RE Royalties : Management Discussion and Analysis - Interim MD&A - September 30, 2021 - Q3

RE ROYALTIES LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

	RE ROYALTIES LTD.
	MANAGEMENT'S DISCUSSION AND ANALYSIS
	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
1.1	Date ...................................................................................................................................................................................	4
1.2	Overview.........................................................................................................................................................................	4
1.2.1	Renewable Energy Royalty Investments...........................................................................................................	5
1.2.2	Disclosure of Environmental and Social Data..................................................................................................	9
1.2.3	Financing......................................................................................................................................................................	11
1.2.4	Distribution to shareholders ...............................................................................................................................	11
1.3	Selected annual information................................................................................................................................	13
1.4	Summary of quarterly results .............................................................................................................................	13
1.5	Results of operations ..............................................................................................................................................	15
1.6	Liquidity .......................................................................................................................................................................	19
1.7	Capital resources ......................................................................................................................................................	19
1.8	Off-balance sheet arrangements ........................................................................................................................	20
1.9	Transactions with related parties .....................................................................................................................	20
1.10	Fourth quarter...........................................................................................................................................................	21
1.11	Proposed transactions............................................................................................................................................	21
1.12	Critical accounting estimates ..............................................................................................................................	21
1.13	Changes in accounting policies including initial adoption......................................................................	21
1.14	Financial instruments and other instruments..............................................................................................	21
1.15	Additional disclosure for venture issuers without significant revenue ............................................	21
1.16	Disclosure of outstanding share data...............................................................................................................	22
1.17	Internal controls over financial reporting and disclosure controls ....................................................	22
1.18	Risk factors..................................................................................................................................................................	22

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RE ROYALTIES LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

Cautionary Note to Investors Concerning Forward-looking Statements

This discussion includes certain statements that may be deemed "forward-looking information" or "forward- looking statements" within the meaning of Canadian and United States securities law. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions of future events or performance (often, but not always, using words or phrases including, but not limited to, "expects", "does not expect", "is expected", "anticipates", "does not anticipate", "plans", "estimates", "believes", "does not believe" or "intends", or stating that certain actions, events or results may, could, would, might or will be taken, occur or be achieved) are not statements of historical fact and may be "forward-looking information". This information represents predictions, and actual events or results may differ materially.

Forward-looking information may relate to the Company's future outlook and anticipated events or results and may include statements regarding the Company's financial results, future financial position, expected growth of cash flows, business strategy, budgets, projected costs, projected capital expenditures, taxes, plans, objectives, industry trends and growth opportunities. Forward-looking information contained in this discussion is based on certain assumptions regarding expected growth, results of operations, performance, industry trends and growth opportunities. In some cases, forward-looking information contained herein are based upon information received from or disseminated by third parties.

While management considers these assumptions to be reasonable, based on information available, they may prove to be incorrect. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to risks associated with general economic conditions; adverse industry events; marketing costs; loss of markets; future legislative and regulatory developments involving the renewable energy industry; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the renewable energy industry generally; income tax and regulatory matters; the ability of the Company to implement its business strategies including expansion plans; competition; currency and interest rate fluctuations; and the other risks discussed under the heading "Risk Factors" in this MD&A. The foregoing factors are not intended to be exhaustive.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date hereof and the Company and its directors, officers and employees disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, you should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. All forward- looking information is expressly qualified in its entirety by this cautionary statement. Forward-looking information and other information contained herein concerning management's general expectations concerning the renewable energy industry are based on estimates prepared by management using data from publicly available industry sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which management believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While management is not aware of any misstatements regarding any industry data or comparables presented herein, industry data and comparables are subject to change based on various factors. The Company has not independently verified any of this data from independent third party sources.

Any forward-looking statements contained in this discussion are made as of the date hereof and the Company does not undertake to update or revise them, except as may be required by applicable securities law.

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RE ROYALTIES LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

1.1 DATE

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited condensed consolidated interim financial statements of RE Royalties Ltd. ("RER" or the "Company") for the three and nine months ended September 30, 2021 (the "Financial Statements") and the audited consolidated financial statements of the Company for the year ended December 31, 2020 and related MD&A (the "Annual MD&A") as publicly filed on SEDAR at www.sedar.com.

The Company reports in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The following disclosure and associated Financial Statements are presented in accordance with IFRS. All monetary amounts herein are expressed in Canadian Dollars ("CAD"), unless stated otherwise.

This MD&A is prepared as of November 29, 2021.

1.2 OVERVIEW

Description of Business

RE Royalties Ltd., formerly Baetis Ventures Ltd., is a public company whose common shares are listed on the TSX Venture Exchange ("TSXV"), under the trading symbol "RE". The Company was incorporated on November 2, 2016 under the laws of the Province of British Columbia, Canada. The address of the Company's corporate office is 14th Floor, 1040 West Georgia Street, Vancouver, BC, V6E 4H1.

The Company acquires revenue-based royalties from renewable energy companies by providing a non-dilutive royalty financing solution to privately held and publicly traded renewable energy companies. The Company's business objectives are to acquire a portfolio of long-term, stable, and diversified renewable energy royalty streams to provide shareholders with capital appreciation and a growing, sustainable, long-term cash distribution.

Management has identified an underserviced segment in the renewable energy capital markets that lies between traditional debt and equity financing. For many small to medium-sized renewable energy companies ("SMREs"), a revenue-based royalty financing has many advantages with respect to flexibility, cost and contractual terms.

Traditional royalty-based financing has been used extensively in the North American natural resource, consumer service, industrial manufacturing, health-care, music and food sectors. Management believes that there is significant demand among SMREs for non-dilutive royalty based financing solutions due to a lack of innovation in the financing for renewable energy projects.

The Company's long-term objectives will be achieved by:

• Acquiring long-term renewable energy generation royalty streams backed by power purchase agreements or other revenue programs from credit worthy utilities and/or facilities which operate in strong merchant markets with stable power pricing;
• Acquiring renewable energy royalties in high-growth areas of the low carbon energy sector including clean transportation, energy storage and, energy efficiency that are backed by offtake arrangements or customer sales and/or lease contracts from credit worthy counterparties.
• Reinvesting capital to acquire new royalties and to grow royalty income and interest;

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RE ROYALTIES LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

• Utilizing debt financing and/or co-investment structures to acquire additional royalties in order to enhance financial returns for shareholders; and
• Maintaining a low operating cost structure.

1.2.1 RENEWABLE ENERGY ROYALTY INVESTMENTS

For detailed description of each royalty investment transaction completed prior to January 1, 2021, refer to the Annual MD&A as publicly filed on SEDAR at www.sedar.com. This MD&A includes only changes and events in the current year to the date hereof.

The Company currently owns a portfolio of 98 royalties on solar, wind and hydro projects operating in Canada, Europe and the United States. A summary of the Company's portfolio as of the date of this MD&A is as follows:

Client

Location

# of

Expected

Royalty as

Energy

Status

Generating

Original

Royaltie

Expiration/

% of

Type

Capacity

Investment

s

Term

Revenue

(C$ million)

Aeolis Wind

British Columbia,

1

2035

1.00%

Wind

Operational

102 MW

$ 1.24

Canada

OntarioCo(a)

Ontario, Canada

59

2040

2.00%

Solar

Operational

18 MW

$ 5.00

Fresh Air Energy

Ontario, Canada

4

2033

1.00%

Solar

Operational

40 MW

$ 1.87

Scotian

Nova Scotia,

12

2036

8.00%

Wind

Operational

40 MW

$ 4.64

Windfields(a)

Canada

Alpin Sun

Texas, USA

2

20 Years

2.00%

Solar

Development

128 MW

$ 1.30

Solar,

Jade Power(a)

Romania

5

2035

1.05%

Wind,

Operational

34 MW

$ 3.80

Hydro

Completed in 2021 - additional details are provided herein (below)

Switch Power 1

Ontario, Canada

4

2031-2033

5% - 3%

Battery

Operational

2 MW

$ 2.31

Switch Power 2 & 3

Ontario, Canada

10

2033-2035

5% - 3%

Battery

Development

19 MW

$5.07

Teichos Energy

Pennsylvania,

1

15 Years

1%

Solar

Development

20 MW

$ 3.00

USA

Total

98

403

$ 28.23

1. As of the date of this MD&A, the Company had received full repayment of the loans advanced to OntarioCo, Scotian Windfields, and Jade Power. Further details are as follows.

Updates and Changes on Royalty Investment Transactions Completed Prior to January 1, 2021

1. Repayment of loan from Jade Power

In January 2021, the Company received $1,750,000 in the final repayment of the $3.8 million loan receivable from Jade Power. Since January 1, 2021 and as of the date of this MD&A, there was no change in the terms of the royalty interests held by the Company in Jade Power's solar, wind, and hydro projects.

1. Repayment of loan from OntarioCo

During the nine months ended September 30, 2021, the Company received $3.0 million, along with accrued interest, in repayment of the $5.0 million loan receivable from OntarioCo. In November 2021, the Company

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