It is not something that we are seeing for the future. This is happening in real time. So in order to service this corporate demand, it’s not simply having the capability or the capital to do it. You actually need to already have a very large pipeline of projects. And this is where our strategy for the last few years is really coming to fruition, where we have been focused on buying premium developers with large development pipelines in core markets really to ensure that we are well positioned to meet this demand as it has accelerated. And today those pipelines are very valuable because they are in the ground, they are existing, they are working through their development process, and they can meet that demand in the near term, as opposed to simply planning for projects three, five, or seven years out.
Sean Steuart: That’s great detail. Thanks, Connor. I will get back in the queue.
Operator: Our next question comes from the line of Robert Hope with Scotiabank.
Robert Hope: Good morning, everyone. I wanted to stick on the data center theme for today. So when you’re looking at your development pipeline and the contracting strategy there, like, how can you maybe add a little bit of color of how it’s moved away from single assets to more groups of assets to serve this demand? And then when you think about the opportunity set in front of you, do large developers such as yourself with a large pipeline, should you disproportionately benefit versus the smaller developers in this, we’ll call it increasing opportunity set so that in essence your market share should increase?
Connor Teskey: Sure. So, good morning, Rob, and thanks for the question. You are right that — this dynamic is going to lead the concentrations in certain regions, this data centre demand dynamic. And to be clear, there is without question the greatest concentration of data centre growth that needs power supply is in the United States. And we are very fortunate that over half of our development pipeline globally fits in the United States. The second thing to highlight here is, yes, well, individual projects might be signing contracts to support individual data centers. The corporate counterparty that backstops that contract is the corporate holdco of these large tech companies. We have a corporate guarantee from the trillion dollar plus market cap companies around the world.
It is not a ring-fenced counterparty credit individualized to a singular data center. And I think that’s a really important dynamic to understand because we take great comfort that as this growing opportunity set continues to expand, these are literally the best counterparties around the world. These are not individual assets. These are the large tech companies themselves that are the counterparties. And then to your question about scale, this is going to play into the hands of the larger players, but I think the reason for that is perhaps a little bit nuanced. And we would really focus on two things. The power demand that is required by these large tech companies is truly remarkable. Sometimes it’s tough to put the magnitudes in context. And therefore, if you are a large technology company looking to secure your power supply, you can either work with literally thousands of individual small developers, or you can work with a smaller number of very large developers.
And we are very fortunate to be in that group or even at the top of the list when it comes to that group that can provide to meet the needs of these large technology companies at a scale that few others can and really move the needle for them in terms of debottlenecking their future growth. So that would be point one. The other point that should not be underestimated and why we are so constructive on this market is the most important thing to these counterparties is that projects are delivered. They are delivered on time. And the developer does not walk away from the project if they can’t get the equipment or they get knocked off schedule because of supply chain or shipping issues. And our global capabilities and our ability to push through issues using our operational capabilities when they arrive ensures that we are amongst the most reliable counterparties to these large tech companies.
The power will be delivered on schedule. And I would say that is a completely underappreciated benefit for large players such as us, because the worst thing for the tech company is if the power isn’t there and the data center can’t turn on. And this is why we’re finding them to be very constructive in terms of contract terms when working with large, reliable counterparties such as ourselves, because the most important thing to them is that reliability and that the project will be delivered on time. And that’s a reputation and a capability we’ve been reinforcing and enhancing for years now.
Robert Hope: I appreciate that. Maybe as a follow up and more broadly, regarding the equity markets, how are you thinking about allocating capital in 2024? Does the returns kind of skew more to the development side versus the buy side right now or how are you seeing that opportunity set?
Connor Teskey: Certainly. Really what we’ve seen particularly in the last call it maybe four weeks of Q4 and into 2024, is what we’ve seen as a stabilization in interest rates. In 2023, rates were going up and up and up. And the great part about our business is, this is a real returns business. It works whether interest rates are at 3% or 4% or 5%. But everyone can appreciate that when markets are uncertain and rates seem like they’re going up in perpetuity, that became a more tougher market for people to transact in. And as we kind of turn the page into a new calendar year here, what we have is stability in interest rates. Maybe they land at three and three quarters, maybe they land at 4.5, but they’re going to be within a pretty tight range here, and that is a very constructive level for our industry.
