Atlantica Yield plc (NASDAQ:AY) Q1 2019 Results Earnings Conference Call May 10, 2019 8:30 AM ET
Santiago Seage - Chief Executive Officer
Francisco Martinez-Davis - Chief Financial Officer
Conference Call Participants
Julien Dumoulin-Smith - Bank of America
Abe Azar - Deutsche Bank
Praful Mehta - Citigroup
Bryan Fast - Raymond James
Welcome to the Atlantica’s First Quarter 2019 Financial Results Conference Call. Atlantica is sustainable total return infrastructure company that owns a diversified portfolio of contracted renewable energy, power generation, electric transmission, and water assets in North and South America and certain markets in EMEA. Just a reminder that this call is being webcast live on the Internet and a replay of this call will be available at the Atlantica Yield corporate website.
Atlantica will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risk and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today’s earnings presentation or the comments made during this conference call in the risk factor section of the accompanying presentation on our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website. Atlantica Yield does not undertake any duty to update any forward-looking statements.
Joining us for today’s conference call is Atlantica’s CEO, Santiago Seage; and CFO, Francisco Martinez-Davis. As usual, at the end of the conference call, we will open up the line for the Q&A session. I will now pass over to Mr. Seage. Please go ahead sir.
Good morning and thank you for joining our first quarter 2019 conference call. We start on page three with the key messages. In today's call we’re going to spend some time reviewing what we believe is our very strong value proposition focused on sustainable infrastructure. Additionally, we will be sharing with you the significant progress we have made in the first quarter of 2019 towards our financial optimization that creates value.
In first place we have successfully refinanced our existing 2019 notes, but most importantly, we have refinanced this piece of corporate debt with improved terms and with flexibility.
In second place we now have several levers in place that should allow us to achieve our CAFD guidance even if distributions from Mohave were delayed. Additionally, we have signed an enhanced collaboration agreement with our main shareholder and partner, Algonquin aimed at accelerating Atlantica’s growth in the U.S. I would provide further details in a few minutes.
Also in relation with our accretive growth story, we are pleased to announce today our first investment in electric battery storage. We have acquired a 30% stake in a 140 megawatt gas-fired facility with electric battery storage at what we consider are attractive and accretive numbers.
Regarding the operating performance of our asset portfolio, it has continued to be a strong quarter. We have achieved growth in terms of revenue, further adjusted EBITDA including unconsolidated affiliates and CAFD.
And finally, our Board of Directors has declared a quarterly dividend of $0.39 per share, representing 22% increase versus the same quarter last year and a 5% increase versus the previous quarter, proving that the board and management remains fully committed to dividend growth.
If we turn to the next page, we can see a on the slide five that our focus is clearly on sustainable infrastructure specifically around renewable energy and water. There is no question that renewable energy is a high growth and attractive market, but it is also very clear that the transition towards a sustainable power mix requires the support of natural gas, power storage and transmission lines. These are the trends and these are our markets, renewable energy and the three technologies to make it happen.
In fact, wind and solar energy are a reality and offer today lower cost than conventional power in many regions around the world and in many states a in the U.S. I am expected to represent in most markets the majority of new investments in the power sector. Around 50% of the world's power generation by 2050 is expected to come from renewable resources with some countries and regions at the much higher percentage than that.
This indicates that renewable energy is mainstream today, but at this point in time our storage in natural gas are will continue being key enablers in the power sector to support wind and solar going forward.
In addition, water is going to be the next frontier in a transition towards a more sustainable world .New sources of water are needed worldwide and water desalination and water transportation infrastructure should help make that possible. In summary, we believe that we are positioned at the center of the sustainable power and water revolution.
In the next the slide I will try to summarize why Atlantica is well-positioned in that market and will be able to capitalize on the growing transition towards sustainability. First of all, on page six we have expensive experience in our industry and we have proven our ability to grow accretively within that industry. We’ve more than $330 million in equity investments announced in the last six months more or less.
In second place our footprint and diversification. We believe is unique and position us very well in both wind, solar and some of our other core sectors with a strong focus in North America and the Americas in general.
Third, Atlantica’s corporate structure has always been designed and continues to be designed to maximize value creation, with low general expenses, our favorable tax structure, no IDRs and a majority of our Board of Directors being independent.
And finally, we have our strong strategic long-term partner, Algonquin that supports our sustainable strategy and provides access to new growth sources and improves our access to capital as we have demonstrated.
On the next page seven, we can see why Atlantica is a sustainable business with a very attractive cash generation profile. In first place our portfolio of assets is underpinned by a long-term high quality set of contracts. All of our assets have contracted or regulated revenue with a weighted average remaining contract life of around 18 years with fixed or hedged interest rates and virtually no commodity exposure.
In fact, as I mentioned we have our very strong long-term cash flow visibility with organic growth opportunities and cash generation tails in most of our assets once the non-recourse debt is paid for before the expiration all our contracts.
And finally, Atlantica is a diversified company both by geography and by sector with a clear focus in the Americas and renewable energy. But most importantly with a very low dependence on natural resources as many of you know large percentage of our revenue is based on availability and not only on power generation.
We therefore depend less than others on the wind or the sun shining. In fact more than 60% of our CAFD will come from non-resource dependent payments or what we call availability based payments.
If we move to slide eight, our high-quality portfolio, our efficient corporate structure, our prudent financing policy combined with our ability to grow up accretively make Atlantica we believe a very attractive total return opportunity with the current dividend yield of more than 7% and an attractive mid-term dividend per share growth target. This we believe places us among the most appealing companies in the industry.
Turning to page number nine, another important aspect of Atlantica is our strong commitment to ESG and sustainability. In fact a few months ago, we were rated by sustainalytics as the top company within renewables, the second within the broader utilities sector and in the top 3% of the global ratings universe.
Atlantica has been the core of the renewable energy transformation and we intend to continue playing that role. We are also a member of the United Nations Global Compact and our renewable energy assets upheld to avoid around 5 million tons of CO2 emissions since they are in operation.
It is therefore very clear that our focus is clean energy, but it is also important to mention that we manage our company with a very strong focus on health and safety and on social and corporate responsibility.
Now, if you move to slide number 10, I will talk about the significant progress achieved in our strategic priorities to create value. In first place, we are committed to achieving our CAFD guidance irrespective of PG&E's exposure.
Thanks to several initiatives that should compensate the Mojave distribution in case that it was delayed due to the situation of the off taker. Additionally, we have refinanced the 2019 notes, as I mentioned before with improved terms and flexibility. Furthermore, we intend to explore options to diverse some assets and reinvest accretively to show value creation.
And finally, although non-company related we believe that the results of the elections in Spain are favorable with regards to the upcoming determination of the rate of return for renewable starting in 2020.
Regarding our equity growth strategy, we are happy to announce today our new investment I mentioned before at attractive returns and also we are happy to announce that the proposal led by our partner AAGES achieved the first position in a bidding process for a new transmission line in Uruguay.
That asset includes two transmission lines with a total of around 50 miles and a substation contracted under 30 and 20-year agreements. In U.S. dollar and we are going to be owning a 25% of that project and we will have or we have a ROFO right over the rest of the investment, so good news. Our ROFO partner, AAGES winning a new asset that will flow to us.
Additionally, in order to accelerate our growth in the U.S. we have signed an enhanced collaboration agreement with Algonquin. And finally the strategic review committee that was created a few months ago is working on the analysis of different strategic alternatives to optimize Atlantica’s value.
As you can see we have started 2019 with a significant number of initiatives that should translate into long-term value creation for our shareholders. Now, if you move to slide 11, Francisco we’ll go over the announcement we made earlier this week about the successful refinancing of our corporate bonds with improved terms.
Thank you, Santiago. We’re very satisfied with the new financing signs since that really bear significant improvement for the company. Atlantica has entered into a senior unsecured note facility with a group of funds for a total amount of the euro equivalent of $300 million.
We will fully hedge the notes with an interest rate swap or not less than three years resulting in an interest rate significantly lower than the one we were paying. The tenure of the notes is six years and we expect them to be issued in the second quarter of 2019.
The proceeds will be use to redeem in full Atlantica’s existing 7% senior notes maturing on November 15, 2019 and for other general corporate purposes. We will achieve several improvements with this corporate finance, refinancing.
First of all, the new financing has a longer tenure compared with existing notes. Second and most important, they will achieve a $4 million cost improvement per annum expected starting in the year 2020.
Third, we will obtain a natural hedge for our CAFD generated in euro given that the facility is denominated in euro. And finally, but also very important, the new facility allows us to capitalize interest on the notes issued for a period up to two years at Atlantica’s discretion.
This will equal to approximately $14 million per year. And if we choose to defer interest payment it will help to partially offset the potential CAFD impact in case the Mohave distribution was delayed.
This is a significant aspect since there is no additional cost, you will allow us to partially bridge our PG&E exposure needed for two years. But let me go on to further details on that. Please turn to the next slide.
I would like to discuss why we're saying today that we could currently expect to achieve our CAFD guidance in 2019 even in the hypothetical case that Mohave distribution to us were delayed as a result of the PG&E situation.
As we have already communicated in the previous earnings call we only have exposure of the PG&E in one of our assets, Mohave and our 2019 CAFD guidance includes $30 million to $35 million distribution for Mohave which is expected in the fourth quarter 2019. PG&E has continued paying invoice according to the PPA and the plant is operating normally. For us it is business as usual.
But even though PG&E continues to honor the contract and we do not expect distribution for the assets until the fourth quarter, we don't have certainty that the 2019 distribution for Mohave will not get delayed. For that reason we had worked to ensure that our CAFD guidance is achieved even if Mohave’s distribution was delayed.
In first place as I have already explained, we have the option to capitalize approximately $14 million per year of interest payments in the new note issuance for a period of two years in order to partially bridge our $30 million to $35 million PG&E exposure for two years, if needed and at no additional cost.
In second place, we expect to release restricted cash accounts in certain assets that will compensate potential delays in Mohave if any. In summary with these two levers we believe that we will be able to compensate 2019 and 2020 Mohave distributions in case they were delayed due to the current situation of PG&E. We therefore remained committed to CAFD and dividend growth.
And now in relation to our growth strategy I will turn the call back to Santiago who will provide further details on the asset investment that we announced earlier today.
Thank you, Francisco. If we turn to page 13; we have signed an agreement to acquire a 30% stake in Monterrey 140 megawatt gas-fired facility in operation in Mexico, which includes 12 megawatts of electric battery storage. The investment represents around $42 million in equity value at an estimated nine times EBITDA. Additionally, it should be a very accretive transaction.
Monterrey has been in operation since 2018 and we present our first investment in electric batteries. It has a U.S. dollar denominated 20-year PPA with two large international corporations. The PPA includes price escalation factors and has no commodity risk. Closing at this point in time is subject to customary conditions present.
Additionally, we have signed a ROFO agreement with the seller for the remaining stake in the asset. Additionally and moving to page number 14, we have signed a new enhanced partnership agreement with Algonquin that should allow us to accelerate our growth in the U.S.
The new agreement has three main pillars. In first place, Atlantica has an option to acquire stakes or make investments in two Algonquin assets in the U.S. for a total equity value of up to $100 million in 2019 subject to the parties acting reasonably in good faith on agreeing terms that can be mutually beneficial.
The second pillar Atlantica and Algonquin have agreed to analyze jointly during the next six months. Algonquin’s contracted assets in the U.S. and Canada with the final objective of identifying assets where a drop-down could add value for both parties according to each company's key metrics.
And finally in third place, the existing shareholder's agreement has been modified to allow Algonquin to increase its shareholding in Atlantica up to a 48.5% without any change in corporate governance.
Algonquin's voting rights and the rights to appoint directors will be limited to a 41.5% to the ownership they have today. And the additional 7% will be voted replicating non-Algonquin shareholders votes, therefore maintaining our current corporate governance.
Part of this investment in Atlantica shares will be done by Algonquin by subscribing around $30 million in new shares to be issued by Atlantica at a price of $21.67 per share. That represents a 6% premium with respect to yesterday's closing price. We believe that this premium versus the market price highlights the confidence of our main shareholder and partner in Atlantic.
We can say that this is an enhanced partnership that should help to accelerate our growth in the U.S. and to create long-term value for shareholders. And now to finish this strategic update on page 15, you have an updated overview of our growth guideline.
This is chart we shared already in late 2018 and as you can see here, we have a significant pipeline that should allow us to invest equity at least between $200 million and $300 million per year through the different buckets and partnerships we have with Algonquin, with AAGES, with third-parties and through acquisitions.
We have demonstrated we believe that we can grow accretively and we are confident that this will continue in the following years, in fact our pipeline at this point in time looks very healthy.
If we move to page 17, we are going to be looking at our quarterly results. And as you can see, revenues in the first quarter of 2019 reached $222 million, a 2% decrease versus the first quarter of 2019 [ph] mainly due to currency translation effects, on a constant currency basis revenues increased by a 4%.
Further, adjusted EBITDA including unconsolidated affiliates increased by 1% up to $181 million or a 7% on a constant currency basis. And CAFD in the first quarter increased by a 5% year-on-year to $45 million in line with our expectations for the year.
Once again, the solid operating performance of Atlantica in the first quarter demonstrates the advantage of having a diversified portfolio with a significant percentage of our revenue is based on availability and not only on generation.
If we move to the next page, we can see that overall our portfolio of assets delivered a solid performance in the first quarter both by segment and by region. North America with a 2% growth in terms of revenues and a decrease in EBITDA mainly due to our $8 million one-off recorded in the first quarter of 2018.
In South America both revenues and EBITDA increased -- thanks to the solid performance of the assets and the contribution of new assets acquired last quarter. In EMEA the revenue decrease was mainly due to the currency translation effect, in fact our Kaxu solar asset delivered a very strong operating performance with a record quarter and a capacity factor over 48%.
In Spain, generation also increased significantly due to higher solar regulation than the same quarter last year and a strong operating performance. If we look at the results by business sector the conclusion is very similar, renewable energy, revenues and EBITDA decreased by a 6%, but they increase by a 2% on a constant currency basis.
Efficient natural gas, very solid performance, transmission lines, very strong performance, water showing strong EBITDA levels of most quarters. If we now move page 19, we can see that electricity produced by our renewable assets reached over 580 gigawatt hours, a 15% increase compared with Q1, overall a strong performance in the first quarter.
If we look at our availability base contracts, ACT as mentioned before, very solid performance. This quarter we have the scheduled major overhaul in one of the two turbines, everything happened as expected and we are now in the second quarter performing the same task in the second turbine.
This explains the lower availability on production levels. Nevertheless as the overhaul was scheduled these had no impact on revenues. Finally, regarding transmission lines and water, again very high availabilities.
I will now turn the call over to Francisco who will take us through the financial figures.
Thank you, Santiago. Let’s move on to slide 20 to walk you through our cash flow for the first quarter of 2019. Our operating cash flow reached $96.9 million compared to $130.5 million in the first quarter of 2018, which included approximately $17 million corresponding to one-off payment received in Solana with no corresponding amount in the first quarter of 2019 which explains most of the decrease.
Additionally, we had a property tax payment in the quarter corresponding to previous years. Net cash used in investment activities was $22.3 million and corresponded mainly to the investments in new assets.
Net cash used in financing activities in the first quarter of 2019 amounted to $44.5 million and corresponded principally to project that schedule repayment. All-in-all, the net change in consolidated cash for the first quarter of 2019 was an increase of $30 million.
On the next slide number 21, we would like to review our net debt position. Our consolidated net that as of March 31, 2019 is similar to that at the close of 2018. We closed the first quarter with net corporate debt of $589.7 million. With this our net corporate debt to cap the pre-corporate debt service ratio stood at 2.5 times the lower internal target of three-time.
On the other hand net project debt as of March 31, 2019 was 4,530 million, 37 million lower than at the closing of 2018. Then finally on slide 22, I would like to review how we are delivering on our commitment to grow dividends.
Our Board of Directors has approved a quarterly dividend of $0.39 per share for the first quarter of 2019 or $1.56 annualized. This represents an increase of 22% compared with the first quarter 2018 and an increase of 5% compared with the last quarterly distribution. This shows our continued confidence in the business and our prospects.
Thank you for your attention. And now we will open the line for questions. Operator we are ready for Q&A at this stage.
Thank you. [Operator Instructions] And we do have questions coming through. The first question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open. Please go ahead.
Hey, good morning team.
Good morning, Julien.
Can you hear me? Excellent. All right. Just a few different questions here. First, with respect to the $30 million from Algonquin, can you elaborate what’s the thought process on the timing and reasons for the issuance here? I just want to understand perhaps the broader thought process around raising capital for drop-down given the current valuation. And then maybe, Francisco, very much related. What is the current status of the strategic review underway? And what are the potential paths from here particularly in light of the latest equity raise?
The reasoning for $30 million equity raise are the opportunities that, as we explained today and as you probably saw, the investment opportunities that we are going to be analyzing, working on and closing with them. So this is an agreement where we are going to be able to make investments in drop-downs coming from them and a smaller part of those investments are going to be financed with this new capital and the remainder would be financed with the other resources that we have available.
In terms of a strategic review committee, as I mentioned the committee continues doing its work, and analyzing a number of options going forward. I will not be able to be obviously specific regarding what the committee is doing. But as you can imagine we have been spending a lot of time on some of the shorter term initiatives that we announced today and on analyzing longer term potential initiatives.
But why raise the cash now for Algonquin. Just to understand it relative to the cash on hand and leverage capacity. Just to understand that piece. And then secondly to come back to the wider 7% increase in Algonquin. Can you comment a little bit more about the timeline here? I mean is the 7% designed to be fully an equity raise at the AY level or is this more about a secondary market transaction potentially?
So starting with your second question, what we have agreed with Algonquin, is that they can increase their ownership by 7%. How and when, it’s up to them. In the context of, let's say, enhanced collaboration agreement, what we are doing here is enhancing our partnership with them through several pieces. One of those pieces would be a higher participation in us, as I mentioned before without any changes in corporate governance.
And basically if you want as a package where both partners are recognizing that we have been working very well in the past, but we can do more. And doing more it's about us being able to invest in some of their assets and then increasing the stake they have in us because they believe that we can create value for them obviously.
Do you mind elaborating that a little bit more on just the liquidity position then as it stands today and the need for the cash raise at present? And liquidity as well as leverage capacity to that you've talked about against targets?
So as you know and as I mentioned before, our pipeline, we showed it in today's presentation. We have a very significant pipeline and we are working on a significant number of very attractive accretive opportunities. Today, we have announced an acquisition. We have announced a new line that has been recently one where we are going to be investing. So in general what we see is a situation where we have significant opportunities for growth.
And we recognize that we have an important financing capacity, but as part of this agreement with Algonquin we decided that it was good to do a small capital increase. That we invested in some of the assets that we are going to be acquiring from them.
The way I would read this Julien is number one; lots of growth opportunities with good numbers. And as you have seen in the past that the investment we have been making have been made a very attractive, with very attractive numbers and that will continue to be the case. So the good news is we see a very strong set of opportunities. And as part of the overall agreement with Algonquin one of the pieces were these let's call it a smaller capital increase at a premium versus the market price showing the confidence that Algonquin has in the business while being able to raise some funds that we will be investing in the very short term in some of those investments.
Got it. One last thing if I can. Just with respect to the issuance you call it small, issuing at a discount to NAV, I suppose is perhaps unusual amongst your peers. How do you think about using external equity on a go forward basis? You've got the 7% arrangement. Is it your expectation that you would indeed be pursuing external capital? Or is this really truly one-off for whatever reason tied to show -- demonstrating you can raise external capital. I just want to make sure I understand sort of the messaging here?
So the messaging, if you want is, we are doing a small capital raise in the context I've described and you've summarized. And the speculation is not to be requiring, needing or making a capital increase, the 7% agreement, the only component of that 7% agreement of new shares at this point in time. The only one we expect is the one we are doing. So we don't know what will Algonquin decide, but in terms of new shares this is the only component in terms of new shares.
I'll leave it there. Thank you.
Thank you, Julien.
The next question comes from the line of Abe Azar from Deutsche Bank. Your line is open. Please go ahead.
Thank you. Good morning. Congratulations.
On the $100 million of investment into the Algonquin assets; is this an option you have? Is this a contract that you've committed to? And then maybe you could talk about the return expectation on those?
So what we have here is an initial agreement regarding two specific assets. The terms need to be negotiated by both parties. So, we are going to be spending the next weeks working on both two specific situations. And we believe we are going to be able to find reasonable terms for both parties. But we need to go through that exercise.
Okay. And this is in addition to the one in Illinois that you did earlier this year, righ?
It is. It is in addition to the one we announced -- the wind asset we announced in Illinois. And on top of that, as I mentioned during the presentation additionally to these two specific assets let’s say by name, we have agreed to review jointly and analyze other options for drop-downs because obviously Algonquin on our perspective here is that given the fact that our key metrics are very different, there should be opportunities to create value a in to certain drop-downs and situations where given the fact that, let's say, the metrics they are focused on and the metrics we are focused on are different. We believe that there would be opportunities for accretive drop-downs for us.
Okay. And then when you look out over the pipeline the next few years, it looks like you have line of sight on a good bit of growth capital. Do you anticipate spending that with issuance to Algonquin or is that you have other sources of funding or is that still TBD?
So I think in general, it’s TBD, we do have significant, let’s say, capacity at this point in time. Obviously, it depends on how quickly opportunities materialize, and most of the let’s say, financing should be happening with some of the means we have today and the fact that we have refinanced our bonds and we refinanced earlier this year or later last year the RCF helps as well. The good thing is we have shareholder who can complement if in the future we need it. For example, these $30 million we have been able to do it a premium to the market because we have sponsor shareholder. It's a very small amount obviously. But if one day we needed a small amount we can see if we can have a reasonable agreement with our shareholder or we could look at the markets if needed.
Right. Do you anticipate Algonquin will be in the market purchasing shares to get up to that 48% or close to it?
I mean again this is up to them. So, you should ask this question to them. We have given them permission if you want. Now they will do whatever they believe is right for them.
Okay. Got it. That's all I had. Great update.
Thank you. Ladies and gentlemen, the next question comes from the line of Praful Mehta from Citigroup. Your line is open. Please go ahead.
Thanks so much. And sorry I'm going to come back to the equity raise just to clarify. And I guess the setup, right. You're saying you're doing a strategic review, stock is undervalued. You also said you have debt capacity. So I'm trying to figure out is the equity raise driven by Algonquin need to increase their ownership so that they are comfortable with the drops. I'm just -- again I'm unable to reconcile these points so that's what I'm trying to understand why go to Algonquin when that the stock is undervalued and you're publicly talking about that? So any more color would be helpful?
Sure. So, what we're trying -- what we have done we believe is a very good deal in terms of our very good agreement with Algonquin is that we believe is very positive for Atlantica, meaning that we will have -- thanks to this agreement, access to assets in the U.S. and we will be able to make investments in the U.S. in reasonable terms, in value creating terms. And as part of that agreement what we are doing is we are raising a small amount of capital that will finance part of those investments. Obviously, given the fact that it will be a small part of the financing of the investments, the investments are -- the accretion is going to be there and the value creation is going to be there.
So, it's only a component of a larger agreement. Would we be doing a significant capital raise? No. We are doing a small capital raise at a premium to the market in the context of what we believe is an attractive partnership agreement with Algonquin.
Got you. Thank you. I guess moving to Slide 13 where you have the asset acquisition. Just wanted to understand the investment $42 million and the EBITDA multiple looks attractive. From a CAFD perspective versus the EBITDA is there any maintenance CapEx or anything else we should be thinking about in terms of what CAFD this asset generates?
No. So there's nothing extraordinary there in terms of CAFD, in terms of IRR, the numbers are very attractive, so that there's no, there's nothing going on in CapEx or anything well -- any anywhere else. The numbers for the acquisition we believe are good.
Okay, great. Thanks. And then on slide 12, this is for the PG&E situation. Just want to understand you're kind of thinking about the situation and you're solving for really a delay. It sounds like in any situation you're saying, hey, we have the ability and the flexibility to wait till the PG&E situation is sorted out. In case it isn't sorted out and in that remote instance that PG&E does have to reject BPAs, is that creating some pressure on the system because now you have drawn down 14 million more and effectively you're going to have to pay that back at least the interest on that back incrementally. So does that put more pressure if there is a rejection? And how do you think about that scenario?
So, in the first place what we believe and obviously each one can have a different point of view here. But what we believe is that the likelihood of that happening is very low based on our knowledge of the situation. And in this scenario where we could have delays. As Francisco explained, we cannot obviously guarantee that we are going to be receiving distribution from Mohave when we expect them. So, the good news is if there were delays we are going to be able to compensate for those delays and for the next for 2019 and 2020 we believe that we have the tools in place to be able to compensate for that without any problem.
Now if you're a scenario which we believe is very unlikely ended up happening, the amount we are talking about are very limited. So we don't believe we are putting any extra pressure on the system as you describe it. We would have a problem obviously because Mohave last year was up 13% of our numbers if you want, but we would not be putting more pressure by doing this. I think that what we are doing today is telling you that we have found over the last few months our way to very prudently navigate through potential delays without paying significant costs to anybody here. So the way we see it is a very positive step to be able to maintain our CAFDs on our dividend payout ratio for the next couple of years.
Very helpful. Thank you so much guys.
Thank you. The next question comes from the line Bryan Fast from Raymond James. Your line is open. Please go ahead.
Yes. Thanks for taking my call here. Just regarding the Monterrey gas assets, could you discuss what the deciding factor will be relating to the additional 70% stake?
Sorry. So regarding Monterrey what we have is a ROFO agreement. And like in any ROFO agreement obviously will depend on when the partner offers us the stake. And under conditions we can negotiate. In principle we are very interested as of today, but whenever that asset is offered a couple of years from now or whenever that happens we will need to look at the specific conditions. We believe the asset is very attractive for a number of reasons. But usually, like any other investment it will depend on conditions.
Okay. Thanks. And then just regarding the Uruguay transmission line asset, any color on the bidding for this project? Did you find it very competitive? And then maybe what are your thoughts on potential returns there?
Sure. I think it's very good news, but AAGES has these new asset, and like every process obviously there was competition. Uruguay is a market we know very well. As you know it's an asset in dollars. So from our point of view we find these very attractive and therefore we are very happy and courageous and we are very happy for ourselves. As I mentioned before we have a smaller stake at this point in time. I'm hoping for their line to be built so that we can exercise our ROFO in the future.
Okay. Thanks. That’s it from me.
Thank you ladies and gentlemen. [Operator Instructions] The next question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open. Please go ahead.
Hey guys. Sorry to come back. I just wanted to clarify a couple of things. Very quickly can you elaborate a little bit more on asset sales? I know you come to the start or a limited amount on the strategic review, but where do you stand with respect to asset sales and narrowing down the portfolio? And then secondly, can you clarify little bit more around Mohave and any potential waiver particularly as negotiations go given DOEs position in this all? How does DOE being involved differentiate this specific project perhaps is a better way to ask that?
So, starting with the second one with Mojave, as you know we don't expect that distribution until the last part of a year. So we obviously talk a lot with our lender with the DOE, but there's not much to report on that front. It's still early and we will continue working with them. As you we have significant experience and they have a significantl experience with us. So we will keep you updated. But at this point in time there's not much to report then what I'm saying. We think they will be supportive like they have been in the past. But I cannot give you more light regarding that. Your first question was regarding asset sales. There as I mentioned in the call, our intention is to demonstrate the value by divesting stakes or assets. If it is done on the right price to demonstrate value in our portfolio, so we do believe that the value of many of our assets is higher than to market is giving credit for, and therefore we will be spending some time seeing if there are potentially interested parties for some of them at the right price. And I'm here. I’m talking about a very narrow set of situations.
But to clarify on the asset sales, he narrow set , that’s a geographic region or is that specific to value against the current share price or just if you can elaborate?
So, I cannot elaborate much Julien. We are working on that at this point in time. So I wouldn’t want to be specific at this point in time. I can tell that that's a lever that we believe we should use, but forgive me if I cannot be more specific.
Last question, when would contemplate buybacks relative to drop-downs, like how do you think about that conceptually? Because, obviously, you're accentuating the drop-down piece of the equation at this point?
Yes. So at this point in time we believe that in the acquisition and the drop-downs we are we are been able and we will continue to be able to do them in accretive terms. Obviously whenever we consider our investment opportunity we compare it versus investing in our own shares. So that's always part of the analysis we conduct. And as you can imagine whenever you approve an investment at the board we compared with other available options including the one you mention.
Thank you very much for your passion.
Thank you, Julien.
Thank you once again. [Operator Instructions]. As we have no further questions at this time, I would like to hand the call back to Mr. Seage for closing remarks.
Great. Thank you very much to everybody for attending the call today. Thanks.
Ladies and gentlemen, that does conclude the conference for today. Thank you all for participating. You may now disconnect.