Q4 2019 Earnings Call

Welcome to the conference call. Please continue just combined to Congress will begin just short game.

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Welcome to the Atlantic a fourth quarter 2019 financial results Conference call I plan to Guy He's a sustainable infrastructure company, that's always a diversified portfolio of contracted renewable energy, which innovation and that's what this mission and what to assets in North and South America I've said in my country markets in India.

Just remind that this call is being webcast live on the Internet and the replay of this call will be available at Atlantic Your corporate website.

I'd like to go well be making public looking statements. During this coal based on the current expectations and some assumptions, which are subject to risks and uncertainties actual results could differ materially from I would look forward looking statements if any public key assumptions I am correct well based on other factors discussed in todays earnings presentation.

All the comments made during this conference call in their risk factor section of the accompanying presentation on our latest reports and filings with the Securities and Exchange Commission each of which can be filed on top of upside I can I get that you'll does not undertake any duty to update any forward looking statements.

I think that's what today's conference call is Atlantic Us C O <unk>.

On seascope much innovated.

As usual at the end of the comfort school, but we'll open the lines for the question and answer session. I will now pass you over to Mr. CJS. Please go ahead Sir.

Good afternoon.

Thanks for joining our fourth quarter 2019 conference call.

On slide three we'll start with the key messages in first place. We have continued to show in a strong performance in the fourth quarter of 2019, we have got the increase of 28% year on year, reaching approximately 50 million board.

<unk> driving gabi for the full two person on 19 to more than 190 million.

That represents an 11% increase when compared versus last year.

Your second place further adjusted to be D.A., including unconsolidated affiliates for the full two person on my 19 also increased.

These case by a 3% on a like for like basis.

In third place our board of Directors has declared a quarterly dividend of 41.

It's centsper share that represents an increase over 11% compared with the fourth quarter of two caution on the deemed forward.

For the full year 19, the D.V. dense declare reached $1.61 centsper share a 16% increase when compared to the these in this declared in 2018.

In fourth place we are.

Pleased to announce that we have completed the pricing of our green bond private placement for approximately $320 million, we expect to use the proceeds.

To repay existing corporate that achieving significant improvements both in cost on thinner us we will explain later in the goal.

And finally, we are encouraged by the strong pipeline of potential investment opportunities in the countries on sectors, where we operate in this regard we'd have signed an option to buy out so let us back said with the investor in 2020, I will provide further details in.

A few minutes.

With that I'm trying to school will summarize our 2019 result.

Thank you Santiago good afternoon, please turn to slide five where we present, our key financial for the year 2090.

Revenues in 2019 reach one sales and 12 million.

3% decrease versus 2018 primary due to currency translation effects.

On a constant currency basis revenues were in line with 2018.

Further adjusted EBITDA, including unconsolidated affiliates decreased by 4% to 822 million.

This decrease was due to the currency translation effects and also to a onetime noncash gain recorded in the second quarter of 2018.

Excluding these effects on a like for like basis or EBITDA for 2019 increased by 3%.

Finally can be generated in 2019 increased by 11% year over year to 190 point Threemillion meeting our guidance for the year once again.

Let's turn to next slide please number six.

Overall, our portfolio of assets delivered a positive performance in 2019.

In North America 2019, even thought was in line with with 2018.

In South America, both revenues and EBITDA increased by 15%.

Thanks to the continued solid performance of our assets and the contributions of the new assets acquired.

The revenue decrease in the EMEA region was mainly due to a formal foreign currency translation effect EBITDA increased by 3% on a like for like basis.

In Spain production increase year over year, mostly due to higher solar radiation.

Also the cultural solar plant continued to deliver a strong operating performance.

Looking below at the results by business sectors, we can see similar effects.

And renewable that energy revenue decrease to that took the currency translation and EBITDA decreased for the same reason and also due to the extraordinary item in the second quarter 2018 that I have previously mentioned.

And then fish and natural gas our Mexican asset continues to show solid performance.

In transmission line revenues increased by 8% and EBITDA by 9%, mainly due to the contribution from the acquired transmission assets. Finally, our water segment keep showing strong EBITDA levels growing 3% year over year.

If we look now at the following slide number seven.

It can review the key operational matrix over assets.

Electricity produced by our renewable assets reach more than 3200 gigawatt hour in 2019, 86% increase compared with 2018.

Overall, our renewable generation assets delivered a good operating performance.

Looking at our availability based contracts.

HCT keep showing solid performance.

Finally in transmission lines and water the two other sectors, where our revenues are based on availability, we've continued to achieve high availability levels up above 100%.

Let's move onto slide number eight to walk you through our cash flow for the full year 2019.

Our operating cash flow for the 12 month period of 2019 reached 364 million compared to 401 in 2018.

The decrease was mainly due to a hard to our hydro variation and working capital, resulting from a lot longer collection periods compared to the same period of the previous here.

In addition, our payments to suppliers increased in 2019 as accounts payable were higher than usual at the end to 2018 due to scheduled overhaul in several assets.

Net cash used in investment activities in 2019 was 100, an 18 million.

And correspondent, mostly two investments a new assets it should be seen in conjunction with a net cash used in financing activities.

That's it includes investments made by our partners.

Net cash invested by us in 2019 amounted approximately 212 million.

Net cash used in financing activities in 2019 amounted to 310.2 million and that included the impact or the refinancing or part of our corporate that earlier this year.

All in all.

The net change in consolidated cash in 2019, what's 65 million dollar decrease.

On the next slide number nine.

We would like to review our net debt position.

We closed 2019 with a net corporate debt of 658 million.

Hi was on the net corporate debt as of December 34, 31st 2019, mainly due to the investments made in 2019.

With this.

Our net corporate debt to cap the pre corporate debt service ratio stood at 2.9 times.

On the other hand that project that as of December 31st.

2019 was.

Was 44.355 billion approximately 200 million lower than at the closing of 2018.

Now I will turn the call back to somebody else.

Thank you on slide 11, and we can see the progress we're making.

In our growth has tried to keep in first place as I mentioned before we believe we have a strong investment pipeline in front of us.

We continue to target the $2 million to $300 million of equity investments per year.

And as part of that.

And as I mentioned earlier, we have signed an option to acquire our partner's equity interest in Solana.

As you know Solana is 280 megawatt gross solar electric generation facility in Arizona the asset.

30 year BA of which 24 years, our remaining that BP has a fixed price weve an escalation factor with a BS are is on a public service us one off taker.

We believe that this is.

Clearly accretive investment that will yield.

We expect to to obtain a double digit GAAP yield from the second half of 2020.

And regarding financing at this point time, we expect to finance the acquisition with a combination of liquidity available.

A rich financing and the potential project debt refinancing.

It another important source of coffee growth of caught the improvement in that context like the one would have today with low interest rates.

He is the continued finance shell optimization of our portfolio and as you know for the last couple of years we've been.

In taking a number of initiatives to refinance on low where our financing cost both at the project on the corporate level in that regard we have recently priced a private placement for approximately 320 million.

The dollars of Green note that will be used if and when closed to refinance existing that achieving very significant interest cost.

Savings starting next year.

We have also refinanced the existing debt or for project ATM to achieving approximately $1 million or improvement in terms of copy.

And finally finally he is also important for us mentioning that our SSD ratings have continued improving due in 2019.

Strong commitment we SDN sustainability is without any question a very important aspect of Atlantic up.

Now I will pass the call back to Francisco, who will discuss with US the announcement about the pricing of the green private placement.

Thank you Sunday I will.

Very satisfied with the price who knows its new financing asset really bear a significant improvement for the company.

We have recently placed a private placement of equivalent over an equivalent of approximately $320 million.

You as senior secured notes denominated in euros in euros to be fully subscribed by private institutional investors.

Closing them funding are expected in April 2020, subject to certain conditions and we intend to use the net proceeds to repay our existing 2017 senior secure no facility what is known as a 2017 Lisa.

The new Green notes consist of a bullet maturity expected in June 2026 that is they have a six year tenor and bear coupon a one point 96% per annum.

But we have been able to leverage our strong E. G focus to price at Green bond fully aligned with the 2018 Green bond principles and we also counted with US second party opinion bustle stay analytics that private placement notes have somebody advantages.

Our cost improvement of approximately 10 million per annum expected from 2021.

An extension of the tenor of approximately three years in average live compared with the 2017 Nefa.

And finally, we obtained a natural hedge for caf to generate a the in Europe.

As I mentioned, we're extremely price to have priced our furtive screen financing because it shows how committed we continued to be to sit with sustainably sustainability I will now pass the call back to some tail.

Following Wi Fi as D on page 13 and.

You can see that earlier this month, we were rated by shifting analytics as the best company.

Within both the renewable power on the barrel their utility sector within what they call they years de risk rating assessment.

These rating represents an improvement versus what last year was already a remarkable rating.

[noise] regarding greenhouse.

Got submissions 2019 has been the first year in which we have reported scope 123, and we have been able to reduce our emissions by up 14% versus the previous year. In fact, if we compare our emissions within the admission rates of.

Let's say traditional power generators were generation is based on fossil fuels.

We have avoided around 4.7 million times over coolant Seo Seo do when compared with 100% fossil fuel based generation. So in summary, we continue making what we believe is significant progress.

On our commitment to years de answers disability.

On the next is light.

You can see that our board of directors has approved a quarterly dividend of 41 cents per share for the fourth quarter.

Or one point 64.

On an annual basis.

These dividend represents an 11% increase when compared with the same quarter in 2018.

Here as well we continue delivering.

Or exceeding on our dps growth targets.

And finally.

Moving to the last page and we would like to share we view our guidance for the year 2020, where we estimate that further adjusted EBIT da would be in the range of 522 $870 million on coffee would be in a range between 200.

$225 million.

Thanks for your attention we that we can open the line for questions operator, we're ready for acuity.

Thank you, ladies and gentlemen will now begin the question and answer session.

If we should ask a question. Please press star and one on your telephone keypad and makes our name to be announced.

The first question come from line of Julien Dumoulin Smith, Please ask the question.

Hi, this is filling in for Julien.

Hi anyway.

So first.

Any guidance, how do you think of your dividend growth strategy.

10% CAGR target that yeah.

Previously how does that still hold.

So regarding.

The dividend growth, we see no reason why dividend growth should be let's say similar to two coffee growth. If you look at.

The copy growth in our guidance its a.

More than up 10% higher then.

The actual 19, so I see no reason why did even should go very differently from that.

Okay is there any reason.

Not to publish an official it's 10% roll forward on.

The there's no reason, we we have.

We are publishing guidance for the year.

Okay.

And on the strategic review with the latest sort of update is this an indication that the strategic reviews heading closer to some form of evolution.

Looking at any other option.

Are there any other options that are still on the table.

Sales or anything else.

Well the the.

The process is ongoing and as you know why I cannot be more specific than that or make any comments.

Okay. Thanks, and just one last one from me on the Green bonds are you seeing any other refinancing opportunities.

To this.

Any.

So estimate Kathy benefit.

I know that's it from Cisco This green bond is.

One of the refinancing opportunities that we see for their holding company debt.

Oh, we already refinanced a left here the high yield with significantly improved terms and we're always looking at the portfolio at the operating company actively to see if there is there more refinancing opportunities, which we think they are.

Okay. Thank you.

Thank you. The next question comes from the line for a full messed up please ask your question.

Thanks, So much you guys.

Hi proposal.

Hi, So maybe in terms of or just a strategic review of just want to do it and show I understood. At this point all the different options from refinancing to asset sales all of them are still on the table nothing has been eliminated at this stage.

As I mentioned peripheral I shouldn't be making comments regarding a process that these are gone ongoing if you allow me.

Alright, Alright fair enough.

Secondly in terms of your stock price performance clearly has been very good.

Even despite you know what did happen over the last week when your stock price clearly had a much better position versus where you started the strategic review.

Is that does that mean that you now have more flexibility around potential M&A.

Acquisitions and using up currency for acquisitions do you think that this opens up more opportunities and venues for you to do that is that.

How should we think of that given your parents, who are not as much stronger than where it was a year ago.

So I think that.

Regarding growth.

For the last couple of years, we have been able to play densify accretive opportunities and we have been able to close on accretive opportunities. Thanks to the fact that.

We have hot.

Ample liquidity and if you want that conservative balance sheet.

And thus we have always said our aviation to invest between two and $300 million per year.

Obviously, we are very happy and with the performance of the share at least until last week.

We do believe that.

For a company like us having.

Let's say a competitive currency in the form of shares is important of course.

Right, but there is no.

No kind of plan to use the issue equity as a way to fund any growth opportunities. If you see anything that is viable at this point.

Well it depends on what opportunities we find done we tackle.

Gotcha fair enough. So it is it's at least open open to that and then just finally on the BG any situation clearly that seems to be heading towards a solution.

From your perspective is there anything we should be thinking off around how they are you kind of see and expect all of that to be resolved once PGT exits and kind of that freeing up and adding a little bit more flexibility from your cash flow perspective.

So based on public information, what do we know US as you know is that the new seems to be on Abbas.

To leave their process by June hopefully.

And we that's what we count on that would allow us to to make distributions in the second part of easier. That's that's our base case.

Got it understood. Thank you guys congratulations.

Thank you properly.

Thank you next question comes from line of David. Please please ask your question.

Thanks, everyone. My first question here just on the the option to purchase the Salon and tax equity investment.

I'm just wondering.

Just to confirm maybe what the deciding factors will be there is it mostly just.

Completing the financing that you're negotiating right now or where the where the every other factors that you're considering before you go and an exercise that investment.

For option, well I'd like any investment.

You will be I mean, we will be we have signed an option. So we will be analyzing that making a decision in the in the coming months.

We will be working on the financing where things are a fairly advanced.

In so in principle, if we have signed an option is because we see the opportunity.

And that's attractive, but obviously until we execute.

We will continue working on.

The opportunity.

Okay, great. Thank you and then.

My second question the.

We have you ever ROFO on the remaining 70% of the Monterrey gas asset I'm. Just wondering if you have any recent thoughts on when you might decide on that and what kind of variables you're looking out there.

So.

It's our overall therefore, we will be able to look at that when our partner says our partner is a financial.

Investors. So at some point time, they will exit, but obviously, it's up to them to decide when to exit and from my point of view, we don't control the timing.

You asked me my guess probably would be one or two years, but it depends on them.

Okay, great. Thank you and then just one last question.

Yes, you've had some time now with the battery asset at Monterrey now in your portfolio I'm wondering if you could just give maybe some comments on how you see battery storage as an opportunity going forward and if if that would just be.

More likely on the net M&A side or could you deployed elsewhere on your footprint on some of your existing renewable facility.

So we do believe that this storage in general is going to we are critical.

Part of the power system in many geographies it and not only battery storage, we believe that there will be different technologies and the 510 years from now you will be mainstream and for companies like us where we'll be investing on deploying capital.

In against the storage, obviously, what we needed to to be careful it's a new technology or new technologies better said it financing you've seen earlier stages and a you need to be careful so that you invest when that technologies mature.

And when you can optimize the financing therefore, I think that finished to make some investments in that technology not very large for some time.

But obviously in mid term, we do think that it will be a very important opportunity for companies like us.

I appreciate the color. Thank you I'll get back into queue.

Thanks to you.

Thank you. The next question comes through line of Stephen but please ask your question.

Hi, good afternoon.

Hey, Steven height.

Hi at most of my questions have been covered I did want to go back to Salon, Oh, just to make sure right I understood. The financing approach slide 11 gives a lot of.

A lot of good information it just to make sure Im clear could you go back through the the strategy for permanent financing of that have that acquisition and I guess, what I'm really focused on is trying to think through the just sort of dry powder in terms of up leverage or other sources of capital that can finance that I just want to make sure im clear on that.

So I would make a couple of comments on only Francisco if he wants to do we love that first of all these CW earlier stages from that point of view, we have an option.

Therefore, we have time and the second thing is it refinancing assets, we expect is going to be a significant source.

Or financing for that I would say a significant part and still.

I wouldn't be more precise on that because we are actually working or from Cisco and his team.

Our working on this so that that should be I'll be component liquidity and you're seeing I beat up our liquidity should be another part of the component.

I'm probably at this point time, we shouldn't we shouldn't be much more specific on that.

Understood Okay.

Okay. That's a that's really all I had thank you.

Thanks for your.

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That does conclude teleconference for today. Thank you for participating you may disconnect have a nice day speaker. Please standby.

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