ContourGlobal eyes major dividend growth from evolving power market

ContourGlobal reported strong sales and profits growth as the wholesale renewable and thermal power provider published its maiden annual results as a FTSE 250 company.

The company, where US private equity group Reservoir Capital still owns 69% of the shares after floating the rest in London in November, reported consolidated revenue up 13% to $1.02bn and lifted income from operations up 21% to $269m.

Adjusted EBITDA rose 17% to $513m, in line with expectations, driven by acquisitions made last year and a full year of operations of the power plants commissioned in 2016. Directors aim to double EBITDA by 2022.

Thermal energy from plants in Spain, Bulgaria, Africa and the Caribbean generated an 18% jump in adjusted EBITDA to $332m, while EBITDA from renewable energy in such places as Brazil, Peru, Italy and Austria was up 9% at $211m. In February, a €806m deal was struck to acquire a 250 MW concentrated solar power portfolio in Spain, which is expected to close before the end of June.

Thanks to strong cashflow generation funds from operations up 23% to $256m, the board pledged to $17.5m of its on a final dividend of 2.6 cents per share, which will be paid in sterling.

Directors said for 2018, dividends "ranging from $75m to $80m" are expected to be recommended, with the plan to increase the dividend by "a minimum of high single digits growth rate each year over the next five years dependent upon ContourGlobal's ability to maintain its strategic goals".

Joseph C Brandt, president and chief executive officer, said the business ticked off all the short-term operational, financial and growth commitments made during the IPO process, chiefly resulting in double-digit growth in revenue and adjusted EBITDA.

"Our recent announcement of a sizable acquisition in the Spanish thermal solar space as well as the successful commencement of the repowering of the first two of our Austrian wind farms provides confidence in both the development and acquisition prongs of our growth strategy and moves forward our target of doubling adjusted run-rate EBITDA within the next five years," he said.

Chairman Craig Huff said the global power industry was going through significant change as countries lean towards varying degrees of energy security, economic development and decarbonisation.

"As integrated power companies continue to rethink their global asset mix, I believe ContourGlobal, as a leader in the contracted power generation space, is well positioned to capitalize on our disciplined, opportunistic growth strategy. Our focus on wholesale, contracted power generation will continue to produce low-risk, long-term cash flows, while our extraordinary operating team continues to optimize and expand our portfolio."

Net debt stood at $2.1bn, in line with expectations, just over four times adjusted EBITDA compared to 4.8 times at the end of the previous year.

Shares in ContourGlobal, having risen from November's float price of 250p to 300p by January before slumping to 226p last month, were up more than 3% on Thursday to 240p.