acquisition of contracted power plants in the us and
TRANSCRIPT
Acquisition of contracted power plants in the US and Trinidad & Tobago
8 December 2020
Disclaimer
2
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Strictly Confidential
Investor Presentation - Participants
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Joseph C. BrandtPresident and Chief Executive Officer
Stefan SchellingerExecutive Vice President and Global Chief Financial Officer
Karl SchnadtExecutive Vice President and Global Chief Operating Officer
Quinto Di FerdinandoSenior Vice President, Chief Operating Officer, Thermal Division
Alice HeathcoteSenior Vice President, Corporate Strategy and Investor Relations
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Investor Presentation - Agenda
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Highlights and Transaction Rationale
Assets Overview
Strategic Rationale and Value creation
Financing and Transaction Timetable
Key Conclusions
Strictly Confidential
Acquisition of 1.5 GW contracted power plants in the US and Caribbean• two essential baseload power plants based in New Mexico and Texas• the largest independent power asset in Trinidad & Tobago• two asset clusters in California and one small peaking unit in Connecticut
Expected adjusted EBITDA contribution in the first year following completion of $92 million,including $5 million of non-recurring integration costs; expected cash distributions to theparent company in the first year of approximately $40 million
AttractiveSubstantialTransaction
Highlights & Transaction RationaleAcquisition of 1.5 GW contracted power plants in the US and Caribbean for $837m on a cash and debt free basis
Attractive, low carbon, natural gas-fired, flexible assets located in or adjacent to areaswhere ContourGlobal has an operating presence
Substantial entry into the bilaterally contracted segment of the US power market where thecompany expects to grow with operationally led acquisitions
Long-term USD-denominated contracts with a weighted average remaining life of 9 years Clear near term re-contracting visibility, plus substantial post contract value Contracts aligned with ContourGlobal business model: with very limited demand, price or
cost input risk
Strong Strategic Fit
Operational & Commercial
Value Creation
Deep ContourGlobal experience in acquired technologies, including a highly efficientcombined heat and power asset similar to those in the Company’s existing Solutionsportfolio, enabling significant operational value creation
Meaningful development and expansion potential including battery storage and hybridtechnology
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Strictly Confidential
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Financial HighlightsDiversification and Meaningful Increase in Parent Company Free Cash Flow
Financial Highlights
Acquired Assets provide a meaningful increase of CFADS and Parent Company Free CashFlow from high quality off-takers with a weighted average credit rating of BBB+
Increases and diversifies Parent Company Free Cash Flow, supporting the Company’sprogressive dividend policy and improving Company’s dividend coverage
Increases USD EBITDA contribution to 36% of total EBITDA and further diversifiesContourGlobal’s technology, currency and geographies
Acquisition expected to generate a risk-adjusted return well in excess of ContourGlobal’scost of capital
Acquisition will increase group Net Debt to Adjusted EBITDA to approximately 5.0x at thetime of Closing, which is well-supported by the high-quality nature of the AcquiredAssets, and expected to fall over subsequent financial periods
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Strictly Confidential© ContourGlobal 7
Assets Overview1,502 MW portfolio: 1,277 MW in the US and 225 MW in Trinidad & Tobago (“T&T”)
SPP / SPS
Hobbs604 MW
Borger230 MWCalifornia Peaking Units
371 MW (8 plants)
Waterside72 MWCAISO
ISO-NE
Map of OperationsKey Assets Characteristics
Contracted assets located in New Mexico, Texas,California and Connecticut in the US and in Trinidad &Tobago
Acquired Assets represent either the most efficientthermal units in the markets where they operate orprovide critical flexible generation, supportingincremental system renewable capacity
Adjacent to geographies where ContourGlobal isalready active: Two of the three major assets located inTexas and New Mexico within close proximity to ourassets and operations in Mexico, while T&T assetlocated in Caribbean region where ContourGlobal isalready present
Significant future opportunity for ContourGlobal tocreate value as a result of its operational platform andcapabilities
1
Hobbs
2
Borger Trinity
3
California Peaking Units
4 5
Waterside
Trinidad & Tobago
Trinity 225 MW
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Increases Capacity by 30% While Adding High Quality USD Contracted Cash Flow
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Capacity increases to 6,307 MW from 4,805 MW Contribution from US$ businesses increases to 36%
15%
22%
6%17%
13%
20%
6%
(1) $873m LTM Q3’20 Adjusted EBITDA before Thermal and Renewables HoldCo expenses pro-forma for full year EBITDA of Mexican CHP acquisition completed in November 2019 as well as Western Generation Portfolio Acquisition ($92m EBITDA contribution).
By Technology By GeographyBy Currency
46%
10%
13%
31%
Europe Africa US & Caribbean Latin America
49%
36%
4%
8%3%
EUR USD BRL Hedged to USD BRL Other
Renewable39%
Thermal43%
HE Cogen 17%
GasHigh Efficiency Cogen
Coal
WindSolar
Hydro
Liquid Fuels
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5%
59%10%
18%
8%A
A-
BBB+
BBB
BB-
Assets supported by long-term contracts with investment grade off-takers
− Weighted average remaining contract life of 9 years and expected to increase to 10 years shortly after close through high visibility contract extensions
− Weighted average off-taker credit rating of BBB+
Contracts primarily capacity based tolling agreements or structured with fuel pass through payments resulting in virtually no demand or input cost risk
Near-term contract extensions are incorporated into existing PPAs or supported by market fundamentals
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Long Term Contracts with High Quality Counterparties that Enhance Credit Profile
Acquired Assets Offtaker Credit Rating1
Percentage of Portfolio Contracted Capacity
--10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%
100.0%
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Contracted Capacity Highly Visible Re-contracting Future Re-contracting1. As of Dec 2020; weighted 2021E EBITDA
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--
10.0
20.0
30.0
40.0
50.0
2019 LTM Q2 2020 2021 2022
PPA Margin Energy Margin Contracted Margin
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The assets are either the newest and most efficient assets in their respective markets or necessary to ensure grid reliability and supporting the transition to renewable grids
Hobbs and Borger (~60% of the Acquisition’s EBITDA) are the two most efficient assets serving their market and off-taker, Southwestern Public Service (“SPS”)
For the California Peaking Assets (371 MW), attractive market fundamentals due to no new anticipated thermal build in their region and the need for reliable and flexible generation to support renewables transition
The California assets have already locked in well priced new Resource Adequacy (“RA”) contracts post-PPA that are attractive relative to the legacy PPA contracts
Near Term Re-contracting Visibility, plus Substantial Post Contract Value
California Assets Re-contracting Supports Upside to Present PPA Levels
Hobbs (604 MW) and Borger (230 MW) are the newest and most efficient assets within SPS and serve critical roles as the legacy fleet retires
7.2 6.0
11.0
Hobbs Borger SPS ThermalAssets
12.0
21.0
42.0
Hobbs Borger SPS ThermalAssets
Heat Rate (MMBtu/MWh) Age (Years)
California assets are expected to increase EBITDA and energy margins immediately post PPA
4.5% YoY Growth
8.6% YoY Growth
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WGP Assets CG Natural Gas
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Acquisition’s Current Cost Structure Relative to CG’s Natural Gas and CHP2 Fleet ($/MW)1
Locational Hub to be formed providing asset management services to existing assets
Hobbs
Borger
CG CHP plant
Bonaire
Increases our capacity in the Caribbean by ~4.5xCreation of new Houston hub
ContourGlobal’s global expertise will drive operational performance on par with existing fleet
Locational hub will allow us to pursue additional growth opportunities in the region
This includes capacity expansion opportunities at Hobbs as well as battery storage opportunities in California and New England
Adjacent to or in regions where we own and acquire assets
Significant Opportunity for Value Creation
Mexico
NM
OK
TX
Houston
Trinity
Energies Antilles
Energies Saint Martin
1. Graph shows relative size of current cost structures as measured on a $/MW basis;2. Combined Heat and Power
CG Comparable FleetAcquired Assets
Clear cost reduction potential
CG CHP plant
Existing CG AssetsAssets to be Acquired
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Asset Size Plant Type
908 MW LigniteMaritsa
800 MW Gas-firedArrubal
147 MW WindAustria Wind
77 MW Solar PVSolar Italy
38 MW Wind & HFOBonaire
250 MW Solar CSP Spanish CSP
Fixed Cost Reduction Availability Other Improvements
22%
20%
32%
16%
26%
24%
2%
2%
1%
3%
2%
2%
€2m fuel savings
Insourced Operations: Zero LTI
Repowering
O&M insourcedSell-down of 49% of asset for ~2x net equity value
Zero LTIs since 2015
Sell-down of 49% of asset for ~2x net equity value
Value Lever
Opportunity to Create Significant Operational Value in line with ContourGlobal’s Track Record
Strictly Confidential
Financing & Transaction Timetable
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Financing Strategy
December Q1 2021
SPA signing followed bytransaction
announcement
Transaction Close and integration
• $837mm EV on a debt free, cash free basis
• ContourGlobal will assume approximately $210 million of existing project net debt.
• Remaining $627 million of consideration will be financed through existing cash on hand and an acquisition financing facility,which will be refinanced by holding company and/or project financing debt.
• The Proposed Acquisition will increase group net debt to Adjusted EBITDA to approximately 5.0x at the time of Closing, which is well-supported by the high-quality nature of the Acquired Assets, and expected to fall over subsequent financial periods
Conditions and Expected Timetable to Completion
2021
Refinancing
Q1 2021 Transaction closing expected subject to shareholder approval and various customary regulatory approvals
Class 1 transaction for the purposes of the UK Listing Rules and therefore requires approval of ContourGlobal shareholders; ContourGlobal L.P. has provided an irrevocable undertaking to vote in favour of the transaction
Break fee of approximately 1% of market capitalization at time of signing payable by the Company if shareholder approval not obtained
Strictly Confidential
Key Conclusions
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Operationally led acquisition, leveraging ContourGlobal’s track record of value creation
Enhances and diversifies EBITDA and cash flow and increases dividend coverage
Expected to generate a risk-adjusted return well in excess of ContourGlobal’s cost of capital
Strategically important assets located in or adjacent to areas where ContourGlobal has an operating presence
Long term contracts from high quality off-takers and limited exposure to production volumes or power prices
Aligned with ContourGlobal’s Sustainable Strategy to reduce carbon intensity of production
Strictly Confidential© ContourGlobal 15
IR InformationContact Point
IR ContactAlice HeathcoteSVP, Corporate Strategy & Investor Relations
Email:[email protected]
Phone:+44.203.626.9077 / +1.646.386.9910386 9901 Web ResourcesCorporate Websitewww.contourglobal.com
Investor Relations:www.contourglobal.com/investors
Strictly Confidential