acquisition of chp portfolio in mexico from alpek...this presentation and are subject to change...
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Strictly Confidential
Acquisition of CHP Portfolio in Mexico from AlpekInvestor Presentation – January 2019
Strictly Confidential
Disclaimer
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The information contained in these materials has been provided by ContourGlobal plc (“the Company”) and has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. It is not the Company’s intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the Company’s financial position or prospects. The information and opinions contained in these materials are provided as at the date of this presentation and are subject to change without notice. Neither the Company nor any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation.
Certain statements in this presentation are “forward-looking statements.” All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management for future operations, are forward-looking statements. These statements involve a number of factors that could cause actual results to differ materially, including, but not limited to, changes in economic, business, social, political and market conditions, success of business and operating initiatives, and changes in the legal and regulatory environment and other government actions. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Any forward-looking statement made during this presentation or in these materials speaks only as of the date on which it is made. The Company assumes no obligation to update or revise any forward-looking statements.
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Alpek CHP Acquisition
Agenda
1. Transaction Rationale & Highlights
2. Progressing our Strategy
3. Asset Overview
4. Financing & Transaction Timetable
5. Key Conclusions
Appendix
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Alpek CHP Acquisition
Presenters
Joseph C. BrandtPresident and Chief Executive Officer
Karl SchnadtExecutive Vice President & Chief Operating Officer
Laurent HulloSenior Vice President & Interim Chief Financial Officer
Alessandra MarinheiroExecutive Vice-President M&A and Business Development LatAm
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Compelling Transaction RationaleExpansion of our Solutions business into Mexico with the acquisition of Alpek’s CHPs. Accretive transaction fits squarely into our strategic and financial approach to acquisitions
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New, highly efficient combined heat & power
facilities, superior technology
Extension of highly successful Solutions
business
Located in attractive market, favourableregulatory regime
Expected to be within 4-4.5x leverage ratio range
within 12 months of closing
Inside the fence location, multiple products
for industrial partnersAssets
Strategic
Financial
Development opportunity for third CHP plant
High quality long term contracts
Significant EBITDA contribution
Earnings accretive
Amortizing project financing
Credit accretive
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HighlightsAcquisition of natural-gas fired combined heat & power assets with 518MW of operational capacity at completion, potential for a further 414MW in development
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✓ $724m purchase consideration, plus $77m VAT payment refundable within 12 months
✓ Estimated Adj EBITDA of $110m in first full year of operations
✓ Attractive 6.58x valuation multiple, transaction expected to be earnings and credit accretive
✓ Amortizing USD project financing to be fully underwritten and led by Scotiabank of up to $590 million to be entered into at closing
✓ Alfa Group affiliates are anchor off-takers contributing to 30% of revenues for the next 10 years
✓ Steam supply fully contracted until 2034 for the 104 MW plant and 2038 for the 414MW plant
✓ Over 90% capacity expected to be contracted by closing under PPAs with WAL of c.11 years
✓ Excess power not consumed by Alfa Group affiliates sold to well-known Mexican industrial and commercial off-takers
✓ USD business with predominately USD-linked PPAs with gas cost pass through
✓ Latin America’s second largest power market
✓ Expansion of successful CG Solutions operations providing inside the fence power and steam products for major industrial businesses
✓ Long term competitive position supported by favourable regulatory regime and exemption from acquiring Clean Energy Certificates
1. Pro forma : 2018 HY LTM plus Alpek assets at expected $110m for first full year of operations
Financial
Long-term contracted revenues
Highlights
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Assets Overview104 MW CHP plant located on Alpek’s petrochemical sites in Veracruz
CELCSA - Cosoleacaque, Veracruz
• 104MW of existing operational capacity
• 20 year steam off-take contract since 2014
• Long-term contracts with subsidiaries of the Alfa group and other industrial/ commercial customers
Cosoleacaque PET PlantCELCSA Plant
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Assets Overview414MW CHP plant located on Alpek’s petrochemical site in Tamaulipas
CGA1 - Altamira, Tamaulipas
• 414MW due to enter commercial operations in H1 2019
• Closing conditioned to testing and commissioning. Alpek remains with construction risks.
• Development rights and permits for an additional 414MW adjacent plant
CGA1 PlantCGA1 Plant
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Assets OverviewAltamira plant entering commissioning phase
Photos:
Cooling towers
Main boiler
Overall plant
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Financing & Transaction Timetable
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Conditions and Expected Timetable to Completion
✓ Class 1 transaction for the purposes of the UK Listing Rules and therefore requires among other conditions the approval of
ContourGlobal shareholders
✓ The Company has secured an irrevocable undertaking from ContourGlobal L.P., who as at 6 January 2019 holds approximately 71%
of the ordinary share capital of the Company
✓ Break fee of approximately 1% of market capitalization at the timing of signing payable by Company if shareholder approval not
obtained by long-stop date
SPA signing, transaction
announcement, financing committed
Publication of Class 1 Circular and notice to
convene general meeting
General Meeting and passing resolution to
approve the transaction
Transaction Completion
January March / April April/May/June
Regulatory approvals
✓ Financed through a combination of amortizing project financing and existing cash on balance sheet
✓ Expected project financing of up to $590m of USD senior secured term loan facility to be underwritten and led by Scotiabank to be
entered into at closing
✓ Limited currency exposure: USD business with predominately USD-linked PPAs, other than small percentage to provide natural
Mexican Pesos hedge for operations
Group leverage
✓ Pro forma consolidated net debt/EBITDA ratio (at constant FX): return to 4 – 4.5x range within 12 months of closing
Financing strategy
Tamaulipas plant starts commercial
operations
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French…
Arrubal
Austria Wind
Maritsa
Solutions
Bonaire
Solar Slovakia
Mexican CHP…
Sochagota (4)
Solar Italy
Asa Branca
Hydro Brazil
Inka
Togo
Chapadas…
250MW…
Cap des Biches
Vorotan…
KivuWatt
Long-Term ContractsRemaining life of contracts for ContourGlobal’s portfolio is expected to remain at approximately 12 years with pro-forma revenues expected to be 90% contracted to 2023
Remaining Contracted / Regulated Life by Asset (Years)(2)
Current contracts / regulated revenues
have a weighted average remaining
term of c.12 years(1)
(1) Weighted by Pro Forma Adjusted EBITDA for the year ended December 31, 2017.(2) For assets with multiple PPAs, numbers shown based on midpoint of the expiration dates for such PPAs; data as of 31-Dec-2017.(3) For Mexican CHP, numbers shown based on the weighted average life of contracts expected at closing.
Acquisition will become one of our largest plants
Acquisition
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Spain CSP
French Caribbean
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Pro forma
Before
Pro Forma 2018 H1 LTM Adj EBITDAFurther diversification across technology, geography and currency
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50%
10%
40%
59%12%
29%
LatAm
Africa
Europe
LatAm
Africa
Europe
61%19%
14%
4%1%
53%30%
12%
4% 1%
USD
BRL Unhedged
EUR
Other
BRL Hedged to USD
39%
18%
43%
45%
5%
50%
Renewable High efficiency cogenerationThermal
By Technology By Geography By Currency
USD
BRL Unhedged
EUR
Other
BRL Hedged to USD
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Pro forma
Before
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6%
18%
15%
18%
39%
18%
43%
45%
5%
50%
Renewable
High efficiencycogeneration
Thermal
7%
21%
17%
5%
Fuel Oil
N Gas - CHP
Coal
N Gas - Thermal
Fuel Oil
N Gas - CHP
Coal
N Gas - Thermal
Renewable
High efficiencycogeneration
Thermal
ThermalBy Technology
Pro Forma Group Profile Post AcquisitionHigh efficiency cogeneration will now account for 18% of group pro forma Adj EBITDA
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Key Conclusions
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✓ Substantial cogeneration capability in Latin America’s 2nd largest power market, long-term competitive position supported by favourable regulatory regime
✓ Platform for growth for Solutions business with major industrial and commercial clientbase
✓ 6.58x EV/ EBITDA multiple; transaction expected to be earnings and credit accretive
✓ Amortizing project financing, expect to return to 4 – 4.5x range within 12 months ofclosing
✓ Another significant step towards achieving ContourGlobal’s growth targets
✓ High efficiency cogeneration technology increasing in prominence in Group
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Appendix
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Regulatory EnvironmentThe assets benefit from the Legado regime, that is not available to new combined cycles or renewable plants, and favorable regulations to highly efficient CHP plants that are qualified as clean technology
• Energy Bank
➢ The bank creates a buffer for planned and unplanned outages and significantly
mitigates the volume and hourly price risks.
➢ Excess energy generated in 12-months periods is stored at "the bank” and could
be "used" in another time during the banking year. At the end of each 12-month
period up to 5% of the balance can be carried forward and the remainder must
be sold to CFE at 85% of the short-term marginal price.
• Reduced T&D Fees➢ Under the Legado regime, generators and off-takers have the benefit of lower
transmission and distribution wheeling fees.
• Clean Energy Certificates
(“CEL”)
➢ Differently than typical combined cycle gas turbine (“CCGT”), cogeneration plants
are considered clean technology under the Mexican regulatory regime and do
not need to purchase clean energy certificates to offset emissions.
• Congestion risk
➢ Legado plants do not pay for “congestion charges”. Under the new regime, users
are responsible to pay for variable transmission charges between the injection
and withdrawal points (difference of nodal prices) corresponding to their
transactions in the MEM.
➢ The CHPs can sell energy in the entire interconnected Mexican territory not being
exposed to congestion risk.
• CENACE Charges ➢ Charges for the system operator are not applicable to Legado plants.
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Technical SpecificationsThermal efficiencies for a CHP plant can exceed 85% and are higher than a typical CCGT plant due to the combined power and heat generation delivering superior efficiency to industrial energy users
Location Cosoleacaque Altamira
Units
COD mm/yy Dec-2014 H1-2019
PPA Weighted Average Life1 # Years 11.7 10.2
Fuel - Natural Gas Natural Gas
Installed Capacity (ISO) MW 104 414
GT Manufacturer - General Electric Siemens
ST Manufacturer - EKOL Siemens
HRSG Manufacturer - Foster Wheeler CERREY
1. Includes the steam supply tenor
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IR Information
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Contact Point
Ross HawleySVP, Investor Relations
Email: [email protected] [email protected]
Corporate Websitewww.contourglobal.com
Investor Relations www.contourglobal.com/investors
IR Contact
Web Resources
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