TerraForm Power, Inc. (NASDAQ:TERP) Q1 2019 Earnings Conference Call Transcript

May 10, 2019 • 09:00 am ET


TerraForm Power, Inc. (NASDAQ:TERP) Q1 2019 Earnings Conference Call Transcript


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Good day, ladies and gentlemen, and welcome to the TerraForm Power 2019 First Quarter Results Webcast and conference call for investors and analysts. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Chad Reed, Head of Investor Relations. You may begin.

Chad Reed

Thank you, operator. Good morning, everyone, and thank you for joining us for our 2019 first quarter 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 would like to remind you that a copy of our earnings release, supplemental information and letter to shareholders can be found on our website. Note also 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 the 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. In the first quarter of 2019, TerraForm Power generated CAFD of $44 million compared to $23 million in the same period of the prior year. In addition to the contribution from the Saeta acquisition, the increase in CAFD reflects the ramp up of the completed margin enhancement initiatives that we began implementing last year. In August 2018, we have secured a framework O&M agreement with GE to whom we are transitioning the operations of our entire North American wind fleet. Also in late 2018, we completed our solar performance improvement plans. We're pleased to report that these initiatives contributed $6 million of CAFD in accordance with expectations.

First, compared to the first quarter of 2018, the O&M expense for our North American fleet -- wind fleet declined by $2 million as a result of turning over operations of six wind farms to GE at the beginning of the quarter. Second, we accrued $2 million of incremental margin under our long-term service agreements at a number of wind farms, including KWP in Hawaii, demonstrating the performance-related benefit of these new contracts. And finally, adjusting for resourcing curtailment, our solar farms produced 14-gigawatt hours more electricity in the first quarter than the prior year. This translates to approximately $2 million in incremental revenue. Once fully implemented, which we expect will occur by mid-2019, we anticipate that these completed margin initiatives would increase CAFD by over $40 million per year.

Note, that the progress summarized above does not include additional cost savings from our Spanish wind fleet. As a result of termination of the O&M contract with the