Q4 2019 Earnings Call
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25, so you have taken a coffee costs social T. Oxycyte. She was happy but my dad. They appear so it's quite piece I hope they might not that do not got stuff and meal difficulties. They said I feel like I say since a few so ladies and gentlemen, thank you for standing by and welcome to for like Inc.'s fourth quarter 2018 results conference call at this time all parties.
Fair enough listen only mode. After the speakers presentation Dolby a question for Sasha.
And during the second only to press Star one on your telephone. Please be advised that today's conference is being recorded if you require any further systems. Please press star zero I would now like to hand, the conference over to your first speaker today on meal director of Investor Relations. Please go ahead Sir.
And now C.N.. Thank you operator, so good morning, everyone and welcome to borrow next a fourth quarter and year end results conference call joining joining me today, our Patrick <unk>, President and Chief Executive Officer, nothing that cost of Vice President and Chief operating officer, they're not getting that vice president and chief.
Financial officers office or sorry [noise].
And other members of our management and finance teams.
Mr and am I will begin with comments about the highlights of the year end, a fourth quarter afterward, Mr. Douglas will provide an update on development production and optimization. So again, that's what carry on with the financial highlights and then we'll be able.
To wrap it up both answer all your questions as you know during this call we will discuss it starts all as well as forward looking information when talking about the future. There are a verity of risk factors that I've been listening or different findings.
What security regulators, which can be can materially change. Our estimates are estimated results. These documents are all available for a consultation that fit our dotcom.
In our webcast presentation document the disclosed I results are presented both on there I FRS and on a combined basis unless otherwise stated all comments made in this presentation will refer to combine basis figures. The press release, the Mdna de consolidated financial statements on a copy of today's presentations are.
All of it available and posted on the Barnett's website that buybacks dotcom on Dirty investors section.
If you wish to receive a copy. These documents. Please contact me so mr. am I will now start with his comments. Please go ahead.
Thank you Stephanie I'm. Good morning, everyone 2019 has been another strong year football.
Hi, I'm really proud that into first year of our strategic plan, we more than double our work, Yeah Festival, which [noise] reach how good 20 million on the 2023 target number 140 to 150 million.
Just came from the strong from me, 39% growth in our it'd be and do you didn't show a positive effect at around 2 billion in refinancing completed during the year.
2019 also marked a return to more normal when condition in France fourth quarter was particularly strong would they production or 15% higher than anticipated in friends in 2019.
Good resolved when I wear submissions in response to request for proposal didn't friends, winning more than 100 megawatts.
We also got the Green light for the 90 megawatt line jump project.
And a week Quickies is set up a U.S. genes to submit a bid 480 megawatt solar projects.
We have a solid growth path and can count on the strong pipeline to reach our 2023 target of 2800 megawatt.
But we took US we'll give you more information on this later.
I will now report our progress towards the four orientation of our strategic plan.
Starting with the growth orientation.
In 2019, we've commissioned for wind projects for 69 megawatt into hydropower station for <unk> for an additional.
26 megawatts.
As mentioned before we also added projects to our growth that and pipeline.
Switching now to our diversification orientation, we are waiting for the result of our 180 megawatts bid in the New York, New York State Solar RFP and remain confident about the outcome.
Our development team in the U.S. in France.
Making really good progress with more projects expected to be added to our pipeline into future.
We are also expecting some development in the near future.
Customer orientation.
Both Europe and North America, as we are I'd add advent stages of negotiation with some corporate customer.
In terms of optimization initiative to highlight was definitely the closing of our 1.7 billion refinancing in France.
On top of freeing up 180 million enough cash to reduce our corporate credit facility. This transaction will generate recurring interest saving of about 15 million a year.
In conclusion for my part we are very happy with the result in progress we are making India exists you execution of our plan. We remain confident for 2020, we'd have a solid and that dry management team dedicated employees and the clear action plan everything is in place for us to continue.
To execute our plan like we did in 2019.
And I'll, let Patrick cover development or yet operations and optimization I will be back later for the question Barry.
Thank you Patrick good morning, everyone I will start by talking about the new we we are presenting our pipeline and growth path Norton in order to give greater visibility toward developing initiative. We are no presenting a word pipeline based on specific criteria using our development process.
Third the just time as we did before this has resulted in some changes in total megawatt prestigious compared to the pipeline presented in the third quarter, but it will be easier for you to fulfill our progress going forward with this change we have also introduced.
A new stage called secured.
These stage include project, which is being awarded a contract P.P. or Rick or.
Seem to keys of Scotland way permits have been obtained.
These projects are not yet totally ready to be built but are close to getting all the authorization needed to get started.
These new stage was added to our gross bye and resulted in the addition of hundreds and 67 megawatts at your hand.
Our gross past also know shows the gap required to reach our target of 28 megawatt in 2023.
Just gap is 535 megawatt no but could be reduced with the expected results from our U.S.. So every bit as well as recent and upcoming bids in France.
Turning now to production.
In Canada when production in the fourth quarter increased by 4% compared to last year coming mainly from the commissioning of our moves League wind farm NBC comparable production was pretty much nine was last year and was anticipated production.
In France, when cutting condition were much better than the fourth quarter last year, resulting in 17 gross.
In person gross over the last year on a comparable basis and 31 person gross overall as mentioned by Patrick at the beginning comparable production in France was also 15% higher than anticipated production.
The fourth quarter.
Overall total when production flow quarter, combining Canada, and France was 16% higher than last year and five person higher than you anticipated production on a comparable basis production was 8% now you're done last year and six person higher than anticipated.
Turning now turning to hydro no worries the commissioning of yellow falls and reopening of Buckingham Canadian Hydro production was 77 person higher than fourth quarter last year.
Comparable production was inline with last year, but 12 person lower than anticipated production.
You S. hydro Wes.
Up by three person over the Coulter or the quote the fourth quarter last year, and 23% higher than anticipated production.
In summary.
Total production for the quarter West 17 person higher than last year, and five person higher than anticipated.
I don't cover in detail, our 2019 full year production, but I would like to I like that when production is in line with anticipated production in France, and full person higher in Canada.
I would also like to I like that when production from assets acquired in 2018 is nine person higher than anticipated production in Canada, and two person how you're in France.
In terms of optimization I would like to mention that we successfully in source mentioned in his contract at site totaling 210 11 megawatts.
In sourcing of maintenance is a major strengths bottlenecks and we are planning to continue this trend in the coming years as mentioned before Repowering is also a good way to optimize the output at specific site.
Shortly after the end of the third quarter, we restart production other our Buckingham hydropower station in Quebec.
Mentioned before capacity has doubled.
This facility going from 10 to 20 megawatts and adding about 5 million in annual contribution to we'd be D.
The next in line is always shown almost repo borrowing in France, which we expect to complete into second half of 2020.
I would provide more information on optimization in coming quarters in conclusion for my part 2019 was a good you're in term of operation as I mentioned by Patrick and I liked with our pipeline and growth path wearing a very good position to brochure gross this complete my part we didn't know.
Lets Bruno covered the financial portion in more detail and we'd be back for the question period.
Thank you Patrick good morning, everyone.
I will start when I review of the progress made in light of our 2023 financial objectives.
Starting with ethanol.
As mentioned by Patrick let Matt we more than doubled our assets totaling 2019, reaching 120 million compared to 59 million in 2018.
And the fourth quarter alone, we improved ethanol by $24 million.
Dividend distribution ratio now stands at 50%, which is right in the middle of our 40% to 60% target.
Our net install capacity stands at 2040 megawatts and with the growth path and pipeline presented earlier bypassing discussed we are very confident that we will reach our 2023 goal of 2800 megawatt.
As Patrick Lemon I gave you a good idea of our main achievements for the year I will review our quarterly results.
Fourth quarter revenues, followed pretty much the same pattern as production presented bypassing the cost.
With growth compared to last year coming from the when sector, but also a good performance from our hydro sector.
Following the reopening of our Buckingham power station.
Decommissioning of yellow false and a good performance of our U.S. operations.
EBITDA increased from 121 million enough fourth quarter of last year 265 million this year.
EBITDA for the wind sector was 31% higher than last year.
Hi, Joe EBITDA more than doubled going from 8 million last year to 17 million. This year 6 million gain on the sale of the land in Scotland also explains part of the increase.
Moving to cash flow.
We generated a $119 million of I FRS cash flow from operations into fourth quarter.
By 68% compared to the same quarter last year.
Ethanol increased by 24 million or 56% going from 44 million in the fourth quarter last year to 68 million this year.
Finally, our financial positions remain solid with our net debt to total market capital ratio down from 65% on December 31st 2018% to 56% on December.
So your first 2019.
In conclusion.
We delivered strong growth compared to last year.
We maintained disciplined financial management and optimize our capital structure with over 2 billion and refinancings, which will generate recurring benefits.
We continue to make good progress and the execution of our financial objectives.
Our teams are focused on growing our pipeline and strategically bidding projects in response to request for proposals.
And we have a solid balance sheet and we are looking for accretive transactions in regions and technologies that we know well.
Thank you for your attention, we're now ready to take your questions.
I'm, calling in fossil putting kessel, who do they actually so it's one.
So that's how they thought as a reminder, please press star followed by one to ask a question.
Your first question comes from Robert Merit from National Bank. Your line is open.
Good morning, everyone.
Wondering Robert.
I'm wondering if you can give us a little more color on what's going on with the Moulin to know and project I see it took a write off.
On the pro Jack, but what's your view on the potential.
Oh for recovery of that value either through building, a project and or future RFP use or.
Or having some kinda claim against a against the laws.
Okay were waiting for the decision on the appeal on the second half of 2020 from the goal say data.
And the we will be the project in an upcoming Irish speed depending on on.
On the due to condition to two to bid, but the project would be a will be accepted to to try this and the project should could be commission two years after getting a P P and a favorable decision on the appeal.
Robert if ever.
Yeah. The result, but the appeal is negative then for sure we will look at.
Doing some procedure against the government that gave us initially department.
I went back to where we're confident do you feel will be positive for us interest.
Okay. When you rebid that project what are the opportunities.
For getting a decent return somewhat like what you would have expected initially and I imagine there was a bit of us on cost here. So you have the ability to to bid fairly aggressively.
Oh yeah.
I'm going to see that we were conservative, let's see negative you for us.
So we took a lot of value out and Uh huh not to do another write off later on so so this is a this is that we've done it and for sure we'll do everything in ER.
But we have a when we'll be let's see reengineering the project to bring back as much value with that need turbines or things like this.
We'll we'll be able to recover some of that right.
Alright. Thank you and then if we can turn to New York and wondering if you can give us some thoughts on.
What's happening in the market there I see there are some potential changes to the regulatory environment, both pros and cons of government seems to be looking too.
Speed up construction, but there could be some changes to the that capacity market there as well and then just two to top that off if you could talk about the outlook.
For a contract awards in New York.
Okay.
I'll answer your last question first.
For contract awards or.
It's a new markets for us so we're anxious and we thought we wouldn't know prior or than where we stand today. So.
So so that's what I can tell you wouldn't.
I like your like I'm mentioning weird.
We're learning this new a this new.
Gross or grow.
State or opportunity for us.
So and we remain confident we will be successful than some of our lives here some of ours is over there.
And for the regulatory changes, we don't see anything that will impact us.
So do you have a sense of the timing on a project awards.
Okay.
Oh as soon as possible.
So that's the only thing because I can answer you are.
Initially we're supposed to be the end of your and we had some rumors it would be beginning of the you're in that.
Two months out in the here and I, it's that doesn't have been unknowns, we don't exactly why it's Ah why isn't that being awarded yet but.
Leading and learning.
Okay I'll get back into queue. Thank you.
Your next question comes from David Cassata from Raymond James Your line is open.
Thanks. Good morning, everyone. My first question here just on the I think you mentioned you're in negotiation or for with corporate customers for power Scream and wondering if he can provide any color or contacts on on.
Maybe the length or pricing of those contracts relative to a what you've been getting or maybe some examples of contracts that have happened in the markets. So far.
Yes, Indeed, we are especially in France or negotiating on to the.
The the assets which are.
Or will that will finish their initial PPD contract.
And today, we are negotiating between see three to eight years of duration.
On on these assets.
And the price of the electricity the price of electricity is in line with.
For the first year.
With the.
The quotation off.
Baseload electricity price into market or little bit high your thanks to the green value of yes.
But we we cannot compare on a long term because there is no quotation overdone two years.
Okay, great. Thank you. That's that's very helpful. And then just one other question, adding some of the project you haven't Scotland aside from line and kill and I'm. Just wondering if any of those are getting close to development or or if there has been a progress there.
There are developing and we will inform you win when do will be oh to rise.
Okay Fair enough. Thank you that's it for me.
Your next question comes from markets Darby from C.I.B.C. Your line is open.
Thanks.
There was when I talk on the discretionary cash flow.
What would have been on a normalized basis. This year and then as you think about interest savings.
You know you're pushing getting a lot closer to your target and that's something you guys would revise higher potentially or or maybe it's kinda comment on where you think are on a normalized basis.
The path to the 140 to 150.
If I normalize you mean, including weather.
Yeah sort of right around LT or your anticipated generation levels.
Yeah, I'm I'm I'm, not so I'm not gonna it gives you a number right.
After the desktop in my mind this morning, but.
Something or potentially we can't more content for the next next quarter.
But I mean in terms of revision so yes. The other part of your question.
I think as I've mentioned last last year. When we presented initially our plan we need to see I'll I'll week progress along to plan, we've given a range of the fall far 2023 targets.
Where as a as you can see we're well on our way to add to that number.
ER already and ER I mean during the course sitting here, if we see that.
That things are are progressing well, we'll introduce a will introduce a very revision as needed and when we get more more comfortable with especially with this year's results.
So when you said the guidance.
Would you say that the refinancing that you've completed.
More positive than expected to lower or sort of greater interest savings than you would have anticipated me second.
Yes, that's fair okay.
And then maybe just on the growth poppies is for Patrick one of the Patrick but.
You've added some project here, but by my calculation are still maybe about 64 megawatts of projects that.
Were successful in the RFP that haven't made it on.
Hi growth path, maybe just talk about when you think those can come on and what's required if it's for the permits and what Stooges those projects right.
Yeah, we're working on the on the authorization essentially off these project and we will come back a win win again when they will be able to rise to definitely I cannot give you a precise date for that.
Okay, and then to pick up on a comment that Bruno said.
His prepared remarks around accretive acquisitions, I mean <unk> todays.
You're talking about just given where your share prices moved.
Markets, but.
Given where the share price had run up to the <unk> access to equity markets make it.
More you're considering on terms of doing acquisition.
So I I quite a sense or as a.
As you all know I think he acquisitions are not generally included our in all right and the plan we presented.
Last last June.
But if we see a if we see the right opportunity and that brings a.
Good return sorry, if we as a.
Savings that we can do on the production side or a good development pipeline in in a fairly a in that potentially significant transaction, we'll certainly look at it and yes, I mean are the.
The access to markets that are at the price or the share.
In some concentration we need to we always have in mind so.
As you said the markets are pretty pretty Wendy today. So.
Let's see where where we end up but the but certainly.
It's a it's a it's a good currency if we want to make a larger acquisition for a smaller things and to fund our strategic plan as we've mentioned in the past, we're not expecting to asked to do.
[noise] a share issue and a stock issue in the short term okay. Thanks.
I'm, calling for proposing kessel I feel they try to be probably numerical.
What's going to ask a question. Please press Star then the number one.
Your next question comes from Sean Steuart from TD Securities. Your line is open.
Thank you good morning, a lot of my questions have been asked.
One topic I'd like to discuss.
One of your peers has established a.
I relationship with Hydro, Quebec and has it's been well received by the investment community I'm wondering if you can comment on the relationship with the case and how collaborative.
That relationship is with respect to discussing growth initiatives beyond just the equity position they haven't boralex.
Yeah.
[noise] as a as everyone knows that cases and that's it.
Likes a large investments.
This is we've been we've been looking at different projects with them and Oh, we haven't there we have not seen that the rights fit up to now but like mentioned earlier, we were lets say column on a pretty calm last year on the M&A [noise].
And so this year, we're going to look more at the M&A, but just to repeat what Bruno said, the if we do any M&A.
They will need to be let's see substantial synergies either developments synergies or operational synergies. If we do some some acquisitions and the stock at the where it was the C or few hours ago for sure. He was a good tool for us to two to look at that in many ways.
We'll see where we end up in the next few days.
Okay. That's all I had thank you very much.
Your next next question comes from Nelson Ng from RBC capital markets. Your line is open.
Sure. Thanks. Thanks, So I was just following up on Mark's comment on the the guidance so it.
If you guys achieved 120 million of.
Discretionary cash flow in 2019, you add the 15 million of or interest cost savings and then I presume.
There was additional savings from the from a in house thing they owe them.
They own M activities like your.
Getting pretty close to the bottom end of that range. So.
Was there any other than the land sale and 2019 was there any kind of one off items that.
The helped a discretionary cash flow in 2018.
Well, we certainly add a little bit of.
Al from my mother nature.
And Ah she noticed this comes and goes so we said, we certainly want to remain conservative as we yeah.
We oh, sorry to predict from one year two together, it's a steep.
The results are going to be on the on especially on the web site and the.
The rest is a is under development sites, we hope to be successful and we are forecast to search and.
Ah certain a ratio of potential additional megawatts.
And as I've mentioned, we'll we'll review its when if any we don't expect to to reach the range. This year I mean, if that certainly guidance I can give.
And we'll see we'll see us for during the year, how we progress and if we need to revise the range, we will provide that information in the NIM in the future.
Okay, and then a few questions for for the Scotland project like can you talk what the next steps for for lime killed in terms of will you start.
But.
Do you need a contract before you start construction or would you start construction look too.
Obtain a contract before you complete the project.
[noise] will we don't need a contract, but we need a financing.
So is this just answer it or if we can find and so without a contract will do so if not we'll we'll try to get a contract so a corporate be for that.
So.
Because it do you do the next step is finalizing engineering and looking that got I find it its financing that's the only thing and get the Green light from the board with let's say a model.
Okay got it and then in terms of the the land sale like.
Is there other land to sell or was that the one piece you are.
You are up even though it's kind of looking to sell and then related to that.
Is there a big piece aligned where you could retain like where you retain the development rights on on a on it or not.
No there was no development on on this land and it's the last that we are selling from from some lens. We are acquired in the 2016.
Tool.
Okay. Just one last question in terms of insourcing owe them for about 211 megawatts.
Could you give a rough number in terms of the I presumed there was some cost savings or whether it's like absolute number or percentage of Oh.
Have a cost savings I I think what was previously discussed was somewhere in the 20% range or a little bit higher but is that in the ballpark.
Yeah on belong Nelson, just it's not necessarily something that we disclose a we I don't know, but do you want to.
Mentions a kind of a ballpark figure or.
It's part of our resolve as part of our EBIT da but.
Not that material at this point, so, but a enough to talk about it.
Yes. This year because it was a we took over at the end of your so for us.
Facility.
Last year.
So.
Good benefit this year and if we give you an indication it would be 1% saving of maintenance.
No I mentioned dollars I'm not expecting knows the percent I don't know somewhere.
But I I haven't I'd, but I think it's not it's it's a very competitive data.
And the and this is a part of our strengths and I don't want to disclose this.
I can just tell you another comment is that it's not just a cost reduction. It's also an improvement of you operation of the turbine.
Typically alignment is off the turbine with the win is a <unk> per.
Better the performed and then and then the the this is this is also a gain that we see already in France and that we we see the teams river and thus we would see on the next project here in Canada.
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Okay. Thanks, I'll leave it there.
Thank you.
We have no further questions I turn the call back over to presenters for closing remarks.
All right. Thank you very much. So thanks, everyone for your attention. If you have any additional questions. Please call me at 514 to one three 104 or five I'll make sure we quickly answer your questions.
For your information our next event will be to first quarter results conference call that they have our AG and on Wednesday may six.
And that's it for us so have a good day.
Thank you.
Mrs sensor company in a copy has telefnica healthy before they might not sacrificing. This concludes today's conference call you may now disconnect.
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