Ladies and gentlemen, thank you for standing by. And welcome to the BEP Second Quarter 2020 Results Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to introduce CEO, Sachin Shah.

Thank you, operator. Good morning, everyone and thank you for joining us for our second quarter 2020 conference call. Before we begin, I'd like to remind you that a copy of our news release, investor supplement, and letter to unit holders 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 are encouraged to review our regulatory filings available on SEDAR, EDGAR and on our website. This morning, I will provide an outlook on the business and an update on our recent growth initiatives. After my remarks Wyatt will provide an overview of our operating results, as well as an update on our balance sheet and funding plan. Following our remarks, we look forward to taking your questions and comments. Over the past 20 years, we have built a scaled global renewable power business with over $50 billion of operating assets and an 18,000-megawatt development pipeline and deep expertise across all major renewable technologies. The world continues to be in the early stages of a global transition to the decarbonization of electricity grids. This shift, which is fueled by a push to reduce carbon dioxide emissions to meet increasingly stringent carbon reduction targets, and solar and wind power becoming the lowest cost easiest to build providers of bulk power will require significant investment over the coming decades. Accordingly, there is considerable room for our business to grow for many years ahead. And as subsidies decline or fall away, the opportunity will increasingly favor investors like ourselves, who can drive value and enhance cash flows from our global scale and depth of operating expertise. We believe that we have established…

Thank you, Sachin, and good morning everyone. During the second quarter, we generated FFO of $232 million or $0.75 per unit which is up slightly from the prior year as the business benefited from recent acquisitions, strong operational performance and execution on margin enhancement initiatives. On a normalized basis, our results are up 19% over the last year. With an increasingly diversified portfolio of operating assets, limited off take or concentration risk and a strong contract profile, our cash flows are highly resilient. While generation for the quarter was below the long-term average driven largely by drier conditions in New York and Colombia, generation so far this year has been roughly in line with long-term average. As we have reiterated, we expect this type of resource cyclicality and therefore do not manage the business based on under or over performance of generation relative to the long-term average in any given period. Our focus continues to be on diversifying the business which mitigates exposure to any single resource, market or counterparty. We continue to be focused on maintaining a highly diversified investment-grade customer base with over 600 customers around the world under long-term power purchase agreements. For example, our commercial and industrial counterparties which comprise less than 20% of our generation are well diversified across regions and sectors with our largest C&I customer representing only 2% of our total contracted generation. Our contract profile remains strong with 95% of total generation contracted in 2020 and a weighted average remaining contract length of 15 years. Therefore, our cash flows are well protected from exposure to short-term price volatility and are expected to remain stable over the long-term. Turning to our segment results. During the quarter, our hydroelectric segment delivered FFO of $193 million. In North America, we remain focused on securing short-term…

[Operator Instructions] Our first question comes from the line of Sean Steuart with TD Securities.

Thanks good morning. A couple of questions, Sachin with respect to your comments on solar cost declines and this being a focus increasingly for BEP going forward. Can you give us some thoughts about how you expect costs and capacity factors for the technology to trend from here? When I reverse engineer the economics of your project in Brazil, it looks like the intent is to build that at less than $0.5 million per megawatt which would suggest ongoing declines. How do you think about the longer-term cost trends for the technology and efficiency of the technology as well?

Hey Sean, sure. So I'd say, first of all with Brazil and often in developing markets, I would just remind you that construction and labor tends to be a lot lower than what you would see in North America and Europe. So a big portion of that is construction and labor costs. That being said the U.S. is also weighed down by tariffs. So you kind of get it on both ends. You get cheaper overall build costs in most markets around the world relative to the U.S. because of tariffs. And then when you add in labor and overall construction costs, the developing world, costs come down to that level that you are ascribing. In terms of where we go from here, what I would say is, two things we're seeing in the solar market. One is that the manufacturers largely in China continue to make significant advances in manufacturing, which means that, they will continue to be able to deliver some cost savings; but more importantly, what they'll be delivering is, higher capacity factor panels and larger panels which have just a better performance overall which means less degradation, longer lifespan, lower ongoing maintenance costs. And if you combine that with our ability to operate and maintain plants in-house do much of the development work on our own, it just gives us a huge advantage. And plus, look we have a business in China. So we have a very strong relationship with a lot of the panel manufacturers. And given our scale, we can drive a global procurement program which -- if you're solely a U.S. solar developer or solely a European developer, you just cannot procure in the scale we can. And therefore we have a number of advantages. And we think that those advantages will allow us to differentiate ourselves over the coming decade.

Thanks for that detail. Wyatt, a question for you, there was a $22 million positive contribution in proportion of adjusted EBITDA from the corporate segment. Can you give us some context on what that relates to?

Yes Sean. So as we mentioned at the last quarter, we have undertaken some public market activities. And really what that reflects is some of those activities in the quarter just given where markets traded to we exited those positions and were able to realize some gains.

Yes. One thing, I would just add to that is in our business we are always rotating capital. Sometimes we're selling assets. Sometimes we're in the market of buying shares. We sometimes buy debt at distressed levels. And we're selling those out. And the thing that you should be reminded of is that, that is just normal course rotation of capital for us buying investments for value and then selling them when markets normalize. Obviously with all the disruption we had in the quarter -- last quarter given the economic shutdown, we picked up significant securities at pretty compelling valuations. We sold some of that, but not all of it. So we booked the gains. But it's no different than us selling a half interest in the solar facility or selling -- bringing a partner into one of our hydros. The only difference is, sometimes the accounting shows up as a gain or shows up as equity. I'd say most importantly what you should realize is, we're creating value for our shareholders by doing this type of activity and it's stuff that we've done for many years now.

Understood. Okay, thanks for that, I will get back in queue.

Thank you. And our next question comes from the line of Rupert Merer with National Bank.

Good morning.

Good morning Rupert.

Sachin so you talked about the move to solar. How does this change your forward view on power prices both the cost of energy and the cost of capacity? And what do you think are the implications for your existing assets?

Yes. It doesn't really change our forward view. I'd say, if you asked us seven to 10 years ago, what our views on power prices were, I'd say generally we were fairly bullish, largely driven by underlying fundamentals of gas in the ground. Obviously, all of that's evolved over that time. Our thinking has evolved around just the cost of wind and solar coming down and really representing the marginal cost of power. And what you've seen us do over the last decade is transition our business very quickly into that dynamic, such that we have a scaled wind and solar business. I think, what we're saying to you now is that that trend continues. Power prices should on a pure energy basis stay low for the foreseeable future. What it means though is that, the value of storage and capacity continues to go up and continues to be deeply valuable. And if you look at the pump storage facilities we own or the capacity payments or what I'd say ancillary services revenues that we earn in our hydro fleet. They have gone up for 10 years now and have really compensated against declining energy prices. So, that being said, I think our view continues to be the same, where energy -- stand-alone energy prices will be low because wind and solar is very economic to build-out. But given that they are intermittent technologies, if you have the ability to store power, to provide backup power, to provide stabilization services to the grid, those services are deeply valuable and increasingly becoming scarce. So, I think we actually have a really nice hedge in the business. And given the complementary nature of the assets we have, we get a lot of diversity not only technologically, geographically but also from a revenue -- pure revenue stack perspective, we have a lot of diversity of the type of revenue we earn, but no change in outlook of pricing. We're not more bullish. And what you'll continue to see from us is a priority on contracting out our power.

So, if you move into building more solar, can we imagine that you'll want to maintain the existing storage assets you have and maybe build out more storage in parallel with solar?

For sure, Rupert that is a key part of our strategy that having this complement of different technologies, it allows us to provide better overall solutions to customers, whether those customers are governments utilities or through our C&I business because, we can provide 24/7 power with backup capability by bundling different technologies we have. So, it is pretty important that we maintain that diversity and it just gives us a more valuable product to the end customer.

And then just a quick follow-up housekeeping question. It seemed like the solar generation this quarter came in significantly lower than the LTA. Was that related to a radiance, or did you see some curtailment in your fleet?

Yes Rupert, its Wyatt here. No you're exactly right. That all had to do with the resource the underlying resource. We really didn't see any meaningful curtailment across our fleet. As we've mentioned before with respect to the markets we're in, our assets as renewable assets generally have priority dispatch onto the grid. And so curtailment wasn't really a meaningful impact to our business this quarter.

Thanks. I’ll leave it there. Thanks very much.

Thank you. And our next question comes from the line of Rob Hope with Scotiabank.

Good morning everyone. Just thinking about the M&A market, debt levels seems elevated, but there's a lot of liquidity out there in the market. How do you think this plays out in the future? And could we see you acquire some distressed assets maybe in 2021 when markets start to normalize and liquidity normalizes?

Yes. I mean look, it's been an expensive highly competitive market for 10 years now. Nothing's really changed. I think, maybe if you asked us three or four months ago, we would have thought we were turning and the opportunity to acquire for deeper value was becoming more interesting. But with all the stimulus and government support, that quickly went away. I would say, our playbook really allows us to always look for deep value distress, but we also do things that differentiate ourselves through our operations, like the Brazil deal, we announced. And therefore we've stayed away from the highly competitive low risk; low return type investments that may be others have had to go into. And we'll continue to stay away from those types of opportunities. And what I'm really getting at is those sort of single-digit return type opportunities, where there really is no differentiator, other than a cost of capital. That's not our playbook. It's not where we focus our time and effort. For us, if we can drive operational enhancement and create value by doing something different, then that's really our area of focus. And you can see that from both transactions, we highlighted this quarter they really signified that strategy.

All right. That’s helpful. And just to follow-up on Sean's question. Just the public securities that you're buying in Q2 and you've sold a portion of. Are you still looking to get toeholds in certain FTES, or is it that the market has rebounded a little quicker than you anticipated?

Yes, look they did rebound quicker than we anticipated without a doubt. So, the short answer is, we're pretty disciplined as an investor group and we will sell-out if we don't see the room to keep acquiring for value. From a total strategy perspective, it's always been a core part of our -- the way we originate transaction flow. Look, ironically, while we were selling out securities this quarter we completed the final stages of the TerraForm merger, which it also started out as a total strategy four years ago. So, I think what you should expect is that it will always be a part of our strategy. We'll always be in the market looking for deep value. But from time to time if we can't secure it we'll sell-out and hopefully realize some gains for shareholders.

All right. Thank you for the answers.

No problem.

Thank you. Our next question comes from the line of Mark Jarvi with CIBC Capital Markets.

Good morning. You guys have sort of been involved in advocacy for maybe looking at a carbon tax in the U.S. market. Do you guys have any updated thoughts on that in light of maybe a change in administration or a preferred structure on what you'd like to see if they went forward with the carbon tax?

Look we don't get too up or down based on changes in politics or regime or governments. When Trump came into Office, we were -- we continue to be bullish on the sector recognizing this trend that we're investing into is a multi-decade global trend and really politics can't stop it based on all the things we've talked about over the years. Obviously, if you get a government coming in that is supportive, that's always good, but we're not banking on anything that is in the form of a subsidy or carbon tax to drive our business nor are we investing assuming those things come into place. So, if they do and it's helpful great. But we have a good business and we know how to invest through different governments and whether we're supported or not we just think that these technologies make sense today and therefore they're going to survive much longer than people's views.

Okay. And then as you continue to grow the solar business just curious how that changes how you guys think about financing your business? Does it change your view on access to medium-term notes or green bonds, or how does that change if the mix changes a little bit from less hydro and a bit more solar over time?

Yes. Thanks Mark. It's Wyatt here. So, in terms of the majority of our financing, as I mentioned in my comments, more than 80% of our financing is at the project level. It's financed on a mass maturity basis. So, it is reflective of the underlying asset. If it's hydro it's a perpetual asset. So, it will be reflective of that. If it's wind or solar it's a finite life asset so it would be an amortizing structure. So, the majority of our financing won't change. It will be just reflective of the underlying asset. In terms of the corporate level, we've always been aware that when we issue medium term notes that we were doing so on the back of a perpetual hydro business. And so over time, we may look to moderate our overall issuance of MTMs to reflect the fact that they are a more finite business. But that's a long way off. We continue to have a very strong base hydro business and so for the most part, we don't really see it overall impacting our financing strategy.

The only thing I would just add is that one very significant change that's occurred in the last five years is that wind and solar in particular solar has a much longer lifespan than the lender community would ascribe to it. And what we're seeing play out in our wind fleet and in our solar fleet is that when these things were typically being underwritten for 25 years the technology is now being built -- the manufacturing specs for the technology are now being built for 35 to 40 years and it's just getting better and more robust. And once you get out to that level, it's largely a perpetual asset. I mean there's component parts in our hydros that also need to be replaced in 40 years. So, I think what's going to happen in our sector -- and I could be wrong, but I think one of the great potential value drivers that changes our business is that over time, wind and solar financings start to reflect a more perpetual asset base. And what happens is if you're running a solar price for 40 to 50 years and you're just replacing component parts over that period it effectively turns the asset into a perpetual asset. And therefore, it's going to start to look and feel a lot more like our hydro business. And once that happens, and there will be an inflection point when this happens, the banks insurance companies and all the lenders who lend in the space will start to gravitate to longer duration interest-only financings and you will see the next leg up in cash flows in our business. And we think that that will happen sooner than people think, almost similar to what happened with our hydro business just 15 years ago when people put their mind to it and realize these are very, very long duration assets that ultimately properly maintained with the right sponsor, can act look and feel like a perpetual asset base.

That's interesting. And maybe just follow-up on that, two things, one, how does sort of resource stability maybe solar or less variable than hydro or wind factor into how you think we're financing them longer term? And then, on the perpetual perspective how does sort of jurisdiction and maybe access to different markets and liquidity from an energy marketing perspective really change how you think about what your dollar should be spent on solar going forward?

So, first of all, wind, I would say wind tends to be the most variable resource, then hydro, then solar. Solar is the most stable resource. And that stability should drive a lower cost of capital in the financing markets. I also think that, because of that my comments around being able to finance them with interest-only long duration bonds, that could be the technology that leads the charge with wind pretty closely behind. In terms of your question around markets and energy marketing obviously for us, it's a huge advantage to have energy marketing capabilities in LATAM in Europe and in North America, because as these projects increasingly age and PPAs, fall off there will be sellers who really just cannot operationally commercializes the back end of these projects. And if we can do it with our marketing capabilities, and our ability to invest the capital needed to bring another 40 years of life to the site that's a real advantage. So again, it all speaks, to why we really prioritize building and investing in our operations, and my comments around these assets starting to look and feel more perpetual in nature. Our view is just that this is sooner than people think. And the technology has really, really matured, as has the entire apparatus that supports the technology from an ongoing maintenance and operations perspective. And therefore, as always, the financing markets should follow. And if that happens, again, we've never factored it into our business but it will be a very meaningful driver of value going forward.

Okay. Thank you.

Thank you. Our next question comes from the line of Ben Pham with BMO Capital Markets.

Okay. Thanks. Good morning. It's a feedback after seven months. I just wanted to touch base. First question is some of your commentary around just where you are right now. I think Wyatt mentioned, you're seeing a ton of growth opportunity I think best positioned in the cycle. So does that mean, when you think about all the tailwinds that maybe just not [Indiscernible] but the renewal energy that you have to [Indiscernible] the growth rates are more at the upper end of your targeted range rather than mid to low point?

Look, what I would say is, our view on this sector hasn't changed in a long-time. I know that maybe if we were on a call five years ago or 10 years ago people were still unsure whether or not this business could grow in size or scale. But the perspective we've always taken is that, the electricity markets around the world represent trillions of dollars of investment opportunity. Generation alone is the largest component of that and has the most transition that has to go through, because it represents significant carbon dioxide output. And so we're in the sweet spot of that because we are global, we can invest across multiple technologies and the disruption and transition in the entire energy supply stack is going to be most felt, on the generation side. So we have believed and continue to believe, that this is an enormous opportunity that we are building our business into and that opportunity will last for 25 years, at least. So I wouldn't say, we think it's bigger today. We thought it was big for many, many years. And what you've hopefully seen is that, we've been able to deliver. And we'll continue to employ the same strategy and playbook, as we build out the business around the world.

Okay. And maybe related to that, when you think about achieving your payout ratio target that 70% of FFO I think a few quarters ago you mentioned, probably a few years. But really when you think about the TERP transaction and some of these other initiatives, that you've done have -- are you of the view now that maybe reaching that payout ratio target is a bit quicker than, what you thought six months ago?

Ben, we're not stressed at all about our payout ratio. Candidly, we weren't stressed when it was 100%. We have always said it's just one indicator of financial health. The more important indicators of financial health are having an investment-grade balance sheet, having a high degree of liquidity, having very stable assets that produce consistent cash flows. It's nice that our payout ratio is down into the high 70s. It gives people lots of comfort. And we'll continue to chip away. But it is not the driver of what we're trying to achieve. And over the years, if I look out over the next 10 years, there will be times where it's 80%. There will be times worth 70%. There might be times where it's 90%. Most importantly though, we will make sure that we have an investment grade balance sheet with a very high degree of liquidity, we obviously have very strong sponsorship with Brookfield Asset Management owning a very large stake in the company. And, therefore, it's one indicator of financial health that we obviously pay a lot of attention to and it's in a great place, but we're not overly focused on it.

I know you had a lot of questions on solar. But I was wondering, can you remind me when you look at solar versus offshore wind. And you mentioned that offshore wind, you didn't want to get into it because of the high subsidization, the cost curve has gone down dramatically. So you don't want to get caught in a situation in 10 years pricing drops and you get some pressure on the other side. So is solar a bit different there where the levelized cost is also dropping, pricing could drop as referenced by an earlier question? Is that compare contrast a little bit different there when you look at the two?

They are different. Look both are mature, both are very good technologies. The difference being on solar what I would say is typically the contract structures on solar, almost everywhere around the world have been much longer than what we've seen in offshore wind. Offshore has typically had 15 years in the beginning. It's in many jurisdictions it's 10 years of contract life and very, very high PPA prices that it's tough to make the bet that they will persist post the PPA environment. It could happen, but it's a tough bet for us to make. The second thing that we wanted to see in that sector is just a little bit more time to understand just some of the impact and implications around the operations of running deepwater or offshore generation. And I would say, the market has really matured. It's done a good job. Would we invest in offshore? Absolutely we would. It would have to be under the right conditions and at the right returns. And what we don't want to do is invest in offshore wind with a bet on the future power price. We'd rather invest in a way where we can drive operational value to create the returns we need to create. If we find that opportunity, we will absolutely invest in offshore wind.

Okay, got it. Okay. Thanks.

Thanks a lot Ben.

Thank you. And our next question comes from the line of Nelson Ng with RBC Capital Markets.

Good morning, everyone. I just had a few questions on the development pipeline. So in Brazil now that you have about three good sized solar developments. And I think for the 1200 megawatt solar facility you mentioned that 75% is contracted. Could you just give a bit of color on the term that that one is contracted for and whether the other two, the 210 and 270 -- sorry 278 megawatt projects, whether those are fully contracted or not?

Yeah. So all three projects have contracts in the range of 20-plus years. And the first two are contracted. The second one is 75% contracted and we will use our client base, our customer base in the country to contract out the balance, which to remind you we have around 600 customers in the country that buy power from us through all of our facilities and very strong ongoing relationships that we can use to lay off the final 25%.

Got it. Okay. And then, can you talk about -- given that you have a sizable footprint in Colombia as well, are you seeing the same type of wind or solar opportunities in Colombia where even if it's not fully contracted you can leverage your footprint to derisk those projects?

Similar. I'd say the big difference in Colombia is the contract market isn't as long as you see in Brazil. Brazil is just much more mature. So you can sign with a counterparty a 12, 15 year contract and that happens on a regular basis. In Colombia, it's more difficult. And, therefore, when you're doing development, you're typically looking for a government PPA to start out with. And then if you have a little bit of exposure left, maybe you don't get a full wrap, we then have a very large marketing group and we are probably one of the, only ones in the country signing 10-year PPAS. So it is certainly an advantage we have, but the depth of the market is just not as strong. So I would say, we probably are -- we're just being more careful in Colombia and you'll see more development in Brazil than you would see in Colombia from our perspective.

Okay. And, like, on that point like for the -- I think two of those Brazilian assets you bought into an advanced development. Is that the strategy whether it's in Colombia or Brazil to get involved at a later stage of development?

Yeah. Typically that's been our strategy for many years is anywhere in the world we're looking more at later stage opportunities. They tend to have the best risk reward paradigm for us. And look, the strategy ebbs and flows. For a few years in Brazil, it was more of an M&A strategy when we felt that there was a scarcity of capital on M&A transactions. Right now we see a scarcity of capital on the development side, and therefore that's been our focus. We'll always be nimble around those types of things. But in general, we prioritize late-stage development and we're not going to burn a lot of capital on early-stage greenfield type transactions.

Okay. And then just one last question. The projects to be completed over the next few years, I think the FFO contribution is about $53 million. Roughly, what's the investment required to achieve that? Should we be thinking, that you invest at 7 times to 8 times FFO multiple to get a mid to low-teen FFO yield?

Less than that. This is going to be a 20%, return on the development stuff it will be a 20% return target. So you should -- Wyatt can follow-up, but your investment sounds a little high.

Yeah. The basic math I would think about, Nelson is that our proportionate capacity on that under construction is around 700 megawatts assume 1 million per megawatts less than $700 million of total capital. You get 60% leverage on that, and then a 20% FFO yield on that. That's going to drive you to your $50 million to $55 million FFO contribution.

Okay. Got it. Thanks.

Thank you. Our next question comes from the line of Andrew Kuske with Credit Suisse.

Thank you. Good morning. Sachin, you mentioned earlier on about partnering and partnerships. Given some of the comments that have come out earlier from, let's call them conventional energy producers, about their aspirations in this cycle for renewable investment, how do you think about alignment for Brookfield on a bigger picture basis with either conventional energy producers or really off-takers and the technology industry is another example where there's a lot of demand for renewables.

Both groups are groups that we are actively talking to, and I would even add oil and gas firms as potential offtakes are also groups that we're talking to. And what I would say is this is all part of an energy transition thesis that's happening or trend that's happening. The technology firms have very stringent carbon reduction targets, because of their supply chains and their datacenters, which are heavy consumers of conventional thermal generation. The oil and gas firms obviously by the nature of what they do produce a lot of CO2. And traditional conventional power producers, which have coal and gas in the ground, are also looking to put capital to work in renewables. We are actively talking to all three groups looking for ways to partner to help with the broad thesis around energy transition. I would say in many respects that was part of how we got involved with TransAlta last year, was to help them with their transition story. So, I think given our capabilities and given our scale, we could be a really good partner around transition where it's a big area of focus for us. And I think to the extent that we can do it in a way that our investors understand that there is a bridge to a greener place and that we're part of that story that could be a really compelling area of growth for us.

Okay. That’s helpful. And I guess maybe just the context it's taking you 25 years to build the company to where it is now. And there are some players out there that have talked about trying to add like 2.5 Brookfield renewables within a 10-year period of time, which is a big aspiration. Do you see that as a big opportunity? Do you clearly have and I'm not trying to be patronizing about it, but you've got a big global footprint and you could be poised for accelerated development. You're not coming from a standing start, right? And how do you price that in the energy transition for a larger player like in the energy producer space?

Yeah. So first what I'd say is that our business -- first from a trading perspective, our business has generally always just reflected the in-place business and growth has been something that people -- investors have struggled to get their minds around in spite of the fact that we continue to deliver growth. I think what you're getting at is that the growth will not only continue, but could accelerate because of the shift that we're seeing from very large corporations that were previously doing things like oil and gas development and exploration moving into renewables. I'd say two things. One is I think it's excellent. It just adds more credibility and capital to the sector and it will drive increased opportunity for us, because there's a lot that we can do that those who are starting from scratch just cannot. Number two, we could be a great partner to those organizations and do things together, so that they're not starting from ground zero, but they're working with somebody, to your point, who's been at it for 25 years. And number three, if those investors are looking for bulk or scale, we could sell into that trend, mature assets that we have on our balance sheet and continue to build out the business like we always have. So there's a lot we can do because of that. And to your comments about their aspirational targets, I think, they are aspirational. And if they can achieve them, more power to them, this is a tough business. We've said it for 25 years, as you've noted and it takes a long time to build it properly.

One final one, if I may. And it's just -- you've mentioned solar cost. We've seen it plummet over the last 20, 30, 40 years, if you want. How do you think about battery costs? And how does that fit into your portfolio?

Yes. We have a few batteries in the portfolio, that we acquired largely in wind projects, actually one also in a hydro facility that we have, because either the existing infrastructure reduced the costs and made it competitive, or because we had some high-priced PPAs that let us invest in the batteries and secure that PPA price for more hours than we could otherwise achieve. And therefore the returns worked. But batteries continue to be expensive and I think will take time to properly commercialize. The biggest difference that we've seen is that batteries aren't attracting the subsidies that were given to wind and solar in the early days, that helped drive capital into manufacturing and R&D. And therefore what you're seeing on batteries is the vast majority of the R&D and capital going in is really coming from the transportation sector, as opposed to from a pure electricity application. So I think batteries will absolutely be a key component of generation and stability 10 to 20 years from now. It's just the path to get there might be slower than what we saw with wind and solar.

Okay. That’s great. Thank you.

No problem. Thanks Andrew.

Thank you. And our next question comes from the line of Anthony Crowdell with Mizuho.

Hey, good morning. If I could just follow-up on an earlier comment. If I looked at slide six in the deck. Can you give a percentage by generation, I guess, is there a sweet spot that you're going to manage to? And also, if you think about how hydro present this nice natural hedge for declining power prices, because of some of the fixed payments or capacity payments, are you limited to how much you could add the other source of generation, so that that natural hedge is still sizable for your portfolio?

Yes. Thank you for the question, Anthony. We've got this question a lot over the years. Look, we're not targeting a certain breakout between the technologies. We're a very opportunistic organization. And we will grow all three segments. To the earlier comments, we'll likely add a couple more segments in the future, whether that's offshore wind, whether that's battery storage, as those technologies evolve, mature and provide an investment opportunity for us. I think what we are more interested in, is having the ability to move our capital across the different technologies where the deepest value opportunity presents itself and being able to buy in bulk across portfolios that have different technologies within them. Around the hedging and the diversity, we think that if we keep growing all of our segments, the natural diversity that that presents actually gives us a higher quality cash flow stream for our investors, because you have more things working for you. But what I would say is, if you look forward, solar will be the segment that should grow the fastest. Wind will be second and hydro will be third. They'll all grow, but that proportion of hydro will likely shrink over time, just on -- not because we're selling the hydro. In fact, it should grow, but it will be growing at a lower rate.

Great. Thanks for taking my questions.

No problem.

Thank you. And our next question comes from the line of Naji Baydoun with iA Securities.

Hi. Good morning. Just a couple of questions. I guess, following up on Nelson's question. Outside of Colombia or Brazil, just wondering what markets you think would have the most potential to build out the types of solar projects you're targeting today?

Today we're adding a lot of development through our business X-Elio in Europe. So that's a big area of growth for us, European solar, in particular in Spain and Southern Europe. We are, obviously, in Latin America we have, active development in the United States. The emerging markets I'd say, the biggest two that we focus on are India and Brazil. And both markets have very, very strong solar potential. You're starting to see it in Brazil, but India will quickly get there, just given its solar resource, its sun resource. We're focused on all of the markets. They all have different risk reward profiles, and we want to make sure that we also manage our exposure to emerging markets in the way that we've always communicated to our investors. So we focus on all the markets to balance out the portfolio.

And I guess, more broadly on your positioning in solar. When you think about transforming or transitioning your business, what does becoming a predominantly solar company mean to you? Obviously, faster and shipper build-out of projects, let's say, versus hydro, taking on maybe earlier stage projects because the returns you're targeting. And also maybe you made a comment about not selling hydro assets. I guess part of your funding strategy is also asset sales. I mean we should expect maybe more wind asset sales going forward relative to hydro and solar?

Okay. Again I'll make a couple of comments. One just on sales and things like that we're entirely opportunistic. It doesn't mean we'll never sell hydro. It doesn't mean we'll never sell solar. We're going to sell into markets that we think -- where we think we can sell at a value that goes beyond what we could create being an owner. In terms of transitioning the business, really, we've already transitioned the business. I think five years ago we started to, maybe seven years ago we really started to focus on building out the operating depth that you need for both wind and solar, hiring people with strong expertise in those areas, taking some of our most well-seasoned engineers and making sure that we had a good handle on the technical issues around those technologies. And then really bringing a lot of our knowledge from hydro operations to bear into wind and solar. And what I would say is today we have over 3000 megawatts of solar. If all we did was solar that would be a pretty large business in its own right? Similarly, wind we have almost 5000 megawatts of wind. If all we did was that that would be a very sizable business in its own right. So we've already transitioned and our operations have very, very significant depth. The amount of experience we have in these technologies with our people is very strong. And therefore, we feel very comfortable growing each of those lines of business without the need to hire or build out a certain type of capability.

Okay. That’s great. Thank you. Maybe just a final question for Wyatt. You've been drawing down your interest expense or your financing costs lower and lower. Just wondering how much more run rate savings do you think you have there or that you're targeting going forward maybe more refinancing in TERP or other initiatives that you want to conclude over the near-term?

Yes. What I'd say is we're constantly looking to optimize our cost of borrowing. We are also focused on fixed rate bonds. So the vast majority of our borrowing in place is fixed rate. So the opportunity to refinance that. There may be opportunities here and there but because of the make hold that would be factored in it's not something that we would do in broad scale. But in terms of the maturities over the next three to five years, we're actively looking to push those out and get duration across our portfolio. And as a result, we would benefit from lowering our borrowing costs. So we'll continue to see that as a benefit to our business but I don't want to position it as a sizable drop in our financing costs because of the fixed rate debt we have in place.

Okay. Thank you.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call back to CEO Sachin Shah for closing remarks.

Thank you everyone. We appreciate your ongoing support and your interest in the business. We look forward to giving you an update next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.