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Atlantic Power Corp (AT)
Q3Â 2020 Earnings Call
Nov 10, 2020, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Hello and welcome to the Atlantic Power Corporation Third Quarter 2020 Results and Conference Call. [Operator Instructions]. Please note, this event is being recorded.
And now, I'd like to turn the conference over to Jim Moore, President and CEO. Mr. Moore, please go ahead.
Ron Bialobrzeski -- Director of Finance
Welcome, and thank you for joining us this morning. This is Ron Bialobrzeski, Director of Finance at Atlantic Power. Our results for the three and nine months ended September 30, 2020, were issued by press release yesterday afternoon and are available on our website, www.atlanticpower.com and on EDGAR and SEDAR.
Management's prepared remarks and the accompanying presentation for today's call and webcast can be found in the Conference Call section of our website. A replay of today's webcast will be available on our website for a period of one year. Financial figures that we will be presenting are stated in U.S. dollars and are approximate, unless otherwise noted.
Please be advised that this conference call and presentation will contain forward-looking statements. As discussed in the company's Safe Harbor statement on Page 2 of today's presentation, these statements are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our various securities filings. Actual results may differ materially from such forward-looking statements.
In addition, the financial results in the press release and the presentation include both GAAP and non-GAAP measures, including Project Adjusted EBITDA. For reconciliations of this measure to the most directly comparable GAAP financial measure, to the extent that they are available without unreasonable effort, please refer to the press release, the Appendix of today's presentation, our annual report on Form 10-K or our quarterly reports on Form 10-Q, all of which are available on our website.
Now, I'll turn the call over to Jim Moore, President and CEO of Atlantic Power.
James J. Moore -- President and Chief Executive Officer
Thank you, Ron. Welcome, everyone. Good morning. With me on the call this morning are Terry Ronan, our CFO; Joe Cofelice, our EVP, Commercial Development; Nick Galotti, our SVP, Operations; and several other members of the Atlantic Power management team. All of us at Atlantic Power hope that this call finds you and your families healthy and safe.
The results for the third quarter are provided in the press release, the presentation and the prepared remarks, which were posted on our website last evening. Please review those materials. I will briefly cover key points this morning. Following my remarks, we will take your questions.
As highlighted on Page 4 of the presentation, our safety performance numbers have improved as a result of continued focus on this critical area with two reportable incidents year-to-date, down from seven a year ago.
We are continuing to manage well through the pandemic. To-date, we have not experienced a material impact on our business or on our planned operations. Our financial results for the third quarter year to-date keep us on-track to achieve our 2020 guidance for Project Adjusted EBITDA.
We have continued to repay debt using our strong operating cash flow from our existing businesses. Year-to-date, we have repaid $61 million in debt, including our equity-owned Chambers project.
Our consolidated leverage ratio at September 30 was 3.9 times or 3.7 times net of cash. We expect that continued debt repayment and anticipated higher Project Adjusted EBITDA in the fourth quarter should result in an improved leverage ratio at year-end.
On the operations front, we returned Cadillac plant service in August and expect it to reach a final settlement of our insurance claim by year-end. Also, in August, we returned the Williams Lake plant to service slightly ahead of schedule. Fuel availability has improved recently. As a result, we now expect Williams Lake to generate modestly positive project EBITDA this year and we expect continued improvement next year.
On the commercial front, in September, we executed a new capacity agreement for Oxnard for 2021, that should yield positive Project Adjusted EBITDA next year, and we are currently exploring opportunities for 2022.
At Calstock, where the PPA is scheduled to expire in December, we are optimistic that another short-term extension will be granted, that would provide time to see if the parties can agree on a longer-term arrangement for the plant.
We have had a strong year in terms of capital allocation. Through July, we invested $48 million in common and preferred share repurchases, which represented a significant acceleration of return of capital to shareholders.
Let me note, we have two interesting significant investors. One is a fund with Intrinsic Value in its name, and the other is called Humble Capital. Well, we focus on intrinsic value in making capital allocation decisions. We also try to be humble, but it's probably fair to say, our record on returning capital to shareholders is strong. $80 million of common share repurchases and another $25 million of preferreds in the last five years with $48 million of that occurring this year. We have reduced shares outstanding during that period from a high of 122 million shares to the current level of approximately 89 million.
On our second quarter call in August, we said we would need to rebuild cash before considering another Substantial Issuer Bid or SIB. At the end of September, we had $9 million in discretionary cash. We expect to reach about $20 million by year-end with the insurance settlement added to the $9 million. That level of discretionary cash would allow us to consider an SIB for either common or preferred shares, or both, with manageable cost relative to the size of SIB.
We can also use our normal course issuer bid if we decide against an SIB. But the NCIB limits the amount of repurchases relative to an SIB.
Actions speak louder than words. So when we say we'll move with speed and scale when opportunities in cash levels are attractive, it's important to remember we have done so with $150 million of capital allocated to repurchases of common and preferred shares and asset acquisitions in the last five years.
We expect to take the same approach with the cash flow and excessive required debt repayment that we expect to generate over the next five years. As we have said over the past few quarters, that's expected to be about $115 million to $165 million of discretionary cash. So it's a $115 million to $165 million of discretionary cash versus a current net market cap of $180 million or so. We expect the markets will catch up with intrinsic value one way or the other.
I'll conclude with the chart on Page 5 in the presentation. We continue to see signs of slight improvement in power markets as reliability issues from an overreliance on intermittent power sources emerge. On a broader level, we may be near a bottom in the long down cycle in commodities.
The chart shows the relative performance of Commodities Index versus the S&P 500. It's worth to look. The ratio is currently at the lowest level in 50 years.
We will now take your questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Nelson Ng with RBC Capital.
Nelson Ng -- RBC Capital Markets -- Analyst
Great. Thanks. Good morning, everyone. Just a quick question on the biomass facilities. I know that -- I think this past year we've seen a bit of downtime and operating issues at a number of the plants. Just from a big picture perspective, like are those facilities just more difficult to operate? Are you -- like, is there any change required in terms of how they operate? Like, what's your take on some of the headwinds you've seen on your biomass facilities?
Nick Galotti -- Senior Vice President-Operations
Nelson, this is Nick Galotti. No, I think in terms of the biomass issues that we had at Grayling and Craven, particularly issues were centered around the steam turbine. On the steam cycle slide, we really had nothing to do with the fact that the fuel is biomass. So I think, a bit of bad luck where both really had issues with turbines at both plants in the same year. Routine inspections that ended up being more work than anticipated. But I think generally the plants are running well.
Our biomass plants are running well. And I think going forward, we expect at those plants the -- the turbines being repaired, that we expect to run through the life of the PPA with those turbines.
Nelson Ng -- RBC Capital Markets -- Analyst
Okay. Thanks. My next question is more big picture as well. Given the likely Biden Government -- just big picture on what you think the impact is? I guess, we're not sure how much of his climate change policies he can push through, which includes carbon neutrality for the power sector in 2035. Obviously, you have some gas-fired facilities, and I guess one coal facility, but what's your take on that, Jim?
James J. Moore -- President and Chief Executive Officer
Yes. Well, I think two areas. One is on taxes. And I think a lot of that will be determined by the Georgia outcome, if it's 50 one way, then I think they'll get some taxes rolling. If it's more than that, probably not. But I'm no better at political prognostication than anybody else. I think the more likely thing to happen and where they don't need the Senate is the -- on the power side. I expect Biden will put us back in the paradise and ban fracking on federal lands, which might actually be a supply enhancement for oil and gas stocks. You might see prices go up, as always, sort of these unintended consequences.
So it's really hard to predict what's going to come out of Washington and what are the real impacts. I don't see any immediate big upsides or downsides to anything coming out of Washington in any of the remaining scenarios.
I do expect Biden would use executive orders to do things on EPA, tariffs and fracking. None of that could have a huge impact on us. I mean, I think like 2035, carbon neutrality, and this -- the Green New Deal, I mean those things are just fairy tales. It's never going to happen. It physically can't happen. It's just not -- the math doesn't work. And there's a number of good -- Bill Gates has been looking at this and his argument is, if you buy the conventional wisdom, which is catastrophic climate change near term -- or not even near term, reasonable term, you got to be doing no cure. I think he's going to write a book on that.
And when you start digging into these things and look at the numbers, it's very difficult to manage CO2 with wind and solar. The current technology is not great. It's not good on costs, despite the headlines you see and the levelized cost of energy analysis, as you see. You know, when we get high levels of penetration in a jurisdiction, we get high priced as -- New England has high prices, California has high prices. There's a good book out of a guy named, I think it's Michael Shellenberger called the Apocalypse, who's an environmentalist.
And I consider myself an environmentalist. Stuart moved to Vermont in 2001 and started a wind energy company up. I've been on the board at solar companies. I'm happy to buy into wind and solar if the prices make sense for us. But in terms of public policies, these things that politicians are throwing out, they're fairy tales.
And now, what can happen is, before the math and the physics intrude, you'll get price spikes, I think. And then, as a holder of assets, that's going to be good for us. I think you're seeing in California, people are starting to wake up to the fact that you need a heck of a lot more wind and solar than CCGT, natural gas plants, to balance a grid and make it reliable.
And if you're going to pour more demand on through EVs, then you're going to have to have more electricity. So EVs would be terrific for this company and for all electric providers. But some of these things the politicians say are just -- they're not really -- they're kind of little bored analysis. They're not stem analysis. And if I think, to really dig into it, it's just not going to happen that way.
And now, having said that, that the margins people trying to do things that are ultimately not feasible in the timeframe they're laying out, can have a material impact on our business. I think it's been a headwind for us for 10 or 20 years now that wind and solar early on, when I shifted our company up in Vermont, 2001 to wind, you had terrific returns, and people were skeptical about the technology. And now, we've hit the other end of the spectrum, where the returns are really modest to poor. And the public opinion and the conventional wisdom is all over it.
So the pendulum has swung completely to the other side. And frankly, the conventional wisdom and the political wisdom, they're not looking at the environmental impact, and they're not looking at the efficacy of wind and solar on CO2. But I don't expect that to happen. Politicians don't do deep dives and analyze math and physics and economics and compare one detriment to the environment to another detriment to the environment. They just pick things that are popular.
So I think whichever way it comes out, we're pretty well balanced. We have hydro. So if things like the New York Policies continue to roll out, there's likely to be higher prices and it'd benefit our hydro facilities. If things like California gets more widespread and people realize the limits of the current battery technology, lithium ion and start realizing they need to have more reliable, more cost effective ways to balance the grid, then CCGT comes back into frame and we have plenty of that. And then biomass has its own kind of attributes.
So that's a longer answer. But I think both on the tax side and on the energy policy side, we're fairly well balanced. And we don't see a big impact on the business either way. There wasn't the last four years and there probably won't be the next four years.
Nelson Ng -- RBC Capital Markets -- Analyst
Okay. Thanks for your thoughts on that, Jim. So just one last question before I get back in the queue. In terms of realizing shareholder value, you've been buying back some stock. But can you comment on the degree at which you've looked at divesting assets, obviously, like valuations for renewable assets, like hydro, as you mentioned, are at very attractive levels. I'm just wondering, if you've looked at that potential decision of divesting assets and whether there is any key considerations or impediments to divesting assets?
James J. Moore -- President and Chief Executive Officer
Yes. So we said I think maybe last year now that -- we come in every day. We rank order everything on what's the current estimated returns when we're investing. And we do the same thing on the divesting side.
We've done a lot of divesting. I mean, we sold off our entire wind portfolio at a nice multiple and enabled us to pay off our junk bonds. We've closed out a number of plants. We've sold maybe one another plant. Between plant sales and closures, I think there's a large percentage. I don't have the number off the top of my head, but it's probably over a quarter of the plants that were there when I showed up in 2015, we've either closed or sold.
I think the problem is we're a micro-cap now. And I think that hurts your share price and liquidity, and it makes it difficult to do things. So I think, we could sell off the hydro, and I think we could get an attractive price. Whether or not it's a price that's above what's implied in the current share price, you can't be sure. But I -- because you don't know what exactly the market is implying. But I assume, if you sold off the hydro, we'd get better value than the current price. But that's the same thing for the whole company. I mean, that's why we've been aggressively buying shares. We've expressed our opinion on the share price with a boatload of share buybacks over the last five years, and particularly this year.
And we're always open. We're deal people. And we're always open to sell anything at the right price. And we're always open to buy anything at the right price. I think just to take a decision that you were going to spin-out, we've looked at spinning out, in a tax-free basis, the hydro a number of times or to sell them for cash. There's a lot of tax consequences. And then, you have to decide is the value of that transaction, plus these stub company in the public market better than if you just went ahead and sold the whole company off.
But we're the opposite of entrench management, and we're deal people. We're always looking at buying assets or doing kind of corporate M&A deals or selling assets. And we're very open to corporate M&A deals. And so everything's always on the table. And we're always doing our numbers. And we're as frustrated as anybody else. I mean, I've got a large share of my net worth in the company. And the thing to do when prices seem to be disconnected from economic reality, as you see it and forecasted, is to go ahead and buy. And that's what we've been doing on the share side.
On the asset side, there's not a big demand for biomass or coal, and CCGT is turning into more of a merchant play, and it kind of has shortened the batteries play. And then the hydro, we could pull out; and again, we've looked at it for years now -- do we sell it, do we spin it off? Is it better to sell the whole company together? And we're driven by what we're seeing in the markets, and I think you can see by our capital allocation.
If we see a chance to surface shareholder value based on what's going on in the markets, we move aggressively. And so, I wouldn't take anything off the table. We're very laser focused on how do we make the shareholders some money from holding these shares.
Nelson Ng -- RBC Capital Markets -- Analyst
Okay. Just a quick clarification. You mentioned that you've looked at spinning out hydro, or just divesting it outright. And you flag the negative tax consequences. Like, does the NOLs you have in Canada or the U.S. help in any way to offset those tax consequences?
James J. Moore -- President and Chief Executive Officer
Yes. They help on the federal level, they don't help on the state level. And then we did a corporate restructuring a few years back. And I think as the NOLs season, you get more efficient in how you use them. But I haven't looked at the spin off in the last couple of months, but I've looked at it, I think, four or five times over the last five years, because I always keep in mind that John Malone tax free spin off kind of idea. But the taxes -- the NOLs, as you say, would help offset some of the federal taxes, but not the state taxes. And as I recall, I don't know if we've hit the point of diminishing returns yet, but the longer we hold them, the more efficient we got on the NOLs vis-a-vis a hydro spin off. But again, the question would be, are you better off spinning them off? Are you better off selling them or having an auction or are you better off selling the whole company?
Nelson Ng -- RBC Capital Markets -- Analyst
Okay. That's great. Thanks. I'll get back to the queue.
Operator
Thank you. And the next question comes from Sean Steuart with TD Securities.
Sean Steuart -- TD Securities -- Analyst
Thanks. Good morning. A few questions on recontracting initiatives. And I'll start with Calstock. It sounds like you're targeting another six months short term extension. The question, I suppose is longer term. How are you thinking about the long-term contracting opportunity set for that asset? And how do you advance that? How should we think about longer term contracts for Calstock looking?
Joseph E. Cofelice -- Executive Vice President-Commercial Development
I think -- It's Joe. Good morning, Sean. First of all, when you mentioned six months, I think what we said is that we expect that the plant will be extended under a short-term extension. We didn't specifically say six months. So that's what I just want to make sure that we're clear on that.
As far as longer term contracting, the biggest struggle that we've had in Ontario is having a framework that we could engage on. If you look at other jurisdictions like British Columbia, we were we were successful with Williams Lake. The government recognized the non-power value of the assets. And that's what's required for a biomass plant to be contracted, because as we all know, the cost of a biomass plant for electricity purposes only, generating electricity, they're just not competitive.
And so the struggle in Ontario, and this goes back to even the previous government, has been fighting a path of engagement. When we received the last extension, a biomass review kicked off. In August, an important document was issued as a report. I think it was sustainable growth. I think it was called Ontario's forest sector strategy. And it's referenced in the budget, I think, that just came out on -- I believe it's on Page 153. And what the government is doing is, it's focusing on growing the forestry sector. And as part of that report that came out in August, it included a commitment to putting a forest biomass action plan in place. And that's the plan that deals with essentially the mill byproducts as a result of growing the forestry sector.
And so what's different now compared to where we were before, is we now have a path for engagement. The Calstock can now be considered as an alternative for dealing with this plant residuals, the plant waste. And we haven't had that situation before in Ontario.
So what's happened is, is that there's no -- I mean, when we start seeing, there's no guarantee that that will negotiate successfully a longer term contract. But I think that what we have is a way to engage, and we are engaging now. That's the good news. So, we'll see where this goes. But this has been a significant step change in Ontario.
Sean Steuart -- TD Securities -- Analyst
That's encouraging. And beyond Calstock and Oxnard, any detail you can give on other recontracting initiatives for assets that are expiring by the end of 2022?
Joseph E. Cofelice -- Executive Vice President-Commercial Development
You said other than Calstock and Oxnard?
Sean Steuart -- TD Securities -- Analyst
Yes. I mean, I think we've got some context on those two. But beyond those assets?
Joseph E. Cofelice -- Executive Vice President-Commercial Development
Sure. Yes. I mean, we have Frederickson coming up in August of 2022. And that's a very important asset for us. And now, we're within two years of the PPA expiration. And so, we're at the point now where potential offtake is -- we'll consider looking at the asset. So, we're beginning to ramp up our efforts there.
We feel good about potential recontracting the plant. It's in a great location for both power and natural gas. It's had a very illiquid point on the grid, where it's located. We're continuing to pursue all contracting options. We're looking at potential utility RFPs. We're talking directly to the PDs. And we're considering other options also.
So, that'll be ramping up soon. But if you look at that asset, that assets capacity factor has been strong. It's actually been up over recent years, which is a good indicator of the value of the plant. We think it's clearly needed, particularly in a hydro-sensitive market, like that, where you just have to have reliable capacity that you can turn on, backup the hydro.
So, we're beginning to ramp that up to really know when we'll have any more to say on it, but we're working on that. Kenilworth, we continue to engage with Merck. We still feel good about the prospects for further short-term extension there.
And then, in Ontario, the gas assets, we just have to wait and see what happens in that market, largely be driven by supply and demand. The most recent Ontario forecast was that -- I think issued by the IESO in July, shorter requirement, maybe 2022, 2023. So we're ready there for the recontracting of Nipigon and potentially bringing back either or both -- sorry, Kapuskasing or North Bay. So I think that about covers it, unless you have a question on a specific asset I didn't mention.
Sean Steuart -- TD Securities -- Analyst
No, that's great. One last question for me, and then I'll turn it over. You mentioned that the Williams Lake feedstock situation was strong this quarter, in tandem, I suppose, with surging lumber markets. It does seem though that there's a likelihood of further sawmill closures in BC over the midterm as timber supply continues to decline. How are you thinking about the supply for that asset over the mid- to- long-term?
Nick Galotti -- Senior Vice President-Operations
I think in the -- this is Nick Galotti. I think in the short and midterm, I think we're feeling pretty good. As you said, the lumber supplier has helped us with the mills. We've purchased two separate grinders to generate our own fuel with forest residual. So I think that supply will be there. But from a long-term standpoint, I think it's a -- everything we're seeing now is on short-term, and we -- from month-to-month to up to a year in terms of contracting. But I think it's a -- it'll be a short term year-over-year for us for now.
Sean Steuart -- TD Securities -- Analyst
Okay. That's all I had. Thanks very much.
Nick Galotti -- Senior Vice President-Operations
Thank you.
Operator
Thank you. And the next question comes from Rupert Merer of National Bank.
Rupert Merer -- National Bank -- Analyst
Good morning, everyone.
James J. Moore -- President and Chief Executive Officer
Good morning.
Rupert Merer -- National Bank -- Analyst
Jim, you mentioned that we could be at the bottom of the cycle in commodity and power markets. And you talked about some of the challenges of running a grid on renewable energy. In the near term, if you have some challenges recontracting some of your assets with capacity, what would your sense be? Should you sit on those and wait, and does the market come back to these assets in a couple of years? Or looking out into the future, have you looked at things like hydrogen, for example, and converting your combustion turbines to burning hydrogen, whether it's green or blue hydrogen? Just give some thoughts on where you think that the market is going to head for some of these assets in the future?
James J. Moore -- President and Chief Executive Officer
Yes. So you always compare what could I sell the assets for today versus what's the likely recontracting scenario on the assets. We like our positions at Curtis Palmer, which is obviously hydro, and we like our position at Frederickson, which is gas.
I think at a kind of higher level, again, I think when people really dig into these things, like it's happening in California now, and you look at cost benefit -- and not just cost of one thing and benefits of the other -- and you look at the efficacy on the environmental side and the damage done on the environmental side when you're building new stuff, and releasing a lot of CO2. I think it starts to shift at some point. But I wouldn't be OK in any of these things. I wouldn't bet on it happening near term.
So we don't have any view that the markets are suddenly going to rationalize. Our view is, it's a long slog, and that you're going to get more growth from wind and solar than you are from gas. And that public policies generally, if sporadically, will favor more wind and solar. And I think the work that people like Gates are doing to kind of point out that the efficacy there is not at all high, and you really need to look at things like DuJour. That's going to take a while to play out.
So the problem you have is when you sell off assets, you sell them off based on today's price curve. And we're not big on predicting price curves and generally people in the commodity business are overly optimistic about prices, fundamental price versus cost curves. I would say, my guess is the best use of the assets will be, as people realize the limits of wind and solar and batteries, lithium-ion batteries with four or five hour durations, as we're starting to see in California, that things will start to normalize.
Now, in California -- and maybe they double down and more of the same until you get a larger problem and then maybe they'll pivot. I think that'll be one of the last states that kind of pivots toward reality in the near term. What we really need is better technology in wind and solar and batteries. And I'm afraid this rent seeking regime we've set up, as I understand it, has lowered the amount of R&D going into those things.
So we don't have any kind of rosy scenario that things are going pop back on gas. I do think, even now, even today in California, even from a year or so ago, we're starting to see more appreciation of the math and the physics and the economics on the ground. And you're seeing it not only kind of in a broad macro -- although specialist kind of places, it hasn't intruded into the broader discussion yet -- but you're seeing it on the ground.
So I think it's not fanciful to think that gas is going to start to catch up a better bid here in terms of output sales. And certainly, Oxnard improved over last year. Our prospects for Oxnard, I think the outlook for Frede and Curtis Palmer are improving as well and they were probably already good. So we do feel like we have reached a bit of an inflection point.
In terms of hydrogen, I'd say, well, Joe Cofelice has spent more time on that than I have. So, he could talk more thoughtfully than I can. Joe, do you what to weigh in on prospects for hydrogen as an option?
Joseph E. Cofelice -- Executive Vice President-Commercial Development
Sure, sure. Thanks. Yes, I guess the central issue is when will hydrogen be cost effective? That's always the question with these things. And is it really a commercial option that would be there for us in the timeframe that we're looking at. And right now, we're not seeing that. I mean, there are a number of different potential applications and structures using hydrogen.
One of the ones that's candid about is, we're going to take essentially worthless wind and solar power that we created by overbuilding wind and solar, and we're going to use that power to manufacture hydrogen. And then we're going to take that hydrogen and we're going to store it. And then we're going to inject it into storage and take it out of storage, and then we're going to convert gas turbines to run on them.
There's a significant amount of capital costs from the wind and the solar all the way through on that. So I think that the struggle with hydrogen is -- I think it's going to be a while before we find a path forward with hydrogen that's cost effective. And so, we monitor it. We actually were looking at it recently in the Calstock area as an option. And it's just -- a lot of these things are all three to five years out. You can spend some time getting ready for them. But there's nothing on the horizon that we're seeing right now that would actually help us with the plants that we have that are either up to recontracting soon or mothballed.
And we have to keep in mind too that the plants that we have in the mothball right now are in Ontario, and they're in Northern Ontario. And the biggest problem we have is our location there. We're in the north of the province. We're not in an area of great demand. And so the plants aren't well situated, obviously to serve Toronto. And that's one of the struggles we face.
James J. Moore -- President and Chief Executive Officer
Yes. Just to reiterate a point, we're very agnostic on these technologies and we're very agnostic on public policies. I mean, if you want to do the drill baby drill, then that's good for our gas plants. If you want to do green new deal, that's good for our hydro plants. If you have a highly -- if you believe the climate is highly sensitive to CO2 and the outputs of that are going to be catastrophic in a reasonable timeframe, then I think Gates and those people are right that we really need to focus on no cure urgently, and wind and solar are not helpful.
And I feel Gates doesn't say that. He would say, yes, decarbonisation is good. But I wish he would say that it's not nearly enough. And I think James Hansen, who was with NASA, one of the big people who early on talked about CO2, said the same thing. We're agnostic. We're in the business to make money. We're not here for any agendas. Like I say, I went to Vermont in 2001 and converted an IPP company into an all-win strategy. I was on the board of a commercial solar developer in New Jersey. I think our favorite asset class today is hydro. Because if you think about the Venn diagram between the outcomes, I think it is more reliable than things like wind and solar, and it's a price taker, so that gas prices go up. That's good for it.
If you start to ban fracking and reduce supply, you're going to increase prices, so that would be good for us. So we're just in this to make money for the shareholders. And I saw wind business twice in 2005 and 2008. We had a big pipeline, and I was an early adopter of the wind strategy. And if I thought we could make a ton of money on lithium-ion batteries, we'd jump on it.
I think what usually happens is people who ride the green waves and the most popular things, they end up destroying a lot of capital over time. We saw that with those clean energy tech funds back 15 years or so ago now. And people, if you look at the actual performance of wind and solar plants, their P90 type outcomes and things like that, it's been a tough slog for cash investors on the wind side for the most part -- for cash investors.
If you're a tax investor, it's been much better. So we have view that the kind of high level, political level analysis of what actually works, and what the economics are and what the math and the physics are, really don't follow some of the political views on either side. I mean, though -- the last four years, they focused on subsidies for coal and nuclear. That makes little sense to me, right? And saying you're going to decarbonize by 2035 is equally nonsensical. But people feel like, oh, well, we're at least going in the right direction. But you're not. You're not having a material impact. But -- so that's a public policy thing. I think most people don't weigh in on these issues. It's better to kind of go along with the crowd. But the problem is, if you invest with the crowd, you will often end up with poor results. And so, we're not doing anything based on any kind of political agenda or trying to teach the world a better way to do anything. We're just looking at the facts on the ground. And if wind -- if can make really attractive returns, picking up wind projects from cash investors that turned out to have poor flip points post their 2001 to 2015 investments, we're going to jump on that.
We -- in fact, we're talking with some investors right now about looking at things like that. I've looked at getting a solar commercial developer. We're open to all of that. It's just driven by how can we make money for the shareholders, not by any kind of macro level views. We take our views with a grain of salt. We've got a great deal of epistemological humility out here. Because when I started the wind company in 2001, I handed out a book on peak oil. It said -- hey, this is a real thing. And there was a goat herder immigrant son down in The Woodlands, Texas -- George Mitchell -- who showed that we were all wrong about that, or every -- all of my consensus was wrong about that.
So we're very bashful about betting on our ability to forecast any of these things, and we just kind of swing at the pitches that come across the plate.
Rupert Merer -- National Bank -- Analyst
So if we look at the next five years while we're looking out into the future, assuming status-quo, I know you're going to be looking for opportunities, but if nothing comes up, you've talked about $115 million to $165 million in discretionary cash, projecting repayment of debt to get down to about $258 million. At what point does debt get down to a level that is sustained by your long-life assets like Curtis Palmer? And then if we look out to 2025, what does the business look like then?
James J. Moore -- President and Chief Executive Officer
Yes. So, I think we will we've said in the past that we can get to net debt zero by 2025, 2027, as I recall, assuming we just focused on the debt. But we don't -- we have said in our materials that we don't think that's the most likely way we would go.
At the other end of the extreme, you've got a $180 million, less than $180 million market cap. And if you generate up to $165 million of cash, and if you divide $2 a share into that, you can take out another 80 million shares, you got 89 million shares outstanding. It's crazy.
In that scenario, I'd love it. I mean, because I'll be -- you're owning my shares. And then at some point, I hand them off to my kids, and they're going to own Curtis Palmer on the Hudson River. Good luck trying to replicate that. And they're going to have some gas plants that I think will have value that's emerging over the next five years in long-lived biomass.
Now, there would be practical limits on. You can't -- at some point, we can't continue to buy shares, because there'll be liquidity issues and regulatory issues and legal issues. I think at some point, you stop going down that road, and you would pivot to [Indecipherable] more of the money or all the money at preferreds for a while or we've taken as far as we can on the share front, hopefully things emerge over five years where you invest.
We didn't do any investing around here the first three years, because we didn't see anything particularly interesting. And we did a lot of selling and closing the plants. And then for a couple years, all of a sudden, we hit it hard and bought four biomass and we bought hydro. We spent $45 million.
So I think over the last five years, if you look at it, we spent $80 million buying shares and $25 million buying impress at an applied 10% plus returned, the common shares at a significant discount to our base case, best estimates of intrinsic value. And then the $45 million, a stuff that we bought were at good return levels. And we continue to think those are going to have turned out to be terrific investments.
I'd pull the trigger on them again, today, if I could do another set like that. So it'll be lumpy and opportunistic, but those are the major ways we'll deploy the capital. Does that answer your question or did I miss it somewhere?
Rupert Merer -- National Bank -- Analyst
Yes. That's great.
James J. Moore -- President and Chief Executive Officer
Okay.
Rupert Merer -- National Bank -- Analyst
Thanks for the color.
Operator
Thank you. That does conclude the question-and-answer session. So I'd now like to return the commerce back to Jim Moore, for any closing comments.
James J. Moore -- President and Chief Executive Officer
Okay. Thanks, everybody, for getting on with us this morning. And hopefully, that helps people think about where we're going with the company. We think about this company like where all our family money is tied up in it and we're in it for the long haul. And what would we do if in that scenario and we try to act accordingly. And I think we've had a pretty good record of allocating capital.
The markets don't recognize that there's probably micro-cap issue. We're not paying a dividend currently. And with all the good uses of capital we have, I think we're likely to focus our capital the way we had the last five years. But we're willing to pivot whenever we think we can do better for the shareholders. And we're laser focused on shareholder value. It's -- we're major shareholders and the insiders, I think it's gone from something like 1% to 4%. And we like our position, but we're also keenly aware that we've got a surface value here.
And over the next three to five years, we'll recontract Curtis Palmer and we'll recontract Frede, and then I think we'll a lot more clarity. And then the question is, what do you do the next three to five years? And the good news is, we've got a really a high level of cash availability. If you look at kind of free cash flow yield the next five years, it's terrific. And we've got a lot of great uses on our balance sheet and we've got a lot of liquidity in our revolver.
If we start to see better opportunities in the power markets in different asset classes, and that usually happens. Things surprise you and all of a sudden things go on sale and then we can move quickly in that direction.
So thanks for your interest and participation on the call. We look forward to updating you on our progress on the year-end conference call. Thanks again.
Operator
[Operator Closing Remarks]
Duration: 49 minutes
Call participants:
Ron Bialobrzeski -- Director of Finance
James J. Moore -- President and Chief Executive Officer
Nick Galotti -- Senior Vice President-Operations
Joseph E. Cofelice -- Executive Vice President-Commercial Development
Nelson Ng -- RBC Capital Markets -- Analyst
Sean Steuart -- TD Securities -- Analyst
Rupert Merer -- National Bank -- Analyst
