made significant progress on growing our Renewable Power business, in particular our hydro portfolio, and on our capital markets and funding strategies. As we announced just prior to the quarter end, we will acquire with our institutional partners a portfolio of 4 hydroelectric generating stations in the Tennessee Valley region, representing an enterprise value of approximately $600 million. We are especially pleased with the quality of these assets, which have been owned by Alcoa since the time of their construction. Moreover, the portfolio is in the late stages of an extensive modernization program, which will increase its capacity to 378 megawatts and an average annual generation to more than 1.4 million megawatt hours per year. These facilities are proven generation assets in a market with favorable supply/demand dynamics. Load growth in the U.S. South is above the national average and the region has more than 22,000 megawatts of coal-fired generation facilities that are planned to be…

Thank you, Richard, and good morning. Before I begin, I wanted to remind you that our 2011 financial results are presented on a pro forma basis, which assumes the combination had taken effect on January 1, 2010. You will also note that the use in our quarterly materials of a new term, adjusted EBITDA. This measure of EBITDA is calculated on the same basis as before and only the terminology has changed. As Richard mentioned, generation levels, which totaled 4,100 gigawatt hours in the second quarter were below long-term average and the prior year, reflecting low precipitation levels and inflows in Eastern Canada and the Northeastern and Midwestern U.S. Generation for the first 6 months of the year is 7% lower than long-term average and 6% higher than the prior year. Generation from wind facilities was considerably higher than in the prior year, primarily due to contributions from recently commissioned and acquired facilities in California and New England and the addition of a wind facility in Southwestern Ontario, which we commissioned in the fourth quarter of 2011. Revenue in the quarter totaled $337 million or $82 per megawatt hour, a year-over-year decrease of $44 million given the lower volumes. A decrease of $65 million was due to the reduction in volumes from our hydro fleet. This was offset however, by new wind and hydro facilities brought online over the last 12 months. Both adjusted EBITDA and funds from operations were impacted more than revenues during the generation -- due to the generation shortfall being most pronounced in markets where contractual prices are higher than our average portfolio price. On a year-to-date basis, which is more indicative of results over time, adjusted EBITDA and FFO were $539 million and $262 million, respectively, and within a reasonable range of our annual objectives…

[Operator Instructions] The first question is from Bert Powell of BMO Capital Markets.

Richard, just in terms of your comments around reservoir levels back at where they are, are you referring to watershed that feeds the run-of-river as well or are you just referring to the dams?

Well, Bert, we're referring to the actual storage compounds that we have access to. So our ability to store water, as you know, is probably somewhere slightly below 30% of our total annual output. And what we're saying at this time of year, our reservoir levels are where they should be for this time of year.

Okay. And how -- based on the weather and how things trended this quarter, how are things looking for the hydrology to feed the run-of-rivers, the non-storage stuff so far in Q3?

Listen, I think it's been -- I would say, characterize it as a very difficult quarter from a hydrological standpoint in Q2. July has not really shown any signs of turning around. So what we're telling everyone is that we have not called on our reservoirs to increase generation. So we still have where our reservoirs should be, and we're hopeful for the rest of the quarter that we actually get higher levels of precipitation than we've had in the last few months.

Okay. And just lastly, Q2 last year, I think you said there were some maintenance deferral until Q3. Can you just -- how does that look this year relative to last year? Did that get done in Q2 this year? Or are we going to look for similar comparable relative to last year?

Bert, it's Sachin. You may recall last year in Q2, there was some significant flooding conditions, which obviously benefited our volumes and results, but meant that we had to defer some CapEx approximately in the range of $4 million to $5 million into the third and fourth quarters of last year. We haven't had to defer anything this year. In fact, I'd say, with dryer conditions, we've been doing a lot of work on the facilities during this period. But you won't see any deferrals this year in the current quarter.

Next question is from Juan Plessis of Canaccord Genuity.

You indicated in your comments that you feel it's a good time to be buying hydroelectric facilities and that there are significant opportunities in the market. Can you talk a little bit about what you're seeing in terms of available assets and valuations and what your appetite would be in terms of the amount or size of assets that you might be willing to purchase in the current environment?

Well, I think without being too specific, what we're seeing is that today, there's probably 2 big drivers: one is, obviously, gas prices have pushed power prices to very low levels that really I think for BREP has very little impact considering that 99% of our portfolio is contracted. However, it does sort of provide opportunities to buy at much better value certain assets that have been out there for sale at some point and provide just better long-term value for us going forward. I think the opportunities are across different segments. I would say there are -- we've been very happy about seeing sort of hydro plants come to markets such as the Tapoco or I should now rename them Smoky Mountain hydros. Those facilities in Tennessee, I think are good example of things that -- assets that are non-core to certain owners that have owned these things for 70 years, but today, are in a position where they're selling them. I would also say that wind opportunities or wind opportunities about -- I would say a significant portion of the wind parks in the U.S. are owned by financial or non-strategic sort of owners, and a lot of that is actually I think today we see lots of opportunities on those fronts. So a combination of low prices plus I think increased deal flow on the hydroelectric front. And again, continued -- I would say continued sort of opportunities on the wind side in North America, particularly in the U.S.

Okay. Now shifting gears into the Q2 results. You mentioned in the supplemental that generation was down primarily due to lower inflow at hydro facilities, can you tell us what the other reasons were for lower generation levels? Were there any outages either planned or unplanned in the quarter?

There was no unplanned outages in the quarter. And so, maybe the use of the word "primarily" was maybe not intended to convey that message, but it was really just lower inflows in the quarter that led to lower hydrology.

Okay. And just lastly here, with respect to the recent acquisitions of hydro assets in the U.S. Can you tell us what your plans are for recontracting those assets when the contracts expire in about 2 years?

Yes. The facilities are fully-contracted up to midpoint of 2014. Obviously, our preference would be to look to renewing some of the contracts that are already in place, but we are going to look at every opportunity and there are -- like we've said, this is a kind of an interesting market with growing demand increasing coal retirements or coal-generating facility retirements, and we feel that in a 1.5 years, that should certainly I think yield great opportunities to recontract this power. But our intent is certainly to try and maximize revenues over time, and considering the current contract level that we actually have until midpoint 2014, we're pretty confident we can improve on that.

The next question is from Nelson Ng of RBC Capital Markets.

Just a quick clarification on the reservoir levels. When you mentioned that they are in line with long-term average this time of year, are you referring to like the 1st of July or more like as of today?

I would say as of today, Nelson. We try not to -- we try to follow basically a rule curve that sort of considers a lot of the constraints in what we can use and can't use of our reservoirs. And what we're telling -- and what we're telegraphing is that those -- the reservoirs are in line with those levels today.

Okay. And then, in terms of the wind generation in the U.S., it was particularly weak in Q2. I think it was about 29% below LTA. Were there any -- I was just wondering whether there were any kind of issues with the commissioning via wind park or was that mainly just due to weak wind speeds?

Nelson, it's Sachin. You're right. I'd say a large portion of the delta actually related to -- in the weeks following commission, we needed to connect through the transmission grid, which was also being upgraded and which was out of our control. So there was a little bit of a reduction in our volumes related to that rather than anything related to the capacity factor of the wind facilities. Those issues have now been resolved. They were onetime issues. And going forward, we wouldn't expect to incur those.

Okay. And then, just on the hydro facilities that were acquired from Alcoa. When will the upgrades be completed? And roughly, what's the remaining CapEx?

Well, I think we expect that, again, many of the -- much of the work has been completed. I think there are some remaining items that are going to be undertaken by the existing contracts and contractors that were in place. Those projects, I believe, should be completed by the end of this year. And therefore, we should be able to report on progress on those projects as we go into the third quarter. Like I say, we don't see any issues on that front.

Okay. And then, just one last question. In terms of hydrology, have you considered getting hydrology insurance? Or do you feel that portfolio is diversified enough?

Nelson, yes. Look, when -- with the formation of breadth and the broader asset base and in particular the stability from Brazil, I think the asset has enough diversity that we don't need to rely on insurance. And cash flows, even in a period like this that -- where volumes are low, are still significantly positive. So I'd say, we certainly don't need the insurance. And that, combined with over $1 billion of liquidity, puts us in a position where I think we're very comfortable at this stage.

Next question is from Matthew Akman of Scotiabank.

On the quarter, when you guys mentioned that hydrology impacted the most where PPA prices are highest, what region or regions specifically are you referring to?

Matthew, so we have higher PPA prices in a number of our assets, notably in Ontario, we have in our Mississagi Plant, we have a contract at $103 for example per megawatt hour relative to a portfolio average that's approximately $88 to $89. So I'd say when -- volumes at Mississagi were particularly lower than sort of the volumes across the balance of the portfolio. And when you're earning $103 a megawatt hour there, it impacts your average price that you achieve in the quarter. So that would be an example of the type of asset that would've contributed to the decline.

And that asset tends to turn pretty quickly on rainfall doesn't it?

It does, yes.

Okay. Previously, you guys had a philosophy of using a reserve-type account relative to shortfalls that would occur in the short term due to hydrology, I guess, now Sachin you're saying your philosophy is kind of to rely on the credit facility and other liquidity in the short-term to smooth these impacts, is that correct?

Yes, I'd say, look, we're sitting on in excess of $250 million of cash in the balance sheet. We have ample liquidity. So using our reserve facility when you're sitting on significant cash and liquidity isn't necessarily the most prudent thing. And I would say that the added diversification of portfolio just makes it less important to us to have to draw on our reserve facility, which over time we'd have to pay back.

You have the option of leaning on the reservoir levels in order to smooth these impacts, is that something that you guys think about versus using cash or credit facilities? And how do you think about that?

We do. This is Richard. So we do look at managing water. I would say, these days, we look at managing it sparingly. I think making sure that we maximize the value of the water in our reservoirs is always top of mind for us. So at the same time, it's more value decision than it is trying to mitigate highs and lows in hydrology. I would say most of managing highs and lows in hydrology are about ensuring that we have appropriate liquidity and that when we actually sort of have periods of low hydrology that we can compensate with -- for that with periods of higher hydrologies. So LTA has always been the best measure for us to actually manage too, and our reservoirs are clearly a tool that we can use to mitigate, but we mainly make decisions based on value of the water in the reservoirs and trying to maximize the optionality of that water.

The next question is from Andrew Kuske of Crédit Suisse.

Just a question relates to the wind power generation in the quarter. Did the hot weather and really the less dense air as a result of the hot weather affect your production on the wind facilities at all?

Not to the degree that you're alluding to. I'd say, it really comes back to what I was saying too earlier, which is we commissioned a couple of facilities in California and the transmission provider was upgrading their system at the same time. So I'd say that the majority of the impact was really the -- just the time we needed to take to actually allow us to connect to the grid post-COD, and those issues have been resolved, Andrew.

And Andrew, if you take those back -- the impact of that out of the equation, I would sort of tell you that hot weather or otherwise, our wind farms across the portfolio performed pretty well in line with our expectations.

Okay, that's very helpful. An then just in the context of having a bigger, broader portfolio, which you have post the transaction of the merger. Do you look to have things like solar in your portfolio in the future? Just -- I mean, if we look at this last quarter, the hydrology production was well below LTA, which, I'd say, somewhat expected. But buffering that, you could have, say, solar in your portfolio in certain areas where when you do have hot -- unusual hot weather and dry weather, you benefit from that.

Listen, I think it's a good question, Andrew. Like we are looking and have been thinking about sort of solar power. I would say we're not at a point where we're going to make a significant capital commitment to that particular technology. We do recognize, and I've said this I think in -- over the course of the last year that we recognize that solar has made significant progress in reducing its cost. We still sort of look at the required incentives to be put in place and what that means in terms of long-term value. We just see, again, better value in wind and hydro assets, and we're actually quite -- I think we've grown to actually have really good systems to manage the actual ups and downs of those 2 technologies and manage the volatility of production that results from resource that whether it be wind or hydrology that varies from quarter-to-quarter. So solar is something that is of interest, but I would say we're far from investing in that space at this time.

Okay, that's helpful. And then if I may just one final question on the recent acquisition, that would be Alcoa assets. When you look at the contracts rolling off in 2014, what do you believe will be the driver of the underlying prices on new contracts? Will it really be renewable portfolio standards in those states and really the need to have renewable generation? Or will it be natural gas prices driving the economics of those facilities in the future?

Listen, 2014, we see particularly I think in this area continued pressure on trying to close coal-fired facilities, which is, again, if you don't build anything other than that, that puts a lot of pressure on prices. I think gas-fired facilities will be the likely bulk power provider in this particular area. So our expectations, maybe not mid-2014 because it will take some time, I believe it's not that sort, it won't turn around on 18 months. But I do think that over the term of let's say 3 to 4 years, at the very least, new gas-fired facility-type pricing should emerge. And what our objective is, is to actually get better than that because we believe that renewables should attract the higher price simply because of the characteristics of renewables, which I think that thesis has been proven right in most jurisdiction today when you compare at current prices.

[Operator Instructions] The next question is from Sean Steuart of TD Securities.

Just wondering if you can speak to, I guess, the growth opportunities. You touched on wind in the U.S. and hydro, I guess, all over the place, but previously, you'd spoken about Australia and New Zealand being maybe a focus for international growth and then Brazil biomass and Europe on more of an opportunistic basis, I guess, in wind and hydro in Europe. Can you talk to a little bit of -- give a little context I guess in the international growth opportunities you're seeing or looking at right now?

Sure. We continue -- and I assume that by international, you don't include Brazil. We continue -- we bought -- we probably have stayed silent on this call, but we bought a 6-megawatt hydro facility in Brazil during the quarter. Again, small facility, but at the same time, everything counts. So when we look at Brazil, we continue to see lots of opportunities and growing opportunities there too. Internationally, I would say that we've done a lot of work, including I think some meetings over the quarter in Australia. To be precise, about 31 meetings in a week. So we've met a lot of people there. We're actually confirming some of the work that we had done on a tabletop basis. And I think it is a very challenging market, although very attractive for a lot of different reasons. Brookfield has invested there in real estate, has significant positions in infrastructure. Our view was, can we leverage that into a Renewable Power business there. I would say there are lots of challenges, and I would say our enthusiasm has gone from very positive to probably slightly less positive to be quite clear. We're not saying we wouldn't invest there, but it is very challenging. 3 retailers control 80% of the market. So as trying to enter that market, there are a lot of challenges for us. Turning more to Europe. There has been clearly a lot of activity in Europe and certainly lots of opportunities. Again, our focus is not necessarily investing in Europe, but really sort of building relationships with European companies that have assets across the world, that would be of interest to us. So that is really our first priority. Our second priority is to look at areas where we feel more comfortable about European risk and look at smaller portfolios that may allow us to have a, call it, an early start to a platform in Europe around certain technologies that we like, which again haven't changed, still hydro, still wind. And if we can do things around that, that on a risk-adjusted basis, works for us, we kind of like those opportunities. So again, we're not saying Australia is not a good place for us to invest, it's just we're trying to sort of tell you that we've now recognized that it's probably going to be a bigger challenge than we thought. At the same time, Europe is maybe a better opportunistic investment sort of landscape today than we thought earlier in the discussions we've had with all of you. So that would be kind of the 2 areas of focus at this stage internationally.

The next question is from Steven Paget of FirstEnergy.

There has been a slight downward revision in your total LTA generation with Q2, it's 18,115 gigawatt hours and it was 18,292, is that just affected by the actual generation of this year's second quarter?

Yes, it's based on the actual generation in the second quarter. And revising, we have a gas facility in Ontario, which we just -- we consider LTA to be equal to what we plan to generate in the quarter.

The next question is from Ian Tharp of CIBC.

I wanted to follow up, Sachin, on your comment regarding the transmission disruptions in California around new wind. Is there any type of release that we might see given that it was beyond your control in terms of the work done by the transmission provider that we might see in the future quarters?

No. Unfortunately, that is the risk that we wear in our contractual terms with our off-takers, so it happens from time to time when you're bringing an asset online. And typically, it's not something that we experience on a regular basis, but in a region where new wind is being developed by us and by others, the transmission grid has to be enhanced accordingly. And so, if there is availability issues, it's on our account. Like I said, it's all been resolved, and we don't expect it on a going forward basis, but it did impact the first few weeks of operation of the assets.

Great, helpful. And just staying in California, Richard, we talked in quarters past around your recent acquisition activity there, your growing comfort in the state and the potential for further acquisitions there. So I wonder if you can speak to I guess the non-international opportunities, perhaps just in the U.S. right now.

Well, Ian, we continue to be very enthusiastic about the Western U.S. market, particularly California. But there's a few areas around that particular area that we are looking at. As you know, there is a significant -- where Coram and Alta VIII are, there is a significant amount of wind that got built there, and a significant component of that wind is owned by financial investors that we think at some point will look to divest of those particular wind parks. So continue to think that where scarcity exist, that's where we want to actually invest. It may be more difficult, but so far, Coram and all of our investments in California, particularly in the Tehachapi area, has turned out to be a very wind-friendly region. I think we've actually been extremely pleased with our acquisitions and how things have worked out there. So we continue to be bullish on that area. I would say in the Northeast, again, similar landscape, less so than I would say Western U.S., but I think similar landscape on the wind front. There continues to be opportunities there that we think we can be the right acquirers of those wind farms. I think at the same time, some of the hydro facilities, again we've now sort of completed or are in the process of completing, Tapoco. We believe that there are other wind or other hydro facilities that may come to the -- to market in particularly the Northeast area. So stating that, I think, hopefully, we'll be able to make sure that we capture the best opportunities for shareholders, and I think North -- Northeast or West is still our focus.

Great, helpful. And then finally just turning to Brazil, you talked a little bit about your acquisition there and your construction. So I wonder if you could speak to the contracting environment there now, what you're seeing in terms of I guess state-run opportunities and then, also the industrial demand that you've spoken about in the past.

Well, I think, GDP growth in Brazil continues to be fairly sort of weak. I think industrial growth in electricity, particularly over the last 2 quarters, has been about 2%, which is uncharacteristic for Brazil. It usually is, I would say, 4% to 5% or 6%. So we continue to monitor that situation very closely. I think it's also -- there's significant capacity in large hydro projects that are expected to come on stream. We continue to monitor that and see that delays maybe sort of involved, and that's going to push that -- those projects further down in terms of their schedule. All of this points that 2013, '14, things should tighten up significantly in Brazil, or at least that is our expectation. And that is where we have maturities. We have about 1 terawatt hour across our 18 terawatt hours of total portfolio that comes due in that jurisdiction. And that is what we're hopefully going to be able to capture higher prices. That said, this is important to understand that today, the price we get under our existing contracts in that jurisdiction is that -- are essentially about where we could recontract today. What we're hopeful of is to increase our ability to actually capture higher prices. So again, the market construct here really is currently I think prices are a little soft. We expect prices to firm up in 2013, '14. And our contract maturities or should mature about the right time to actually recontract them at higher prices.

Okay, great. And so, in terms of I guess the bid tension you'd find around pricing in that 2013, 2014 timeframe is -- maybe talk a bit to the -- that the sources there, one might be the commissioning of these delayed hydro projects and I supposed the other is some economic recovery in the growth rate you've referred to. So are there any other structural things in Brazil that would be leading to more bid tension once you recontract?

Listen, I think you probably hit on the main ones. GDP growth recovery, industrial growth, investment from the Brazilian government in infrastructure that will certainly I think fuel much of the GDP growth that is not showing up today. It is still a very positive economy. We can't lose sight that today this is an economy that almost has full employment, that 5% unemployment, that historically in Brazil has never occurred. So when we look at it, we continue to be pretty bullish on the economy in Brazil. We're just saying today, it's kind of slowed down and we're watching very closely. Our expectation is, demand will recover. At the same time, even when we look at sort of the anemic growth today, there's still going to be a pretty tight market in 2013, '14.

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 very much for joining us this morning. And again, we look forward to talking to you again in Q3, and thank you again for joining us.

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