ContourGlobal plc (LON:GLO), an international owner and operator of contracted power generating assets, has today announced its full year results for the year ended 31 December 2019.
- Strong financial performance with Adjusted EBITDA +15% to $703 million, Funds from Operations +12% to $338 million and Income from Operations +11.5% to $292 million
- Acquisitions and strong operational performance driving cash generation and growth
- Quarterly dividend of $24.75 million, with dividend cover of 2.2x. Maintaining and reaffirming annual 10% dividend increase
- Kosovo project will not proceed as it cannot be concluded by the 24 May 2020 required project completion date. No further investment in coal
- Mexico acquisition closed in November 2019, adding $110 million of annualized Adjusted EBITDA
Joseph C. Brandt, President and Chief Executive Officer of ContourGlobal, said:
“2019 was a strong year in all aspects of our business. Our first priority is always health and safety. In 2019 our Lost Time Incident Rate was an industry leading 0.03 and we passed 442 continuous days without an LTI. These are notable achievements and we remain committed to Target Zero. Health and safety performance is achieved through operating excellence, which is also the key to financial results. In 2019, due to very good operational performance and new business acquisitions, we delivered a 12% increase in Funds from Operations to $338 million and Adjusted EBITDA rose 15% to $703 million.
The consistent, contracted cash generation of our business allows us to continue to deliver our long-term commitment to shareholders, including an annual 10% increase in our dividend. Today we announce a quarterly dividend of $24.75 million, or 3.6901 cents per share.
We maintain our focus on growing the business and efficiently using capital. During the year, we completed an extremely successful ‘farm down’ of our Spanish Concentrated Solar Power business, and closed the highly attractive acquisition of two gas-fired combined heat and power plants in Mexico.
We announce today that the Kosova e Re project cannot go forward. The political situation in Kosovo since July, the recent formation of a government led by a Prime Minister publicly opposed to the project and the government’s inaction have made it impossible for the project to meet the required milestones by its project completion date. As we have stated in the past, Kosovo was to have been our last coal development project. We will not develop or acquire coal power plants in the future and, with only one majority-controlled coal project in our 107 power plant portfolio, we are increasingly reducing our carbon emission intensity.
We are positive about the outlook. Electricity supply requires over $1.5 trillion of annual investment over the next decade. Most of this investment will be in renewable generation and low-carbon base-load generation such as natural gas and combined heat and power. Our skill set and track record makes us well placed to take advantage of this growth.
As an example of low-carbon innovation, last month, we inaugurated a wind, battery and fuel oil system in Bonaire. We are able to reduce cost for the customer, lower carbon emissions and enhance the potential of the renewable content. We see many opportunities for further growth, including organic, greenfield and acquisitions.”
Dividend – on target with 10% annual dividend increase
- A fourth quarterly dividend of $24.75 million, or 3.6901 cents per share, to be paid on 9 April 2020
- A total of $99 million has been declared for 2019, an increase of 10% on 2018, in line with dividend policy
Project pipeline and strong future growth
- Successfully closed acquisition of Mexican CHP in November 2019. Adding $110 million of Adjusted EBITDA on annual basis. Integration is proceeding according to plan
- The Kosova e Re project cannot proceed, as set out above. The Company will not pursue any other new coal projects, or acquisitions, in the future
- The Company constantly seeks opportunities to optimize its portfolio and recycle capital, creating additional value to investors
o Sold 49% stake in Spanish CSP in May 2019 for €134 million, contributing a $52 million gain to Adjusted EBITDA
Financials – maintaining strong cashflow and balance sheet
- Strong cashflow generation with Funds from Operations up 12% to $338m and cash conversion at 48%.
- Adjusted EBITDA up 15% to $703m, driven by the Renewable division, including the farm-down of the Spanish CSP business and overall good resource. Thermal division EBITDA was stable year-on-year, with growth coming from the Mexican CHP acquisition in November 2019
- Income from operations up 12% to $292m mainly due to the full year impact of the Spanish CSP acquisition and the Mexican CHP acquisition, slightly offset by the acquisition-related costs for the Mexican CHP
- An impairment has been recognized against the Kosovo project of $12 million, recoverable costs of $22 million remain on the balance sheet
- In July 2019 we issued €100 million 4.125% secured notes due 2025 at 106.0% of par corresponding to a yield of maturity of 3.024%, the lowest ever. The proceeds are to be used to fund future growth
- $3.5bn Net Debt as at 31 December 2019. Net Debt to EBITDA ratio unchanged at 4.4x, in line with guidance of 4.0x to 4.5x
- Parent Company Free Cash Flow of $213 million, providing dividend cover of over 2x
- To date we have not experienced meaningful disruption to our operations resulting from COVID-19 and do not currently expect material disruption in 2020
- Our office-based employees have increasingly been working remotely since February 20 when we closed our Milan office. The group has a distributed office strategy rather than a single headquarters and the company’s nine senior executives are based in five different cities
- Power plant operations have to date been unaffected by the spread of COVID-19. The company has taken various proactive measures related to power plant shifts, remote monitoring and operating technology and critical spares and inventory. Each of the company’s power plants and offices are interconnected with video, audio and data
- The Company does not face any near-term refinancing requirements and has ample liquidity at the parent company and in its projects. The vast majority of our debt, $3.1 billion, is at the project level and amortizes over time. There are only immaterial bullet maturities of our project financing debt due in the next several years. At the parent level the company has issued corporate notes, €450 million maturing in 2023 and €400 million maturing in 2025
- The current wider market uncertainty has not impacted our cashflows. Our budgets for the full year remain stable and on the basis of our contracted and regulatory revenues we expect 2020 Adjusted EBITDA to be between $710 million to $745 million, benefiting from the full year of the Mexican CHP acquisition, completed on 25 November 2019
- Continuing to see opportunities for further accretive M&A and development in core markets
- Maintaining 10% annual dividend growth target