Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Polaris Renewable Energy Inc (RAMPF, Financial) reported stable power production at its San Jacinto facility, marking the best quarter in the last four quarters despite maintenance activities earlier in the year.
- The company announced a new acquisition of a 26 MW wind farm in Puerto Rico, which is expected to enhance its portfolio and provide growth opportunities in the renewable energy sector.
- Polaris Renewable Energy Inc (RAMPF) has a strong cash position, allowing it to fund acquisitions like Punta Lima without raising additional equity.
- The company has secured a contract for its Panama solar park, ensuring 100% of production is contracted at favorable pricing, which provides revenue stability.
- Polaris Renewable Energy Inc (RAMPF) plans to issue a green bond, which could significantly increase cash flow per share without the need for equity dilution, positioning the company for further growth and debt repayment.
Negative Points
- Power production in Nicaragua and Peru was lower compared to the same period last year, attributed to seasonal factors and maintenance activities.
- Net earnings for the quarter decreased to $480,000 from $1 million in the same period last year, indicating a decline in profitability.
- Cash generation from operating activities was lower due to reduced cash receipts from Nicaragua and recognition of unearned revenue in Peru.
- The company faces uncertainties related to the approval of its new acquisition by the local regulator in Puerto Rico, which could impact the timing of the deal closure.
- Polaris Renewable Energy Inc (RAMPF) has to implement a battery energy storage system in Puerto Rico within two years, which could require additional capital expenditure.
Q & A Highlights
Q: Can you provide more details on the timing and capital deployment for expansion opportunities in Puerto Rico?
A: We anticipate closing the acquisition by March, pending PREPA approval. Post-closing, we plan to seek approval for expansion, potentially in phases. The site supports significant energy increases, likely starting with a 10-20 MW solar addition, followed by larger expansions. The transmission capacity exceeds 100 MW, offering substantial growth potential over the next few years. β Marc Murnaghan, CEO
Q: How do you prioritize expansion opportunities between Puerto Rico and the Dominican Republic?
A: Puerto Rico's PPA prices are about 10% higher, making it slightly more attractive. However, both opportunities are close in terms of returns, and we plan to advance both projects simultaneously. The Puerto Rican market signals strong demand for renewables, which is encouraging for future developments. β Marc Murnaghan, CEO
Q: Can you update us on the potential bond issuance and its terms?
A: We aim to repay the San Jacinto loan and are considering a bond issuance between $150 million and $200 million. The fixed income market prefers scale, and recent upgrades in Nicaragua's credit rating are favorable. We seek non-amortizing debt to optimize our capital structure, focusing on maintaining a low debt-to-EBITDA ratio. β Marc Murnaghan, CEO
Q: What are the insurance arrangements for the Punta Lima wind farm, especially considering past storm damage?
A: The turbines are newer models with design improvements, and the project is fully insured against natural catastrophes and revenue loss. We believe the current insurance is somewhat overextended and plan to adjust it to align with our investment value, potentially reducing costs. β Marc Murnaghan, CEO
Q: How does the tax equity structure at Punta Lima affect financial reporting and earnings?
A: We will consolidate 100% of the revenue and costs, with a 6% minority interest reflecting the tax equity partner's share. This structure will be similar to our operations in Ecuador, with adjustments for tax equity accounting. β Marc Murnaghan, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
