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Atlantica Yield plc (NASDAQ:AY)
Q1 2020 Earnings Call
May 7, 2020, 12:45 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Atlantica's First Quarter 2020 Financial Results Conference Call. Atlantica is a sustainable 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 a replay of this call will be available at the Atlantica 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 the comments made during the conference call, in the Risk Factors section of the accompanying presentation, on our latest reports and filings with the Securities and Exchange Commission, 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 lines for the Q&A session. I will now pass over to Mr. Seage. Please go ahead, sir.

Santiago Seage -- Chief Executive Officer and Director

Thank you very much. Good morning and thank you for joining our first quarter 2020 conference call. First of all, on Page 3, I would like to say that our employees and the employees of our suppliers are safe and that Atlantica has not experienced any material impact from COVID-19. Regarding our performance in the quarter, we continued showing a positive performance in the first quarter of 2020. Our CAFD increased by 5.4% year-over-year to around $48 million. Adjusted EBITDA including unconsolidated affiliates for the first quarter decreased by an 8% [Phonetic], mostly due to the foreign exchange translation impact, lower solar radiation in some of our geographies, and an accounting one-off in 2019. Additionally, our Board of Directors has declared a quarterly dividend of $0.41 per share.

Additionally, we have successfully closed the previously announced Green Bond private placement for $320 million and we have already used the proceeds to repay existing corporate debt achieving, as previously announced, savings of around $10 million from next year while achieving, more importantly, a very significant extension in the maturity. And finally, we continue making what we believe is very good progress on our accretive growth initiatives.

In first place, we have extended the option to acquire our partner's equity in Solana. In second place, we have made an investment to create a renewable energy platform in Chile, together with local financial partners where we are proceeding with a first investment with the acquisition of a 50 megawatt solar PV plant. Third, PTS has reached commercial operation during the first quarter of 2020 and if conditions precedent are met, we would increase our stake in the asset up to the previously announced 70% by the third quarter of 2020. And finally, we are very pleased to announce that we have refinanced a small part of our solar assets in Spain with a recap of more than $140 million that we expect to use for new investments.

Moving to Page 4, we can tell you that we have had no material impact from COVID. In first place, health and safety obviously remains our top priority and in that regard, we have reinforced our safety measures and protocols, reorganized our teams, and implemented a long list of new safety measures including testing both at our assets and offices. We have taken the required safety and operating measures in order to continue running our asset portfolio safely and without disruptions. 100% of our office employees have been working remotely even before the authorities established restrictions or recommendations in each location. In fact, we are now starting the process to gradually bring people back to the offices.

In second place, we have continued providing a reliable service to all our clients. We did not have any significant disruptions in availability or production due to COVID-19 and additionally, we have, we believe proactively managed our supply chain to avoid any potential future disruptions. For instance, we have increased purchases and inventories of spare parts and equipment required for operations when running some of our assets. In summary, business as usual.

And finally, although it is not possible to forecast if we or our off-takers will be impacted in the future by this COVID situation, if it continues, we believe that it is very important to remember that Atlantica has a very resilient business model. As you know, all of our assets are subject to long-term contracted take-or-pay or regulated revenues. Francisco will now get into the details of our financial results.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you, Santiago. Good morning to all. Now please turn to Slide number 6 where I will present our key financials for the first quarter. Revenues in the first quarter of 2020 reached $210 million, a 5% decrease versus the first quarter of 2019 and adjusted EBITDA including unconsolidated affiliates decreased by 8% to $166 million. The decrease is primarily due to currency translation effects and lower solar radiation in Spain and South Africa. Regarding CAFD, we generated $47.6 million in the first quarter of 2020, an increase of 5% year-over-year.

Let's now please turn to Slide number 7. Overall, our portfolio of assets delivered a positive performance in the first quarter. In North America, our EBITDA increased by 5% [Phonetic] compared to the first quarter of 2019. This increase corresponds mainly to higher solar radiation in the first quarter and good operating performance. In South America, both revenues and EBITDA increased by 6% and 1% respectively thanks to the [Technical Issues] of our assets with higher production from our wind assets and high availability levels of our transmission lines. The revenues and EBITDA decrease in the EMEA region were mainly due to the depreciation of the euro against the U.S. dollar as well as to lower production in Spain and Kaxu due to lower solar radiation and an unscheduled outage in Kaxu.

Looking below at the results by business sector, we can see similar effects. In renewable energy, revenues and EBITDA decreased due to the reasons previously mentioned. In efficient natural gas, our Mexican assets continue to show solid performance. The decrease in revenues and EBITDA that you can see here is due to a one-time non-cash accounting adjustment recorded in the first quarter of 2019. Our transmission lines continued to show extremely good availability levels that contributed to the revenues and EBITDA increases. And finally, our water segment keeps showing strong EBITDA levels growing 7% year-over-year.

If we look now at the following Slide number 8, we can review the key operational metrics of our assets. Electricity produced by our renewable assets reached to 526 gigawatt hours in the first quarter of 2020, which is below the first quarter of 2019 as a result of the factor I have already explained. Looking at our availability-based contracts, again, ACT keeps showing solid performance and finally, in transmission lines and water, the two other sectors where our revenues are based on availability, we continue to achieve high availability levels of nearly 100%.

Let's move on to Slide 9 to walk you through our cash flow for the first quarter of 2020. Our operating cash flow for the three months period ended March 31st, 2020 reached $86 million compared to $97 million in the same period of 2019. The decrease was mainly due to lower EBITDA, net of non-cash items and variation in working capital in the first quarter of 2020 as a result of longer collection periods. Furthermore, insurance payments, typically paid in the first quarter, also increased. Net cash used in investing activities in the first quarter of 2020 was approximately $1 million. Net cash provided by financing activities in the first quarter of 2020 amounted to approximately $60 million and correspond primarily to the draw down on the existing financing lines, partially offset by the dividends paid to shareholders and non-controlling interests and the scheduled repayment of principal of our project financing agreements. All-in-all, the net change in consolidated cash for the first quarter of 2020 was an increase of approximately $145 million.

On the next Slide number 10, we would like to review our net debt position. We closed the first quarter of 2020 with a net corporate debt of $652 million, pretty much in line with the net debt at the close of 2019. With this, our net corporate debt to CAFD pre-corporate debt service ratio stood at 2.4 times. On the other hand, net project debt as of March 31st, 2020 was $4.2 billion, which represents a reduction of more than $100 million compared with the closing of 2019.

On Page 12, we can see that as of March 31st, 2020, Atlantica's available corporate liquidity stood at approximately $406 million, out of which are approximately $155 million was corporate cash. In addition, and most importantly, the company has no significant corporate debt maturities in the short-term. Our weighted average corporate debt maturity as of today is approximately 4.7 years. This makes us observe the current financial markets from a comfortable perspective. This is not unexpected. We have been doing our homework during the past 12 months and thus we have successfully refinanced more than $550 million of corporate debt.

Furthermore, we have also negotiated significant improvements both in terms of cost and flexibility, but most importantly, we have significantly extended our corporate maturities. As you can see, Atlantica's principal corporate maturities are now in 2025 and 2026. I think the message is clear. We have a strong liquidity position and at the same time, we don't have any significant debt maturities in the short-term. I will now turn the call back to Santiago.

Santiago Seage -- Chief Executive Officer and Director

Thanks, Francisco. On Page 13, when talking about accretive growth and our strategy to continue investing accretively. In first place, you remember that we have signed an option to acquire our partner's equity interest in Solana in the solar asset in Arizona. In April 2020, we extended this option until August this year. In second place, our previously announced investment in PTS, the asset reached commercial operation during the first quarter and it has also closed a project finance agreement. Therefore, assuming that certain conditions precedent are met, we would be increasing our stake in the asset up to a 70% by or around the third quarter this year.

And finally, we have been able to make an investment together with financial partners to create a renewable energy platform in Chile. The platform has already made a first investment, a PV plant of around 50 megawatts in an area with excellent solar resource. The plant is in operation. We expect that this first investment obviously will be the first of many and we hope that this platform will be a source of growth for us in the future.

In the next Page 14, we also announced that we have releveraged some of our solar assets in Spain. We told you in the last quarter that we were working around refinancing some of our assets in Spain following regulation and that we can announce that we did close a transaction that represents a very significant recap of more than $140 million. We expect to use the proceeds of such refinancing to finance new investments in renewable energy. This financing has been done at a sub-holding company level and funds are already available to us.

Very important, it is non-recourse to Atlantica's corporate level as it is guaranteed only by the assets distributions and the existing non-recourse project debt that the assets had before remain in place and unchanged. This new financing has been done as a green project finance that is issued or has been issued in compliance with the 2018 Green Loan Principles and has what we call an unqualified second party opinion delivered by Sustanalytics. This once again shows that our strong presence in ESG, our strong commitment to ESG is helping us to become a very active player in green financing, both at the corporate and project level.

And finally, on Page 15, our Board has approved our quarterly dividend of $0.41 per share or $1.64 annualized. In summary, from our point of view, this quarter we have been able to keep business running as usual in spite of the COVID situation while continuing to optimize our financing as we have been doing in the last quarters and continuing to invest accretively in growth as we have been doing in the last quarters or the last couple of years and our intention is to continue doing so with or without COVID. Thank you very much. Operator, we open the line for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And we have a question from the line of David Quezada from Raymond James. Please go ahead, your line is now open.

David Quezada -- Raymond James -- Analyst

Thanks, good morning everyone. My first question here just on the Chile growth platform or investment platform. I'm wondering if there are any additional details you can share on the pipeline of projects, you know, the scope of that opportunity and maybe even some comment or just remind us what your hurdle return rates would be in that jurisdiction.

Santiago Seage -- Chief Executive Officer and Director

Sure. Thanks, David for the question. As I mentioned in the call, we expect this to be a significant source of growth in the future. Chile for us is a very attractive market where typically assets can be contracted in dollars and has typically been a fairly competitive market as well. With this platform, what we expect is to be able to access assets and to create a critical mass of renewable energy assets with different technologies. The first investment is a PV plant. Our intention is to do renewable energy in the broader sense of the word and to be able to contract portfolios of those renewable assets with good off-takers. In terms of returns, in a country like Chile, typically we can target a high-single digit, ideally low-double digit when you're talking in dollars unlevered.

David Quezada -- Raymond James -- Analyst

Excellent. Thank you very much. And then just on the extension for the Solana tax equity interest. I'm just wondering what the thought process was behind extending it and what are you looking for there before you would go ahead with it.

Santiago Seage -- Chief Executive Officer and Director

So the reason for extension was mainly the financial markets. We did this in very early April and we thought it was not the right context to close the financing of that investment and we thought that we would be better off by delaying that and that's why we extended the option. It's a significant investment and we want to make sure that we make the decision carefully and we finance the investment the best way we can. Obviously, we cannot guarantee that we will be exercising the option, but we have been working toward that for a significant time.

David Quezada -- Raymond James -- Analyst

Okay that makes sense. Thank you and then just one more for me. Obviously, on the refinancing front, you guys have made a lot of good progress recently. I'm just wondering if you could maybe comment on how far along you are with that opportunity and if you see any other imminent project refinance opportunities across your footprint.

Santiago Seage -- Chief Executive Officer and Director

So from my side, my answer to your question would be, yes, we do see opportunities. Yes, we can do more. Yes, we will do more and now I leave it to Francisco.

Francisco Martinez-Davis -- Chief Financial Officer

Yes and David, we are looking at, we have said in the past to [Phonetic] opportunities with refinancing opportunities in Spain. We announced today the holding company that gives us significant liquidity at Atlantica, but we are also continuing to look at the portfolio actively to see to try to determine which projects are more suitable for a refinancing, but we're actively looking to additional refinancings.

David Quezada -- Raymond James -- Analyst

Excellent. Thank you very much. That's it for me.

Santiago Seage -- Chief Executive Officer and Director

Thanks to you, David.

Operator

Thank you. [Operator Instructions]. There are no further questions at this time, please continue.

Santiago Seage -- Chief Executive Officer and Director

Okay, thank you very much. Probably many of us are presenting at the same time and the market is about to open. So thank you very much to all of you. We will be attending virtual conferences organized by different banks as you can see in our press release and we will be more than happy to organize virtual one-on-ones with any of you. Thanks a lot.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you.

Santiago Seage -- Chief Executive Officer and Director

Bye. We can close now the lines, operator. Thank you.

Operator

[Operator Closing Remarks]

Duration: 24 minutes

Call participants:

Santiago Seage -- Chief Executive Officer and Director

Francisco Martinez-Davis -- Chief Financial Officer

David Quezada -- Raymond James -- Analyst

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