Ladies and gentlemen, good morning. My name is Simon and I will be your conference operator today. At this time, I would like to welcome everyone to the TransAlta Corporation first quarter 2020 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Ms. Chiara Valentini, you may begin your conference.

Thank you Simon. Good morning everyone and welcome to TransAlta's first quarter 2020 conference call. With me today are Dawn Farrell, President and Chief Executive Officer, Todd Stack, Chief Financial Officer, John Kousinioris, Chief Operating Officer, Brett Gellner, Chief Development Officer and Kerry O'Reilly Wilks, Chief Legal, Regulatory and External Affairs Officer. Today's call is webcast and I invite those listening on the phone lines to view the supporting slides that are currently posted on our website. A replay of the call will be available later today and the transcript will be posted to our website shortly thereafter. As usual, all of the information provided during this conference call is subject to the forward-looking statement qualifications set out on slide two, further detailed in our MD&A and incorporated in full for the purposes of today's call. All amounts referenced during the call are in Canadian currency, unless otherwise stated. The non-IFRS terminology used, including comparable EBITDA, funds from operations and free cash flow are also reconciled in the MD&A for your reference. On today's call, Todd and Dawn will provide an overview of the quarter's results along with expectations for balance of the year 2020. After these prepared remarks, we will open the call for questions. With that, let me now turn the call over to Dawn.

Thanks Chiara and welcome everyone to our call today. Today, I am going to make a few comments on our first quarter and our outlook for 2020. Of course, Todd will take you through the details. I will come back for a short period after to talk about how we are doing against our priorities for 2020 and I will also give you some insight into the exceptional job that our employees are doing as they respond to this COVID-19 virus. Overall, the results for the quarter were solid and in line with our expectations. The quarter did demonstrate the strength of our operations, our contractedness and our portfolio diversification. And you will see today from Todd that we continue to have strong liquidity and that we will achieve our goal of reducing our senior recourse debt to CAD1.2 billion by November. In the first quarter, financially, we delivered CAD220 million of EBITDA and CAD109 million of free cash flow or about CAD0.39 a share. These results were ahead of 2019 by 18% on a per-share basis. We achieved strong availability and safety performance. The entire fleet had an average availability of 92.8% for the quarter and we achieved safety results of 1.18 on our total injury frequency rate, which are really exceptional results. And we accomplished those strong operational performances while also changing many of our frontline operating, maintenance and construction protocols to keep our people safe from the COVID-19 virus. On March 12, we began operating with nearly 650 people in their homes, who frankly never missed a beat. So far, our protocols have kept people safe from the virus, which is a new priority for us as we move through the rest of 2020 and into 2021. We were opportunistic during the quarter with our NCIB and…

Thank you Dawn and welcome to everyone on the call. I will start by reviewing the financial highlights on slide five. Results for the first quarter 2020 were strong and were indicative of the resilience of our operations, our contractedness and our portfolio diversification. During the quarter, we generated CAD220 million of EBITDA, which was in line with the same period in 2019 and free cash flow improved by 15% year-over-year to CAD109 million in Q1 versus CAD95 million last year. Strong performance in our U.S. coal and wind and solar segments was offset by lower EBITDA at the Canadian coal and energy trading segments and higher corporate costs driven by impacts of hedging our long term incentive plans. We also had strong foreign exchange gains in the quarter that were driven by hedges on our U.S. and Australian business operations. Overall, free cash flow per share was CAD0.39 in the quarter and exceeded 2019 results by 18%, which was in line with our expectations. Alberta power prices in the quarter averaged CAD67 per megawatt hour and were consistent with the first quarter of 2019 as both years experienced below average temperatures. The important thing to note is that the below average temperatures and subsequent peak pricing we experienced in January, which averaged CAD120 per megawatt hour, heavily affected the average price for the quarter. Both February and March settled relatively lower at CAD39 per megawatt hour on average. For the remainder of 2020, we anticipate weaker power prices for Q2 as we expect to see continuing reduced demand related to COVID-19 as well as the continued changes in operations for Alberta oil and gas producers. However, we are completely hedged for Q2 and partially hedged for Q3 and Q4, which protects us from these low prices. If power prices…

Thanks Todd. That was excellent. So let me spend a couple of minutes on how we have had to adjust our operations to deal with COVID-19. So first and foremost, I would really like to thank all our frontline employees and staff and contractors across Canada, U.S. and Australia for their dedication and their ability to adapt very, very quickly to many new protocols that protect them and their families, while they continue to come to work every day and make sure that our facilities run and support the customers and the economy here in Alberta and across all of our operating regions. They are some of our unsung heroes behind the scenes in this crisis. At TransAlta, we initiated our pandemic plan on March 9 and by Monday 16, we moved nearly 650 people home where they continue to work as if nothing really had happened. Our key principle was to get as many people out of the plants as possible so that our essential frontline operators, maintainers and engineers would have as few interactions as possible to deal with. We quickly modified work schedules and physical distancing practices. We instituted health screening. We enhanced our cleaning arrangements. We changed travel schedules. We initiated a travel ban. And we put in place quarantine practices to ensure the health and safety of our employees. Our employees quickly adapted to the new norm and embraced the challenges on the new health and safety practices this global pandemic has created. Today, all of our operations are running as they did before COVID. And currently, we are grateful to report no cases of COVID-19 in our company. We are monitoring daily recommendations by public health authorities related to all our operating regions and we are adjusting operational requirements as required and we have…

Thank you Dawn. Simon, would you please open the call up to questions from the analysts and media?

[Operator Instructions] And your first question comes from the line of Maurice Choy with RBC Capital Markets. Your line is open.

Thank you and good morning. Just to kick off, you mentioned that the quarterly results in Q1 were in line with your expectations and obviously, you would affirm your 2020 guidance despite the changes in the Alberta market. Todd, you mentioned that there are some cost levers you can pull. Could you elaborate a little bit more about that and any other tailwinds you might see for the remainder of 2020?

Sure. Good morning.

Go ahead, Todd.

Yes. It's Todd here. Yes. So there are a number of levers that we can look to pull and I did mention in my call, one of the areas in our sustaining capital and some of our productivity capital. So there are a number of areas in there. Again, nothing that would impact the overall delivery of the year or the delivery of our strategic priorities, but there are some more discretionary projects in there that we can look to defer and/or cancel outright. And so I have mentioned the guidance on the sustaining capital would be at the lower end of what we provided back in January.

Thanks. And just to follow-up on that. If I look at energy marketing, you previously had a gross margin guidance of CAD75 million to CAD85 million, is that an area where you still reconfirm your view? And as well, the total return swaps, given the share price movements, would that be some type of reversal coming to Q2 that could help EBITDA as well?

Yes. So for energy marketing, definitely they are on track. I mean, they had a good quarter. I think it was healthy EBITDA, less than last year, but they definitely are on track for the year. So no concerns on the energy marketing team. And you are right, on the equity swap, we have seen a recovery in our price from the March 31 level. So that will normalize over time. And again, that is an economic hedge for the company for some of the incentives that are paid out in shares.

Great. And then just to finish off, I can see that you have provided information on liquidity as well as your market condition outlook. Was there any consideration about potentially deferring capital spend or even needing to pivot a little bit of your CapEx strategies?

Yes. And I think you are speaking more to the coal to gas work or some of the wind farms. So I would say, no. Like the Sun 6 outage to converted coal to gas is a high priority for the company. I see it as one of the best projects that we have and so that's on track. So really no discussion about deferring that. Dawn mentioned the K2 and K3 deferrals. That's really driven off of, as she mentioned, supply chain issues not about our desire to extend that. So those are definitely top priority projects. And as far as the renewable projects, again, the Skookumchuck facility and the Windrise project and WindCharger, again very strategic. No discussion about deferring those other than what needs to be done to manage through the supply chain issues, which are not material. It's moving things around a little bit here and there. But basically still high priority and still a main focus of the company.

I guess when you say strategic, is it fair to say that in the short term, there may be volatility, but the long term outlook of the market is really unchanged?

Yes. Absolutely. That's I mean Q2 has been settling soft here, which is not, again Q2 is typically a lower quarter, but long term we see the market being very healthy.

Great. Thank you very much.

Your next question comes from the line of Rob Hope with Scotiabank. Your line is open.

Hello everyone. Maybe a follow-up to Maurice's question. Just when you are taking a look at the 2021 contract or forward price right now, how are you thinking about layering on hedges there as well as what do you think of a recovery in demand looks like in Alberta?

Yes. If we knew the answer to that, we would probably wouldn't have to run these companies. But I think as we look ahead, we think that the forward curve, as you know, it's very thinly traded anyway as you look out that far. I think it reflects some recovery in it already. And as we go through the next couple of months here, I think it really depends on how quickly you get away from some of these supply shut-in situations here in Alberta. So a lot of the recovery in the power market will likely be less about oil and gas prices and more about the ability of people just to get their supply out of the province into the marketplace. You would have to expect as you look ahead and economy starts to recover from this that there will be more transportation demand, both for driving and some flying. And that would underpin additional upside. So we will have a very measured approach to how we leg into 2021. And we will be watching our customers carefully and their response to how transportation demand picks up as we go forward.

And then would you have any hedges for 2020 currently?

We have a small number of hedges for 2021 currently. Yes.

Okay. Thank you for that. And then just in terms of a kind of allocation of capital question. The Michigan and the U.S. cogeneration strategy, what returns on capital are you looking for there? And what size of an opportunity set do you think you could see over the longer term? And could there be additional opportunities in 2020 and 2021?

Dawn, you want me take that or?

Yes. Generally.

Sorry, go ahead.

Yes. Go ahead Brett. Yes, go ahead.

Yes. Just, obviously we can't speak about the Michigan cogen. But as we talk about cogen, not just in the U.S. but also here in Canada, we are going to be looking for probably double digit type returns. All those projects are highly contracted, as you know. It's a sweet spot for the company. We operate a lot of cogen. We see it as a very good opportunity. But again, we are, as always, going to be very disciplined in how we pursue those, but certainly it's tough to give you a market size or opportunity size. But as others are having to cut back capital, one area we are seeing them not pursue is the cogen side, which might present an opportunity for a third-party like us to come in and work with them.

All right. Thank you.

Your next question comes from the line of Patrick Kenny with National Bank Financial. Your line is open.

Hi. Good morning everybody. Just on Brookfield surpassing its 9% ownership commitment, almost 12% now I believe. And I guess that will continue to move up naturally as you execute your NCIB. Can you comment on whether or not this level of ownership has any impact on your willingness to continue to buy back the CAD80 million of shares this year and I guess next year as well? And also maybe just remind us if the Hydro agreement contemplated any maximum ownership level or any other ownership restrictions?

Yes. So I will take the first question and then I will turn it to John for the second question. So I think we are just looking at the CAD80 million share buyback in our capital allocation as something that we can be very opportunistic about. So a lot of it depends on where the prices are. For sure, currently, at the price we are seeing in the market today, even with Brookfield are currently increasing, there's still great opportunities to buy TransAlta stock and for our shareholders. So we will continue to look at that. So I think, Patrick, you can just think about as we look ahead in the current pricing environment continuing to buy back shares makes sense for us. And John, do want to talk about the Brookfield agreement?

Yes. Hi. It's a good question and I am just going from my memory. I think there is a cap on the ownership that they have in the company up to 20%. There is a sandfill that's included in that. But I am going from memory and we can double check that and get back to you.

Yes. I think, John, it's slightly less than 20%. It's just over 19%, yes.

There you go.

Okay. Great. And maybe for Todd, if you could perhaps provide a just a bit more granularity on the funding plan with respect to repaying or refinancing the 2022 bonds. I know it's still a ways out, but just given how shaky the credit markets have been over the past couple of months, especially for non-IG credits, if there is a plan to get back to investment-grade between now and then?

Yes, for sure. I mean 2022, as you say, is a long ways out there. We have got a lot of runway ahead of us. We had always anticipated refinancing some portion of that bond when it comes due. And what you have seen in the last couple of bonds that we have matured, we didn't usually wait right until the maturity date. We would usually front run it. And then with some kind of a financing and then either do a call for those bonds or just wait for it to naturally mature. So I see that kind of working out the same. So we will have a lot more details on that in 2021 to think about how refinancing, we are going to refinance that. But again our plan over the next couple of years is to be not having to lean on additional debt demands at TransAlta to fund our coal to gas project and our repowering projects.

Okay. That's great. Thank you very much.

Your next question comes from the line of Ben Pham with BMO. Your line is open.

Okay. Thanks. Good morning. I just want to go the Pioneer Pipeline sale and clarify, first off, the timing of that sale. And also what are you gaining really from that sale versus the upside that you are giving up? I am just trying to get more color on the pros and cons of what's going on there.

So Brett, do you want to take that?

Sure. Yes. So timing is, obviously, TC Energy is federally regulated as you know. So it has to go through CER approval and that takes time under way. But certainly we just have to follow that timeline and take their guidance on that. We will be supporting them through that process. I mean, we think it has a lot of benefits. I mean, first of all, as you know, the NOVA system is very liquid and deep. So this pipe will be, post-sale of closing, connected into one of the main laterals of the NOVA system and gives us access to every single basin in Alberta and BC. So it just deepens our access. We continue to have a second pipe in there. So back to our original strategy was to always have two pipes for reliability and diversification. So we have achieved that and we got some proceeds out of it and we can redeploy those proceeds elsewhere.

Okay. And your pricing, it fits in NPV neutral?

Pardon me.

When you look at, the sale is largely NPV neutral? You had a slide previously EBITDA ramping up over time, but I guess?

Right. Yes. I mean, certainly, the ramping up was dependent, as we outlined, how much gas would flow specifically on to that line directly and as a partner we would share in that. But yes, I mean we are giving that up through the sale. But as you know, the proceeds are a fair level of proceeds from our perspective plus we are getting all these other benefits that I mentioned.

Okay. That makes sense. And then on your hedging, I mean, thanks a lot for providing all the detail there, giving us greater confidence in your guidance. I am just wondering going forward then just as a regular policy, are you planning to keep providing this? Because, I know you really have limited disclosure on this in the past level of detail because of competitive reasons. So is this more a one-off situation? Or is this something we should expect going forward?

I think we will evaluate that as we go forward. I think, for sure, if we believe that giving hedging information will reduce our competitiveness, we won't be giving it. But I think everything that we have given you here is more behind us as opposed to ahead of us. And we thought it was critically important. Especially when you look at some of the demand destruction that's taking place in Alberta here in Q2, we thought it was important for people to see that that's not going to factor into how we see our year.

Okay. And then maybe one last item for me is, are you worried at all around the gas price curves in future years as you have coal to gas transition?

Yes. I mean, when we did our, again, somebody earlier talked about, we just talked about the long term strength of our strategy. Our strategy is predicated primarily on a forward view of carbon pricing that goes from CAD30 this year to CAD40 next year to CAD50 the year after and then starts to climb potentially after that. And if you look at the way the carbon policy works in Canada, it just gets more and more aggressive relative to coal. So you can't just look at gas price in absence of looking at carbon policy. And you have got to look at it relative to the short term and the long term. So in the short term, some increase in gas prices actually improves margins for the coal plants. As you know, Alberta doesn't typically trade relative to the gas pricing. It's more of an event-driven market, but there is some flow-through on that. And we still have plants that are running on coal. We will have K3, which will be dual-fuel. And then in the longer term, as you start to really pressure test the strategy with carbon pricing, even higher gas prices have always been more economic. And we also know because we have gas people on our Board that when you start to see upward, you are seeing for example today, there hasn't really been a lot of us stampede towards drilling dry gas because people have been getting gas out as an associated product out of liquid. But when you start dangling some higher gas prices in front of Alberta gas producers, they go out and find gas. So we think it's a very competitive market. Higher pricing will bring on more supply. And so net net, as we get all the calculus looking over the next 20 years, we still continue to believe that our gas strategy will outperform our strategy of trying to save off higher and higher carbon prices.

All right. That's great. Thank you.

Your next question comes from the line of Mark Jarvi with CIBC. Your line is open.

Hi guys. This is actually Ollie Primak, on the line for Mark Jarvi. I just had a few questions for you and a few of them have already been answered. So I am thinking, maybe I can ask them a little bit differently. Just with respect to the hedges that you discussed, given where forwards are which are close to the average hedge price that you already currently have, is there an opportunity or any interest from your perspective to add more hedges for the balance of 2020?

Yes. Just the way the Alberta market trades, I mean there is current prices in the hedging market and then there is liquidity in the hedging market. So as we see, as liquidity opens up, we will definitely be layering in hedges at various prices as we go forward.

Okay. Perfect. And with respect to the delays at Windrise and Skookumchuck, how do you expect those delays to impact the timing of potential drop-downs with RNW?

We believe that we can continue to work with the RNW Board to think about what the appropriate drop-down schedule will be to sort of maximize value for both companies. So we have shown in the past that they will take some construction risk if we think that's the right value exchange. So it could delay it slightly in terms of our expectations, but it doesn't change the path that we are on.

Okay. Perfect. I think that's it for us actually. Thank you for you time.

Great. Thank you. Yes, thank you.

Your next question comes from the line of Andrew Kuske with Credit Suisse. Your line is open.

Thank you. Good morning. With some new generation in Alberta being pushed off in time, does that really increase the envelope of time for your market transition? And I guess more directly, does it positively change your return profile on your coal to gas conversions?

Yes. I mean, Andrew, for sure. So let me talk about that two ways. So in terms of changes in our time for our transition, we continue to try to accelerate every aspect of our transition that we can. So as we prepare for 2021 and we are looking at what does that mean for the company as a whole, we just absolutely are working hard to accelerate everything we can. So our transition continues to track and we continue to try to find ways to go even faster. In terms of the reduction in generation coming from cogen, because of people having to focus on their own businesses and that's good news. That can only be good news for us in terms of the value.

Would you care to quantify the value that you see from that?

Well, there's lots of moving parts here, right. We need a little bit, a couple of more quarters, quarter-by-quarter to see what the transition out of COVID looks like before we get bold enough to start to quantify that value. But just generally, if you don't have the supply in the market and the demand starts to recover to where it was, it's going to add a couple of dollars a megawatt hour to our pricing assumptions.

If I could just maybe have one follow-up and it relates to what you are seeing. Obviously, it's a dismal economic environment everywhere. But when you look at labor rates on your coal to gas conversions and just productivity, because obviously the environment's changed with COVID-related, construction practices are just different. How is that impacting scheduling and then also just costs?

Yes. You know it's funny. There are some additional costs for sure as you get PPE for people and as you have to take, I mean, when people show up at the gate they have to sign papers and they have to have their temperature taken and there is a lot more procedure that goes into the place. But we are actually finding that it just reinforces a really strong safety culture. And a really strong safety culture is generally more productive because you tend not to do things twice. You tend to be very careful about how you do your work, very careful about how people work with one another, a lot more planning and generally if you have been around power plants or your construction projects, the key has always been planning. The more planning there is, the better you have all your stuff ready to go. The more organized and disciplined the work teams are, generally the construction goes better. So we do believe that there is some, for sure, there's deflation going on, as you know in this environment. And I do think that potentially benefits us as we go forward. But I currently am not seeing the additional costs or protocols of COVID changing our productivity. And even when we look at our office workers, I mean we are finding some tremendous productivity coming out of using this IT technology. For example, as we have been able to quickly adapt to even with our investors like you guys, using IT technology to meet with people. Well, that takes us off planes. It takes us out of airports. It allows us to have more time to focus on the business. So at this point, I am just not seeing the additional costs adding drag, I am seeing them actually allow us to get more planned and more thoughtful and a little bit better at what we do.

Okay. That's great. Thank you very much.

Thanks Andrew.

Your next question comes from the line of Charles Fishman with Morningstar. Your line is open.

Thank you. Dawn, on slide 12, you have added a footnote that talks about Keephills 1 repowering being delayed beyond the 2023 time frame. Yet when I look at the similar slide at the fall Analyst Day, it was always 2023, 2024. So was that footnote added just for clarification on the slide? Or did something happen? And I guess, if you could provide color?

Yes. So nothing happened. We always said that we would, so Keephills 1, remember right now, we haven't decided if we are going to convert it in a simple conversion or just hold on to it as the coal unit and then making a combined cycle plant. And so we had always anticipated that we would get the permitting for both Sun 5 and Keephills 1. When we announced the Kineticor turbines, we have pushed those to Sundance Unit 5. We always had Sundance Unit 5 for 2023 and then Keephills 1 would follow in 2024 or 2025. So nothing really has changed. And maybe Brett, is there anything you want to comment on in terms of that footnote? Because everything is tracking as per what we, I think, talked about last September.

Yes. No, for sure, nothing's changed. And as Dawn says, both are permanent. But our focus is on the 5 repowering right now. And then we will evaluate, as Dawn says, K1 as we kind of head into next year.

Okay. So next year would be final investment decision you would anticipate?

On K1?

Yes.

No. Well, I can't say no, but look, I mean these things, remember, these repowerings are not like the simple conversions, which can be done relatively quickly. So these are longer time frames in terms of EPC contracts construction. So yes, we can't commit to when we will make that decision. I am just saying, as we kind of make our way into next year, we will be really looking at K1 in terms of, as Dawn says, what our decisions are, simple conversion, repowering et cetera. But we wanted to get it permitted, which we have, just so that it's ready if we want to pull the trigger there.

Okay. Got it. Stay safe, guys.

Yes. If you look at the cash, it's about CAD700 million for our conversion, compared to CAD30 million, CAD40 million for just a simple conversion. So with Keephills 1, we have got it, sort of, sitting to decide. We will decide whether or not we do a simple conversion on it on its way to be in a combined cycle or we will just simply run it as a coal plant and then convert it to a combined cycle midway through the decade. So it's a pretty big capital decision. So that's why we wanted to get our three simple conversions done and then Sundance 5 really moving along and then we will look at pricing in the market and determine if we want to make a capital allocation to Keephills 1. So you will start to see discussion of that decision making in 2021. And I think then we will give you a sense of what our rationale is as we go forward.

Okay. Thanks for the additional comments. That's all I had. Stay safe.

Thank you. You too.

Your next question comes from the line of Naji Baydoun with Industrial Alliance Securities. Your line is open.

Good morning. I just wanted to go back to an earlier comment on the cogeneration strategy. I appreciate acquisitions probably slowed down this year. But are you still thinking about doing maybe one or two deals in this space every year? And how much capital could you dedicate to these acquisitions?

Yes. I would say that, I mean again it's more opportunistic than it -- the thing I have learned after 35 years is if you start sending targets like one or two deals and you try to get committed to that, you will start dropping returns. So we see a lot of cogeneration projects. And at the right return, we have the capacity to do one or two deals a year and we would certainly want to do that. And as Brett said earlier, cogeneration is always the same. Everybody wants their own cogeneration project until they need their cash for their own businesses and then they start to look at partners. And this is a good time for that. People will need partners on cogen as they refocus on their own businesses. And so to the extent that we can get the right returns, we definitely have the capacity to add more cogeneration and will. And by opening up and having a foothold now, even though it's small in U.S., it's just gives us better brand recognition in that market and is opening up more phone calls that we can take and start to look at where those opportunities are. The other thing I should say is, we do expect the ESG framework to be quite strong coming out of this. So we don't believe even with a lot of the sort of the economic fallout of what's going on with COVID, we don't believe that it will reduce the necessity for companies to have a very strong ESG set of goals. And that leads you well down the path to both cogen and wind and solar. It's really helpful as well in terms of our hydro assets. So we expect that continues to see more demand for cogen and for us more opportunities to do deals at the right return.

Okay. I appreciate that. Just maybe one other question. Thank you for the extra color on the reasoning behind the Pioneer Pipeline sale. Just wondering if you see other areas where you could opportunistically monetize other assets in the portfolio today.

Currently, there is not really any sort of big asset that we have where we think, okay, that's run out of road or that doesn't have the kind of return expectation. But we have a process where we take our every single asset in the company and fleet by fleet through the year, we evaluate the returns. Then we have discussions with our Board on that. So we do have a very disciplined process inside the company for ensuring that we don't get complacent. So as we go through that process, if we see projects here and there that where we think that maybe somebody is a better owner than we are, we will make those decisions. But right now, there isn't anything that stands out as either a poor performer or something that's off our strategy.

Okay. Thank you.

Your next question comes from the line of Robert Howard with Boiling Point Resources. Your line is open.

Hi. Thanks for taking my call. I just wanted to ask about just the gas conversions. It sounds like they are going well. Has there been any surprises in doing it? I mean, you are just started, are they going smoothly? Do you think things are going to end up, performance wind up being better out of them? Or do you think costs going up, going down as you keep putting them? And just sort of wanted to get a feel for what you are experiencing as you are finally doing the work on these?

So Brett, you want to take that one?

Sure. Yes. As you know our first one is here later this year. So maybe ask that question to us after that. But certainly, we have got our partner. We are partners with Heartland in Sheerness. They did a conversion here already and reasonably well, especially given they did it right in the middle of the situation, the COVID situation we are in, so yes. No, we don't expect any issues. The boiler conversions themselves are relatively straightforward. They have been done in the U.S. a fair amount. And I just want to remind you that most of all of our conversions are fixed price. So we have already entered into agreements. So there we don't anticipate any significant change. Over time, do they change? Don't anticipate that in a material way. The Sun 5 is still relatively early, where we purchased gas turbines already. So those are in place. Really now we are in the process of getting their second balance plant and in the market for EPC contracts. So again, more of a fixed priced type contract likely out of that. But again we won't know that and that one's won't start up till 2023.

Yes. Okay. Sounds great. Thanks.

Your next question comes from the line of John Mould with TD Securities. Your line is open.

Thanks. Good morning. Just going back to the drop-downs. Recognizing that RNW's independent Board members handle those discussions. I am just hoping for a little more context on how do you factor risks resulting from COVID-19 into that discussion? Not so much general constructions, but more the ongoing risk of equipment and construction relays that may still be difficult to quantify this far end from project COD, at least in the case of Windrise?

Yes. Again, I think as usual, the devil is always in the detail. And they get their advisors and their advisors give them advice in terms of what the quantification of those risks are. And we also, as you know, on the other side, we quantify what the risks are, because we are actually managing those projects. And I think really what it comes down to is whether or not at the right time, you can cross that bid offer and both get comfortable that it makes sense for both sides. And so I just find, it's probably a lot more conversation and a lot more analysis in terms of what we are seeing from the suppliers and what is really going on. What we have actually found is people protect their rights right away because of what's going on with COVID. But as they have been working through what the real impacts are, they haven't been as that is what I think people initially thought they might be. So I am not finding it difficult. I am not finding it any more difficult than I have in 35 years to evaluate what's going on in the construction space. It looks fairly normal to me with a little bit of additional noise that you have to deal with.

Okay. Great. And just on the PPAs themselves, are there any issues under the Skookumchuck or Windrise PPAs if not meeting the original COD dates?

Yes. Brett, do you want to take that one?

Yes. No, nothing that would change, where we are at. Certainly, every PPA has certain dates in them. Usually it's an LD type equation versus termination type equations. So right now, nothing from our perspective impacts the economics of those projects and back to Dawn's earlier point, the demand for renewables we see continuing to increase and we are seeing companies purchase this type of power through long term contracts to meet their own ESG. And so it's beneficial to all parties involved.

Okay. Thanks. And then maybe lastly, just moving to Ontario. You noted on your last call, you made a submission to the government's contract review process. I am just wondering if there have been any further developments on that front, recognizing that the government and the market operator have been busy with other issues there.

John, do you want to take that one?

Sure. We did, as you say, make the submission in the province. I think there is still a state of flux there in terms of which way they are going to go in the province. I think we remain optimistic that we will find an appropriate outcome for the contracts that we currently have for Sarnia with the ISO. Remember that contract doesn't expire until 2025. So we still got some time to actually see it through. But our sense is that there will be a constructive outcome as things sort of settle down and people begin focusing on businesses as usual in the coming months.

Okay. Those are all my questions. Thank you very much.

Your next question comes from the line of Chris Varcoe with Calgary Herald. Your line is open.

Hi, Dawn. Got on late, so my apologies if this has been asked earlier. But can you tell me, has there been any rebound in power demand in the last few weeks in Alberta? And with the gradual reopening of the Alberta economy, what's your outlook for power demand through the rest of 2020?

Yes. Chris, it's actually been a bit the opposite. So demand came off right away in March and then we are seeing a little bit more of it come off especially last week as a number of producers are shutting in. We expect that demand destruction to continue through the second quarter here. But then as the summer comes in and picks up and as people get back, I mean, naturally, a lot of demand will start to come back. So currently it's going down and we expect it to start to come back in the summer, especially more and more companies are talking about bringing 25% to 50% of their workers back starting in June. More and more people are still realizing that they can use safety practices to make sure that they keep people safe and run their companies. So all of that will make a real positive difference to demand as we go forward.

And just secondly, with the success of having people work from home, is there any thoughts within the company maybe not needing as much office space and having people work from home permanently?

Yes, That's a hot, hot topic around the place. I mean, for sure, we have seen that there are different disciplines that where there is quite a benefit to people working at home because they pick up some of our people. For example, out at our plants, it can be difficult to get engineers to work out of the plants, because they have got to drive maybe an hour back. And if we can find some way to have them also have a home office and get some additional productivity by not having to make those drives a couple of days a week, that increases productivity and well-being for the employees and it increases productivity for us. So we are looking at, there is situations like that for some of our engineers and some of our applications programmers that are doing a lot of our big data stuff. But we also know that there is quite a huge social element to leadership and to work and to how people organize things, which benefits by convening in person. So we do believe that it will have, what we call, a hybrid model, where we will have people in the office, we will have people at home and we will have sort of a mix of the two as we go forward here until there's a vaccine. And I think probably, the other thing, Chris, that we have learned and I think you and I have talked about, the IT technology is pretty phenomenal and our ability to convene online with people on the line and look at documents and talk to one another is substantially better than anything I have ever seen. And I think that helps us manage through this and it also gives us new ways of working together in the future.

Thank you.

And there are no further questions at this time. I would turn the call back over to our presenters.

Yes. Thank you Simon and thank you everyone. That concludes our call for today. If you have any further questions, please don't hesitate to reach out to the Investor Relations team. Thank you and have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.