Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MPC Energy Solutions NV (STU:5IX, Financial) reported significant year-over-year increases in energy output, revenue, and operating profits, surpassing the full-year numbers of 2023 by the end of September 2024.
- The company successfully implemented a cost-cutting program, reducing overhead by 30% year-over-year, which is contributing to improved financial performance.
- The construction of a major solar PV plant in Guatemala is underway, expected to nearly double the company's capacity and financial metrics by mid-next year.
- Operating margins in Colombia have improved significantly, with the Los Ira Soles project recovering from previous setbacks and achieving a 36% operating margin.
- MPC Energy Solutions NV (STU:5IX) maintains a low leverage on its balance sheet compared to peers, providing a certain upside in a high-interest rate environment.
Negative Points
- The company's CHP plant in Puerto Rico is facing deteriorating demand, leading to a forced sale at a valuation significantly below book value, resulting in anticipated impairments.
- MPC Energy Solutions NV (STU:5IX) is taking a non-cash impairment of around $1.7 million due to challenges faced by its investment in Internet Global, a project developer.
- The free cash position decreased due to tax prepayments, although the company expects cash inflows from divestment activities by year-end.
- The company has lowered its year-end guidance for revenue and EBITDA due to halted production in Puerto Rico, despite strong performance from other plants.
- The adjusted EPS remains negative, although it shows improvement compared to the previous year, indicating ongoing financial challenges.
Q & A Highlights
Q: Your free cash position has decreased. How much money do you expect to come in from different divestment activities you are currently pursuing? And what is the timeline?
A: The potential sales we are currently looking at amount to around $25 million, including Colombian assets and the forced sale in Puerto Rico. We expect over $4 million to flow back this year from these sales, with the larger Colombian projects potentially concluding by Q3 of next year. Additionally, we anticipate $300,000 from our El Salvador project this year.
Q: Can you elaborate on the impairment you expect from the sale in Puerto Rico, the sales price that you're expecting, and the other impairments?
A: The remaining book value of the Puerto Rico asset is around USD 8.3 million. We expect to recover about half of this, resulting in a substantial write-off. Other impairments are on discontinued projects in Colombia and Jamaica. However, some projects, like those in El Salvador and Guatemala, have higher values than reflected in our books.
Q: What is the status of construction and your coinvestor search for the Guatemala project?
A: Construction is 50% complete, with all materials on site and module installation about to begin. We remain on schedule to connect by mid-next year and are still within budget. Due diligence for potential deals is ongoing, and updates will be provided when available.
Q: What is the sustainable energy price for the El Salvador plant?
A: Currently, the price is around $130 per megawatt hour, trading at a 16% discount to the reference tariff. We expect the price to remain between $105 and $110 per megawatt hour, driven by regional water reserve levels affecting hydropower plants.
Q: Do you have to invest a further part of your free cash for the San Patricio project?
A: No, the project is fully funded. We invested USD 8.5 million in equity, and the bank is providing around $30 million in debt. The equity portion has been invested, and further costs will be covered by the bank.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
