Atlantica Sustainable Infrastructure PLC

NASDAQ:AY

Earnings Call Transcript 2021-Q1

[Operator]

Welcome to Atlantica’s First Quarter 2021 Financial Results Conference Call. Atlantica is a sustainable infrastructure company that owns a diversified portfolio of constructed renewable energy, power of generation, electricity distribution and weather assets in North and South America and certain markets in India.

As a reminder that this call is being broadcast live on the internet, and the replay of this call will be available on Atlantica’s 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 the today’s earning 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.

Atlantica does not undertake any duty to update any forward-looking statements. Joining us for today's conference call are Atlantica’s CEO, Santiago Seage; and Director of Investor Relations, Leire Perez. As usual, at the end of the conference call, we will open the lines for the Q&A session. I want to pass you over to Mr. Seage. Please go ahead, sir.

[Santiago Seage, CEO]

Thank you very much. Good morning, everybody. And thanks for joining our first quarter 2021 conference call. As you have probably seen, in Q1, we had what we believe is a strong performance with revenue growth of 11.8% and a CAFD increase of 7.6%.

With that, our Board of Directors has declared a quarterly dividend of $0.43 per share, $0.01 higher than in the previous quarter. Additionally, in April, we announced a new investment of 49% interest in a 600-megawatt wind portfolio in the U.S. And finally, during the first four months of the year, we have closed two previously announced investments; Coso, a 135-megawatt contract of renewable energy plant in California, and our second PV plant in Chile through our investment platform.

If we take a look at the results for the quarter on Page 4, you can see that revenue, as I mentioned before increased by 11.8% reaching $235 million, while adjusted EBITDA including unconsolidated affiliates increased by a 2.5% up to $170 million. Regarding CAFD, we generated $51.2 million in the first quarter, an increase of close to 7.6% year over year.

In terms of performance by sector and geography, on Page 5, we can see that in North America revenue increased by 2% up to $60.6 million, while the decrease in EBITDA in the region was due to a collection last year of certain insurance proceeds and to higher OpEx mostly due to a major scheduled maintenance in Mojave in the first quarter of 2021.

South America revenue and EBITDA increased by a 7% and a 6% respectively, thanks to the contribution of recently acquired assets. In the case of EMEA, revenue and EBITDA increased by an 18%, thanks to the contribution from new assets, better solar radiation and increased performance in certain assets as well as the exchange rate.

Looking below at the results by sector, we can see similar effects. In renewable energy, revenue and EBITDA increased thanks to the reasons mentioned previously, while in efficient natural gas, the decrease in EBITDA was mainly due to operation and maintenance costs which as many of you know are higher in the quarters preceding measure maintenance, something that is expected at the end of this year.

Transmission Lines continue to show in very good availability levels. And finally, in Water, you can see a significant increase in revenue and EBITDA, thanks to the contribution from our third asset in this sector. Moving on to Page 6, we can see that the electricity produced by our renewable energy assets reached more than 600 gigawatt hours in the first quarter, an increase of 15% compared to the same quarter last year.

If we look at availability-based contracts in ACP, availability for the first quarter was lower due to a scheduled maintenance the stops and didn’t have any impact on revenue. Transmission Lines and Water assets continued to show high availability levels. I will now turn the call over to Leire to cover the financial part.

[Leire Perez, Director of IR]

Thank you, Santiago. And good morning, everyone. Let's now move on to Slide 7 to walk you through our cash flow for the first quarter. Our operating cash flow for the first quarter of 2021 reached $147 million, showing an important increase versus the same quarter of last year, mostly thanks to an improvement in variations in working capital.

Financing cash flow for the first three months of 2021 includes the positive impact of $131 million, corresponding to the second tranche of the equity raise closed in January, partially offset by schedule project debt repayment for approximately $23 million and $51 million of dividends paid to shareholders and non-controlling interest.

Only now the net change in consolidated cash for the first quarter of 2021 was an increase of approximately $200 million. On the next Slide number 8, we would like to review our net debt position. We closed the first quarter of 2021 with net corporate debt of $531 million. With this, our net corporate debt to CAFD pre corporate debt service ratio stood at 2.6 times including the impact of personal investment that was closed in April. Net project debt as of March 31, 2021 was $4576 million.

I will now turn the call back over to Santiago.

[Santiago Seage, CEO]

Thanks. Looking at Page 9. And as we announced a few weeks ago, we have reached an agreement for the acquisition of a 49% interest in 600 megawatts more or less wind portfolio in the U.S. And the portfolio is composed of four assets in different states, and the assets have five-year average PPAs with investment grade of takers.

Our initial investment is expected to be approximately $197 million. And this price represents an enterprise value to EBITDA multiple lower than six times, what we believe is an attractive multiple. We do see significant value creation opportunities in both PPA including life expansion and repowering of the assets. Additionally, with this investment, we are further increasing and diversifying our presence in renewable energy in North America.

With that, operator, we are ready for Q&A.

[Operator]

Okay, ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. And we will now take our first question. Our first question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is now open.

[Anya Shelekhin, Bank of America Merrill Lynch]

Hey, this is Anya, just stepping in for Julien. Good morning. So, I wanted to ask, on Slide 15, you mentioned opportunities to potentially extend the life of some of your assets. Could you maybe talk a little bit about that? What -- which ones comes to mind in particular and how do you see recontracting economics?

[Santiago Seage, CEO]

Hi, Anya good morning. So, on Page 15 of our deck as you mentioned, we have a chart that we try to update every quarter showing the PPA life of each of the of the assets the contracted life showing the life of debt when the non-recourse project debt gets amortized. And beyond that PPA life, we do believe that many of our assets will be able to enjoy, let's say, second lives.

In some cases, that might be re-contracting with long PPAs or with shorter PPAs. And in some other cases, it might be merchant lives. At this point in time, it's difficult to be very specific regarding what kind of economics or what type of second life we expect for the assets. As you can see on that page, in the current portfolio, the first assets to find themselves in this situation.

So will be two smaller assets, where the contracted life finishes in 2032. So, I think it's difficult at this point in time to be very specific regarding economics, obviously, many cases, prices would be lower than what we enjoy today. And no secret about that. But it's difficult to have a crystal ball and be very specific regarding 2032 and beyond.

[Anya Shelekhin, Bank of America Merrill Lynch]

Okay, great. Thanks. And then second question, just wanted to ask on the status of the [ph] PCS investment on, should we at this point, just assume that this is not included or I guess a better way to ask that is, if you were to announced that that one that acquisition is not going through, is there risk to your long-term growth guidance? Or do you feel like you could effectively mitigate that at this point?

[Santiago Seage, CEO]

So, that project is not included in our projections, and therefore, we did not do it. It should not affect we believe our projections.

[Anya Shelekhin, Bank of America Merrill Lynch]

Okay. All right. Thank you.

[Santiago Seage, CEO]

Thank you.

[Operator]

Okay, our next question from the line of David Quezada from Raymond James. Your line is now open.

[David Quezada, Raymond James]

Thanks, morning, everyone. My first question just on the pace of investments we've seen so far this year, obviously, you've been quite successful and exceeded your $300 million target. Would you say that the outlook for investments for you has improved significantly since you came out with that target? And maybe as just an add on, could you just discuss your preference today in terms of -- relative preference in terms of geographies that you operate in today?

[Santiago Seage, CEO]

Great, thank you, David. Good morning. And yes, obviously, at this point in time, four or five months into the year, we have been able to sign and close a number of transactions. We remain optimistic regarding opportunities to invest in the geographies and sectors where we operate. In terms of preference, similar things to what we own today.

So, we are spending our time looking at opportunities in the geographies you are familiar with, and the sectors you are familiar with. And in terms of preference, probably what we're looking at is not different from what we own today. Obviously, we will be doing more investments if we find opportunities with the right metrics that we believe make sense. And if we don't find them, we will not like we have always done.

[David Quezada, Raymond James]

Okay, great. That's good color. Thank you. And then just a question here on the wind, or sorry, the portfolio of assets in the U.S. that you acquired a 49% stake in recently, just curious when you look to repower or re-contract those assets, will the majority owner be the one that takes the lead on that or will you also play a role there? And how close do you think you'll get to the end of that the remaining contract term before you look to re-contract one of those assets or repower?

[Santiago Seage, CEO]

So, I think it's too soon to be very specific as well. We haven't closed there. As you know, we have signed the agreement but it hasn't closed, it's subject to regulatory approval in both partners be in a 51-49 partnership, both partners need to be in agreement with when you look at things like the ones you are mentioning. We do believe on our side that there are significant opportunities and we will be working with our partner towards those opportunities, obviously.

[David Quezada, Raymond James]

Okay, that's great. Thank you very much. That's all I had.

[Santiago Seage, CEO]

Thank you.

[Operator]

[Operator Instructions]. Okay, no questions at the moment from the audience. Please continue.

[Santiago Seage, CEO]

Great. So, we will leave it here unless anybody else comes up with any questions. Thank you very much for joining us today and looking forward to talking with you in conferences later next week, I think, mostly. Thank you very much.

[Leire Perez, Director of IR]

Thank you.

[Operator]

Okay, that does conclude our conference for today. Thank you for participating. You may all disconnect.