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Atlantica Yield plc (NASDAQ:AY)
Q1 2019 Earnings Call
May. 10, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Atlantica's First Quarter 2019 Financial Results Conference Call. Atlantica is a sustainable total return infrastructure Company that owns a diversified portfolio of contracted renewable energy, power generation, electric transmission and water assets in North and South America and certain markets in EMEA. Just a reminder that this call is being webcast live on the Internet and replay of this call will be available at the Atlantica Yield corporate website.

Atlantica will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risk and uncertainties. Actual results could differ materially from our forward-looking statements. If any of our key assumptions are incorrect, are because of other factors discussed in today's earnings presentation or the comments made during this conference call in the Risk Factors sections of the accompanying presentation on our latest reports and filings with the Securities and Exchange Commissions of -- each of which can be found on our website. Atlantica Yield does not undertake any duty to update any forward-looking statements.

Joining us for today's conference call is Atlantica's CEO, Santiago Seage and CFO, Francisco Martinez-Davis. As usual at the end of the conference call, we will open the line for the Q&A session.

I will now pass you over to Mr. Seage. Please go ahead, sir.

Santiago Seage -- Chief Executive Officer and Director

Good morning, and thank you for joining our first quarter 2019 conference call. If we start on Page 3, with the key messages, in today's call we're going to spend some time reviewing what we believe is a very strong value proposition, focused on sustainable infrastructure. Additionally, we will be sharing with you the significant progress we have made in the first quarter of 2019 toward our financial optimization that creates value.

In first place, we have successfully refinanced our existing 2019 notes, but most importantly, we have refinanced this piece of corporate debt with improved terms and with flexibility. In second place, we now have several levers in place that should allow us to achieve our CAFD guidance, even if distributions from Mojave were delayed. Additionally, we have signed an enhanced collaboration agreement with our main shareholder and partner, Algonquin, aimed at accelerating Atlantica's growth in the U.S. I will provide further details in a few minutes.

Also in relation with our accretive growth history, we are pleased to announce today our first investment in electric battery storage. We've acquired a 30% stake in a 140 megawatt gas-fired facility with electric battery storage, -- what we consider are attractive and accretive numbers. Regarding the operating performance of our asset portfolio, it has continued to be a strong quarter. We have achieved growth in terms of revenue, further adjusted EBITDA including unconsolidated affiliates and CAFD. And finally, our Board of Directors has declared a quarterly dividend of $0.39 per share, representing 22% increase versus the same quarter last year, and a 5% increase versus the previous quarter. Proving, that the Board and Management remains fully committed to dividend growth.

If we turn to the next page, we can see on the Slide 5, that our focus is clearly on sustainable infrastructure, specifically around renewable energy and water. There is no question that renewable energy is a high growth and attractive market, but it is also very clear, that the transition toward a sustainable power mix, requires the support of natural gas, power storage and transmission lines. These are the trends and these are our markets. Renewable energy and the three technologies to make it happen. In fact, wind and solar energy are a reality and offered to date, lower cost than conventional power in many regions around the world, and in many states in the U.S.

And I respect it to be present in most markets, the majority of new investments in the power sector. Around 50% of the world's power generation by 2050, is expected to come from renewable sources, with some countries and regions at a much higher percentage than that. This indicates that renewable energy is mainstream today. But at this point in time, power storage and natural gas are and will continue to be in key enablers in the power sector to support wind and solar going forward. In addition, water is going to be the next frontier in a transition toward a more sustainable world. New sources of water are needed worldwide, and water desalination and water transportation infrastructure should help make that possible. In summary, we believe that we are positioned at the center of the sustainable power and water revolutions.

In the next slide, I will try to summarize why Atlantica is well positioned in that market and we'll be able to capitalize on the growing transition toward sustainability.

First of all, on Page 6, we have expensive experience in our industry. And we have proven our ability to grow accretively within that industry. With more than $330 million in equity investments announced in the last six months, more or less. In second place, our footprint and diversification, we believe is unique and position us very well in both wind, solar and some of our other core sectors, with a strong focus in North America and the Americas, in general.

Third, Atlantica's corporate structure has always been designed and continues to be designed to maximize value creation, with low general expenses -- favorable tax structure, no IDRs and the majority of our Board of Directors being independent. And finally, we have a strong strategic long-term partner Algonquin that supports our sustainability strategy and provides access to new growth sources and improved our access to capital, as we have demonstrated.

On the next Page 7, we can see why Atlantica is a sustainable business with a very attractive cash generation profile. In the first place our portfolio of assets is underpinned by a long-term high quality set of contracts. All of our assets have contracted or regulated revenue with a weighted average remaining contract life of around 18 years, with fixed or hedged interest rates and virtually no commodity exposure. In fact, as I mentioned, we have a very strong long-term cash flow visibility, with organic growth opportunities and cash generation tails in most of our assets, once the non-recourse debt is paid for, before the expiration of our contracts.

And finally, Atlantica is a diversified company both by geography and by sector, with a clear focus in the Americas and renewable energy. But most importantly, we have very low dependence on natural resources, as many of you know, large percentage of our revenue is based on availability, and not only on power generation. We therefore depend less than others on the wind or the sun shining. In fact more than 60% of our CAFD will come from non-resource dependent payments or what we call availability based payments.

If we move to Slide 8, our high quality portfolio, our efficient corporate structure, our prudent financing policy combined with our ability to grow accretively, make Atlantica we believe, a very attractive total return opportunity, with our current dividend yield of more than 7% and an attractive midterm dividend per share growth target. This we believe places us among the most appealing companies in the industry.

Turning to Page number 9, another important aspect of Atlantica is our strong commitment to ESG and sustainability. In fact a few months ago, we were rated by Sustainalytics as the top company within renewables. The second within the broader utilities sector in the top 3% of the global ratings universe.

Atlantica has been of the core of the renewable energy transformation and we intend to continue playing that role. We are also a member of the United Nations Global Compact, and our renewable energy assets have helped to avoid around 5 million tons of CO2 emissions since they are in operation. It is therefore very clear that our focus is clean energy, but it is also important to mention that we manage our Company with a very strong focus on health and safety and on social and corporate responsibility.

Now if you move to Slide number 10, I'll talk about the significant progress achieved in our strategic priorities to create value. In first place, we are committed to achieving our CAFD guidance irrespective of PG&E's exposure. Thanks to several initiatives that should compensate the Mojave distribution, in case that it was delayed due to the situation of the offtaker. Additionally, we have refinanced the 2019 notes as I mentioned before, with improved terms and flexibility.

Furthermore more, we intend to explore options to divest some assets and reinvest accretively to show value accretion. And finally, although non-company related we believe that the results of the elections in Spain are favorable with regards to the upcoming determination of the rate of return for renewables, starting in 2020. Regarding our accretive growth strategy, we are happy to announce today a new investment, I mentioned before, at attractive returns, and also we are happy to announce that the proposal led by our partner, AAGES achieved the first position in a bidding process for a new transmission line in Uruguay. That asset includes two transmission lines, with a total of around 50 miles and a substation, contracted under 30 and 20-year agreements, in U.S. dollar and we are going to be owning a 25% of that project and we will have or we have a ROFO right over the rest of the investment. So good news, our ROFO partner, AAGES winning a new asset that will flow to us.

Additionally, in order to accelerate our growth in the U.S., we have signed an enhanced collaboration agreement with Algonquin. And finally, the strategic review committee that was created a few months ago is working on the analysis of different strategical alternatives to optimize Atlantica's value. As you can see, we have started 2019 with a significant number of initiatives, that should translate into long-term value creation for our shareholders.

Now if you move to Slide 11, Francisco will go over the announcement we made earlier this week, about the successful refinancing of our corporate bonds with improved terms.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you, Santiago. We are very satisfied with the new financing signs, since it really bears significant improvement for the Company. Atlantica has entered into a senior unsecured note facility with a group of funds for a total amount of the euro equivalent of $300 million. We will fully hedged the notes with an interest rate swap of not less than three years, resulting in an interest rate significantly lower than the one we're paying. The tenor notes is six years and we expect them to be issued in the second quarter of 2019. The proceeds will be used to redeem in full Atlantica's existing 7% senior notes maturing on November 15, 2019 and for other general corporate purposes. We will achieve several improvements with this corporate finance refinancing.

First of all, the new financing has a longer tenor, compared with the existing notes. Second, and most important, we will achieve a $4 million cost improvement per annum expected starting in the year 2020. Third, we will obtain a natural hedge for our CAFD generated in euro, given that the facility is denominated in euro. And finally, but also very important, the new facility allows us to capitalize interest on the notes issued for a period, up to two years at Atlantica's discretion. This will equal to approximately $14 million per year. And if we choose to defer the interest payment, it was helped to partially offset the potential CAFD impact, in case the Mojave distribution was delayed. This is a significant aspect since there was no additional cost, it will allow us to partially bridge our PG&E exposure needed for two years.

But let me go on to further details on that. Please turn to the next slide. I would like to discuss why we are saying today that we could currently expect to achieve our CAFD guidance in 2019, even in their hypothetical case, the Mojave distribution to us were delayed, as a result of the PG&E situation. As we have already communicated in the previous earnings call, we only have exposure at PG&E in one of our assets, Mojave. And our 2019 CAFD guidance includes $30 million to $35 million distribution from Mojave, which is expected in the fourth quarter of 2019.

PG&E has continued paying invoice, according to the PPA and the plant is operating normally. For us it is business as usual. But even though PG&E continues to honor the contracts, and we do not expect distribution for the assets until the fourth quarter. We don't have certainty that the 2019 distribution for Mojave will not get delayed. For that reason, we have worked to ensure that our CAFD guidance is achieved, even if Mojave's distribution was delayed. In the first place, as I have already explained, we have the option to capitalize approximately $14 million per year of interest payments in the new note issuance for a period of two years, in order to partially bridge our $30 million to 35 million PG&E exposure for two years, if needed and at no additional cost.

In second place, we expect to release restricted cash accounts in certain assets that will compensate potential delays in Mojave, if any. In summary, with these two levers, we believe that we will be able to compensate 2019 and 2020 Mojave distributions, in case they were delayed due to -- due to the current situation of PG&E. We therefore remain committed to CAFD and dividend growths. And now in relation to our growth strategy, I will turn the call back to Santiago, who will provide further details on the asset investment that we announced earlier today.

Santiago Seage -- Chief Executive Officer and Director

Thank you, Francisco. If we turn to Page 13, we have signed an agreement to acquire a 30% stake in Monterrey, a 140-megawatt gas-fired facility in operation in Mexico, which includes 12 megawatt of electric battery storage. The investment represents around $42 million in equity value, at an estimated nine times EV/EBITDA. Additionally, it should be a very accretive transaction. Monterrey has been in operation since 2018 and represents our first investment in electric batteries.We have U.S. dollar denominated 20-year PPA with two large international corporations.

The PPA includes price escalation factors and has no commodity risk. Closing at this point in time is subject to customary condition specific. Additionally, we have signed a ROFO agreement with the seller for the remaining stake in the asset. Additionally, on moving to Page number 14, we have signed a new enhanced partnership agreement with Algonquin, that should allow us to accelerate our growth in the U.S. The new agreement has three main pillars. In first place, Atlantica has an option to acquire stakes or make investments in two Algonquin assets in the U.S. for a total equity value of up to $100 million in 2019, subject to the parties acting reasonably, in good pace and agreeing terms that can be mutually beneficial.

The second pillar Atlantica and Algonquin have agreed to analyze jointly. During the next six months, Algonquin's contracted assets in the U.S. and Canada with the final objective of identifying assets where a drop down could add value for both parties according to each company's key metrics. And finally, in third place, the existing shareholders agreement has been modified to allow Algonquin to increase its shareholding in Atlantica, up to a 48.5%, without any change in corporate governance.

Algonquin's voting rights and the rights to appoint directors will be limited to a 41.5% through the ownership they have today and the additional 7% will be voted, replicating non-Algonquin shareholders vote. Therefore maintaining our current corporate governance. Part of this investment in Atlantica shares will be done by Algonquin by subscribing around $30 million in new shares to be issued by Atlantica at a price of $21.67 per share. That represents a 6% premium with respect to yesterday's closing price. We believe that this premium versus the market price highlights the confidence of our main shareholder and partner in Atlantica.

We can say that this is an enhanced partnership that should help to accelerate our growth in the U.S. and to create long-term value for our shareholders. And now to finish their strategic update on Page 15, you have an updated overview of our growth pipeline. This is a chart we shared already in late 2018, and as you can see here, we have a significant pipeline that should allow us to invest equity at least between $200 million and $300 million per year, through the different buckets and partnerships we have with Algonquin, with AAGES, with third-parties and through acquisitions. We have demonstrated, we believe that we can grow accretively and we are confident that this will continue in the following years. In fact, our pipeline at this point in time, looks very helpful.

If we move to Page 17, we are going to be looking at our quarterly results. And as you can see, revenues in the first quarter of 2019 reached $222 million, a 2% decrease versus the first quarter of 2018, mainly due to currency translation effects. On a constant currency basis, revenues increased by 4%. Further adjusted EBITDA, including unconsolidated affiliates increased by 1%, up $281 million or 7% on a constant currency basis. And CAFD, in the first quarter increased by 5% year-on-year to $45 million in line with our expectations for the year.

Once again, the solid operating performance of Atlantica in the first quarter demonstrates the advantage of having a diversified portfolio, where a significant percentage of our revenue is based on availability and not only on generation. If we move to the next page, we can see that overall, our portfolio of assets delivered a solid performance in the first quarter, both by segment and by region. North America with a 2% growth in terms of revenues and a decrease in EBITDA mainly due to $8 million one-off recorded in the first quarter of 2018.

In South America, both revenues and EBITDA increased, thanks to the solid performance of the assets and the contribution of new assets acquired last quarter. In EMEA, the revenue decrease was mainly due to the currency translation effect, in fact our Kaxu solar asset delivered a very strong operating performance, with a record quarter and a capacity factor over 48%. In Spain, generation also increased significantly due to higher solar regulation, in the same quarter last year, and a strong operating performance. If we look at the results by business sector, the conclusion is very similar, renewable energy, revenues and EBITDA decreased by 6%, but they increased by 2% on a constant currency basis.

Efficient natural gas very solid performance, transmission lines very strong performance, water showing the strong EBITDA levels of most quarters.

If we now move to Page 19, we can see that, electricity produced by our renewable assets reached over 580 gigawatt hours, a 15% increase compared with Q1. Overall, a strong performance in the first quarter. If we look at our availability-based contracts, ACT, as mentioned before, very solid performance. This quarter we had the scheduled major overhaul in one of the two turbines, everything happened as expected and we are now in the second quarter performing the same task in the second turbine. This explains the lower availability and production levels, nevertheless as the overhaul was as scheduled, this have no impact on revenues. Finally, regarding transmission lines and water, again, very high availabilities.

I will now turn the call over to Francisco who will take us through the financial figures.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you, Santiago. Let's move on to slide 20, to walk you through our cash flow for the first quarter of 2019. Our operating cash flow reached $96.9 million compared to $130.5 million in the first quarter of 2018, which included approximately $17 million corresponding to one-off payments received in Solana, with no corresponding amount in the first quarter of 2019, which explains most of the decrease.

Additionally, we had a property tax payment in the quarter, corresponding to previous years. Net cash used in investment activities was $22.3 million and corresponding mainly to the investments and new assets. Net cash used in financing activities in the first quarter of 2019, amounted to $44.5 million and corresponding principally the project debt scheduled repayments. All in all, the net change in consolidated cash for the first quarter of 2019 was an increase of $30 million.

On the next Slide number 21, we would like to review our net debt position. Our consolidated net debt as of March 31, 2019 is similar to that at the close of 2018. We closed the first quarter with net corporate debt of $589.7 million. With this our net corporate debt to CAFD pre-corporate debt service ratio stood at 2.5 times, the lower internal target of three times.

On the other hand, net project debt as of March 31, 2019 was $4,530 million, $37 million lower than at the closing of 2018. Then finally on Slide 22, I would like to review how we are delivering on our commitment to grow dividends. Our Board of Directors has approved a quarterly dividend of $0.39 per share for the first quarter of 2019 or a $1.56 annualized. This represents an increase of 22% compared with the first quarter of 2018 and an increase of 5% compared with the last quarterly distribution. This shows our continued confidence in the business and our prospects.

Thank you for your attention, and now we will open the line for questions. Operator, we're ready for Q&A at this stage.

Questions and Answers:

Operator

(Operator Instructions) And we do have questions coming through. The first question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open. Please go ahead.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey, good morning team.

Santiago Seage -- Chief Executive Officer and Director

Good morning, Julien.

Francisco Martinez-Davis -- Chief Financial Officer

Can you hear me?

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Excellent. Alright. Just a few different questions here, first with respect to the $30 million from Algonquin. Can you elaborate, what's the thought process on the timing and reason for the issuance here. Just want to understand perhaps the broader thought process around raising capital for drop-downs given the current valuation. And then maybe perhaps very much related, what is the current status of strategic review under way? And what is the potential paths from here, particularly in light of the latest equity raise?

Santiago Seage -- Chief Executive Officer and Director

So the reasoning for the $30 million equity raise are the opportunities that as we explained today, and as you probably saw. The investment opportunities that we are going to be analyzing, working on them closing with them. So this is an agreement where we are going to be able to make investments in drop downs coming from them, and smaller part of those investments are going to be financed with this new capital, and the remainder will be financed with the other resources that we have available.

In terms of the strategic review committee, as I mentioned, the committee continues doing its work and analyzing a number of options going forward. I will not be able to be obviously specific regarding what the committee is doing. But as you can imagine, we have been spending a lot of time on some of the shorter-term initiatives that we announced today and on analyzing longer term potential initiatives.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Why raise the cash now for Algonquin, just understand it relative to the cash on hand and leverage capacity. Just to understand that piece, and then, secondly, to come back to the wider 7% increase in Algonquin. Can you comment a little bit more about the timeline here? I mean, is the 7% designed to be fully in equity raise at the AY level or is this more about a secondary market transaction potentially?

Santiago Seage -- Chief Executive Officer and Director

So starting with your second question, what we have agreed with Algonquin is that, they can increase their ownership by a 7%. How and when, is up to them. In the context of, let's say, the enhanced collaboration agreement, what we're doing here is enhancing our partnership with them through several pieces, one of those pieces would be a higher participation in us, as I mentioned before, without any changes in corporate governance. And this if you want is a package where both partners are recognizing that we have been working very well, in the past, but we can do more. And doing more is about, us being able to invest in some of their assets and then increasing the stake, they are helping us, because they believe that we can create value for them obviously.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Do you mind elaborating then a little bit more on just the liquidity position then? As it stands today, and the need for the cash raise at present? And liquidity, as well as leverage capacity to that you've talked about against target?

Santiago Seage -- Chief Executive Officer and Director

So, as you know, and as I mentioned before, our pipeline, we showed it in today's presentation, we have a very significant pipeline and we are working on a significant number of very attractive accretive opportunities. Today, we have announced an acquisition, we have announced a new line that has been recently won, where we are going to be investing. So, in general what we see is a situation, where we have significant opportunities for our growth. And we recognize that we have an important financing capacity, but as part of these agreement with Algonquin, we decided that it was good to do a small capital increase in order to reinvest it, in some of the assets that we are going to be acquiring for them -- from them.

The way we would we view this Julien is number one, lots of growth opportunities with good numbers. And as you have seen in the past, the investment we have been making -- have been made a very attractive, with very attractive numbers and that will continue to be the case. So the good news is, we see a very strong set of opportunities. And as part of the overall agreement with Algonquin, one of the pieces were these, let's call it a smaller capital increase at the premium versus the market price showing the confidence that Algonquin has in the business, while being able to raise some funds that we will be investing in the very short-term in some of those investments.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Got it. One last thing if I can -- just with respect to the issuance, you call it small, issuing at a discount to NAV has perhaps unusual among your peers. How do you think about using external equity on a go-forward basis? You've got the 7% arrangement, is it your expectation today that you would indeed be pursuing external capital? Or is this really truly one-off for whatever reason tied to show -- demonstrating you can raise external capital? I just want to make sure I understand sort of the messaging here.

Santiago Seage -- Chief Executive Officer and Director

So the messaging, if you want is, we are doing a small capital raise in the context I described and you summarized and the expectation is not to be requiring, needing or making capital increase. The 7% agreement, the only component of that 7% agreement of new shares. At this point in time, the only one we expect is the one we are doing. So we don't know what will Algonquin decide. But in terms of new shares, this is the only component in terms of new shares.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

I leave it there. Thank you.

Santiago Seage -- Chief Executive Officer and Director

Thank you, Julien.

Operator

Thank you. The next question comes from the line of Abe Azar from Deutsche Bank. Your line is open. Please go ahead.

Abe Azar -- Deutsche Bank -- Analyst

Thank you. Good morning, congratulations.

Santiago Seage -- Chief Executive Officer and Director

Thank you.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you.

Abe Azar -- Deutsche Bank -- Analyst

On the $100 million of investment into the Algonquin assets. Is this an option you have? Is this a contract that you committed to? And then maybe you could talk about the return expectation on those?

Santiago Seage -- Chief Executive Officer and Director

So what we have here is an initial agreement regarding two a specific assets. The terms, need to be negotiated by both parties. So, we are going to be spending the next weeks working on both, to a specific situations and we believe we are going to be able to find reasonable terms for both parties, but we need to go through that exercise.

Abe Azar -- Deutsche Bank -- Analyst

Okay. And this is in addition to the one in Illinois that you did earlier this year, right?

Santiago Seage -- Chief Executive Officer and Director

It is. It is in addition to the one we announced, the wind assets we announced in Illinois. And on top of that, as I mentioned during the presentation, additionally to this, to a specific assets, let's say by name, we have agreed to review jointly and analyze other options for drop-downs, because obviously Algonquins and our perspective here is that, given the fact that our key metrics are very different. There should be opportunities to create value to certain drop-downs. And situations where -- given the fact that, let's say the metrics they are focused on and the metrics we are focused on are different. We believe that there will be opportunities for accretive drop-downs for us.

Abe Azar -- Deutsche Bank -- Analyst

Okay. And then when you look out, over the pipeline the next few years. It looks like you have line-of-sight on a good bit of new growth capital. Do you anticipate funding that with issuance to Algonquin? Or is that, you have other sources of funding or is that still TBD?

Santiago Seage -- Chief Executive Officer and Director

So, I think in general, these two TBD, we do have significant, let's say capacity at this point in time. Obviously, it depends on how quickly opportunities materialize. And most of -- let's say financing should be happening with some of the means we have today, the fact that we have refinanced our bonds and we refinanced earlier this year or later last year the RCF helps as well. The good thing is we have a shareholder who can complement, if in the future we need it. For example, this $30 million, we have been able to do it at a premium to the market, because we have a sponsor and shareholder. It's a very small amount, obviously, but if one day, we needed a small amount. We can see if we can have a original agreement with our shareholder or we could look at the markets if needed.

Abe Azar -- Deutsche Bank -- Analyst

All right. Do you anticipate Algonquin will be in the market purchasing shares to get up to that 48% or close to it?

Santiago Seage -- Chief Executive Officer and Director

I mean again, this is up to them. So you should ask this question to them. We have given them permission if you want, now they will do whatever they believe is right for them.

Abe Azar -- Deutsche Bank -- Analyst

Okay, got it. That's all I had today. Great update.

Santiago Seage -- Chief Executive Officer and Director

Thanks Abe.

Operator

Thank you. Ladies and gentlemen, the next question comes from the line of Praful Mehta from Citigroup. Your line is open. Please go ahead.

Praful Mehta -- Citigroup -- Analyst

Thanks so much. And sorry, I'm going to come back to the equity raise, just to clarify. And I guess the setup, right? You're saying you're doing a strategic review, stock is undervalued. You also said, you have debt capacity. So I'm trying to figure out, is the equity raise driven by Algonquin's need to increase their ownership? So that they're comfortable with the drops. I'm just, again, I'm unable to reconcile these points. So that's why I'm trying to understand why go to Algonquin when you know that the stock is undervalued, and you're publicly talking about that. So anymore color would be helpful.

Santiago Seage -- Chief Executive Officer and Director

Sure. So, what we are trying, what we have done, we believe is a very good deal in terms of a very good agreement with Algonquin, that we believe is very positive for Atlantica, meaning that we will have -- thanks to these agreement access to assets in the U.S. and we will be able to make investments in the U.S. in reasonable terms, in value-creating terms. And as part of that agreement, what we are doing is, we are raising a small amount of capital, that will finance part of those investments. Obviously, given the fact that it will be a small part of the financing, of the investments. The investments are -- the accretion is going to be there and the value creation is going to be there. So it's only a component of our larger agreement. Would we be doing a significant capital raise? No. We are doing a small capital raise at the premium to the market, in the context of what we believe is an attractive partnership agreement with Algonquin.

Praful Mehta -- Citigroup -- Analyst

Got it. Thank you. I guess moving to Slide 13, where you have the asset acquisition, just wanted to understand the investment $42 million and the EBITDA multiple looks attractive from a CAFD perspective versus the EBITDA. Is there any maintenance CapEx or anything else we should be thinking about in terms of what CAFD, this asset generates?

Santiago Seage -- Chief Executive Officer and Director

No. So there is nothing extraordinary there in terms of CAFD, in terms of IRR, the numbers are very attractive. So there is no, there is nothing going on in CapEx or anything anywhere else. The numbers for the acquisition, we believe are good.

Praful Mehta -- Citigroup -- Analyst

Okay, great. Thanks. And then on Slide 12, this is for the PG&E situation, just wanted to understand your kind of thinking about the situation and you're solving for really a delay, it sounds like. In any situation, you're saying, hey we have the ability and the flexibility to wait till the PG&E situation is sorted out. In case, it isn't sorted out, and in that remote instance that PG&E does have to reject PPAs. Is that creating some pressure on the system, because now you have drawn down $14 million more. And effectively, you're going to have to pay that back, at least the interest on that back, incrementally. So does that put more pressure if there is a rejection or how do you think about that scenario?

Santiago Seage -- Chief Executive Officer and Director

So in first place, what we believe, and obviously each one can have a different a point of view here. But what we believe is that, the likelihood of that happening is very low, based on our knowledge of the situation. And in this scenario where we could have delays, as Francisco explained, we cannot, obviously guarantee that we are going to be receiving distribution from Mojave when we expect them. So the good news is, if there were delays, we are going to be able to compensate for those delays. And for the next, for 2019 and 2020 we believe that we have the tools in place to be able to compensate for that, without any problem.

Now if your scenario, which we believe is very unlikely, ended up happening, the amounts we are talking about are very limited. So we don't believe we are putting any extra pressure on the system as you describe it. We would have a problem, obviously because Mojave, last year was up 13% of our numbers, if you want. But -- we would not be putting more pressure by doing this. I think that what we are doing today, is telling you that we have found over the last few months, a way, to very prudently, navigates through potential delays, without paying significant costs to anybody here. So the way we see, it is as a very positive step to be able to maintain our CAFDs, on our dividend payout ratios over the next couple of years.

Praful Mehta -- Citigroup -- Analyst

Very helpful. Thank you so much, guys.

Santiago Seage -- Chief Executive Officer and Director

Thank you.

Operator

Thank you. The next question comes from the line of Bryan Fast from Raymond James. Your line is open. Please go ahead.

Bryan Fast -- Raymond James -- Analyst

Yes, thanks for taking my call here. Just regarding the Monterrey gas assets. Could you discuss what the deciding factor will be relating to the additional 70% stake?

Santiago Seage -- Chief Executive Officer and Director

Sorry. So regarding Monterrey, what we have is a ROFO agreement, and like in any ROFO agreement, obviously will depend on when the partner offer us the stake and the conditions we can negotiate. In principle we are very interested, as of today. But whenever that asset is offered in -- couple of years from now or whenever that happens, we will need to look at the specific conditions. We believe the asset is very attractive for a number of reasons, but usually like any other investment, it will depend on conditions.

Bryan Fast -- Raymond James -- Analyst

Okay, thanks. And then just regarding the Uruguay transmission line asset, any color on the bidding for this project? Did you find it very competitive? And then maybe what are your thoughts on potential returns there?

Santiago Seage -- Chief Executive Officer and Director

So I think it's very good news, but AAGES has this new asset. And like every process, obviously, there was competition. Uruguay is a market, we know very well, as you know it's an asset in dollars. So from our point of view, we find this very attractive, and therefore we are very happy for ages and we are very happy for ourselves. And as I mentioned before, we have a smaller stake at this point in time and hoping for the line to be built, so that we can exercise our ROFO in the future.

Bryan Fast -- Raymond James -- Analyst

Okay. Thanks. That's it from me.

Santiago Seage -- Chief Executive Officer and Director

Thank you.

Operator

(Operator Instructions) The next question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open. Please go ahead.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey guys, sorry to come back. So I just wanted to clarify couple of things, very quickly. Can you elaborate a little bit more on asset sales? I know you commented at the start or a limited amount on the strategic review, but where do you stand with respect to asset sales and narrowing down the portfolio? And then secondly, can you clarify a little bit more, around Mojave, and any potential waiver particularly as negotiations (inaudible) given DOEs position in this all? Just how does DOE being involved? Differentiate this specific project, perhaps it's a better way to ask that.

Santiago Seage -- Chief Executive Officer and Director

So starting with the second one with Mojave. And as you know, we don't expect a distribution until the last part of the year. So we obviously talk a lot with our lender with the DOE. But there is not much to report on that front, it's still early, and we will continue working with them. As you know, we have significant experience, and they have a significant experience with us. So we will keep you updated. But at this point in time, there is not much to report on what I'm saying, we think they will be supportive, like they've been in the past, but I cannot be -- I cannot give you more light, regarding that.

Your first question was regarding asset sales. There as I mentioned during the call, our intention is to demonstrate value by divesting stakes or assets, if it is done at the right price to demonstrate value in our portfolio. So we do believe that the value of many of our assets is higher than what the market is giving to aid for. And therefore we will be spending some time, seeing if there are potential interested parties for some of them, at the right price. And I'm here, I'm talking about a very narrow set of situations.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

But to clarify on the asset sales, the narrow set, that's a geographic region or is that specific to value against the current share price or just if you can elaborate?

Santiago Seage -- Chief Executive Officer and Director

So I cannot elaborate much, Julien. We are working on that at this point in time, so I wouldn't want to be more specific at this point in time. I can tell you that, that's a lever that we believe we should use, but forgive me, I cannot be more specific.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Last question, when would you contemplate buybacks relative to drop-downs? Like how do you think about that conceptually? Because obviously you're accentuating the drop-down piece of the equation at this point.

Santiago Seage -- Chief Executive Officer and Director

Yes, at this point in time, we believe that in the acquisition, on the drop-down, we are being able and we will continue to be able to do them in accretive terms. Obviously, whenever we consider our investment opportunity, we compare it versus investing in our own shares. So that's always part of the analysis, we conduct. And as you can imagine, whenever you approve an investment at the Board, we compare it with other available options, including the one you mentioned.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you very much for your patience.

Santiago Seage -- Chief Executive Officer and Director

Thank you, Julien.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you.

Operator

Thank you. (Operator Instructions) As we have no further questions at this time, I would like to hand the call back to Mr. Seage for closing remarks.

Santiago Seage -- Chief Executive Officer and Director

Great. Thank you very much to everybody for attending the call today. Thanks.

Operator

Ladies and gentlemen, that does conclude the conference for today. Thank you all for participating, you may now disconnect.

Duration: 57 minutes

Call participants:

Santiago Seage -- Chief Executive Officer and Director

Francisco Martinez-Davis -- Chief Financial Officer

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Abe Azar -- Deutsche Bank -- Analyst

Praful Mehta -- Citigroup -- Analyst

Bryan Fast -- Raymond James -- Analyst

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