Q2 2022 Atlantica Sustainable Infrastructure PLC Earnings Call
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The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Welcome to Atlantica second quarter, 'twenty 'twenty financial results Conference call Atlantica is a sustainable infrastructure company.
A reminder, that this call is being webcast live on the Internet and a replay of this call will be available on Atlantic Coast corporate website.
Atlantica will 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, including the risk factors section of the accompanying presentation.
And in our latest reports and filings with the Securities and Exchange Commission.
All of which can be found on our website.
Atlantic <unk> does not undertake any duty to update any forward looking statements.
Joining us for today's conference call Atlantic as CEO , Santiago, <unk> 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'll now pass you over to Mr. <unk>. Please go ahead.
Thank you very much good morning, and thank you for joining us for our second quarter 2022 conference call.
A few key messages to start with the.
In the first half of the year revenue has increased by a four 7% and adjusted EBITDA has increased by three 7% on a comparable basis.
While coffee growth has been six 7% up to $117 million.
Our board of directors.
Yes.
Declared a quarterly dividend of 44 cents.
On a per share.
Regarding.
Growth on investments.
Growth in the first half of the year.
We have closed or earmarked investments between 160.
<unk> million dollars.
With that I will turn the call over to Francisco, who will guide us through our financial results.
Thank you Santiago and good morning to everyone.
Please turn to slide number four where I will present, our key financial for the first half of 2022.
Revenue reached 555 million, which represents a four 7% growth on a comparable basis, excluding the effect of nonrecurring solar project that we discussed last year.
This change.
EBITDA amounted to $402 million, representing an increase of three seven.
On that same comparable basis.
Regarding cash available for distribution, we generated $117 million in the first half of 2022.
An increase of six 7% year over year.
On the following slide number five you can see our performance by geography and business sector.
In North America revenue increased by 11% to $199 million in the first half of 2022, while EBITDA increased by 19%. Thanks to the recently acquired in the United States.
In South America, where revenue and EBITDA remained stable since the contribution of assets, we acquired recently or offset by lower wind resource this quarter.
Revenue in the EMEA region decreased by 22% in the first half of 2022.
Mainly due to foreign exchange impact and the nonrecurring effect I previously mentioned.
EBITDA in the EMEA region decreased by 13% in the first half of 2022, mostly due to FX impact.
A one time gain in the first quarter of 2021.
Looking below at the results by business sector.
Can see similar effects.
Let's now please turn to slide number six we will review our operational performance.
Energy.
Our renewable assets reached 2647 gigawatt hours in the first half of 2022.
An increase of 33% versus the same period of 2021.
The increase was largely due to the contribution of the assets recently acquired.
Looking at our availability based contracts.
Once again ACP continues to show solid performance.
In transmission lines and water the two sector revenues based on availability.
We continue to achieve high availability levels.
Let's now move to slide number seven to walk you through our cash flow in the first half of 2022.
Our operating cash flow reached $264 million at seven 2% increase compared to the first half 2021.
Investing cash flow in the front half of 2022.
Mainly includes the investments in new assets and the distributions received from entities under the equity method.
Financing cash flow with 167 million and mainly includes the scheduled principal repayments of our project financing agreement for $156 million.
And dividend paid to shareholders and noncontrolling shareholders for $116 million.
I will now turn the call back over to Santiago.
Great.
Talk briefly now about.
Growth in investments each year.
As you can see on the following page.
Invested until you know the end of the year of $102 million, including the transmission line in Chile and with these costs.
Last quarter.
Two small PV plants.
As well as investments in the assets we are building.
Additionally, we expect to invest between $60.
Millions of dollars.
In the remainder of the year in assets under construction and showing the fact that.
Development and construction is gradually becoming a larger part of our investments.
Moving to the next page.
We want to show you.
<unk>.
How we create value.
And how we create value.
In the case of Atlantica is about obviously the coffee we generate every quarter, but also we create value by repaying.
Our debt in fact.
If you look on this page.
The coffee before debt principal repayments.
You can see that was $255 million for the first half of the year more than twice the coffey generated in the same period.
This obviously, suggesting that our cash generation.
Significantly larger than the <unk>.
And we use it on top of using it for generating Duffy, we use it to repay.
Debt.
In fact.
We all know at Atlantica, we use nonrecourse project debt as our main.
And sort of.
Financing.
We use the cash flow generated at the project level.
Both to be paid.
Net debt project debt and to generate and Kathy.
We believe that these conservative debt structure.
Reinforces our focus on long term value creation, meaning that.
By amortizing our debt, we do create value for the shareholders.
Other awards.
Because of the fact that our project debt.
Paid before the end of.
The Ppas if we wish.
We'll ensure that that would be it.
Bye.
Cash generation at the project level should be significant because the PPA should still be in place while the debt has been rebate. Additionally in the life beyond the existing PPA.
Yes.
The assets would not be leverage.
And with that.
If we move to the last page number 10.
What we see is that in fact.
Both net project debt.
And total net debt.
Creased by more than $300 million in the first half of 2022.
Showing that in our case equity value creation happens to company.
On dividends, but also happens to be significant debt repayments.
We are doing every quarter.
With that I conclude today's presentation. Thanks for joining us we will now open the lines for questions. Whenever you want operator, we are ready.
Thank you.
A reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A queue.
Our first question comes from the line of Julien Dumoulin Smith from Bank of America. Please go ahead your.
Your line is open.
Hi, Good morning, Thank you as always for the time. This morning I appreciate it Hey, I wanted to talk on the subject of FX quickly, obviously, a lot of moving pieces to that but especially a focused on euro of late can you talk through your cost structure.
Capital structure and the projects as best you see kind of the swings in FX again, you guys give great details on your projects, but would love to understand a little bit of the the positive offset here in the form of euro exposure.
Your SG&A and other operating expenses et cetera as well.
Okay, Julian good morning Francisco.
Paul.
What we do Julian in P&L.
Revenues in Europe coming out of our Spanish projects.
And what we do is.
We have some of the debt at the holding company in euros and we have also G&A in euro so that that is a natural hedge to the euros that we get.
And that we get from our from our assets in Spain, and what we do then.
As you know we have.
Our hedging policy, it's 24 months, we hedged 100% of the first 12 months, 75% on a per months 12 to 24 on a rolling basis. So we do have expenses.
Sure.
And our capital structure.
Our G&A.
Peter on natural hedge.
To the devaluation of the euro.
Julien.
Right.
And that just is there a good way to think about that I mean outside of the heuristic as you describe are being sort of one for one is there any kind of way to think about.
Say half of or 80% of your G&A is all in euro.
I don't know if there is a good way to think about that percent I know, it's obviously the preponderance.
I would think the preponderance of that when we.
We look at our G&A structure.
We have at the holding company I would say the preponderance of that is in Europe .
Excellent alright, perfect and then just moving away from that in brief.
Can you talk about the IRA here and the legislative prospects and specifically as I look at your portfolio have you guys looked at Andrew spoken with some of your Counterparties with respect to Repowering with some extent storage ITC to take advantage of that if it were to come here. Obviously, you have a handful of sites and the southwest here that that might be relevant.
Yes.
<unk>.
Obviously subject to we do believe that there could be a significant opportunity.
And for Us.
For the sector in general.
Two we will be powering <unk>, where we do have some opportunities.
From a timing point of view.
Lee.
The support you can get.
In terms of tax advantages and use what's going to guide you are tightening and.
Therefore, depending on what happens there.
We would be able to capture some of those opportunities sooner or later repowering, but also as you rightly mentioned.
Let's say hybrid 19 existing projects, we have historic or with different technologies, so lots of things to be done.
If that happens.
Obviously subject to specific worthy.
Okay.
Yes, clearly and actually just.
Geothermal since.
Little bit of more novel subject is that an opportunity as well.
Or is that more limited.
Yes. It is more it is probably more limited.
Things you can do around that but in our case, our geothermal plant is fully contracted with existing technologies. So probably the potential in the short term there is lower.
Got it alright excellent guys I'll leave it there. Thank you very much and good luck as always a pleasure. Thank you Julien.
Thank you.
We are now going to take our next question.
Our next question comes from the line of David <unk> from Raymond James. Please go ahead. Your line is open.
Thanks, Good morning, everyone. My first question here just.
Maybe moving over to Europe , obviously, we continue to see pretty elevated power price environment there.
So maybe kind of a two part question first do you see any opportunities to expand.
Maybe organically your fleet in Spain through either expansions or storage there.
And does does the current high power price environment, then I guess, maybe even potential.
Potential demand from corporates for renewable power does that does that prompt you to consider looking at any new jurisdictions throughout Europe .
Great. Thanks for the question David.
In the existing feed we have mostly in Spain, but also in Italy. The assets are fully contracted so for better or worse.
We let's say we know the revenues, we are going to be having going forward.
And therefore in the short term.
It's difficult to capture opportunities within the existing fleet because for better or worse. It is very contracted now having said that there are opportunities.
And similar to what we just discussed in the U S. There are opportunities to include a storage in some assets to hybrid values them with other technologies, which is something you can do.
<unk> jurisdiction.
Uhm.
I'm sure that in the current environment.
Alright.
For that kind of.
New investments.
We'll be higher than what we thought some time ago, so without being specific my short answer to your question would be yes, there will be opportunities and expansions.
<unk> borrowings et cetera.
Yes.
When looking at development of new projects, clearly there should be opportunities in both countries, Spain, and Italy in terms of new jurisdictions.
Clearly that's something.
We are looking at.
Very recently.
Nevertheless, the environment in Europe in general.
Offers more opportunities than before and that's something we need to take into account when we learn analysis.
Excellent. Thank you for that maybe just one more for me.
I'm curious now that now that you're moving more towards <unk>.
Doing some of your own construction.
And development in house any comment you can provide on what youre seeing in terms of availability of the equipment.
How does the supply chain been for you.
Just recently here and how do you see it trending going forward.
Yes, so in general I would say that.
At least in our experience.
Things are slowly getting better.
Probably late 2021 is when is the supply chain at least in our case supply chain issues.
There are more important.
In our case, we have been able to continue with our plans, obviously theres inflation, obviously, there have been ups here and there, but we have been able to continue with our plan and our case without.
Major disruptions so going forward I am personally optimistic I think that the supply chains.
We slowly.
Improving I think that.
Suppliers are and will continue adapting to the current situation.
There has been a little bit of.
Let's say unexpired duration I believe on the side of some companies like us.
<unk> seen demand until it artificially and I think we are all going to go back to a more normal scenario. So I wouldn't say that it's going to be.
D C, but it's going to be easier.
Excellent I appreciate the color I'll turn it over.
Thank you David.
Thank you we are now going to take our next question.
Please standby.
Our next question comes from the line of William Craton from UBS. Please go ahead. Your line is open.
Excellent good morning, and thank you.
First question just wanted to maybe see if you could provide an update on on asset pricing and what you are seeing we recently saw one of your peers execute on third party acquisition at a greater than 10% yield.
Curious as you are seeking.
Their potential third party opportunities kind of what you've seen as.
As far as the latest on on pricing.
Yes, we have seen is on what we are seeing is a market.
I would say.
This is slowly improving from our point of view.
Our developer would probably say the opposite somebody who only develops.
The market in late 2021.
Probably got into some pricing.
To put it mildly probably what's your rationale in many cases.
And what we are seeing in especially in the second quarter.
Our.
Situations, where.
Sellers are selling at prices that seem.
Closer to something reasonable.
And in some situations processes were broadly somebody hop told the seller that they could get a very high price or being canceled.
Because the sellers have not been able to reach those prices. So I think we are getting to a healthier market from our point of view.
In.
Returns.
Are probably coming back all you can eat our way I think that a larger player.
Interest in this sector like us.
We'll be able to find more assets, creating value in the future than what probably could be found in late 2021, and having said that.
I'm talking about the market broadly and it's very different by sector or by.
State by geography, So we continue to see some transaction, probably not make too much sense, but in general.
Think that the market is becoming.
More rationale.
That's very helpful. Thank you.
Also wanted to touch on here the impact of your.
Ppas that are indexed to inflation I'm curious if you could speak to what sort of tailwind thats been for you year to date and have you seen or started to see the benefit of.
The higher CPI rolling through your contracts.
Yes, obviously, the IP and demand in the year the effect of that is.
He is not that significant because obviously.
<unk> helps from that point of view.
But yes, as you know in more or less half of our business we do have.
In inflation linked escalation factors and therefore in the assets, where we have those provisions clearly is going to be.
Helpful.
The impact is going to be more significant next year.
And the following years.
But.
We are starting to see it yes.
Great. That's all for me thank you.
Thank you.
Thank you. This concludes today's Q&A session I will hand, the call back to you.
Great. Thank you very much.
To everyone.
This concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
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