 Hi, how's everybody doing today? I am your host Rich here on behalf of RichTVLive and I'm here with our very special guest. It is Bernard Tan, CEO of RE Royalties. How are you doing today Bernard? Very good Rich. Great to see you again. Great to see you as well. The last time we met in person was at a conference here in Vancouver and now we're getting a chance to do a video together face-to-face which is pretty cool and I'm excited about the progress of RE Royalties so I had a few questions for you. First and foremost, can you explain to me what is a royalty company and specifically what does RE Royalties do? Thanks Rich. Yeah, so we do get that question a lot so royalty companies are actually quite common and quite prevalent in our everyday lives so we don't usually see that but it's out there so to give you an example, when I go and purchase a meal at ANW or Boston Pizza, a royalty company, a publicly traded royalty company actually receives a percentage of the price that I pay for that meal. Similarly, when I download an app from the Apple store and purchase say some music, Apple the music label and the musician also gets paid a royalty on it and within your community you probably also know that some of the largest mining companies in the world today don't actually do any mining. They're actually simply royalty companies. For RE Royalties, we are actually the first royalty company focused entirely on the renewable and sustainable energy sector. The reason we put this company together was we saw the opportunity to really apply a very well proven royalty business model to the renewable sector and where royalty financing really didn't exist. We saw very similar parallels to the exponential growth of royalty financing in the mining and oil and gas sectors in the mid-2000s which really established the giants like Franklin Nevada and Wheaton Precious today. To date we have 84 royalties from solar wind and hydro projects located in Canada, the US, and the European Union. 80 of the 84 are actually on projects that are already operating and providing immediate cash flow. So the unique thing with that is that it allows us to generate revenues and positive cash flow from operations which then allows us to provide our shareholders with a certificate. That's great. Every shareholder wants to get their hands on a dividend so that's fantastic for a smaller mid-cap company still to be potentially offering dividends is huge. So I'm really really excited and impressed with your business model. Now what is the difference between investing in a royalty company versus a renewable energy company? Yeah, we get that question a lot as well and that's a great question. Royalty companies are actually a little bit different and actually present a quite a unique investment value proposition because it has certain characteristics which as investors we find very appealing. So for instance our economic interest is top line generated so based on revenues as opposed to bottom line. So we're not exposed to things like increasing costs or increasing taxes that can really grind against the cash flow of a project. Compared to say a producer, developer, or supplier in the renewable energy space, we have very low overheads. We have a very small team. So the nice thing with that is that as we grow we can scale profitably so we don't need to carry a lot of GNA and overhead costs to manage the company. We also don't need any construction or sustaining capital to get an asset operational in order to generate cash flow and we can also get diversification a lot quicker. And this also in addition to the fact that the industry itself is growing quite rapidly puts the company in a very unique position which we believe we can capitalize on in the coming decades. Now when we met at the investor conference, I believe your stock was at 80 cents. Today it sits at over $1.40. What has the company, how has the company performed in the last six months? I would say everyone knows that the last six months has gone through a lot of systemic changes due to the pandemic. The last two quarters and you can see this on our published financial statements, we're actually our two very best quarters in terms of revenue growth. And this is without any new capital injection so it's very organic growth and our revenue is screwed by 70% and cash flow from operations, it's about 800,000 to close to a million which then again supports that sort of distribution back to our shareholders. Very good. And where do you invest and what do you invest in? We are currently in British Columbia so the royalties that we own are projects in DC, Ontario, Nova Scotia, Texas and Eastern Europe. We tend to focus only on OECD countries. We also do like geographical diversification as you can see from our portfolio because a lot of times electricity doesn't trade as a global commodity even though it is a global commodity. Markets tend to be very regional so in Canada as an example there are 12 regional markets or basically each province has their own market. In the US there's actually even more, there's about over 150 markets alone. So what we try to do is that when we look at buying and acquiring royalties we want to ensure that we diversify our risks across multiple jurisdictions. We also like proven technology so we tend to have a bias for operating projects that are already in commercial operations or in the very near term because again it's all about cash flow, we like cash flow and that's tend to be what we focus on. We're currently in solar and wind, the bed of hydro but we tend to also look at opportunities in areas like energy storage, energy efficiency, renewable natural gas and electric transportation. I would say that those areas are still in our quote-unquote R&D box but we're definitely focused on looking for opportunities there as well. Now I've done lots of videos, a lot of interviews with companies over the last few years and yours is the only doing what you're doing right now, the only one I can think of doing what you're doing so you're clearly unique. What makes your investment strategy unique? In terms of the royalty structure, we do take a page out of the mining royalties playbook so we essentially have two products. One is we essentially buy a royalty stream much like a miner or an oiling gas typically in the range of about 20 years so that's one product that we of how we invest. The second product which actually comprises about 80% of how we invest actually is a loan and a royalty model so that's a little bit different from the resource sector in the sense that we actually lend to a developer or an operator on typically a very short term basis so anywhere between six months up to three years and in addition to that we acquire a long-term royalty. The reason we like this structure and also a lot of our clients like the structure is because we can recycle that capital so to give you sort of an example we closed a transaction about three four months ago with an existing client so they came back to us it's a repeat client. We made a one-year loan to them so the loan was five million dollars and then we also bought a 20-year royalty on their 57 rooftop operating project so these are already cash flowing. The interest itself you know we received five hundred thousand dollars in interest so roughly 10% on the five million dollar loan but we also get a hundred thousand dollar per year royalty for the next 20 years. Wow. Yeah so at the end of that one year loan we get our entire five million dollars back but that royalty keeps going for another 19 years. We then take that five million we reinvest it with either the same client or a different client and create another 20-year cash flow stream of you know say a hundred thousand again so you can see that that capital is you can compound it so it's sort of that golden rule of investing where you keep compounding and create these cash flow streams and once these cash flow streams are established they pretty much are you know basically on remote they're automatic so you know every year we're basically clipping that that royalty check so you know if you imagine based on sort of a you know 20-year period you can actually create a lot of royalties without actually you know utilizing that capital so the return on capital is just off the charts because essentially you're you know getting that growth trajectory in your cash flows. Yeah so based on those numbers you're essentially on a five million dollar investment you're essentially getting back two point five million dollars over a period of 20 years is that correct? Yeah yeah you're making 50% of your money back in 20 years that is incredible. Yeah so the math you know when you sort of put it on a spreadsheet it's quite interesting you know we the the nice thing as well is what we typically look for is also the certainty of the cash flow because that is extremely important that's why we do have a bias towards operating projects because we can see that check we can see that check next year or whether it's quarterly yeah so you know that's why we are you know we feel that we're in a pretty good position right now. Where is this sector headed and how do you see RE royalties role in the sector? Yeah so there's definitely a lot of literature out there you know in terms of the growth of the sustainable energy the pandemic has you know obviously sort of brought to the forefront as well of you know building back better building back greener and it is partially true in the sense that you know I think there's a lot of momentum there in the sector but if you look historically as well you know this is sort of pre-pandemic you can see that it was already headed heading in that direction the global market for renewables it's just absolutely massive in the last year alone there were more than 200 billion you know that's US dollars that was invested into renewables this in terms of investment was larger than mining oil and gas cannabis right so so there's huge momentum huge amounts of capital being put into the renewable sector itself and a lot of that's really driven by the cost decrease with a lot of the technologies renewables essentially is a technology play it gets cheaper and cheaper it's like you know it's like buying you know your Apple iPhone or you know your smartphone it just improves every year if you look at you know how much it costs to produce solar power you know even places like the Yukon it is way cheaper you can actually get solar in the Yukon wind costs have also decreased by you know a tremendous order of magnitude in the last 10 years and today solar and wind are actually you know the cheapest form of new electricity generation in two thirds of the world wow yeah so it is not a fad it is happening the electricity grid is changing and we where we see our royalties is that you know as an emerging leader providing alternative financing to this industry I think the best parallel is to look at the similar evolution of companies like the precious metal or Franklin Nevada in the mid 2000s where they started off as niche players as well but over time you know they were able to grow their products and they became leaders in the mining sector itself and I think you know Franklin Nevada and wheat and precious metals are worth roughly about 30 billion dollars today that's incredible now you recently came out with a green bond which I'm very interested in and I talked about in our previous video can you explain why and how this is good for shareholders and bond holders sure so part of the reason we came out with a green bond you know we had sort of kept an eye on the green bond market itself green bonds are effectively a debt instrument so as an investor if you're looking at your portfolio you have your equities you have your fixed income sort of allocation right so typically in the past it's always you know the most financial advisors advise you know you buy 60 equity 40 debt as a fixed income if you look at the Canadian marketplace in itself there's not a lot of green bond products so a number of our investors who were equity holders you know basically came to us say yeah you know it's nice I bought some equity you know I'm part of the 60 percent but you know when are you guys going to come up with a fixed instrument because you know I have an allocation and I'm not getting a lot of return on my five-year GIC you sort of you know google and research what a five-year GIC is paying today they're typically so in that one to two percent range if you buy sort of a large corporate green bond if you know as a everyday investor you can actually get access to it so as an example CIDC came out about two days ago to with a new green bond issuance so it was a five-year green bond it was unsecured and the yield on that was one percent per year so it's basically you know you're not even beating inflation in terms of the green bond you know so a lot of investors were you know told us that hey you know you guys need to come up with green bonds so we did you know we wanted to come out to the market and be able to deliver sort of a unique investment so our green bonds pay a coupon of six percent so you know for every thousand dollars you know you pay you annually sort of 60 dollars and essentially you know it gets we pay on a quarterly basis the other unique thing with our green bond offering as well it's it's structured as senior secured so in terms of protection you know it has the highest level of protection for the investor as previously mentioned we are already cash flowing so bond investors have that added layer of you know us being able to service the interest payments and also eventually the full repayment of the principle so to give you sort of an analogy what is senior secured some bonds are unsecured and you know some bonds are asset backed so our bonds because they're senior secured they're only about five percent globally in terms of bonds are actually senior secured so at the very top quality what it is is that if you're unsecured it's like a credit card you know if you don't pay back you just get harassing phone calls but no one can come in sort of take your assets as an asset back loan it's different so it's like a car loan so if you don't pay your loan they'll come in and take your car but they can't take anything they can't take your house they can't take your financial assets senior secured is at the very top so you don't pay back you know basically you're fully exposed so for a bond investor that's a very high level of protection you know in terms of the cash flows and the company's asset the benefit for our shareholders on the other hand is that effectively we can leverage lever up so historically we've only sort of utilized equity but because our targeted IRRs are much higher so mid teams effectively anything above six percent accrues directly to our shareholders without any direction so it's a benefit for both you know if you're an equity shareholder you get the benefit of this capital working for you and getting said that up that sort of additional sort of uplift whereas if you're a bond holder you get the full protection that you know your six percent deal will be fully secured and there's no disruption and you know you won't get your money back so so very different value compositions but we wanted to make sure that we were able to provide that for our investors I love it I mean whenever you can provide a product a financial instrument where you can offer higher returns than the banks you know you're going to have a lot of interest and then on top of that when you can actually secure their money and I believe it's a five-year loan correct like if I invest 10 000 I have to hold it there for five years but I can receive a dividend payment quarterly which you mentioned so let's say we're doing 10 000 as a number I would be receiving 600 a year at six percent so I would receive 150 dollars every three months correct so that's what it works like guys and like I like like Bernard said you can't find that anywhere else as far as banks are concerned you might be able to find it from a private lender but they may not be securing it so this is a great product like I said I haven't seen it anywhere else and I think it's a very special product you guys are offering now for investors that are looking at the future of our e-royalties you've got some great products do you have any other new catalysts that investors can look forward to in the future or are you just going to stay focused on your green bonds right now I see in the next two to three months we're definitely focused on that green bonds but in terms of catalyst you know I would say putting that money to work is probably the catalyst that will sort of increase again our cash flows our revenues so in terms of where we're at in terms of our investment you know we have a couple sort of letters of intent that we're currently in negotiation with obviously prospective clients in terms of putting that capital of work once we're able to put that capital to work then you'll see that that will translate into new revenues additional sort of growth perspective and yeah I would say that's you know I would say that's definitely something much shorter term than longer term to be in terms of opportunity now we're going to have this video get circulated to all of our social media following all of our investors all over the world if you if an investor wanted to get in contact with you Bernard what's the best way for them to reach you I would say the best way is go to our website it's www.reroyalties.com that is you know all the contact information is there please reach out to us if you have any questions on you know our business our stock review trade on the TSXB under the symbol RE you know feel free to reach out leave us send us an email or you can also call us well thank you so much for your time today Bernard Tan the CEO of RE Royalties guys take a look at this company I think they're doing something very unique I believe the returns for the green bonds are pretty spectacular congratulations on all your success so far Bernard and continue on your objectives hopefully you continue to achieve everything that you settle for yourself and for your company yeah thank you Rich and thank you for having me on thank you for joining us thank you guys for watching have yourselves a great day everybody and put RE Royalties on your watch list put it on your radar and if you'd like to get a nice return on your investment contact Bernard 6% not bad thanks guys have a nice day