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Just Energy Group’s (JE) CEO James Lewis on Q4 2016 Results – Earnings Call Transcript

Just Energy Group, Inc. (NYSE: JE ) Q4 2016 Earnings Conference Call May 19, 2016 10:00 AM ET Executives Rebecca MacDonald – Executive Chair James Lewis – President and Co-Chief Executive Officer Just Energy Pat McCullough – Chief Financial Officer Analysts Nelson Ng – RBC Capital Market Carter Driscoll – FBR Damir Gunja – TD Securities Sameer Joshi – Rodman & Renshaw Operator Good morning, ladies and gentlemen. Welcome to the Just Energy Group Inc. Conference Call to discuss the Fourth Quarter 2016 Results for the period ended March 31, 2016. At the end of today’s presentation, there will be a formal Q&A session. [Operator Instructions] I would now like to turn the meeting over to Ms. Rebecca MacDonald. Go ahead Ms. MacDonald. Rebecca MacDonald Good morning. Thank you for joining us thing morning for our fiscal 2016 fourth quarter earnings conference. I’m Rebecca MacDonald, Executive Chair, Just Energy. And are here with me this morning, Co-CEO James Lewis and CFO Pat McCullough. Unfortunately, we will not be joined by Co-CEO, Deb Merril, as she is attending funeral services for a family member. Before we begin, let me preface the call by telling you that our earnings release and potentially our answers to questions will contain forward-looking financial information. This information may eventually prove to be inaccurate, so please read the disclaimer regarding such information at the bottom of our press release. Fiscal 2016 was tremendous year or Just Energy from a financial, operational and strategic positioning perspective. Our business continues to perform very well, delivering strong top and bottom line results, while generating meaningful cash flow. In parallel, with delivering strong results we were able to take strategic measures to position the company for continued long-term success in this exciting changing industry. On behalf of the board, I want to extend our appreciation to Deb, Jay, Pat and the entire team for their focus and commitment to driving meaningful change throughout the organization. As I look back over the past three years, essentially the time strains can put this new leadership team together, this is clearly a developing track record of delivering on our promises to our shareholders, customers and all of our stakeholders. In fiscal 2016, we exceeded our own guidance and overcame a very tough comparison to the strong fourth quarter of 2015. Given our world class risk management and our hedging strategy, we were able to drive strong performance in recently completed winter quarter, despite a relatively warm weather. As you’d recall, the winter weather of last year provided a windfall across much of the industry. The recent winter was about 15% milder than normal across Just Energy customer base in North America. Delivering such a strong result is testament to our hedging philosophy and commitment to establishing a stable and predictable earning profile. We feel strongly that our demonstrated ability to consistently deliver performance driven results in our any environment is now the new norm at Just Energy, as a result of our strengthened financial position and improved profitability profile. As you’ve heard us talk about all year long, we’ve taken action to change the business foundation and reposition the company to capture more accretive, profit and cash flow by not allowing our team to chase market share at the expense of margin due to our refusal to engage in risky pricing tactics that would ultimately damage our improved profitability profile. While this strategy will result in a decline in next customer additions from time to time, we feel strongly that our margin for customer improvement initiative is working. The progress is evident in improved scale and leverage in our model that is allowing us to take 5% topline sales growth for the year and deliver 17% gross margin and 15% Base EBITDA growth, while driving a 62% increase in cash flow. Let me be very clear, we are managing this business for the long-term, if that yield shorter negative additions for the sake of long-term accretive profit and cash flow, we will do it every single quarter. Let me also be clear, that we are planning for and we are well positioned for significant growth. We see tremendous opportunities to achieve our goals through the addition of product, markets and partnerships that will deliver value to our customers and growth for our business. Today, we are operating from greatly improved financial position. And our strategy is proving our ability to consistently deliver throughout any cycle. Our financial flexibility combined with the commitment to maintain a capital like model supports our ability to pursue a growth strategy centered on geographic expansion, structuring superior product value proposition and enhancing the portfolio of energy management offering. We feel confident, our strategy will continue to deliver in fiscal 2017 and beyond. With that I will pause, and ask Pat to provide some additional color on the quarter and years financial results. Pat. Pat McCullough Thank you, Rebecca. Overall, it was an outstanding year in terms of both profitability and cash. We’re very pleased with the financial results we’re generating as a results of the actions we’ve taken to reposition the company. The business is performing exceptionally well, and we’re seeing a consistency in our ability to take strong topline performance and deliver even more impressive bottom-line results. Let me cover some of the recent highlights for the fourth quarter and full year, then I’ll add more added color in specific focus areas and provide our outlook for fiscal 2017. In the fourth quarter, sales were $1,075.9 million, a decrease of 11% over the very strong quarter of fiscal 2015. The quarterly decline was a mix of lower commodity prices, lower volume due to warm weather and lower net additions from the year ago period in the consumer division, combined with lower sales prices for variable products in the commercial division. The effect of these items combined with the lower customer base more than offset the positive foreign exchange impact. For the full year, sales were up 5% to $4,105.9 million. The increase is primarily a result of the currency impact of converting US dollar denominated sales into Canadian dollars. Gross margin increased 5% to $204.3 million during the quarter, this is a continuation of the same positive foreign exchange impact and ongoing success of our margin improvement strategies that led to a full year gross margin increase of 17% to $702.3 million over last year. This quarter’s gross margin did not feel the impact of the warm weather that Rebecca mentioned due to our superior weather hedging program. Let me step back to add some color on how far we’ve come along this profitability for customer initiative. Today, we’re signing consumer customers at $207 of gross margin for our RCE, which compares to $191, just one year ago and $166 two years back. Additionally, commercial margins are being added now at $84 for RCE, up from $79 just one year ago, and $67 two years ago. So that’s a 25% improvement in both consumer and commercial over the two year period. We were able to drive these improvements in margin because our new innovative products are gaining more appeal and presenting more value for our customers. This is allowing us to price our energy management solutions competitively without sacrificing customer satisfaction. This satisfaction is evident in the attrition rate remaining flat year-over-year in what we consider a highly competitive market. The improvement in our operating results is also reflected in our cash flow performance. We ended the quarter with $127.6 million on cash and cash equivalents, up 62% from $78.8 million at the end of fiscal 2015. In addition, base funds from operations increased 37% from the same quarter last year and increased 49% year-over-year to $138.2 million. You’ve heard us talk a lot about the changes and repositioning this company has undergone, and this is another great example of delivering on promised change. Today, we’re happy to be able to say that the payout ratio on base funds is 54% for the full year, down from 94% in fiscal 2015 and down from 139% in fiscal 2014. Given the growth we’re projecting moving forward, I’m confident this achievement is sustainable. We’ve also remained committed to reducing debt. At year-end, long-term debt was $660.5 million, a decrease of 2% year-over-year. Despite the higher value of the US denominated debt due to foreign exchange, we successfully reduced debt during the year by $7 million through our normal course issuer bid program and an additional $25 million through repayment of our unsecured senior notes. As a result, book value net debt was 2.6 times the trailing 12 month Base EBITDA, significantly improved from 3.3 times just one year ago and approximately 6 times two years ago. We remain focused on further improvements to our debt position going forward. We were also successful in controlling overhead cost. Administrative expenses for the year increased by 10% to $170.3 million, however this was entirely driven by higher costs required to support customer growth in the UK, as well as the impact of the exchange rate on the US dollar denominated administrative cost. Selling and marketing expenses for the year increased 14% to $257.3 million, due to the impact of foreign exchange on the US base commission and overhead expenses. The start-up cost associated with the residential solar division, as well as the expenses becoming more directly co-related to the growing portion of the customer base for which selling cost are recorded over the life of a contract. In fact, the majority of the year-over-year increase was driven by prepaid commercial commissions. I’d also like to point out that during the recent quarter, we made four strategic sales in energy management solutions hires, whom we’re very excited to have on-board. These new members of the team provide us increased confidence in our ability to execute our growth strategy around solar and broader energy management solutions that will drive future customer growth within existing and new channels. To wrap up the year, the sum of all these activities and results led to strong bottom line results that exceeded even our aggressive expectations. Base EBITDA increased by 10% to $74.7 million this quarter, excluding the additional prepaid commission expense item. It’s important to remember that our reported Base EBITDA in the fourth quarter of this year included $7.4 million of prepaid commission expense, reflecting the change in classification of prepaid commissions to a current asset effective April 1, 2016. Base EBITDA was $67.3 million in the quarter, a 1% decrease from last year when we fully reflect this change in the current period. For the full year, Base EBITDA increased by 25% to $225.5 million in comparison to the fiscal 2015 excluding the additional prepaid commission expense. In fiscal 2016, we incurred $17.9 million of prepaid commission expense. When you include the prepaid commission expense item, reported Base EBITDA was $207.6 million, an increase of 15% over the prior year. While we did benefit nearly $21 million from foreign currency impact on the translation of our US operations, it was still a very impressive year as we posted performance based improvements of $24.5 million for the year. Now let me turn to the outlook for 2017. The improvements we’ve made to the business are here to stay. To reflect the progress in repositioning the business and to build off of our strong 2016, we believe we will achieve fiscal 2017 Base EBITDA in the range of $223 million to $233 million, reflecting continued double-digit percentage year-over-year growth. Fiscal 2017 guidance includes deductions to Base EBITDA of approximately $40 million for prepaid commercial commissions, which were previously have been included in amortization within selling and marketing expenses. This represents a $22 million year-over-year increase in this expense versus 2016, and represents a go forward run rate for this incremental deduction in future years. As you saw this year, we expect to offset this headwind with continued strong gross margin performance and foreign exchange benefit. If you consider the 20% EBITDA growth that we recorded this year, prepaid commission adjusted and on top of that another 25% for next year, this is a very compelling fees. In addition, Just Energy’s solar program continues to show promise, based on the success of the pilot launch in Southern California, operations will continue to grow with further expansion in California and in Northeast United States. In fiscal 2017, our solar and renewables business is expected to contribute $10 million towards the double digit percentage Base EBITDA targets. With that, I’ll turn it over to Rebecca for some concluding remarks. Rebecca MacDonald Thanks Pat. We enter fiscal 2017 well positioned to participate in the significant growth opportunity that exists in our changing industry. The energy management solution industry is in the midst of significant transformation as customers demand value added product that address the changing manner in which energy will be consumed. We embrace this change and feel we are uniquely capable of transforming our vision and insights into action, by delivering effective strategies and compelling product that capitalize on change and deliver real value. Our growth plan is centered on continued geographic expansion, structuring superior product value proposition and enhancing the portfolio of energy management offerings. Geographically, our expansion plan are focused in Europe, where we are actively evaluating new markets. Our UK business is striving and we are successfully adding consumer and commercial customers in a profitable manner. We believe this early success validates our ability to compete outside of North America and we plan to take this experience and expand into two new European nations this year. A large part of our ongoing success is also being driven by our ability to provide innovative product that take advantage of technological advantage and offer a superior value proposition to our customers. New products like our unlimited plan, our bundled product offering, our JustGreen offering, smart stat, thermostat and JustSolar to name just a few exciting opportunities. During the year, we also started [indiscernible] energy efficient LED lightbulbs without commodity product, and we added air filters to our suite of options. Each of those initiative –innovative product gaining more appeal and delivering more values to customer, which in turn is allowing us to price our solutions at premium, while retaining customers for long duration. In summary, this has been an incredible year for our company, and one we feel places us [indiscernible] on the best path of becoming the premium world-class provider of energy management solution. Our business is healthy and growing even stronger. We are committed to delivering another year of double-digits earnings growth, maintain our stable dividend, pursuing prudent geographic expansion and further strengthening the company’s financial and strategic position in the coming year. We would like to thank the employees of Just Energy, for making these results possible. As leadership team, we are very fortunate to have a group of employees who deliver results and believe in the future of Just Energy. Thank you for all you do for the business we operate, the customers we service, and the communities which we live in. With that I would like to open it up for questions. Question-and-Answer Session Operator Thank you. [Operator Instructions] We have a question from Nelson Ng from RBC Capital Market. Nelson Ng Great, thanks. Congratulations on a good quarter. Rebecca MacDonald Thank you very much. Pat McCullough Thank you, Nelson. Nelson Ng My first question relates to the customer margins, in terms of additions and the attrition, so I’m not sure if my math is right, but are the margins for the consumer customers lost higher than the margins for the consumer customers added in Q4? Pat McCullough The margin for… Nelson Ng For the customers lost, for Q4 specifically and not for the year, was it higher than the margins for the customers added? James Lewis No, the margin for the customer for Q4 and full year had [indiscernible]. Now, if we continue to look at those customers the mass markets are – has been added, as Rebecca talked about the bundles there, so that would be the case. Nelson Ng Okay. Pat McCullough So Nelson, we can help you with this offline. I know we put this full year fiscals in our MD&A, but we can pull apart the fourth quarter for you. Nelson Ng Okay, that’s great. And then, just in terms of the fiscal 2017 guidance, like once you back out solar and you kind of back out the – or adjust for the commercial commission prepayments, it implies like a growth rate of above 15% EBITDA for the base energy retail business. I guess, like what’s your expectations in terms of the customer level going forward for the year, compared to I guess the growth in margins? James Lewis Nelson, when you – if you look at it, I think – we’re looking at this from an overall cost perspective, we’re getting more value add, the customers were singing up, or cost selling, up selling investing customers with the filters, with the deck, with the LED lights, so we expect more value under the existing customers. As we bring on new customers, our expectation is that from next year, we’re mostly in the range of 300,000 customers to add. As you go – brings the guidance, typically, and now we didn’t have the other original value in gross margins a little bit. Nelson Ng So you expect modest customer growth than most of the EBITDA growth will come from higher margins per customer? James Lewis Yes. But we are expecting, as Rebecca said to add more customers this year. Rebecca MacDonald I think in the last couple of years, Nelson, what you’ve seen is a, cleaning up our customer base that grew over time with number of unprofitable customers and this theme of change is focused on financial metrics, way more than on actual absolute number of customers. And one thing that we have proven to ourselves is that the margin for customer with the bundled product that is growing, and we don’t expect any change there. Now, would we like to add more customers? Absolutely. But, we have created enormous amounts of discipline around the margin that we will accept for each customer. And if we are not able to get it, we are happy to walk away from it. So what Jay is saying, look at the bundle and look at additions. And, we want to add as many profitable customers as we possibly can. But the key is profitable. Nelson Ng I see. But I guess in terms of your revenue guidance, you’re assuming like a modest customer growth, plus stronger margins per customer to drive growth, right? Pat McCullough Yeah, this is Pat, Nelson. If you go back to our growth strategy, we’re expecting both customer top line and bottom line growth through three main initiatives, geographic expansion, product enhancements to both bundling, but also bringing superior product structures like flat bill products to markets, when volatility returns, we think those are going to exciting products, and then the enhancement of more things sold through the customer at higher value. Nelson Ng I see, okay. And then just kind of moving on to the balance sheet, so you have a $128 million of cash at the end of the quarter, like I presume you’ll allocate some of that to reduce debt, as you’ve done in the last quarter. Can you talk about your – I guess your uses of cash in the next year in terms of what you intend to do with that and also, are there any updates in terms of I guess refinancing or addressing the 2017 maturity? Pat McCullough That was more than one question. Sure, let me start at the top. So, we’re very proud of this quarter based on the cash generated. Not only did we report, as we mentioned a $128 million of cash, we actually paid down $25 million of principal on the high yields senior note. And yes, that remains the priority. As we generate cash and [indiscernible] the dry powder on our balance sheet, we support the restructuring efforts of the business, which we’re very pleased, are right on track and we’re very confident that we’re going to be able to restructure the long-term converts and debt on our balance sheet in a shareholder efficient manner. Nelson Ng And do you have any, I guess updated timing on the solution? Pat McCullough We’re consistent with what we’ve said in the past, we see this getting done this year, this calendar year. We won’t be spilling into the fiscal 2017 calendar year, or the calendar year 2017. Nelson Ng Okay. Thanks Pat. I will get back in the queue. Pat McCullough Thanks, Nelson. Operator Our next question comes from Carter Driscoll from FBR. Carter Driscoll Good morning. So, can you talk maybe just about the competitive situation and maybe in conjunction with some of the changing regulatory in particular, obviously your state had a bit of a hick-up in terms of its curves to the energy retailing market most recently. How do you kind of deal with that from a high level? And then I’ve a couple of follow-up. James Lewis Yes, Carter. We believe the [indiscernible] that’s what they were looking at, whatever the drivers is. And if you look at, historically, when we have those competition, it will drive long-term value. So what we’re doing is we’re working with industry groups, and all the other markets to make sure they have the right market structure in place, that can deliver those types of value. What you’ve seen in place, where you have open access to the bill and you have policy going, you can offer customer innovative products, such as bundle that depends on what you do when you have markets when we only have aligned among the customer bill. Rebecca MacDonald I’m so sorry, I’d like to add to this, management of Just Energy is confident that we would be able to maneuver to any regulatory changes that might show through the year. Being in this for 25 years, I have seen so many different regulatory changes over time, pendulum goes left to the right and back, and our approach by large is conversation with the local environment about moderation, everything has to be balanced. Governments do want to protect the customers, but responsible players want to protect the customers as well. And we see the best protection customer guest is a strong consumer protection act and a very good value proposition to that customer. If you don’t try to drive value then in our opinion you are not going to survive in the business. Pat McCullough And Carter, this is Pat. One of the other enticing things about our strategy is as we move to more off grid or let’s say grid unconnected products, we’ve come a lot less attendant on regulation versus deregulation trends, where some of our competitors are pretty concentrated selling commodity only in deregulated markets. We’re really moving away from that to a broader or more diverse portfolio of products. And if you think about some of the new companies that are selling solar energy storage, they are not constrained by deregulation versus regulated space. Carter Driscoll And to that point Pat, can you talk maybe about your tax rate for some of the new bundled product, maybe quantify a little bit, so we get a sense of how that translate from just commodity offerings? Pat McCullough Sorry, I didn’t understand the beginning of your question Carter. Carter Driscoll I was just saying, can you talk about the attach rates for some of the bundled services, relative to your existing RCE base and how that’s trended over the past few quarters, so we get a sense, or try to quantify going forward as we try to apply some level run rate to, you’re kind of decoupling from the largely dependents on the commodity markets. Pat McCullough Yeah, that’s right. And as we were talking about earlier, and as Jay alluded to. Number of customers versus RCEs, which are commodity equivalent and the products per customer are going to be major drivers of improvement for us in the future. And as we create more of these bundled attach solutions, we’re really piloting first and then scaling into solutions that provide better conversion upfront and then less attrition and longer lifecycles with customers. So if you can get a – obviously stickier, more profitable customer you’re really going to be working both the front end and the back end of those income and cash cycles. And we see evidence of that as we bring differentiated value propositions to our customers. And we’re excited because we’re really starting to get to the point where we can take some of these high levels like LEDs, smart thermostats and solar from tens of thousands of customers to more. Carter Driscoll But quantifying it, is that possible at this point, can you just talk about your tax rate, as from some period, or over a longer period of time, is it 5%, is it 10%? James Lewis I think earlier on, Carter, I think we see in the market where we’re able to deal with and attrition rate, we see attrition, say about 5 percentage points and some like is 10%. What you’ll see in those markets, where you have a control of the bill and you choose the right customer, we’re getting a much this year value composition in those markets. As we look and figure out the ways to deliver this and constrain markets where we don’t have that sort of bill, the stickiness isn’t that strong because the utility determined to win the dropped customers in those markets. So [indiscernible] strong, but in other markets it’s extremely strong. Pat McCullough And Carter, the direct answer to your question is no, we’re not presenting a tax rate at this point in time, but obviously as we move to a broader portfolio RCEs don’t really represent, the strategy what the business will be doing. So you will see us begin to report in a different way in the future where we’re really talking about number of customers and products per customer, so that we can directly to the answer to your question. Carter Driscoll Alright. And then, just maybe a couple of quick ones. On the national side, you talked about kind of the margin expectations as you penetrate and the time to reach maybe kind of, what you’ve earned domestically, and then is there any incremental spend for those two target markets, you’re looking to expand internationally, is that already baked into your EBITDA guidance for the year? Pat McCullough Yes, it is. We’re really looking to address two markets as Deb mentioned on the last call. We’ve put some investor materials out on our investor website, which showed the P&L and the cash over the last four years for our UK organic business development. We’re assuming a similar business case as we enter markets in Continental Europe. Now the difference in Continental Europe and the UK is, UK and Germany are the largest markets by far. So other markets that Deb spoke about, Netherlands, Austria, Ireland are smaller markets. But we do expect to see similar sized customers as the UK, those customers end up being much smaller than North American users of energy, but they end up being much more profitable on a common energy unit basis, meaning gross margin for RCE for example on commodity. So we’re believing, as we’ve said in the past that single-digit millions of dollars to penetrate two new markets, we don’t want to take more than that on in the year, but we expect to have breakeven just after about a year’s time and get a cash on cash return in less than two years, that’s what we experienced in the UK, that’s what we think we can do in the other Continental European markets. Carter Driscoll It’s very helpful. Then just lastly, I’ll sneak one in, on the Resi Solar side, what do you see in terms of pricing, obviously there has been some comments about slowdown in market, I think it’s more unrealistic expectations entering the year, but any kind of feedback you can give, what you’ve learned, whether you can hold EBITDA margins that you thought you would get from those markets and kind of the uptake, I know you reiterated the same contribution you did last quarter, but any incremental color would be helpful? Pat McCullough Yeah, I think we all know with SolarCity and SunEdison that the solar industry is taking some loss. It is impacting the cost of capital of our counterparties, and it’s impacting the cost of capital of financing solar across the industry. So yes, is the answer to your question that there is going to be pressure on our origination income and other parts of the value chain like installation and panels, which we do not participate in. But we really do believe we can hold higher origination income to the industry, but we’re obviously going to feel the same pressure that the industry feels. Rebecca MacDonald And just to add, we have already looked at solar and part of our bundle, because of diversified offerings we have to our customer base, we don’t want to hang our hat on any – not totally on solar and not totally on commodity, and that’s what does give us a real competitive edge. I would definitely, I don’t think this management team would want to be in 100% solar business today, and that’s not the space we would enjoy very much. Carter Driscoll Okay. I appreciate all your responses. I’ll go back in the queue. Thank you. Rebecca MacDonald You’re welcome. Operator We have a question from Damir Gunja from TD Securities. Damir Gunja Thanks good morning. Rebecca MacDonald Good morning. Damir Gunja Maybe can you just confirm the exact level of FX that you’re assuming in your forward guidance? Pat McCullough Yeah, Damir, we’re assuming 1.25 US deal saving. Damir Gunja Okay, that’s great. Thanks. And, I guess just a second one since everything was asked, I just want to confirm you quoted 300,000 customer adds for the coming year, that’s on a net basis? Pat McCullough Yes, Damir. And I think, the way we’re thinking about this, is it comes from geographic expansion, continued improvement in the UK, but also those non-RCE type customers. And I think solar being our energy storage pilot that we talked about in our outlook as well. Damir Gunja Okay. Got it. Okay, thank you. Operator We have a question from Sameer Joshi from Rodman & Renshaw. Sameer Joshi Hey, Pat, good morning. Pat McCullough Good morning. Sameer Joshi Just a quick question on – follow-up on Carter, line of questioning about the solar, is the outlook phase $10 million contribution to Base EBITDA from the solar business, should we expect the top line to be sort of in the same proportion as the $223 million to $223 million would reflect on the top line? Pat McCullough Relative to solar sales? Sameer Joshi Yeah. Pat McCullough Yeah, so I will refresh everyone’s memory on accounting for solar sales given we’re in origination business model. We’ll be experiencing the normal size installation that the industry sees, so I think 5, 6 kilowatts, we’ll be reporting revenue on the basis of the origination income that were paid. There is no cost of goods sold on our transactions, so gross margin will be equal to revenue. And then we’ll be recognizing our direct sales cost, our marketing efforts, our overheads between the gross margin and EBITDA lines. So that’s where you’ll see the fallout. We’ve talked publicly that we know third-parties are paying as much as $1 per watt, excuse me in Southern California, lower amounts closer to $0.50 in the Northeast, but we know that third-parties can hold as much as $1,500 US per transaction. We’re hoping to hold something in that range, but as I mentioned with Carter, there is quite a bit of pressure on those margins and with the heavy margins on the origination side of the business, we don’t think those will be sustainable for the long-term, but in the short-term we hope to experience those type of industry norms. Sameer Joshi Okay. That is helpful. And just two part question. Where there any installations in the – this quarter, in the last quarter, and going forward, are you giving any outlook in terms of solar installations, should we expect total installed base to be in the 5,000 to 7,000 range, and that 5 to 6 kilowatt per residence? Pat McCullough Yeah, if you use the industry norms, that’s the math that you would get to based on our guidance for fiscal 2017. And to answer your question that were limited installations done in fiscal 2016, they’ll become material to us in the coming year, so we’ll start to segment and show the details as to what we’re signing, what we’re recognizing as revenue gross margin needed up. Sameer Joshi Great. Thanks a lot, and good luck. Pat McCullough Thank you. Rebecca MacDonald Thank you. Well, if there are no more questions, I would like to thank you very much for joining us on this call. As management team, we really really appreciate your support, and if there are any other additional questions, all of us are available, you can call us directly. And look forward to talking to you in August when we report our first quarter. Pat McCullough Thank you. Rebecca MacDonald Thanks. James Lewis Thanks. Operator Thank you. Ladies and gentlemen, this concludes today’s conference. 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Atlantica Yield’s (ABY) CEO Santiago Seage on Q1 2016 Results – Earnings Call Transcript

Atlantica Yield (NASDAQ: ABY ) Q1 2016 Results Earnings Conference Call May 13, 2016, 08:30 AM ET Executives Leire Perez – IR Santiago Seage – CEO Francisco Martinez-Davis – CFO Analysts Stephen Byrd – Morgan Stanley Sean McLoughlin – HSBC Brian Taddeo – Robert W. Baird Operator Ladies and gentlemen, welcome to the Atlantica Yield’s First Quarter 2016 Earnings Presentation Conference Call. Atlantica Yield is a total return company that owns a diversified portfolio of contracted assets in the energy and environment sectors in North and South America and certain markets in EMEA. Atlantica Yield focuses on providing a predictable and growing quarterly dividend to its shareholders. Just a reminder that this call is being webcasted live on the Internet and the replay of this call will be available at the Atlantica Yield Corporate Website, www.atlanticayield com. Joining us for today’s conference call is Santiago Seage, Chief Executive Officer; Francisco Martinez-Davis, Chief Financial Officer and Leire Perez, Director of Investor Relations. 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. Santiago Seage. Please go ahead, sir. Santiago Seage Thank you. Good morning. Thank you, everybody for joining us today in Atlantica Yield’s first quarter 2016 conference call. Please proceed to Slide 3, where we will start the presentation with the key messages. In first place we’re very pleased to announce that we’ve closed our first quarter of the year with excellent operating results in terms of revenue, further adjusted EBITDA and cash generation at the project companies. Our assets in general have shown a very good performance, in line with expectations. In fact, the assets have generated more than $18 million of cash in the quarter. In second place, we’ve generated CAFD, our cash available for distribution in line with expectations taking into account the [visual] of the first quarter and it’s seasonality. With this, we’re on track to meet our guidance for 2016 in all the metrics shared at the beginning of the year. In addition, we have made good progress when working towards achieving full autonomy from our sponsor and managing our sponsor-related risks. Regarding waivers that we require in our project finance agreements, we continue our negotiations with lenders in order to obtain those waivers on the cross default provisions and we have additionally secured four more waivers regarding our sponsor ownership in Atlantica. We still have clearly significant work to be done, but we’ve made very important progress on these very important fronts of increasing autonomy and securing the waivers required in our project finance agreements. And finally we would like to spend some time at the end of the presentation regarding our view of the evaluation versus the price of our equity to date. We consider that the intrinsic value of our current portfolio even without including any growth is not reflected in the current share price. In fact we do plan to grow, as we explained in our last quarterly presentation, we do plan to grow towards the end of the year and in 2017 and we believe that that is not reflected either in the current price. With that, if we turn to Page 6 in the presentation, we’re going to now review the main results for the quarter. As you can see, in the first quarter we’ve achieved what we consider our excellent results first, on revenues where we have recorded $206 million in revenues representing a 74% increase period-over-period. Further adjusted EBITDA has reached $155 million compared with $105 million in the same quarter of 2015. The decrease that you see that in EBITDA margin has been mainly due to fact that our mix of assets is different now and to the fact that we have not received in the first quarter of 2016 our dividend from the preferred equity investment in Brazil. Additionally, we have generated $18.7 million of cash available for distribution in the quarter, including a one-time impact of $14.9 million coming from the partial refinancing of a project ATN 2 specifically. As we will see later CAFD in first quarter of the year is typically lower than in the rest of the quarters due to seasonality in cash distributions. In fact our CAFD in the month of April has already been similar to the complete Q1. On Slide 7, you can see our revenues and further adjusted EBITDA breakdown by geography and business sector, showing good results across all segments and all geographies. In our EMEA region, the very high growth is driven by the integration of recent acquisitions as well as operational excellence in many of these mature assets. In North America, the increasing revenue was mainly driven by higher production in our two solar plants in the U.S, Solana and Mojave. In South America, growth was mainly explained by the acquisition of our last transmission line in Peru, ATN2. Looking at further adjusted EBITDA margins, you can see the impact of not receiving the dividend in Brazil that I mentioned before and looking at the results by business sector, we can see that in renewable energy, revenues have more than doubled, thanks to the acquisitions made during last year, while in conventional power, our asset in Mexico as ACT continues delivering excellent results above expectations. In transmission lines, higher revenues are driven primarily by the acquisition of the line I mentioned before in Peru, during 2015. And finally Water assets have delivered again very good results. Moving on Slide Number 8, the good financial results are based on the solid overall operating performance of our portfolio. Within renewable, collection reached 514 Gigawatt hours in this quarter, compared to 319 Gigawatt hours in the same quarter last year. Our Solar assets achieved operating results in line or above expectations during the quarter. In Solana, we are currently implementing the previously announced enhancements needed at the plant. We still have significant work in front of us to improve and optimize these assets. Mojave, has delivered very good results in the quarter after scheduled stop for maintenance in the month of January. In fact, in February and March in many days Mojave has been able to beat the technical model, respected technical capacity. Kaxu, our asset in South Africa has completed its first year of operations, exceeding expectations for the quarter, thanks partially to very high levels of summer solar aviation. Finally in Spain, our portfolio of solar assets has continued to demonstrate very strong performance and maturity. Wind assets have shown very good operating results although wind has been lower than expected in the first quarter due El Niño phenomenon. In April, on the contrary we have had a very good month in terms of wind resource and the assets have been producing above expectations. Our conventional power generating facility in Mexico as I mentioned before, exceeded its contractual targets and in spite of the fact that they have scheduled maintenance stop during the quarter. Finally our recognition lines and water plants have either comfortably achieved or exceeded forecasted availability levels. I will now turn the call to Francisco who have been called today and is going to try to go through the financial metrics. Francisco Martinez-Davis Thank you very much, Santiago. On Slide 9, we have included updated guidance on our EBITDA and CAFD seasonality. Regarding EBITDA, seasonality in solar assets in the U.S. and Spain is balanced by our availability based contracts in conventional, transmission line and water segments, which provide stability to the portfolio and also by wind assets and the South African solar plant, both delivering higher EBITDA in quarter one and quarter four, both the solar assets that peaked in quarter two and in quarter three. In our cash flow and our cash available for distribution however, seasonality is higher. As you know with the fine cash available for distribution, as cash distributed from project companies to Atlantica Yield holding level, less corporate G&A and corporate interests. In most of our projects, cash distribution from project companies occur as specific times of the year defined in general by the terms of our project financing agreements. As a result CAFD is typically lower in the first quarter and higher in the third quarter of the year. On Slide 10 as you can see, we have achieved operating cash flow of nearly $85 million during the first quarter of that year, a significant increase with respect to the first quarter of last year increase. The increase is driven by good cash generation of assets acquired during 2015. Investing cash flow corresponds mainly to the scheduled closing of the transaction of our 13% stake in Solar Corp One and Two that we announced in 2015 and movements in our restricted cash accounts classified in financial investments. Financing cash flow includes $14.9 million of proceeds from the partial refinancing of ATN2 and scheduled principal debt repayments. Moving on to the next Slide page 11, our total liquidity has increased by approximately $76 million to $667 million, thanks to a strong cash generation by our project companies. Our total liquidity includes $45.4 million of corporate cash at Atlantica Yield, $529.4 million of cash at project companies of which $210 million are restricted and a further $93 million are also restricted in the form of short term financial investments. As you know, we’ve currently negotiated with some of our lenders several waivers and as we explained on our 2015 result presentation, we expect that the final outcome will require us to maintain some additional cash at the project level. Taking a conservative approach, we have classified as restricted cash our best estimate at this time, which explains the increase in restricted cash. Despite this reclassification our unrestricted cash at the project companies have a healthy increase of $41 million. Turning to Slide 12, we have included a reconciliation of our corporate cash from December 31, 2015, till the end of March. As you can see our corporate cash position has remained constant. In the first place, our project companies generated $87.5 during the quarter after servicing their debt obligations. From that amount we used $34.4 million to increase our restricted cash accounts as we have explained earlier. In additional — in addition, our available cash at the project companies increased by $41.1 million as you know we define cash available for distribution as cash that is distributed from project companies to Atlantica Yield holding company level. Given that these distributions are lower in the first quarter due to seasonality, there is an increase in cash that as of March 31 is sitting at project companies. Furthermore we paid $8.5 million in G&A and corporate interest and we have obtained $14.9 million from the partial refinancing of ATN2 as we previously explained. Finally we used $19.1 million to close acquisition of our 13% stake in Solar Corp 1 and 2 from JGC our Japanese Partner in the project. As a reminder Solar Corp 1 and 2 is a 100 megawatt solar assets in Spain where we already own 74% and this acquisition was part of our fourth round of acquisitions announced in 2015. The following slide on Slide 13 you can see the details of our net deposition, which consists of net corporate debt of $625 million and net project debt of $5.1 billion. Net debt increased from December 31, 2015, mainly due to the $113 million of translation differences in our Europe denominated project debt. With these levels of corporate leverage and considering our expected CAFD before corporate interest for 2016, our corporate leverage continues to be below three times CAFD. As you know our strategy is to use non-recourse project financing in all assets. We intend to limit corporate debt. Thank you very much for your attention and now I’ll pass it back to Santiago. Santiago Seage Thank you, Francisco. So in summary, regarding results for the quarter, a very strong quarter in terms of revenues EBITDA but also cash generation at the project level where part of that is in CAFD this quarter and the rest we will seen as CAFD in the remaining quarters when we distribute that cash from the project companies to the holding level. We are now going to continue with the second quarter representation on Page 15, where we want to update you regarding our progress to mitigate risks from our sponsor and to achieve autonomy in all dimensions. As we announced in our last earnings call in the first half of 2016, our focus remains on execution, executing on these, obviously on operational performance, but also executing regarding autonomy from the sponsor and risk mitigation. In terms of risks, the one we have been talking about now for a couple of quarters are the waivers that we require in some of our project finance agreements. As you know there are two types of waivers, the first one repairs to cross default closes with our sponsor. At this point in time, we have four assets where these provisions still apply, Solana, Mojave, Kaxu and Cadonal, our negotiations are ongoing and we are optimistic regarding the resolution of these waivers or a clear majority of these waivers. Regarding the second type of waivers, those that are related to a sponsor ownership minimum levels in some of our projects, we have made significant progress and we have obtained another four waivers for our projects. Therefore in total, we now have waivers for 10 of the projects, regarding a sponsor ownership and we are working towards achieving the remaining 10 waivers. Overall, progress has been good and we are relevant, but we still need some time to reach our objectives in terms of waivers. In second place, regarding our preferred equity investment in Brazil, in April Abengoa has presented a consolidated restructuring plan in front of the Court in Brazil on behalf of the company where we own a preferred equity investment and on behalf of two other of their subsidiaries. We therefore continue working on defending our interests and as you know we additionally have a right to retain dividends to Abengoa and their certain scenarios. In terms of our process of gaining autonomy from our sponsor, our back office operation is in a very advanced stage. Additionally regarding IT separation, we have created an experienced team in house that is working together with external consultants and we expect to finish this separation process before the end of the year. Finally our Annual Shareholders Meetings approved last Wednesday the change our legal name to Atlantica Yield PLC as expected. On Slide 16, regarding dividend, in February 2016 so we informed you, our Board of Directors decided to postpone the decision regarding the fourth quarter 2015 dividend. Considering the uncertainties caused by Abengoa’s situation, the Board has now decided not to declare it. Regarding the dividend corresponding to the first quarter of 2016, the Board of Directors have decided to postpone the decision on that dividend until we have obtained a sufficient number of waivers, a majority of — a clear majority of those waivers. We know that this is a very sensitive topic and we know that many of our shareholders have a strong point of view regarding dividend. However, at this point time the Board of Directors considers that this is the best option to protect the value of the company and to position the company for successful 2016. We currently — in fact we currently expect that in our next quarterly results presentation, we will have achieved enough waivers. Additionally, we currently expect to meet our guidance regarding dividends and to be clear, four quarterly dividends corresponding to their respective quarters in 2016. Going to Slide 17, we want to finish today’s presentation with a few comments regarding the evaluation or the value in the market of our stock. In our opinion, as I mentioned at the beginning, the stock price does not reflect the intrinsic value of the existing assets in our portfolio even if we do not include any growth whatsoever. In fact we believe that if you perform let’s say a bottom-up DCA evaluation of our portfolio, you should arrive to a significantly higher number than our market price. Additionally, as Management we believe that we will be able to grow accretively towards the end of the year and in 2017 and going forward. We do have and we are working on a number of significant opportunities for equity growth and we plan to push you some of them starting with the smaller ones toward the end of the year. On Slide 18, we want to show you some data that you’re obviously familiar with, but we want to point out that currently our shares are trading well below our accounting equity book value. In fact if you look at our financial statements, our total equity book value is close to $2 billion. If we deduct non-controlling interests, which does not belong to us and you add the cash grants collected in the past, this as you know is our cash collected that we don’t have to reimburse, we get to an equity book value per share, which is close to $27. Obviously we felt including any growth as I started with the equity book value. This demonstrates that our shares or we believe that this demonstrates that our shares are currently trading significantly below this accounting book value. In fact, today, our market capitalization is around 60% of the equity book value, including cash grants. On Slide 19, we have presented another way to look at the same situation. If you look at our run rate CAFD, that we expect from the existing portfolio, you remember that these numbers, these were shared in the last quarterly presentation, the number we shared was between $205 million and $215 million. If you compare that with our current market cap, you will see that our CAFD yield is around that 13% without considering any improvement in existing assets beyond run rate without considering any refinancing without considering any growth ever again. Now if you remember that many of our long-term PPAs have inflation based price increase provisions or if you can see there that the assets can be optimized going forward, or if you consider that at some point in time, we should be able to grow quickly again, either from third parties, from our current sponsorer or from other sponsorers, we believe that the CAFD yield of 13% shows that there is a gap here between value and price. We obviously understand that in order for you to see — for you investors to see these valuation gaps, we need to help those of you who run the models. In fact, we have been working on recommendation from many of you and in the appendix of this presentation, you will find some additional disclosures regarding the number of areas that we believe will help you in your evaluations. One of the important point for us is the cost of equity that you use when you do your discounted cash flow evaluations. We believe that in our case, company that owns assets contracted in the long term that are in operation, the right way to calculate the cost of equity is by taking the cost of debt of our offtakers, remember that in most cases, our offtakers have bonds trading in the market and our finance team has spend some time putting together averages of the yields of those bonds few days ago and providing you in the appendix averages for each of our offtakers. We believe that, that cost of debt plus has more risk premium operating risk premium, however you want to call it is the right way to come up with a cost of equity for our portfolio that makes sense. Like always teams available for questions regarding these or the additional disclosures of any topics. In fact, next week we plan to spend time in New York and Boston meeting investors and we will be happy to guide you through these questions. With this, I would conclude the presentation of our first quarter 2016 results and leave the call open for questions. Thanks a lot for your attention. Operator, we’re ready for Q&A. Question-and-Answer Session Operator [Operator Instructions] First question comes from Stephen Byrd from Morgan Stanley. Please go ahead sir. Stephen Byrd Hi, thanks for taking my questions. I wanted to start with what you mentioned about dividend payments, it’s encouraging that you believe by next quarter you’ll have enough waivers to pay dividend and you made a statement that the intention is to pay four quarterly dividends in 2016. I was just a little confused, does that effectively mean that you would target catch-up payments for the quarters that weren’t paid such that you did have four payments or did it mean something else, I just wasn’t sure? Santiago Seage Okay. What I said is that our current intention obviously subject to all the things I mentioned before is to be four dividends corresponding to each of the quarters in 2016. Obviously, the last one would be a dividend declared for the fourth quarter, which is payable in the following year. Stephen Byrd Understood, but if you’re not paying a dividend in the first quarter, would you then have a one additional payment in the calendar year ’16 or how would that given that you’re going to be off by one payment, how would that play out? Santiago Seage Let me try to explain myself again. Our intention if things work as I explained before would be to declare a dividend for the first dividend for the first quarter later then usually, but it would still be a dividend let’s say from a business point of you corresponding to the first quarter. Stephen Byrd Perfect, that’s very clear, that’s great. Wanted to shift over to Solana, could you just give us a little more detail on the status of operations towards time to have that asset performing as you want? What sort of risk around being able to have that asset being fully at the level you expect do you see? Santiago Seage At this point time as I mentioned in the call, we are implementing a number of enhancements of improvements that we have been discussing for the last few months. Our expectation at this point in time is that this is going to take a few months this year. We’re not going to — we don’t expect to see Solana this year, reaching run rate and we expect that with improvements we are making now, next year we should be at or very close to run rate. That’s our current expectation. Obviously with the caveats that we’re still implementing those changes. Stephen Byrd Understood, and thus your guidance reflect Solana not being at full operations in 2016? Santiago Seage I didn’t understand you sorry? Stephen Byrd In terms of your expectations for cash flow for 2016 how are you to factor in… Santiago Seage Yes, it was factoring. So, I’m talking versus our rate. I’m not talking versus our expectations or our guidance. Stephen Byrd Understood, understood. Just one last one and I’ll go back into the queue, you had given a restricted cash estimate, which was helpful for us to understand the amount of cash that you would expect to be restricted from negotiation. Does that include an estimate for all projects in terms of what you expect I guess it’s $210 million. Is that sort of your best estimate of total restricted cash following all negotiations or is that just for some of those negotiations? Santiago Seage We, as Francisco explained, we have included an estimation which is our current best estimation for all the assets where we believe we might end up having to restrain some cash. Stephen Byrd That’s great. Thanks very much. I’ll get back in the queue. Operator Next question comes from Sean McLoughlin from HSBC. Please go ahead sir. Sean McLoughlin Thank you. Two questions for me. In highlighting the difference between what you perceive is your value in how the markets sees, have you considered a possible sale of assets to try to crystallize in the market to the value that you hold in your portfolio? And secondly, I wanted just an update on the ONM side at what stage are you in let’s say fully detaching Abengoa from the disposed and when you expect that to be completed and any let’s say short term operational concerns that that we should be aware of related to this? Thanks. Santiago Seage Thank you. Regarding the facility of selling an asset or assets in order to demonstrate the value in the portfolio, this is clearly an option that as a Board we need to consider. At this point in time we’re not engaged in proactive process to do this. The way we think about this is as we shared with the market the first half of the year is about focusing on execution, managing the risks and the autonomy. We expect that with that, the price should start to reflect that. Now if at some point time in the future, in a few quarter from now, we have not seen improvement regarding the price, we’ll need to consider all options to demonstrate the value in our portfolio and what you mention selling an asset is clearly one of the options but it’s an option we would consider as Management as an Board of Directors. For some time we can leave with this location, but we cannot leave with this location forever as you can imagine and therefore we will take whatever action is required to demonstrate the value of the portfolio. Regarding your second question, you were asking about operation and maintenance contracts where Abengoa is providing that service. As of today Abengoa is performing in those contacts and therefore we do not plan and we cannot cancel existing contracts for operation and maintenance. What we have built as you know are back-up plans in case that at some point in time in any of the assets where they are the operator, they would not perform and those plants are in place, but as of today, Abengoa is performing in this activity vis-à-vis our assets and in fact the numbers regarding the quarter or regarding April show that at this point in time we don’t have issues on that front. Back office is separate — is different. In back office functions, we are totaling splitting things. In ONM for the moment we’re keeping the contracts we have. Sean McLoughlin Okay. Thank you. Operator Next question comes from Stephen Byrd from Morgan Stanley. Please go ahead sir. Stephen Byrd Yes. I just wanted to touch on the guidance that you had laid out on the last call, where you did indicated 2016 given $1.45 to $1.80 a share are you still in line with that guidance? Santiago Seage As I mentioned, during the call, we’re keeping the guidance we gave last quarter, which are the numbers you mentioned. Stephen Byrd Okay. That’s great. Just going to my list again, the ownership waivers you mentioned, I think you have — you’ve collected 10 waivers and I just wondered if in those waivers that you’ve already collected for the ownership, are some of the major projects in that group of waivers? Santiago Seage So, we do have 10 out of 20 and some of the larger assets are not in that list. So, some of the larger assets are — we’re still working on them. Stephen Byrd Okay. That’s great. I guess just going back to the prior questions on ONM costs, as you look at overall, I just wanted to make sure I understood at a high level, the cost that you see, do you see any unforeseen issues in terms of the ONM cost structure that’s all have as a separate company? Santiago Seage At point in time, we do not expect any significant change in any scenario from our cost point of view. We don’t expect higher cost. We don’t expect a lower cost. Stephen Byrd Okay. That’s great and then just last one for me, in terms of the cash from the refinancing, I just want to make sure I heard that correct, was that $14.9 million that you received from the refinancing? Santiago Seage That’s correct. Stephen Byrd Okay. That’s great. That’s all I have. Thank you. Operator Next question comes from Brian Taddeo from Baird. Please go ahead sir. Brian Taddeo Good morning. Couple for me. One more as a percentage to kind of the separation. I think on last call, you talked about migrating some of the FX contracts from Abengoa to third parties. Can you just give us an update as to where that stands? Francisco Martinez-Davis Hello, it’s Francisco Martinez-Davis. We currently have five-year hedge agreement with Abengoa. They’re still in place. That is an agreement under the financial support agreement that will continue. Once Abengoa is restructured and what we have done and we mentioned in the call if we’ve evaluated different alternatives in case Abengoa was not there to provide the service, we’ve had received other operators that we will coverage on CAFD coming out in years. So we do have a backup plan if needed. Brian Taddeo So you’re certainly not looking to move them over unless Abengoa does not perform is the situation as I understand it. Francisco Martinez-Davis That is correct. Brian Taddeo Okay. Another question with regard to the ongoing — receiving the ongoing waivers, it’s good to hear you expect to have a lot of them by next quarter, what is the time horizon, when does it become an issue if you don’t have them done by the end of the second quarter, does that become an issue or what sort of leeway do you used to have in terms of timing to get those done? Santiago Seage So what we’re asking for here are something I would define without being a lawyer, sorry for that, as if we end this waiver. So the event did not happen, but we’re asking for a waiver regarding a potential change in ownership. As you know, Abengoa today owns 41% of the company, therefore there is no event of nothing, but we’re preemptively approaching all lenders saying can you give me a waiver today for an event that might happen in the future. Therefore if Abengoa continued having their 41%, we could go on like this for a long time, but obviously Abengoa sold or lost part of their shares there would be a reason for asking for that waiver. Brian Taddeo How about on the four remaining financial waivers as well? Santiago Seage It’s the same thing. So we have approached as well asking can you give me a waiver because there is a cross default there. We have potential default by this mantra. Brian Taddeo Okay. And then another one with regard to the your CAFD guidance for the year, can you just remind us how much of that is tied to the operational cash flow versus how much of that is tied to refinancing of project that cash coming back? Santiago Seage So in principle, the guidance we gave you obviously is for operational CAFD, We, at this point in time we are on plan to do any other refinancing but the one you saw in the Q1. Brian Taddeo So was that $14 million, is that in the annual CAFD number? Santiago Seage $14.9 million, yes. Brian Taddeo Okay. So that’s part of the original guidance. Santiago Seage Well obviously when we did the guidance, we didn’t count on this. Therefore, later in the year, we will need to see if we can increase the guidance, thanks to this one-off or not, but we didn’t count on our refinancing when we calculated our guidance. We normally do guidance based on ongoing CAFD without one-offs. Brian Taddeo Okay. So the way I should understand that is really operational at this point is about $14 million lower and then we’ll assess as the year goes on. Santiago Seage Well the way I would look at it is, we might be able to increase our CAFD guidance later in the year because we did have a one-off or we’re in $14.9 million more conservative than what some investors would like us to be. Brian Taddeo Got you. Okay. And then one last one for me, as you talk about the growth potential at the end of year under $17 million, is that — would you expect that being done via M&A or organic growth and then how would think about funding any of those possibilities? Santiago Seage So the pipeline we’re looking at now especially for the end of the year is made up of a small acquisitions in much less competitive environment than larger acquisitions and therefore regarding financing, we could be considering either some cash at hand or a small transaction somewhere. We’re not thinking about doing any large transaction. We want to go back to growth by making sure that we show to investors that we know how to do growth equitably and we believe at least in the short term it’s going to be much easier to do equity growth, do small transactions where some of our big competitors are not spending their time, Brian Taddeo Okay. Thank you very much for all the information. Operator There are no further questions. Thank you. Santiago Seage Okay. Then thanks to everybody and as I mentioned before, we’ll be in New York and Boston couple of days next week. If you want to meet us, let us know. Thank you very much operator. Operator Ladies and gentlemen, this now concludes our conference call. You may now disconnect your lines. Thank you. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. 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