Atlantica Sustainable Infrastructure plc (NASDAQ:AY) Q1 2024 Earnings Call Transcript May 8, 2024
Atlantica Sustainable Infrastructure plc beats earnings expectations. Reported EPS is $-0.05, expectations were $-0.12. AY isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to Atlantica’s First Quarter 2024 Financial Results Conference Call. 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, which are based on current expectations and assumptions and 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, 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 the 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, sir, go ahead.
Santiago Seage: Good morning. Thank you very much for joining us for our first quarter 2024 conference call. I will start with a few high-level messages. As you have seen in the first quarter and compared versus the same period last year, revenue remained stable while adjusted EBITDA decreased by 0.9%, excluding the effect of the unscheduled outage that we discussed last quarter. Operating cash flow increased by a 57% year-over-year up to close to $66 million. In terms of growth and new projects, we recently signed a 15-year PPA for a new 100-megawatt solar + storage project in California, and we completed, among other projects, we completed the acquisition of two operating wind assets in the UK. I will now turn the call to Francisco, who will take us through our financial results.
Francisco Martinez-Davis : Thank you, Santiago. Good morning to everyone. Please turn the Slide 4, where I present our key financials for the first quarter of 2024. Revenue remained stable at $242.9 million, compared with $242.5 million in the first quarter of 2023. The increase in revenue in our assets in North America was offset by the outage at Kaxu that we mentioned last quarter. As a reminder, the plant restarted operations in mid-February, and the damage and business interruption is covered by our insurance policy after a 60-day deductible. Adjusted EBITDA was $164.2 million, representing a 0.9% decrease compared with the same period last year, excluding the impact of the outage at Kaxu. Regarding cash available for distribution, we generated $50.9 million in the first quarter of 2024.
On the following Slide 5, you could see our performance by geography and business sector. In North America, revenue increased 18% to $86.2 million in the first quarter of 2024, compared to the same period of last year, and EBITDA increased 6% to $55 million. Production increased in our solar assets in the US. In South America, both revenue and EBITDA increased 2% compared with the first three months of 2023, up to $44.7 million and $34.6 million, respectively, mainly due to inflation in the indexation mechanism in most of our contracts. In the EMEA region, revenue decreased 11% to $112 million, versus the same period of 2023, mostly due to the unscheduled outage at Kaxu. Looking below at the results by business sectors, we can see similar effects.
Let’s now please turn to Slide 6, where we will review our operational performance. Electricity produced by renewable assets reached 1,063 gigawatt hours in the first three months of 2024, a decrease of 11% versus the same period 2023, mainly due to a decrease in Kaxu and lower solar radiation in Spain. On the other hand, production in our solar assets in the U.S. increased by 16%, thanks to better performance at Solana. Looking at our availability-based contracts, our efficient natural gas and heat segment, as well as our water assets and transmission lines, continue to achieve very high availability levels in the first quarter of 2024. On the next Slide 7, we will take a look at our cash flow. In the first quarter of 2024, operating cash flow reached $65.6 million, an increase of 57%, compared to the same period last year, mostly thanks to an improvement in changes in working capital.
Net cash used in investing activities in the first quarter of 2024 includes $84.4 million of investments, corresponding to the acquisition of two operating wind assets in the United Kingdom and approximately $22 million in investment in assets under construction development. I will now turn the call back over to Santiago.
Santiago Seage: Thank you, Francisco. During this first quarter of 2024, we have continued to make progress in our growth strategy that, as you know, is focused on developing and building new contracted projects, while complementing that with acquisitions whenever returns are attractive enough. Following that strategy, we have signed a 15-year PPA with an investment grade off-taker for a new 100-megawatt PV + storage project in Southern California. The project is located fairly close to several of our large assets in operation in California and Arizona, and to three projects we are building or close to start building in the area. As you can see, we continue to build volume in the Southwest, an area where we have critical mass and where we can achieve synergies.
We expect this project to reach ready-to-build stage later this year. In addition, during the quarter, we have acquired our first two wind assets in the U.K., as we have mentioned. The assets are regulated and have no project debt as of today. The price of the investment represented as 6.6x EV2/ EBITDA multiple, and this investment should allow us to use the net operating losses carry forwards that we have in the U.K., reaching what we believe is an attractive after-tax return for the investment. If we look at other geographies, I will make a comment about a project in Chile as an example of how repowering existing renewable energy assets with storage can add value. The Chile PV 3 plant signed a 10-year PPA, including the battery storage expansion currently under construction.
Chile is one of those markets where the storage clearly allows to capture higher returns through higher PPA pricing. As you know, more or less a 40% of our pipeline is in storage. That is simply because we continue to see an increasing opportunity for storage in several of our key markets, both storage, in combination with existing or new renewable energy assets, or as standalone. As you know, Chile PV 3 is a PV asset in operation where we are building a battery repowering our expansion. Regarding the sale of our stake in Monterrey, it recently closed and we expect proceeds of more or less $43 million subject to a number of things you see there. Additionally, there is a earn-out mechanism that could result in additional proceeds in the future.
A final point before we move to Q&A. We are aware of market and media speculation around Atlantica, and following past practice, we will not make any comments regarding that. With this, we conclude today’s presentation. Thanks for joining us. We will now open the line for questions. Operator, we are ready for Q&A whenever you want.
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