Q4 2021 Atlantica Sustainable Infrastructure PLC Earnings Call
Welcome to conference call. Please continue to stand by your conference will begin shortly.
Okay.
[music].
Welcome to Atlantica as full year 2021 financial results conference call.
Lunch cat is a sustainable infrastructure company.
Just to remind you that this call is being webcast live on the Internet and a replay of this call will be available on Atlanta, because corporate website atlantica will be making forward looking statements drove in the school.
Just on current expectations on 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 Puget and the risk factors section of the accompanying presentation and in our latest reports.
Filings with the Securities and Exchange Commission, all of which can be found on our website atlantica does not undertake any duty to update any forward looking statements joining.
Joining us for today's conference Cool Atlantica, CEO , San Diego seat and CFO Francisco Martinez Davis.
As usual at the end of the conference call. We will open the lines for the Q&A session I would now pass you over to Mr. <unk> Pizza go ahead.
Good afternoon, and thank you very much for joining us for our 2021 conference call.
Starting with a few.
Our remarks regarding the quarter and the year, we have closed the 2021 meeting our guidance for the year both in terms of cash available for distribution.
The adjusted EBITDA.
Our board of Directors has declared a quarterly dividend of <unk> 44 cents per share.
And.
Regarding 2021.
And it's important to remember that we invested over.
Over $400 million to $480 million.
Well above our target.
On the following that in the first two months of two.
Two we have already closed or earmarked investments for more than $110 million, including both acquisitions of contracted assets in operation as well as construction of new renewable energy.
Facilities.
With this we are initiating our two restaurant in 'twenty two.
Items in the range of 230 to 200.
And finally 2021 hustle, so being a very good year in terms of ESG.
And we will be spending a minute reviewing our credentials.
With that I will leave you with Francisco, who will take you through our financial results.
Okay. Thank you Santiago and good afternoon to everyone.
Please turn to slide number five where I will present, our key financials for the full year 2020 one.
Adjusted EBITDA reached $824 million.
On a comparable basis, excluding foreign to change in that 77 million of noncash provision caused by the electricity prices in Spain.
Our adjusted EBITDA growth would have been 13, 8%.
Regarding Kathy we generated $225 6 million for the full year 2021 an increase of 12, 4% year over year.
On the following slide number six you can see our performance by geography and business sector.
In North America revenue increased by 20% to $395 8 million in 2021 while EBITDA increased by 12%.
Thanks to the recently acquired assets in the United States.
In South America.
When you increase by 2% due to the Greenfield investments in PV plants.
EBITDA in the Mena region decreased by 1% compared with 2020.
Growth thanks to the recent investments and higher production in Spain, what's upset by the noncash provision related to high electricity prices in Spain.
The year.
Looking below at the results by business sector, we can see sitting in our results.
Let's now turn it over to please turn to slide number six well will review our operational performance.
Electricity produced by our renewable assets reached 4600 <unk>.
The five gigawatt hours in 2021 .
An increase of 43% births had plenty plenty.
The increase was largely due to the contribution so assets recently acquired.
Production also increased sitting around sits in EMEA when solar radiation was higher.
On the other hand solar radiation was lower than expected in the U S.
And the wind resource was lower than expected in our assets in North and South America.
Looking at our availability based contracts.
Once again a C. T continues to show solid performance.
In transmission lines and water the two.
Two other sectors, where our revenues based on availability.
We continued to achieve high availability levels.
Let's move to slide number eight to walk you through our cash flow for the full year 2021 .
Our operating cash so for 2021 reached 506 million.
Showing a 15% increase is going to say, it's 'twenty 'twenty, mainly thanks to higher adjusted EBITDA and higher electricity prices.
The noncash provision I previously mentioned.
It is included in the non monetary items.
So you can see the growth in operating cash flow when we exclude the non monetary items.
Investing cash flow and pointed 21, we're at $351 million.
Explained by the new assets acquired during the year.
Financing cash flow in 2021 corresponds mainly to the scheduled project debt repayments for approximately $418 million.
219 million of dividends paid to the shareholder and Noncontrolling interest.
Financing cash flow also includes the positive impact of about 131 million of the equity raise closed in January and 40 million for the repayment of our <unk>.
Note issuance facility with the proceeds of that $400 million Green.
Green notes issued in May.
Moving to the next slide number nine in 'twenty 'twenty. One we also made good progress on the ESG front and.
And our efforts continue to be recognized.
This year, we've set on emissions reduction target, which was approved by the science based target initiative.
In December 2021 atlantica was included in Cdp's, a list achieving the highest score on environmental and transparency.
And action and related to climate change.
In January 'twenty 'twenty. Two we were included once again as one of the world.
100, and more sustainable corporations by corporate Knights ranked number eight in the global 100 index.
In February pointed 22 sustained analytics updated is raised in atlantica.
And we were included in the top third percentile performance on ESG ratings in the utility sector.
Also in 2020 two atlantica was awarded the boroughs class distinction in the S&P Global 20 pointed to sustainability yearbook.
Only two U S listed companies received a metal.
Bare metal distinction within the utilities industry.
I will now turn the call back over to Sanjay.
Thanks Francisco moving.
Moving on to the second part of today's presentation.
221 on page 11, and has been an exceptional year in terms of your investments in November 2021, we closed our last our investment and a 20 megawatt contracted solar assets in operation.
For a total equity investment of close to $24 million. These wasn't investment on there our ROFO agreement with Algonquin.
With this in 2021, we invested more or less for $180 million and growth of which more than 80%, Washington, North America, mostly in the U S where we closed.
In our coastal on our vento and investments during the year.
Moving on.
Number 12 in the first two months of 2022 as I already mentioned it.
I've already closed or earmarked investments for more than $110 million, which is close to 40% of our target in terms of your investment and for the year or a $300 million.
In target number.
M D.
These investments that we have already closed or earmarked include $51 million in acquisition for already closed on between 60 and 70 million for assets that are currently under construction.
And we are going to be investing in doing these year 2022.
And the next page you have a bit more detail regarding these investments and T. L for 63 mile transmission line with a long term PPA in U S dollars with inflation escalator on a multiple and that you see there of <unk>.
7.7 times EV EBITDA.
We also recently closed our third the investment in a small portfolio of solar constructed assets in Italy.
And Additionally, we are investing $40 million in three assets currently under construction at each of them with Ppas for 15 years and.
Signed and closed.
With that we are initiating our 2022 guidance we've had target in terms of coffee of between 230 $250 million on an EBITDA in the range of $810 million up too.
$870 million.
And if we talk about the midterm on page 15, as you know our metering got the per share growth target is in the range of 5% to 8%.
And we expect to achieve that through a combination of our three sources of growth in first place organic growth many of our assets as you know.
Escalation factors something that this year is going to be very important.
Additionally, we expect our overtime to half Repowering.
Unexpired shouldn't opportunities in a number of our assets.
In some cases those opportunities would be in the shorter term in other cases and midterm.
Our second the girls lever development and construction of new assets, we currently own a portfolio of earlier stage projects under development in most of the markets, where we are present in most cases, we invest are in development together with our partners.
And we own a percentage of the project with the right to increase our ownership in the future in some instances in other situations, we invest in development on our own.
As we continue building our own pipeline of assets are these sorts of growth will become more and more relevant already this year 2022 would be the first year when investing in projects we have developed.
And we'll be material already as you can see.
And finally, our third girls lever, we expect to continue acquiring assets from third parties in many cases like the two acquisitions are closed in these for the first two months of 2022 through a smaller.
Let's call them profit dairy situations and.
We have been able to.
Generate on close.
In summary, we are confident and optimistic that in 2022, we will continue creating value through what we believe is a portfolio of low risk contracted assets and through new investments in both new Washington Operation, We acquired and in the development.
Construction of new projects.
With this I conclude today's presentation. Thanks for joining us and we will open the lines for questions operator whenever you want.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the husky. Please standby, while we compile the Q&A roster.
Yeah.
Your first question comes from the line of David Quezada from Raymond James Please ask your question.
Thanks, Hi, everyone. My first question here just relates to.
Your growth outlook going forward and in the company's strategy certainly you've been very successful in terms of.
Investing capital over the past year and a debt I'm just curious you know the two major themes.
Clearly there that are in the market today or a permanent.
Cost inflation, which everyone is very aware of and and the higher power higher power price environment I'm, just curious maybe high level, how those how you shift your strategy in response to those things if at all and how does that affect your opportunity set.
Yeah.
Hey, David Thanks for the question I saw that yes, as we as you know very well is to combine acquisitions, we say investing in projects. We have developed in many cases, we've with partners.
Lee.
Things like what you're mentioning things like expectations regarding power prices.
It should be helping them in you know our strategy going forward. It Nevertheless.
To start the continuous being to go after.
Very contracted opportunities low risk opportunities and pricing there probably.
It's going to continue being a bit better given what we have seen in the last year, but we are not going to change our strategy in that regard. The market is probably there are probably a bit healthier today than what it was 18 months ago in terms of pricing discipline.
Industrial help.
Somebody like us.
Okay excellent. Thank you and then maybe one just specifically on on the T. L for acquisition I'm curious if you can give us any color on the process there was that a bilateral or a competitive process and.
D D C. What other opportunities do you see there if anything beyond the 8 million additional capital you intend to spend there.
So this was a bilateral situation.
One of those situations, we are able to generate because.
Because of our local presence in certain markets is one of those asset classes, we like and transmission lines.
Operationally the risk is low and we think it fits very well.
R R.
Our business model.
So happy to work on visa smaller.
In situations, where we believe we can achieve better returns obviously than in competitive situations. We would love these situations to be larger, but we are happy and closing one after another even if they are.
Smaller.
Excellent that's great color. Thank you maybe just one more for me and just on your given the strength of the <unk>.
Estimates are the pace of investments you've been making lately just any thoughts on.
On your on your balance sheet and funding plan.
And maybe specifically would you contemplate asset sell downs in any case across your portfolio.
Yeah, and just what what kind of funding leavers would you like to pull over the next year.
Sure. So in terms of funding as you know are our key metric there is our net corporate debt.
Versus Kathy.
And where are we.
We target to be.
More or less than the three point something a range today, we are more or less there is useful.
So that does for US is the key metric and we will be financing growth respecting in that metric.
Regarding <unk> and.
The possibility of divesting Italian point in time, some assets, it's something we.
Usually we would contemplate and with the right metrics So I E.
It will depend obviously on the opportunities, we refined and going forward, but it would be part of the toolbox like many other options.
Perfect. Thank you very much that's it for me.
Thank you. Your next question comes from the line of Colton Bean from Tudor Pickering.
Jim.
Good afternoon. So just a quick one to start off on the investments disclosed for 2022.
Help us reconcile the $110 million to $120 million of committed capital on slide 12, with the $90 million of individual projects on slide 13.
Yes, so what what we have closed or earmarked is a total of 410 to 120 composed of the acquisition of 51. The 40 million. We are investing in projects that are currently under construction on the remaining.
Are funds that are earmarked for projects that are going to start construction very soon within the year.
Got it and then as you think about deploying additional capital throughout the year can you just update us on where you stand in discussions with your partner on Lone Star two and if we can see a repowering announcement at some point in the future.
So the discussions there are ongoing.
And.
Our expectation would follow your question would be yes, we do.
We would expect them.
In the future to be able to we contract either through our food repowering or through.
Some other strategy.
Depending on the expectations regarding power prices are specifically and in the market, where the asset operates in Texas, the timing might be different so there could be.
Differentially durations, where you stood off going for a full repowering now you might sell in the market for some time or you might sign a short term agreement for some time, while we wait for the right timing to make any investment and there are many moving parts there.
And therefore, it's difficult to me to give you a very precise answer.
Understood and then just a on.
On the operation side of things understand maintenance in Florida has been ongoing can you update us on when you would expect to conclude repairs and returned to a more normalized capacity factor.
Yes so.
<unk> are ongoing.
And us we have.
I have told you know disclosure, we expect to continue with some of that work during this year.
So I would say later this year, we should be closer to <unk>.
On ongoing.
Run rate.
Great I appreciate the time.
Thank you. Your next question comes from the line of Julien Dumoulin Smith from Bank of America. Please ask your question.
Hey, good afternoon team. Thank you so much for the time just maybe first question if I can the EBIT for 'twenty two versus 21 can you talk a little bit more about the increase there obviously, its a little bit lighter than the the cash year over year I. It seems like there might be some FX in there, but can you talk about that just in brief some of the the the Delta obviously what you've.
You provided an extended you Kathy guidance, but just talk about the EBIT bridge, if you don't mind.
Okay.
Good afternoon, but sort of San Francisco you saw in the presentation that the main there there is some effects of the coming out of you mentioned an explanation, but the main element that is affecting the EBITDA was 77 million provision that we booked in 'twenty.
'twenty one as a result of the power prices in Spain.
Is the main two elements.
<unk> EBITDA in 2020 one.
Okay, Alright fair enough.
And then just you mentioned in the prepared remarks also inflation escalators, specifically in your contracts being I think you put some emphasis on that front for this year can you talk about what the escalators are tied to and how much of your organic growth. This year is tied to that specifically.
Sure. If you look at the if you go through our disclosure you will see that are close to half of our business has got some form of an escalator most of that linked to U S. CPI. If you want on a smaller part of that link to do something.
Yes.
And therefore in a year like this year when the inflation in <unk>.
Our key markets is going to be significantly higher than what we all expected a couple of years ago.
It's a very important feature on it's a feature that I personally believe is going to differentiate well contracted portfolios where in many of your assets you can compensate inflation and even more than compensate the inflation because obviously your cost chart is small part of your revenues.
So portfolios that can.
Even improve profitability, thanks to inflation adjustment versus portfolios that were contracted flat on might suffer some erosion in these periods of higher inflation. So I just wanted to remind everybody that in our case close to half of our business is.
Linked to CPI. So obviously it depends on what expectations you have regarding inflation on whether you think it's a very short term effect or not but these year, we expect to have.
Price reviews in a number of our contracts in some cases in most cases, probably we can do that once a year.
Got it and maybe just to quantify that if you. If you don't mind, you know you're talking about 2% to 3% coming from the organic bucket how much is coming from escalation itself versus as you say some of these expansion and improvements if you will.
So the two to three as an average of that period.
On obviously.
That's going to be higher in the short term because of inflation and as I mentioned before around half of our business has inflation adjustment. So multiply whatever expectation for inflation, you half by 50% and that should be more or less the price increase you should see in our portfolio.
In the short term.
Excellent. Thank you I appreciate that and just like last year. I mean, you, obviously did an incredible job last year and finding.
Numerous opportunities and exceeding some of your targets here meaningfully exceeding your targets at 480 here, you've obviously, you're tracking meaningfully ahead of your targets for 'twenty two already can you talk about how you.
You could be lining up and palatability of basically doing the same thing again this year as you did last year.
Well I think it's too soon to tell Julien as you know our objective in life is not to invest a certain amount of money, but to invest when we find opportunities that can create value and can be accretive that's the key target Oh.
Always preferred to explain I would prefer to explain why we didn't meet our target then why the capital. We spent then return what we expected so as of today I would say that as you know 300 is not a number of carved in stone, it's more a guidance for you.
Following us of what we target every year, but if we find the right opportunities. We will do what we did last year, which is clearly invest more but as of today I think it's too soon to tell hopefully.
By the end of the year you will be seen.
Numbers.
But once we have closed more investments and once we are closer to the end of the year.
Excellent. Thank you alright, perfect I'll leave it there have a great day.
Thank you Dan.
Yeah. Good question. It comes from the line of MX Chelsea from CIBC. Please ask your question.
Thanks, everyone.
I Wonder if you could share anything in terms of the build multiples of the acquisition multiples.
T V plan for one and two in Colombia, and then I guess.
Who bears the restaurant construction or do you guys take all of that restaurant, one that sort of equity has to we are investing for.
For those projects horrible timing of it.
Now or is it later this year.
So in these projects we are bearing the construction risk.
Lucy there the size sees limited, let's say so.
We are happy and taking that risk.
So long as we you know you'd be.
It comes in a smaller part of our.
Our balance sheet.
The investment will happen during this year.
2020 to gradually and as of today. The amount you have in front of you.
It would be equity.
In the future there's an opportunity to include nonrecourse project debt in those assets and that is something that we are not contemplating now and we think that from a financial point of view.
The way to optimize these assets. These first two build them put them into operation on once we have some critical mass there.
A nonrecourse financing.
Okay.
Okay, perfect and then.
Did I hear it when he said that incremental sort of I don't know 20 or $30 million between what they disclosed investments in what is the sort of earmarked or.
Announced investments are.
Are those all.
Our development projects did you say or some of them tied to pending M&A third they'll tell you that that third bucket. If you want would be four additional projects. We have developed it's a smaller amount as well as you can deduct there, but it would be in assets that we have developed.
The other thing we've been talking about.
Chris in your capabilities for organic development.
Just maybe talk a little bit about the progress you've made in 'twenty 'twenty. One office. He found out about project here potentially more partisan comment as you look forward like to.
The 500 million of equity this year like what percentage could come from your own internal development versus likely M&A.
So as we have been saying for the last couple of years, we think that for a company with our profile and.
Yeah.
Devoting part of our investments every year two projects, we have developed or co develop with partners is the right thing return should be somehow higher than making acquisitions of assets in operation.
And these.
These year 2022, it's going to be a meaningful part.
And if you look at the numbers you have in front of you it.
It could be 'twenty, maybe a 30% that that's the kind of ballpark number I would guess estimate.
For the year, so it's meaningful but at the same time.
Most of our investments this year are still going to come from.
Acquisitions of old fashion assets in operation, if you want and the assets we develop unbilled as you can see the three you have in front of you went when we start construction. They have long term ppas signed and therefore from a risk point of view.
We are talking about a low risk and from a contractual point of view.
Understood.
Internal development capabilities comes along with some upfront costs, obviously before we send the capitalized projects.
And how do you deal with those costs for your cash available for distribution.
They do more internally generated projects does it influence at all in terms of where you think dividend growth can go over the next couple of years.
You should not the way we deal with development is probably very different from some.
Some other companies you might be familiar with so we use partners.
We follow if you want a lower cost approach. So we are not trying to have here and the largest pipeline or.
Whatever you want to call. It we are trying to develop a number of assets that are going to help us.
And to achieve the target of having a significant part of our investments with a higher return and to do that we don't need to get into huge investments that theyre going to be meaningful in any way.
You know our metrics, we will continue being who we are on the only thing we are doing this complementing that using our scale. We have in house at a very low cost without trying too.
For the most brilliant pipeline or nervous or anything like that.
Understood. Thanks for the update.
Thank you.
Your next question comes from the line of Gonzalo <unk> <unk> from BNP Exane. Please ask your question.
Hi, Good afternoon, San Diego County, scope and well most of my questions have already been answered.
I used to have one last follow up on electricity prices in Spain.
Assuming current.
Prices and what could be there.
Noncash provision that you should have to record and youre comfortable for 2022.
Yeah.
So I will answer that question.
I'm, sorry, I don't have a clue I think Miami.
Okay.
But it's all those question is referring to something fairly specific which is at this point in time power prices in Spain are significantly higher than what anybody expected a couple of years ago and that triggers from an accounting point of view they need to book a provision.
It's a number that Francisco mentioned before for 2021.
For 2022.
The provision would be sizeable I would say if prices remain where they are in any case when we have given guidance, we have taken that into account.
Although we know question from Julian before our EBITDA guidance for this year 2022.
Range is wider than what we typically do mostly because of these provisions because of these noncash provision at this point in time is difficult to foresee them on obviously, you're going to follow up with our Investor Relations team, who will be much more knowledgeable it'll be so then let me.
Okay. Thank you very much.
Hello.
Yeah.
Your next question comes from the line of Angie <unk> from Stifel. Please ask your question.
Okay.
Thank you I'm, sorry, if you've already covered this but.
I have actually two questions. One is have you issued any equity under your ATM program and then secondly.
Given what's happening in Europe .
This seems to be more of an emphasis on investments in batteries.
Batteries, and and Green hydrogen and I was just wondering if.
You might be able to retrofit some of your European assets in order to.
Basically benefit from those additional investments.
Hi, Angie.
So starting.
Starting with your second question.
Obviously, it's too early to try to extract too many conclusions of what's going on in eastern Europe .
I would personally say that one of the things we are going to see is that it.
In general investments in renewable energy.
<unk> and administrations across the board governments across the board are going to push for uneven quicker development over with energy storage on all sorts of flavors around that for obvious reasons.
Many other players probably we are going to.
Fine further opportunities to do things.
Because of our regulators have administration is pushing because of higher power prices that are going to make.
That kind of your investments.
<unk>.
Profitable.
And then regarding your first question you were asking about the ATM, Yes, you will find it in the disclosure we issued some shares with the ATM.
We'll be in our disclosure in the in the detailed disclosure.
Okay, just one follow up.
The <unk>.
Leverage at three and a half times.
Can you remind us please.
That's a level that you feel comfortable with.
It is again.
Okay Express it as three point something so the 0.5 falls within the something.
Okay. Thank you.
Once again, if you wish to ask a question. Please press star one on your telephone.
Our next question comes from the line of William Griffin from UBS. Please ask your question.
Great. Thanks, everyone just a quick.
Quick easy one for me here, but just trying to understand.
What you're including in the 2022 cap the guidance in terms of contributions from the new investments the $110 million that you have.
<unk> identified a committed so far how much of that is in and then.
Is there anything on top of that that you're assuming that's a part of that guidance. Thank you.
So out of the investments we have been talking about obviously the acquisitions.
The coffee from the acquisitions is included that estimation for the.
Assets under construction there is very little because these specific assets under construction.
We're going to reach commercial operation as you can see there towards the end of the year.
I mean in terms of new investments our policy or our practice is to include what we believe we are going to be able to invest during the year.
Let's say the the coffee that whatever we are going to invest in during the year it should be delivering.
Yeah.
Great. Thanks, very much that's all for me.
Thank you.
That seems to be no further questions.
On the call back to the speaker.
Great. Thank you very much to everybody and thanks, operator, we can leave it here.
That does conclude our conference for today. Thank you for participating you may all disconnect.
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Thanks.
Yes.
Thank you.
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