And with the stabilization of interest rates, there is still significant access to capital in this industry, and that is creating a very, very robust bid from both strategics and financials. In terms of where we are seeing opportunities for capital recycling, it is very broad-based. We are seeing opportunities in Asia Pac, as you mentioned. We are seeing opportunities in North America. The one that I would highlight that you didn’t mention is we’re also seeing significant opportunities for capital recycling in Europe.
Operator: Our next question comes from the line of Mark Jarvi with CIBC.
Mark Jarvi: So just staying on the asset sales, that $1.3 billion net to BEP, how much line of sight do you have on that? How would you put your conviction level on hitting that number? Is there an opportunity to exceed that number this year?
Connor Teskey: Mark, we feel very good about that number. We started the year by launching a few fairly meaningful sales processes that at this point are well advanced and are seeing strong traction. So in terms of hitting the number we’ve guided to, I would say we have a very, very high degree of comfort. And if we continue to see that robust bid for high-quality derisked assets, as we mentioned on the previous question, I think we would just continue to add to that pipeline of capital recycling because that is where our business can really hum. When we’re able to sell high-quality derisked assets at a lower cost of capital and reinvest that capital into very attractive higher returning investments, that drives really great returns for our business. So if we continue to see the market play out as we’re seeing it today, we’ll certainly look to add to that pipeline throughout the year.
Mark Jarvi: Just coming back to your comment about normalization and stabilization of interest rates, we did see a move back up in the 10 years. Did that slow any processes down? Or does that actually just push some sellers to have to transact just given where their own balance sheets are right now?
Connor Teskey: Certainly. So maybe the way I would position it is in 2023, and I’m clearly being a little bit illustrative here, interest rates went from 2% to 4% to 6%, and there was a concern they’d go even higher than that. Now interest rates have stabilized in a very constructive level. If they end up 50 basis points higher or 50 basis points lower, it is still a very constructive environment for investing and transacting. So we wouldn’t expect the recent movement in interest rates to derail our plans for the year. What we would say is on the investing side, we are seeing some opportunities in the market where that move in interest rates from 0% to 2% to, let’s say, 4% to 5%, there are some market participants whose capital structures or growth strategies were not well prepared for that move in interest rates, and that is one of the things that’s driving opportunities for us to deploy capital at really attractive returns in this environment.
Mark Jarvi: Understood. And then just lastly on the framework agreement with Microsoft and, obviously, you had a relationship with Amazon and you think about big buyers from the tech side of things, how does that factor into sort of your M&A pursuits, whether it’s operating assets, you might be able to recontract or repowering or development pipelines. Has anything changed? Or have you seen this coming and that’s already kind of factored into how you’ve been pursuing your acquisitions, both on development side and operating side?
Connor Teskey: So we very much appreciate the way you frame that question because if anything, perhaps what the agreement with Microsoft, given it’s somewhat public nature does is it kind of demonstrates why we’ve been doing what we’ve been doing, which is very constructively and thoughtfully acquiring high-quality pipeline in critical markets around the world. So we absolutely will continue to do that going forward. And the demand that we are seeing gives us incredible conviction to continue to lean into that strategy. What the demand we are seeing and what the agreement with Microsoft does is it does really derisk a meaningful component of our development activities for the remainder of the decade.
And it also allows us to move with a lot of conviction to expand and develop in areas and geographies that match where we are seeing demand from our portfolio of customers. And when you have such strong visibility on tens or multiple tens of gigawatts of offtake, it really allows you to move with more confidence in things like putting shovels in the ground and getting development permits, it allows you to lean into, looking to source equipment, looking to source financing because you know that demand is going to be there. So we simply see this as a first step in accelerating into the strategy that we’ve been executing on for a number of years now.
Operator: Our next question is from the line of Jessica Hoyle with Scotiabank.
Jessica Hoyle: So just to start thinking about the Microsoft deal and dealing with large tech companies, is how narrow is the competition to provide these types of renewable packages just given they are across multiple geographies and are quite large?
Connor Teskey: Thanks, Jessica. The arrangement we have been able and are fortunate to be partnered with Microsoft on and similar with some of our other very large customers, is there is a very significant differentiation. In order to be a credible partner of scale, one, you need the capital and the amount of capital to support these types of partnerships is very limited to a small number of participants in the marketplace today. So we would certainly see that as a major limiting factor and one that differentiates us. But the other important things that we would highlight is you need the operating capabilities. This is bringing on multiple projects across multiple geographies concurrently. And therefore, you need that best-in-class development and construction capability.
And then the last point is, even if you are large and have the capital and have the capabilities, you actually need the assets, you need the pipeline. And this is where our approach of acquiring pipeline over the last 2 or 4 or 5 years is really coming to fruition because we have the projects and the assets to meet this growing demand already. This is a very real opportunity today and really lends itself to those that have that pipeline already, not those who are going to start developing it today in order to deliver it several years from now.
Jessica Hoyle: That’s helpful. And then you talked a little bit on this, but maybe can you talk a little bit more about the opportunity set out there just in terms of buy versus build. There seem to be a lot of packages out there. So I just want to get your overall thoughts on these dynamics in the market.
Connor Teskey: Great. The — back to the comment that we think it is a bifurcated market where you can be both a very active buyer and a very active capital recycler, we do expect there to be a lot of transactions this year for the same reasons. Banks are lending. Again, the institutional bid is back, the strategic bid is back, and there is certainly a lot of capital available in the space. Given the very robust pipeline that Esper highlighted, we mean this with absolutely no sensationalization, our pipeline for growth is probably larger today than it’s been at any point in history. And as a result of the scale of that pipeline, it is quite diversified. It is across both operating assets and development opportunities really across all markets around the world that we’re active in.
Operator: I’m currently showing no further questions at this time. I’d like to hand the call back over to Connor Teskey for closing remarks.
Connor Teskey: Great. Well, thank you, everyone, for joining us on today’s call. As always, we greatly appreciate your interest and support of Brookfield Renewable and we look forward to giving you an update following our Q2 results. Thank you, and have a great day.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
