cg 2017 results call - contourglobal · (3) run-rate for mexico chp and spanish csp ebitda...
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Investor Presentation
30 July 2019
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This presentation does not constitute or form a part of, and should not be construed as, an offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of ContourGlobal plc (“ContourGlobal” or the “Company”) or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group or with any other contract or commitment whatsoever.
The information contained in these materials has been provided by 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.
Information contained herein relating to markets, market size, market share, market position, growth rates, penetration rates and other industry data pertaining to the Company’s business is based on the Company’s estimates and is provided solely for illustrative purposes. In many cases, there is no readily available external information to validate market related analyses and estimates, thus requiring the Company to rely on internal surveys and studies. The Company has also compiled, extracted and reproduced market or other industry data from external sources, including third parties or industry or general publications, for the purposes of its internal surveys and studies. Any such information may be subject to significant uncertainty due to differing definitions of the relevant markets and market segments described.
This presentation contains references to certain non-IFRS financial measures and operating measures. These supplemental measures should not be viewed in isolation or as alternatives to measures of the Company’s financial condition, results of operations or cash flows as presented in accordance with IFRS in its consolidated financial statements. The non-IFRS financial and operating measures used by the Company may differ from, and not be comparable to, similarly titled measures used by other companies. The non-IFRS adjustments for all periods presented are based upon information and assumptions available as of the date of this presentation.
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Disclaimer
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Financial Results 12
ContourGlobal Snapshot 4
Appendix 19
Growth Strategy and Recent Developments 15
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Table of Contents
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1. ContourGlobal Snapshot
KivuWatt – Methane Gas Extraction Facility & Power Plant (Rwanda)
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Long term contracts and regulated tariffs delivering stable and secure cash flows
Diversified footprint by geography and technology: no single asset contributes more than 18% group EBITDA
Proven track record of value accretive growth through both operationally lead acquisitions and greenfield development, with attractive M&A and development pipeline
Modest Leverage: primary use of non-recourse debt financing provides significant protection to bond investors
High cash flow conversion: underlying assets distributing +$224m cash to parent in LTM Q1 2019.1
5
Business Highlights World Class Operator with Large Global Footprint Diversified Across Geographies and Technologies Delivering Superior Financial Results
$636m LTM Q1 2019 EBITDA
+18% EBITDA CAGR since 2016 4.8 GW² 31-Mar-2019 contracted generation
Portfolio Thermal Solar Wind Hydro Biogas
High Efficiency Cogen
(1) Calculated as CFADS ($182.1m) + Solar Italy Sale proceeds ($42m). (2) Capacity includes 518 MW Mexican Cogeneration acquisition signed in Jan-2019 and Interporto acquisition which closed in Jun-19.
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305 331 440
513 610 636
2014 2015 2016 2017 2018 LTM Q12019
6
LTM Q1 2019 Financial and Credit Snapshot High value growth
(1) CFADS as defined in Bond indenture as cash received on the corporate level less cash overheads divided by interest expense at the corporate level (2) Calculated as (Existing Senior Secured Notes at Holding Level – Unrestricted Cash at Holding Level) / (CFADS + Solar Italy Sale Proceeds) (3) Run-rate for Mexico CHP and Spanish CSP EBITDA contributions for a full year (acquired May 2018). The Mexico CHP acquisition is expected to close in Q3 2019
Adj. EBITDA +18% CAGR since 2016 $636m
DSCR 5.6x1
LTM Q1 2019 Key Financial Metrics
FFO $320m +21% CAGR since 2016
+18% growth vs. 2017A HoldCo Net Leverage 2.4x2
Adj. EBITDA Growth
2014-2018 CAGR 19%
Run-rate LTM Q1 2019 EBITDA3
Significant M&A and development pipeline to deliver targeted growth
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100% 99% 99% 96% 100% 100%
10% change in electricityspot prices
10% depreciation of BRL P90 resource level acrossall renewables
10% change in fuel prices 10% change in CO2 prices
7
Diversified: technology, geography and currency Our business model and strongly diversified asset base lead to resilient financial performance
(1) Excluding Corporate and Holding company costs
LTM Q1 2019 Adj. EBITDA1 by Technology LTM Q1 2019 Adj. EBITDA1 by Geography LTM Q1 2019 Adj. EBITDA1 by Currency
Financial performance is highly resilient to external factors
61%13%
26%
Europe Africa Latam
62%20%
12%
4% 2%
EUR USDBRL BRL Hedged to USDOther
20%
22%
8%17%
24%
9%
Coal Natural Gas Fuel Oil
Wind Solar Hydro
Thermal 49%
Renewable 51%
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2
3
5
5
5
6
7
7
11
14
15
15
17
17
17
18
21
21
Arrubal
French Caribbean
Sochagota
Maritsa
Solutions
Bonaire
Austria Wind
Solar Slovakia
Solar Italy
Asa Branca
Togo
Inka
Spanish CSP
Chapadas Complex
Cap des Biches
Hydro Brazil
Vorotan Complex
KivuWatt
8
Stable Long Term Contracted / Regulated Revenues Delivering Robust Cash Flows Weighted Average Remaining Contracted / Regulated Term of 11 Years
(1) For assets with multiple PPAs, numbers shown based on midpoint of the expiration dates for such PPAs; data as of 31-Mar-2019. (2) Weighted by adjusted EBITDA before corporate and holding company costs. (3) New Sochagota PPAs until 2023
Maintained Long Weighted Average Remaining Contracted / Regulated Term2 (Years) Remaining Contracted / Regulated Life by Asset (Years)1,2
% of Total Estimated Adjusted Revenues in 2019E-2024E
>90%
<10%
Contracted / Regulated Revenue Uncontracted / Unregulated Revenue
Current contracts / regulated revenues
have a weighted average remaining
term of c.11 years
3
12 11
12 11
2015 2016 2017 2018
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0.00 0.03
0.18 0.18 0.19 0.24 0.26 0.26 0.26 0.30 0.35 0.36 0.36 0.44 0.46 0.50 0.54
0.90
0.88 0.90
1.21
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Total
Selected Peers Top Quartile = 0.20³
9
Thermal – Equivalent Availability Factor5 (%)
Renewable – Equivalent Availability Factor5 (%)
Leading the Sector in H&S Performance - LTIR1
(1) Peers information as 2017 reported in annual reports/sustainability reports published by companies normalized to basis of 200,000 working hours. (2) Lost time injury rate (LTIR) is an industry standard reporting convention for calculating injuries in the workplace. LTIR measures recordable lost time incident (LTI) rates on the basis of 200,000 working hour. (3) Selection of comparable peers from study performed by Black&Veatch. (4) Based on the 2017 report for days away from work cases - injuries and illnesses from the bureau of labor statistics. (5) Equivalent Availability factor refers to the actual number of hours a plant or group of plants is available to produce electricity divided by total number of hours of the reported period.
• To provide a safe working place for employees, contractors and sub-contractors is also part of operational excellence and is reflected in the company’s “Target Zero Program” (zero harm, zero injuries) and driven by a culture of continuous improvement.
• As a result, ContourGlobal has become an industry leader in Health and Safety performance as demonstrated by benchmark lost-time incident rates (“LTI” rates)
L T I R - P E E R S V S C G 93.0% 92.6% 90.2% 95.3%
2016 2017 2018 Q1 2019
97.0% 97.6% 96.8% 96.8%
2016 2017 2018 Q1 2019
World Class Operating and Health & Safety Performance ‘Achieving Target Zero’ is one of ContourGlobal’s Key Priorities
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Fixed-price contracts that typically contain inflation pass-through terms
Long-term contracts typically with state-owned or supported utilities or large investment grade companies, or stable regulatory regimes (avg. credit rating BBB-/Baa2)
No Price Risk
Negligible Revenue /
Volume Risk
Limited Credit Risk
No Cost Risk
Contract Structure Differs between technologies Thermal: No volume risk; plants paid full capacity payment irrespective of off-taker demand Renewables: Plants typically paid set price based on MWh produced
Typical Thermal PPAs virtually eliminate commodity risk via fuel and CO2 emissions costs pass-through mechanisms
Long-term contracts, weighted average remaining contract life of 11 years Limited Duration Risk
Investments in High-Quality and Stable Businesses De-risked Business Model Resulting From Well / Highly Structured Prospects
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85%
15%
IG post PRI Non IG
11
Improved Credit Quality of Off-takers and Mitigated Counterparty Risk Through Political Risk Insurance Long-standing and Comprehensive Program to Protect Against Political Risk
(1) Excluding Corporate Costs. (2) Based on S&P and Moody’s Ratings.
Average Credit Rating of Off-takers Post PRI: A / A2
Average Credit Rating of Off-takers Pre Political Risk Insurance (“PRI”): BBB- / Baa2 LTM Q1 2019 Adjusted EBITDA by Credit Rating1, 2
Insurers include development finance institutions and double A rated private insurers
Policy
ContourGlobal secured PRI policies for most of our projects in sub-investment countries and expect to continue to use this type of insurance for future projects where available and deemed attractive
PRI is underwritten at the Issuer level, which is not part of the project lender collateral package
Amount Insured
90 – 100% of Net Investment Value is typically covered under all PRI contracts
Protection Contracts typically cover expropriation, political violence, currency
inconvertibility, forced divestiture and breach of contract and non-honouring of an arbitration award
Timing Processing time for insurance proceeds are typically 180 days for
expropriation, and 90 days or less for other events
PRI Underwriters
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2. Financial Results
Asa Branca 160MW Wind Farm (Brazil) 12
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440
513
610636
2016 2017 2018 LTM Q12019
FFO (US$m)1
302 320
208
256
2016 2017 2018 LTM Q12019
905
1,023
1,253 1,286
2016 2017 2018 LTM Q12019
13
Robust Financial Performance Significant Growth in Revenues, Adjusted EBITDA and FFO
(1) Adjusted EBITDA and FFO are non-IFRS measures.
Revenue (US$m) Adjusted EBITDA (US$m)1
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Robust Credit Metrics
(1) CFADS as defined in Bond Indenture. (2) Special $90m distribution received in April 2016 following the settlement of the receivables balance from NEK. (3) Calculation as stated in the bond Indenture.
Issuer CFADS (US$m) 1
Debt Service Coverage Ratio3
CAGR: 20%
Maritsa Special Dividend2
Strong And Stable Cash Flow Generation Underpinning Healthy Debt Coverage Ratio
211100
301232 204 182
2015 2016 2017 2018 LTM Q1 2019
100
301
232204 182
36 33 41 34 33
2.8x
9.2x
5.6x 6.1x5.6x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
0
50
100
150
200
250
300
350
2015 2016 2017 2018 LTM Q1 2019
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3. Growth, Strategy and Recent Developments
Sabaudia 6MW solar farm (Italy) 15
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Extraordinary Track Record of Value Creation Ongoing Industry Transformation Favours ContourGlobal’s Disciplined, Opportunistic Growth Strategy – CAGR of 26% Since 2006
285 285 285 316 715
2,433 2,451 2,643 2,875
3,618 3,934
4,158 4,317 4,847
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Current
Financial liquidity coupled with a lean organizational structure enables patience in identifying attractive targets and quick execution of transactions
Installed Capacity
(MW)
Strong track record of creating value through developing greenfield assets and integrating acquisitions where ContourGlobal has a competitive advantage
Developments Greenfield Acquisitions Acquisitions with Refurbishment Acquisitions
Operationally led opportunistic investor with a long-term focus employing efficient capital structure and risk mitigation mechanisms Profile
Value Creation
Capabilities
(1) Includes the InterPorto and the Mexico CHP acquisitions
1
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• Fixed cost reductions achieved in conjunction with increased performance
• Long-term owner / operator business model ensures we maintain control of processes and costs
• No inefficient outsourcing, offers greater potential synergies across region
• Accountability with continuous operational benchmarking to best-in-class
• Zero-based Organizational Design: low fixed costs, enhanced transparency and communication
• Timely Transparency: Real time course correction through widely accessible data systems; global network with full integration of all plants and people.
17
Fixed Cost Reduction AvailabilityOther Operational
Improvements
Maritsa908MW
Lignite Plant
Arrubal800MW
Gas-Fired Plant
Austria Wind150 MW
Wind Farm
Solar Italy65MW
Solar PV Assets
Bonaire28MW
Wind & HFO
Value lever
22%
20%
32%
16%
2%
2%
1%
3%
InsourcedOperations;
Zero LTI
Repowering
O&M insourced
Zero LTIssince 2015
26% 2% €2m fuel savings
ContourGlobal Operations Way Philosophy
Performance of Operational-Led Acquisitions reflects the value of CG Operational Structure and program
(1) Analysis represents improvements/events between date of acquisition of each asset and 31-Dec-2017
1
Track-record of creating value in acquisitions by improving cost structure while increasing operational performance
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Growth - Mexican Cogeneration Business Acquisition Signed in Jan 2019 on Track for COD and Close in Q3 2019
• Acquisition of two natural-gas fired combined heat & power assets from Alpek SA for 518MW of operational capacity at completion, further 414MW in development
• More than 90% contracted including heat and steam with seller
• Commissioning of 414 MW CGA 1 plant progressing with COD expected in Q3 2019.
• Successful commissioning is a condition precedent to transaction close.
• Total consideration $724m, with an additional payment at closing estimated at $77m of VAT (expected to be refunded in full within 12 months). Sources are: $590 of project financing and $211 from parent cash
CELCSA: 104 MW
Transaction Highlights and Update:
CGA I: 414 MW Plant under commission
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Appendix
Sao Domingos II 25MW Hydro Power Plant (Brazil)
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ContourGlobal Portfolio
(1) HFO refers to heavy fuel oil, and LFO to light fuel oil. (2) Capacity weighted. (3) Includes acquisition of 12.4 MW portfolio (Interporto) that was closed in June 2019 (4) Signed but not closed.
Segment Facility / Project Name Location Gross Cap.
(MW) Number of Assets Fuel Type1
ContourGlobal Ownership COD Power Purchaser PPA Expiration
Maritsa Bulgaria 908 1 Coal 73% 1978 NEK 2024 Arrubal Spain 800 1 Natural Gas 100% 2005 Gas Natural Fenosa 2021 TermoemCali Colombia 240 1 Natural Gas / Diesel 37% 1999 Various 2023 Sochagota Colombia 165 1 Coal 49% 1999 Various 2023 Togo Togo 100 1 Natural Gas / HFO / Diesel 80% 2010 CEET 2034
Cap des Biches Senegal 86 1 HFO / Gas 100% Q2 2016 / Q4 2016 Senelec 2036 French Caribbean (Guadeloupe and Saint Martin)
French Caribbean 35 2 HFO / LFO 100% 2000; 2003 EDF 2020; 2023
Bonaire Dutch Antilles 28 1 Fuel Oil / Wind 100% 2010 WEB 2025 KivuWatt Rwanda 26 1 Biogas 100% Q4 2015 EWSA (ex-Electrogaz & REC) 2040
Total Thermal 2,388 10 ContourGlobal Solutions Europe – Nigeria –
Brazil 132 11 Natural Gas 100%;100%; 80% 1995-2015 Investment grade global
industrial companies 2020-2033
Mexican CHP assets4 Mexico 518 2 Natural Gas cogeneration 100% 2014/19 Mexican industrial/commercial N/A Total High Efficiency Cogen 650 13
Chapada Complex Brazil 438 3 Wind 51%, 51%, 100% 2015; Q1 2016 CCEE; distribution companies 2035 Vorotan Armenia 404 1 Hydro 100% 1970 AEN 2040
Spanish CSP Spain 250 5 CSP 100% 2009-2012 CNMC 2034-2037 Brazil Hydro Brazil 167 9 Hydro 73%2 1963; 1992; 2009-
2012 Distribution companies 2027-2042
Asa Branca Brazil 160 1 Wind 100% 2013 Distribution companies 2033 Austria Wind Austria 155 10 Wind 94% 2003-2019 OeMAG; Verbund (for assets
with FiT ended) 2016-2032
Inka Peru 114 2 Wind 100% 2014 Distribution companies and Other Generation companies
2034
Solar Italy3 Italy 77 48 Solar 51% 2007-2013 Gestore Servizi Energetici S.p.A 2027-2033 Solar Slovakia Slovakia 35 3 Solar 51% 2010-2011 Distribution companies 2025-2026 Solar Romania Romania 7 1 Solar 100% 2013 Met Romania Energy Sa 2028 Biogas Italy Italy 2 2 Biogas 100% 2013 Gestore Servizi Energetici S.p.A 2028
Total Renewable 1,809 85 Total Portfolio 4,847 108
Thermal Renewables
High Efficiency Cogen
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CFADS Breakdown by Asset(Before Corporate and Divisional Costs)1 2016 2017 2018 LTM Q1 2019
Maritsa 118 30 65 34
European PV Solar2 22 55 38 47
Spanish CSP – – 35 35
Arrubal 19 28 18 18
Cap des Biches – 7 17 12
ContourGlobal Solutions3 28 41 15 16
Peru Wind 23 5 15 14
Brazil Hydro (1) 55 14 14
Vorotan 111 13 9 9
Togo 6 6 7 7
Caribbean5 10 9 5 5
Austria Wind 7 8 4 4
KivuWatt – – 4 8
Colombia6 4 8 4 3
Brazil Wind 2 5 - -
Total Before Corporate and Divisional Costs 349 270 249 226
Corporate and Divisional Costs (48) (38) (46) (44)
Total CFADS 301 232 203 182
CFADS Breakdown by Asset1
(1) CFADS (Cash Flows Available for (Corporate) Debt Service) as defined in Bond Indenture (2) Includes Solar Italy, Slovakia and Romania in 2016 - Q1 2019, and Solar Czech in 2016 only (3) Includes Solutions Europe and Africa and Solutions Brazil
(4) $84m second instalment of acquisition payment not deducted from CFADS (5) Includes French Caribbean and Bonaire (6) Includes Termoemcali and Sochagota
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4
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Long Term Contracts or Regulated Tariffs Delivering Stable Cash Flows
Counterparties
Term
Commodity Price
Key Revenue Components
Volume Risk
Thermal Assets Renewable Assets
Typical Framework PPA Feed-in tariff, regulated tariff or PPA
PPAs are typically state-owned or supported utilities or large investment grade companies FiTs or regulated tariffs normally have the grid / electricity system operator as the counterparty
Long-term contracts, with 20+ year duration from Commercial Operation Date (COD) ContourGlobal’s portfolio has a 11-year weighted average remaining contract life
Fixed payment provided minimum availability requirements are met
Reimbursement for fuel and operating costs
FiTs and PPAs – fixed price for any electricity produced Regulated tariffs – regulated returns with minimal
electricity price risk
No commodity risk given fuel pass-through mechanisms in PPAs Not applicable
No volume risk, limited volatility ContourGlobal normally assumes volume risk Volume driven by operating KPIs (EAF and EFOR) as
well as resource availability
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Adjusted EBITDA Reconciliation
23
(a) Includes realized and unrealized foreign exchange gains and losses and change in fair value of derivatives of $52.9 million and $(44.5) million and $8.5 million for the three years ended December 31, 2016, 2017 and 2018 respectively and $(17.2) million and $5.7 million for the three months periods ended March 31, 2018 and 2019, respectively.
(b) Corresponds to our share of Adjusted EBITDA of plants accounted for under the equity method (Sochagota, TermoemCali and Productora de Energia de Boyaca) which are reviewed by our chief operating decision maker as part of our Thermal Energy segment.
(c) Represents the Spanish long-term capacity incentives payable in relation to our Arrubal power plant. These incentives, which ended in early 2017, were granted for the construction of the plant with payment from authorities. (d) Relate primarily to pre-acquisition costs such as professional fees, due diligence costs and bargain purchase gains. (e) Represents the effect of the divestment of 49% stake of our Italian and Slovakian Solar PV portfolio. (f) Represents redundancy and staff-related restructuring costs in connection with the reorganization of corporate offices in the Group. (g) Represents the incentive plan as described in note 4.26 of our 2018 consolidated financial statements. (h) Gain on termination of the CG Solutions – Kiev plant relates to the sale of the CG Solutions power plant in Kiev to CCH (equal to sale proceeds net of write-off on assets), which was completed in August 2016. (i) Represents the gain resulting from the sale of three solar energy plants in Czech Republic representing a total of 6.0 MW in November 2016. (j) Represents the costs resulting from the successful completion of the Initial Public Offering in the United Kingdom of ContourGlobal plc. (k) Mainly reflects the non-cash impact of financial concession payments and finance lease payments in all periods.
Year ended December 31, 3 months ended March 31 12 Months Ended
(In $ million) 2015 2016 2017 2018 2018 2019 March 31, 2019
Net profit / (loss) -56.6 20.8 13.5 10.4 -24.5 7.9 42.8 Income tax expense 25.1 22.1 27.1 17.4 4.8 6.6 19.2 Finance costs, net(a) 273.1 201.9 220.7 236.6 70.2 50.1 216.5 Depreciation and amortization 149.8 169.4 185.6 239.3 50.5 68.9 257.7 Share of profit in joint ventures and associates -3.4 -7.3 -5 -2.9 -0.4 -3.9 -6.4 Share of Adjusted EBITDA in joint ventures and associates(b) 20.6 21.4 21.6 21.2 6.4 5.3 20.1 Government grants(c) 8.1 6.5 — — — — — Acquisition related items(d) 12.8 12.3 9.5 19.6 2.7 3.1 20 Effect of sale of minority interest in assets(e) 2 — — 20.9 — -2.6 18.3 Resturcturing costs(f) -97.3 — — 6.7 — 0.1 6.8 Private incentive plan(g) -1 — — 4.1 — 2.1 6.2 Gain on termination of the CG Solutions—Kiev plant(h) — -12.1 — — — — — Gain on sale of Czech assets(i) — -3 — — — — — Costs related to CG plc. IPO(j) — — 12.7 0.4 0.7 — -0.3 Other(k) -14.7 8.4 27.5 36.3 8.6 6.8 34.5
Adjusted EBITDA 318.5 440.4 513.2 610.1 119.0 144.4 635.5
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FFO Reconciliation
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Funds from Operations refers to Cash Flow from Operating Activities excluding changes in working capital, less interest paid, less Maintenance Capital Expenditure, less distribution to non-controlling shareholders. Funds from Operations is not a measurement of financial performance under IFRS. For further details on the limitations of this non-IFRS measure see “Presentation of Financial and Other Information—Non-IFRS Financial Measures.” The following table reconciles net cash generated from operating activities to Funds From Operations for each period presented:
Year ended December 31, 3 months ended March 31 12 Months Ended
(In $ million) 2015 2016 2017 2018 2018 2019 March 31, 2019
Net cash generated from operating activities 341 532.6 420.6 578.2 146.7 142.2 573.7
Change in working capital -32.1 -135.6 39.4 -50.9 -38.9 -4 -16
Interest paid -133.8 -154.3 -169.2 -180.9 -31.2 -44.9 -194.6
Maintenance capital expenditure -16.5 -14.5 -18.7 -24.6 -5.2 -10 -29.4
Cash distribution to minority interests -16.8 -20.3 -16.2 -19.5 -20.3 -14.3 -13.5
Funds From Operations 141.8 207.9 255.9 302.3 51.1 69.0 320.2
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