Full Year 2023 Atlantica Sustainable Infrastructure PLC Earnings Call
Operator: Hello everyone, and thank you for standing by. Today's call will be beginning shortly. We thank you for your patience. Today's call will be beginning shortly. We thank you for your patience. Thank you for watching.
Hello, everyone and thank you for standing by today's Toby beginning shortly we thank you for your patience.
[music].
Welcome to Atlanta cause full year 'twenty 'twenty financial results conference call just to remind you that this call is being webcast live on the Internet and a replay of this call will be available on atlantica corporate website.
Operator: Welcome to Atlantica's full year 2023 financial results conference call. Just a reminder that this call is being webcast live on the internet, and a replay of this call will be available on Atlantica's corporate website. Atlantica will be making forward-looking statements during this call that are based on current expectations and assumptions and 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, 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. Atlantica does not undertake any duty to update any forward-looking statements.
Let's call, we'll be making forward looking statements. During this call, which are based on current expectations and assumptions and 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, 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 atlantica does not undertake any G.
To update any forward looking statements joining us for today's conference call or Atlantica, CEO, Santiago <unk> and <unk>.
Operator: Joining us for today's conference call are Atlantica's CEO, Santiago Siege, and the CFO, Francisco Martinez-Davis. As usual, at the end of the conference call, we will open the lines for the Q&A session. I will now pass you over to Mr. Siege. Please, sir, go ahead.
Speaker Change: Francisco Martinez Davis as usual at the end of the conference call. We will open the lines for the Q&A session I will now pass you over to Mr. <unk>. Please go ahead.
Santiago Seage Medela: Thank you very much. Good morning. Thank you for joining us for our 2023 conference call results. In 2023, we met the guidance we provided at the beginning of the year, both regarding EBITDA and for CAPI. If we cover briefly some of the achievements during the year, we remind you that in early 2023 we were able to refinance two large assets in Spain, creating long-term value by extending maturities at what at the time were still very reasonable costs. Additionally, 2023 has been a year where we have continued to evolve in our growth strategy, demonstrating that Atlantica can grow through a combination of development and construction of our own pipeline and through the acquisition of assets In fact, during the year, several new solar assets have reached commercial operation.
Thank you very much.
Santiago: Good morning, Thank you for joining us for our 2023 conference call results.
Speaker Change: In 2023, we have met the guidance we provided at the beginning of the year both regarding EBITDA.
For coffee.
Speaker Change: If we go over briefly some of the achievements.
Speaker Change: In the year.
Speaker Change: We remind you that in early 2023, we were able to refinance two large assets in the Spain, creating long term value by extending maturities.
Speaker Change: What are the time, we're still very reasonable.
Speaker Change: <unk> costs.
Speaker Change: Additionally, 2023 has been a year, where we have continued evolving in our <unk>.
Speaker Change: Growth is strategy demonstrating that atlantica can grow through a combination of development and construction of our own pipeline.
Speaker Change: And through the acquisition of assets whenever we find opportunities with reasonable returns in fact during the year several new solar assets have reached commercial operation.
Santiago Seage Medela: Additionally, our development team in the U.S. has made very significant progress during the year. At this point in time, we have three new projects fully contracted and under construction or about to start construction in the southwest of the U.S., leveraging the IRA. As you all know, North America continues to be our main target geography in terms of new investments and capital allocation. And finally, in 2023, we have continued finding and moving forward new development opportunities in our key geographies. In fact, our renewal pipeline has increased by 12% versus last year.
Additionally, our development team in the U S has made very significant progress during the year.
Speaker Change: This point in time, we have three new projects fully contracted.
Speaker Change: Under construction or about to start construction in the southwest of the U S leveraging the IRI.
Speaker Change: As you all know North America continues to be our main target geography in terms of.
Speaker Change: New investments in terms of capital allocation.
Speaker Change: And finally in 2023, we have continued finding on moving forward new development opportunities in our key geographies in fact, our renewal pipeline has increased by 12% versus last year.
Francisco Martinez: If we now look forward and talk briefly about 2024, we see that as of March 1, we have already committed or earmarked between $175 and $220 million in new investments, with a majority allocated to solar and storage projects in the U.S. This represents 60-70% of our $300 million investment target. Additionally, we expect to complement that amount with some targeted acquisitions, as we believe that the current M&A market is constructive in some areas, where we believe that we should be able to lock in accretive transactions like the ones we have done in the past. So all in all, at this point in time, we think that the $300 million target is achievable. Finally, together with our partner, we are in the process of divesting our 30% stake in Monterey. We consider that this is a good example of capital recycling opportunities. With that, I will now turn the call over to Francisco, who will guide us through our financial results. Thank you, Santiago. And good morning to everyone.
Speaker Change: If not we look forward and we talk briefly about 2024.
Speaker Change: We see that also March one.
We have already committed or earmarked between 175 and $220 million in new investments with the majority allocated to it.
Speaker Change: Solar and storage projects in the U S.
Speaker Change: This represents a 60, 70% of our $300 million.
Speaker Change: Investment target.
Speaker Change: Additionally, we expect to complement that amount.
Speaker Change: Some targeted acquisitions.
Speaker Change: We believe that the current M&A market.
Speaker Change: Is constructive in some.
Areas.
Speaker Change: We believe that we should be able to lock in.
Speaker Change: Accretive.
Speaker Change: Transactions like the ones, we have done in the past.
Speaker Change: So all in all.
Speaker Change: This point in time, we think that the $300 million target.
Speaker Change: Achievable.
Speaker Change: Finally, together with our partner we are in the progress of divesting, our 30% stake in Monterey.
Speaker Change: We can see that our bodies are good example of capital recycling opportunities.
Speaker Change: With that I will now turn the call over to Francisco, who will guide us through our financial results.
Francisco: Thank you Santiago and good morning to everyone.
Francisco Martinez: Please turn to slide number four, where I will present our key financials for full year 2023. Revenue remains stable at $1,099.9 million. Adjusted EBITDA was $794.9 million, within our 2023 guidelines range and showing a 1.7% increase versus 2022, excluding the effect of foreign exchange in our unscheduled audit at CACHU. Regarding cash available for distribution, we generated $235.7 million in 2023, also once again meeting the yearly guidance. On the following slide, number five, you can see our performance by geography and business sector. In North America, revenue increased by 4.9% to $424.9 million in 2023 compared to the same period last year, mostly due to higher production in our solar assets in the U.S. with higher availability at Solana. The increase in adjusted EBITDA was lower, 3%, mainly due to lower production from our wind assets where we had lower wind resources during the year.
Francisco: Please turn to slide number four where I will present, our key financials for full year 2023.
Francisco: Revenue remains stable at $1099 9 million.
Francisco: Adjusted EBITDA was $794 9 million within our 2023 guidance range and showing a one 7% increase versus 2022.
Francisco: Excluding the effect of foreign exchange and our scheduled on a scheduled outage at <unk>.
Francisco: Regarding cash Bill for distribution, we generated $235 7 million in 2023 also once again meeting the yearly guidance.
Francisco: On the following slide number five you can see our performance by geography and business sector.
Francisco: North America revenue increased by four 9% to $424 9 million in 2023 compared to the same period over last year.
Francisco: Mostly due to higher production in our solar assets in the U S with a higher availability at Solana.
Francisco: The increase in adjusted EBITDA was lower 3%, mainly due to lower production from our wind assets, where we had lower wind resource during the year.
Francisco Martinez: In South America, revenue increased by 13% compared with 2022, up to $188.1 million, and even that increased 15.9% to $146.7 million. The increase was mainly due to assets which recently entered into operation and inflation in the indexation mechanisms in our contract. In the EMEA region, revenue on adjusted EBITDA decreased by 8.2% to $328.9 million and 8.8 percent to $26.6 million, respectively.
Francisco: In South America revenue increased by 13% compared with 2022 up to $188 1 million and EBIT increased 15, 9% to $146 7 million.
Francisco: The increase was mainly due to assets, which recently entered into commercial into operation and inflation indexation mechanisms in our contracts.
Francisco: In the EMEA region revenue and adjusted EBITDA decreased by two.
Francisco: Our percent to $328 9 million and eight 8% to $26.6 million respectively.
Francisco Martinez: The reduction was mainly due to an unscheduled outage at Kachu that we discussed in the previous quarter. As a reminder, we expect the insurance policy to cover the impact of business interruption after a 60-day deductible. Let's now please turn to slide number six, where we will review our operational performance. Electricity produced by our renewable assets reached 5,458 gigawatt hours in 2023, an increase of 2.6 percent versus the same period of 2022, mainly due to the increase in production in our solar assets in the United States and Spain, as well as the contribution of recently consolidated assets and those that have entered into operation recently, looking at our availability-based contract. Our efficient natural gas and heat segment and water segments will continue to achieve very high availability levels in 2023. Now, please turn the call back over to Santiago.
The reduction was mostly due to the scheduled outage of culture that we discussed in the previous quarter.
A reminder, we expect insurance policy to cover the impact of <unk>.
Francisco: Interruption after a 60 day deductible.
Francisco: Now please turn to slide number six where we will review our operational performance.
Francisco: Electricity produced by our renewable assets reached 5458 gigawatt hours in 2023, an increase of two 6% versus the same period of 2022, mainly due to the increase in production in our solar assets in the United States.
Francisco: In Spain, as well as the contribution of recently consolidated assets and those that have enter into operation recently.
Francisco: Looking at our availability based contracts.
Francisco: Our efficient natural gas and heat segment, the water segments continued to achieve very high availability levels during 2023.
Francisco: Let me now please turn the call back to over to Santiago.
Santiago Seage Medela: Thank you, Francisco. If we take a look at page number seven, and as many of you know, Atlantica targets around $300 million in investments every year. As of early March, and as I mentioned before, we have already invested, committed, or earmarked between 60% and 70%, more or less of that target. As of today, we expect to complement that with additional developments that might get into construction during the year, and targeted acquisitions in certain areas. A majority of those $175 to $220 million are expected to be invested in solar and storage projects that we have already contracted in the U.S., including COSO I and COSO II and a new project called Overnight. As a reminder, COSO Batteries I and II are two standalone battery projects in California.
Santiago: Thank you Francisco, if we take a look at.
Santiago: Page number seven on so many of you know atlantica targets around $300 million of investments every year as of early March and as I mentioned before we have already invested committed or earmarked between 60, and 70% more or less of that target as of today, we expect to complement.
Santiago: That with additional developments that might get.
Santiago: Into construction during the year.
Santiago: Targeted acquisitions in certain areas.
A majority of those 175 to 220.
Santiago: <unk>.
Are expected to be invested in.
Santiago: On the storage projects that we have already contracted in the U S, including cost so one on.
Santiago: So too.
Santiago: And our new project in.
Santiago: Called overnight as a reminder.
Santiago: So, but there is one and two are two standalone battery projects in California, with combined storage capacity of 180 megawatt hours.
Santiago Seage Medela: We've combined the storage capacity of 180 MWh, and both of them have signed PPAs with an investment-grade utility and are currently under construction. We also expect, as you see there, to invest another 35 to 60 million in solar and storage projects in other geographies, mostly South America and a bit in Europe. If we move on to page 8, we highlight two of the projects, the most recent projects, highlighting a little bit what the portfolio that is starting construction looks like.
Santiago: And both of them have signed Ppas with on.
Santiago: On investment grade utility on our currently.
Santiago: <unk> under construction.
Santiago: We also expect as you see there to invest another 35% to $60 million in solar and storage projects in other geographies, mostly some of America.
Santiago: A bit in Europe.
Speaker Change: If we move on.
Speaker Change: To page eight.
Speaker Change: We highlight there too.
Projects.
Speaker Change: Although more most recent projects.
Speaker Change: Highlighting there a little bit how the portfolio.
Speaker Change: That is just starting construction looks like.
Santiago Seage Medela: Overnight, as I mentioned before, is a new 150 megawatt solar PV project in California. Recently, we entered into a 15-year bus-bar PPA with an investment-grade utility. Under that TPA, overnight, we'll be receiving a fixed price per megawatt hour with no basis risk, something that, as you all know, we like. We are now busy working on a second phase of the same project that will include storage, resulting in a solar plant with storage in California. But meanwhile, we have contracted for the solar part of the plant, and we will be starting construction soon. Another example of new projects, ATS and ATN expansions. These projects... are expanding some of the transmission lines we own in South America, and these new investments will be receiving capacity payments with inflation indexation and denominated in U.S. dollars. In summary, a very low-risk contract in what we consider is a very low-risk asset class in geographies where we can find very good returns that, as you know, we like to combine with our investments in North America.
Speaker Change: Overnight as I mentioned before is a new 150 megawatt.
Speaker Change: Solar PV project in California.
Speaker Change: Recently, we entered into a 15 year bus bar.
Speaker Change: Hey.
Speaker Change: With an investment grade utility.
Speaker Change: Under that Tpa overnight, we'll be receiving fixed price per megawatt hour with no basis risk something that as you all know.
Speaker Change: We like.
We are now busy working on a second phase of the same project that will include storage.
Speaker Change: Resulting in a solar plant with the storage in California.
Speaker Change: Meanwhile, we have contracted.
Speaker Change: Solar.
Speaker Change: Part of the plant.
Speaker Change: And we will be starting construction soon another example of new projects.
Speaker Change: On ATM expansions these.
Speaker Change: And these projects.
Speaker Change: <unk>.
Speaker Change: Our expanding some of your transmission lines, we own in South America.
Speaker Change: These new investments, we will be receiving capacity payments with inflation indexation.
And.
Speaker Change: The nominated in U S dollars.
Speaker Change: In summary.
Speaker Change: A very low risk.
Speaker Change: Contract.
Speaker Change: And what we're going to see there is a very low risk asset class in geographies, where we can find.
Speaker Change: Very good returns.
As you know we like to combine with.
Speaker Change: Our investments in North America.
Santiago Seage Medela: Moving to the next page, you can see an update of our pipeline that includes 2.2 gigawatts of renewable energy and 6 gigawatt hours of storage projects. We continue to focus on North America as our key geography, and we continue to focus on solar and battery storage as our main sectors for technology. With that, Francisco will now close the presentation with our 2024 guidance. Thank you, Santiago.
Speaker Change: Moving to the next page you can see.
Speaker Change: An update of our pipeline.
Speaker Change: That.
Speaker Change: <unk> two.
Speaker Change: Two two gigawatts over and with energy.
Speaker Change: The six gigawatt hours of storage projects.
Speaker Change: We continue to focus on North America, our key geography, and we continue to focus on solar.
Speaker Change: Storage.
Speaker Change: So our main sectors or technologies.
Speaker Change: With that Francisco will now close the presentation with our 2020 for guidance.
Francisco: Thank you Santiago on the next.
Francisco Martinez: On the next slide, we're initiating our 2024 guidance. This year, we expect adjusted EBITDA in the range of $800 to $850 million and cash available for distribution in the range of $220 to $270. We're initiating this guidance with a wider range for CAFTI because of four major effects. The proceeds from the potential sale of our equity interest in a monetary asset that we expect to close in the first half of 2024. Dan Scaggio and Laurie Ceccaccio.
Francisco: Next slide we are initiating our 2020 for guidance.
Francisco: This year, we expect adjusted EBITDA in the range of $800 million to $850 million and cash available for distribution in the range of two <unk> to $2 70.
Francisco: We are initiating this guidance with a wider range for Kathy.
Francisco: Because of four major effects.
Francisco: The proceeds from the potential sale of our equity.
Francisco: This isn't a monetary asset that we expect to close in the first half of 2024.
Francisco: Dan schedule outage a cartoon.
Operator: Although we expect insurance to cover the business interruption after a customary 60-day deductible, the outage will affect distributions in 2024. Volatility and electricity market prices in Spain could also affect distributions in 2024. However, deviations against regulated prices during this period are to be compensated for starting in 2026, according to the regulation. Finally, uncertainty regarding the level of collections of SAT could bring volatility to the 2024 CAFD. And this could have either a positive or a negative effect. We expect to be able to narrow this range in the upcoming quarters. With that, we conclude today's presentation. Thank you all for joining us.
Francisco: Although we expect insurance to cover the business interruption after a customary 60 day deductible.
Outage will affect distributions in 2024.
Francisco: Volatility in electricity market prices in Spain.
Francisco: Also affect distributions in 2024.
Francisco: However, deviations against regulated prices. During this period are the big compensated starting in 2026, according to the regulation.
Francisco: And finally uncertainty regarding the level of collections have I'd say D could bring volatility to the 2024.
Francisco: And this could have either a positive or negative effect.
Francisco: We expect to be able to narrow that range in the upcoming quarters.
Speaker Change: With this let me conclude today's presentation. Thank you all for joining us and now operator, we're open for Q&A.
Operator: And now, operator, we're open to Q&A. Thank you. If you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, that is start followed by two.
Speaker Change: Thank you if you would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad.
Speaker Change: Your mind I would like to be Rebased Nicky.
Kay: Followed by Kay.
Nelson Ng: Our first question today comes from Nelson Ng with RBC Capital Markets. Nelson, please go ahead. Great, thanks. I just had a few questions on Monterey. Can you give some color on what the proportional EBITDA contribution will be in 2023? Yes, yes, we can hear you.
Kay: Our first question today comes from Nelson <unk> with RBC capital markets Nelson. Please go ahead.
Nelson: Great. Thanks.
Nelson: Had a few questions on Monterey can.
Nelson: Can you do.
Nelson: This.
Nelson: Can you give some color on what the proportionate EBITDA contribution was in 2023.
Nelson: Hello.
Santiago Seage Medela: Good morning, first of all. So the EBITDA contribution, as you know, is not a public number. What we can tell you is that it's a very small part of EBITDA. And then, in terms of, I guess, the CAFDI bridge that you've included, so it includes, I think, $30 million from Monterey. Can you describe how or how you came up with the $30 million relative to the $45 to $52 million in proceeds? And, I guess, do you generally include sale proceeds? CAFTE, and should we expect that going forward?
Speaker Change: Yes, yes, we can hear you good morning first of all.
Speaker Change: So the EBITDA contribution as you know it's not.
Speaker Change: A public number what we can tell you is that it's.
Speaker Change: Very small part of albeit EBITDA.
Okay, Great and then in terms of I guess the cap the bridge that you've included.
Speaker Change: So it includes $30 million from Monterrey can you describe.
Or how you came up with the $30 million relative to the $45 million to $52 million in proceeds and I.
Speaker Change: I guess do you generally include sale proceeds and cap D and should we expect that going forward.
Speaker Change: So and I propose that you follow up on these detailed question with IR.
Speaker Change: Okay sounds good.
Speaker Change: And then one last question on Monterrey with Aetna also made follow up with IR later, but I'll.
Nelson Ng: Nelson, I propose that you follow up on this detailed question with IR. And then one last question on Monterey, which I can also maybe follow up with IR later, but I think in the notes you mentioned that you can't guarantee that the transaction will close. So are there any particularly onerous?
I think in the notes you mentioned that you can't guarantee that the transaction will close.
Speaker Change: So are there any particularly onerous.
Speaker Change: A condition precedent is there anything like that.
Speaker Change: Is there is the risk of closing, particularly higher for this transaction are generally you expect no clothes that you just say no.
Santiago Seage Medela: I mean, we do expect to close, and in our disclosure, you will see that we say that we expect to close during the first half of this year. There is nothing abnormal or that is not customary in the conditions for closing. The only thing is, obviously, we don't control the timing.
No I mean, we do expect to close on in our disclosure you will see that what do we say that we expect to close during the first half of this year. There is nothing abnormal or that is not customary.
Speaker Change: In the in the conditions to close the only thing is obviously, we don't control the timing that's why we have been cautious in the wording, but we do expect to close.
Nelson Ng: That's why we have been cautious in the wording, but we do expect to close. I just have one last question. The overnight solar and potential storage project, I think, could be a pretty large project for you, all folks. Thank you, get a partner.
Speaker Change: Okay.
Speaker Change: I just have one last question on the overnights.
Speaker Change: Solar at potential storage project.
Speaker Change: I think it.
It would be a pretty large project for you, particularly if there's also.
Santiago Seage Medela: I'm just thinking in terms of strategy, but also funding as well. Yes, so at this point in time, what we have contracted and we will be starting to purchase and build is the solar component. And at this point in time, our expectation is to retain 100% of the equity. As you know, in the U.S., if you include tax equity financing and back leverage, the amount of equity as a percentage of the total investment, let's say, is fairly low. If and when the second phase happens, and depending on financing, we will obviously be able to consider options like the one you're suggesting. And what's the timing for that project? When does the PPA kick in?
Speaker Change: Storage components.
Speaker Change: Would you be looking at.
Speaker Change: I guess retaining 100% of that project.
Speaker Change: Would you like to get a partner I was just thinking in terms of strategy, but also funding as well.
Speaker Change: Yes. So at this point in time, what we have contracted.
Speaker Change: We will be starting.
Speaker Change: To purchase Unbilled is.
Speaker Change: It's all a component.
And at this point in time.
Speaker Change: Our expectation is to retain 100% of the equity as you know in the U S.
Speaker Change: If you include tax equity financing on bank leverage the amount of equity.
Speaker Change: <unk> of the total investment.
Speaker Change: And that's a fairly low.
Speaker Change: If the if and when the second phase happens depending on financing, we will obviously be able to consider options like the one youre, suggesting.
Speaker Change: Great and what's the timing for that project when does the PPA kick in.
Nelson Ng: Or when does the project need to be completed? So, the way we have signed the TTA is fairly flexible, so there's a, let's say, a fairly long window in which we can start operations, years. Okay, I'll leave it there. Thank you very much.
Speaker Change: Does the project needs to be completed.
Speaker Change: So the way we have signed a PPA is fairly flexible so there's let's.
Speaker Change: That's a fairly long window in which we can.
Speaker Change: The start of operations.
Speaker Change: Okay. So it could be a few years out.
Speaker Change: Okay I'll leave it there thank you very much.
Mark Thomas Jarvi: Great. Thank you, Nelson. The next question comes from Mark Jarvi with CIBC Capital Markets. Mark, please go ahead. Yeah, good morning.
Speaker Change: Great. Thank you Nelson.
Speaker Change: The next question.
Speaker Change: Question comes from Mark Jarvi with CIBC capital markets.
Mark Thomas Jarvi: Mark. Please go ahead.
Mark Thomas Jarvi: Yes, good morning.
Francisco Martinez: Some decent progress towards equity commitments for the year, and you're talking about M&A. How do you think about the funding backdrop right now, if you do get to 300 million in equity deployment? And does access to capital at all constrain your willingness to push towards 300 million in the short term? Hi Mark. This is Francisco.
Mark Thomas Jarvi: Some decent progress towards equity commitments for the year and you are talking about M&A.
Mark Thomas Jarvi: Do you think about the funding backdrop right now if you do get to $300 million of FTE deployment.
And does access to capital at all constrained your willingness to push towards the 300 million in the short term.
Speaker Change: Hi, Mark.
Francisco Martinez: I mean, that is a very good question. Well, we expect, as I said, the $175,000 to $220,000. These are our commitments throughout the year, so this is spread out throughout the year. So we expect to fund those through a combination of several levers that we have. We have the retained portion of the CAFD that we regenerate throughout the year.
Speaker Change: Francisco I mean that is a very good question.
We expect.
Speaker Change: I've said that the $1 75 to 220. These are commitments throughout the year. So that is spread out throughout the year. So we expect to fund those through a combination of several levers that we have we have the retained portion of the capital that we generate throughout the year. We also.
Francisco Martinez: We also have a cash position on hand that we could use towards that purpose. We could have additional drawdowns on our corporate facilities since we are in a position where we could increase our leverage within our target. And then we could also use, as Santiago mentioned in the previous question, non-recourse debt at the project level.
Speaker Change: So have a cash position on hand that we could use towards the purpose, we could have additional drawdowns on our corporate facilities.
Speaker Change: We are in a position, where we could increase our leverage within our target.
Speaker Change: And then.
Speaker Change: We could also use as Gavin mentioned.
Speaker Change: The previous question nonrecourse debt at the project level. These are fully contracted.
Francisco Martinez: These are fully contracted assets, so we are looking at a combination of project financing and tax equity. And we have been in active discussions with potential lenders regarding these three projects. And then, lastly, we mentioned the Monterey Project.
Asset. So we are looking at a combination of project financing and tax equity.
Speaker Change: We have been.
Speaker Change: In active discussions with potential lenders.
Speaker Change: Lenders regarding the <unk> III project and then finally, we mentioned the Monterrey project.
Francisco Martinez: As I said, we have some opportunities with regard to capital recycling, and we could put that in the mix also, Mark. Okay. And then, again, if you try to get to $300 million, though, do you think all those tools or those different options would get you there, as it stands today?
Speaker Change: We have some opportunities with regards to capital recycling, we could put that in the mix also mark.
Speaker Change: Okay.
Mark Thomas Jarvi: And then again, if you're trying to $300 million do you think all of those tools are those different options would get you there as it stands today.
Francisco Martinez: And you can, like, there's no need for equity to get to $300 million of equity deployment this year? At this particular stage, we're not contemplating equity, Mark. Yeah.
Speaker Change: It looks like there's no need for equity to to get to 300 million of equity deployment. This year.
Speaker Change: At this particular stage, we have not contemplated equity mark yet.
Santiago Seage Medela: Okay. So the guidance midpoint sort of implies, I know the sale of Monterey is maybe a one-time item, but even if you hit the lower end, you're sort of in that 11-12% CAFTE yield. Relative to where the share price is today, I just wanted to check how you guys think about, you know, the new hurdle rates for growth. Are you able to get that on projects above where your stock yields, you know, versus maybe buying back some shares right now?
Speaker Change: So the guidance midpoint sort of implies I know the sale of Monterrey as maybe a one one time item, but even if you're at the lower end youre sort of in that 11%, 12% cash yield.
Speaker Change: Relative to where the share prices today, just wanted to check how youre thinking about.
Speaker Change: The new hurdle rates for growth are you able to get that on.
Speaker Change: It's above where your stock yields.
Versus maybe buying back some shares right now just trying to think about hurdle rates your perception on your cost of capital and capital allocation right now.
Francisco Martinez: I'm just trying to think about hurdle rates, your perception of your cost of capital and capital allocation right now. So, both in projects we have developed in our building in M&A, our hurdle rates are obviously higher. At this point in time, we are able to deploy capital with those higher hurdle rates. However, because of the fact that we are under a Certificate of Review, stock repurchase at this point in time is not an option we can consider. Obviously, in the future, it would not be an option if the Certificate of Review was not there.
Speaker Change: So.
Speaker Change: Both in projects, we have developed on our building.
Speaker Change: <unk>, our hardware rates, obviously are higher.
Speaker Change: At this point in time, we are able to deploy capital with those higher hurdle rates.
Speaker Change: Because of the fact that we are on there on the rest of the review.
Speaker Change: Stock repurchase at this point in time is not an option we can consider obviously.
Speaker Change: In the future it would be an option.
Speaker Change: The review was not there.
Francisco Martinez: Okay, and then maybe one question for Francisco, is there any option to re-sculpt some of the debt in Spain over the next year or two here just as you deal with the current parameters and the adjustments that come in 2026 to either enhance free cash flow in the short term or optimize the cash flow profile of those assets? We, as Santiago mentioned, have refinanced a couple of the projects. We continue to look actively, not only in Spain, Mark, but in the geographies where we have opportunities for those projects that have long tails. So the answer to the question is yes, we continue to actively evaluate some of the refinancing opportunities, not only in Spain but across our whole portfolio. And those would not be in your guidance. Those would be potentially, uh.., beneficial or additive to the cap key profile this year or next year. Mark, I mean, they're not in the guidance. I think there are more midterm opportunities.
Speaker Change: Okay, and then maybe one question for Francisco is there any option to re scope some of the debt in Spain over the next year or two here just as you deal with the current parameters and the adjustments that come in 2026.
Francisco: Either enhance free cash flow in the short term or optimize.
Francisco: The cash flow profile of those assets.
Francisco: We did some depot mentioned I mean, we refinanced a couple of the projects.
Francisco: We continue to look actively not only in Spain.
Mark, but and digest that.
Francisco: The geographies where.
Francisco: Where will.
Francisco: We have opportunities on those projects that have long long tail, so that and so the question is yes, we continue to evaluate.
Francisco: At least some of the some of the refinancing opportunities not only in Spain, but in our whole portfolio.
Francisco: And those would not be in your guidance those would be potentially.
Francisco: Beneficial are additive to the.
Francisco: <unk> profile this year or next year.
Francisco: Mark I mean.
Mark Thomas Jarvi: They're not in the guidance I think there are more mid term opportunities, but as I've said that this is something that we can do that.
Mark Thomas Jarvi: But as I said, this is something that we continue to do, that we keep evaluating on a constant basis, but more midterm opportunities, Mark. Got it. Okay. Thanks for your time today. Thank you. The next question comes from Angie Storzynski with Seaport. Please go ahead.
Mark Thomas Jarvi: We keep.
Mark Thomas Jarvi: Evaluated on a constant basis by more midterm.
Speaker Change: <unk> Mark.
Mark Thomas Jarvi: Got it okay. Thanks for the time today.
Speaker Change: Thank you.
Speaker Change: The next question comes from Angie <unk> with Seaport.
Please go ahead.
Angie: Hi, Good morning, So I was just wondering.
Agnieszka Anna Storozynski: So I was just wondering, you mentioned obviously M&A opportunities and an ongoing strategic review. So is this strategic review basically a search for growth opportunities? I mean, it almost feels like we're in this perpetual strategic review with no updates, no timelines, or anything on what the target here is. So in the study review, Angie, as you will understand, we cannot make any comments. Okay, and then on Monterey and Caffey, so is it fair to assume that this contribution is basically like a debt paydown with the use of proceeds? Basically, that's what it is? 424-CAF-D, Andy, I mean, it's included in the guidance.
Angie: You mentioned, obviously M&A opportunities.
And ongoing strategic review. So so is this strategic review basically search for.
Angie: Our growth opportunity I mean, you almost feels like we are in this perpetual strategic review with no update no timeline anything on what the target here.
Angie: So most of the review R&D as you will understand we cannot make any comment.
Speaker Change: Okay, and then on the Monterey and Kathy So is it fair to assume that this contribution is basically.
Angie: Debt pay down.
Angie: The use of proceeds.
Kathy: Basically that's what it is.
For 2000 and for Cathy.
Kathy: And we I mean, it's included in the guidance.
Francisco Martinez: What I mentioned before is with regard to the use of proceeds, we have the deployment of the capital that we want to that we want as we have mentioned in the presentation. And part of the proceeds a month away will be used to fund a portion of our development pipeline. Okay, and lastly... Are you guys seeing any deterioration in the EBITDA, or more importantly, CAFD, of existing assets as they age? We obviously see it from existing wind power assets in the U.S., and I'm just wondering if you're experiencing the same phenomenon across other assets and other jurisdictions?
Kathy: What I mentioned before is with regards to use of proceeds Lee we have the deployment of the capital that we want to.
Kathy: We want that we have mentioned in the presentation part of the proceeds of Monterrey will be used for four by to fund a portion of our development pipeline.
Speaker Change: Okay and lastly.
Speaker Change: Are you guys seeing any.
Speaker Change: Any deterioration and.
Speaker Change: EBITDA or putting caps caskey.
Speaker Change: Just on assets.
Speaker Change: <unk>.
Speaker Change: We obviously see it some.
Speaker Change: Existing wind power assets in the U S and I'm just wondering if you're experiencing the same phenomenon across other assets and other jurisdictions.
Santiago Seage Medela: So overall, my answer would be no. Obviously, each asset is different, and you do need to work on your assets, and you do need to spend some money to make sure that they are going to be, to continue generating what they need to generate, but overall, my answer would be no. Thank you. Thank you, Angie. The next question comes from William Grippin with UBS. Please go ahead. Good morning.
Speaker Change: So overall.
<unk>.
Speaker Change: My answer would be no.
Speaker Change: Obviously, each asset is different and you do need to work on your assets you really need to spend some money to make sure that they are going to be to continue generating will be need to generate but overall my answer would be no.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you Angie.
Speaker Change: The next question comes from William <unk> with UBS.
William: Please go ahead.
William: Good morning, Thanks, very much for the time My first question just clarifying here on the EBIT Guide does that include the gain on sale piece of the Monterey sale that you are contemplating.
William Spencer Grippin: Thanks very much for your time. My first question is, just clarifying here on the EBITDA guide, does that include the gain on sale piece of the Monterey sale that you're contemplating? Looks like the CAFI guide includes the $30 million. I assume that's the return on capital portion. Just wondering where the gain shows up, if anywhere in the guide.
William: It looks like the Cafe guide includes the $30 million I assume that's the return on capital portion just wondering where the gain shows up if anywhere in the guidance.
William: It is.
It's been the cap the as we mentioned before and.
Francisco Martinez: It is in the cap, as we mentioned before, and there is a one-time gain that's small on the sale of the Monterrey asset, William, but it's not material. Is that reflected in, well, how do we bridge the gap then between the $30 million you're showing for the CAFD walk versus the $45 to $52? Proceeds that you're anticipating? I mean, is that, you know, 15 plus million?
William: There is a one time gain that small on that.
William: <unk>.
Speaker Change: On the sale of the month or asset that William but it's not material.
Speaker Change: Is that reflected in so.
Speaker Change: So how do we bridge the gap between the $30 million of showing for the captive work versus the <unk> 45 to 52.
Speaker Change: Proceeds that youre anticipating I mean.
Speaker Change: Is that.
Speaker Change: 15 plus million.
William Spencer Grippin: Is that going to show up? Is that what's adding to the EBITDA guidance, or is it something less than that? William, let's do something. Let's walk through this to fine-tune the number that said the transaction hasn't closed. So let us circle back to you without question. All right, fair enough.
We're going to show up is that what's what's adding to the EBITDA guidance or is it something less than that.
Speaker Change: William I'll, let Phil I'm, saying.
Phil: Let's walk through that.
Phil: To fine tune the number that said the transaction Hasnt closed let us let us circle back to you to without question.
Speaker Change: Alright fair enough.
Santiago Seage Medela: And just wanted to, coming back to some of your comments on M&A. You know, what types of assets are you seeing as the most attractive opportunities for you here, potentially? And, you know, where are they in their life cycle?
Speaker Change: And then just wanted to coming back to some of your comments on M&A.
Speaker Change: What types of assets are you seeing most attractive opportunities for you here potentially.
Speaker Change: Where are they in their lifecycle are these may be assets that are a bit more seasoned or things that have more recently been developed in commission.
Santiago Seage Medela: Are these maybe assets that are a bit more seasoned or things that have more recently been developed and commissioned? So, in terms of potential acquisitions, we spend time looking at assets in operation that are mature with a lower risk profile. Obviously, the challenge is to find such opportunities at the right return. So, typically, when we do acquisitions, it will be assets where we have some sort of competitive advantage, either because it's close to assets we own already or because there's some synergy somewhere that allows us to make an additional return. And those would be the opportunities we would be closing. Additionally, we spend a bit of time sometimes looking at assets in earlier stages where we can still add value and improve them, but historically, most of our investments have been assets in operation, generating cash, with low risk, where we can add some value and get a higher return than anybody else.
Speaker Change: So in terms of potential acquisitions, we spent time looking at assets in operation.
Speaker Change: Mature with a lower risk profile, obviously, the challenge is to find such opportunities.
Speaker Change: At the right return so typically.
Speaker Change: When we do acquisitions, you will be assets, where we have some sort of competitive competitive advantage either because seats.
Speaker Change: A close to assets, we own already or because there are some synergies somewhere that allows us to make an additional return and those would be the opportunities will be closing. Additionally, we spent a bit of time, sometimes looking at.
Speaker Change: Assets in earlier stages.
Speaker Change: Where we can still add value improve them.
But historically most of our investments have been assets in operation generating the cash low risk, where we can add some value and get a higher return than anybody else. That's what we need to do in order to make sure that those investments are accretive obviously.
William Spencer Grippin: That's what we need to do in order to make sure that those investments are accretive, obviously. All right, thanks very much for your time. I'll pass it on.
Speaker Change: Yeah.
Speaker Change: Alright, thanks, very much for the time.
Rupert M. Merer: Thank you. Our next question comes from Rupert Merer with the National Bank of Canada. Rupert, please go ahead.
Speaker Change: I'll pass it on thank you.
Speaker Change: Our next question comes from <unk>, <unk> with National Bank of Canada.
Speaker Change: Please go ahead.
Santiago Seage Medela: Hi, good morning. Just to follow up on that last question on M&A, so fair to assume you wouldn't look at M&A and any new jurisdictions at this point but just focus on where you have an existing footprint? No, I wouldn't say that, but there would need to be clear synergy value creation or a situation where we can achieve the return we need. Okay, very good.
Speaker Change: Hi, good morning.
Speaker Change: Just to follow up on that last question on M&A. So fair to assume you wouldn't look at M&A and any new jurisdictions at this point, but just focus on where you have an existing footprint.
Speaker Change: No.
Speaker Change: I wouldn't say that but there would need to be.
Speaker Change: Clear synergy value creation or a situation where.
Speaker Change: We can achieve the return we need.
Okay very good and then secondly, wondering if you can give us an update on supply chain. It seems over the last few quarters, we've stopped worrying about supply chain, but just wondering if you can.
Santiago Seage Medela: And then secondly, wondering if you can give us an update on the supply chain. It seems that over the last few quarters, we've stopped worrying about the supply chain, but I just wondered if you could give us an update on where you see the supply chain heading, where it matters for you in solar panels and batteries. What kind of trends are you seeing in prices and availability, delivery times of equipment? So, what we see at this point in time overall is that the supply chain, at least for us, is not an issue. If we look at PV panels globally, there's an oversupply, and prices have been coming down significantly during 2023. More recently, we are starting to see that in the US as well in recent months.
Speaker Change: Give us an update on where you see the supply chain heading where it matters for you in solar panels and battery, so what kind of trends, you're seeing on prices and availability delivery times of hub equipment.
Speaker Change: So what do we see at this point in time overall is that the supply chain at least for US it's not an issue.
Speaker Change: If we look at TV panels globally, and there is an oversupply prices have been coming down during 2023 significantly more recently, we are starting to see that in the U S as well in recent months.
Santiago Seage Medela: Let's say a bit less than in other markets, but overall, the PV dynamics I think are good for somebody purchasing like us. In the case of batteries, battery prices have been coming down as well significantly during 2023 globally, everywhere. So again, good dynamics for us. The only area where, as a developer, you need to be careful and plan properly is when you are purchasing some specific electrical equipment, transformers, some breakers, some very specific products where today's supply chains are longer, and you just need to plan your purchasing ahead.
Speaker Change: That's a bit less than in other markets, but overall PV dynamics.
Speaker Change: I think are good for somebody purchasing like us in the case of batteries, but the prices have been coming down as well significantly.
Speaker Change: In 2023.
Speaker Change: Globally everywhere, so again good dynamics for us.
And the only area.
Speaker Change: Sure.
Speaker Change: As a developer.
Speaker Change: You need to be careful on plan properly.
Speaker Change: Yes, when you are approaching some specific electric equipment transformers.
Speaker Change: Some breakers some various specific.
Speaker Change: Products were debate.
Supply chains are longer and you just need to plan your your purchasing ahead.
Rupert M. Merer: But overall, for us, this is not and has not been in the last few quarters a problem. Great. I'll leave it there. Thanks for calling. Thank you. We have no further questions, so I'll turn the call back to the management team for any closing comments.
Speaker Change: But overall.
Speaker Change: For us this is not.
Speaker Change: And has not been in the last few quarters our problem.
Speaker Change: Yes.
Speaker Change: Great I'll leave it there thanks for color.
Speaker Change: Thank you.
Speaker Change: We have this other questions I will turn the call back to the management team for any closing comments.
Speaker Change: No operator.
Operator: We will conclude the call by now. Thank you very much to everybody for attending. Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines, www.globalonenessproject.org
Speaker Change: We are we will conclude the call by now thank you very much to everybody for attending.
Speaker Change: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.
Speaker Change: [music].
Okay.
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Speaker Change: Thank you.
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Speaker Change: Thank you.
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Speaker Change: Okay.
Speaker Change: Sure.