TerraForm Power, Inc. (NASDAQ:TERP) Q4 2018 Earnings Conference Call Transcript

Mar 15, 2019 • 09:00 am ET


TerraForm Power, Inc. (NASDAQ:TERP) Q4 2018 Earnings Conference Call Transcript


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Good day, ladies and gentlemen, and welcome to TerraForm Power 2018 Fourth Quarter and Full-Year Results. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, today's call is being recorded.

I would now like to turn the call over to Mr. Chad Reed, Head of Investor Relations. Sir, you may begin.

Chad Reed

Thank you, operator. Good morning, everyone, and thank you for joining us for our 2018 full-year results conference call. I'm joined today by John Stinebaugh, our Chief Executive Officer; and Michael Tebbutt, our Chief Financial Officer.

Before we begin, I'd like to remind you that a copy of our earnings release, supplemental information and letter to shareholders can be found on our website. Also available on our website is an updated corporate profile. I want to remind you that we may make forward-looking statements on this call. These forward-looking statements are subject to known and unknown risks, and our actual results may differ materially. For more information, you're encouraged to review the Risk Factors section in our SEC filings, which can be found on our website.

In addition, we will refer to non-GAAP financial measures. For more information on a reconciliation of these non-GAAP measures to comparable GAAP measures, please refer to our earnings release and supplemental information.

With that, I'll now turn the call over to John.

John Stinebaugh

Thanks, Chad. Upon becoming our sponsor in late 2017, Brookfield articulated its strategy to transform TerraForm Power into a fully-integrated renewable power company that delivers an annual total return in the low-teens to our shareholders.

Total return will be comprised of a dividend yield backed by a payout ratio of 80% to 85% of CAFD and a dividend growth rate of 5% to 8% per year. Three simple pillars underpin our strategy. First, investing on a value basis in operating wind and solar assets in North America and Western Europe. Second, enhancing the value of our existing assets by optimizing costs, increasing revenue and investing in organic growth; and third, strengthening our balance sheet. During 2018, we made significant progress in building the foundation to deliver on this long-term strategy.

We invested $1.2 billion to acquire Saeta, increasing our asset base by 40%. With Saeta, we acquired a 1,000 megawatt portfolio of high-quality wind and solar assets primarily in Spain at a very attractive value, and we established a scale operating platform from which we will continue to build our European operations. When we acquired Saeta, there was considerable uncertainty regarding the reset of the regulatory return in Spain in 2020. We priced the deal such that in a conservative downside case, we would earn a return on equity within our target range of 9% to 11%. Despite uncertainty regarding the elections in Spain that will take place in April of this year, we are optimistic that the outcome will be significantly better than our underwriting assumption, as there is broad-based support for renewable power amongst the political parties in Spain.

In addition, we executed an