Atlantica Yield (AY) Q3 2021 Earnings Call Transcript

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Atlantica Yield (AY 1.37%)
Q3 2021 Earnings Call
Nov 10, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Atlantica's third quarter 2021 financial results conference call. Atlantica is a sustainable infrastructure company that owns a diverse portfolio of contracted renewable energy, storage, efficient natural gas, transmission lines, 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 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 you over to Mr. Seage. Please go ahead, sir.

Santiago Seage -- Chief Executive Officer

Thank you very much. Good morning, and thank you for joining us for our third quarter conference call. A few opening remarks. During the first nine months of this year 2021, we have delivered our CAFD of $168 million, which represents a growth of close to 13% versus the same period in the previous year.

Our board of directors has decided to increase the dividend and has declared a quarterly dividend of $0.435 per share. Additionally, on the ESG front, we continue making progress. As you know, we have been very focused for the last years on ESG. And in the last few weeks, we have had our emissions target approved by the Science Based Targets initiative.

This is a recognized organization that certifies that emission reduction targets are ambitious enough to be aligned with the goals set in the Paris Agreement to limit global warming. For us, having a third party certifying that our plans in emission reductions comply, let's say, with these goals is extremely important, and we know that for a number of our investors, this is also important. So we are very happy to be able to communicate this. In addition, we have recently received the Terra Carta Seal, a recognition to our commitment to sustainability, in an event at COP26, the United Nations Climate Change Conference, which is still ongoing in the U.K., in Glasgow.

I will now turn the call over to Francisco, who is in Florida at the EEI Conference. I mentioned this because we have had some difficulties with the line. So I hope that everything will be OK. Francisco, over to you.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you very much, Santiago, and good morning, everybody. Please turn to Slide 4, where you can see our key financials for the first nine months Revenue in the first nine months of 2021 reached 940.4 million, which represents an 8.4% growth on a comparable basis, excluding foreign exchange, and the nonrecurring impact in our renewable sector that we discussed in the second quarter. Adjusted EBITDA, including unconsolidated affiliates, increased by 2.1% to 634.1 million. We generated 168.5 million of cash available for distribution in the first nine months of 2021, an increase of 12.9% year over year.

If we look at our CAFD per share, we stood at $1.52 year to date, a growth of 3.6% year over year. On the following slide, Slide 5, you can see our performance by geography and business sector. In North America, revenue increased by 15% to 308.7 million in the first nine months of 2021, thanks to the recently acquired assets, while EBITDA increased by 2%. In South America, revenue and EBITDA increased by 5% and 1%, respectively, also due to recent investments.

EBITDA in the EMEA region increased by 2% compared to the first nine months of 2020, thanks to new assets, higher revenue at Kaxu, and foreign exchange differences. If we look at EBITDA by business sector, we can see similar effects. Now let's please turn to Slide 6, where we will review our operational performance. Electricity produced by our renewable assets reached 3,460-gigawatt hours in the first nine months of 2021, an increase of 33% compared to the same period of 2020.

The increase was largely due to the contribution of recently acquired assets. Production also increased in South Africa and Spain, where solar radiation was higher. On the other hand, solar radiation was lower than expected in the U.S. and the wind resource was lower than expected in our assets in North and South America.

Looking at our availability-based contracts, efficient natural gas, transmission lines, and water assets have continued to achieve high availability levels in the first nine months of 2021. Let's now move to Slide 7 to walk you through our cash flow. Our operating cash flow for the first nine months of 2021 reached 442 million, a very significant increase versus the same period of 2020, thanks to an improvement in variations in working capital. Investing cash flow for the first nine months of 2021 was 323 million as a result of acquisitions closed during the period.

Financing cash flow for the first nine months of 2020 corresponds primarily to the scheduled project debt repayments for approximately 256 million and 165 million of dividends paid to shareholders and noncontrolling interest. Financing cash flow also includes a positive impact of 131 million of the equity raise closed in January and 40 million for the refinancing of one of our note issuance facility with the proceeds of the 400 green notes issued in May. I will now turn the call back over to Santiago.

Santiago Seage -- Chief Executive Officer

Thank you. If we move to Page 8, we see that in 2021 year to date, we have made what we consider this very good progress in our investment growth plan in North America with the acquisitions of three assets, including two very large renewable energy portfolios, where we have invested around $370 million of assets in operation. We are also investing $25 million more or less in solar in photovoltaics in South America, and we have additionally recently closed the acquisition of two photovoltaic assets in Italy, our first investment in that country. Overall, including some additional smaller investments, this is north of 460 million year to date, well above the guidance of $300 million that we have been sharing with you.

We are now focused on new opportunities for 2022, and we expect to be able to share or update targets and plans when we present our 2021 results in February. Operator, we are ready for Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] And your first question is from the line of Angie Storozynski from Seaport. Please go ahead.

Angie Storozynski -- Seaport Global Securities -- Analyst

Thank you. It was great to see you guys at the EEI, but just a couple of follow-up questions. So we've had the infrastructure bill passed in the U.S. Congress with direct pay for renewable new build.

I'm just wondering if you think that that's going to help with finding acquisition targets in order to allocate the 300 million per year in growth.

Santiago Seage -- Chief Executive Officer

Absolutely. We think that that's a very important piece. In fact, some of our larger assets used that feature in the past. So I personally think that this is going to be very good for the sector in general.

It's going to be very good for larger investments, and in our case, it's something that should help us going forward.

Angie Storozynski -- Seaport Global Securities -- Analyst

OK. And then secondly, during the EEI, we talked about the potential expansion of existing sites, additions of battery or maybe also pilot hydrogen projects at some of the solar thermal sites in Spain. Could you expand on this?

Santiago Seage -- Chief Executive Officer

Yes. I mean without being very specific because obviously, many of these are ongoing plans. We do see in the short and the midterm, a number of opportunities to invest in plants we already own, in sites we already own through different ways, including the ones you mentioned. I -- we think that going forward, being able to offer hybrid technologies, let's say, so combining different renewable energy technologies, including storage, including clean fuels like hydrogen, it's going to be one of the ways to make renewable more dispatchable, closer to a baseload and to be able to extract further value from assets you own already.

Obviously, depending on the geography, your PPA, or other regulation, these things can be done, let's say, quicker or you might need to wait for a few years. But clearly, there's some value there, and we are working on a number of those opportunities.

Angie Storozynski -- Seaport Global Securities -- Analyst

Good. Just one follow-up. I remember, in the past, you had some concerns about the replacement cycle of the battery components and if it's accurately reflected in the return expectations for these assets. So has anything changed? Or do you think that the market is now accurately reflecting the maintenance CapEx of these assets?

Santiago Seage -- Chief Executive Officer

No. I think that there's a certain uncertainty there. The track record in batteries is what it is, so not very long. And therefore, there is some uncertainty there.

And as you know, we are -- or we consider ourselves a prudent investor, but there are situations where even with that uncertainty, the projects can work, and we still have some time in front of us to work through some of those questions.

Angie Storozynski -- Seaport Global Securities -- Analyst

Great. Thank you.

Santiago Seage -- Chief Executive Officer

Thank you.

Operator

Thank you. [Operator instructions] And your next request is from the line of Julien Dumoulin-Smith from Bank of America. Please go ahead.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

Hey, guys. This is Anya, filling in for Julien this morning. So first, I guess, I'm going to follow up a little bit on the growth side. Aside from the U.S., what other geographies have you sort of been looking at internationally in terms of growth opportunities? And then what about the potential contribution from AAGES?

Santiago Seage -- Chief Executive Officer

Good morning, Anya. Good to hear you. Regarding growth opportunities, we -- from a geographical point of view, we continue focusing on the same geographies we have been focused for a number of years, and probably, with a similar weight to the one we have in our portfolio today. So the U.S.

is clearly a priority. And in fact, this year, as you know, a significant part of our investments have happened there. On top of that, we continue working on the key market in South America where we already have presence. We do see opportunities in South America.

We think that the markets where we are present, the clear trend there is for renewable energy to continue growing, and we do see significant opportunities. We do see opportunities around renewable energy, and we also see opportunities around midterm, around some of the newer technologies I was discussing before. On top of that, in Europe, and we continue working on situations, and we think that there will be opportunities to deploy capital there. So a similar story to what you know today.

Core U.S. with -- coupled with opportunities in South America and in certain areas in Europe. In terms of your question -- your second question, as you know, our growth strategy is about three pillars, if you want. And one of the pillars is co-investment with third parties or agreements with third parties, where we are working in different regions with different players.

And one of them -- one of those relationships is with AAGES. We are currently working with them specifically in Colombia as we announced some time ago. And going forward, we plan to continue working with all our partners, including AAGES, but not only that one. Going forward, our strategy as you know is to grow through multiple sources.

We don't depend on one specific partner or one specific situation in our growth.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

OK. Great. And then as a follow-up, could you maybe talk a little bit more about inflationary pressure as supply chain issues and then how that could impact potential new projects and COD timing?

Santiago Seage -- Chief Executive Officer

Yes. So clearly, we are seeing the same pressures everybody is seeing. The good thing is, with our business model, the impact that can have on us is very limited because at any point in time, the amount of capital we are deploying in building ourselves -- assets is very limited. Therefore, that is not a concern for us at this point in time.

Although, obviously, we see a market like what our peers and companies in the sector are seeing a market where it will take a few quarters before supply chains come -- go back to normal. But fortunately, our cash flow does not depend on that. Our cash flow depends on operating the fleet of assets we own.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

OK. Great. Thank you. And then just one final one here.

Just wanted to get an update on how the assets across your portfolio are doing operationally? Any issues? And then progress on ACT payments from Pemex?

Santiago Seage -- Chief Executive Officer

So starting with the last part of the question, and it's in our disclosure, the situation today is significantly better. And in general, in the fleet, we are where we expect. As you know, with one asset Solana, where we are doing a number of improvements and that has been performing below what we expect.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

OK, thanks. And then anything on Pemex? Or is that the same --

Santiago Seage -- Chief Executive Officer

As I mentioned at the beginning, the situation has improved significantly.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

OK. Great. Thank you. I'll jump back in the queue.

Thank you.

Operator

Thank you. [Operator instructions] And there are no further questions at this time. With that, we conclude the presentation today. Thank you for participating.

You may disconnect.

Santiago Seage -- Chief Executive Officer

Thank you. Thanks to everybody.

Francisco Martinez-Davis -- Chief Financial Officer

Thank you. Bye-bye.

Duration: 25 minutes

Call participants:

Santiago Seage -- Chief Executive Officer

Francisco Martinez-Davis -- Chief Financial Officer

Angie Storozynski -- Seaport Global Securities -- Analyst

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

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