Altius Renewable Royalties Corp.

Management's Discussion and Analysis of Financial Conditions and Results of Operations

For the three and six months ended June 30, 2022 and 2021

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with Altius Renewable Royalties Corp. (the "Corporation", "ARR" or the "Company") consolidated financial statements for the three and six months ended June 30, 2022 and related notes.This MD&A has been prepared as of August 4 2022. This MD&A is expressed in US dollars and rounded to the nearest hundred, except per share amounts.

Caution Concerning Forward-Looking Statements, Forward-Looking Information

Management's discussion and analysis of financial condition and results of operations contains forward-looking statements.By their nature, these statements involve risks and uncertainties, many of which are beyond the Corporation's control, which could cause actual results to differ materially from those expressed in such forward-looking statements. Readers are cautioned not to place undue reliance on these statements. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Caution Concerning Non-GAAP Financial Measures

Attributable royalty and other revenue ("attributable revenue") and adjusted EBITDA do not have any standardized meaning prescribed under IFRS and should not be considered in isolation or as a substitute for measures of performance. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. Detailed definitions and reconciliation to various IFRS measures can be found under 'Non-GAAP Financial Measures'.

Additional information regarding the Corporation, including the Corporation's continuous disclosure materials, is available on the Corporation's website at www.arr.energyor through the SEDAR website at www.sedar.com.

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Description of Business

Altius Renewable Royalties Corp. is a renewable energy royalty company whose investments result in the creation of gross revenue royalties and royalty-like payments related to development through to operating-stage wind, solar, battery storage and other types of renewable energy projects. The Corporation's operations are primarily managed through its Great Bay Renewables Holdings, LLC. and Great Bay Renewables Holdings II, LLC. joint ventures, which it is partnered equally with certain funds (the "Apollo Funds") managed by affiliates of Apollo Global Management, Inc. ("Apollo").

A summary of the joint venture's royalty interests is listed below, and a detailed listing of the royalties can be seen in Appendix A - Summary of Operational and Development Stage Renewable Energy Royalties.

Pro ject

Renewable Energy

Royalty Basis

Facility Size

Clyde River

Hydro

10% of revenue

5 MW

Prospero 2

Solar

Variable

250 MW

Phantom

Solar

Variable

15 MW

Old Settler

Wind

Variable

150 MW

Cotton Plains

Wind

Variable

50 MW

JayHawk

Wind

2.5% of revenue

195 MW

Operational

665 MW

TBA

Wind

2.5% of revenue

500 MW

El Sauz

Wind

2.5% of revenue

300 MW

Canyon

Wind

2.5% sliding scale*

360 MW

Panther Grove

Wind

3% of revenue

400 MW

Appaloosa

Wind

1.5% of revenue

175 MW

Hoosier Line

Wind

3% of revenue

180 MW

Blackford Wind

Wind

3% of revenue

200 MW

Flatland

Solar

Fixed payments*

180 MW

Honey Creek

Solar

1.5% of revenue

400 MW

Blackford Solar

Solar

1.5% of revenue

150 MW

Development

2,845 MW

Total

3,510 MW

*Refer to press release dated June 29, 2022 for additional information

Organizational Structure

On October 11, 2020 the Corporation, through a newly created subsidiary, Altius GBR Holdings, entered into a strategic relationship with the Apollo Funds to accelerate the growth of its innovative renewable energy royalty business. Under the agreement structure the Apollo Funds had the right to solely fund the next $80,000,000 in approved investment opportunities in GBR and earn a 50% ownership in the joint venture, with opportunities thereafter intended to be funded equally by the Apollo Funds and the Corporation with an equally shared governance structure. As a result of contributions by the Apollo Funds during the year ended December 31, 2021, the Corporation's ownership in the joint venture was diluted to 50%.

On October 11, 2020 as a result of the governance structure with Apollo, the Corporation determined that it no longer controlled its subsidiary, Great Bay Renewables, Inc. ("GBR Inc"). The Corporation equity accounts for its interests in Great Bay Renewables Holdings I, LLC ("GBR I")

Management Discussion and Analysis

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and Great Bay Renewables Holdings II, LLC. ("GBR II"), collectively referred to herein as GBR or the joint venture and reports its share of earnings or loss and its share of other comprehensive earnings or loss. The renewable energy investments form part of the joint venture and the Corporation's share of revaluation of those investments are recorded in the Corporation's other comprehensive earnings.

The following represents a summarized organizational chart for ARR.

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Strategy

ARR's long-term strategy is to gain exposure to renewable energy assets by owning and managing a portfolio of diversified renewable energy royalties. The Corporation's primary approach to growing the business is to provide tailored financing solutions to renewable energy project developers and operators in return for a royalty on a project's gross revenues. The Corporation executes this strategy through its joint venture with the Apollo Funds.

ARR has identified demand for capital investment within the renewable energy sector in return for royalty-based financing. Royalty-based financing has been used extensively in other industries, such as finite natural resource, industrial manufacturing, healthcare, and music. Furthermore, the adoption of royalty-based financing has often been a major growth catalyst for certain industries. As a specific comparable, within the mining sector where adoption of royalty financing has become widespread, it provides an alternative to traditional sources of capital, increases the overall supply of capital, and ultimately finances a significant component of project development. Based upon the Corporation's success to date in deploying capital, it believes that royalty-based financing can eventually continue to grow to play a similar role within the renewable energy sector.

While ARR's investment approach is somewhat project stage agnostic, ARR seeks to optimize the risk adjusted return of its investments. For development stage opportunities, the Corporation has structured its investments using a portfolio approach, mitigating the development and construction risk of any one specific project, while ensuring the agreements are structured to meet a minimum return threshold. In addition to development stage projects, ARR has made two investments to date in operating stage projects.

The Corporation does not seek to operate renewable energy assets or directly develop projects. ARR's business model is focused on passively financing development or operating projects in order to grow a portfolio of renewable project royalty interests. The Corporation believes that the advantages of this business model include the following:

Focus and Scalability. As the Corporation's management does not handle operational decisions or tasks relating to the development or operation of renewable power projects, they are able to focus their time and resources on carrying out the Corporation's growth strategy of identifying and executing on renewable royalty-based investment opportunities. As such, ARR's business model allows it to acquire and monitor more renewable power interests than an operating company of similar size could generally effectively manage.

Exposure to Redevelopment Upside without Project Costs and Overhead. The Corporation believes that its royalty and royalty-like investment model provides exposure to several forms of project upside. ARR may benefit from any life extensions, re-powering, and other project enhancements, without incurring additional associated operating, development, or sustaining costs.

Asset Diversification. The Corporation is able to invest and create royalty interests in a broad portfolio of renewable power assets across a spectrum of geographic regions and operators, thus reducing its dependency on any one asset, project, location, or counterparty.

Price Exposure.Several of the Corporation's royalty interests maintain exposure or partial exposure to market electricity prices. These have been generally increasing in recent periods owing to inflationary and other marginal cost pressures in the broader electrical generation industry. As typically top-line or revenue based interests the Corporation can benefit from higher prices without meaningful direct exposure to inflationary cost pressures.

Management Discussion and Analysis

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Altius Renewable Royalties Corp. published this content on 08 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 August 2022 14:34:03 UTC.