Q4 2019 Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the Terraform power 2019 fourth quarter and full year results webcast and conference call for investors and analysts as a reminder, this conference is being recorded.
I'll now like to turn the conference over to Sharif Xavi head of Investor Relations you may begin.
Thank you said.
Good morning, everyone. Thanks for joining us for our 2019 fourth quarter and full year results conference call and webcast on joined today by John Steinbeck, Our Chief Executive Officer, and Michael Our Chief Financial Officer. Please note that a copy of our earnings release supplemental information and letter to shareholders can be found on our website terraform power Dot com.
During this call management will be providing remarks on the merger agreement with Brookfield renewable which was announced last evening via separate press release note also that we may make forward looking statements on this call. These forward looking statements are subject to known and unknown risks and our actual results may differ materially for more information you're encouraged to review the risk.
Factors section in our SEC filings, which can be found on our website. In addition, we will refer to non-GAAP financial measures for more information on a reconciliation of these non-GAAP measures to comparable GAAP measures. Please refer to our earnings release and supplemental information with that I'll now turn the call over to John Thanks Theresa.
In 2019, Terraform power made substantial progress executing its business plan of acquiring high quality assets for value enhancing the cash flow from its existing asset base and strengthening its balance sheet has a number of the key initiatives were completed during the course of year, our financials do not fully reflect these benefits nonetheless.
Yes, Terraform power increased CAFD per share by 17% year over year, primarily driven by the full year contribution from the acquisition of Siesta I'll briefly go through a few select highlights from 2019 and subsequent to year end first we executed value, adding acquisitions totaling 400.
Megawatt 480 megawatts, including the acquisition of 320 megawatts of DG solar assets.
United States in the fourth quarter and the recent acquisitions of 145 megawatts of solar plants in Spain to point equity of approximately $440 million.
With regards to Repowering, we received all permits and a non materiality determination from the New York Independent system, operator required for our two newer projects. The total 160 megawatts and we continue to target commercial operation date in 2021.
Upon signing long term service agreements, we transitioned 15 out of 16 wind farms in North America to GE, who are providing owned them services and initiative that is expected to reduce onem cost expense by $20 million.
We also replaced the legacy operator of our wind farms in Europe with the original equipment manufacturers and executed Lps as they are expected to lock in annualized cost reductions of $4 million.
And finally, we signed a framework agreement with estimate solar technology to provide owned them services for our North American Solar fleet and initiative is expected to reduce annualized cost by approximately 5 million and convey robust performance guarantees toward weak.
Now I'll turn the call over to Mike will discuss our financial results and provide an update on liquidity.
Thanks, John and good morning, everyone.
I'd like to stop by Recapping, our financial results in 2019, we generated captive $173 million, which was 47 getting greater than 2018 on a pad share based as captain was 81 cents, which was a 17% increase over the prior year.
The increase was largely attributable to a full year contribution from the data acquisition, which closed in June 2018, partially a contribution from our recent DG acquisition and cost savings from the implementation of LTSS in North America Europe.
This was offset by lower availability from our North American inflated as we accelerated deferred maintenance in order to implant sales hit days.
As well as lower realized prices in North American wind due to contract roll off and greater negative basis in Texas and filing lowest Spanish wholesale pocket prices.
Factoring in depreciation amortization and other non cash charges 2019 level net loss attributable to cause a shareholders was 149 million compared to net income of 12 million in 2018.
The year on year change was primarily due to higher allocation of losses to non controlling interests in the prior year it related to the reduction in U.S corporate tax rate.
Moving on to our liquidity in 2019, we continued to capitalize on attractive market conditions to bolster our liquidity and position ourselves for growth in October we issued 300 million of equity price at 16 77 per share representing a 50% premium price at the beginning of 2019.
During the year, we were very active on the liability management front at but the Colbert and project levels looking at historically low interest rates, we issued 700 million of 10 senior notes at a coupon of 4.75% and use the proceeds to repay a 300 million notes due 2025 at 344 million totally.
The June 2022.
With that refinancing we expect to realize debt service savings of 6 million per year and extended maturity profile such that we have no corporate maturities and to until 2023.
Over the course of 2019, we also completed seven nonrecourse debt refinancings totaling $1.6 billion, raising net proceeds of $460 million and lowering our weighted average interest rate by 50 basis points.
As a result of these initiatives our corporate liquidity stood at 1.3 billion at the end of 2019, including our 500 million spots aligned with Brookfield.
I'll now turn the call back to John to discuss outlook and provide an update on the merger agreement with Brookfield renewable thanks, Michael.
As I mentioned, despite substantial progress in executing its business plan 2019 was a transitional year for terraform power.
From a financial perspective, we executed a number of key initiatives to significantly increase the value of our asset base. If these initiatives were not fully reflected in our financial results in 2020, Terraform power will benefit from nearly a full year of results from the 480 megawatts of acquisitions of TG assets in North America.
And redwoods solar assets in Spain. Furthermore, we should realize the vast majority of the benefits from the cost savings and performance guarantees in the owned them agreements for our wind fleets in North America, and Europe as well as our solar fleet in North America.
As a result of the rapid global spreads of Cobot 19, Pandemics, there's been tremendous uncertainty as to the economic impact of the virus on supply chains and consumer demand as well as unprecedented volatility in the financial markets over the past few weeks. Fortunately, we believe terraform power is well positioned to write up.
Craig.
As 95% of our revenues generated under long term contracts does have a weighted average contract duration of 13 years, which can slates or business from declines in commodity prices. In addition, we have a geographically diversified portfolio of projects of which over 90% of our PPA off takers are under investment.
Grade credits or municipalities with investment grade characteristics mitigating our exposure to any single region were counterparty also our businesses less labor intensive than most other industries, which enables us to allow many of our staff and contractors to work remotely for extended period of time without impacting our.
Operations, and finally, our wind and solar assets are predominantly operational mitigating our exposure to supply chain disruptions. We will continue to monitor this situation very closely in particular focusing on the impact. These events are having on our own them providers and any adverse adverse impact too.
Our customers, but we remain confident in the resilience of our business.
Now I'll spend a few minutes discussion the merger with Brookfield renewable.
I'm very pleased to report that last evening, Brookfield renewable and Terraform power entered into a definitive merger agreement Highwoods per field renewable will acquire each share of class a common stock of terraform power for consideration equivalent 2.381 of a Brookfield renewable power renewable.
Partners units Terraform power shareholders can elect to receive their consideration in units of Brookfield renewable partners were Bep, a limited partnership which currently trades on the New York Stock exchange and the Trento stock exchange or shares of Brookfield Renewable Corporation, we're Pepsi.
A new security that will be launched in conjunction with the close of the merger that is designed to be equivalent in value to unit of backup for reference Pepsi will be a Canadian corporation listed on the TSX and the NYSE and will be structured with the intention of being economically equivalents.
You bet units, including identical distributions and it will be 40 exchangeable at any time at the shareholders option for a better unit on a one for one basis.
The Special Committee of Trps Board of directors as unanimously recommended the transaction, which features and improved exchange ratio relative to Brookfield renewables initial proposed offer in January of 0.36 units of bet for each term share and provides a 17% premium to tie.
Curves on affected share price the transaction is subject to the approval of Trps shareholders, representing a majority of the outstanding term class a common shares not owned by Brookfield renewables and its affiliates is also subject to other customary closing conditions is expected that the transaction will close in the third quarter of.
2020.
Now I want to take a moment and highlight the benefits of this merger to term shareholders.
CHRW shareholders will be owners of a combined company that will be one of the largest integrated pure play renewable power companies in the world with total assets of approximately 50 billion and with a 20 year track record of delivering strong total returns across a number of economic cycles as well as consistent distribution.
In addition, trps shareholders will benefit from the premium of 17% to Trps unaffected stock price.
A broader growth mandate that includes acquisitions of all technologies of renewable power assets as well as development opportunities globally.
Enhanced diversification through exposure to long life Hydro assets. In addition to wind and solar assets as well as geographic exposure to the high growth Asian, and Latin American markets. In addition to North America in Europe.
Reduced risk as a result of Brooklyn, profiled renewables strong investment grade balance sheet and increased liquidity as well as finally continued sponsorship by Brookfield asset management, which will own 54% of the combined company.
In closing we believe this merger provide significant value for term shareholders, giving them the ability to continue participating in the upside of Trps operating assets in developed markets, while benefiting from Brookfield renewables enhanced diversification development capabilities and strong investment grade balance sheet, we incurred shareholders.
Good for the transaction at the shareholder meeting details of which will be announced in due course. This concludes our formal remarks, we'd be pleased to take questions at this time.
Later.
Ladies and gentlemen ask a question you need a press star one on your telephone to withdraw your question press the pound.
Please standby will be compiled acuity roster.
[music].
Again, ladies and gentlemen to ask a question ill Neenah Press Star one.
And our first question comes from and time Ahmad with Bank of America Merrill Lynch. Please proceed with your question.
Hey, guys congrats on the other great results.
Thanks.
Just a quick question with regards to through the acquisition.
Look from Brookfield.
Is there any.
Plants to them.
So to refinance the capital structure and the into near future.
At closing.
Terraform power will be a subsidiary of Brookfield renewable so.
Its corporate debt will remain in place as well as the project debt underneath the corporate debt.
At this point.
I am not aware of any plans to refinance that corporate debt.
Okay.
I think that's a different.
I'm not aware of any plant any plans to refinance the corporate debt.
Okay. Okay got it okay. Thank you very much.
Thank you and again, ladies and gentlemen that star one to ask a question.
And I'm not showing any further questions at this time I'll now turn the call over to series Zazi for any further remarks.
Thank you operator, thank everyone for joining us today. This concludes our costs.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
[music].
Oh.
[music].
[music].
[music].
Good day, ladies and gentlemen, and welcome to the Terraform power 2019 fourth quarter and full year results webcast and conference call for investors and analysts.
As a reminder, this conference is being recorded.
I like to turn the conference over to Sharif evolving head of Investor Relations you may begin.
Thank you said.
Thank you everyone. Thanks for joining us for 29, <unk> fourth quarter and full year results conference call webcast joined today by Johnston, Our Chief Executive Officer, Unlike our Chief Financial Officer. Please note that a copy of our earnings release, something that's why information and letter to shareholders can be found on our website <unk> power Dot com.
During this call management will be providing remarks on the merger agreement with Brookfield, renewable which was announced last evening be a separate press release.
No also that we may make forward looking statements on this call. These forward looking statements are subject to known and unknown risks and our actual results may differ materially for more information you're encouraged to review the risk factor section and our FCC filings, which can be found on our website. In addition, we will refer to non-GAAP financial measures for more information on it.
Consummation of these non-GAAP measures to comparable GAAP measures. Please refer to our earnings release and supplemental information with that I'll now turn the call over to John Thanks Tracy.
In 2019, Terraform power made substantial progress executing its business plan of acquiring high quality assets for value enhancing the cash flow from its existing asset base and strengthen its balance sheet as a number of the key initiatives were completed during the course of year.
Financial do not fully reflect these benefits Nonetheless, terraform power increased cash per share by 17% year over year, primarily driven by before your contribution from the acquisition of side.
I'll briefly go through a few slide highlights from 2019 and subsequent to year end.
First we executed value, adding acquisitions totaling 400 megawatt 480 megawatts, including the acquisition of 320 megawatts of PG solar assets.
States in the fourth quarter and the recent acquisitions of 145 megawatt solar plants in Spain to point equity of approximately 440 million.
With regards to Repowering.
We received all permits.
Non materiality determination from the New York Independent system, operator required for our two New York projects. The total 160 megawatts and we continue to target commercial operation date in 2021.
Upon signing long term service agreements, we transition 15 out of 16 wind farms in North America to GE, we're providing on him services and initiative. It is expected to reduce our NIM cost expense by $20 million.
We also replaced the legacy operator of our wind farms in Europe with the original equipment manufacturers and executed LTSS.
I expect it to walk in annualized cost reductions of $4 million.
And finally, we signed a framework agreement with estimate software technology to provide owned them services for our North American Solar fleet and initiative is expected to reduce annualized cost by approximately 5 million and convey robust performance guarantees to our fleet.
Now I'll turn the call over to Mike will discuss our financial results and provide an update on a quick.
Thanks, John and good morning, everyone.
I'd like to stop by Recapping, our financial results.
2019, we generated Kathy of 173 million, which was 47 million greater than 2018 on a pad share based dense cap you with anyone said, which was 17% increase over the prior year.
The increase was largely attributable to a full year contribution from say the acquisition, which closed in June 2018, possibly a contribution from our recent DG acquisition and cost savings on the implementation of LTSS in North America in Europe.
This was offset by lower availability from our North American women flavor as we accelerated the fed maintenance in order to implement 10 days.
As well as lower realized prices in North American wind due to contract roll off and greater negative basis in Texas and filing lowest Spanish also Bakken prices.
Factoring in depreciation amortization and other non cash charges 2019 level net loss attributable to common shareholders was 149 million compared to net income of 12 million in 2018.
The year on year changes, primarily due to higher allocation of losses to non controlling interests in the prior year related to the reduction in U.S. corporate tax rate.
Moving onto our liquidity in 2019, we continued to capitalize on attractive market conditions to bolster our liquidity and position ourselves for growth.
Today, we issued 300 million of equity price at 16 77 per share representing a 50% premium priced at the beginning in 2019.
During the year, we were very active on the liability management front, but the call parts and project levels walking at historically low interest rates, we issued 700 million of 10 senior notes at a coupon of 4.75%.
The proceeds to repay Uthree hundred Midland.
2025 at Atthree 44 million template be June 2022.
With that refinancing we expect to realize debt service savings of 6 million per year and extend the maturity profile such that we have no corporate maturities and to until 2023.
Over the course of 2019, we also completed seven nonrecourse debt refinancings totaling 1.6 billion raising net proceeds of 460 million and lowering our weighted average interest rate by 50 basis points.
The results of these initiatives our corporate liquidity stood at one point Threemillion at the end of 2019, including a 500 million spots aligned with Brookfield.
I'll now turn the call back to John to discuss outlook and provide an update on the merger agreement with Brookfield renewable thanks, Michael.
As I mentioned, despite substantial progress in executing its business plan 2019 was a transitional year for terraform power.
From a financial perspective, we executed a number of key initiatives.
Nick Clegg increase the value of our asset based fees initiatives were not fully reflected in our financial results in 2020, Terraform power will benefit from nearly a full year of results from the 480 megawatts of acquisitions TG assets in North America, and Reglet solar assets in Spain. Furthermore, we should go.
The vast majority of it benefits from the cost savings and performance guarantees in the OEM agreements for our wind. Please in North America, and Europe as well as our solar fleet in North America.
As a result of the rapid global spreads have come at 19 pandemic. There has been tremendous uncertainty as to the economic impact of the virus on supply chains and consumer demand as well as unprecedented volatility in the financial markets over the past few things. Fortunately, we believe terraform power is well positioned to write up.
Craig.
As 95% of our revenue is generated under long term contracts have a weighted average contract duration of 13 years, which can switch our business from two clients in commodity prices.
And we have a geographically diversified portfolio of projects, which over 90% of our PPA off takers are investment grade credits or municipalities with investment grade characteristics mitigating our exposure to any single region or counterparty also our business is less labor intensive than most other industry.
Which enables us to allow many of our staff and contractors to work remotely for extended period of time without impacting operations and finally, our wind and solar assets are predominantly operational mitigating our exposure to supply chain disruptions. We will continue to monitor this situation very closely.
In particular, focusing on the impact these events are having on our own them providers and any adverse adverse impact to our customers, but we remain confident in the resilience of our business.
Now I'll spend a few minutes discussion the merger with Brookfield renewable.
I'm very pleased to report last evening, Brookfield renewable and Terraform power entered into a definitive merger agreement, which profiled renewable.
He shares of class a common stock of Terraform power for considerations equivalent 2.381 of April filled renewable power renewable partners units Terraform power shareholders can elect to receive their consideration in units of Brookfield renewable partners were path.
Limited partnership, which currently trades on the New York Stock exchange and the try to stock exchange or shares of Brookfield Renewable Corporation or Pepsi.
A new security that will be launched in conjunction with the cause of the merger that is designed to be equivalent in value to unit.
For reference Pepsi will be a Canadian corporation listed on the TSX and the NYSE and will be structured with the intention of being economically equivalent to pep units, including identical distributions and it will be fully exchangeable at any time at the shareholders option for a path.
On a one for one basis.
The Special Committee of Trps Board of directors as unanimously recommended the transaction, which features and improved exchange ratio relative to Brookfield renewables initial proposed offer in January of 0.36 units of for each trps share and provides a 17% premium.
On effected share price the transaction is subject to the approval of term shareholders, representing a majority of the outstanding term class a common shares not owned by Brookfield renewable and its affiliates is also subject to other customary closing conditions.
Expected that the transaction will close in the third quarter of 2020.
Now I want to take a moment and highlight the benefits of this merger to term shareholders.
Sure shareholders will be owners of a combined company that will be one of the largest integrated pure play renewable power companies in the world with total assets of approximately 50 billion and with a 20 year track record of delivering strong total returns across a number of economic cycles as well as consistent distribution.
In addition term shareholders will benefit from the premium of 17% Trps unaffected stock price.
A broader growth mandate that includes acquisitions.
All technologies of renewable power assets as well as development opportunities globally.
Enhance diversification through exposure to long life Hydro assets. In addition to wind and solar assets as well as geographic exposure to the high growth Asian, and Latin American markets. In addition to North America in Europe.
Reduce risks as a result of Brooklyn, Brookfield renewables strong investment grade balance sheet and increase liquidity as well as finally continued sponsorship by Brookfield asset management, which will own 54% of the combined company.
In closing we believe this merger provide significant value for term shareholders given that the ability to continue participating in the upside cerps operating assets in developed markets, while benefiting from Brookfield renewables enhanced diversification development capabilities and strong investment grade balance sheet, we incurred shareholders.
For the transaction at the shareholder meeting.
Most of which will be announced in due course. This concludes our formal remarks, we'd be pleased to take questions at this time operator.
Ladies and gentlemen ask a question you need to press star one on your telephone to withdraw your question press the pound Keith.
Please standby will we compile the Q and a roster.
Again, ladies and gentlemen to ask a question you will need our press star one.
And our first question comes from.
And time Armani with Bank of America Merrill Lynch. Please proceed with your question.
Hey, guys congrats on the other great results.
Thanks.
Just a quick question with regards to to the acquisition.
From Brookfield.
Is there any.
Plants to.
To sort of.
Refinance.
Capital structure into into near future.
At closing.
Terraform power will be a subsidiary of Brookfield renewable so.
Its corporate debt will remain in place as well as the project debt underneath the corporate debt.
At this point.
Im not aware of any plans to refinance that corporate debt.
Okay.
At this point.
I'm not aware of any plan any plans to refinance the corporate debt.
Okay. Okay got it okay. Thank you very much.
Thank you and again, ladies and gentlemen that star one to ask a question.
And are not showing any further questions at this time I'll now turn the call over to series.
Zazi for any further remarks.
Thank you operator, thank everyone for joining us today. This concludes our costs.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.