Q4 2019 Earnings Call
Good afternoon, ladies and gentleman Jack.
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As a reminder, this conference call is being recorded today I would now like to turn the conference over to your host Mr., Jay Davis, managing director of Investor Relations.
Thank you welcome to Macquarie infrastructure corporations earnings Conference call, that's probably the fourth quarter and told your 20 watching all things being webcast and open to the media.
And that's got to my financial performance on this call.
Summarizing the results we filed the financial report on form 10-K, with the Securities Exchange Commission based materials were released this morning copies may be downloaded from our website at www dot before dot com slash I see.
During the proceeds over to supporting infrastructure Corporation's Chief Executive Officer, Christopher phone, let me remind you that this presentation. Its proprietary lights are mature and recording <unk> Rebroadcasting attributes of this presentation in over one part without prior written consent of Macquarie infrastructure Corporation is prohibited.
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This presentation contains forward looking statements we face in some cases get sports with good thing I'm sure your future events or else comes to identify these forward looking statements forward looking statements. In this presentation are subject to a number of lists and uncertainties.
A description of known risks that could cause our actual results to differ appears under the caption risk factors in our form 10-K.
Actual results performance prospects for opportunities could differ materially from those expressed <unk> implied by the forward looking statements additional good stuff, which we are currently aware, but also cause our actual results to differ.
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Worldwide, except as reported by ball.
We will reference the mountain gas that's groups earnings before interest taxes, depreciation and amortization or EBITDA and free cash flow as defined by Oh.
A reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in the people's attached to our earnings press release.
Additionally, Christopher farms participating in today's call was Macquarie infrastructure Corporation's Chief Financial Officer, B. I'm sure.
With them, it's my pleasure to introduce MIT <unk>, Chief Executive Officer, Christopher Frost.
Thank you Jay.
I suppose you get joining our call this morning.
We'll be aware you reported it always seems pretty natural operational results for the full year. Once you don't see building.
I figured out cool by commenting on some of the how much room nights results.
Great uptake now for <unk> strategic alternatives.
Well they provide additional call material at 29 three financial results.
[laughter] prepare good moments, probably discussing no twentytwenty before I turn the call to your question.
It's actually generated adjusted EBITDA up six I could be emboldens, an adjusted free cash flow before taking money bones in 29 seen in like the Todd pod.
Because include contract termination of approximately 13, when we bought one let's see why on T.T. as much.
Even if it's a junior right you can expect its financial results. We also completed the street Bonnie about portfolios.
There were many businesses of the contracts to pile.
And so the strength that we.
We are pleased with these outcomes.
An acquisition of the company genuinely.
I'd now like just when I'm looking at fissionable value for shareholders through wants to see some strategic alternatives.
As far as tomorrow, because you don't try though we ought to be assuming strategically chosen because I am I see including the sale of the company.
Well I think businesses.
We also makes it would be what you're talking through two thatll be Twentytwenty tour fundamental analysis that you maximize the options available to us.
We have done that [laughter], it's about an actual.
Collectively movie sounds pretty says poor.
As Gill shouldn't I was just give me probably pool.
Until such times, we have any person on the sale items.
Sure I forgot websites, we wouldn't be speculating on any particular outcome Nike.
Commons, probably consistently we remain confident no ability to unlock additional though.
Well, we actively pursuing strategic what's going to be we continue to execute initiatives and support am I, saying three strategic pool.
These priorities on one.
15 of infrastructure without using soon.
Correct me, but you know bankable capital one's losses.
Three strengthening our balance sheet.
The successful execution of at least in support of these priorities contributor to the financial results consistent with that block.
He was supported by strategic property <unk>, they're sitting infrastructure that businesses.
They're dealing with.
We announced this morning, but I am Treaty has signed a significant contract with Bunge Green diesel.
Dr Green diesel, it's a joint venture between Valero Energy Corporation Darling ingredients.
I'm disease Twinkie, Tyco pay contract R&D between will provide storage and handling services to dawn really the bike feedstock and seasonal.
Did you actually will construct <unk> fall I bought one part funds conducting two parties trained to dawn brings real fundraising bone.
In addition, I can speak to you will expand the way I wouldn't really infrastructure that supports terminal to accommodate <unk> linespeed scope and finished product suite from the dog Green <unk>.
Contracts is expected to begin generating revenue for wanting to see see you like 2021.
It's hard to this project artisan keeps people also.
Approximately 800000 barrels well be existing storage capacity, if you much weaker voice to renewable diesel difficult lakes and feedstock.
That would bring the title amounts of it'd be in what you do a little has to be great [laughter] it'll be 20, I see two 2.3 billion barrel.
Could you just picking up because between capacity on the loan Mississippi River by approximately 20% consistent with the strategy, we sit out few noktwenty actually.
[laughter], Great example, with a great party checked it helps you shouldn't behind team tea and connected to customers, who both products for which there was a click up and going to amount.
In addition to the done in Green Party Jake.
BT has agreed to take the expansion of its the so let's get caught us off on behalf of existing customer.
It's between construct additional clinical storage capacity puts you want to if this thing he contracts.
Including previously announced repositioning projects are in C.T. has committed to purchase for the traditional fast.
I'll be where are you going from 50 million thought one since 20 I'd say.
Approximately okeechobee builds is being invested today.
So the 150 million go live isn't expected to be invested during twentytwenty.
Collectively these projects are expected to generate incremental stabilized EBITDA for the $9 billion annually.
Oh that $6 million is expected to be completed you can twentytwenty girl Pizza 19 countries doesn't seem 20 to 21.
The chart here [laughter] $39 billion 20 to 22.
The purchase that I'm teaching a being propel is crazy multiple approximately nine times EBITDA up.
Hopefully prove out stability in tough times between cashed in Brighton capacity over the long term as a result of having a weighted average of mutual contract so approximately on TV.
I would direct your attention to slide eight.
Something like I used to see website. This morning for additional information on these projects, including the timing of the expected contributions from specific procedure.
Regardless it was all traveled writing business between 29 team.
Oh, I didn't see reported results be lawn and garden.
Storage utilization the ball stifling before horses, <unk> Hearts, we treat persons.
There's a whole uses utilization I have reached eight cool thing.
Down slightly versus 2018, but in the <unk> I use as anticipated.
Consistent with our expectations demolish the storage grew throughout this year, which do not like faced an increase from two approximately 86% European.
Oh substantially from the true.
29 team of approximately 80%.
I am teaching benefiting from a recovering utilization on the lower Mississippi River driven by strong demand for heavy switching to avoid storage relates to find I'm 2023.
This additional demand increase bites utilization and leverage contract channel compare.
On T. I'd say.
I tell you know in the month, you must be tool storage, that's where my boss.
I'll just put storage to produce as much advantage I.
The balance of blending of marine fuels is longer than expected.
Supply employers sulfur fuel oil.
Shoot me bunker fuel me. Thank you.
When the new regulations came into effect on January one twentytwenty.
They don't segment valuable so the people wouldn't trees, we used to me teaching them onto the state reducing the amount just for the chip since the market's issue. This is low.
We expect a month it just looks towards your face sounds increase through the second half is this year as markets normalize following the implementation of I'm at Twentytwenty.
Importantly across time team, we believe story to right size. The lies in the fourth quarter 29 team will reach four inch revenue is expected to be longer in twentytwenty compared with 29 chain, reflecting the full year in pexip contracts for new bulk storage right to the second half of last year.
It's hard to take the actually report from adults, who want to fight against the backdrop with a modest increase.
Increasing driven like next from quantify.
Atlantic Aviation was able to attract large spread across which you can drink conceivable fuel.
That's fine to take action was also able to increase the number of tenant leasing space and the new England that are being constructed over the past few years.
In addition to tenants purchasing a large portion of fuel Anybodys Atlantic aviation benefits from the fact, but tenet and train see their cloud generate annual rental revenue.
The construction of its still haven't since being back probably airport lease extensions, but improve our visibility into the Atlantic Aviations cashed in writing capacity.
Beyond that the development spin off the diversified dozens of the pieces with approximately 40% gross profit coming from Hunter rentals, and that's certainly services turned 29 thing.
Let's see the while also reported results in line with guidance, reflecting stable performance with both the regulated and unregulated portions of Hawaii gas and drunk on contribution.
Cogeneration operations.
Am I see Hawaii remains focused on executing initiatives and supportive they clean energy supply plan.
Particulate to bring claim cost effective energy to customers through Alaska, Hawaii.
Provides additional commentary on outlook for Twentytwenty, including I caught in a few moments.
At this point I'll like to provide additional detail on our results for the fourth quarter and who you talk to mountain.
Thanks, Chris Good morning.
I'll briefly recap how consolidated results going forward that maybe this will be how long the performance about individual authorizing businesses.
[laughter] generating adjusted EBITDA of $604 billion.
Adjusted free cash from $410 billion.
According to how good the lessons there was always with <unk> capital 29 Tonight.
These investments will produce attractive amounts of additionally, the solid free cash flow in the future.
We mine site the strong financial position.
I have to deal with a cash balances are slightly over 360 million.
Richard just under four times that sets, we even saw.
During the year, we repriced lets say consolidated if a total of 655 million of debt, including 350 million of holding companies that can go to withstand your knowledge right pipe maturity on July 29 say.
A portion of the cash balance of the deconsolidation of sounds pretty how's it going into all the since it stems from the successful silos developed contracted power businesses.
Our net $223 million.
But shouldn't be on current portfolio businesses.
<unk> leverage to increase thousands of course through the year, that's been quite a portion of our cash balance in the coming across projects, including the dawn grain diesel project.
I was like between the appointment of the Kapstream today's projects.
The generation of <unk> pools out leverage to increase it means one.
Between our existing past bounce projected operating performance in Twentytwenty.
Got plan Clark accommodates appointment for not just hypothetically numerous beverage for lot of Swan a half times.
Finally, we reported <unk> dollar $298 million for the year up 1% for $296 billion 20 high to me.
A small increase feeling figure includes the $50 dollar termination pilot and prospects that average utilization largely offset by increased cost symbian passes lot lot of rich storage rights.
But that kind of you I should reported EBITDA or $276 million for 20, not saying.
Oh, it's 5% spent $263 billion get 20 ice cream.
I've done that kind of the I sense results reflect continued effective management of the business against the backdrop with more to squeeze in general aviation flight activity.
It's hard to see Hawaii generated $60 million a beat retired 29 thing out since $58 million him 20 ice name.
Well coal however that the 20 I'd say in result metrics locked down it's not it within the kind of cool contracting business at the end about here.
Excluding that transaction and must see Hawaii CVSR increased not to say you're on you.
Why does benefited from the who's your pocket 20 nods name.
<unk> activity gas rights that went into effect in July 20, I'd say.
Partially offset by a decrease your gas consumption associated with <unk> average temperatures.
Corporate and other segment recorded negative EBITDA of $25 million for the year.
Hi, 20, I think by $7 million.
The year on year change reflects the absence of affiliate revenue contribution from the renewable power development joint venture. The we exited paycheck and increased professional services fees incurred primarily in connection with off the shoot a strategic alternatives.
But something that my speech tax position, we fully utilize found net operating loss carry forward at the end of 20, though I'm, saying.
Offsetting a portion of the taxes associated with the guide on styles contracted power businesses.
On our pricing income.
This means that we expect them off so you will have the current federal income tax liability twentytwenty.
By somehow projections, including for the deployment of cross capital.
To support hunting approximately $20 million in federal income taxes in Twentytwenty.
We are forecasting having a cash balance at year end 2020.
Approximately $100 million off to this client.
Consistent with <unk>, Dod and similar expressions of the cash generated by our businesses.
I see board has authorized pilot the dividends of adult let's shift for the fourth quarter of 29 setting.
[laughter] then we'll be Pike on March 11, Twentytwenty to shareholders of record on bought six twentytwenty.
Before it's not caused the Chris I want to touch on the coupon to borrow south lights and its implications for I must say.
In addition to the impact on macro economic activity generally when we want to train one the spot cross the jet fuel transportation fuel process at the constant statute since the start of 2020.
To traffic passing said the magic ideation.
Switching to read the same Hawaii before.
Since you consumption patterns for I'd say take so we might be impacted the corroborative bar south pipeline by city has been limited to that because the ice.
I've got the decline in the process of jet fuel in January had been package. This $1 billion on Advansix results.
Oh, the jet fuel prices appear to have stabilized since February.
With that I'll hand, the call that caused the decreased 50 sports on Twentytwenty.
Thanks Lee.
Moving forward with it the skews a strategic alternatives, we remain focused on operating out businesses as safely and efficiently as possible.
We expect to continue to execute on activities in support of our piece for TG program.
[laughter] initiatives designed to improve im assuming its all about visibility into the long term catcher tightening capacity of our businesses.
We expect currency treats it couldn't write EBITDA between 245 and $255 million from 20 to 22.
We are going to be one.
Turing to utilize they shouldn't we increased the how I think since you twentytwenty and I'm thinking in and around lots and just things.
This outcome reflects increased amounts it just looks for reaching back.
But leasing up the remaining storage capacity, let's say said he was the sub roast refinery.
[laughter] stories right sustainable throughout the year, no TV advertising twentytwenty, he's wants to be consistent lease rates achieved.
The fourth quarter with 29 team and three.
Hi, chicks placed in service in Twentytwenty contributed approximately $6 million within pathology.
We believe we don't make reasonable assumptions were likely to great seems amounts to store can pay.
And risk associated with the Koreans apart.
It is expected in the second houses the here as long as soap the fuel more read between the cool down just to look storage and blended increase in order to me, it's a bond osmose twentytwenty coupon fuel.
They should have a positive impacts benign some teams utilization.
Clearly the full impact of the correct. The bars is among these point <unk>.
<unk> expense resulted in extended spike I'm going to trade he could reduce the amount for marine fuel storage.
Im sure. We are confident you know NTT east ability to further diversify its products in customer mix, but to the renewed capacity conductivity and capabilities the physician business well over the long term one.
We expect the pontification to try to break evens out between 219 and 300 nothing deleveraging twentytwenty.
Hey, we're achieving what on the growth in the public the fuel specialties consistent for 29 team.
Two.
The only place margins on field sales continued to go I think historically normal right.
And.
Increases in high occupancy and rental revenue continue.
As you mentioned, you're not a press release. This morning Atlantic Aviation has agreed to acquire a small fios Bridgeport, Connecticut.
The contribution from which was included in that guidance for the year.
Well also continue to pursue accretive acquisition and development opportunities to expand the business and services. It provides the customers consistent with our strategic priorities.
And my seat Hawaii is expected just didn't like even though the between 60 and $65 million you Twentytwenty.
This core cost includes an expectation or disgrace consumption of probably pennies, particularly on deposit commercial and industrial customers.
We expect to deploy between 202 hundred 25, putting doubles important capital Jersey Yeah.
This whole cost includes the roughly $160 million related to previously approved projects.
Twentytwenty portion of projects announced today.
Of course continues with best in the makes its about businesses.
So, let's just say they tested writing capacity.
We expect to the point between 55 and $65 million.
It's kept extraordinary here.
The majority being allocated to our MTT, that's supposed to be Macau used historically.
Don't forget, though we expect it might seem to generate he puts out with between 575 and 600 million doses in twentytwenty.
Excluding the impact of the contract termination payments received <unk> and speak to you 29 team.
Quite the year on year Grace the forecasting a sudden did pull into that guidance.
We fly through from EBITDA to free cash flow to be between 360, and $400 billion and supportive about product.
<unk> for a dividend distribution of one, though 'cause shape Costco you twentytwenty.
But like almost free cash flow generation reflects an anticipated increases net interest expense, primarily as a result, who refused turns on cash balances.
The pipe in the federal income taxes of approximately $20 million metered good yeah.
So the importance of doubt.
Gardens forgotten consolidating the sold the seems like continued operation of our existing portfolio business.
Teach extent you so one or more about businesses. These estimates would like he needs to be a revised.
You know I had placed with the performance about businesses and 29 team and concept internet prospects for Twentytwenty equally with respect to shoot of strategical too.
With that I think you okay. Your participation cooled this morning.
At this time I lost calibrated open the funds for your questions.
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Your first question comes from the lineup Tristan Richardson from Suntrust interest.
Hey, good morning, guys.
Good morning person.
Appreciate the Hey, guys guidance presuming you noted that it did you feel like it was the acquisition talk about about growth in 2020, maybe on a same store basis or just sort of some of the underlying assumptions.
Panic basis.
It's Christmas them in terms of the acquisition that we announced this morning, it's really from an overall Atlantic perspective, immaterial starwood tens of millions always in homes that purchase process and the expected contribution to the 2020 non Dod is roughly a million dollars so effectively the guidance.
Oh it incorporates a same store revenue because I think if you think about 19, notwithstanding you know sort of weaker than we've seen historically on if I I slot Dod or an activity increases year over year, we sold very good pull through on the volumetric so I'm not sort of flow through a very.
Hey, good view from a fuel gross profit suspected enron, we'd be overall EBITDA performance at Atlantic as well as very good performance from a higher rental perspective, as well and we would anticipate similar thing in terms of performance for 2020.
As well and so the why you're thinking about that guidance is that really at the midpoint it effectively in pause or repetition of the year over year EBITDA growth that we experienced in 19 against the backdrop is somewhat muted cross and if I slaughter activity.
Helpful. Thank him and then which isn't just thinking about let Brad that free cash flow period again, thats, okay to capex for the year, but thinking about thinking about where you see long term leverage or where are your comfort level, our with long term average.
Yeah, I think in terms of comfort level, that's really unchanged from what we said historically you didnt not for the quarter to four and a half times right. So here because we think about Vichy obviously with the N.. We stopped for you with a very significant cash balance we anticipate that a water that well be deployed into projects such as the dawn and grain pays a project that we announced the sport.
I think when the year with over $100 million of cash and beverage in not for on a quarter to four and a half times range in terms of the existing portfolio hint that square that the comfort level really uses as we've spoken about before clearly, though some of these projects take some time to be developed and in terms of the arm to T portfolio we've done.
Anticipate that they will all reach stabilization into 2022, so you'll see it would've been of elevation in terms of we have reached in advance of those projects coming online.
Helpful. Thank you guys are very much Pittsburgh.
The system.
Again like metabolism intensive if you have a klabin at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the Q. Please press the pound key <unk>.
Next question comes from the line of TJ Schultz with RBC capital markets.
Hey, good morning. Thanks can you just did a just trying to differentiate the pricing pressure and I MTT you've seen and 2019. Then are you saw in 2019 it at I.M.T. Saint Rose Virgo that beyond where are you getting more pricing pressure or what are the some whereas some of the fact.
There's not driving each geography, and and as the view that this is stabilized going forward.
Yeah, TJ, it's Chris Good morning, I'm, because we said in the prepared remarks in rights for 29 team to consistent with our expectations and guidance and you'll recall that last year, we spoke about having some long term legacy contracts, particularly in New York hub.
But rolls off onto onto level Mark of rights and use you saw that in our results for 29 team and you'll say sort of see the full year impact all that being in Twentytwenty. As we also sit in the prepared remarks, we're seeing a good recovery in utilization, particularly around the heavy industry do Lloyd.
Both at failing angles, so it surprises and that is driving us back to historic levels of utilization and Simla similar rates I.
I think the sort of the area of focus for US. He is with respect to New York, <unk>, and particularly as it relates to to clean product and so as I said in my prepared remarks, we think the fourth quarter.
2019 in terms of the other than average revenue is what weve rolled into in terms of Twentytwenty, which is which is really sort of reflecting a lot of those legacy contracts being reviewed but being renewed at a lower market rights with compared to when they were entered into.
Okay, great great and just to clarify the Diamond Green diesel project.
That storage capacity.
That you are building something that is by the expansion of the Diamond Green diesel facility or is there.
Upside to your capacity additions once that expand on a on the facilities is complete.
Yeah. They see the infrastructure improvements were making a will ensure that sit raises the logistics hub.
For the Oh, the expansion of the the Dawn and Green refinery I think you raise a good point and that is in terms of the the upside that exists and its right that the finished product pipeline has additional capacity to handle additional product and it has also.
Has the ability to operate by direction lease I'd, probably from surprise to the refinery and from the refinery to to sit right.
That pipeline also has the ability not only to handle renewals as easily but can also handle say gasoline distillate as well as both traditional and reviewed than that so and I think you'll also appreciate the fact that way that finished product pipeline terminates he is less than half a mile away from two.
To worldscale refineries as well as a a petrochemical facility and so we do you see a potential upside to the diamond Green diesel makes or to the infrastructure improvements that we're making to the extent that we're able to attract.
Other product on to a onto that pipeline and so I think that you know we havent included that within ends up in the numbers, but numbers that we've sort of sit out represent the the contracted payments, but we do you sort of see upside to the story, particularly around enhancing our connectivity to the system players.
You know driving a more stable storage demand environment, and obviously, increasing the diversity and product mix it rose.
Okay makes sense.
Just lastly from me on that strategic alternatives I think what I've heard today essentially that you've made the decision. So your advisors to.
Formally movement or so with that is there yet more formal timeline to complete the process or are there more formal process is underway now just anything you can add there. Thanks.
Yeah look what I sort of sitting in the prepared remarks was that we use the time since making the announcement to evaluate the the value maximizing options available to us.
We have moving forward, we say a sales process and that you know at this stage, we're not willing to sort of speculate as to you sales structure and timing as you would the Asia would appreciate but you know we are moving forward with the same focus and commitment as we have done with the the sale of some of that larger noncore businesses.
Okay. Thank you.
[noise] things TJ.
At this time there are no further questions I would now like to turn the conference back to Christopher Frost, Chief Executive Officer.
Thank you for participating in our conference call today, we remain focused on driving value for our shareholders through both effective management about businesses and to see their strategic alternatives for the company. We look forward to speaking with you on our next quarterly call all prior to that as circumstances, where it with that good morning and have a great.
Right.
Ladies and gentlemen, this concludes todays conference. Thank you for your participation and has a wonderful day you may now disconnect.
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