Connor Teskey: Certainly. So one of the competitive advantages and something we’ve been very proud of over the last several years is the performance of our centralized procurement approach. And via that group, we’ve been constantly diversifying our ability to procure panels from different sources that give us a lot of flexibility as we manage through what is a very fluid situation in terms of tariffs and trade actions to the United States. We’ve certainly done some obvious things increasing our procurement from domestic manufacturers within the U.S. and things like our investment in Avaada, which is beginning to produce solar panels itself in India, put us in a unique position where we don’t see the current environment slowing our growth profile in any way.
The one additional point that I think it’s important to recognize when it comes to the headlines around equipment procurement and solar panels is around the world, solar panels are — in markets outside the United States, solar panels are cheaper today than they’ve been at any point in history. This really is a tale of 2 worlds, if you will. You’ve got the dynamics in the United States that are impacted by the trade discussions and the tariffs, in the United States, solar panel prices have come down materially in the last 12 months. But outside of the United States, solar panel prices have come down dramatically. And that is obviously very, very constructive to our broader business and the economics we can get out of our projects.
Operator: Our next question comes from the line of Rupert Merer with National Bank.
Rupert Merer: Can you give us a little more color on the scale of the market opportunity for power and data? And how much of your growth could come from data markets in the future. And I suppose if you look at the overall market for power, we’re seeing drivers from reshoring, electrification, population growth. How much of that growth do you think can come from data?
Connor Teskey: Thanks, Rupert. Maybe let’s tackle this a slightly different way. The dynamic in the market today is very simply, there is an imbalance between supply and demand. There is far more demand for incremental new build in particular, clean power than there are available projects. And that is a dynamic that we do not expect to change for years or potentially decades to run because as you say, we’ve had these long-standing enduring trends that were driving electricity demand whether it be energy security, whether it be the electrification of industry, transport, residential, but all of that has just been multiplied in the last 12 to 24 months with this huge incremental driver of demand, which is data centers to support AI and cloud compute.
And therefore, in terms of how much of our growth is going to go towards supporting the tech sector, I would say, a very meaningful component but our business continues to be very, very well diversified. But the nature of the current environment is that incremental demand from the techs is really lifting all boats. And one thing that we are seeing on the ground across all of our businesses is that incremental demand from the techs for whom procuring power is on the critical path to growth, those companies are getting a lot more constructive around price and terms in how they procure power.
And quite frankly, they’re dragging the rest of the market with them and creating a really, really robust and constructive environment to be a renewables developer, whether you’re contracting with a tech company or anyone else. So while we do expect a very large and growing portion of our business to be supplying this incremental tech demand, the point that we like to highlight is this incremental tech demand is supporting the entire sector regardless of who your counterparty is.
Rupert Merer: All right. Great. And looking at your framework agreement with Microsoft, any color you can give on the typical terms you might expect in your contracts, maybe looking at contract duration or ability to index your power price. Any color?
Connor Teskey: Yes, certainly. So the way the framework agreement works is it aligns one of the largest, if not the largest, corporate procure green power with one of the, if not the largest, producer and provider of green power. And it makes it very, very efficient for us to work together because we have essentially agreed on a framework PPA under which we can offer Microsoft projects to meet their demand going forward. The important thing we would highlight about this agreement is it’s really in line with our historic development approach. We — the final prices in these PPAs and terms in these PPAs will be negotiated between us and Microsoft to reflect the cost of construction and financing at the time, and to ensure that they are within our target returns as we have done with Microsoft over the gigawatt of transactions we’ve done with them in recent times.
Therefore, we expect the contracts that we execute under this agreement to be very much in line with what we’ve done in the past, long-term contracts, 15 to 20 years plus inflation-linked at agree to prone prices that allow us to achieve our target returns.
Rupert Merer: My final question here may be a question for Microsoft. But when you’re working with Microsoft to develop power solutions to support data centers, how important is the cost of power, meaning are they looking to develop data centers where power is cheap? Or do you think there are more important considerations for the location?
Connor Teskey: No doubt. That is a question for Microsoft. We wouldn’t want to speak for them. But perhaps what we can share is what we are seeing in the market, which is — and again, apologies to really be driving on, on this point. The supply-demand imbalance for power is very dramatic right now. And therefore, the accessibility to power, having comfort that the power is going to be delivered on time at scale in order to not compromise your growth trajectory, certainly seems to be the priority in the market today. And that’s creating a really constructive environment for us as renewable power developers. But the important thing to recognize about the product that we do offer to Microsoft, all the technology companies, all of our broader power marketing clients is renewables are the cheapest form of bulk electricity.
So even while this is a constructive market and it’s allowing us to develop in a very attractive way, the power that we are offering them is long-duration power at a discount to retail rates, which is obviously supportive for their businesses.
Operator: Our next question comes from the line of Nelson Ng with Capital Markets — RBC Capital Markets.
Nelson Ng: Congrats on the Microsoft agreement. So no surprise one further question on the Microsoft arrangement. So I was just wondering whether the Microsoft transaction takes up a lot of your current development capacity in the U.S. over that 5-year period? And whether there’s room for, let’s say, another framework agreement with another offtaker in the U.S.
Connor Teskey: So I’ll maybe come at that in reverse order. Absolutely, we could do other framework agreements or multiple other framework agreements, given the capacity we have and the pipeline we’ve assembled. I think it’s important to understand the strategy that we have been pursuing, which is we have been acquiring and building a portfolio of leading renewable power developers with attractive pipelines in major core markets around the world because we had confidence that given our relationships with the large offtakers of power, we would be able to contract and build out those pipelines. And therefore, as we sit today, while we are thrilled about this agreement with Microsoft, we fully expect to not only expand this agreement but do other similar arrangements with other major buyers around the world.
And maybe just to give some directional numbers around this, we are currently — have a run rate of producing 7,000 to 8,000 megawatts of new generation capacity from organic development within our current business. Those numbers will naturally grow as our existing businesses get built out over time. And obviously, we are a growth company, we are going to consistently add other developers and other pipeline as we move through the remainder of this decade. It’s very conceivable that by the period of ’26 to ’30, we will be producing well over 10 gigawatts a year, if not more. And therefore, while our arrangement with Microsoft takes — derisks a good portion of that, it still is expected to only be a minority within our broader portfolio.
Nelson Ng: That’s great color. So do you see this type of framework agreement as potentially being a template for, I guess, further project developments going forward?
Connor Teskey: Perhaps the way we’d answer that is, we have a lot of arrangements with different customers and those arrangements are always tailored to meet the needs of that specific customer. And while this agreement with Microsoft is certainly unique in its scale, we have lots of existing partnerships without our — throughout our business, and we will continue to do other partnerships going forward, where this one is precedent setting and we do think will trigger other similar types agreements in its scale. But what we would expect is they all look a little bit different because one of the unique things that we can bring is not simply the scale, but the ability to tailor the energy solutions to meet that specific clients’ needs. And therefore, these broad framework agreements, I would say, tend to be fit for purpose depending on who the counterparty is.
Nelson Ng: Okay. Great. And then just shifting gears a bit on the capital recycling side. You mentioned that you’re expecting net proceeds to Brookfield Renewable of about $1.3 billion this year. Are you seeing some of that pent-up demand from last year kind of shift into this year? And then also, is it safe to assume that most of that capital recycling would happen in North America or maybe other parts like Asia Pacific? I know that you’re — you have a lot of, I think, solar projects and a few wind projects going on in the Asia Pacific region.
Connor Teskey: Sure. So maybe to take a step back and this wasn’t your specific question. But one thing that we often get asked is, is this a better market for investing or a better market for capital recycling? And more so than probably any point in recent history, we would say right now the market is heavily, heavily bifurcated, and we think it is a very, very good market for both. And therefore, we are seeing very, very attractive opportunities to deploy capital at scale at attractive returns. But on the same time, we are also seeing a very robust bid for high-quality derisked assets. Now tying that back to your question, is some of this perhaps a little bit of pent-up demand from last year? Maybe. But we really think that the key drivers of it is there is still a broad institutional bias to adding more exposure to this space.
