Atlantica Sustainable Infrastructure PLC (AY) Q4 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals a mixed financial performance with strong EBITDA growth in South America but declines in EMEA. The Q&A section highlights uncertainties in the Monterrey transaction and strategic review, which may concern investors. However, positive developments in electricity production and no significant asset deterioration are reassuring. The market cap indicates a small-cap stock, suggesting potential volatility. Overall, these factors balance out, leading to a neutral sentiment.
Key Financial Performance
Revenue $1,099.9 million, stable year-over-year.
Adjusted EBITDA $794.9 million, a 1.7% increase versus 2022, excluding the effect of foreign exchange and unscheduled outage at Kaxu.
Cash Available for Distribution (CAFD) $235.7 million, meeting yearly guidance.
North America Revenue $424.9 million, a 4.9% increase compared to last year, mainly due to higher production in solar assets.
North America Adjusted EBITDA Decreased by 3%, mainly due to lower production from wind assets.
South America Revenue $188.1 million, a 13% increase compared to 2022, driven by new assets entering operation and inflation in contracts.
South America EBITDA $146.7 million, a 15.9% increase, attributed to new operational assets and inflation.
EMEA Revenue $328.9 million, an 8.2% decrease, primarily due to an unscheduled outage at Kaxu.
EMEA Adjusted EBITDA $26.6 million, an 8.8% decrease, also due to the unscheduled outage at Kaxu.
Electricity Production 5,458 gigawatt hours, a 2.6% increase versus 2022, mainly due to increased production in solar assets.
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Operating Highlights
New Solar Projects: Several new solar assets have reached commercial operation in 2023, including Coso 1 and Coso 2, which are under construction.
Overnight Project: A new 150-megawatt solar PV project in California with a 15-year busbar PPA.
Market Expansion in North America: North America continues to be the main target geography for new investments, with a focus on solar and storage projects.
Renewal Pipeline Growth: The renewal pipeline has increased by 12% compared to last year.
Operational Efficiency: Electricity produced by renewable assets reached 5,458 GWh in 2023, a 2.6% increase from 2022.
High Availability Levels: Efficient natural gas and heat segments achieved very high availability levels during 2023.
Investment Strategy: Committed between $175 million and $220 million in new investments for 2024, primarily in solar and storage projects.
Divestment Strategy: In progress of divesting a 30% stake in Monterrey as part of capital recycling opportunities.
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Risk or Challenges
Regulatory Issues: Volatility and electricity market prices in Spain could affect distributions in 2024, with deviations against regulatory prices to be compensated starting in 2026.
Operational Challenges: Scheduled outage at Kaxu will affect distributions in 2024, although insurance is expected to cover the business interruption after a 60-day deductible.
Economic Factors: Uncertainty regarding the level of collections at ACT could bring volatility to the 2024 cash available for distribution (CAFD), potentially having either a positive or negative effect.
Competitive Pressures: The current M&A market is described as constructive, indicating potential competitive pressures in securing accretive transactions.
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Guidance & Outlook
Investment Target: Atlantica targets around $300 million of investments every year. As of early March, they have already committed or earmarked between $175 million and $220 million in new investments, primarily in solar and storage projects in the U.S.
Growth Strategy: The company continues to evolve its growth strategy through a combination of developing its own pipeline and acquiring assets with reasonable returns.
Renewal Pipeline: The renewal pipeline has increased by 12% compared to the previous year.
Project Development: Three new projects are fully contracted and under construction in the Southwest U.S., leveraging the IRA.
Divestment: Atlantica is in the process of divesting its 30% stake in Monterrey as part of capital recycling opportunities.
2024 Adjusted EBITDA Guidance: Expected in the range of $800 million to $850 million.
2024 Cash Available for Distribution (CAFD) Guidance: Expected in the range of $220 million to $270 million.
Factors Affecting CAFD: Potential sale of Monterrey assets, scheduled outage at Kaxu, volatility in electricity market prices in Spain, and uncertainty regarding collections at ACT.
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Shareholder Return Plan
Shareholder Return Plan: Atlantica has earmarked between $175 million and $220 million for new investments in 2024, primarily in solar and storage projects in the U.S., which represents 60%-70% of their $300 million investment target for the year.
Divestment: The company is in the process of divesting its 30% stake in Monterrey, which is considered a good example of capital recycling opportunities.
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Key Q&A
Q:Can you just -- can you give some color on what the proportionate EBITDA contribution was in 2023?
A: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 the EBITDA.
Q:Can you describe how -- or how you came up with $30 million relative to the $45 million to $52 million in proceeds?
A:Nelson, I propose that you follow up on this detailed question with IR.
Q:Are there any particularly, like onerous condition precedents or anything?
A:We do expect to close. There is nothing abnormal or that is not customary in the conditions to close.
Q:Would you be looking at, I guess, retaining 100% of that project? Or would you look to get a partner?
A:At this point in time, our expectation is to retain 100% of the equity.
Q:What's the timing for that project? When does the PPA kick in? Or when does the project need to be completed?
A:The way we have signed the PPA is fairly flexible. So there's a fairly long window in which we can start operations.
Q:Does access to capital at all constrain your willingness to push towards the $300 million in the short term?
A:We expect to fund those through a combination of several levers that we have.
Q:You think all those tools or those different options would get you there as it stands today?
A:At this particular stage, we are not going to play with equity.
Q:Are you able to get that on projects above where your stock yields versus maybe buying back some shares right now?
A:Our hurdle rates obviously are higher.
Q:Is there any option to resculpt some of the debt in Spain over the next year or two?
A:We continue to evaluate actively some of the refinancing opportunities.
Q:Is this strategic review basically a search for growth opportunity?
A:On the strategic review, we cannot make any comments.
Q:Is it fair to assume that this contribution is basically like a debt paydown with the use of proceeds?
A:It's included in the guidance.
Q:Are you guys seeing any deterioration in the EBITDA, or more importantly, CAFD of existing assets like as they age?
A:Overall, my answer would be no.
Q:Does that include the gain on sale piece of the Monterrey sale that you're contemplating?
A:It's in the CAFD.
Q:How do we bridge the gap then between the $30 million you're showing for the CAFD walk versus the $45 million to $52 million proceeds?
A:Let's walk through that to fine-tune the numbers.
Q:What types of assets are you seeing most attractive opportunities for you here potentially?
A:We spent time looking at assets in operation, mature with a lower risk profile.
Q:Is it fair to assume, you wouldn't look at M&A in any new jurisdictions at this point?
A:No. I wouldn't say that.
Q:Can you give us an update on where you see the supply chain heading?
A:Overall, for us, this is not and has not been, in the last few quarters a problem.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the strategic review, stating they cannot make any comments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America geography
Bank Canada
CAFD effect
Chief
Coso
IR
Officer
acquisition asset
area
asset opportunity
battery
capital allocation
construction acquisition
contribution
deployment
development construction
equipment
financing
gain
guide
hurdle rate
interruption day
majority storage
midterm opportunity
outage Kaxu
panel
phase
portion
proceeds CAFD
proceeds sale
profile
progress
project storage
range
regard
stock
supply chain
update supply
use proceeds
yield share
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The earnings call reveals a mixed financial performance with strong EBITDA growth in South America but declines in EMEA. The Q&A section highlights uncertainties in the Monterrey transaction and strategic review, which may concern investors. However, positive developments in electricity production and no significant asset deterioration are reassuring. The market cap indicates a small-cap stock, suggesting potential volatility. Overall, these factors balance out, leading to a neutral sentiment.
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