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TerraForm Power Inc (TERP) Q2 2021 Earnings Call Transcript

By Motley Fool Transcribers – Aug 13, 2021 at 10:30AM

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TERP earnings call for the period ending June 30, 2021.

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TerraForm Power Inc (TERP)
Q2 2021 Earnings Call
Aug 13, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning ladies and gentlemen and welcome to the TerraForm Power Operating LLC 2021 Second Quarter Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Michael Tebbutt, CFO. Please go ahead.

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Michael Tebbutt -- Chief Financial Officer

Thank you, operator. Good morning everyone and thank you for joining us for our 2021 second quarter results conference call and webcast for TerraForm Power Operating LLC. Before we begin, I'd like to remind you that a copy of our Q2 financial statements is published on our website and can be found under the Financials and Filings page ar terraformpower.com.

Note also that we may make forward-looking statements on this call. These forward-looking statements are subject to known and unknown risks and our actual results may differ materially. In addition, we refer to non-GAAP financial measures. For more information on a reconciliation of these non-GAAP measures to comparable GAAP measures, please refer to our Q2 financial statements.

Our 4,200 megawatt renewable portfolio performed well in the quarter. In addition, we continued to execute on a number of initiatives that are meant to strengthen the credit profile of the business by derisking operations, executing on margin enhancement initiatives, completing accretive growth opportunities, and sourcing low cost of capital for capital recycling and asset level up financing initiatives.

From a financial perspective, TerraForm Power had adjusted EBITDA of $227 million in the second quarter of 2021. which was 1.4% higher than in the second quarter of the prior year. We had high EBITDA contribution from our wind segment and our regulated solar and wind segment included in part from higher average realized market prices in Spain, which continue to be well above prior year, partially offset by lower availability in our U.S. solar.

Overall, we continue to generate stable revenues from our wind and solar assets and benefit from the scale of our fleet, diversification of our customer base, and highly contracted cash flows with long duration power purchase agreements with average remaining term of 14 years.

We recently executed a new 10-year operations and maintenance contract to service the distributed generation fleet we acquired from AltaGas in 2019. The new agreement consolidated the portfolio's operations and maintenance service under one agreement and streamlines asset management. We expect to complete the transition in the third quarter and provide $1 million of cost savings on an annual run rate basis.

In the second quarter, we continue to advance the repowering of all turbines at our two New York wind projects with a nameplate capacity of 160 megawatts. Construction is progressing well and we remain on track and on budget to reach completion of the project by the end of 2021. Once completed, annual generation will increase by 100 gigawatt hours, which will generate an additional $7 million of adjusted EBITDA.

Recently, our parent company Brookfield announced an agreement with Trane Technologies to jointly pursue and offer decarbonization-as-a-service for commercial, industrial, and public sector customers comprising energy efficient retrofits and upgrades of building energy infrastructure along with captive distributed solar, energy storage, and other power generation across North America.

Over time, we expect this will provide some growth opportunity to TerraForm by leveraging our U.S. distributed generation business and Trane's leading energy efficiency and technical engineering, construction, and project development experience to jointly develop and implement new customer opportunities. These decarbonization solutions will help customers meet sustainability targets while reducing operating costs through upgrading critical energy infrastructure and installing onsite renewable energy.

Turning to our debt and liquidity, our financial position remains healthy and our current available liquidity stands at $670 million of corporate liquidity to fund our capital requirements. Overall, 93% of our debt is fixed rate or swap debt and we continue to have a very manageable corporate debt stack with no near-term maturities.

We continue to take advantage of the strong market conditions for financing renewable power assets at low interest rate environment to execute on refinancings and upfinancings across the portfolio. In June, we closed $160 million non-recourse refinancing of four [Phonetic] utility scale solar assets in Ontario, Canada totaling 60 megawatts generating net proceeds of $27 million. The benefits of this transaction include reduced cost of debt and a 14-year extension of the maturity date.

Post quarter-end in Spain, we closed two strategic refinancings at Extresol 3 and Surazello [Phonetic] concentrated solar power assets comprising of 100 megawatts. The benefits of these refinancings include reduced cost of debt, extending the maturities by up to six years, eliminating refinancing risk and generating net proceeds of $260 million, which were used to pay down almost the entire balance drawn on our corporate revolver.

In addition, we recently closed on a new letter of credit facility for $50 million guaranteed by Export Development Canada, which will free up additional capacity on our corporate revolver facility. As we look forward, we will continue to focus on key operational priorities including executing on our repowering projects, margin enhancement initiatives, and strengthening the credit profile of the business.

That concludes our remarks for today. If you have any questions, please don't hesitate to contact our Investor Relations team at [email protected]ieldrenewable.com. Thank you for joining us today.

Operator

[Operator Closing Remarks]

Questions and Answers:

Duration: 7 minutes

Call participants:

Michael Tebbutt -- Chief Financial Officer

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