Q3 2020 Atlantica Sustainable Infrastructure PLC Earnings Call
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20 financial results conference call.
That's good is it sustainable infrastructure company that owns a diversified portfolio of contracted revenue energy power generation electric transmission and water.
That's in the North and South America and test markets in EMEA.
Just a reminder, that this call is being webcast live on the Internet and TV pay off this call will be available at the Atlanta, 'cause corporate web site.
I'd like to call, we'll be making forward looking statements. During this call based on current expectations and assumptions, which are subject to risks and uncertainties.
Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings presentation or because of other factors discussed in the risk factor section of the accompanying presentation on our latest reports and filings with the Securities and Exchange Commission each of which can be found on our web site.
Yeah.
That's good does not undertake any duty to update any forward looking statements joining us for today's conference call Heartlands, because CEO Santiago siege, I see Oh Francisco Martinez Davis.
As usual at the end of the conference call. We will open the lines for the Q and a session I would now pass over to Mr. Siege. Please go ahead Sir.
Thank you very much and good morning.
Bobby Thanks for joining our third quarter 2000, and wouldn't be conference call.
Few opening remarks before from school Big So were we.
The presentation, although results in first place.
We couldn't be neutral when what we believe is a very positive performance in the third quarter of 2020 Argus available for distribution costs increased by nearly 14% year on year, reaching $52 million compared versus the same quarter last year.
If we look at the first nine months of 2000 and wouldn't be Gabi has increased by 6.4%, reaching a bit more than $149 million.
In second place or it is important to mention that in the first nine months of 2020, we generated a round $260 million of one off gosh, well nonrecourse refinancings off existing assets as we announced previously.
And finally, we continue making progress on our agreed beef growth initiatives.
First we closed during the third quarter the third quarter. This a line a tax equity investor body out us on PC abated.
Second we have signed a purchase agreement to acquire a beast, we keep enough that you got another.
Closing you just didn't subject to customary conditions to approve close.
And by regulators.
A third in 2020, we have invested or announce the investments for over $320 million a over our target and we expect to continue capturing growth couple of doing piece with the one thing that did that.
Target.
Hey, we have full for $2 million to $300 million of additional equity investment every year.
With that I'll turn the call to from Cisco, who will go over the financial results.
Thank you if somebody of all good morning to all now.
Now please turn to slide number five where I will present, our key financials for the first nine months.
Revenue in the first nine months of Twentytwenty reached 769 million, a 40.7% decrease versus the same period in 2019.
And adjusted EBITDA, including unconsolidated affiliates decreased by 5.6% to 621 million.
The decrease was mainly with mostly due to lower for a lower resources band and lower production and car to triggered by the unscheduled outage discussed in previous quarters.
Regarding Kathy we generated 52 million in the third quarter of 2020, an increase of close to 18% year over year.
Driving capital generation of the four to five months or 20.3 to 149 million.
This represents a 6.4% increase compared with 140.2 million in the same period of 2019.
In addition to our cash flow available for distribution in the first nine months of Twentytwenty, we generated 260 million one off cash so.
Three project debt refinancings net of transaction costs reserve, an interest rate swap cancellation.
This cash is being used to finance growth without increasing corporate debt.
Let's now please turn to slide number six to review performance by sector geography.
In North America revenue decreased by 2% compared to the first nine months of 2019.
This reduction is due to a decrease in revenue in our efficient natural gas segment.
Primarily caused by a onetime noncash accounting adjustment a nice CP in the first quarter of 2019.
In our solar assets in North America production and revenue increased in the first nine months of plenty plenty.
Thanks to a better performance so more javier.
Despite solo lower foliar radiation in the third quarter caused by the smoke from the California wildfire.
In South America, both revenue and EBITDA increased by 6% and 2% respectively.
Thanks to the continued solid performance of our assets with higher levels of production from our wind assets and high availability levels in transmission lines.
And also due to the contribution from recently acquired assets.
The revenue and EBITDA decreased in the EMEA region was mainly due to solar radiation in Spain, and the lower production and how true caused by the unscheduled outage previously mentioned.
Looking below the results by business sector, we can see similar effects.
In renewable energy revenue and EBITDA decreased due to the reasons previously mentioned.
And efficient natural gas, our Mexican assets continued to show solid performance.
Our transmission lines continued to show very good availability level that together with acquisitions.
Explain the increase in revenue and EBITDA.
And finally in our water segment revenue and EBITDA increased by 64% and 33% respectively due.
Due to the contribution from the myth that water desalinization plant that we've started to consolidate in the second quarter of 20 point.
If we if we now look at the following slide number seven we can review the key operational metrics over assets.
Electricity produced by a renewable assets reach 2608 gigawatt hours in the first nine months of 2020.
Looking at our availability based contracts once again HCP keeps showing solid performance.
And finally in transmission lines and water that two other sector, where our revenue is based on availability.
We continue to push to achieve high availability levels around a 100%.
Let's now move to slide eight to walk you through our cash flow for the first nine months of 2020.
Our operating cash flow for the first nine months of Twentytwenty reach 303 million.
Joining a slight decrease compared to the same period of 2019.
Lower EBITDA was partially offset by a less negative variation in working capital and lower interest paid.
In addition, and Twentytwenty, we paid approximately 266 million for the acquisition of.
Oh, the tax equity investor interest and Solana.
From an accounting perspective, this amount to classify the financing cash flow.
Financing cash flow for the first nine months of the year also included net proceeds from the project debt refinancings.
And corporate debt financings dividend payments and our scheduled project debt repayments of approximately a 130 million.
All in all the net change in consolidated cash in the first nine months was 2020 and was an increase of approximately 226 million.
On the next slide number nine we would like to review our net debt position.
We closed the first nine months of 2020.
With net corporate debt of 773 million.
An increase after completing the Solana investment with this our net corporate debt to cap the pre corporate debt service ratio stood at 3.3 times.
Thanks to the corporate and the project debt refinancings.
Close to the first nine months of 2020, we have been able to extend our maturities and today, we don't have any significant corporate debt maturities until 2025.
Our average corporate debt maturity was approximately 3.5 0.2 years, that's so September Thirtyth 2020.
In addition.
We now have all revolving credit facility entire amount to 300, and 425 million available, which together with our corporate cash on hand of 187 million.
Represents a total liquidity of more than 600 million available to fund has potential acquisitions.
Net project debt as of September Thirtyth plenty plenty was 4670 9 million.
The increase with respect to December 31st 2019 was mainly due to the non recourse debt of the new assets consolidated in the period.
Project debt refinancings, and accrued interest partially offset by the by the scheduled principle that are more recession.
I will now turn the call back to some people.
Thank you very much Francesco.
Let's talk now about the growth on investments.
That's pvt. As previously mentioned, we have closed the acquisition of our tax equity investor interest in in Solana.
In addition, we have reached an agreement for the acquisition or pedestrian keeping asset in Canada.
We said that on previously announced the investments.
In 2020 year to date, we have reached a round $320 million.
As we currently see a strong pipeline of investment opportunities.
We continue to target potentially with the investments in the region of at least $2 million to $300 million per year. Obviously this year it will be more than that.
If you take a look at slide.
Slide number 12, and you have an overview of the new asset and the district heating.
Asset in Calgary, and the asset provides heating services to a number of high credit quality clients.
Including a wide range of four different types of of client.
It represents.
No our first investment industry, keeping our sector, which is recognized.
A key measure for Cds to reduce emissions.
The asset has availability based revenues.
Inflation indexation and 20 years on average in a way did contract life.
It is obviously essential infrastructure with high barriers to entry.
We believe it.
He is a growth opportunity for us we.
We have signed the purchase agreement.
And obviously closing is subject to customary conditions.
We've got three approvals.
Additionally, unless a final note.
You can see that our board of directors has approved our quarterly dividend of 42 cents per share for the third quarter or $1.68 cents annualized.
With that we conclude todays presentation. Thanks for your attention and we will now open the lines for questions. Operator, whenever you want we are ready for Q any.
Thank you if you would like to ask a question on today's conference call. Please press star one on your telephone keypad.
And when should you wish to ask a question.
First question comes from the line of Julien Dumoulin Smith from Bank of America. Please go ahead. Your line is now open.
Hey, good morning, Keith Thanks for the time, you all are doing well.
Good morning first year.
Absolutely. Thank you.
If we can talk about this transaction on the district side, what type of metrics can you provide whether a cap to yield some kind of higher or however, you want to describe it and then related to that you know obviously this is a smaller transactions. How do you think about this relative to your two to 300 million annually.
Forget for growth investments seems about a 10th of that so just you just something that we should expect every quarter here are some of the smaller type.
Since the kind of feather in.
Thanks Julien.
So starting with your second question and.
The way you if you look at our investment fees year, you'll see that we have a combination of larger transactions. This year. It was the solana tax equity investor combined with some smaller transactions, so going forward $2 million to $300 million yearly investment should be again, a combination we have now.
We should be making it smaller transactions even numbers are right.
But obviously in order to reach the two to 300, we will also have a larger investments every now and then from a metrics point of view. This is an investment that we believe fits our criteria. Both in terms of coal fire are on in terms of.
The accretion or kabi generation it has growth potential within.
From our point of view the main difference is that it's what we would call a permanent asset into an asset that we believe in.
Can be recontracted contracted by year on average 20 years from today. So it provides.
Our cost visibility that these clearly longer than some of the other contracted assets. We are used to and asset category. It's at a battery that we believe feeds very well.
Our profile and our intention is to grow in that new market for us.
Got it.
When you think about the Pts deal here.
Thanks, what's the timeline on that front just to kind of come to some resolution I know that there's been a lot of factors here.
So it's.
It's an investment that has been delayed and.
We cannot be sure about the timing because it depends on third parties on things happening that we do not control under.
And therefore, each I cannot give you an answer because we cannot control. It we cannot control of it even if it's going to close because a number of the conditions have not be met so as of today.
Excellent and then lastly from me.
Just reconfirming or the timeline for when we'll we'll re reengage on the subject of dividend growth.
And growth more broadly here.
What's the question Julien there.
Well is it just when can we expect updates on on longer term dividend growth targets, just want to rebuild and the timeline there.
So as you know.
Typically we give guidance for the year when we presented the yearly results that's February and probably from our point of view that would be the right time to to talk about guidance short and mid term.
Just reconfirming there. Thank you guys have a great day, which is great. Thanks to you and thank you Julien.
Thank you. Your next question comes the line of David Souter from Raymond James. Please go ahead. Your line is now open.
Thanks, Good morning, everyone I'm. Good morning, My first question Hey, Good morning, My first question here.
Just in in Europe, I mean, we've got the the European climate law coming up soon and since you do have quite a few assets.
In the region I'm wondering if you could just talk about it.
If you see any any potential opportunities emerging there are there any new jurisdictions that you might consider going into that maybe weren't as promising before and just any color you can provide on on if that provides any opportunities.
Thanks, So I would say I will make a few comments there.
In general we believe that.
Given.
Let's say that the global situation and the impacts of gold bid.
And Walt administration around the World are doing we believe that there are going to be opportunities similar to the one you describe so administration launching efforts around.
Around sustainable infrastructure in Europe, it's becoming a reality.
As you are aware there is a large program being launched by the European Union, We believe that we should be able to capture some opportunities. It's just delayed earlier stages regarding how it's going to work on on what role we can play there, but clearly it's going to be good for our market and he should be good for us and in.
Europe, but not only in Europe, I mean, we we believe that.
The us for example, perhaps depending on what happens whenever something happens and it may be there could be initiatives along those lines you one way or another so we do believe that in several jurisdictions, there should be opportunities and we'd have ministrations pushing is sustainable.
Infrastructure, one way or another.
That's great color. Thank you and then maybe a follow up to that just a question on Calgary District heating I'm. Just wondering if you could talk about how that how that deal came about.
Whether it was through the Algonquin relationship or outside of that and.
Whether it was a competitive bids.
Bidding situation.
He was a process run by by the seller.
We obviously collaborated with with our major holder there, but it was it was a competitive situation.
Okay. Okay fair enough and then I guess, maybe a related question there just as your.
Your valuation I mean at the stocks been doing better lately and hopefully that that continues.
As as your cost of capital I guess.
Yes, lower do you see an increased potential for dropdowns from from ages oral Algonquin and do you think that that growth could I guess resumed on that front.
Yes in general.
We are let's say fairly optimistic regarding growth opportunities and we believe that from a market point of view there are opportunities. We believe that we have been doing our homework for some time.
Creating those opportunities and also as you mentioned.
The stock price helps so we do believe that we are going to to capture opportunities from other sources, we use including hopefully the when you were mentioning the relationship with Algonquin Dislodge ages.
Okay excellent. Thank you very much I'll get back in the queue.
Thank you.
Thank you. Your next question comes from the line of Angie Storozynski from Seaport Global. Please go ahead. Your line is now open.
Good morning.
Well I have a question about.
How you okay.
Okay, Thats a potential acquisition targets I mean, do you have any preference as to their location. It does it just come down to cash per share accretion out of the cash yield.
The district heating acquisition, it's definitely a very interesting asset.
He said it sets in and the Yieldco model, but in the past you mentioned, maybe some expansion of the water de sell assets.
It seems like were somewhat going away from traditional wind and solar a venue poles and so just wondering if again if you have any preference as to the asset mix at that.
As you proceed with gross stuff.
Strategy.
Yep. Thank you.
No I think in general we are as you know we are exposed to a number of different sectors, including a wind and solar but not only with on solar and we think that that's positive and that creates more opportunities as long as the assets.
In hardwood offtakers good contracts and good operational track record, we are happy investing in different sectors on different geographies. So from that point of view. We are open now being realistic we do expect that the majority of our investments will continue being in wind and solar because those markets are many times larger.
Than than the others, where we compete.
In.
Typically in any year and most of our investments should happening within solar but that doesn't mean that we are going to be shy.
Taking advantage of the fact that we know well other sectors.
Which in some cases are less competitive.
And therefore, we expect to continue investing in those other sectors you were mentioning or in transmission lines for example.
How about a geographic mix does that matter I mean.
It had a holistic acquisition in Solana.
Yes, our expectation is to continue having a similar geographical mix to the one we have today, So north America should be our core we should be investing as well in South America in dollars some investments in western Europe.
But but broadly our expectation would be to maintain the mix, we have more or less in fact during the last year, probably we've done a bit of that and when we look at the pipeline we have it.
We symbols and.
The portfolio we own today.
Okay and my last question.
I understand that you're going to be providing guidance on the on the.
Well on the fourth quarter call.
I mean, you are building are you building some contingencies in case, the PTC transaction were not to close.
Meaning that you actually have to.
Flew off those.
Project, So acquisition targets that could fall.
Fully replenish the.
Yes, the cash contribution that that PTC PUC, Pts project was still close to half.
Well Thats, obviously, a part of the plan and what we.
The the target we have is to invest that $2 million to $300 million with or without a specific asset in this case, Pts. So we we continue being very active in looking at opportunities to be able to to compensate if that didn't happen because the reality as I mentioned before we don't control it.
Hi, good thank you.
Thanks to you.
Thank you there are no further questions at this time please continue.
If we have no more questions operator, we will close the lines can you verify that there are no further questions.
There are no further questions.
Great. So thank you very much to everyone.
Have a nice day, thank you bye bye.
That does conclude our conference for today. Thank you for participating you may now disconnect.
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