Atlantica Sustainable Infrastructure PLC (AY) 2020 Q4 法說會逐字稿

Welcome to Atlantica's Full Year 2020 Financial Results Conference Call. Atlantica is a sustainable infrastructure company that owns a diverse portfolio of contracted renewable energy, power generation, electric transmission and water assets in North and South America and in certain markets in EMEA. 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 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 our latest -- 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 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 over to Mr. Seage. Please go ahead, sir.

Thank you very much. Good morning and thank you for joining us today for our 2020 conference call. I will start with a few key messages. We have closed 2020 with a very strong performance across our fleet and 5.5% growth versus the year before. In terms of growth, in 2020, we closed over $300 million in equity investments, but more importantly, for 2021, we have already agreed approximately $280 million in new equity investments, including the acquisition of 3 new renewable energy assets.

With this, we are initiating our 2021 CAFD target guidance in the range of $220 million to $240 million, and we are setting midterm CAFD per share growth target in the range of 5% to 8%. And finally, we have received in the last couple of months, top ESG ratings from 3 different rating entities. I will now turn the call over to Francisco, who will take us through financial results.

Thank you, Santiago. Good morning. Please turn to Slide #5, where I will present our key financials for full year 2020. Revenue in 2020 reached $1,013 million, stable versus the previous year. And adjusted EBITDA included unconsolidated affiliates decreased by 3.1% to $796 million. Regarding CAFD, we generated $201 million in the full year 2020, an increase of close to 6% year-over-year. In addition to our cash available for distribution, in full year 2020, we generated $216 million in one-off cash through 3 project debt refinancing's.

Please now turn to Slide #6 where you can see that in 2020, we have had a very strong cash generation. CAFD was $201 million, but the cash generated by the assets in reality was $461 million. At Atlantica, most of our project debt is amortized or -- over the life of the PPA. $461 million is, therefore, the cash generated by our portfolio of assets before project debt principal repayments. And out of that amount, we have used over $260 million to repay project debt principle.

Let's now please turn to Slide #7. Where we will review our performance by sector and geography. In North America, revenue remained stable at $331 million in 2020. The decrease in EBITDA was mainly driven by higher operating expenses at our solar assets in the region. In South America, revenue and EBITDA increased by 7% and 4%, respectively, thanks to the continued solid performance of our assets. With higher production from our wind assets and high availability level in transmission lines and also due to the contribution from recently acquired assets.

Revenue and EBITDA in the EMEA region decreased slightly. Looking below at the results by business sector, we can see similar effects. And renewable energy, revenue and EBITDA decreased due to the reasons previously mentioned. And efficient natural gas, revenue and EBITDA decreased mainly due to a onetime adjustment with no cash impact recorded in ACT in 2019. Our transmission lines continue to show very good availability levels, which, together with acquisitions, explain the increase in revenues and EBITDA. And finally, in our water sector, revenue and EBITDA increased, thanks to the contribution from our third water desalination plant that we started to consolidate in the second quarter of 2020.

Moving on to the following Slide #8. This provides an overview of the key operational metrics of our assets. Electricity produced by our renewable assets reached 3,244 gigawatt hours in 2020, a slight increase versus 2019. Looking at our availability-based contracts, once again, ACT continues to show solid performance. And finally, in transmission lines and water, the 2 other sectors where our revenue is based on availability, we continue to achieve high availability levels of around 100%.

Let's now move to Slide 9 to walk you through our cash flow for full year 2020. Our operating cash flow for 2020 reached $438 million, showing close to our 21% increase versus 2019, mostly thanks to an improvement in variations in working capital. In addition, in 2020, we paid approximately $267 million for the acquisition of the tax equity interest in Solana. From an accounting perspective, this amount is classified as financing cash flow. Financing cash flow in 2020 also including the net proceeds from the debt refinancing's and corporate debt financings, our scheduled project debt repayment of approximately $260 million, dividend payments of $192 million and $162 million in proceeds from the underwritten public offering closed in December 2020.

All in all, the net change in consolidated cash in 2020 was an increase of $295 million approximately. On the next Slide, 10, we would like to review our net debt position. We closed 2020 with net corporate debt of $659 million, similar to that of the previous year. With this, our net corporate debt to CAFD pre-corporate debt service ratio stood at 3x.

Thanks to the corporate and project debt refinancing's closed during the first 9 months of 2020, we have been able to extend our maturities. And as of today, we do not have any significant corporate debt maturity until 2025. Our average corporate debt maturity stood at approximately 5.1 years as of December 31, 2020.

In addition, we have $415 million available from our revolving credit facility, which together with our corporate cash on hand of $335 million, represents a total liquidity of more than $750 million available to finance new investments. Net project debt as of December 31, 2020, was $4,704 million. I will now turn the call back over to Santiago.

Thank you very much, Francisco. On Page 11 and 12, you're going to see that we have continued doing our homework regarding ESG. We have improved key health and safety KPIs. We have avoided 5.4 million tons of CO2, and we have continued improving and implementing best practices around corporate governance and social activities.

Additionally, you will see that we have recently received top ratings from 3 different ESG rating entities, including in February, Sustainalytics, who has rated us again for the second consecutive year as the top company globally in ESG risk rating within both the renewable power and the utilities segments, an extraordinary achievement.

CDP has given us an A minus rating among the leaders in our industry. And finally, in January, Atlantica has been included in the Global 100 more sustainable companies index by Corporate Knights, ranking 12 globally and second, within global power generation.

Moving on to talk about 2021. You can see on Page 14 that last year, we closed over $300 million in acquisitions and investments. And more importantly, on Page 15, we have already agreed investments for around $280 million for this new year. These investments include the acquisition of COSO, our renewable energy asset in California, Calgary District Heating, as that we announced a few months ago, and our first solar plant in Colombia.

We also expect to invest in other assets, including Chile PV 2, which is our second investment through our renewable energy platform locally. Regarding COSO, you can see that it's 135-megawatt facility in California. Actually, it is the third largest geothermal plant in the U.S. and provides baseload renewable energy to the California ISO. This, we believe, is extremely important.

During the last 10 years, renewable energy has been about providing cheap but intermittent power. Now the challenge is to provide renewable energy solutions that can provide baseload or close to baseload. And COSO is part of that solution, in a state, such as California, which targets, as we all know, 0 emissions and which has already or enjoys already a high penetration of intermittent solar power. Therefore, these assets, these baseload renewal energy asset has, we believe, a very high long-term value in a state that does not want emissions but needs to turn on the light 24 hours per day.

Additionally, the asset has 3 PPAs signed with 3 investment grade off-takers with an average 19 years contract life. The asset is located in Southern California, fairly close to our existing solar assets in California and Arizona. And operational maintenance is and will continue being done in-house with the existing team. Total investment is expected to be approximately $170 million, and closing is expected in the first half of this year. Talking about the other main acquisitions already agreed for 2021, in October last year, as previously announced, we reached an agreement to acquire Calgary District Heating, an asset in operation with 20 years of average weighted contracted life.

Additionally, we recently reached an agreement with Algonquin to acquire a 20-megawatt solar asset in Colombia with a 15-year PPA in place. Closing is expected to take place after the asset reaches commercial operation expected by mid-2021. Additionally, Atlantica agreed to co-invest with Algonquin in 2 additional solar plants in Colombia, currently under development.

And finally, in 2021, we have closed our second investment through the renewable energy platform we created in Chile. This new asset is a 40-megawatt solar plant with partially contracted revenues. As a result of this, we are very optimistic regarding growth prospects in 2021.

Moving on to Page 18. We can see that Atlantica has been able to grow its dividend per share significantly in the last few years. And on Page 19, with the new investments announced, we expect to continue doing so in 2021. Even though not all the investments I mentioned will obviously have a full year effect in 2021. Our targets for this year are -- in terms of EBITDA, adjusted EBITDA, including unconsolidated affiliates, to be in the range between $820 million and $860 million. And in terms of CAFD, our target is to be in the range between $220 million and $240 million.

If we talk now beyond 2021, you can see on Page 21 that we do see a significant potential in terms of growth, accretive investments in the regions and sectors where we operate. Given that pipeline of opportunities, we now target potential investments, equity investments of approximately $300 million per year, combining 3 sources. In first place, organic growth, which can be delivered through the optimization of the existing portfolio through escalation factors at many of our assets and through the expansion of some of existing assets. This applies mostly to transmission lines, but we also expect to have opportunities in the midterm to expand or repower some of our renewable energy assets.

In second place, we expect to grow by investing mostly with partners, including AAGES, in assets under development and construction. And thirdly, we expect to continue growing through third party acquisitions. In some cases, this will be smaller, let's say, proprietary opportunities. And in other cases, it will be through larger transactions like the one we have announced today.

Our target, therefore, and as I mentioned before, is to invest around $300 million every year, although in 2021, we obviously target more than that. Moving to Page 22. We can see that based on the previously mentioned opportunities; we are setting midterm CAFD growth in terms of CAFD per share growth targets in the range of 5% to 8%.

With that, we conclude today's presentation. We will now open the lines for questions. Operator, whenever you want, we are ready for Q&A.

(Operator Instructions). You have a question from the line of Julien Dumoulin-Smith of Bank of America.

Congratulations on the update. If I may, Santiago, you talk about 2021, and it sounds like you've largely identified the targets for '21 but where are you in identifying targets for '22 and '23 as you talk about, especially your organic opportunities, right, those that sit within your portfolio? How well-defined are those at this point in time, if you can add some details as to how far down the line you are on the visibility?

Sure. Thanks, Julien. Regarding 2021, as you said, we are announcing today that the $300 million target. I talked about; we are close to getting there. Obviously, for 2021, our target now is to go beyond the $300 million. And regarding visibility on 2022 and '23 opportunities, as we show in the presentation, at this point in time, we have a fairly high visibility regarding where growth is going to come from in terms of organic growth, including escalation, including some expansion opportunities, we believe we are going to be having and including some of other opportunities with partners.

Obviously, regarding acquisition from third parties, we always work with a pipeline. And today, it's too soon to be very conclusive regarding that bucket within growth. But in general, we feel reasonably optimistic, and we think that the visibility we have is probably as high as we have ever had it.

Got it. And if I can ask you to elaborate. I mean, obviously, you got these 3 buckets. When you think about where you have visibility ready, I mean, like not to try to pin you down too much, but organic growth, I mean, clearly, you've got visibility there for the next few years, you would think. The development with partners, presumably, and you can speak to that a little bit more. I mean, doesn't that already get you within the range over the next 3 years? I don't want to be too leading forward in terms of where you sit within the 5% to 8% because you've called it out. But the third-party acquisitions seem to be drive you within the range rather than getting to the range. Does that make sense? Just if you can elaborate on the first 2 buckets in terms of the line of sight and clarity to at least deliver at the low end, I suppose, is the way to say that.

Yes. So what we are doing today, Julien, is we are setting a target in terms of growth or investment of $300 million. That's our target, not $200 million to $300 million, okay? And talking about that $300 million target, you are totally right. So we obviously have more visibility regarding the first 2 buckets versus the third one. The first 2 buckets represent more or less 2/3 of the total. So we do have visibility of those 2/3. And regarding updates on those 2 buckets, my expectation, Julien will be that over the next few quarters, we are going to be able to give you more granularity regarding some of the specific investments we are going to be making there. Obviously, we are at the beginning of 2021. So today, we wanted to focus on visibility on 2021.

And in the next quarter, during the year, we expect to be able to show you some more granularity there beyond some of the opportunities like Colombia that we have already been talking about.

(Operator Instructions)

There are no more questions coming through on the line, sir.

Okay. Then thank you very much, everybody, for joining -- and joining us. And operator, we can leave it here. Thank you.

Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.