AquaVenture Holdings' (WAAS) CEO Doug Brown on Q4 2017 Results - Earnings Call Transcript

AquaVenture Holdings Limited (NYSE:WAAS) Q4 2017 Results Earnings Conference Call March 1, 2018 8:00 AM ET

Executives

Courtney Denihan - Director, IR

Doug Brown - CEO

Tony Ibarguen - President

Lee Muller - CFO

Analysts

Chip Moore - Canaccord

Deane Dray - RBC Capital Markets

Vlad Bystricky - Citi

Vishal Shah - Deutsche Bank

Pavel Molchanov - Raymond James

Operator

Greetings and welcome to AquaVenture Holdings Fourth Quarter and Full Year 2017 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference call over to Courtney Denihan, Director of Investor Relations. Please go ahead.

Courtney Denihan

Thank you, operator. Good morning, everyone. We released our earnings press release this morning and posted a slide presentation to the Investor Relations section of our website at investors.aquaventure.com. We will be referencing the slides during this call. Today’s speakers are Doug Brown, Chief Executive Officer; Tony Ibarguen, President; and Lee Muller, Chief Financial Officer.

Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, beliefs, estimates, plans and prospects including our forecasted 2018 financial results, including the impact of our adoption in 2018 of guidance relating to revenue recognition, expectations regarding future business development and acquisition activities, anticipated impacts and incremental costs related to recent hurricanes, expectations regarding performance, growth, cash flows and margins from recently completed acquisitions, expected margins and the impact thereon from various customer contracts, our strategic focus, the impact of operating results of the timing, size and accounting treatment of acquisitions, statements relating to AquaVenture’s ability to complete the proposed acquisitions on the terms or in the timeframes currently expected, expected purchase price adjustments, the ability of the conditions to closing to be satisfied or waived, and AquaVenture’s ability to successfully integrate and operate acquired businesses or assets, and to achieve the expected financial, including EBITDA contributions from them, in addition to projected EBITDA amounts that the acquired businesses or assets have been forecast using Generally Accepted Accounting Principles and effects for financial statements for the period ended December 31, 2017, such amounts may change significantly as a result of the Company’s adoption in 2018 of guidance under the new accounting pronouncements including those relating to revenue recognition. Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in our financial prospectus dated October 5, 2016 and in our subsequent filings with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements.

In addition, during today’s call, we will discuss non-GAAP measures and other key metrics which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP measures to the most comparable GAAP measure can be found in our earnings release.

I would now like to turn the call over to our Chief Executive Officer, Doug Brown.

Doug Brown

Good morning, and thank you for joining us on today’s call.

On slide 3, I’d like to start today’s call by commenting on some highlights from AquaVenture’s fourth quarter and full-year 2017. Tony will then provide an overview of the operations of our Quench and Seven Seas Water segments. Lee will then walk you through our financial results in more detail. And finally, I will return to provide color on our outlook for 2018 before opening the line to your questions.

AquaVenture had an exciting 2017 completing the strong financial results and progress made against the goals we set out at the beginning of the year. This time last year, I outlined AquaVenture’s continued focus on executing our strategy for growth and revenue and cash flow, which we intended to achieve by expanding existing customer relationships, wining new customers and pursuing strategic acquisitions.

During 2017, we had strong execution, achieving a 24% increase in adjusted EBITDA plus cash collected on our Peru construction contract, on a 6.2% increase in revenues. We expanded our Quench business into Canada and developed new opportunities through our Wellsys acquisition, increasing our presence in the growing point-of-use market. We also optimized our capital structure by refinancing our remaining debt while increasing incremental capital and amending an existing credit facility on more favorable terms.

We executed these objectives while weathering flooding in Peru from two Category 5 hurricanes in the Caribbean. Our recent M&A announcements highlight our continued pursuit of these goals in 2018 by entering into a binding agreement to acquire majority interest in what you expect to be Seven Seas Water’s first African desalination plant and executing additional acquisition agreements in both segments. I could not be more proud of our team who has performed exceptionally well and of the results we were able to deliver, especially in light of the weather-related headwinds. I’m very pleased with the achievements completed during our first full year as a public company and look forward accomplishments in 2018.

In regarding to our financial performance, we reported consolidated revenues of $32.4 million in the fourth quarter, an increase of 8.4% over the prior year period. Adjusted EBITDA of $10.5 million for the quarter was 18% higher than the prior year period. And the combination of adjusted EBITDA and cash collected on the Peru construction contract was $12.5 million for the quarter, an increase of 22.2% over the prior year period.

I’d now like to turn the call over to Tony who will provide an update on both segments.

Tony Ibarguen

Thanks, Doug.

Looking at Seven Seas Water operational highlights and recent developments on slide 4, we previously announced the execution of two acquisition agreements in February. One, a binding agreement with Abengoa Water to purchase a 56% economic interest and again [technical difficulty] desalination plant; and two, an agreement to purchase a desalination plant in Long Island, Bahamas. The Ghanaian desalination plant, which has a capacity to deliver 18.5 million gallons per day of potable water is expected to be Seven Seas Water’s first desal plant in Africa and the largest plant in our portfolio. The base purchase price of approximately $26 million is subject to adjustment in accordance with the terms of the purchase agreement.

While we expect this acquisition to close by the end of the second quarter, there are significant conditions precedent that must first be satisfied. We will continue to keep you updated on our progress towards the completion of this acquisition as well as on our offer to purchase the remaining 44% economic interest.

The Bahamas plant has a design capacity of approximately 200,000 gallons per day of potable water and represents a nice tuck-in within our core Caribbean market. The base purchase price of approximately $3 million would represent approximately six times trailing 12 months EBITDA. This acquisition is anticipated to close within the next two months after receive approval from the Central Bank of the Bahamas and subject to customary closing conditions.

We’re excited about our acquisition activity to start the New Year and look forward to bring you additional news regarding the execution of our growth strategy. We continue to closely monitor the recovery efforts of the Caribbean islands affected by hurricanes Irma and Maria five months after the storms. There are still varying degrees of recovery in the Caribbean. Power has been largely but not completely restored throughout the islands. Hotels are not full of tourists yet but are filled with relief workers who are providing vital assistance and rebuilding efforts. We believe that the recovery efforts are occurring on most islands at a quicker pace than we originally expected. However, in one particular location, St. Maarten, there has been consistently lower water demand following the hurricanes. In St. Maarten, we have contractual mechanisms including required minimum take-or-pay provision that protects us from significant declines in demand. However, we approached our St. Maarten customer to amend the water purchase agreement in the best interest of both parties by extending the contract term in exchange for a reduction in the contractual minimums.

Following that the Council of Ministers in St. Maarten authorized the public health minister to proceed with this proposed amendment that will beginning April 1, 2018, reduce the required minimum monthly water purchase by our customer for three years from 2018 to 2021, in exchange for a three-year extension to the water purchase agreement from 2022 to 2025. The reduced minimum take-or-pay will revert to current volumes thereafter. In addition, the government has the option to extend the lower minimums for an additional two years, which would extend the contract expiration to 2027. This amendment is expected to be finalized during the next few weeks.

Historically, at Seven Seas, we have periodically entered into negotiations with customers to reduce water costs in exchange for expanded capacity, contract extensions or other contract changes that we believe are mutually beneficial. This amendment is consistent with that win-win approach. The forecasted EBITDA impact on our financials will be a maximum reduction of a $0.5 million per year for three years, but may be less depending on actual volume of water consumed. Overall, we are very pleased to have amended an agreement with our St. Maarten customer that extends our long-term partnership on mutually beneficial terms that helps them as they continue to recover.

In regard to hurricane-related costs, last quarter, we estimated that we would spend an additional $700,000 to $800,000 on hurricane-related repairs and maintenance over the following six months. In the fourth quarter, we incurred approximately $400,000 on hurricane-related expenses and we anticipate spending an incremental $300,000 to $400,000 in the first few quarters of 2018, keeping us in line with our previously stated estimates. We continue to support our employees and their families that suffered significant personal damage in any way we can. We understand that we’re a critical part of the infrastructure on the islands and are proud to be a key part in getting our customers the water they need to return to normal life. And we will continue to support the communities affected and do our part to assist in the recovery of all these islands.

Turning to Quench on slide 5. As we announced on our M&A update call two weeks ago, Quench closed on two tuck-in acquisition in January, purchasing the point-of-use water filtration assets of Clarus Services and Watermark USA. These transactions, which increased our customer density in the Virginia and Pennsylvania markets, added approximately 600 customers and 1,500 units to Quench’s rental asset base at an aggregate purchase price of approximately $1.6 million. We continue to take advantage of consolidation in the highly fragmented point-of-use water market in North America and expect to close later today on an agreement to acquire the water filtration assets of Wa-2 Water, which is based in Vancouver, British Columbia. This acquisition further expands our presence in Canada, which we entered in 2017, through the acquisition of Quench Canada and Ontario. Wa-2 gives us a leading position in Western Canada with over 3,000 customers and 5,000 installed rental units. The purchase price for this transaction is approximately $5.2 million, which is about five times the trailing 12-month EBITDA of the acquired assets. The combination of these three acquisitions will bring Quench’s total installed rental unit base to over 100,000 units.

And with that, I’ll turn it over to Lee who will take you through our financial results. Lee?

Lee Muller

Thanks, Tony.

Now turning to slide 6, and our financial results. As Doug mentioned earlier, we’re pleased with our strong fourth quarter performance to finish out the year. Total revenues were $32.4 million during the fourth quarter of 2017, reflecting an 8.4% increase over the prior year quarter. For the full-year 2017, we recorded a $121.2 million of revenues, which was a 6.2% increase year-over-year. Consolidated gross margin for the fourth quarter of 2017 was 48.2%, a 50 basis-point decrease.

Total selling, general and administrative expenses decreased 24.9% to $18.7 million in Q4 2017. The decrease was primarily due to $6.1 million reduction in compensation expenses attributable to the one-time IPO triggered cash bonuses, including payroll taxes recorded in Quench in the prior year period.

Adjusted EBITDA for the quarter was $10.5 million, which was an 18% increase over the prior year period. Adjusted EBITDA margin of 32.5% reflected and improvement in 270 basis points. Adjusted EBITDA plus cash collected on the Peru construction contract for Q4 2017, increased 22.2% to $12.5 million. On full-year basis, we recorded adjusted EBITDA of $38.1 million and adjusted EBITDA plus cash collected on the Peru construction contract of $46.2 million, increases of 6% and 23.9% respectively over the prior year.

Moving on to our segment results on slide 7. Seven Seas Water revenue increased 1.4% to $15.1 million compared to the prior year period. The $200,000 increase was mainly due to the inclusion of incremental revenues of $400,000 from our Peru operations acquired in October 2016 and $300,000 higher revenues in the USVI due to an increase in short-term demand following hurricanes, partially offset by $500,000 of lower revenues in the BVI related to rate adjustments in connection with the 2017 contract amendment. Adjusted EBITDA of $6.7 million for the fourth quarter of 2017 increased 12% over Q4 2016, driven by the increase in revenues couple coupled with the $600,000 decrease in SG&A expenses compared to Q4 2016. Adjusted EBITDA margin of 44.6% reflected a 430 basis-point improvement. Adjusted EBITDA plus cash collected on the Peru construction contract increased 19% to $8.8 million.

Turning to Quench on slide 8. Revenues increased 15.4% to $17.2 million over the prior year period. Rental revenues increased 9.7% compared to Q4 2016, which included 7.2% organic growth and 2.4% inorganic growth, driven by the PWI line and Quench Canada acquisitions.

In other revenues, the $1.1 million increase was driven by $1.8 million of dealer equipment sales revenue in connection with the Wellsys acquisition and a $100,000 increase in coffee sales, partially offset by an $800,000 reduction in customer equipment sales. The gross margin of 53.2% for the fourth quarter decreased 180 basis points compared to Q4 2016. The decrease was driven by the impact of the increasing contribution of the Wellsys dealer equipment sales and the growth of coffee revenue which are lower margin businesses that replace the higher margin direct customer equipment sales. Quench’s adjusted EBITDA for the fourth quarter increased 30.1% to $4.8 million, adjusted EBITDA margin increased 310 basis points to 28%.

On slide 9, I’d like to provide a brief update on select balance sheet items. As of December 31, 2017, cash and cash equivalents were a $118.1 million, and our total debt was a $174.3 million. As a reminder, the increases in these items were primarily due to the $150 million corporate credit agreement entered into in August, which contributed approximately $47 million of incremental cash and related debt. In November, we entered into an amendment to convert that interest rate on 50% of the outstanding principal balance of this debt to a fixed rate of 8.167%. The remaining 50% of the outstanding balance will stay at a variable rate of LIBOR plus 6%. Given where LIBOR is trending, we are pleased to have mitigated our interest rate exposure on this debt.

Moving to select cash flow items on slide 10, I would like to focus on the full-year results. On the full year basis, our operating cash flows grew 17.4% to $15.9 million which equals our capital expenditures during 2017 as compared to a deficit in the prior year. The new revenue recognition rules which have taken effect January 1, 2018, mostly affect our Seven Seas Water business. It is important to note that the changes in our revenue recognition policies do not have an impact on our cash flows generated from our existing contracts, nor do they have an impact on our project fundamentals, deal economics or the IRR we generate from our projects. We plan to provide a more thorough review of the impact of the adoption in a few weeks that will include a bridge between accounting standards in effect through December 31, 2017 and the new revenue recognition rules. While certain accounting metrics of the company will change, our cash flow and deal economics will not change. Lastly, we do believe this will affect how we approach and evaluate our existing business and new business opportunities. A good deal is still a good deal.

I will not turn it back over to Doug for closing remarks.

Doug Brown

Thanks, Lee. I’d like to walk you through our outlook for the full-year 2018.

Slide 11 provides the outlook ranges under both the standards in effect at December 31, 2017, as well as those in effect beginning January1, 2018. For our 2018 outlook, we have incorporated expectations for both existing businesses as well as the addition of the recently completed announced transactions of Clarus Services, Watermark USA, Wa-2 Water Company, the Seven Seas Water acquisition of the Long Island, Bahamas, desalination plant and the St. Maarten contract amendment. We have not included in our outlook any impact related to the purchase of the majority interest in the Ghanaian plant. The reason for this is that until the significant conditions precedent are resolved, there are too many unknown factors to be able to incorporate the impact into our outlook.

Under the accounting guidance in effect January 1, 2018, i.e. the new accounting rules, we are targeting revenues between $131 million and $136 million, adjusted EBITDA between $42 million and $47 million, and adjusted EBITDA plus principal collected on the Peru construction contract between 47 and $52 million.

The adoption of the new accounting standards is forecast to have an immaterial impact on revenues in 2018. The projected adjusted EBITDA outlook is favorably impacted by approximately $2 million. And the adjusted EBITDA plus principal collected on the Peru construction contract is projected to be approximately $1 million lower under the new accounting standards.

Overall, I’m pleased with our 2017 financial results and our progress on executing our strategy for growth and improvement cash flow. Our recent announcements have gotten AquaVenture off to a great start for 2018. And we will continue to look for ways to expand our existing relationships and explore new strategic initiatives.

I would like to thank our shareholders who continue to believe in our management team in our Company for their ongoing support. I would also personally like to thank our employees for their efforts and commitment to making this such a great company. Together, we will drive AquaVenture’s growth and deliver strong returns to our shareholders.

With that operator, please open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Chip Moore with Canaccord. Please go ahead with your question.

Chip Moore

Yes. Good morning. Thanks. Hey, guys. Maybe you could start on volumes up 5.3%, great to see, talk a little bit more about St. Maarten that you guys being proactive going to tem and you’re pretty confident, you don’t see anymore those sort of negotiations.

Doug Brown

St. Maarten was the one that stood to us. It was apparent that the volume was down; they were below the minimum take by a considerable amount. And we just thought that it was the right thing to do. And so, we approached the government with this idea. They liked the idea. It saved them money now when they need it. They’re looking for all the capital they can get to implement repairs on the island. And this is was definitely an example of a win-win situation for both of us.

Chip Moore

Got it.

Doug Brown

Rest of the carbine note, you look at the volumes, that volume data that we put, does not include the volumes in Trinidad and Curaçao because they were not impacted by the hurricanes. So, that’s the volume only of the islands where they were hit by hurricanes. And generally speaking, the volume, the consumption remains strong. We don’t really see any other areas were we would expect to try to do a contract modification or reduce minimum. So, it’s kind of interesting. If you go to the Caribbean now -- and most of the places, the recovery is happening faster than what we would expect. Most of the places, it’s actually quite hard to get a hotel room. Yes, there are a fewer hotel rooms available but the hotel rooms that are there are filled mostly with construction workers. Although when you go on a -- if you take a flight to the BVI or even St. Maarten, it’s a surprising how many tourists you see on the plane.

Chip Moore

Maybe if I could sneak in one more, on the Abengoa plant, obviously we just talked pretty recently. But any updates on those negotiations? And then given the Veolia news, your confidence there?

Doug Brown

So, on Abengoa, since I think we had our call two weeks ago, last week, I spent the whole week in Ghana, meeting with various officials including government officials. And I am confident that we are going to get there. There’s -- the contract does need -- the water supply agreement does need to be modified. We’ve been down this road before plenty of times. So, I am very confident that we will get this across the finish line. But, there is work that needs to be done. And I am sorry, the second part, the Veolia? I don’t really have a comment on the Veolia issue right now.

Operator

Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Deane Dray

I just want to circle back on the volumes comment for the quarter. So, you were really helpful last November in providing what the volumes were across the Caribbean plants and it was up 6.2%. And so, now for the full quarter, we are seeing that ramp down to 3.5%. So, what’s your expectation in terms of the normalizing trend here. As relief efforts kind of ramp down, tourism has to ramp back up, might we see a period where volumes are actually negative in 2018?

Doug Brown

That’s possible. In general for our forecast, I think we are forecasting overall relatively flat volumes. We don’t really expect to see a negative comparable. But, we are also not forecasting this 3% increase to continue. So, there will be a transition from the relief workers to tourism; it could result in a dip, like you said. But, we don’t -- we are not forecasting that but we are not forecasting an increase either. And you need to remember that in most of our contracts, we do have some protection with minimum take positions.

Deane Dray

Of course, and level of transparency here is really helpful. So, I appreciate that. And then, just on the St. Maarten renegotiation, I completely understand how you ramp down the minimums and then you extend the length of the contract, but I didn’t hear anything about price. Did price change at all in the terms of the contract?

Doug Brown

So, the average price actually increases a little bit at the lower volume. So that contract has a structure of a fixed base price, fixed volume and then incremental production over that fixed amount is at a lower amount. And so, as you reduce the minimum take, the actual average price for the water is actually increasing slightly. It’s very small though.

Deane Dray

But that’s -- Doug, that’s exactly the point I was looking for because when you make these changes, that’s part of the win-win. And I like seeing the uptick in price, even though that’s modest, that makes it a win for you guys as well. So, I appreciate that color. And then for Lee, I have to think the uptick in corporate expense related to all the work you guys had to do on the revenue recognition. What kind of accounting gymnastics that you have to go through to do these calculations?

Lee Muller

To come up with our new guidance under 606, is that your question?

Deane Dray

Yes, sir.

Lee Muller

Yes. So, as we mentioned, we’re going to be coming up with some more information over the next couple of weeks. But yes, there was some effort with our auditors and some accounting consultants that impacted us, principally on our concession contracts. And we’ll be providing more information over the next few weeks in terms of giving some assistance on modeling.

Deane Dray

And then, just last one related to that. And I probably understand why the Peru contract has a negative impact. But could you solid out for us what’s unique about the Peru contact with regard to revenue recognition?

Lee Muller

So, this is really -- so, remember, cash hasn’t changed, and it’s really just the accounting impact of 606. And really this is just a movement from cash being added back -- the interest income portion being added back as part of the cash collected on the note receivable, and it’s becoming a revenue under 606. That’s principally the difference.

Operator

The next question is from the line of Andrew Kaplowitz of Citi. Please proceed with your questions.

Vlad Bystricky

Good morning, everyone. It’s Vlad Bystricky on for Andy. How are you?

Doug Brown

Great. How are you?

Vlad Bystricky

Good, thanks. So, just following up on Abengoa, I understand your decision to exclude the deal from guidance. But, as negotiations are ongoing, can you talk about your confidence around the timing? And also you’ve mentioned the conditions that need to be met, but can you talk a little bit around what those conditions are?

Doug Brown

So, the two principal conditions are one, reaching a conclusion on the water supply agreement revision that is anticipated. So, we expect that the water supply agreement between BDDG, which is the local operating company that owns the desal plant and Ghana Water, which is the offtaker. That water supply agreement does need to be modified. And we understand the parameters of what’s needed. But, we have to reach a conclusion on that. So, that’s the major line.

It could be in modifying that water supply agreement that the purchase price for the water might change, and that could affect the profitability of the plant. But that would also affect the purchase price of the plant. So, we have a mechanism in the contract that we think gives us a good basis for understanding the multiple that we’re going to be paying and the IRR on the cash flows that we’re going to receive. But the variable is exactly how -- what is the final water price going to be and therefore what is the final purchase price for the equity going to be. That’s the most important thing.

There is a second point where we expect, we need to get approval of the lenders to project, so these would be the lenders to BDDG. And we anticipate that there may be some changes to the terms and conditions of those loans. And again, that needs to be finalized. So, those are the two principal CPs. Needless to say, we have now been in discussion with the lenders. We’ve initiated discussions with the government of Ghana, and Ghana Water. And obviously we are working with Abengoa on this project and we are also working with the 44% shareholder, also because we have expanded the purchase offer to them as well. And we anticipate that we will be able to complete the acquisition of both Abengoa’s shares and the minority shareholders position as well.

Vlad Bystricky

And then maybe just…

Doug Brown

Sorry. You also asked about timing. And there is a long-stop date in the share purchase agreement with Abengoa of June 30th. I will say that we think that that’s definitely doable. The parties are all motivated. But, you are dealing with -- negotiating with the government entities, which those introduce some uncertainty about timing, but that’s what we’re all aiming for right now as of June 30 finish date.

Vlad Bystricky

And then, maybe just shifting to Quench for a minute here. It seems that the pace of acquisition activity at Quench has really stepped over the past few months, beginning with Wellsys and Clarus and Watermark and now the Wa-2 deal. So, maybe specifically with respect to Wa-2, can you talk about how you are thinking about Quench expansion opportunities in Canada? And then more broadly, can you just comment on the overall M&A pipeline at Quench and whether this accelerated pace of M&A could continue over the next few quarters?

Tony Ibarguen

Yes. We are very excited about Wa-2, western Canada’s leader in this space, and looking forward to closing that later today or tomorrow. And we will -- we see further opportunity for expansion in Canada, consistent with our plans in the U.S. to penetrate major markets, get additional organic and M&A growth to create density, which improves profitability. And so, we’re having planted the flag in Ontario with Quench Canada last June, this is a logical follow-on for us. And we are continuing to look for opportunities to grow, both organically and with acquisition in Montreal, Toronto and certainly out west. So, you should expect us to continue to look there. Across the U.S. our pipeline is very robust. We started rebuilding the pipeline shortly after the IPO and have through the acquisition of Wellsys, introduced a whole new bunch of dealers out in the marketplace. And so, we are quite busy and excited to continue to be able to keep this pace up for the rest of the year.

Operator

Our next question comes from the line of Vishal Shah with Deutsche Bank. Please proceed with your question.

Vishal Shah

Just on the M&A front, can you maybe talk a little bit about the just the environment overall in terms of how some of these assets are trading today versus say 12 months ago and whether you’re going to look at more international or particularly Western African acquisitions in the Seven Seas segment?

Doug Brown

So, I don’t believe that we’ve really seen anything that structurally changed in the M&A market for the desal space. There is still a fairly board range of valuation metrics. So, we don’t anticipate any big changes. Some places -- there aren’t a lot of big projects out there like the SUEZ GE Water. The smaller projects that we tend to focus on tend to be a little bit more traded on a lower multiple. And I think, the SUEZ is now probably thinking about the price they paid to the GE Water business. But, there are defiantly opportunities we’re seeing. Our deal flow remains strong, price points, though -- I don’t think there’s anything that’s really changed.

Africa itself, I will be quite honest, the Ghana situation, we were being pretty opportunistic about. We knew that Abengoa was having structural and financial issues a couple of years ago. We actually first reached out to Abengoa regarding this particular asset over two years ago. And so, it’s been some time working on it. There are some other select assets in Africa that we’ve identified that could be interesting. As I think as I said on the last conference call, at Ionics, we had a lot of experience both in Sub-Saharan Africa and North Africa. And there are some assets out there, either Abengoa or otherwise that could represent potential targets going forward. But, we’re still also heavily focused on South America, tuck-ins in the Caribbean and something in the Middle East.

Vishal Shah

That’s very helpful. And just one other question on the existing assets. Do you talk about any further potential improvements in some of these desal plants that could add some incremental EBITDA to this year’s guidance?

Doug Brown

There are a couple of projects where we are a in discussion with our offtakers about increasing volume from existing projects. I prefer not to get into too much detail on those because it’s confidential at this point. But, there is definitely -- there’s definitely upside and at last two projects that we’re talking to customers about increasing volumes. These things also have a tendency when they come up, they come up quickly. So, it wouldn’t surprise me if between now and the end of the year something that’s not on our radar ends up being on our radar. So, we will defiantly keep you posted on that.

Operator

[Operator Instructions] The next question comes from the line of Pavel Molchanov with Raymond James. Please go ahead with your question.

Pavel Molchanov

Over the past year, you’ve amended two of your I guess eight or nine Caribbean contracts. And I’m just curious, historically speaking, is that a normal pace of contract amendments, or is that kind of one-off and we should maybe get a period of greater contract stability going forward?

Doug Brown

So, I’d say that’s clearly the case of St. Maarten is a hurricane-related issue. So, we wouldn’t expect that to recur. The case of the BVI was frankly a -- we inherited a water supply agreement from Biwater that had an error in it and we needed to correct it. Otherwise, I wouldn’t expect anything to change. I would remind you that we’ve also had two contract changes in Trinidad, both of them expansions, and we have had a couple of contract changes in Curaçao, again, expansions. And we started in Curaçao with a three-year deal doing 20% of the water for the refinery and we ended up with a contract for the life of the refinery doing 80% of the water. So, these things happen. Most normally, they are because the customer decides they more water, to do that, we need to bring in more equipment, and so we end up with a contract extension. The two specific though for the BVI and St. Maarten are one-off events. And unless they come back to us and start asking for a significant increase in water production, we would not expect to see any of these contracts being changed going forward.

Pavel Molchanov

And we’ve been talking a lot about M&A in Seven Seas, and obviously great to see that, you guys are getting more active there. But, what about new build opportunities? In other words, in are you in talks with any prospective customer, about actually developing a brand-new project from the ground up as a way of entering a new market?

Doug Brown

Yes, we absolutely area. I think we have -- there’s been public disclosure in the past about our effort in Corpus Christi, Texas that we continue to make progress on. And frankly we are hoping that we are going to be in a position to start talking about specifics on that within the next couple of quarters. If you look at our transaction, our deal flow, probably about a third of the opportunities that we are looking at are greenfield versus brownfield. So, we definitely still -- and then, if you look at our portfolio, half of our existing plants were purchased and half were greenfields builds. So, we do both. And from an economic perspective, we are bidding different, the multiples and the IRRs are pretty comparable between greenfield and brownfield. the one benefit that brownfield has is that as soon as you put the capital up, you start generating cash flow and EBITDA whereas when you are dealing with the greenfield, you often have to have a negative cash flow upfront for some period of time, which could be up to nine months or year before you start generating positive cash flow.

Operator

Thank you. At this time, I would like to turn the floor back to Doug Brown for closing remarks.

Doug Brown

Thank you, everybody. I appreciate your interest in AquaVenture. 2017 has certainly been an interesting, challenging, and exciting year for us. We’ve gotten 2018 off to an excellent start, in my opinion. And we are looking forward to being able to continue delivering solid performance and growth throughout the year. Thanks again for your interest and you support in AquaVenture.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.