F-1 1 d682298df1.htm FORM F-1 Form F-1
Table of Contents

As filed with the Securities and Exchange Commission on April 1, 2014

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Abengoa Yield plc

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

 

 

England and Wales   4911   Not applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

1 Park Row

Leeds, United Kingdom LS1 5AB

Tel.: +34 954 937 111

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Abengoa Solar LLC

1250 Simms St., #101

Lakewood, CO 80401

Tel.: (303) 928 8500

Attn.: Christopher B. Hansmeyer

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Jeffrey C. Cohen

Linklaters LLP

1345 Avenue of the Americas

New York, New York 10105

Phone: (212) 903-9000

 

Michael J. Willisch

Davis Polk & Wardwell LLP

Paseo de la Castellana, 41

28046 Madrid

Phone: + 34 91 768 9610

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

Calculation of Registration Fee

 

 

Title of Each Class of

Securities to be Registered

  Proposed
Maximum
Aggregate
Offering  Price(1)(2)
  Amount of
Registration Fee

Ordinary Shares, nominal value $0.10 per share

  $600,000,000   $77,280

 

 

(1)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the aggregate offering price of additional shares that may be purchased by the underwriters.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated April 1, 2014.

Preliminary Prospectus

             Ordinary Shares

 

LOGO

(Incorporated in England and Wales)

Ordinary Shares

$             per share

 

 

This is the initial public offering of the ordinary shares of Abengoa Yield plc, or Abengoa Yield. We were recently formed by Abengoa, S.A., or Abengoa. We refer to this offering of ordinary shares, or the shares, as the “offering.”

We currently expect that the initial public offering price per share will be between $             and $            .

Immediately following this offering, Abengoa will indirectly hold         % of the voting power in Abengoa Yield. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NASDAQ Global Select Market.

We have applied to list our shares on the NASDAQ Global Select Market under the symbol “ABY”.

We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, and, as such, are allowed to provide in this prospectus more limited disclosures than an issuer that would not so qualify. In addition, for as long as we remain an emerging growth company, we will qualify for certain limited exceptions from the Sarbanes-Oxley Act of 2002. Please see “Risk Factors—Risks Related to Ownership of our Shares—We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements, which could make our shares less attractive to investors” and “Summary—JOBS Act.”

 

 

Investing in our shares involves risks. See “Risk Factors” beginning on page 36 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Public Offering Price

   $                    $                

Underwriting Discounts(1)

   $         $     

Proceeds to Abengoa Yield, before expenses

   $         $     

 

(1)

Abengoa is paying certain expenses of the underwriters. See “Expenses of the Offering” and “Underwriting.”

The underwriters expect to deliver the shares to purchasers on or about                     , 2014 through the book-entry facilities of The Depository Trust Company.

To the extent that the underwriters sell more than              shares, the underwriters have the option to purchase up to an additional              shares from an Abengoa subsidiary at the public offering price less the underwriting discount. We will not receive any proceeds from the exercise of the underwriters’ over-allotment option.

 

Citigroup    BofA Merrill Lynch

The date of this prospectus is                     , 2014.


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TABLE OF CONTENTS

 

     Page  

Enforcement of Civil Liabilities

     1   

Definitions

     1   

Presentation of Financial Information

     3   

Presentation of Industry and Market Data

     4   

Cautionary Statements Regarding Forward-Looking Statements

     6   

Summary

     8   

The Offering

     29   

Summary Combined Financial Information

     31   

Risk Factors

     36   

Use of Proceeds

     62   

Cash Dividend Policy

     63   

Capitalization

     75   

Dilution

     76   

Unaudited Pro Forma Combined Financial Information

     78   

Selected Financial Information

     82   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     88   

Industry and Market Opportunity

     112   

Business

     121   

Regulation

     147   

Management

     172   

Related Party Transactions

     178   

Principal and Selling Shareholder

     185   

Description of Share Capital

     186   

Shares Eligible for Future Sale

     201   

Taxation

     203   

Underwriting

     209   

Expenses of the Offering

     215   

Legal Matters

     216   

Experts

     217   

Where You Can Find More Information

     218   

Combined Financial Statements

     F-1   

We are responsible for the information contained in this prospectus and in any free-writing prospectus we prepare or authorize. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

 


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ENFORCEMENT OF CIVIL LIABILITIES

We are a public limited company organized under the laws of England and Wales. A majority of our directors and officers and certain other persons named in this prospectus reside outside the United States and all or a significant portion of the assets of the directors and officers and certain other persons named in this prospectus and a significant portion of our assets is located outside the United States.

As a result, it may not be possible for U.S. investors to effect service of process within the United States upon these persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in the United Kingdom and in Spain, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the U.S. federal securities laws.

DEFINITIONS

Unless otherwise specified or the context requires otherwise in this prospectus:

 

   

references to “we,” “us,” the “Issuer” and “our” refer to Abengoa Yield plc, including the assets and liabilities to be contributed to us by Abengoa immediately prior to the consummation of the offering, unless the context otherwise requires;

 

   

references to “Abengoa” refer to Abengoa, S.A., together with its subsidiaries, unless the context otherwise requires;

 

   

references to “Abengoa ROFO Assets” refer to all of the future contracted assets in renewable energy, conventional power, electric transmission and water of Abengoa in the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European Union, and four additional assets in other selected regions, including a pipeline of specified assets that we except to evaluate for acquisition in 2015, 2016 and beyond, for which Abengoa will provide us a right of first offer to purchase if offered for sale by Abengoa;

 

   

references to “ACBH” refer to Abengoa Concessoes Brasil Holding, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines;

 

   

references to “Adjusted EBITDA” have the meaning set forth in “Presentation of Financial Information”;

 

   

references to “Annual Combined Financial Statements” refer to the audited Combined Financial Statements as of and for the years ended December 31, 2013 and 2012 (which include a statement of financial position as of January 1, 2012), including the related notes thereto, prepared in accordance with IFRS as issued by the IASB (as such terms are defined herein), included in this prospectus;

 

   

references to “BOOT” refer to build-own-operate-transfer arrangements;

 

   

references to “cash available for distribution” have the meaning set forth in “Cash Dividend Policy”;

 

   

references to “COD” refer to commercial operation date of the applicable facility;

 

   

references to “Combined EBITDA” have the meaning set forth in “Presentation of Financial Information;

 

   

references to “CSP” refer to Concentrating Solar Power;

 

   

references to “DOE” refer to the U.S. Department of Energy;

 

   

references to “EBITDA” have the meaning set forth in “Presentation of Financial Information”;

 

   

references to “EPC” refer to engineering, procurement and construction;

 

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references to “euro” or “€” are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time;

 

   

references to “Executive Services Agreement” refer to the agreement we will enter into with Abengoa pursuant to which Abengoa will arrange for a team of executives to provide executive management services to Abengoa Yield in the year following the consummation of this offering;

 

   

references to “FPA” refer to the U.S. Federal Power Act;

 

   

references to “gross capacity” or “gross MW” refer to the maximum, or rated, power generation capacity, in MW, of a facility or group of facilities, without adjusting by our percentage of ownership interest in such facility as of the date of this prospectus;

 

   

references to “GW” refer to gigawatts;

 

   

references to “IFRS as issued by the IASB” refer to International Financial Reporting Standards as issued by the International Accounting Standards Board;

 

   

references to “IPP” refer to independent power producers;

 

   

references to “ITC” refer to investment tax credits;

 

   

references to “membership interest” refer to ownership interest in the applicable entity, including such economic interest and right, if any, to participate in the management of the business and affairs of the entity, including the right, if any, to vote on, consent to or otherwise participate in any decision or action of or by the members of the entity and the right to receive information concerning the business and affairs of the entity, in each case to the extent expressly provided in the relevant operating agreement;

 

   

references to “MW” refer to megawatts;

 

   

references to “MWh” refer to megawatt hours;

 

   

references to “O&M” refer to operations and maintenance services provided at our various facilities;

 

   

references to “operation” refer to the status of projects that have reached COD (as defined above);

 

   

references to “pre-construction” refer to the status of projects for which a PPA is in place and for which financing arrangements are in the process of being implemented;

 

   

references to “PV” refer to photovoltaic;

 

   

references to “PPA” refer to the power purchase agreements through which our power generating assets have contracted to sell energy to various offtakers;

 

   

references to “ROFO Agreement” refer to our agreement with Abengoa that will provide us a right of first offer to purchase any of the Abengoa ROFO Assets offered for sale by Abengoa;

 

   

references to “RPS” refer to renewable portfolio standards adopted by 29 states and the District of Columbia that require a regulated retail electric utility to procure a specific percentage of its total electricity delivered to retail customers in the state from eligible renewable generation resources, such as solar or wind generation facilities, by a specific date;

 

   

references to “Support Services Agreement” refer to the agreement we have entered into with Abengoa pursuant to which Abengoa will provide certain administrative and support services to us and some of our subsidiaries;

 

   

references to “total net fixed assets” refer to the sum of intangible assets and property, plant and equipment, and fixed assets and projects, net of depreciation, amortization and provisions for impairment charges; and

 

   

references to “TWh” refer to terawatt hours.

 

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PRESENTATION OF FINANCIAL INFORMATION

The selected financial information as of and for the years ended December 31, 2013 and 2012 and as of January 1, 2012 is derived from, and qualified in its entirety by reference to, our Annual Combined Financial Statements and our unaudited pro forma combined financial information, which are included elsewhere in this prospectus, which are prepared in accordance with IFRS as issued by the IASB.

Our Annual Combined Financial Statements reflect the combination of certain of the assets and associated liabilities that Abengoa will contribute to us immediately prior to the consummation of the offering.

Certain numerical figures set out in this prospectus, including financial data presented in millions or thousands and percentages describing market shares, have been subject to rounding adjustments, and, as a result, the totals of the data in this prospectus may vary slightly from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other data set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are calculated using the numerical data in our Annual Combined Financial Statements or the tabular presentation of other data (subject to rounding) contained in this prospectus, as applicable, and not using the numerical data in the narrative description thereof.

Non-GAAP Financial Measures

This prospectus contains non-GAAP financial measures including Combined EBITDA, or EBITDA, Adjusted EBITDA and cash available for distribution.

Combined EBITDA, also referred to as EBITDA, is calculated as profit for the year from continuing operations, after adding back income tax expense/(benefit), share of (loss)/profit of associates, finance expense net and depreciation, amortization and impairment charges of entities included in the Annual Combined Financial Statements.

Adjusted EBITDA is calculated as profit for the year from continuing operations, after adding back income tax expense/(benefit), share of (loss)/profit of associates, finance expense net (excluding the net income from our exchangeable preferred equity investment in ACBH) and depreciation, amortization and impairment charges of entities included in the Annual Combined Financial Statements.

Cash available for distribution is calculated as set forth in “Cash Dividend Policy—General—Estimate of Future Cash Available for Distribution.”

We present non-GAAP financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. The non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS as issued by the IASB. Non-GAAP financial measures and ratios are not measurements of our performance or liquidity under IFRS as issued by the IASB and should not be considered as alternatives to operating profit or profit for the year or any other performance measures derived in accordance with IFRS as issued by the IASB or any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities.

Some of the limitations of these non-GAAP measures are:

 

   

they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

 

   

they do not reflect changes in, or cash requirements for, our working capital needs;

 

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they may not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments, on our debts;

 

   

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and Combined EBITDA, Adjusted EBITDA and cash available for distribution do not reflect any cash requirements that would be required for such replacements;

 

   

some of the exceptional items that we eliminate in calculating Combined EBITDA, Adjusted EBITDA and cash available for distribution reflect cash payments that were made, or will be made in the future; and

 

   

the fact that other companies in our industry may calculate Combined EBITDA, Adjusted EBITDA and cash available for distribution differently than we do, which limits their usefulness as comparative measures.

In our discussion of operating results, we have included foreign exchange impacts in our revenue by providing constant currency revenue growth. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations. We calculate constant currency amounts by converting our current period local currency revenue using the prior period foreign currency average exchange rates and comparing these adjusted amounts to our prior period reported results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to substitute for recorded amounts presented in conformity with IFRS as issued by the IASB nor should such amounts be considered in isolation.

Pro Forma Financial Information

We present in this prospectus unaudited pro forma combined financial information consisting of the unaudited pro forma combined income statement of Abengoa Yield for the year ended December 31, 2013 and the year ended December 31, 2012 as well as the unaudited pro forma combined statement of financial position of Abengoa Yield as of December 31, 2013 to give effect to the consolidation of Mojave, the transfer to us of a preferred equity investment in Abengoa Concessoes Brasil Holding, or ACBH, a Brazilian company that owns 15 electric transmission lines, the contribution of certain related party loans and repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of this offering.

Unaudited pro forma combined financial information has been derived from, and should be read in conjunction with, the Annual Combined Financial Statements as of and for the year ended December 31, 2013 and for the year ended December 31, 2012 prepared in accordance with IFRS as issued by the IASB, included elsewhere in this prospectus.

PRESENTATION OF INDUSTRY AND MARKET DATA

In this prospectus, we rely on, and refer to, information regarding our business and the markets in which we operate and compete. The market data and certain economic and industry data and forecasts used in this prospectus were obtained from internal surveys, market research, governmental and other publicly available information, independent industry publications and reports prepared by industry consultants. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable but we have not independently verified them, and there can be no assurance as to the accuracy or completeness of the included information.

Certain market information and other statements presented herein regarding our position relative to our competitors are not based on published statistical data or information obtained from independent third parties, but reflect our best estimates. We have based these estimates upon information obtained from our customers, trade and business organizations and associations and other contacts in the industries in which we operate.

 

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Elsewhere in this prospectus, statements regarding our contracted concessions activities, our position in the industries and geographies in which we operate are based solely on our experience, our internal studies and estimates and our own investigation of market conditions.

All of the information set forth in this prospectus relating to the operations, financial results or market share of our competitors has been obtained from information made available to the public in such companies’ publicly available reports and independent research, as well as from our experience, internal studies, estimates and investigation of market conditions. We have not funded, nor are we affiliated with, any of the sources cited in this prospectus.

All third-party information, as outlined above, has to our knowledge been accurately reproduced and, as far as we are aware and are able to ascertain, no facts have been omitted which would render the reproduced information inaccurate or misleading, but there can be no assurance as to the accuracy or completeness of the included information.

 

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this prospectus, including, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we operate or are seeking to operate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “is likely to,” “may,” “plan,” “potential,” “predict,” “projected,” “should” or “will” or the negative of such terms or other similar expressions or terminology.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements speak only as of the date of this prospectus and are not guarantees of future performance and are based on numerous assumptions. Our actual results of operations, financial condition and the development of events may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements. Investors should read the section entitled “Risk Factors” and the description of our segments and business sectors in the section entitled “Business” for a more complete discussion of the factors that could affect us. Important risks, uncertainties and other factors that could cause these differences include, but are not limited to:

 

   

Changes in general economic, political, governmental and business conditions globally and in the countries in which we do business;

 

   

Difficult conditions in the global economy and in the global market and uncertainties in emerging markets where we have international operations;

 

   

Decreases in government expenditure budgets, reductions in government subsidies or adverse changes in laws affecting our businesses and growth plan;

 

   

Challenges in achieving growth and making acquisitions due to our dividend policy;

 

   

Decline in public acceptance or support of energy from renewable sources;

 

   

Inability to identify and/or consummate future acquisitions, whether the Abengoa ROFO Assets or otherwise, on favorable terms or at all;

 

   

Legal challenges to regulations, subsidies and incentives that support renewable energy sources;

 

   

Extensive governmental regulation in a number of different jurisdictions, including stringent environmental regulation;

 

   

Changes in prices, including increases in the cost of energy, natural gas, oil and other operating costs;

 

   

Counterparty credit risk and failures of counterparties to our offtake agreements to fulfill their obligations;

 

   

Inability to replace expiring or terminated offtake agreements with similar agreements;

 

   

Changes in interest rates and foreign currency exchange rates;

 

   

New technology or changes in industry standards;

 

   

Inability to manage exposure to credit, interest rate, exchange rate, supply and commodity price risks;

 

   

Reliance on third-party contractors and suppliers;

 

   

Deviations from our investment criteria for future acquisitions and investments;

 

   

Failure to maintain safe work environments;

 

   

Effects of catastrophes, natural disasters, adverse weather conditions, climate change, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of our plants;

 

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Insufficient insurance coverage and increases in insurance cost;

 

   

Revocation or termination of our concession agreements;

 

   

Litigation and other legal proceedings;

 

   

Reputational risk, including damage to the reputation of Abengoa;

 

   

Inability to adjust regulated tariffs or fixed-rate arrangements as a result of fluctuations in prices of raw materials, exchange rates, labor and subcontractor costs;

 

   

Lack of electric transmission capacity and potential upgrade costs to the electric transmission grid;

 

   

Variations in market electricity prices;

 

   

Loss of senior management and key personnel and our reliance on Abengoa to supply administrative, financial, executive and other support services to us;

 

   

Disruptions in our operations as a result of our not owning the land on which our assets are located;

 

   

Disruption of the fuel supplies necessary to generate power at our conventional generation facilities;

 

   

Failure of our newly-constructed assets or assets under construction to perform as expected;

 

   

Variations in meteorological conditions;

 

   

Changes in our tax position and greater than expected future tax liability;

 

   

Changes to our relationship with Abengoa; and

 

   

Various other factors, including those factors discussed under “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” herein.

We caution that the important factors referenced above may not be all of the factors that are important to investors. Unless required by law, we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or developments or otherwise.

 

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SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our shares. Before investing in our shares, you should read this entire prospectus carefully for a more complete understanding of our business and this offering, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Information” and our Annual Combined Financial Statements and the related notes included elsewhere in this prospectus.

About Abengoa Yield

We are a dividend growth-oriented company formed to serve as the primary vehicle through which Abengoa, S.A. (MCE: ABG SM, ABG.B/P SM /NASDAQ: ABGB), or Abengoa, will own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue-generating assets, initially focused on North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as Europe (Spain). In the future, we intend to expand this presence to selected countries in Africa and the Middle East.

We believe we are well positioned to be a premier company for investors seeking a total return based on stable and growing dividend income from a diversified portfolio of low-risk, high-quality assets, and for investors with a key objective of accretive dividend growth.

We intend to take advantage of favorable trends in the power generation and electric transmission sectors globally, including energy scarcity and a focus on the reduction of carbon emissions. To that end, we believe that our cash flow profile, coupled with our scale, diversity and low-cost business model, will offer us a lower cost of capital than that of a traditional engineering and construction company or independent power producer and provide us with a significant competitive advantage with which to execute our growth strategy.

With this business model, our objective is to pay a consistent and growing cash dividend to holders of our shares that is sustainable on a long-term basis. We expect to target a payout ratio of 90% of our cash available for distribution and will seek to increase such cash dividends over time through organic growth and as we acquire assets with characteristics similar to those in our current portfolio. We will focus on high-quality, newly-constructed and long-life facilities with creditworthy counterparties that we expect will produce stable, long-term cash flows.

Upon consummation of this offering, we will own eleven assets, comprising 710 MW of renewable energy generation, 300 MW of conventional power generation and 1,018 miles of electric transmission lines and an exchangeable preferred equity investment in ACBH. Each of the assets we own has a project-finance agreement in place. Our project-level debt was approximately $2,895 million as of December 31, 2013. When we refer to these assets as our assets or being owned by us throughout this prospectus, we mean that they will be transferred to us by Abengoa and owned by us immediately prior to the consummation of the offering.

We have signed an exclusive agreement with Abengoa, which we refer to as the ROFO Agreement, which provides us with a right of first offer on any proposed sale, transfer or other disposition of any of Abengoa’s contracted renewable energy, conventional power, electric transmission or water assets in operation and located in the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European Union, as well as four assets in selected countries in Africa and the Middle East. We refer to the contracted assets subject to the ROFO Agreement as the “Abengoa ROFO Assets.” See “Related Party Transactions—Right of First Offer.” Based on the acquisition opportunities available to us, which include the Abengoa ROFO Assets as well as any third-party acquisitions we pursue, we believe that we will have the opportunity to grow our cash available for distribution in a manner that would allow us to further increase our cash dividends per share over time.

 

 

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Prospective investors should read “Cash Dividend Policy,” including our financial forecast and related assumptions, and “Risk Factors,” including the risks and uncertainties related to our forecasted results, acquisition opportunities and growth plan, in their entirety.

Pursuant to our cash dividend policy, we intend to pay a cash dividend each quarter to holders of our shares. Our initial quarterly dividend will be set at $0.2592 per share, or $1.04 per share on an annualized basis. See “Cash Dividend Policy.”

Upon consummation of this offering (assuming no exercise of the underwriters’ over-allotment option), Abengoa will own indirectly     % of our shares.

About Abengoa, S.A.

Abengoa, listed on the Madrid Stock Exchange and the NASDAQ Global Select Market, is a leading engineering and clean technology company with operations in more than 50 countries worldwide that provides innovative solutions for a diverse range of customers in the energy and environmental sectors. Over the course of its 70-year history, Abengoa has developed a unique and integrated business model that applies accumulated engineering expertise to promoting sustainable development solutions, including delivering new methods for generating power from the sun, developing biofuels, producing potable water from seawater and efficiently transporting electricity. A cornerstone of Abengoa’s business model has been investment in proprietary technologies, particularly in areas with relatively high barriers to entry. Abengoa’s engineering and construction activities provide sophisticated turnkey engineering, procurement and construction services from design to implementation for infrastructure projects within the energy and environmental sectors and Abengoa engages in other related activities with a high technology component. Its concession-type infrastructure activities include greenfield development, management and operation and maintenance of infrastructure assets, usually pursuant to long-term concession agreements. Its industrial production activities produce mostly bioethanol.

Immediately prior to the consummation of this offering, Abengoa intends to transfer to us the eleven assets described herein that, prior to the offering, were a part of Abengoa’s concession-type infrastructure activity.

Purpose of Abengoa Yield

Through this offering, Abengoa and Abengoa Yield intend to create enhanced value for holders of our shares by seeking to achieve the following objectives:

 

   

offer an investment vehicle with predictable, recurrent and growing dividends to investors valuing long-term contracted assets;

 

   

create a vehicle with a competitive source of equity capital to benefit from the acquisition of long-term contracted assets developed by Abengoa and other third-party assets; and

 

   

align strategic interests, with Abengoa maintaining a majority shareholding in Abengoa Yield.

Current Operations

We own a diversified portfolio of renewable energy, conventional power and electric transmission line contracted assets in North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as in Spain. Our portfolio consists of five renewable energy assets, a cogeneration facility and several electric transmission lines, all of which are fully operational, with the exception of Palmatir and Mojave, where the construction of each asset is substantially complete and which are expected to be fully operational by June 2014 and October 2014, respectively. In addition, we own an exchangeable preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, consisting mostly of electric transmission lines. All of our assets

 

 

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have contracted revenues (regulated revenues in the case of the Spanish assets) with low-risk offtakers and collectively have a weighted average remaining contract life of approximately 26 years as of December 31, 2013. Over 90% of cash available for distribution from these assets in each of the next four years will be in U.S. dollars or indexed to the U.S. dollar and our policy is to use currency coverage contracts if required to maintain that ratio. Over 90% of our project-level debt is hedged against changes in interest rates through an underlying fixed rate on the debt instrument or through interest rate swaps, caps or similar hedging instruments.

Our renewable energy assets consist of (i) two Concentrating Solar Power plants in the United States, Solana and Mojave, each with a gross capacity of 280 MW; (ii) one on-shore wind farm in Uruguay, Palmatir, with a gross capacity of 50 MW; and (iii) two Concentrating Solar Power plants in Spain, Solaben 2 and Solaben 3, each with a gross capacity of 50 MW. We have selected these assets because they represent a diversified portfolio in terms of technology and geography, are relatively mature and have an attractive cash generation profile.

Our conventional power asset consists of Abengoa Cogeneracion Tabasco, or ACT, a 300 MW cogeneration plant in Mexico.

Our electric transmission assets consist of (i) two lines in Peru, ATN and ATS, spanning a total of 931 miles; (ii) three lines in Chile, Quadra 1, Quadra 2 and Palmucho, spanning a total of 87 miles; and (iii) an exchangeable preferred equity investment in Abengoa Concessoes Brasil Holding, or ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of electric transmission lines.

Our forecasted cash available for distribution for the twelve months ending June 30, 2016, which reflects the first full twelve-month period when all of our eleven current assets, including Mojave, are expected to distribute cash on a recurrent basis, is as set forth below by sector and region after deducting general and administrative expenses allocated proportionally across segments and business sectors:

 

LOGO   LOGO

 

 

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Our annual forecasted cash available for distribution for the twelve months ending June 30, 2015 and the twelve months ending June 30, 2016 based on our current assets and without any acquisitions are as set forth below:

 

LOGO

The following table provides an overview of our current assets (excluding our exchangeable preferred equity investment in ACBH):

 

Our Assets

 

Type

  Ownership   Location   Currency   Capacity
(Gross)
  Status   Offtaker   Counterparty Credit
Ratings(3)
  COD/
Expected COD
  Contract
Years Left

Solana

  Renewable (CSP)   100%
Class B(1)
  Arizona
(USA)
  USD   280 MW   Operation   APS   A-/A3/BBB+   4Q 2013   29

Mojave

  Renewable (CSP)   100%   California
(USA)
  USD   280 MW   Startup and
Production
Testing
  PG&E   BBB/A3/BBB+   4Q 2014   25

ACT

  Conventional Power   100%   Mexico   USD   300 MW   Operation   Pemex   BBB+/Baa1/BBB+   2Q 2013   19

ATN

  Transmission Line   100%   Peru   USD   362 Miles   Operation   Peru   BBB+/Baa2/BBB+   1Q 2011   27

ATS

  Transmission Line   100%   Peru   USD   569 Miles   Operation   Peru   BBB+/Baa2/BBB+   1Q 2014   30

Quadra 1 & Quadra 2

  Transmission Line   100%   Chile   USD   81 Miles   Pre-Operation/
Operation(4)
  Sierra
Gorda
  N/A   2Q 2014 &

1Q 2014

  21

Palmucho

  Transmission Line   100%   Chile   CLP   6 Miles   Operation   Endesa   BBB/NA/BBB+   4Q 2007   23

Palmatir

  Renewable (Wind)   100%   Uruguay   USD   50 MW   Startup and
Production
Testing
  Uruguay   BBB-/Baa3/BBB-   2Q 2014   20

Solaben 2 & Solaben 3

  Renewable (CSP)   70%(2)   Spain   Euro   2x50 MW   Operation   Spain   BBB-/Baa2/BBB   2Q 2012 &
4Q 2012
  24

 

(1)

On September 30, 2013, Liberty Interactive Corporation agreed to invest $300 million in Class A membership interests in exchange for a share of the dividends and taxable loss generated by Solana. See Note 1 to our Annual Combined Financial Statements for more information.

(2)

Itochu Corporation holds 30% of the economic rights to each of Solaben 2 and Solaben 3.

(3)

Reflects the counterparty’s issuer credit ratings issued by Standard & Poor’s Ratings Services, or S&P, Moody’s Investors Service Inc., or Moody’s, and Fitch Ratings Ltd, or Fitch.

(4)

Quadra 2 is in full operation. We expect to achieve COD on Quadra 1 in April 2014. Both Quadra 1 and Quadra 2 have been generating revenues throughout 2014.

 

 

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Our assets and operations are organized into the following three business sectors:

Renewable Energy: Our renewable energy assets include two Concentrating Solar Power plants in the United States, Solana and Mojave, each with a gross capacity of 280 MW and located in Arizona and California, respectively. Solana is a party to a long-term power purchase agreement, or PPA, with Arizona Public Service Company and Mojave is a party to a PPA with Pacific Gas & Electric Company. Solana reached its Commercial Operations Date, or COD, on October 9, 2013 and Mojave has substantially completed construction and we expect to enter the startup and production testing stage by May 2014, with expected COD by October 2014.

Additionally, we own an onshore wind farm in Uruguay, Palmatir, with a gross capacity of 50 MW. The wind farm is subject to a 20-year U.S. dollar-denominated PPA with a state-owned utility company in Uruguay. The construction of Palmatir is substantially complete and COD is expected in June 2014.

Finally, Solaben 2 and Solaben 3 are two Concentrating Solar Power plants each with a gross capacity of 50 MW and located in Spain. Both projects have been in operation since mid-2012 and receive regulated revenues under the framework for renewable energy projects in Spain.

Conventional Power: Our conventional power asset consists of ACT, a 300 MW cogeneration plant in Mexico. ACT is a party to a 20-year take-or-pay contract with Petroleos Mexicanos S.A. de C.V., or Pemex, for the supply of electric power and steam to a refinery located in the state of Tabasco. Pemex also supplies the natural gas required for the plant at no cost to ACT, which insulates the project from natural gas price variations.

Electric Transmission: Our electric transmission assets consist of (i) two lines in Peru, ATN and ATS, spanning a total of 931 miles; (ii) three lines in Chile, Quadra 1, Quadra 2 and Palmucho, spanning a total of 87 miles; and (iii) an exchangeable preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines.

Peru. ATN and ATS are core lines in the Peruvian electric transmission system. Each line is subject to a U.S. dollar-denominated 30-year contract with the Ministry of Energy of the Government of Peru that is indexed to the U.S. Finished Goods Less Food and Energy Index. ATN reached COD in 2011 and ATS reached COD on January 17, 2014.

Chile. Quadra 1 and Quadra 2 are two electric transmission lines that are subject to a concession contract with Sierra Gorda SCM, a mining company owned by Sumitomo Corporation, Sumitomo Metal Mining and KGHM Polska Mietz. Quadra 1 and Quadra 2 have been in operation since December 2013 and January 2014, respectively. We expect Quadra 1 to reach COD in April 2014 and Quadra 2 reached COD in March 2014. The concession contract is denominated in U.S. dollars and has a remaining term of 21 years. Palmucho is a six-mile electric transmission line and substation subject to a private concession agreement with a utility, Endesa, with a remaining term of 23 years. Palmucho reached COD in October 2007.

Brazil. In addition to the assets listed above, we own a preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, consisting mostly of electric transmission lines (see “Business—Our Operations—Electric Transmission—Exchangeable Preferred Equity Investment in Abengoa Concessoes Brasil Holding” for details on the transmission assets held by ACBH).

This preferred equity investment grants us the following rights:

 

   

During the five-year period commencing on July 1, 2014, we will receive, in four quarterly installments, a preferred dividend of $18 million per year.

 

 

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Following the initial five-year period, we will have the option to (i) remain as preferred equity holder receiving the first $18 million in dividends per year that ACBH is able to distribute or (ii) convert the preferred equity into ordinary shares of specific project companies owned by ACBH.

Our Growth Strategy

We intend to grow our cash available for distribution and, in turn, dividend per share, by optimizing the operations of our existing assets, achieving COD of our Mojave facility by October 2014 and by acquiring new contracted revenue-generating assets from Abengoa under the ROFO Agreement, and from parties other than Abengoa. Abengoa has informed us of its intention, which is reflected in the ROFO Agreement, for Abengoa Yield to serve as its primary vehicle for owning, managing and acquiring contracted assets in our primary geographies (North America, Chile, Peru, Uruguay, Brazil, Colombia and the European Union) and four assets to be mutually agreed in other selected regions. Abengoa will assist us in pursuing such acquisitions by presenting acquisition opportunities to us. In general, we expect to acquire only assets that are developed and operational, and we expect Abengoa to continue to pursue construction and development opportunities for its own account. Under the ROFO Agreement, Abengoa will not be obligated to offer or sell any of the Abengoa ROFO Assets to us by any date or at all. As a result, we do not know when, if ever, Abengoa will offer us any Abengoa ROFO Assets. In addition, in the event that Abengoa elects to sell such assets, Abengoa will not be required to accept any offer we make for any Abengoa ROFO Asset.

We will leverage the ability of Abengoa to develop, build and operate assets in our target sectors and secure contracted assets that we expect to generate accretive growth for our shareholders once purchased by Abengoa Yield. We intend to use the following investment guidelines in evaluating prospective acquisitions in order to successfully execute our accretive growth strategy:

 

   

high quality offtakers, with long-term contracted revenue, ideally longer than 20 years;

 

   

project financing in place at each project;

 

   

operations and maintenance contract in place at each project;

 

   

management and operational systems and processes at the Abengoa Yield level, while leveraging Abengoa’s support and capabilities;

 

   

focus on regions and countries that provide growth opportunities while balancing security and risk considerations, which regions and countries include the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European Union; and

 

   

preference for U.S. dollar-denominated revenues, in the absence of which, we will implement a cost-effective, ad-hoc hedging policy that will support stability of cash flows.

Abengoa has contracted assets with an equity book value of approximately $4.5 billion in its concession-type infrastructure activity, including the assets described in “—Our Current Operations.” A significant portion of these assets are currently in operation and Abengoa may elect to offer such assets for sale to us in the future. In addition, Abengoa has announced its intention to invest approximately $440 million in additional concession-type infrastructure assets per year from 2014. If these investments are made, they will further add to the pool of assets that Abengoa may elect to offer to sell to us in the future.

 

 

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The ROFO Agreement will provide us with a right of first offer to acquire Abengoa’s contracted renewable energy, conventional power, electric transmission or water assets operating in our primary geographies (North America, Chile, Peru, Uruguay, Brazil, Colombia and the European Union) and four assets to be mutually agreed in other selected regions. The following table presents the projects that, based on their maturity stage and cash generation profile, we expect Abengoa to propose to us for evaluation for acquisition in 2015 and 2016:

 

Expected
ROFO
Assets

 

Type

  Ownership   Location   Currency   Capacity   Status   Offtaker   Counterparty
Credit Ratings(1)
  COD/
Expected
COD
  Contract
Years

Left

2015

                                       
Cadonal  

Renewable (Wind)

  100%   Uruguay   USD   50 MW   Construction   Uruguay   BBB-/Baa3/BBB-   1Q 2015   20
Solacor 1 & 2  

Renewable (CSP)

  74%   Spain   Euro   2x50 MW   Operation   Spain   BBB-/Baa2/BBB   2012   23
Shams  

Renewable (CSP)

  20%   U.A.E.   USD   100 MW   Operation   Abu Dhabi   AA/Aa2/AA   3Q 2013   25
Honaine  

Water

  25.5%   Algeria   USD   7M
ft3/day
  Operation   Sonatrach   N/A   2012   23
                   

2016

                                       
3T  

Conventional Power

  100%   Mexico   USD   220 MW   Construction   Several   N/A   4Q2016   20-25
ATN3  

Transmission Line

  100%   Peru   USD   220 Miles   Construction   Peru   BBB+/Baa2/BBB+   3Q 2016   30
Helioenergy 1 & 2  

Renewable (CSP)

  50%   Spain   Euro   2x50 MW   Operation   Spain   BBB-/Baa2/BBB   2011   23
SPP1  

Conventional Power

  51%   Algeria   Euro   150 MW   Operation   Sonatrach   N/A   3Q 2011   22

 

(1)

Reflects the counterparty’s issuer credit ratings issued by S&P, Moody’s and Fitch.

We expect that, pursuant to the ROFO Agreement, Abengoa will from time to time present us with acquisition opportunities that are expected to fulfill our investment guidelines. If Abengoa offers an Abengoa ROFO Asset to us, we will have 60 days to complete due diligence and negotiate the acquisition of the asset. If we do not agree to purchase the applicable asset after such period, Abengoa will be free to pursue the sale with other potential buyers. Under the ROFO Agreement, Abengoa will not be obligated to offer or sell any of the Abengoa ROFO Assets to us by any date or at all. As a result, we do not know when, if ever, Abengoa will offer any Abengoa ROFO Assets. In addition, in the event that Abengoa elects to sell such assets, Abengoa will not be required to accept any offer we make for any Abengoa ROFO Asset. Abengoa also may, following the completion of good-faith negotiations with us during the 60-day period mentioned above, choose to sell such assets to a third party or not to sell the assets at all. However, if we do not reach an agreement, any sale to a third party within 18 months following such 60-day period must be on terms and conditions generally no less favorable to Abengoa than those offered to us. After such 18-month period, the asset will cease to be an Abengoa ROFO Asset. We will pay Abengoa a fee of 1% of the equity purchase price of any Abengoa ROFO Asset that we acquire as consideration for Abengoa granting us the right of first offer.

 

 

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In addition to the potential acquisition targets for 2015 and 2016 listed above, the following table presents some of the longer term opportunities that Abengoa may present to us for acquisition in the future:

 

Other Possible ROFO
Assets

  

Type

  

Location

  

Capacity

  

Status

Palen

   Renewable (CSP)    United States    250 MW    Development

Parump

   Renewable (PV)    United States    90 MW    Development

Water SA

   Water    United States    50 million gallons/day    Development

Zapotillo

   Water    Mexico    112 Miles    Pre-Construction

Chile Solar Tower

   Renewable (CSP)    Chile    110 MW    Development

Leasing

   Renewable (Wind)    Uruguay    70 MW    Pre-Construction

Manaus

   Transmission Line    Brazil    364 Miles    Operation

Norte

   Transmission Line    Brazil    1,476 Miles    Construction

ATE IV-VIII

   Transmission Line    Brazil    354 Miles    Operation

ATE XVI-XXII

   Transmission Line    Brazil    3,593 Miles    Pre-Construction

Ashalim

   Renewable (CSP)    Israel    110 MW    Pre-Construction

Kaxu

   Renewable (CSP)    South Africa    100 MW    Construction

Khi

   Renewable (CSP)    South Africa    50 MW    Construction

Tenes

   Water    Algeria    7M ft3/day    Construction

Skikda

   Water    Algeria    3.5M ft3/day    Operation

Our agreements with Abengoa will not prohibit Abengoa from acquiring or operating contracted assets that fulfill our principles. See “Risk Factors” and “Related Party Transactions—Project-Level Management and Administration Agreements” for further information.

Industry Overview

We operate our assets in three business sectors:

 

   

Renewable Energy, with Concentrating Solar Power in the United States and Spain and wind power in Uruguay;

 

   

Conventional Power in Mexico; and

 

   

Electric Transmission in South America, where we own assets in Peru and Chile, as well as an exchangeable preferred equity investment in a company that develops, constructs, invests and manages contracted assets, consisting mostly of electric transmission lines in Brazil.

Renewable Energy

Renewable energy has been growing at a rapid pace globally in the last decade, and Bloomberg’s Global Renewable Energy Market Outlook expects that generation from renewable sources will increase significantly from 2012 to 2030. Within the renewable energy sector, wind and solar have been growing significantly and we believe that they will continue to do so.

Concentrating Solar Power uses direct sunlight to heat a fluid (heat transfer fluid) that produces steam to feed a steam cycle and produce electricity. This technology has experienced significant international development in the last decade. Concentrating Solar Power technology requires a high level of direct solar irradiation to be feasible. The best geographical areas for Concentrating Solar Power are located between 35º North and 35º South from the Equator and we refer to such area as the “Sunbelt.” This area includes the southwestern United States and Spain, where we have Concentrating Solar Power facilities.

 

 

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The most important factor that distinguishes Concentrating Solar Power from other forms of renewable energy generation, such as photovoltaic, is its “dispatchability,” or the ability to adapt production to demand, which is essential for electrical grids. Dispatchability is achieved through the thermal inertia inherent in the heat transfer fluid used, the addition of thermal energy storage and/or the hybridization with conventional fuels, like gas or biomass. Participants in the solar industry have built, and continue to build Concentrating Solar Power during the last decade in many of the regions within the Sunbelt, including the southwestern United States, Mexico, Chile, Spain, Italy, several countries in North Africa and the Middle East, South Africa, India and China.

Renewable Energy: Concentrating Solar Power in the United States and Spain

Concentrating Solar Power development in the United States began in the late 1970s with the creation by the U.S. Department of Energy, or DOE, of renewable energy incentives and the development of energy research and development, or R&D, programs. California, which has among the best direct solar insolation in the United States, was the first state to support solar development. State tax incentives in California combined with U.S. federal income tax incentives enabled the construction of the first Concentrating Solar Power plants in California in the late 1980s. California’s policies enabled the building of nine Solar Electric Generating Station, or SEGS, plants, with a total capacity of 354 MW, in the Mojave Desert from 1985 through 1992. The construction and operation of the SEGS plants was a landmark for Concentrating Solar Power in the United States and demonstrated the financial viability of parabolic trough Concentrating Solar Power plants.

A further wave of Concentrating Solar Power development in the United States began ten years ago with the re-establishment of federal renewable energy policies and the enactment of state renewable portfolio standards. From 2006 to 2010, 17 new Concentrating Solar Power projects were developed in the southwestern United States with a cumulative capacity of 507 MW. Since 2010, five new Concentrating Solar Power plants have been built with a total capacity of 1,300 MW. Abengoa is the leader in this market with an installed capacity of 681 MW.

The evolution of Concentrating Solar Power in Spain represented a breakthrough in the development of this technology. Since 2007, when Abengoa opened Europe’s first commercial Concentrating Solar Power tower plant with capacity of 11 MW, the Concentrating Solar Power market has expanded rapidly. There are now 50 plants in Spain with an aggregate capacity of 2,300 MW, according to the European Solar Thermal Electricity Association.

Renewable energy: Wind Power in Uruguay

Latin American governments are looking to wind power to support their emerging economies, to alleviate variations in hydropower and other seasonal electricity sources, and to shore up the threat posed by insecure imported power sources. Latin America has abundant wind resources, both onshore and offshore, but these resources are still untapped in many countries. In Uruguay, the traditional leading source of energy has been hydroelectric power. However, due to growing demand, the exploitation of large-scale hydropower has reached its economic limit. This has resulted in the installation of additional base load thermal plants and the incorporation of other alternative energy sources. It is expected that UTE, the state-owned company in Uruguay that has a monopoly over transmission and distribution of energy and controls 58% of all generation capacity, will continue to award PPAs to private generators for renewable energy purchases, particularly in wind and biomass.

Conventional Power

Conventional power generation worldwide is going through a transformation fostered by economic growth in many regions and climate change concerns. As a result, we expect that a large number of natural gas power plants will be built worldwide. In many cases utilities and governments will be interested in signing long-term PPAs instead of investing in new plants and we expect to benefit from these opportunities.

 

 

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Conventional Power in Mexico

According to Promexico, Mexico had more than 63 GW of installed conventional power capacity in 2012. The power generation market in Mexico comprises:

 

   

state-owned power generation plants, which contributed 60.4% of the energy generated in 2012;

 

   

independent power producers, or IPPs, which produced 28.1% of the energy generated; and

 

   

self-generation, which accounted for 11.6% of the energy generated.

We believe future development of the Mexican conventional power industry will be driven by economic growth in Mexico and the effect of the energy reform that is currently under way.

Mexican energy reform has three main pillars:

 

   

to facilitate and increase the role of private sector investment in the power sector and in areas of the hydrocarbons value chain (such as refining);

 

   

to strengthen independence and transparency in the energy regulatory bodies; and

 

   

greater focus on environmental protection, fostering cleaner energies and fuels (such as natural gas and co-generation schemes).

We believe that the effect of this reform, coupled with economic growth in the country, may foster new capacity additions in the private sector for projects such as combined cycles and cogeneration plants.

We own one co-generation plant in Mexico that produces both steam and power for the consumption of a Pemex refinery and we believe there are significant additional co-generation opportunities in Mexico.

Electric Transmission

The potential for growth and development in the electric transmission industry comes from several factors:

 

   

increasing global demand for electricity;

 

   

inadequate and insufficient electrical grid capacity;

 

   

construction of new power plants and demand-response facilities; and

 

   

the need to connect new renewable energy generation plants, which are typically built in remote areas, to consumption centers.

These global trends, coupled with the particular economic, geographic and demographic characteristics of countries including the United States, Peru, Chile and Brazil have led to significant growth of the installed base of electric transmission lines in each country and we expect such growth to continue in the foreseeable future.

Water

Although we do not own any assets in the water sector as of the date of this prospectus, we intend to evaluate and potentially purchase water assets in the future, particularly in the field of desalination and water transportation.

 

 

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We expect the water sector to experience significant growth globally driven by the following long-term trends:

 

   

Growing water demand and water scarcity: As demand for water grows in areas with limited resources, driven by increasing world population, the need to develop new assets to produce water (i.e., desalination and potabilization) and to transport water will grow as well. In fact, the increase in demand for water has surpassed population growth by a factor of two as a result of the increased income per person and growth in water use for agricultural purposes and industrial development.

 

   

Regulation of water management and enforcement of those regulations will continue to intensify: As public awareness and concerns about water grow, we expect a corresponding increase in governmental attention, legislation, regulatory controls and overview and enforcement.

 

   

Pressure to deliver better performance: Water utility companies are under pressure to maximize operating efficiencies and performance, and we believe that infrastructure and technologies that will allow them to do so will be in high demand.

Our Business Strategy

Our primary business strategy is to increase the cash dividends that we intend to pay to holders of our shares over time while ensuring the ongoing stability of our business. Our plan for executing this strategy includes the following key components:

Focus on contracted renewable energy, conventional power generation and electric transmission lines. We intend to focus on owning and operating these types of assets, for which we possess deep know-how, extensive experience and proven systems and management processes, as well as the critical mass to benefit from operating efficiencies and scale. We expect that this will allow us to maximize value and cash flow generation going forward. We intend to maintain a diversified portfolio in the future, as we believe these technologies will undergo significant growth in our targeted geographies.

Increase cash available for distribution and dividends by optimizing our existing assets. Some of our assets are newly operational and we believe that we can increase the cash flow generation of these assets through further management and optimization initiatives and in some cases through repowering. Additionally, once Mojave achieves COD, which is expected to occur by October 2014, we will have a new revenue-generating asset that we expect will result in a significant increase to our cash flow generation. Finally, our Palmatir facility has substantially completed construction with COD expected in June 2014 and also is expected to generate increased cash flows. See “Risk Factors—Risks Related To Our Assets—Certain of our facilities are newly constructed and may not perform as expected.”

Increase cash available to grow our dividend per share through the acquisition of new assets in renewable energy, conventional power and electric transmission. We expect the ROFO Agreement with Abengoa will provide us with access to a large number of acquisition opportunities that will allow us to achieve accretive growth over the next few years. Abengoa expects to have over thirty contracted assets in our target sectors under construction or operation after this offering and is developing many others. This, together with the fact that Abengoa acts as a greenfield developer, should allow us to access a large pipeline of contracted assets going forward. Additionally, we intend to analyze other potential acquisitions from third parties. We believe that our know-how and operating expertise in our key markets together with a critical mass of assets in several geographic areas and the access to capital provided by being a listed company will permit us to successfully realize our growth plans.

Increase available cash by expanding into water assets. We believe that contracted water assets, which include desalination plants, water treatment facilities and transportation facilities, constitute a high-growth

 

 

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market. Moreover, the water market offers attractive acquisition opportunities and is one in which Abengoa enjoys a strong market position. Accordingly, our target list of opportunities under the ROFO Agreement includes five water assets, two of which are in operation. We expect these assets to help us achieve growth and potentially achieve a critical mass if we acquire any of them from Abengoa pursuant to the ROFO Agreement.

Maintain geographic diversification across two principal geographic areas. Our focus on two main markets, North America and South America, helps to ensure exposure to markets in which we believe the renewable energy, conventional power and electric transmission sectors will continue growing significantly. We believe that a strategic exposure to international markets will allow us to pursue greater growth opportunities and achieve higher returns than if we only focus on assets located in the United States.

Enjoy a shareholder-oriented financial strategy. We intend to focus on maximizing the cash generation potential of the assets currently held in our portfolio. With cash received from our contracted assets, we intend to distribute quarterly dividends of substantially all cash available following the deduction of a provision to allow for the prudent management of our business. Additionally, as our controlling shareholder, Abengoa has a strategic interest to create a vehicle that focuses exclusively on cash flow generation from contracted assets, and this offering is a key component of this strategy. Accordingly, Abengoa, as our controlling shareholder, will seek to actively support our strategy to maximize dividend distribution, subject to the boundaries of prudent management.

Foster a low-risk approach. We intend to maintain, over time, a portfolio of contracted assets with a low-risk profile due to creditworthy offtake counterparties, long-term contracted revenues, over 90% of cash available for distribution in or indexed to the U.S. dollar and proven technologies in which we have deep expertise and significant experience, located in countries where we believe conditions to be stable and safe.

Additionally, our policies and management systems include thorough risk analysis and risk management processes that we apply whenever we acquire an asset, and which we review monthly throughout the life of the asset. Our policy is to insure all of our assets whenever economically feasible.

Maintain financial strength and flexibility. We intend to maintain a solid financial position through a combination of cash on hand and credit facilities. This prudent strategy provides the required flexibility to maintain our dividend throughout the year in spite of the inherent seasonality of our business. Additionally, conservative cash management may help us to mitigate any unexpected downturns that reduce our cash flow generation.

Our Competitive Strengths

We believe that we are well positioned to execute our business strategies because of the following competitive strengths:

Stable and predictable long-term U.S. and international cash flows with attractive tax profiles. We believe that our young asset portfolio has a highly stable, predictable cash flow profile consisting of predominantly long-life electric power generation and electric transmission assets that generate revenues under long-term fixed priced contracts or pursuant to regulated rates with creditworthy counterparties and with long-term O&M contracts in place. Additionally, our facilities have minimal to no fuel risk. The offtake agreements for our assets have a weighted average remaining duration of approximately 26 years (based on the relevant technical indicator by type of asset), providing long-term cash flow stability. Additionally, our business strategy and hedging policy is intended to ensure a minimum of 90% of cash available for distribution in or indexed to the U.S. dollar. Furthermore, due to the fact that we are a UK resident company we should benefit from a more favorable treatment than would apply if we were a corporation in the United States when receiving dividends from our subsidiaries that hold our international assets because they should generally be exempt from UK taxation due to

 

 

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the UK’s distribution exemption. Based on our current portfolio of assets, which include renewable assets that benefit from an accelerated tax depreciation schedule, and current tax regulations in the jurisdictions in which we operate, we do not expect to pay significant income tax for a period of at least ten years due to existing Net Operating Losses, or NOLs, except for ACT in Mexico, where we expect to pay income taxes in five to seven years once we use existing NOLs. See “Risk Factors—Risks Related to Taxation—Our future tax liability may be greater than expected if we do not utilize Net Operating Losses, or NOLs, sufficient to offset our taxable income,” “Risk Factors—Risks Related to Taxation—Our ability to use U.S. NOLs to offset future income may be limited,” and “Risk Factors—Risks Related to Taxation—Changes in our tax position can significantly affect our reported earnings and cash flows.” Furthermore, based on our current portfolio of assets, we believe that there is minimal repatriation risk in all of the jurisdictions in which we operate. See “Risk Factors—Risks Related to Our Business and the Markets in Which We Operate—We have international operations and investments, including in emerging markets that could be subject to economic, social and political uncertainties.”

Experienced and incentivized management team. Abengoa Yield’s management team has significant and valuable expertise in developing, financing, operating and managing renewable energy, conventional power and electric transmission assets. Their financial and tax management skills will help us achieve our financial targets and continue to grow on a cash accretive basis over the medium- to long-term. Additionally, we intend to encourage our executives to ensure that they focus on cash generation and long-term value creation for our shareholders.

Our relationship and our agreements with Abengoa. We believe our relationship with Abengoa, including Abengoa’s expressed intention to maintain a controlling stake in us, provides us with significant benefits, including managerial and operational expertise and a sustainable source of future growth opportunities based on Abengoa’s greenfield development capabilities and construction expertise. Moreover, Abengoa provides a significant pipeline of opportunities in our targeted sectors and geographies. Abengoa usually targets an internal rate of return for its projects that is higher than the expected cost of equity of Abengoa Yield, thus both parties could benefit from a contribution of assets from Abengoa to us.

Specifically, the various agreements we have in place with Abengoa allow us to access:

 

   

Abengoa Management and Operational Expertise. We will monitor and oversee operations in each asset and will continue implementing Abengoa standards required in key areas like reporting, management, quality, health and safety and compliance.

 

   

Abengoa Asset Development Track Record. Over the last ten years, Abengoa has successfully developed approximately 2,000 MW of renewable power assets, 673 MW of conventional power plants and over 7,700 miles of electric transmission lines.

 

   

Abengoa Financing Experience. Over the last ten years, Abengoa has financed through non-recourse project financing more than $15 billion worth of projects, mostly in North America and South America as well as in Europe, Africa and the Middle East. We expect that we will realize significant benefits from Abengoa’s financing and structuring expertise as well as its relationships with financial institutions and other lenders.

 

   

Abengoa Construction Expertise. Abengoa has built approximately 10,000 MW of power generation facilities (renewable and conventional), over 21,800 miles of electric transmission lines and water desalination plants with capacity in excess of 329 million cubic feet per day, as well as many infrastructure assets in other markets. Many of these projects have been built for third parties pursuant to the standards of these third parties. Abengoa was recently ranked by Engineering News Record as the largest international power facility contractor (previously ranked among the top three during the preceding five years) and the largest electric transmission contractor for the seventh consecutive year.

 

   

Abengoa Operation and Maintenance Expertise. Abengoa currently provides operation and maintenance services to renewable energy plants with an aggregate capacity of approximately

 

 

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1,000 MW, conventional power plants with an aggregate capacity of approximately 1,000 MW, approximately 7,700 miles of electric transmission lines and water treatment facilities with an aggregate capacity of 21.7 million of cubic feet per day.

 

   

Abengoa Technical Expertise in Our Key Technologies and Presence in Our Key Geographies. Abengoa has deep know-how and expertise in the technologies that we use in our assets and has an important presence and experience in our key geographies.

Multi-technology portfolio of assets that is strategically positioned. Our portfolio of assets uses technologies that we expect to benefit from long-term trends in the electricity sector. Our renewable energy generation assets generate low or no emissions and serve markets where we expect growth in demand in the future. Additionally, our electric transmission lines connect electricity systems to key areas in their respective markets and we expect significant electric transmission investment in our geographies. As a result, we believe that we may be able to benefit from opportunities to repower some of our assets during the lives of our existing PPAs and to extend the terms of those contracts after current PPAs expire. We expect our well-diversified portfolio of assets by technology and geography to maintain cash flow stability.

Our Agreements with Abengoa

We describe below some agreements that we will enter into with Abengoa in connection with the consummation of the offering. For a more comprehensive discussion of our agreements with Abengoa and certain of its affiliates, please see “Related Party Transactions.” For a discussion of the risks related to our relationship with Abengoa, please see “Risk Factors—Risks Related to Our Relationship with Abengoa.”

Support Services Agreement. We will enter into a Support Services Agreement under which Abengoa has agreed to provide certain management and administrative services to us and some of our subsidiaries. These services include accounting and administrative services for us and most of our subsidiaries, legal support in certain countries, IT services, human resources management services and technical support, among others. Pursuant to the Support Services Agreement, we will pay a support services fee equal to approximately $625,000 per quarter to Abengoa. The support services fee will be subject to an inflation-based adjustment annually beginning on January 1, 2015 at an inflation factor based on the year-over-year changes in the U.S. consumer price index, or U.S. CPI. It also will be subject to adjustments following the consummation of future acquisitions (in an amount to be mutually agreed upon by the parties). See “Related Party Transactions—Support Services Agreement.” In addition, some of our assets have entered into operations and administrative agreements with affiliates of Abengoa for their operating and administrative needs, which will remain in effect after the consummation of this offering and which are described in “Related Party Transactions—Project-Level Management and Administration Agreements.”

Executive Services Agreement. Under the Executive Services Agreement, Abengoa will provide ten senior managers that will deliver executive management services to us and some of our subsidiaries. This executive team will devote a majority of its time to our business activities, but it will also manage other Abengoa contracted assets to optimize them and facilitate their offer for sale to us in the future. We will pay an executive management fee of approximately $500,000 per quarter. Our expectation is that we will directly employ the executives within one year following the consummation of this offering. Following their transfer to Abengoa Yield, these executives will continue to dedicate some of their time to managing assets owned by Abengoa, and we will charge a percentage of their compensation and related costs back to Abengoa. We estimate that in 2014 and 2015, the executives will devote approximately 60% of their time to us.

ROFO Agreement. Abengoa has agreed to grant us a right of first offer on any proposed sale, transfer or other disposition of any of their contracted renewable energy, conventional power, electric transmission or water assets in operation and located in the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and

 

 

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the European Union for a period of five years following the consummation of this offering. Additionally, we and Abengoa will agree within one month of the consummation of this offering on a list of four additional assets in secondary geographies that will be included among the Abengoa ROFO Assets. If we purchase one of these four assets in the secondary geographies or, if after 60 days of negotiations we and Abengoa are unable to reach an agreement on an asset offered for sale to us, we will update the list to include a replacement asset. If we are unable to agree on the replacement asset, Abengoa will propose three additional assets out of which we will choose one to be a replacement asset. We can extend the term of the agreement as many times as desired for subsequent three-year periods, provided we have completed at least one acquisition in the last two years of the preceding term after having been offered at least four acquisition opportunities. Under the terms of the ROFO Agreement, Abengoa will agree to negotiate with us in good faith, for a period of 60 days, to reach an agreement with respect to any proposed sale of an asset for which we have a right of first offer. Under the ROFO Agreement, however, Abengoa will not be obligated to offer or sell the assets and, therefore, we do not know when, if ever, these assets will be offered to us. In addition, in the event that Abengoa elects to sell such assets, Abengoa will not be required to accept any offer we make or, following the completion of good faith negotiations with us and subject to certain exceptions, may choose to sell the assets to a third party or not sell the assets at all. However, any sale to a third party within 18 months of Abengoa and us failing to reach agreement during such 60-day period in relation to transfer of an Abengoa ROFO Asset must be on terms and conditions generally no less favorable to Abengoa than those offered by Abengoa to us. After such 18-month period, the asset will cease to be an Abengoa ROFO Asset. We will pay Abengoa a fee of 1% of the equity purchase price of any Abengoa ROFO Asset that we acquire as consideration for Abengoa granting us the right of first offer. See “Related Party Transactions—Right of First Offer.”

Financial Support Agreement. We have entered into a Financial Support Agreement under which Abengoa will agree to facilitate a new $50 million revolving credit line and maintain any guarantees and letters of credit that have been provided by it on behalf of or for the benefit of us and our affiliates for a period of five years.

Conflicts of Interest. While our relationship with Abengoa and its subsidiaries is a significant strength, it is also a source of potential conflicts. As discussed above, Abengoa or certain of its affiliates will provide certain services to us, and Abengoa may offer to sell us assets. In order to protect our new shareholders from potential conflicts of interest, Abengoa has covenanted that it will transfer our executive management team to us within one year following the consummation of this offering and we will have a corporate governance model which provides that Abengoa representatives on our board of directors may not vote on matters that would represent a conflict of interest. See “Related Party Transactions—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest” for a discussion of the risks associated with our organizational and ownership structure and corporate strategy for mitigating such risks.

Asset Transfer

Abengoa Yield was incorporated in the United Kingdom on December 17, 2013 by Abengoa, to own and operate a portfolio of renewable energy, conventional power and electric transmission assets previously owned and operated by Abengoa and its subsidiaries.

Prior to the consummation of this offering, through a series of transactions, which we refer to collectively as the “Asset Transfer,” Abengoa will contribute, or cause a subsidiary to contribute, the following assets:

 

   

100% of Abengoa’s interest in Abengoa Solar US Holdings Inc., a Delaware corporation, which holds the Class B membership interests of ASO Holdings Company LLC, which in turn owns Solana, a 280 MW Concentrating Solar Power generation facility located in Maricopa County, Arizona, a renewable energy asset further described in the table set forth in “Business—Our Operations.” The Class A membership interests of ASO Holdings Company LLC are held by Liberty Solar LLC, an indirect subsidiary of Liberty Interactive Corporation.

 

 

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100% of Abengoa’s interest in Abengoa Solar Holdings USA Inc., a Delaware corporation, which holds Mojave Solar Holdings LLC, which in turn owns Mojave, a 280 MW Concentrating Solar Power generation facility located in San Bernardino County, California, a renewable energy asset further described in the table set forth in “Business—Our Operations.”

 

   

99.99% of Abengoa’s interest in ACT Holding, S.A. de C.V., a company organized under the laws of Mexico (one share will be held by Servicios Auxiliares de Administracion, S.A. de C.V., a Mexican company that is a subsidiary of Abengoa, due to local legal requirements), which in turn owns 99.99% of Abengoa Cogeneracion Tabasco, S. de R.L. de C.V. (one share will be held each by Abengoa Mexico, S.A. de C.V., a Mexican company that is a subsidiary of Abengoa and Abener Energia, S.A., a Spanish company that is a subsidiary of Abengoa), which in turn owns ACT, a 300 MW gas-fired cogeneration facility located inside the New Pemex Gas Processing Facility near the city of Villahermosa in the State of Tabasco, Mexico. ACT is a conventional power asset further described in the table set forth in “Business—Our Operations.”

 

   

100% of Abengoa’s interest in Abengoa Concessions Peru, S.A., a company organized under the laws of Peru, which owns the following electric transmission companies in Peru: (i) Abengoa Transmision Sur S.A., which owns ATS, a 569-mile electric transmission line, including one 500kV electric transmission line and two short 220kV electric transmission lines, which are linked to existing substations; three new substations (SE Poroma, SE Ocona and SE Montalvo) and the extension of the three existing substations (SE Chilca, SE Marcona Existente and SE Moquegua) and (ii) Abengoa Transmision Norte, S.A., which owns ATN, a 362-mile electric transmission line of 220kV, including two new substations (SE Coconocha and SE Kiman Ayllu) and the extension of the four existing substations (SE Cajamarca and SE Carhuamayo 220kV, SE Carhuamayo 138kV and Paragsha 220kV). Each of these assets is an electric transmission line asset as further described in the table set forth in “Business—Our Operations.”

 

   

100% of Abengoa’s interest in Abengoa Concessions Infrastructures, S.L., or ACIN, a company organized under the laws of the Kingdom of Spain, which owns:

 

   

Palmatir, S.A., which owns Palmatir, a 50 MW wind power facility, Palmatir, located in Peralta, Uruguay. Palmatir is a renewable energy asset further described in the table set forth in “Business—Our Operations.”

 

   

the following electric transmission companies in Chile: (i) Palmucho, S.A., which owns a six-mile electric transmission line of 220kV located in Biobio Region, for the utility, Endesa; (ii) Transmisora Mejillones, S.A., which owns Quadra 1, the 49-mile electric transmission line of 2x220kV, for Sierra Gorda SCM; and (iii) Transmisora Baquedano, S.A., which owns Quadra 2, the 32-mile electric transmission line of 110kV, for Sierra Gorda SCM. Each of these is an electric transmission line asset further described in the table set forth in “Business—Our Operations.”

 

   

Solaben 2 and Solaben 3, each a 50 MW Concentrating Solar Power generation facility located in Spain. ACIN holds the economic rights to Solaben 2 and Solaben 3 in partnership with Itochu Corporation, which holds 30% of the economic rights to each asset. Solaben 2 and Solaben 3 are each a renewable energy asset further described in the table set forth in “Business—Our Operations.”

 

   

An exchangeable preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines.

 

 

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Upon the consummation of this offering:

 

   

we will issue              shares to the purchasers in this offering in exchange for net proceeds of approximately $             million based on an initial public offering price of $             per share, the midpoint of the range set forth on the cover of this prospectus;

 

   

we will distribute $             million in cash and              shares to subsidiaries of Abengoa, as the consideration paid to Abengoa in connection with the Asset Transfer; and

 

   

we will enter into the ROFO Agreement, the Executive Services Agreement, the Support Services Agreement, the Financial Support Agreement and the Trademark License Agreement with Abengoa.

Immediately following the consummation of this offering:

 

   

Abengoa will indirectly own              shares, representing         % of the economic and voting power of our shares;

 

   

the purchasers in this offering will own              shares, representing         % of the economic and voting power of our shares;

 

   

if the underwriters were to exercise their option to purchase additional shares, we would not issue any new shares, but Abengoa would sell the required shares to the underwriters; and

 

   

if the underwriters exercise in full their option to purchase additional shares, Abengoa will own shares representing         % of the economic and voting power of our shares, while purchasers in this offering will own              shares, representing         % of the economic and voting power of our shares.

The following summary chart sets forth our ownership structure after giving effect to the Asset Transfer and this offering:

 

LOGO

 

 

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(1)

Abengoa Yield holds directly one share in Palmucho, Quadra 1 and Quadra 2.

(2)

ACIN holds directly one share in ATN and ATS.

(3)

One share is held by Servicios Auxiliares de Administracion, S.A. de C.V. due to Mexican legal requirements.

(4)

One share is held by each of Abengoa Mexico, S.A. de C.V. (a Mexican subsidiary of Abengoa) and Abener Energia, S.A. (a Spanish subsidiary of Abengoa).

Material Tax Considerations

Based on our current portfolio of assets and current tax regulations in the United Kingdom and our key operating jurisdictions, including the United States, Mexico, Peru and Spain, we expect not to pay significant income taxes for at least the next ten years due to the fact that we expect to be able to utilize certain tax assets, including net operating losses, or NOLs, and NOL carryforwards to offset future taxable income, except for ACT in Mexico, where we expect to use NOLs in five to seven years. Additionally, due to the fact that we are a UK resident company we should benefit from a more favorable treatment than would apply if we were a corporation in the United States when receiving dividends from our subsidiaries that hold our international assets because they should generally be exempt from UK taxation due to the UK’s distribution exemption. The risks associated with our tax assets include the potential that our NOLs may not offset our taxable income, limitations on our ability to use U.S. NOLs and changes in tax rates or tax laws. See “Risk Factors—Risks Related to Taxation—Our future tax liability may be greater than expected if we do not utilize Net Operating Losses, or NOLs, sufficient to offset our taxable income,” “Risk Factors—Risks Related to Taxation—Our ability to use U.S. NOLs to offset future income may be limited” and “Risk Factors—Risks Related to Taxation—Changes in our tax position can significantly affect our reported earnings and cash flows.”

If we make distributions from current or accumulated earnings and profits, as computed for U.S. federal income tax purposes, such distributions will generally be taxable to U.S. Holders (as defined in “Taxation—Material U.S. Federal Income Tax Considerations”) of our shares in the current period as ordinary income for U.S. federal income tax purposes. Under current law, if certain requirements are met, such dividends would be eligible for the lower tax rates applicable to qualified dividend income of non-corporate taxpayers. See “Taxation—Material U.S. Federal Income Tax Considerations—Taxation of distributions on the shares.” If our distributions exceed our current and accumulated earnings and profits as computed for U.S. federal income tax purposes, such excess distributions will constitute a non-taxable return of capital to the extent of a U.S. Holder’s tax basis in our shares and will result in a reduction of such tax basis. To the extent such excess exceeds a U.S. Holder’s tax basis in our shares, such excess will be taxed as capital gain. A “return of capital” represents a return of a U.S. Holder’s original investment in our shares. Upon the sale of our shares, a U.S. Holder of such shares generally will recognize capital gain or loss measured by the difference between the sale proceeds received by the U.S. Holder and its U.S. federal income tax basis in our shares sold, as adjusted to reflect prior distributions that are treated as return of capital. See “Risk Factors—Risks Related to Taxation—Distributions to U.S. Holder of our shares may be taxable as dividends.” While we expect that a portion of our distribution(s) to U.S. Holders of our shares may exceed our current and accumulated earnings and profits as computed for U.S. federal income tax purposes and therefore constitute a non-taxable return of capital distribution to the extent of a U.S. Holder’s tax basis in our shares, no assurance can be given that this will occur. We intend to calculate earnings and profits annually in accordance with U.S. federal income tax principles.

The United Kingdom does not currently impose withholding tax on dividends paid by Abengoa Yield, to any Holder whether resident in the United Kingdom for tax purposes or resident in any other jurisdiction (e.g., U.S. Holders). See “Taxation—Material U.K. Tax Considerations.”

For a discussion of U.K. and U.S. federal income tax considerations applicable to an investment in our shares, see “Taxation—Material U.K. Tax Considerations” and “Taxation—Material U.S. Federal Income Tax Considerations.”

 

 

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Risks Associated with Our Business

We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or may materially and adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider these risks, including the risks discussed in the section entitled “Risk Factors,” before investing in our shares. Risks related to our business include, among others:

 

   

if the global economy and the global capital markets experience continued disruptions or volatility, it may be difficult for us to access the capital necessary to grow our business and we may otherwise encounter disruptions to our operations;

 

   

if existing government subsidies, incentives or support of our business are curtailed or subject to regulatory changes or changes in law, we may face difficulties in achieving or maintaining the profitability of our existing projects and challenges to the successful execution of our growth plan;

 

   

our cash dividend policy, which targets the distribution of most of our cash available for distribution each quarter, may prevent us from growing as fast as businesses that reinvest their available cash to expand ongoing operations;

 

   

if Abengoa is unable to successfully identify and develop assets to sell to us under the ROFO Agreement, if we are unable to find suitable acquisition opportunities from third parties or if we are unable to arrange for adequate financing for our proposed acquisitions, our ability to execute our growth strategy may be impeded and our ability to increase the amount of dividends paid to holders of our shares may be limited;

 

   

if we are unable to comply with the extensive governmental regulations to which we are subject, including stringent environmental regulations, we may be subject to material fines, penalties or sanctions, as well as reputational damage, and our operations may be disrupted;

 

   

if we are unable to replace expiring or terminated offtake agreements with agreements on similar terms or at all, our results of operations and cash flows could be materially and adversely affected. Furthermore, any replacement offtake agreements may have contract prices below current market prices;

 

   

if we are unable to meet our performance expectations for newly-constructed power generation facilities (such as Mojave) or transmission lines, operate our plants efficiently or manage our capital expenditures, we may be unable to achieve targeted dividend levels for holders of our shares;

 

   

if we are unable to satisfy financial and other covenants in our existing or future indebtedness, we may be unable to pay cash dividends and may experience an event of default which, if not cured or waived, may entitle our lenders to demand repayment or enforce their security interests, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. As of December 31, 2013, we had approximately $2,895 million of total indebtedness under various project-level financing arrangements; our indebtedness may adversely affect our ability to fund our operations, raise additional capital or otherwise implement our business strategy;

 

   

if we encounter unanticipated costs or delays in the construction and operation of new contracted concessions, or if we fail to achieve expected cash flows from newly-acquired assets, our financial return may be lower than expected. Alternatively, the completion of such facilities or the distribution of cash by such facilities to us may be delayed;

 

   

if we experience any unexpected operational or mechanical failures, including failure associated with breakdowns and forced outages and our insurance policies do not cover or do not cover fully those events, then our facilities’ generating capacity could be reduced below expected levels, reducing our revenues. These reductions may jeopardize our ability to pay dividends to holders of our shares at forecasted levels or at all;

 

 

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if we experience a lack of transmission capacity or failure or delay in the operation or development of the interconnection and transmission facilities that deliver the wholesale power we sell from our electric generation assets to our customers, we may lose revenues;

 

   

if, as a result of fluctuations in energy prices, exchange rates, labor costs or other variations, we encounter higher than expected operating costs, we will be limited in our ability to increase revenues because we are subject to regulated tariffs or other long-term fixed rate arrangements that restrict our ability to independently raise tariffs; additionally, if our renewable energy facilities encounter meteorological or climactic conditions that are less favorable than anticipated, we may be unable to achieve expected production levels, which could adversely affect our business, financial condition, results of operations and cash flow;

 

   

Abengoa, as our controlling shareholder, will exercise substantial influence over our operations; we are highly dependent on Abengoa for the future acquisition of assets. Our relationship with Abengoa may give rise to conflicts of interests and may have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for our shares, which could prevent shareholders from receiving a premium for their shares; and

 

   

our dependence on the support services to be provided by Abengoa under the Executive Services Agreement, the Support Services Agreement, the Financial Support Agreement and project level agreements may have a material adverse effect on our business, financial condition, results of operations and cash flows, in the event Abengoa fails to perform its obligations under these agreements.

Corporate Information

Our principal executive offices are currently located at 1 Park Row, Leeds, United Kingdom, LS1 5AB. Our telephone number is +34 954 937 111. Our website will be located at http://www.abengoayield.com and www.abengoayield.co.uk. We intend to make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission, or the SEC, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus. The SEC maintains an internet site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC.

We plan to file our annual report on Form 20-F with the SEC no later than 90 days after the end of our fiscal year. We plan to furnish a quarterly report with the SEC on Form 6-K no later than 60 days following the end of each of the first three fiscal quarters of each year, or as soon thereafter as is reasonably practicable. The quarterly report will include substantially the same information as required by a Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations; provided that the financial statements included in such quarterly report will be prepared and presented in accordance with IFRS as issued by the IASB.

JOBS Act

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we

 

 

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are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

An emerging growth company may also take advantage of reduced reporting requirements that are otherwise applicable to public companies. Among these provisions is an exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in the assessment of our internal control over financial reporting. We have elected to rely on this exemption and will not provide such an attestation from our auditors.

We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenue of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value of our shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act.

 

 

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THE OFFERING

 

Issuer   

Abengoa Yield

Number of shares offered by us

  

             shares.

Over-allotment option

  

Abengoa Concessions Investments Limited, or the selling shareholder, has granted the underwriters an option to purchase up to an additional              shares at the initial public offering price to cover over-allotments, if any. See “Underwriting.” We will not receive any proceeds from the exercise of the underwriters’ over-allotment option. See “Use of Proceeds.”

Share capital after the offering

  

Immediately after the offering, we will have an aggregate of 80 million shares outstanding.

Use of proceeds

  

We will receive approximately $             million from the sale of shares by us in the offering. This amount is net of underwriting fees and commissions.

  

We intend to distribute all of the net proceeds from this offering, less $10 million to strengthen our liquidity position, to Abengoa, as part of the consideration paid to Abengoa in connection with the Asset Transfer. See “Use of Proceeds.”

Listing

  

We have applied for listing of the shares on the NASDAQ Global Select Market under the symbol “ABY”.

Cash dividends

  

Upon completion of this offering, we intend to pay a regular quarterly dividend to holders of our shares. Our initial quarterly dividend will be set at $0.2592 per share ($1.04 per share on an annualized basis), which amount may be changed in the future without advance notice. Our ability to pay the regular quarterly dividend is subject to various restrictions and other factors described in more detail under the caption “Cash Dividend Policy.”

  

We expected to pay a quarterly dividend on or about the 75th day following the expiration of each fiscal quarter to holders of our shares of record on or about the 60th day following the last day of such fiscal quarter.

  

We believe, based on our financial forecast and related assumptions included in “Cash Dividend Policy—Estimated Cash Available for Distribution for Twelve Months Ending June 30, 2015 and June 30, 2016,” that we will generate sufficient cash available for distribution to support our initial quarterly dividend of $0.2592 per share ($1.04 per share on annualized basis). However, we do not have a legal obligation to declare or pay dividends at such initial quarterly dividend level or at all. See “Cash Dividend Policy.”

 

 

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Taxation

  

Abengoa Yield will not be required to withhold amounts on account of United Kingdom tax at source when paying a dividend in respect of its shares. See “Taxation—Material U.K. Tax Considerations—Taxation of dividends.” For a discussion of the tax considerations applicable to an investment in the shares, see “Taxation.”

Risk factors

  

See “Risk Factors” beginning on page 36 and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in the shares.

Lock-ups

  

We, the selling shareholder and our officers and directors listed in the “Management” section have agreed that, for a period commencing on the date of this prospectus and ending 180 days after the date of admission to listing of our shares on the NASDAQ Global Select Market, we and they will not, without the prior written consent of the representatives of the underwriters, dispose of or hedge any of our shares, or any securities convertible into or exchangeable for our shares, subject to certain exceptions. See “Underwriting” for a more detailed discussion of the underwriting arrangements for the offering.

Unless otherwise indicated, all information contained in this prospectus:

 

   

assumes no exercise of the underwriters’ option to purchase up to an additional              shares to cover over-allotments in connection with the offering, if any;

 

   

assumes an initial public offering price of $             per share, which is the midpoint of the range set forth on the cover page of this prospectus; and

 

   

assumes completion of the transactions described under “Summary—Asset Transfer.”

 

 

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SUMMARY COMBINED FINANCIAL INFORMATION

The following tables present selected historical financial and business level information for Abengoa Yield as of and for each of the years ended December 31, 2013 and 2012, and as of January 1, 2012. The selected historical financial data as of and for the years ended December 31, 2013 and 2012 have been derived from and are qualified in their entirety by reference to, the Annual Combined Financial Statements, prepared in accordance with IFRS as issued by the IASB included elsewhere in this prospectus.

The selected combined financial information as of and for the years ended December 31, 2013 and 2012 and as of January 1, 2012 is not intended to be an indicator of our financial condition or results of operations in the future. You should review such selected combined financial information together with our Annual Combined Financial Statements and notes thereto, included elsewhere in this prospectus.

The following tables should be read in conjunction with “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Annual Combined Financial Statements and related notes included elsewhere in this prospectus.

Combined income statement

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                     2012          

Operating revenues and costs

    

Revenue

   $ 210.9      $ 107.2   

Other operating income

     379.6        560.4   

Raw materials and consumables used

     (8.7     (4.3

Employee benefit expense

     (2.4     (1.8

Depreciation, amortization and impairment charges

     (46.9     (20.2

Other operating expenses

     (420.9     (573.6
  

 

 

   

 

 

 

Operating profit

   $ 111.6      $ 67.7   
  

 

 

   

 

 

 

Finance income

     1.2        0.7   

Finance expense

     (123.8     (64.1

Net exchange differences

     (0.9     0.4   

Other financial income/(expense) net

     (1.7     (0.2
  

 

 

   

 

 

 

Finance expense net

   $ (125.2   $ (63.2
  

 

 

   

 

 

 

Share of (loss)/profit of associates

     —          (0.4
  

 

 

   

 

 

 

Profit before income tax

   $ (13.6   $ 4.2   
  

 

 

   

 

 

 

Income tax benefit/(expense)

     11.8        (4.0
  

 

 

   

 

 

 

Profit for the year

   $ (1.8   $ 0.1   
  

 

 

   

 

 

 

Profit attributable to non-controlling interest

     (1.6     1.2   
  

 

 

   

 

 

 

Profit for the year attributable to the combined group

   $ (3.4   $ 1.3   
  

 

 

   

 

 

 

 

 

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Combined statement of financial position

 

(in millions of U.S. dollars)    As of December 31,      As of January 1,
2012
 
     2013      2012     

Non-current assets:

        

Contracted concessional assets

   $ 4,418.1       $ 2,058.9       $ 1,546.8   

Investments in associates carried under the equity method

     387.3         734.1         180.2   

Financial investments and other

     28.9         13.7         9.4   

Deferred tax assets

     52.8         60.2         44.1   
  

 

 

    

 

 

    

 

 

 

Total non-current assets

   $ 4,887.1       $ 2,866.9       $ 1,780.5   
  

 

 

    

 

 

    

 

 

 

Current assets:

        

Inventories

     5.2         —           —     

Clients and other receivables

     97.6         106.1         124.8   

Financial investments

     266.4         127.6         101.7   

Cash and cash equivalents

     357.7         97.5         40.2   
  

 

 

    

 

 

    

 

 

 

Total current assets

   $ 726.9       $ 331.2       $ 266.7   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 5,614.0       $ 3,198.1       $ 2,047.2   
  

 

 

    

 

 

    

 

 

 

Total equity

     1,287.2         1,139.8         583.9   

Non-current liabilities:

        

Long-term non-recourse project financing

     2,842.4         1,320.0         1,003.2   

Other liabilities

     1,209.4         502.2         214.6   
  

 

 

    

 

 

    

 

 

 

Total non-current liabilities

   $ 4,051.8       $ 1,822.2       $ 1,217.8   
  

 

 

    

 

 

    

 

 

 

Current liabilities:

        

Short-term non-recourse project financing

     52.4         48.9         78.7   

Other liabilities

     222.6         187.2         166.8   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     275.0         236.1         245.5   
  

 

 

    

 

 

    

 

 

 

Equity and total liabilities

   $ 5,614.0       $ 3,198.1       $ 2,047.2   
  

 

 

    

 

 

    

 

 

 

 

 

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Combined cash flow

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                     2012          

Gross cash flows from operating activities

    

Profit for the year

   $ (1.8   $ 0.1   

Adjustments to reconcile after-tax profit to net cash generated by operating activities

     92.4        22.8   

Net interest/taxes paid

     (62.4     (41.6

Variations in working capital

     9.2        66.6   
  

 

 

   

 

 

 

Total net cash flow generated by (used in) operating activities

   $ 37.4      $ 47.9   
  

 

 

   

 

 

 

Total net cash flows used in investment activities

   $ (694.6   $ (1,098.7
  

 

 

   

 

 

 

Net cash flows generated by finance activities

   $ 914.9      $ 1,107.3   
  

 

 

   

 

 

 

Net increase/(decrease) in cash and cash equivalents

     257.7        56.5   

Cash and cash equivalents at the beginning of the year

     97.5        40.2   

Currency translation difference on cash and cash equivalents

     2.5        0.8   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the year

   $ 357.7      $ 97.5   
  

 

 

   

 

 

 

Geography and business sector data

Revenue by geography

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                      2012          

North America

   $ 114.0       $ 62.3   

South America

     25.4         17.0   

Europe

     71.5         27.9   
  

 

 

    

 

 

 

Total revenue

   $ 210.9       $ 107.2   
  

 

 

    

 

 

 

Revenue by business sector

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                      2012          

Renewable Energy

   $ 82.7       $ 27.9   

Conventional Power

     102.8         62.3   

Electric Transmission

     25.4         17.0   
  

 

 

    

 

 

 

Total revenue

   $ 210.9       $ 107.2   
  

 

 

    

 

 

 

 

 

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Non-GAAP Financial Data

EBITDA by geography

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                      2012          

North America

   $ 96.7       $ 61.1   

South America

     19.0         10.2   

Europe

     42.8         16.7   
  

 

 

    

 

 

 

Combined EBITDA(1)

   $ 158.5       $ 88.0   
  

 

 

    

 

 

 

EBITDA by business sector

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                      2012          

Renewable Energy

   $ 55.8       $ 16.1   

Conventional Power

     83.3         61.1   

Electric Transmission

     19.4         10.8   
  

 

 

    

 

 

 

Combined EBITDA(1)

   $ 158.5       $ 88.0   
  

 

 

    

 

 

 

 

(1)

EBITDA is calculated as profit for the year from continuing operations, after adding back income tax expense, share of (loss)/profit of associates, finance expense net and depreciation, amortization and impairment charges of the combined entities. EBITDA is not a measurement of performance under IFRS as issued by the IASB and you should not consider EBITDA as an alternative to operating income or profits or as a measure of our operating performance, cash flows from operating, investing and financing activities or as a measure of our ability to meet our cash needs or any other measures of performance under generally accepted accounting principles. We believe that EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to evaluate us. EBITDA and similar measures are used by different companies for different purposes and are often calculated in ways that reflect the circumstances of those companies. EBITDA may not be indicative of our historical operating results, nor are meant to be predictive of potential future results. See “Presentation of Financial Information—Non-GAAP Financial Measures.”

The following table sets forth a reconciliation of EBITDA to our profit for the year from continuing operations:

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                     2012          

Reconciliation of profit for the year to EBITDA

    

Profit for the year attributable to the combined group

   $ (3.4   $ 1.3   

Profit attributable to non-controlling interest

     1.6        (1.2

Income tax expenses/(benefits)

     (11.8     4.0   

Share of loss/(profit) of associated companies

     —          0.4   

Net finance expenses

     125.2        63.2   
  

 

 

   

 

 

 

Operating profit

   $ 111.6      $ 67.7   
  

 

 

   

 

 

 

Depreciation, amortization and impairment charges

     46.9        20.2   
  

 

 

   

 

 

 

Combined EBITDA (unaudited)

   $ 158.5      $ 88.0   
  

 

 

   

 

 

 

 

 

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The following table sets forth a reconciliation of EBITDA to our Net cash generated by operating activities:

 

(in millions of U.S. dollars)    Year ended December 31,  
             2013                     2012          

Reconciliation of EBITDA to Net cash generated or used from operating activities

    

Combined EBITDA (unaudited)

   $  158.5      $ 88.0   

Other cash finance costs and other

     (67.9     (65.0

Variations in working capital

     9.2        66.6   

Income tax (paid)

     (0.1     (0.3

Interests (paid)/received

     (62.3     (41.4
  

 

 

   

 

 

 

Net cash generated or used from operating activities

   $ 37.4      $ 47.9   
  

 

 

   

 

 

 

 

 

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RISK FACTORS

Investing in our shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information contained in this prospectus, before making any investment decision. Any of the following risks and uncertainties could have a material adverse effect on our business, prospects, results of operations and financial condition. The market price of our shares could decline due to any of these risks and uncertainties, and you could lose all or part of your investment.

Risks Related to Our Business and the Markets in Which We Operate

Difficult conditions in the global economy and in the global capital markets have caused, and may continue to cause, a sharp reduction in worldwide demand for our products and services and negatively affect our access to the levels of financing necessary for the successful refinancing of our project level indebtedness

Our results of operations have been, and continue to be, materially affected by conditions in the global economy and in the global capital markets. Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, sovereign debt and the instability of the euro have contributed to increased volatility and diminished expectations for the economy and global capital markets going forward. These factors, combined with volatile oil and gas prices, declining global business and consumer confidence and rising unemployment, have precipitated an economic slowdown and have led to a recession and weak economic growth. Adverse events and continuing disruptions in the global economy and in the global capital markets may have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility with certain factors, including consumer spending, business investment, government spending, inflation affecting the business and economic environment that could affect the economic and financial situation of our concession contracts counterparties and, ultimately, the profitability and growth of our business.

Generalized or localized downturns or inflationary or deflationary pressures in our key geographical areas could also have a material adverse effect on the performance of our business. A significant portion of our business activity is concentrated in the United States, Mexico, Peru and Spain, and we have significant investments in Brazil. Consequently, we are significantly affected by the general economic conditions in these countries. Spain, for instance, has recently experienced negative economic conditions, including high unemployment and significant government debt which we believe could adversely affect our operations in the future. The effects on the European and global economy of any exit of one or more member states (each a “Member State”) from the Eurozone, the dissolution of the euro and the possible redenomination of our financial instruments or other contractual obligations from euro into a different currency, or the perception that any of these events are imminent, are inherently difficult to predict and could give rise to operational disruptions or other risks of contagion to our business and have a material, adverse effect on our business, financial condition and results of operation. In addition, to the extent uncertainty regarding the European economic recovery continues to negatively affect government or regional budgets, our business, results of operations and cash flows could be materially adversely affected.

The global capital and credit markets have experienced periods of extreme volatility and disruption since the last half of 2008. Continued disruptions, uncertainty or volatility in the global capital and credit markets may limit our access to additional capital required to operate or grow our business, including our access to new equity capital to make further acquisitions or access to non-recourse project financing which we may use to fund or refinance many of our projects, even in cases where such capital has already been committed. Such market conditions may limit our ability to replace, in a timely manner, maturing liabilities and access the capital necessary to grow our business, or replace financing previously committed for a project that ceases to be available to it. As a result, we may be forced to delay raising capital, issue shorter-term securities than we prefer, or bear a higher cost of capital which could decrease our profitability and significantly reduce our financial flexibility or even require us to modify our dividend policy. In the event that we are required to replace previously committed financing to certain projects that subsequently becomes unavailable, we may have to postpone or cancel planned capital expenditures.

 

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We have international operations and investments, including in emerging markets that could be subject to economic, social and political uncertainties

We operate our activities in a range of international locations, including Mexico, Peru, Uruguay, Chile and Spain and have significant investments in Brazil, and we expect to expand our operations into new locations in the future. Accordingly, we face a number of risks associated with operating and investing in different countries that may have a material adverse effect on our business, financial condition, results of operations and cash flows. These risks include, but are not limited to, adapting to the regulatory requirements of such countries, compliance with changes in laws and regulations applicable to foreign corporations, the uncertainty of judicial processes, and the absence, loss or non-renewal of favorable treaties, or similar agreements, with local authorities or political, social and economic instability, all of which can place disproportionate demands on our management, as well as significant demands on our operational and financial personnel and business. As a result, we can provide no assurance that our future international operations and investments will remain successful.

A significant portion of our current and our potential future operations and investments are conducted in various emerging countries worldwide. Our activities and investments in these countries involve a number of risks that are more prevalent than in developed markets, such as economic and governmental instability, the possibility of significant amendments to, or changes in, the application of governmental regulations, the nationalization and expropriation of private property, payment collection difficulties, social problems, substantial fluctuations in interest and exchange rates, changes in the tax framework or the unpredictability of enforcement of contractual provisions, currency control measures, limits on the repatriation of funds and other unfavorable interventions or restrictions imposed by public authorities. Our dollar-denominated contracts in Peru and Mexico are payable in local currency at the exchange rate of the payment date. In the event of a rapid devaluation or implementation of exchange or currency controls, we may not be able to exchange the local currency for the agreed dollar amount, which could affect our cash available for distribution. Governments in Latin America frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations. Governmental actions in certain Latin American countries to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital or exchange controls and limits on imports.

Decreases in government budgets, reductions in government subsidies and adverse changes in law may adversely affect our business and growth plan

Poor economic conditions have affected, and continue to affect, government budgets and threaten the continuation of government subsidies such as regulated revenues, cash grants, U.S. federal income tax benefits and other similar subsidies that benefit our business, particularly with respect to renewable energy. Such conditions may also lead to adverse changes in laws. For example, in the United States, due to the failure of the U.S. Congress to enact a plan by February 28, 2013 to reduce the federal budget deficit by $1.2 trillion, $85 billion of automatic budget cuts went into effect on March 1, 2013, reducing discretionary spending by all agencies of the federal government for the remainder of the federal fiscal year ending September 30, 2013. These cuts affected, among others, the U.S. Department of the Treasury’s, or the U.S. Treasury, program providing for cash grants in lieu of investment tax credits, or ITCs. See “Regulation—Regulation in the United States—U.S. Tax Incentives and Other Federal Considerations for Renewable Energy Generation Facilities—Section 1603 U.S. Treasury Grant Program.” In addition, a number of states and municipal authorities are experiencing severe fiscal pressures as they seek to address mounting budget deficits. The reduction or elimination of tariffs or subsidies or adverse changes in law could have a material adverse effect on the profitability of our existing projects, and the lack of availability of new projects undertaken in reliance on the continuation of such subsidies could adversely affect our growth plan.

 

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Pursuant to our cash dividend policy, we intend to distribute all or substantially all of our cash available for distribution through regular quarterly distributions and dividends, and our ability to grow and make acquisitions through cash on hand could be limited

As discussed in “Cash Dividend Policy,” our dividend policy is to distribute all or substantially all of our cash available for distribution each quarter and to rely primarily upon external financing sources, including the issuance of debt and equity securities and, if applicable, borrowings under our revolving credit line with Abengoa, to fund our acquisitions and potential growth capital expenditures. We may be precluded from pursuing otherwise attractive acquisitions if the projected short-term cash flow from the acquisition or investment is not adequate to service the capital raised to fund the acquisition or investment, after giving effect to our available cash reserves. See “Cash Dividend Policy—General—Our Ability to Grow our Business and Dividend.”

We intend to make regular quarterly cash distributions to our shareholders in an amount equal to the cash available for distribution generated during a given quarter, less reserves for the prudent conduct of our business, and subject to the stated payout ratio during that given period. As such, our growth may not be as fast as that of businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional equity securities in connection with any acquisitions or growth capital expenditures, the payment of dividends on these additional equity securities may increase the risk that we will be unable to maintain or increase our per share dividend. There will be no limitations in our articles of association on our ability to issue equity securities, including securities ranking senior to our shares. The incurrence of any bank borrowings or other debt by intermediate subsidiaries or by our project-level subsidiaries to finance our growth strategy will result in increased interest expense and the imposition of additional or more restrictive covenants, which, in turn, may impact the cash distributions we receive to distribute to holders of our shares.

We may not be able to identify or consummate any future acquisitions on favorable terms, or at all

Our business strategy includes growth through the acquisitions of additional revenue-generating assets primarily from Abengoa, pursuant to the ROFO Agreement, and from third parties. This strategy depends on Abengoa’s ability to identify and develop assets and desire to sell those assets to us, as well as our ability to successfully identify and evaluate acquisition opportunities and consummate acquisitions on favorable terms. However, the number of acquisition opportunities may be limited.

Our ability to acquire future renewable facilities depends on the viability of renewable assets generally. These assets currently are largely contingent on public policy mechanisms including, among others, ITCs, cash grants, loan guarantees, accelerated depreciation, carbon trading plans, environmental tax credits and R&D incentives, as discussed in “Regulation—EU Directives—Incentives for renewable energy” and “Regulation—Regulation in the United States—U.S. Tax Incentives and other Federal Considerations for Renewable Energy Generation Facilities.” These mechanisms have been implemented at the U.S. federal and state levels and in other jurisdictions where our assets are located to support the development of renewable generation and other clean infrastructure technologies. The availability and continuation of public policy support mechanisms will drive a significant part of the economics and viability of our growth strategy and expansion into clean energy investments. For example, an ITC is crucial for the development of Concentrating Solar Power plants in the United States and the benefits of ITC for new projects might be lower beginning in 2017. See “Industry and Market Opportunity—Solar—Concentrating Solar Power Technology in the United States.”

Our ability to effectively consummate future acquisitions will also depend on our ability to arrange the required or desired financing for acquisitions. We may not have access to the capital markets to issue new equity securities or sufficient availability under our credit facilities or have access to project-level financing on commercially reasonable terms when acquisition opportunities arise. An inability to obtain the required or desired financing could significantly limit our ability to consummate future acquisitions and effectuate our growth strategy. If financing is available, utilization of our credit facilities or project-level financing for all or a portion of the purchase price of an acquisition, as applicable, could significantly increase our interest expense, impose additional or more restrictive covenants and reduce cash available for distribution. Similarly, the issuance

 

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of additional equity securities as consideration for acquisitions could cause significant shareholder dilution and reduce our per share cash available for distribution if the acquisitions are not sufficiently accretive. Our ability to consummate future acquisitions may also depend on our ability to obtain any required government or regulatory approvals for such acquisitions, including, but not limited to, the Federal Energy Regulatory Commission, or FERC, approval under Section 203 of the Federal Power Act, or FPA, in respect of acquisitions in the United States; the National Electric Energy Agency, Agencia Nacional de Energia Eletrica, or ANEEL, approval for the acquisition of transmission lines in Brazil; or any other approvals in the countries in which we may purchase assets in the future pursuant to the ROFO Agreement or otherwise. We may also be required to seek authorizations, waivers or notifications from debt and/or equity financing providers at the project or holding company level; local or regional agencies or bodies; and/or development agencies or institutions that may have a contractual right to authorize a proposed acquisition.

In addition, changes in our shareholder base as a result of future equity issuances to fund acquisitions or other equity-based capital markets transactions may trigger the requirement to seek waivers, authorizations or approvals from agencies, governments, financing providers, concession contract counterparties or any other relevant contract counterparty. Failure to secure any required waivers, authorizations or approvals may adversely affect our business.

Additionally, the acquisition of companies and assets are subject to substantial risks, including the failure to identify material problems during due diligence (for which we may not be indemnified post-closing), the risk of over-paying for assets (or not making acquisitions on an accretive basis) and the ability to retain customers. Further, the integration and consolidation of acquisitions requires substantial human, financial and other resources and, ultimately, our acquisitions may divert management’s attention from our existing business concerns, disrupt our ongoing business or not be successfully integrated. There can be no assurances that any future acquisitions will perform as expected or that the returns from such acquisitions will support the financing utilized to acquire them or maintain them. As a result, the consummation of acquisitions may have a material adverse effect on our business, financial condition, results of operations and cash flows and ability to pay dividends to holders of our shares.

Finally, while we benefit from a right of first offer with respect to the Abengoa ROFO Assets, we will compete with other companies for limited acquisition opportunities from third parties, which may increase our cost of making acquisitions or cause us to refrain from making acquisitions from third parties. Some of our competitors for acquisitions are much larger than us with substantially greater resources. These companies may be able to pay more for acquisitions due to cost of capital advantages, synergy potential or other drivers, and may be able to identify, evaluate, bid for and purchase a greater number of assets than our financial or human resources permit. If we are unable to identify and consummate future acquisitions, it will impede our ability to execute our growth strategy and limit our ability to increase the amount of dividends paid to holders of our shares.

We rely on certain regulations, subsidies and tax incentives that may be changed or legally challenged

We rely in a significant part on environmental and other regulations of industrial and local government activities, including regulations mandating, among other things, reductions in carbon or other greenhouse gas emissions and minimum biofuel content in fuel or use of energy from renewable sources. If the businesses to which such regulations relate were deregulated or if such regulations were materially changed or weakened, the profitability of our current and future projects could suffer, which could in turn have a material adverse effect on our business, financial condition and results of operations. In addition, uncertainty regarding possible changes to any such regulations has adversely affected in the past, and may adversely affect in the future, our ability to refinance a project or to satisfy other financing needs.

Subsidy regimes for renewable energy generation have been challenged in the past on constitutional and other grounds (including that such regimes constitute impermissible European Union state aid) in certain jurisdictions. In addition, certain loan guarantee programs in the United States, including those which have

 

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enabled the DOE to provide loan guarantees to support our Solana and Mojave projects, have been challenged on grounds of failure by the appropriate authorities to comply with applicable U.S. federal administrative and energy law. If all or part of the subsidy and incentive regimes for renewable energy generation in any jurisdiction in which we operate were found to be unlawful and, therefore, reduced or discontinued, we may be unable to compete effectively with conventional and other renewable forms of energy.

The production from our renewable energy facilities is the subject of various tax relief measures or tax incentives in the jurisdictions in which they operate. These tax relief and tax incentive measures play an important role in the profitability of our projects. In the future, it is possible that some or all of these tax incentives will be suspended, curtailed, not renewed or revoked. For example, our Solana and Mojave projects are reliant on the ITC Cash Grant program to repay a significant portion of their respective external debt financing and the failure to receive anticipated funds, or any funds at all, pursuant to the ITC Cash Grant would have an adverse effect on our ability to receive distributions from our Solana and Mojave projects. The occurrence of any of the above could adversely affect the profitability of our current plants and our ability to refinance projects, which could in turn have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to extensive governmental regulation in a number of different jurisdictions, and our inability to comply with existing regulations or requirements or changes in applicable regulations or requirements may have a negative impact on our business, results of operations or financial condition

We are subject to extensive regulation of our business in the United States, Mexico, Spain, Peru and Brazil and in each of the other countries in which we operate. Such laws and regulations require licenses, permits and other approvals to be obtained in connection with the operations of our activities. This regulatory framework imposes significant actual, day-to-day compliance burdens, costs and risks on us. In particular, the power plants and transmission lines that we own are subject to strict international, national, state and local regulations relating to their operation and expansion (including, among other things, leasing and use of land, and corresponding building permits, landscape conservation, noise regulation, environmental protection and environmental permits and electric transmission and distribution network congestion regulations). Non-compliance with such regulations could result in the revocation of permits, sanctions, fines or even criminal penalties. Compliance with regulatory requirements, which may in the future include increased exposure to capital markets regulations, may result in substantial costs to our operations that may not be recovered. In addition, we cannot predict the timing or form of any future regulatory or law enforcement initiatives. Changes in existing energy, environmental and administrative laws and regulations may materially and adversely affect our business, margins and investments. Our business may also be affected by additional taxes imposed on our activities, reduction of regulated tariffs and other cuts or measures.

Further, similar changes in laws and regulations could increase the size and number of claims and damages asserted against us or subject us to enforcement actions, fines and even criminal penalties. In addition, changes in laws and regulations may, in certain cases, have retroactive effect and may cause the result of operations to be lower than expected. In particular, our activities in the energy sector are subject to regulations applicable to the economic regime of generation of electricity from renewable sources and to subsidies or public support in the benefit of the production of biofuels from renewable energy sources, which vary by jurisdiction, and are subject to modifications that may be more restrictive or unfavorable to us.

Our business is subject to stringent environmental regulation

We are subject to significant environmental regulation, which, among other things, requires us to obtain and maintain regulatory licenses, permits and other approvals and comply with the requirements of such licenses, permits and other approvals and perform environmental impact studies on changes to projects. There can be no assurance that:

 

   

public opposition will not result in delays, modifications to or cancellation of any project or license;

 

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laws or regulations will not change or be interpreted in a manner that increases our costs of compliance or materially or adversely affects our operations or plants; or

 

   

governmental authorities will approve our environmental impact studies where required to implement proposed changes to operational projects.

We believe that we are currently in material compliance with all applicable regulations, including those governing the environment. While we employ robust policies with regard to environmental regulation compliance, there are occasions where regulations are breached. On occasion, we have been found not to be in compliance with certain environmental regulations, and have incurred fines and penalties associated with such violations which, to date, have not been material in amount. We can give no assurance, however, that we will continue to be in compliance or avoid material fines, penalties, sanctions and expenses associated with compliance issues in the future. Violation of such regulations may give rise to significant liability, including fines, damages, fees and expenses, and site closures. Generally, relevant governmental authorities are empowered to clean up and remediate releases of environmental damage and to charge the costs of such remediation and cleanup to the owners or occupiers of the property, the persons responsible for the release and environmental damage, the producer of the contaminant and other parties, or to direct the responsible parties to take such action. These governmental authorities may also impose a tax or other liens on the responsible parties to secure the parties’ reimbursement obligations.

Environmental regulation has changed rapidly in recent years, and it is possible that we will be subject to even more stringent environmental standards in the future. For example, our activities are likely to be covered by increasingly strict national and international standards relating to climate change and related costs, and may be subject to potential risks associated with climate change, which may have a material adverse effect on our business, financial condition or results of operations. We cannot predict the amounts of any increased capital expenditures or any increases in operating costs or other expenses that we may incur to comply with applicable environmental, or other regulatory, requirements, or whether these costs can be passed on to our concession contract counterparties through price increases.

Increases in the cost of energy and gas could significantly increase our operating costs in some of our assets

Some of our activities (in particular, our Concentrating Solar Power plants in Spain that produce a portion of their power from natural gas) require some consumption of energy and gas, and we are vulnerable to material fluctuations in their prices. Although our energy and gas purchase contracts generally include indexing mechanisms, we cannot guarantee that these mechanisms will cover all of the additional costs generated by an increase in energy and gas prices, particularly for long-term contracts, and some of the contracts entered into by us do not include any indexing provisions. Significant increases in the cost of energy or gas, or shortages of the supply of energy and/or gas, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Counterparties to our offtake agreements may not fulfill their obligations and, as our contracts expire, we may not be able to replace them with agreements on similar terms in light of increasing competition in the markets in which we operate

A significant portion of the electric power we generate and the transmission capacity we have is sold under long-term offtake agreements with public utilities, industrial or commercial end-users or governmental entities, with a weighted average remaining duration (weighted using the relevant technical indicator by each type of asset) of approximately 26 years.

If, for any reason, any of the purchasers of power or transmission capacity under these agreements are unable or unwilling to fulfill their related contractual obligations or if they refuse to accept delivery of power delivered thereunder or if they otherwise terminate such agreements prior to the expiration thereof, our assets, liabilities, business, financial condition, results of operations and cash flow could be materially and adversely

 

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affected. Furthermore, to the extent any of our power or transmission capacity purchasers are, or are controlled by, governmental entities, our facilities may be subject to legislative or other political action that may impair their contractual performance.

The power generation industry is characterized by intense competition and our electric generation assets encounter competition from utilities, industrial companies and other independent power producers, in particular with respect to uncontracted output. In recent years, there has been increasing competition among generators for offtake agreements and this has contributed to a reduction in electricity prices in certain markets characterized by excess supply above designated reserve margins. In light of these market conditions, we may not be able to replace an expiring or terminated agreement with an agreement on equivalent terms and conditions, including at prices that permit operation of the related facility on a profitable basis. In addition, we believe many of our competitors have well-established relationships with our current and potential suppliers, lenders and customers and have extensive knowledge of our target markets. As a result, these competitors may be able to respond more quickly to evolving industry standards and changing customer requirements than we will be able to. Adoption of technology more advanced than ours could reduce our competitors’ power production costs, resulting in their having a lower cost structure than is achievable with the technologies we currently employ and adversely affect our ability to compete for offtake agreement renewals. If we are unable to replace an expiring or terminated offtake agreement, the affected facility may temporarily or permanently cease operations. External events, such as a severe economic downturn, could also impair the ability of some counterparties to our offtake agreements and other customer agreements to pay for energy and/or other products and services received.

Our inability to enter into new or replacement offtake agreements or to compete successfully against current and future competitors in the markets in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Transactions with counterparties expose us to credit risk which we must effectively manage to mitigate the effect of counterparty default

We are exposed to the credit risk profile of the counterparties to our long-term concession contracts, our suppliers and our financing providers, which could impact our business, financial condition and results of operations. Although we actively manage this credit risk through diversification, the use of non-recourse factoring contracts, credit insurance and other measures, our risk management strategy may not be successful in limiting our exposure to credit risk. This could adversely affect our business, financial condition, results of operations and cash flow.

We may be subject to increased finance expenses if we do not effectively manage our exposure to interest rate and foreign currency exchange rate risks

We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and foreign currency exchange rate fluctuations. Some of our indebtedness (including project-level indebtedness) bears interest at variable rates, generally linked to market benchmarks such as EURIBOR and LIBOR. Any increase in interest rates would increase our finance expenses relating to our variable rate indebtedness and increase the costs of refinancing our existing indebtedness and issuing new debt (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Interest Rates”). Although most of our long-term contracts are denominated in or indexed to U.S. dollars, we conduct our business and incur certain costs in the local currency of the countries in which we operate. As we continue expanding our business into existing markets such as South America and Europe, and into other new markets, we expect that an increasing percentage of our revenue and cost of sales will be denominated in currencies other than our reporting currency, the U.S. dollar. As a result, we will become subject to increasing currency translation risk, whereby changes in exchange rates between the U.S. dollar and the other currencies in which we do business could result in foreign exchange losses.

 

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We seek to actively manage these risks by entering into interest rate options and swaps, which according to our policies, generally cover at least 75% of the outstanding project debt, to hedge against interest rate risk. In addition, we plan to use future currency sale and purchase contracts and foreign exchange rate swaps or caps to hedge against foreign exchange rate risk when our exposure to non-U.S. dollar denominated cash flows is significantly below our 90% target. If our risk management strategies are not successful in limiting our exposure to changes in interest rates and foreign currency exchange rates, our business, financial condition and results of operations could be materially and adversely affected.

Our competitive position could be adversely affected by changes in technology, prices, industry standards and other factors

The markets in which our assets or projects operate change rapidly because of technological innovations and changes in prices, industry standards, product instructions, customer requirements and the economic environment. New technology or changes in industry and customer requirements may put pressure on the profitability of our existing projects by increasing the incentives of counterparties to our long-term contracts to seek new alternative projects or request higher service standards.

Our performance under our concession contracts may be adversely affected by problems related to our reliance on third-party contractors and suppliers

Our projects rely on the supply of services, equipment or software which we subcontract to Abengoa or other third-party suppliers in order to meet our contractual obligations under our contracted concessions. The delivery of products or services which are not in compliance with the requirements of the subcontract, or the late supply of products and services, can cause us to be in default under our contracts with our concession counterparties. To the extent we are not able to transfer all of the risk or be fully indemnified by Abengoa or other third-party contractors and suppliers, we may be subject to a claim by our customers as a result of a problem caused by a third party that could have a material adverse effect on our reputation, business, results of operations, financial condition and cash flows.

Supplier concentration may expose us to significant financial credit or performance risk

We often rely on a single contracted supplier or a small number of suppliers for the provision of fuel, transportation of fuel, equipment, technology and/or other services required for the operation of certain of our facilities. In addition, certain of our suppliers provide long-term warranties with respect to the performance of their products or services. If any of these suppliers cannot perform under their agreements with us, or satisfy their related warranty obligations, we will need to utilize the marketplace to provide or repair these products and services. There can be no assurance that the marketplace can provide these products and services as, when and where required. We may not be able to enter into replacement agreements on favorable terms or at all. If we are unable to enter into replacement agreements to provide for fuel, equipment, technology and other required services, we would seek to purchase the related goods or services at market prices, exposing us to market price volatility and the risk that fuel and transportation may not be available during certain periods at any price. We may also be required to make significant capital contributions to remove, replace or redesign equipment that cannot be supported or maintained by replacement suppliers, which could have a material adverse effect on our business, financial condition, results of operations, credit support terms and cash flows.

The failure of any supplier or customer to fulfill its contractual obligations to us could have a material adverse effect on our financial results. Consequently, the financial performance of our facilities is dependent on the credit quality of, and continued performance by, our suppliers and vendors.

We may be adversely affected by risks associated with acquisitions or investments

As a part of our growth strategy, we intend to make certain acquisitions and/or financial investments, and we may take on additional equity and debt to pay for such acquisitions. Moreover, we cannot guarantee that we

 

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will be able to complete all, or any, such transactions that we might contemplate in the future. To the extent we do, such transactions expose us to risks inherent in integrating acquired businesses and personnel, such as the inability to achieve projected cash flows; recognition of unexpected liabilities or costs; and regulatory complications arising from such transactions. Furthermore, the terms and conditions of financing for such acquisitions or financial investments could restrict the manner in which we conduct our business, particularly if we were to use debt financing. These risks could have a material adverse effect on our business, financial condition and results of operations.

In addition, we have made and may continue to make equity investments in certain strategic assets managed by or together with third parties, including governmental entities and private entities. In certain cases, we may only have partial or joint control over a particular asset. For example, we currently hold only economic rights in respect of our Brazilian investment through ACBH, which economic rights provide us with the right to receive a preferred dividend of $18 million annually for a five-year period commencing on July 1, 2014, but we do not have control over ACBH. Investments in assets over which we have no, partial or joint control are subject to the risk that the other shareholders of the assets, who may have different business or investment strategies than us or with whom we may have a disagreement or dispute, may have the ability to independently make or block business, financial or management decisions, such as the decision to distribute dividends or appoint members of management, which may be crucial to the success of the project or our investment in the project, or otherwise implement initiatives which may be contrary to our interests. Additionally, the approval of other shareholders or partners may be required to sell, pledge, transfer, assign or otherwise convey our interest in such assets, or for us to acquire Abengoa’s interests in such assets as an initial matter. Alternatively, other shareholders may have rights of first refusal or rights of first offer in the event of a proposed sale or transfer of our interests in such assets or in the event of our acquisition of an interest in new assets pursuant to the ROFO Agreement or with third parties. These restrictions may limit the price or interest level for our interests in such assets, in the event we want to sell such interests.

Finally, our partners in existing or future projects may be unable, or unwilling, to fulfill their obligations under the relevant shareholder agreements or may experience financial or other difficulties that may adversely affect our investment in a particular joint venture. In certain of our joint ventures, we may also be reliant on the particular expertise of our partners and, as a result, any failure to perform our obligations in a diligent manner could also adversely affect the joint venture. If any of the foregoing were to occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

There are risks relating to future acquisitions and investments

Our board of directors might approve acquisitions and investments in the future. This could result in our making acquisitions or investments in assets that are different from, and possibly riskier than, those described in this prospectus. These changes could adversely affect the market price of our shares or our ability to make distributions to shareholders.

The facilities we operate are, in some cases, dangerous workplaces at which hazardous materials are handled. If we fail to maintain safe work environments, we can be exposed to significant financial losses, as well as civil and criminal liabilities

The facilities we operate often put our employees and others in close proximity with large pieces of mechanized equipment, moving vehicles, manufacturing or industrial processes, heat or liquids stored under pressure and highly regulated materials. On most projects and at most facilities, we are responsible for safety and, accordingly, must implement safe practices and safety procedures, which are also applicable to on-site subcontractors such as our O&M services providers. If we fail to design and implement such practices and procedures or if the practices and procedures we implement are ineffective or if our O&M service providers or other suppliers do not follow them, our employees and others may become injured and our and others’ property may become damaged. Unsafe work sites also have the potential to increase employee turnover, increase the cost

 

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of a project to our customers or the operation of a facility, and raise our operating costs. Any of the foregoing could result in financial losses, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, our projects and the operation of our facilities can involve the handling of hazardous and other highly regulated materials, which, if improperly handled or disposed of, could subject us to civil and criminal liabilities. We are also subject to regulations dealing with occupational health and safety. Although we maintain functional groups whose primary purpose is to ensure we implement effective health, safety and environmental work procedures throughout our organization, including construction sites and maintenance sites, the failure to comply with such regulations could subject us to liability. In addition, we may incur liability based on allegations of illness or disease resulting from exposure of employees or other persons to hazardous materials that we handle or are present in our workplaces.

Our business may be adversely affected by catastrophes, natural disasters, adverse weather conditions, climate change, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of our plants, facilities and electric transmission lines

If one or more of our plants, facilities or electric transmission lines were to be subject in the future to fire, flood or a natural disaster, adverse weather conditions, drought, terrorism, power loss or other catastrophe, or if unexpected geological or other adverse physical conditions were to develop at any of our plants, facilities or electric transmission lines, we may not be able to carry out our business activities at that location or such operations could be significantly reduced. For example, drought may affect the cooling capacity of our thermosolar projects. Any of these circumstances could result in lost revenue at these sites during the period of disruption and costly remediation, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, despite security measures taken by us, it is possible that our sites and assets could be affected by criminal or terrorist acts. Any such acts could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our insurance may be insufficient to cover relevant risks and the cost of our insurance may increase

Our business is exposed to the inherent risks in the markets in which we operate. Although we seek to obtain appropriate insurance coverage in relation to the principal risks associated with our business, we cannot guarantee that such insurance coverage is, or will be, sufficient to cover all of the possible losses we may face in the future. If we were to incur a serious uninsured loss or a loss that significantly exceeded the coverage limits established in our insurance policies, the resulting costs could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, our insurance policies are subject to review by our insurers. If premiums were to increase in the future or certain types of insurance coverage were to become unavailable, we might not be able to maintain insurance coverage comparable to those that are currently in effect at comparable cost, or at all. If we were unable to pass any increase in insurance premiums on to our customers, such additional costs could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be subject to litigation and other legal proceedings

We are subject to the risk of legal claims and proceedings and regulatory enforcement actions in the ordinary course of our business and otherwise. The results of legal and regulatory proceedings cannot be predicted with certainty. We cannot guarantee that the results of current or future legal or regulatory proceedings or actions will not materially harm our business, financial condition, results of operations or operations, nor can we guarantee that we will not incur losses in connection with current or future legal or regulatory proceedings or actions that exceed any provisions we may have set aside in respect of such proceedings or actions or that exceed any available insurance coverage, which may have a material adverse effect on our business, financial condition, results of operations and cash flows. See “Business—Legal Proceedings.”

 

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We are subject to reputational risk, and our reputation is closely related to that of Abengoa

We rely on our reputation to do business, obtain financing, hire and retain employees and attract investors, one or more of which could be adversely affected if our reputation were damaged. Harm to our reputation could arise from real or perceived faulty or obsolete technology, failure to comply with legal and regulatory requirements, difficulties in meeting contractual obligations or standards of quality and service, ethical issues, money laundering and insolvency, among others. In addition, our reputation is closely related to that of Abengoa. If the public image or reputation of Abengoa were to be damaged as a result of adverse publicity or otherwise, we could be adversely affected due to our relationship with Abengoa. Any such perceived or real difficulties experienced by Abengoa would harm our reputation, which could have an adverse effect on our business, financial condition and results of operations.

Risks Related to Our Assets

The concession agreements under which we conduct some of our operations are subject to revocation or termination

Certain of our operations are conducted pursuant to contracted concessions granted by various governmental bodies. Generally, these contracted concessions give us rights to provide services for a limited period of time, subject to various governmental regulations. The governmental bodies or private clients responsible for regulating and monitoring these services often have broad powers to monitor our compliance with the applicable concession contracts and can require us to supply them with technical, administrative and financial information. Among other obligations, we may be required to comply with investment commitments and efficiency and safety standards established in the concession. Such commitments and standards may be amended in certain cases by the governmental bodies. Our failure to comply with the concession agreements or other regulatory requirements may result in contracted concessions not being granted, upheld or renewed in our favor, or, if granted, upheld or renewed, may not be done on as favorable terms as currently applicable. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In some of the markets in which we are present, or in which we may own assets in the future, political instability, economic crisis or social unrest may give rise to a change in policies regarding long-term contracted assets with private companies, like us, in strategic sectors such as power generation or electric transmission. Any such changes could lead to modifications of the economic terms of our concession contracts or, in extreme scenarios, the nationalization of our assets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Revenue from our contracted assets and concessions is significantly dependent on regulated tariffs or other long-term fixed rate arrangements that restrict our ability to increase revenue from these operations

The revenue that we generate from our contracted concessions is significantly dependent on regulated tariffs or other long-term fixed rate arrangements. Under most of our concession agreements, a tariff structure is established in such agreements, and we have limited or no possibility to independently raise tariffs beyond the established rates and indexation or adjustment mechanisms. Similarly, under a long-term power purchase agreement, we are required to deliver power at a fixed rate for the contract period, with limited escalation rights. In addition, we may be unable to adjust our tariffs or rates as a result of fluctuations in prices of raw materials, exchange rates, labor and subcontractor costs during the operating phase of these projects, or any other variations in the conditions of specific jurisdictions in which our concession-type infrastructure projects are located, which may reduce our revenue. Moreover, in some cases, if we fail to comply with certain pre-established conditions, the government or customer (as applicable) may reduce the tariffs or rates payable to us. In addition, during the life of a concession, the relevant government authority may unilaterally impose additional restrictions on our tariff rates, subject to the regulatory frameworks applicable in each jurisdiction. Governments may also postpone annual tariff increases until a new tariff structure is approved without compensating us for lost revenue. Furthermore, changes in laws and regulations may, in certain cases, have retroactive effect and expose us to

 

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additional compliance costs or interfere with our existing financial and business planning. For example, the Spanish government modified regulations applicable to renewable energy assets, including Concentrated Solar Power, in 2012 and 2013 which as a result, lowered yearly revenues of such assets. In the case that any one or more of these events occur, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Revenue from our renewable energy and conventional power facilities is partially exposed to market electricity prices

In addition to regulated incentives, revenue and operating costs from certain of our projects depend to a limited extent on market prices for sales of electricity. Market prices may be volatile and are affected by various factors, including the cost of raw materials, user demand, and if applicable, the price of greenhouse gas emission rights. In several of the jurisdictions in which we operate, we are exposed to remuneration schemes which contain both regulated incentive and market price components. In such jurisdictions, the regulated incentive component may not compensate for fluctuations in the market price component, and, consequently, total remuneration may be volatile. There can be no assurance that market prices will remain at levels which enable us to maintain profit margins and desired rates of return on investment. A decline in market prices below anticipated levels could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our solar and wind projects will be negatively affected if there are adverse changes to national and international laws and policies that support renewable energy sources

Recently, certain countries, such as the United States, a market that is one of our principal markets, have enacted policies of active support for renewable energy. These policies have included feed-in tariffs and renewable energy purchase obligations, mandatory quotas and/or portfolio standards imposed on utilities and certain tax incentives (such as the Investment Tax Credit in the United States). See “Regulation—Regulation in the United States—U.S. Tax Incentives and other Federal Considerations for Renewable Energy Generation Facilities—Section 1603 U.S. Treasury Grant Program.”

Although support for renewable energy sources by governments and regulatory authorities in the jurisdictions in which we operate has historically been strong, and European authorities, along with the United States government, have reaffirmed their intention to continue such support, certain policies currently in place may expire, be suspended or be phased out over time, cease upon exhaustion of the allocated funding or be subject to cancellation or non-renewal. Accordingly, we cannot guarantee that such government support will be maintained in full, in part or at all.

If the governments and regulatory authorities in the jurisdictions in which we operate or plan to operate were to further decrease or abandon their support for development of solar and wind energy due to, for example, competing funding priorities, political considerations or a desire to favor other energy sources, renewable or otherwise, the assets we plan to acquire in the future could become less profitable or cease to be economically viable. Such an outcome could have a material adverse effect on our ability to execute our growth strategy.

Lack of electric transmission capacity availability, potential upgrade costs to the electric transmission grid, and other systems constraints could significantly impact our ability to generate solar electricity power sales

We depend on electric interconnection and transmission facilities owned and operated by others to deliver the wholesale power we will sell from our electric generation assets to our customers. A failure or delay in the operation or development of these interconnection or transmission facilities or a significant increase in the cost of the development of such facilities could result in the loss of revenues. Such failures or delays could limit the amount of power our operating facilities deliver or delay the completion of our construction projects, as the case may be. Additionally, such failures, delays or increased costs could have a material adverse effect on our

 

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business, financial condition, results of operations and cash flows. If a region’s electric transmission infrastructure is inadequate, our recovery of wholesale costs and profits may be limited. If restrictive transmission price regulation is imposed, the transmission companies may not have a sufficient incentive to invest in expansion of transmission infrastructure. Additionally, we cannot predict whether interconnection and transmission facilities will be expanded in specific markets to accommodate competitive access to those markets. In addition, certain of our operating facilities’ generation of electricity may be curtailed without compensation due to transmission limitations or limitations on the electricity grid’s ability to accommodate intermittent electricity generating sources, reducing our revenues and impairing our ability to capitalize fully on a particular facility’s generating potential. Such curtailments could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We do not own all of the land on which our renewable energy, conventional power or electric transmission assets are located, which could result in disruption to our operations

We do not own all of the land on which our power generation or electric transmission assets are located and we are, therefore, subject to the possibility of less desirable terms and increased costs to retain necessary land use if we do not have valid leases or rights-of-way or if such rights-of-way lapse or terminate. Although we have obtained rights to construct and operate these assets pursuant to related lease arrangements, our rights to conduct those activities are subject to certain exceptions, including the term of the lease arrangement. Our loss of these rights, through our inability to renew right-of-way contracts or otherwise, may adversely affect our ability to operate our power generation and electric transmission assets.

Certain of our facilities are newly constructed or in the late stages of construction, and may not perform as expected

We completed the construction of Solana, ACT, Quadra 1, Quadra 2 and ATS during 2013 or the first half of 2014. Mojave has substantially finished construction and is in the startup and production testing stage as of the date hereof and expected to reach COD by October 2014. Additionally, Palmatir has substantially completed construction and is expected to be fully operational by June 2014. Therefore, our expectations regarding the operating performance of Mojave (which we expect will be our largest source of cash available for distribution following COD), Palmatir and newly-finished assets are based on assumptions, estimates and past experience with similar assets that Abengoa has developed and built, and without the benefit of a substantial operating history. Projections contained in this prospectus regarding our ability to pay dividends to holders of our shares assume newly-constructed facilities perform to our expectations. However, the ability of these facilities to meet our performance expectations is subject to the risks inherent in newly-constructed power generation facilities and the construction of such facilities, including, but not limited to, degradation of equipment in excess of our expectations, system failures and outages. The failure of these facilities to perform as we expect could have a material adverse effect on our business, financial condition, results of operations and cash flows and our ability to pay dividends to holders of our shares.

Some of our facilities will not have reached COD as of the date of this offering. Delays or a failure to achieve COD at all may reduce anticipated revenues from these assets, generate unexpected costs or, in extreme cases, trigger defaults in our concession or financing agreements

Mojave has substantially completed construction and COD is expected by October 2014. Unexpected technical difficulties, or the occurrence of unpredictable events, such as natural disasters or catastrophes, may delay COD or otherwise prevent us from meeting the contractual deadlines established in the Mojave PPA and/or our related financing contracts. Palmatir’s construction is substantially finished, with COD expected in June 2014. Although many of the potential causes for delay are covered under the applicable engineering, procurement and construction contract we have with Abengoa subsidiaries, any delays or failure to achieve COD could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends to holders of our shares.

 

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The generation of electric energy from renewable energy sources depends heavily on suitable meteorological conditions, and if solar or wind conditions are unfavorable, our electricity generation, and therefore revenue from our renewable energy generation facilities using our systems, may be substantially below our expectations

The electricity produced and revenues generated by a renewable energy generation facility are highly dependent on suitable solar or wind conditions, as applicable, and associated weather conditions, which are beyond our control. Furthermore, components of our system, such as mirrors, absorber tubes or blades, could be damaged by severe weather. In addition, replacement and spare parts for key components may be difficult or costly to acquire or may be unavailable. Unfavorable weather and atmospheric conditions could impair the effectiveness of our assets or reduce their output beneath their rated capacity or require shutdown of key equipment, impeding operation of our renewable assets and our ability to achieve forecasted revenues and cash flows.

We base our investment decisions with respect to each renewable generation facility on the findings of related wind and solar studies conducted on-site prior to construction or based on historical conditions at existing facilities. However, actual climatic conditions at a facility site, particularly wind conditions, may not conform to the findings of these studies and therefore, our solar and wind energy facilities may not meet anticipated production levels or the rated capacity of our generation assets, which could adversely affect our business, financial condition and results of operations and cash flows.

Our costs, results of operations, financial condition and cash flows could be adversely affected by the disruption of the fuel supplies necessary to generate power at our conventional generation facilities

Delivery of fossil fuels to fuel our conventional and some Concentrated Solar Power generation facilities is dependent upon the infrastructure, including natural gas pipelines, available to serve each such generation facility, as well as upon the continuing financial viability of contractual counterparties. As a result, we are subject to the risks of disruptions or curtailments in the production of power at these generation facilities if a counterparty fails to perform or if there is a disruption in the relevant fuel delivery infrastructure.

Risks Related to Our Indebtedness

Our indebtedness could adversely affect our ability to raise additional capital to fund our operations or pay dividends. It could also expose us to the risk of increased interest rates and limit our ability to react to changes in the economy or our industry as well as impact our cash available for distribution

As of December 31, 2013, we had approximately $2,895 million of total indebtedness under various project-level financing arrangements. Our indebtedness will increase as a result of the consolidation of Mojave. Concurrently with the completion of this offering, we will enter into a new $50 million revolving credit line with Abengoa. We do not intend to make borrowings under our new revolving facility in connection with this offering. All of our existing indebtedness is incurred at the project level, except certain debt facilities with Abengoa and third parties that will be cancelled with the proceeds of this offering. Our substantial debt could have important negative consequences on our financial condition, including:

 

   

increasing our vulnerability to general economic and industry conditions;

 

   

requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to pay dividends to holders of our shares or to use our cash flow to fund our operations, capital expenditures and future business opportunities;

 

   

limiting our ability to enter into long-term power sales or fuel purchases which require credit support;

 

   

limiting our ability to fund operations or future acquisitions;

 

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restricting our ability to make certain distributions with respect to our shares and the ability of our subsidiaries to make certain distributions to us, in light of restricted payment and other financial covenants in our credit facilities and other financing agreements;

 

   

exposing us to the risk of increased interest rates because a portion of some of our borrowings (below 10% as of the date hereof) are at variable rates of interest;

 

   

limiting our ability to obtain additional financing for working capital, including collateral postings, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and

 

   

limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have less debt.

The agreements governing our project-level financing contain financial and other restrictive covenants that limit our project subsidiaries’ ability to make distributions to us or otherwise engage in activities that may be in our long-term best interests. The project-level financing agreements generally prohibit distributions from the project entities to us unless certain specific conditions are met, including the satisfaction of certain financial ratios. In addition, the project-level financing for Mojave prohibits distributions until such facility reaches COD and the first principal repayment is made. Our inability to satisfy certain financial covenants may prevent cash distributions by the particular project(s) to us and, our failure to comply with those and other covenants could result in an event of default which, if not cured or waived, may entitle the related lenders to demand repayment or enforce their security interests, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, failure to comply with such covenants may entitle the related lenders to demand repayment and accelerate all such indebtedness. If our project-level subsidiaries are unable to make distributions, it would likely have a material adverse effect on our ability to pay dividends to holders of our shares.

Letter of credit facilities or personal guarantees to support project-level contractual obligations generally need to be renewed, at which time we will need to satisfy applicable financial ratios and covenants. If we are unable to renew our letters of credit as expected or replace them with letters of credit under different facilities on favorable terms or at all, we may experience a material adverse effect on our business, financial condition, results of operations and cash flows. Furthermore, such inability may constitute a default under certain project-level financing arrangements, restrict the ability of the project-level subsidiary to make distributions to us and/or reduce the amount of cash available at such subsidiary to make distributions to us.

In addition, our ability to arrange financing, either at the corporate level or at a non-recourse project-level subsidiary, and the costs of such capital, are dependent on numerous factors, including:

 

   

general economic and capital market conditions;

 

   

credit availability from banks and other financial institutions;

 

   

investor confidence in us, our partners and Abengoa, as our controlling shareholder;

 

   

our financial performance and the financial performance of our subsidiaries;

 

   

our level of indebtedness and compliance with covenants in debt agreements;

 

   

maintenance of acceptable project credit ratings or credit quality;

 

   

cash flow; and

 

   

provisions of tax and securities laws that may impact raising capital.

We may not be successful in obtaining additional capital for these or other reasons. Furthermore, we may be unable to refinance or replace project-level financing arrangements or other credit facilities on favorable terms or

 

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at all upon the expiration or termination thereof. Our failure, or the failure of any of our projects, to obtain additional capital or enter into new or replacement financing arrangements when due may constitute a default under such existing indebtedness and may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Potential future defaults by our subsidiaries or by Abengoa could adversely affect us

All of our subsidiaries finance project assets and significant investments, including capital expenditures typically relating to contracted assets and concessions, primarily under loan agreements and related documents which, except as noted below, require the loans to be repaid solely from the revenue of the project being financed thereby, and provide that the repayment of the loans (and interest thereon) is secured solely by the shares, physical assets, contracts and cash flow of that project company. This type of financing is usually referred to herein as “non-recourse debt” or “project financing.” As of December 31, 2013, we had $2,895 million outstanding indebtedness on a combined basis.

While the lenders under our non-recourse project financings do not have direct recourse to us or our subsidiaries (other than the project borrowers under those financings), defaults by the project borrowers under such financings can still have important consequences for us and our subsidiaries, including, without limitation:

 

   

reducing our receipt of dividends, fees, interest payments, loans and other sources of cash, since the project company will typically be prohibited from distributing cash to us and our subsidiaries during the pendency of any default;

 

   

causing us to record a loss in the event the lender forecloses on the assets of the project company; and

 

   

the loss or impairment of investors’ and project finance lenders’ confidence in us.

If we were to fail to satisfy any of our debt service obligations or to breach any related financial or operating covenants, the applicable lender could declare the full amount of the relevant indebtedness to be immediately due and payable and could foreclose on any assets pledged as collateral. Further, certain of our financing arrangements contain cross-default provisions such that a default under one particular financing arrangement in Abengoa could automatically trigger defaults under some of our financing arrangements while certain technical obligations related to the construction of our assets are still outstanding (i.e., performance guarantees). As a result, a default under any indebtedness above certain thresholds in Abengoa could result in a substantial loss to us or could otherwise have a material adverse effect on our and our subsidiaries’ ability to perform our and their respective obligations in respect of any of our debt obligations.

Any of these events could have a material adverse effect on our financial condition, results of operations or cash flows.

Maintenance, expansion and refurbishment of electric generation facilities involve significant risks that could result in unplanned power outages or reduced output

Although the facilities in our portfolio are relatively new, they may require periodic upgrading and improvement in the future. Any unexpected operational or mechanical failure, including failure associated with breakdowns and forced outages, could reduce our facilities’ generating capacity below expected levels, reducing our revenues and jeopardizing our ability to pay dividends to shareholders at forecasted levels or at all. Degradation of the performance of our solar facilities above levels provided for in the related offtake agreements may also reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may also reduce profitability.

If we make any major modifications to our conventional or renewable power generation facilities or electric transmission lines, we may be required to comply with more stringent environmental regulations, which would likely result in substantial additional capital expenditures. We may also choose to repower, refurbish or upgrade our facilities based on our assessment that such activity will provide adequate financial returns. Such facilities

 

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require time for development and capital expenditures before commencement of commercial operations, and key assumptions underpinning a decision to make such an investment may prove incorrect, including assumptions regarding construction costs, timing, available financing and future fuel and power prices. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Related to Our Relationship with Abengoa

Abengoa will be our controlling shareholder and will exercise substantial influence over Abengoa Yield and we are highly dependent on Abengoa

Abengoa will beneficially own and be entitled to vote a majority of our outstanding shares upon completion of this offering. As a result of this ownership, Abengoa will continue to have a substantial influence on our affairs and its ownership interest and voting power will constitute a majority of any quorum of our shareholders voting on any matter requiring the approval of our shareholders. Such matters include the election of directors, the adoption of amendments to our articles of associations and approval of mergers or sale of all or substantially all of our assets. This concentration of ownership may also have the effect of delaying or preventing a change in control of Abengoa Yield or discouraging others from making tender offers for our shares, which could prevent shareholders from receiving a premium for their shares. In addition, Abengoa will have the ability to appoint a majority of our directors. Abengoa may cause corporate actions to be taken even if its interests conflict with the interests of our other shareholders. See “Related Party Transactions—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest.” There can be no assurance that the interests of Abengoa will coincide with the interests of purchasers of our shares or that Abengoa will act in a manner that is in our best interests.

Furthermore, we will depend on the executive services and management support provided by or under the direction of Abengoa under the Executive Services Agreement and the Support Services Agreement. We will depend on Abengoa to provide us with our revolving credit line and maintain existing guarantees and letters of credit in our favor, under the Financial Support Agreement. If Abengoa were to fail to provide the requisite financial support, we may be unable to obtain financing from a third party on comparable terms, without undue delay or at all. Any failure to effectively support our operations, implement our strategy or provide financial support could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Abengoa or Abengoa subsidiaries currently provide support and administration services as well as operating and maintenance services at most of our facilities. Any failure by Abengoa to perform its requirements under the services arrangements, or any failure by us to identify and contract with replacement service providers, if required, could adversely affect our business or the operation of our facilities and have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be able to consummate future acquisitions from Abengoa

Our ability to grow through acquisitions depends, in part, on Abengoa’s ability to identify and present us with acquisition opportunities. Abengoa established us to own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue generating assets. Although Abengoa has agreed to grant us a right of first offer with respect to certain contracted revenue assets that Abengoa may elect to sell in the future (as described in “Related Party Transactions—Right of First Offer”), Abengoa will be under no obligation to sell or propose for consideration for acquisition any assets to us or to accept any related offer from us, and may identify other opportunities for itself and its other subsidiaries and pursue such opportunities for its or their respective accounts. Furthermore, Abengoa has no obligation to source acquisition opportunities specifically for us. There are a number of factors which could materially and adversely impact the extent to which suitable acquisition opportunities are made available from Abengoa, including:

 

   

the same professionals within Abengoa’s organization that are involved in acquisitions that are suitable for us have responsibilities within Abengoa’s broader business. Limits on the availability of such individuals will likewise result in a limitation on the availability of acquisition opportunities for us; and

 

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in addition to structural limitations, the question of whether a particular asset is suitable is highly subjective and is dependent on a number of factors, including an assessment by Abengoa relating to our liquidity position at the time, the risk profile of the asset, the consistency of the asset with our investment criteria, and whether such asset is an appropriate fit given our then current operations and other factors.

If Abengoa determines that an opportunity is not suitable for us, it may still pursue such opportunity on its own behalf, or on behalf of another Abengoa affiliate. In making these determinations, Abengoa may be influenced by factors that result in a misalignment or conflict of interest. See “—Risks Related to Our Business and the Markets in Which We Operate—We may not be able to identify or consummate any future acquisitions on favorable terms, or at all” for a description of risks associated with the identifying, evaluating and consummating acquisitions generally, including acquisitions of Abengoa ROFO Assets.

The departure of some or all of Abengoa’s employees could prevent us from achieving our objectives

We will depend on the diligence, skill and business contacts of Abengoa’s executives and personnel and the information and opportunities they generate during the normal course of their activities. Under the Executive Services Agreement, senior Abengoa managers will provide executive management services to us for up to one year following the consummation of this offering; thereafter, we expect that these executives will be directly employed by us. Our future success will depend on the continued service of these individuals, who are not obligated to remain employed with Abengoa and who are not obliged to accept direct employment with us. Abengoa has experienced departures of key professionals and personnel in the past and may do so in the future, and we cannot predict the impact that any such departures will have on our ability to achieve our objectives. The departure of a significant number of Abengoa’s professionals or a material portion of the Abengoa employees who work at any of our facilities for any reason, or the failure to appoint qualified or effective successors in the event of such departures, could have a material adverse effect on our ability to achieve our objectives.

Our organizational and ownership structure may create significant conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of holders of our minority shareholders and that may have a material adverse effect on our business, financial condition, results of operations and cash flows

Our organizational and ownership structure involves a number of relationships that may give rise to certain conflicts of interest between us and our minority shareholders, on the one hand, and Abengoa, on the other hand. Five of our initial directors, including our chairman who will have a tie-breaking vote, will be affiliated with Abengoa. Prior to the completion of this offering, we will enter into an Executive Services Agreement and a Support Services Agreement with Abengoa. Ten of our senior managers will be Abengoa senior managers who devote their time to both our company and Abengoa as needed to conduct the respective businesses pursuant to the Executive Services Agreement. Although our directors and executive officers owe fiduciary duties to our shareholders, these shared Abengoa executives will have fiduciary and other duties to Abengoa during the period before we directly employ them, which duties may be inconsistent with our best interests and those of our minority shareholders. In addition, Abengoa and its representatives, agents and affiliates will have access to our confidential information. Although some of these persons will be subject to confidentiality obligations pursuant to confidentiality agreements or implied duties of confidence, neither the Executive Services Agreement nor the Support Services Agreement contains general confidentiality provisions.

Following the completion of this offering, Abengoa will be a related party under the applicable securities laws governing related party transactions and may have interests which differ from our interests or those of our other minority shareholders, including with respect to the types of acquisitions made, the timing and amount of dividends made by Abengoa Yield, the reinvestment of returns generated by our operations, the use of leverage when making acquisitions and the appointment of outside advisors and service providers. Any material transaction between us and Abengoa (including the proposed acquisition of any Abengoa ROFO Asset) will be subject to our related party transaction policy, which will require prior approval of such transaction by a majority

 

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of the independent members of our board of directors (as discussed in “Related Party Transactions—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest”). The creation of our related party transaction approval policy may not insulate us from derivative claims related to related party transactions and the conflicts of interest described in this risk factor. Regardless of the merits of such claims, we may be required to spend significant management time and financial resources in the defense thereof. Additionally, to the extent we fail to appropriately deal with any such conflicts, it could negatively impact our reputation and ability to raise additional funds and the willingness of counterparties to do business with us, all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If Abengoa terminates the Executive Services Agreement or the Support Services Agreement, or defaults in the performance of its obligations under the agreement, we may be unable to contract with a substitute service provider on similar terms, or at all

We will rely on Abengoa to provide us with executive management for up to one year following the consummation of this offering under the Executive Services Agreement and support services on an ongoing basis under the Support Services Agreement, and we will not have independent executive management or support personnel for that interim period. Our future success depends significantly on the involvement of certain of Abengoa’s senior managers and employees, who have valuable expertise in all areas of our business. Abengoa’s ability to retain and motivate the senior managers and employees involved in the management of our business, as well as attract highly skilled employees, will significantly affect our ability to run our business successfully and to execute our growth strategy. If we were to lose access to one or more of the ten senior managers provided for under the Executive Services Agreement or, for example, valuable local managers with significant experience in the markets in which we operate, it might be difficult to appoint replacements. This could have an adverse impact on our business, financial condition, results of operations and cash flows.

The Executive Services Agreement will provide that Abengoa cannot terminate the agreement unilaterally; however, the Support Services Agreement will provide that Abengoa may terminate the agreement upon 180 days’ prior written notice of termination to us if we default in the performance or observance of any material term, condition or covenant contained in the agreement in a manner that results in material harm and the default continues unremedied for a period of 60 days after written notice of the breach is given to us. If Abengoa terminates the Support Services Agreement or defaults in the performance of its obligations under the Executive Services Agreement or Support Services Agreement, we may be unable to contract with a substitute service provider on similar terms or at all, and the costs of substituting service providers may be substantial. In addition, in light of Abengoa’s familiarity with our assets, a substitute service provider may not be able to provide the same level of service due to lack of pre-existing synergies. If we cannot locate a service provider that is able to provide us with services substantially similar to those provided by Abengoa under the Executive Services Agreement or Support Services Agreement on similar terms, it would likely have a material adverse effect on our business, financial condition, results of operation and cash flows.

Risks Related to Ownership of our Shares

We may not be able to pay a specific or increasing level of cash dividends to holders of our shares in the future

The amount of our cash available for distribution principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

 

   

the level and timing of capital expenditures we make;

 

   

the level of our operating and general and administrative expenses, including reimbursements to Abengoa for services provided to us in accordance with the Support Services Agreement;

 

   

seasonal variations in revenues generated by the business;

 

   

our debt service requirements and other liabilities;

 

 

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fluctuations in our working capital needs;

 

   

our ability to borrow funds;

 

   

restrictions contained in our debt agreements (including our project-level financing); and

 

   

other business risks affecting our cash levels.

As a result of all these factors, we cannot guarantee that we will have sufficient cash generated from operations to pay a specific or increasing level of cash dividends to holders of our shares. Furthermore, holders of our shares should be aware that the amount of cash available for distribution depends primarily on our cash flow, and is not solely a function of profitability, which is affected by non-cash items. We may incur other expenses or liabilities during a period that could significantly reduce or eliminate our cash available for distribution and, in turn, impair our ability to pay dividends to shareholders during the period. Because we are a holding company, our ability to pay dividends on our shares is limited by restrictions or limitations on the ability of our subsidiaries to pay dividends or make other distributions, such as pursuant to shareholder loans, capital reductions or other means, to us, including restrictions under the terms of the agreements governing project-level financing or legal, regulatory or other restrictions or limitations applicable in the various jurisdictions in which we operate, such as exchange controls or similar matters or corporate law limitations, any of which could change from time to time and thereby limit our subsidiaries’ ability to pay dividends or make other distributions to us. Our project-level financing agreements generally prohibit distributions to us unless certain specific conditions are met, including the satisfaction of financial ratios.

Our cash available for distribution will likely fluctuate from quarter to quarter, in some cases significantly, due to seasonality. See “Business—Seasonality.” As result, we may reduce the amount of cash we distribute in a particular quarter to establish reserves to fund distributions to shareholders in future periods for which the cash distributions we would otherwise receive from our subsidiary project companies would otherwise be insufficient to fund our quarterly dividend. If we fail to establish sufficient reserves, we may not be able to maintain our quarterly dividend with a respect to a quarter adversely affected by seasonality.

Dividends to holders of our shares will be paid at the discretion of our board of directors. Our board of directors may decrease the level of or entirely discontinue payment of dividends. For a description of additional restrictions and factors that may affect our ability to pay cash dividends, please see “Cash Dividend Policy.”

The assumptions underlying the forecasts presented elsewhere in this prospectus are inherently uncertain and subject to significant business, economic, financial, regulatory and competitive risks that could cause our actual cash available for distribution to differ materially from our forecasts

The forecasts presented elsewhere in this prospectus are based on our current portfolio of assets and were prepared using assumptions that our management believes are reasonable. See “Cash Dividend Policy—Assumptions and Considerations.” These include assumptions regarding the future operating costs of our facilities, our facilities’ future level of power generation, interest rates, administrative expenses, tax treatment of income, future capital expenditure requirements, if any, the COD of Mojave and Palmatir on schedule and to budget and the absence of material adverse changes in economic conditions or government regulations. They also include assumptions based on wind and solar resource studies that take into account meteorological conditions and on the availability of our facilities and transmission lines. The forecasts assume that no unexpected risks materialize during the forecast periods. Any one or more than one of these assumptions may prove to be incorrect, in which case our actual results of operations will be different from, and possibly materially worse than, those contemplated by the forecasts. There can be no assurance that the assumptions underlying the forecasts presented elsewhere in this prospectus will prove to be accurate. Actual results for the forecast periods will likely vary from the forecast results and those variations may be material. We make no representation that actual results achieved in the forecast periods will be the same, in whole or in part, as those forecasted herein.

 

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We are a holding company and our only material assets after completion of this offering will be our interest in our subsidiaries, upon whom we are dependent for distributions to pay dividends, taxes and other expenses

We are a holding company whose sole material assets are the ones contributed to it by Abengoa in the Asset Transfer. We do not have any independent means of generating revenue. We intend to cause our operating subsidiaries to make distributions to us in an amount sufficient to cover all applicable taxes payable and dividends, if any, declared by us. To the extent that we need funds for a quarterly cash dividend to holders of our shares or otherwise, and one or more of our operating subsidiaries is restricted from making such distributions under the terms of its financing or other agreements or applicable law and regulations or is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition and limit our ability to pay dividends to shareholders.

We have a limited operating history and as a result there is no assurance we can operate on a profitable basis

We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of operation. We cannot assure you that we will be successful in addressing the risks we may encounter, and our failure to do so could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Market interest rates may have an effect on the value of our shares

One of the factors that will influence the price of our shares will be the effective dividend yield of our shares (i.e., the yield as a percentage of the then-market price of our shares) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our shares to expect a higher dividend yield. Our inability to increase our dividend as a result of an increase in borrowing costs, insufficient cash available for distribution or otherwise could result in selling pressure on, and a decrease in, the market price of our shares as investors seek alternative investments with higher yield.

If you purchase shares sold in this offering, you will incur immediate and substantial dilution

If you purchase shares in this offering, you will incur immediate and substantial dilution, because the assumed initial public offering price of $             per share is substantially higher than the as adjusted net tangible book value per share on an as adjusted basis to give effect to the Asset Transfer. The as adjusted net tangible book value of our shares is $             per share. For additional information, see “Dilution.”

Market volatility may affect the price of our shares and the value of your investment

Following the completion of this offering, the market price for our shares is likely to be volatile, in part because our shares have not been previously publicly traded. We cannot predict the extent to which a trading market will develop or how liquid that market may become. If you purchase shares in this offering, you will pay a price that was not established in the public trading markets. The initial public offering price will be determined by negotiations between the underwriters and us. You may not be able to resell your shares above the initial public offering price and may suffer a loss on your investment. In addition, the market price of our shares may fluctuate due to the termination of the ROFO Agreement, the Executive Services Agreement, the Support Services Agreement or additions or departures of Abengoa’s key personnel, changes in market valuations of similar companies and/or speculation in the press or investment community regarding us or Abengoa. Securities markets in general may experience extreme volatility that is unrelated to the operating performance of particular companies. Any broad market fluctuations may adversely affect the trading price of our shares.

You may experience dilution of your ownership interest due to the future issuance of additional shares

We are in a capital intensive business, and may not have sufficient funds to finance the growth of our business through future acquisitions. As a result, we may require additional funds from further equity or debt

 

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financings, including tax equity financing transactions or sales of preferred shares or convertible debt, to complete future acquisitions, expansions and capital expenditures and pay the general and administrative costs of our business. In the future, we may issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of purchasers of our shares offered hereby. The potential issuance of additional shares or preferred stock or convertible debt may create downward pressure on the trading price of our shares. We may also issue additional shares or other securities that are convertible into or exercisable for our shares in future public offerings or private placements for capital-raising purposes or for other business purposes, potentially at an offering price, conversion price or exercise price that is below the offering price for our shares in this offering.

If securities or industry analysts do not publish or cease to publish research or reports about us, our business or our market, or if they change their recommendations regarding our shares adversely, the price and trading volume of our shares could decline

The trading market for our shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendations regarding our shares adversely, or provide more favorable relative recommendations about our competitors, the price of our shares would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our shares to decline.

Future sales of our shares by Abengoa may cause the price of our shares to fall

The market price of our shares could decline as a result of sales by Abengoa of such shares in the market, or the perception that these sales could occur. Abengoa has agreed to certain limitations on the ability to dispose of or hedge any of our shares, or any securities convertible into or exchangeable for our shares, for a period of time commencing on the date of this prospectus. Future sales of substantial amounts of the shares and/or equity-related securities in the public market, or the perception that such sales could occur, could adversely affect prevailing trading prices of the shares and could impair our ability to raise capital through future offerings of equity or equity-related securities. The price of the shares could be depressed by investors’ anticipation of the potential sale in the market of substantial additional amounts of shares. Disposals of shares could increase their offer in the market and depress their price.

There may not be a public market for our shares

There is currently, subject to official notice of issuance, no public market for our shares. While we have applied to list our shares on the NASDAQ Global Select Market, an active or liquid public market for our shares may not develop or be sustained. If an active trading market does not develop or is not maintained, the liquidity and market price of our shares could be negatively affected.

The trading market for our shares may be volatile and may be adversely affected by many events

The market for securities issued by issuers such as us is influenced by economic and market conditions and, to varying degrees, market conditions, interest rates, currency exchange rates and inflation rates in other countries. There can be no assurance that events in the United States, Latin America, Europe or elsewhere will not cause market volatility or that such volatility will not adversely affect the price of the shares or that economic and market conditions will not have any other adverse effect. Fluctuations in interest rates may give rise to arbitrage opportunities based upon changes in the relative value of the shares. Any trading by arbitrageurs could, in turn, affect the trading price of the shares.

 

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As a “foreign private issuer” in the United States, we are exempt from certain rules under the U.S. securities laws and are permitted to file less information with the SEC than U.S. companies

As a “foreign private issuer,” we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.

Judgments of U.S. courts may not be enforceable against us

Judgments of U.S. courts, including those predicated on the civil liability provisions of the federal securities laws of the United States, may not be enforceable in courts in the United Kingdom or other countries in which we operate. As a result, our shareholders who obtain a judgment against us in the United States may not be able to require us to pay the amount of the judgment.

There are limitations on enforceability of civil liabilities under U.S. federal securities laws

We are incorporated under the laws of England and Wales. Most of our officers and directors reside outside of the United States. In addition, a portion of our assets and the majority of the assets of our directors and officers are located outside the United States. As a result it may be difficult or impossible to serve legal process on persons located outside the United States and to force them to appear in a U.S. court. It may also be difficult or impossible to enforce a judgment of a U.S. court against persons outside the United States, or to enforce a judgment of a foreign court against such persons in the United States. We believe that there may be doubt as to the enforceability against persons in England and Wales and in Spain, whether in original actions or in actions for the enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the laws of the United States, including its federal securities laws. Because we are a foreign private issuer, our directors and officers will not be subject to rules under the Exchange Act that under certain circumstances would require directors and officers to forfeit to us any “short-swing” profits realized from purchases and sales, as determined under the Exchange Act and the rules thereunder, of our equity securities. In addition, punitive damages in actions brought in the United States or elsewhere may be unenforceable in England and Wales and in Spain.

We will incur increased costs as a result of being a publicly traded company

As a public company, we will incur additional legal, accounting and other expenses that we did not incur as a private company. In addition, SEC and NASDAQ rules impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements, which could make our shares less attractive to investors

We are an “emerging growth company,” as defined by the JOBS Act. For as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various public company

 

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reporting requirements. These exemptions include, but are not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and (ii) reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements. We could be an emerging growth company for up to five years after the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which such fifth anniversary will occur in 2019. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company prior to the end of such five-year period. The information that we provide to holders of our shares may be different than you might receive from other public reporting companies in which you hold equity interests. We cannot predict if investors will find our shares less attractive as a result of our reliance on these exemptions. If some investors find our shares less attractive as a result of any choice we make to reduce disclosure, there may be a less active trading market for our shares and the price for our shares may be more volatile.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Shareholders in certain jurisdictions may not be able to exercise their pre-emptive rights if we increase our share capital

Under our articles of association, holders of our shares generally have the right to subscribe and pay for a sufficient number of our shares to maintain their relative ownership percentages prior to the issuance of any new shares in exchange for cash consideration. Holders of shares in certain jurisdictions may not be able to exercise their pre-emptive rights unless securities laws have been complied with in such jurisdictions with respect to such rights and the related shares, or an exemption from the requirements of the securities laws of these jurisdictions is available. We currently do not intend to register the shares under the laws of any jurisdiction other than the United States, and no assurance can be given that an exemption from the securities laws requirements of other jurisdictions will be available to shareholders in these jurisdictions. To the extent that such shareholders are not able to exercise their pre-emptive rights, the pre-emptive rights would lapse and the proportional interests of such holders would be reduced.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation organized in Delaware

We are incorporated under English law. The rights of holders of our shares are governed by English law, including the provisions of the U.K. Companies Act 2006, and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations organized in Delaware. The principal differences are set forth in “Description of Share Capital—Differences in Corporate Law.”

Provisions in the U.K. City Code on Takeovers and Mergers may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders

The U.K. City Code on Takeovers and Mergers, or the Takeover Code, applies, among other things, to an offer for a public company whose registered office is in the United Kingdom and whose securities are not admitted to trading on a regulated market in the United Kingdom if the company is considered by the Panel on Takeovers and Mergers, or the Takeover Panel, to have its place of central management and control in the United Kingdom. This is known as the “residency test.” The test for central management and control under the Takeover Code is different from that used by the U.K. tax authorities. Under the Takeover Code, the Takeover Panel will

 

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determine whether we have our place of central management and control in the United Kingdom by looking at various factors, including the structure of our Board of Directors, the functions of the directors and where they are resident.

If at the time of a takeover offer the Takeover Panel determines that we have our place of central management and control in the United Kingdom, we would be subject to a number of rules and restrictions, including but not limited to the following: (1) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (2) we may not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (3) we would be obliged to provide equality of information to all bona fide competing bidders

Risks Related to Taxation

Changes in our tax position can significantly affect our reported earnings and cash flows

Changes in corporate tax rates and/or other relevant tax laws in the United Kingdom, the United States or the other countries in which our assets are located could have a material impact on our future tax rate and/or our required tax payments. Although we consider our tax provision to be adequate, the final determination of our tax liability could be different from the forecasted amount, which could have potential adverse effects on our financial condition and cash flows. In relation to the United Kingdom Controlled Foreign Company regime, or the U.K. CFC rules, we have good arguments to consider that the foreign entities held under Abengoa Yield would not be subject to the U.K. CFC rules. Changes to the U.K. CFC rules or adverse interpretations of them, could have effects on the future tax rate and/or required tax payments in Abengoa Yield. With respect to some of our projects, we must meet defined requirements to apply favorable tax treatment, such as lower tax rates or exemptions. We intend to meet these requirements in order to benefit from the favorable tax treatment; however, there can be no assurance that we will be able to comply with all of the necessary requirements in the future, or the requirements could change or be interpreted in another manner, which could give rise to a greater tax liability and which could have an adverse effect on our results of operations and cash flows.

Our future tax liability may be greater than expected if we do not utilize Net Operating Losses, or NOLs, sufficient to offset our taxable income

We expect to generate NOLs and NOL carryforwards that we can use to offset future taxable income. Based on our current portfolio of assets, which include renewable assets that benefit from an accelerated tax depreciation schedule, and subject to potential tax audits, which may result in income, sales, use or other tax obligations, we do not expect to pay significant taxes for a period of approximately ten years, with the exception of ACT in Mexico, where we expect to use existing NOLs in five to seven years.

While we expect these losses will be available to us as a future benefit, in the event that they are not generated as expected, or are successfully challenged by the local tax authorities, such as the U.S. Internal Revenue Service, or the IRS, or Her Majesty’s Revenue and Customs among others, by way of a tax audit or otherwise, or are subject to future limitations as discussed below, our ability to realize these benefits may be limited. A reduction in our expected NOLs, a limitation on our ability to use such losses or the occurrence of future tax audits may result in a material increase in our estimated future income tax liability and may negatively impact our results of operations and liquidity.

Our ability to use U.S. NOLs to offset future income may be limited

Our ability to use U.S. NOLs generated in the future could be limited if we were to experience an “ownership change” as defined under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the IRC, and similar state rules. In general, an “ownership change” would occur if our “5-percent shareholders,” as defined under Section 382 of the IRC, collectively increased their ownership in us by more than 50 percentage

 

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points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change U.S. NOLs equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurs. The long-term tax-exempt rate for April 2014 is 3.56%. Future sales of our shares by Abengoa, or sales of shares of Abengoa, as well as current or future issuances by us or Abengoa could contribute to a potential ownership change.

Distributions to U.S. Holders of our shares may be fully taxable as dividends

It is difficult to predict whether or to what extent we will generate earnings or profits as computed for U.S. federal income tax purposes in any given tax year. If we make distributions on the shares from current or accumulated earnings and profits as computed for U.S. federal income tax purposes, such distributions generally will be taxable to U.S. Holders of our shares as ordinary dividend income for U.S. federal income tax purposes. Under current law, if certain requirements are met, such dividends would be eligible for the lower tax rates applicable to qualified dividend income of certain non-corporate U.S. Holders. While we expect that a portion of our distributions to U.S. Holders of our shares may exceed our current and accumulated earnings and profits as computed for U.S. federal income tax purposes, and therefore may constitute a non-taxable return of capital to the extent of a U.S. Holder’s basis in our shares, no assurance can be given that this will occur. We intend to calculate our earnings and profits annually in accordance with U.S. federal income tax principles. See “Taxation—Material U.S. Federal Income Tax Considerations.”

If we are a passive foreign investment company for U.S. federal income tax purposes for any taxable year, U.S. Holders of our shares could be subject to adverse U.S. federal income tax consequences

If Abengoa Yield were a PFIC for any taxable year during which a U.S. Holder holds our shares, certain adverse U.S. federal income tax consequences may apply to the U.S. Holder. Abengoa Yield does not believe it was a PFIC for its most recent taxable year and does not expect to be a PFIC for U.S. federal income tax purposes for its current taxable year or in the foreseeable future. However, PFIC status depends on the composition of a company’s income and assets and the fair market value of its assets (including, among others, less than 25% owned equity investments) from time to time, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. Accordingly, there can be no assurance that Abengoa Yield will not be considered a PFIC for any taxable year.

If we were a PFIC, U.S. Holders of our shares may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements. See “Taxation—Material U.S. Federal Income Tax Considerations—Passive foreign investment company rules.”

 

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USE OF PROCEEDS

We estimate the net proceeds to us from this offering will be approximately $            million, based on an assumed public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus and after deducting underwriting commissions payable by us.

We intend to distribute all of the net proceeds from this offering, less $10 million to strengthen our liquidity position, to Abengoa, as part of the consideration paid to Abengoa in connection with the Asset Transfer.

Each $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds to us by approximately $            million, after deducting underwriting commissions payable by us, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Any increase or decrease in net proceeds would result in a corresponding increase or decrease in the amount paid to Abengoa.

The underwriters may also purchase up to an additional              shares from the selling shareholder at the public offering price, less the underwriting commissions, from the closing date of this offering to cover over-allotments, if any. We estimate that the net proceeds to the selling shareholder will be approximately $            million, after deducting underwriting commissions and assuming the exercise in full of the underwriters’ over-allotment option. We will not receive any proceeds from the exercise of the underwriters’ over-allotment option.

 

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CASH DIVIDEND POLICY

You should read the following discussion of our cash dividend policy in conjunction with “—Assumptions and Considerations” below, which includes the factors and assumptions upon which we base our cash dividend policy. In addition, you should read “Cautionary Statements Regarding Forward-Looking Statements” and “Risk Factors” for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our business.

This forecast of future operating results and cash available for distribution in future periods is based on the assumptions described below and other assumptions believed by us to be reasonable as of the date of this prospectus. However, we cannot assure you that any or all of these assumptions will be realized. These forward-looking statements are based upon estimates and assumptions about circumstances and events that have not yet occurred and are subject to all of the uncertainties inherent in making projections. This forecast should not be relied upon as fact or as an accurate representation of future results. Future results will be different from this forecast and the differences may be materially less favorable.

For additional information regarding our historical combined results of operations, you should refer to our Annual Combined Financial Statements included elsewhere in this prospectus.

General

Our Cash Dividend Policy

We intend to pay a regular quarterly dividend in U.S. dollars to our shareholders starting in the third quarter of 2014. Our quarterly dividend will initially be set at $0.2592 per share, or $1.04 per share on an annualized basis, and the amount may be changed in the future without advance notice.

We expect to pay a quarterly dividend on or about the 75th day following the expiration of each fiscal quarter to our shareholders of record on or about the 60th day following the last day of such fiscal quarter. With respect to our first dividend payable on December 15 to holders of record on December 1, assuming a closing date of                     , 2014, we intend to pay a full initial dividend of $0.2592 per share.

We have established our initial quarterly dividend level based on a targeted cash available for distribution payout ratio of 90%, after considering the cash available for distribution that we expect our projects will be able to generate, less reserves for the prudent conduct of our business (including for, among other things, dividend shortfalls as a result of fluctuations in our cash flows). Our board of directors may, by resolution, amend the cash dividend policy at any time. We intend to grow our business via improvements in our existing projects, the start of production of Mojave and through the acquisition of operational projects, which, we believe, will facilitate the growth of our cash available for distribution and enable us to increase our dividend per share over time. However, the determination of the amount of cash dividends to be paid to holders of our shares will be made by our board of directors and will depend upon our financial condition, results of operations, cash flow, long-term prospects and any other matters that our board of directors deem relevant. Our cash dividend policy reflects a basic judgment that our shareholders will be better served by distributing most of the cash distributions we receive from our project companies each quarter in the form of a quarterly dividend rather than retaining it. In addition, by providing for the provision of reserves each quarter after calculating cash available for distribution, and thereby enabling us to retain a portion of cash generated from operations, we believe we will also provide better value to our shareholders by maintaining the operating capacity of our assets and, in turn, dividend paying capacity.

Our cash available for distribution is likely to fluctuate from quarter to quarter, in some cases significantly, as a result of the seasonality of our assets, maintenance and outage schedules, among other factors. Accordingly, during quarters in which our projects generate cash available for distribution in excess of the amount necessary for us to pay our stated quarterly dividend, we may reserve a portion of the excess to fund cash distributions in

 

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future quarters. In quarters in which we do not generate sufficient cash available for distribution to fund our stated quarterly cash dividend, if our board of directors so determines, we may use retained cash flow from other quarters, as well as other sources of cash, such as net cash provided by financing activities, receipts from cash grant proceeds, or, if applicable, borrowings under our new revolving credit line or future credit facilities, to pay dividends to our shareholders. Our estimation of cash available for distribution does not include non-recurring cash generation events nor the starting cash position.

Estimate of Future Cash Available for Distribution

We primarily considered forecasted cash available for distribution in assessing the amount of cash that we expect our assets will be able to generate for the purposes of the dividends we will distribute during the forecast period. Cash available for distribution is a non-GAAP financial measure that is not required by, or presented in accordance with, IFRS as issued by IASB.

We believe that an understanding of cash available for distribution is useful to investors in evaluating our ability to pay dividends pursuant to our stated cash dividend policy. We have forecasted cash available for distribution through monthly cash projections that can actually reach the holding company per project. Nevertheless, in general we expect that “cash available for distribution” will be similar to Adjusted EBITDA generated during the period,

less:

 

   

changes in other assets and liabilities (this can have both a negative and positive impact);

 

   

non-cash revenue linked to U.S. cash grants;

 

   

minorities dividend;

 

   

cash interest paid;

 

   

principal amortization of indebtedness; and

 

   

cash taxes;

plus:

 

   

temporary financial investment interests.

We have approved a policy to distribute 90% of our cash available for distribution and our controlling shareholder has communicated to us that it supports and plans to continue supporting such policy.

Risks Regarding Our Cash Dividend Policy

We do not have any operating history as an independent company upon which to rely in evaluating whether we will have sufficient cash available for distribution and other sources of liquidity to allow us to pay dividends on our shares at our initial quarterly dividend level on an annualized basis or at all. There is no guarantee that we will pay quarterly cash dividends to our shareholders. We do not have a legal obligation to pay our initial quarterly dividend or any other dividend. While we currently intend to maintain our initial dividend following the completion of this offering and to grow our business and increase our dividend per share over time, our cash dividend policy is subject to all the risks inherent in our business and may be changed at any time as a result of certain restrictions and uncertainties, including the following:

 

   

The amount of our quarterly cash available for distribution could be impacted by restrictions on cash distributions contained in our project-level financing arrangements, which require that our project-level subsidiaries comply with certain financial tests and covenants in order to make such cash distributions. Generally these restrictions limit the frequency of permitted cash distributions to semi-annual or annual payments, and prohibit distributions unless specified debt service coverage ratios, historical and/or

 

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projected, are met. See the sub-sections entitled “—Project Level Financing” under the individual project descriptions in “Business—Our Operations”. When forecasting cash available for distribution and dividend payments we have aimed to take these restrictions into consideration, but we cannot guarantee future dividends. Additionally, we may incur debt in the future to acquire new projects, the terms of which will likely require commencement of commercial operations prior to our ability to receive cash distributions from such acquired projects. These agreements likely will contain financial tests and covenants that our subsidiaries must satisfy prior to making distributions. Should we or any of our project-level subsidiaries be unable to satisfy these covenants or if any of us are otherwise in default under such facilities, we may be unable to receive sufficient cash distributions to pay our stated quarterly cash dividends notwithstanding our stated cash dividend policy. See the “Project-Level Financing” descriptions contained in “Business—Our Operations” for a description of such restrictions.

 

   

We and our board of directors will have the authority to establish cash reserves for the prudent conduct of our business and for future cash dividends to our shareholders, and the establishment of or increase in those reserves could result in a reduction in cash dividends from levels we currently anticipate pursuant to our stated cash dividend policy. These reserves may account for the fact that our project-level cash flows may vary from year to year based on, among other things, changes in prices under offtake agreements, operational costs and other project contracts, compliance with the terms of non-recourse project-level financing including debt repayment schedules, the transition to market or recontracted pricing following the expiration of offtake agreements, working capital requirements and the operating performance of the assets. Furthermore, our board of directors may increase reserves to account for the seasonality that has historically existed in our assets’ cash flows and the variances in the pattern and frequency of distributions to us from our assets during the year.

 

   

We may lack sufficient cash to pay dividends to our shareholders due to cash flow shortfalls attributable to a number of operational, commercial or other factors, including low availability, unexpected operating interruptions, legal liabilities, costs associated with governmental regulation, changes in governmental subsidies, changes in regulation, as well as increases in our operating and/or general and administrative expenses, including existing contracts with Abengoa and its subsidiaries, principal and interest payments on our and our subsidiaries’ outstanding debt, income tax expenses, working capital requirements or anticipated cash needs at our project-level subsidiaries. See “Risk Factors” for more information on the risks to which our business is subject.

 

   

We may pay cash to our shareholders via capital reduction in lieu of dividends in some years.

 

   

Our project companies’ cash distributions to us and, as a result, our ability to pay or grow our dividends are dependent upon the performance of our subsidiaries and their ability to distribute cash to us. The ability of our project-level subsidiaries to make cash distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness, applicable corporation laws and other laws and regulations.

Our Ability to Grow our Business and Dividend

We intend to grow our business primarily through the improvement of existing assets, the COD of Mojave and the acquisition of contracted power generation assets, electric transmission lines and other infrastructure assets, which, we believe, will facilitate the growth of our cash available for distribution and enable us to increase our dividend per share over time. Our approved policy is to maximize cash distributions to shareholders and specifically to distribute 90% of our cash available for distribution. However, the final determination of the amount of cash dividends to be paid to our shareholders will be made by our board of directors and will depend upon our financial condition, results of operations, cash flow, long-term prospects and any other matters that our board of directors deems relevant.

We expect that we will rely primarily upon external financing sources, including commercial bank borrowings and issuances of debt and equity securities, to fund any future growth capital expenditures. To the extent we are unable to finance growth externally, our cash dividend policy could significantly impair our ability

 

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to grow because we do not currently intend to reserve a substantial amount of cash generated from operations to fund growth opportunities. If external financing is not available to us on acceptable terms, our board of directors may decide to finance acquisitions with cash from operations, which would reduce or even eliminate our cash available for distribution and, in turn, impair our ability to pay dividends to our shareholders. To the extent we issue additional shares to fund growth capital expenditures, the payment of dividends on those additional shares may increase the risk that we will be unable to maintain or increase our per share dividend level. Additionally, the incurrence of additional commercial bank borrowings or other debt to finance our growth would result in increased interest expense, which in turn may impact our cash available for distribution and, in turn, our ability to pay dividends to our shareholders.

For the fiscal year ended December 31, 2013, cash available for distribution was $0, as none of our assets generated any dividends or any other form of distribution during the period. Most of our assets (Solana, Mojave, Palmatir, ATS, Quadra 1 and Quadra 2) were under construction or had only been in operation for a few months, as of December 31, 2013, thus preventing any cash distribution. ATN’s and ACT’s project-level debt facilities were refinanced during the last quarter of 2013, which prevented cash distributions prior to that refinancing. Additionally, Solaben 2 and Solaben 3 reached COD during the second and fourth quarters of 2012, respectively and were prohibited by their project financing agreements from paying dividends prior to mid-2014. For the foregoing reasons, cash available for distribution in the first six months of 2014 is expected to be $0. See “Business—Our Operations” for details on project financing limitations for distributions.

Estimated Cash Available for Distribution for the Twelve Months Ending June 30, 2015 and June 30, 2016

Based upon the material assumptions described below and other assumptions that we believe to be reasonable as of the date of this prospectus, we forecast that our cash available for distribution during the twelve months ending June 30, 2015 and 2016 will be approximately $92 million and $150 million, respectively. The increase in the forecasted cash available for distribution for the twelve months ending June 30, 2016 over the twelve months ending June 30, 2015 is primarily attributable to a full twelve months of distributions from Mojave, which will have no distributions in the prior year and, to a lesser extent, the start of cash distributions from certain other projects, such as Palmatir, Quadra 1 and Quadra 2. We expect that Mojave will be our largest source of cash available for distribution following COD. This amount would be sufficient to pay our initial quarterly dividend of $0.2592 per share on all outstanding shares immediately after consummation of this offering for each quarter in the twelve months ending June 30, 2015 and the twelve months ending June 30, 2016. If our board were to decide to maintain the 90% payout ratio in the twelve month period ending June 30, 2016, based on the foregoing, our quarterly dividend would increase to approximately $0.42 per share or $1.69 on an annualized basis.

We are providing this forecast to supplement our financial statements in support of our belief that we will have sufficient cash available to allow us to pay a regular quarterly dividend on all of our outstanding shares immediately after consummation of this offering for each quarter in the twelve months ended June 30, 2015, at our initial quarterly dividend of $0.2592 per share (or $1.04 per share on an annualized basis). Please read “—Assumptions and Considerations” for further information as to the assumptions we have made for the forecast. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” for information regarding the accounting policies we have followed for the forecast.

Our forecast is a forward-looking statement and reflects our judgment as of the date of this prospectus of the conditions we expect to exist and the course of action we expect to take during the twelve months ending June 30, 2015 and the twelve months ending June 30, 2016. It should be read together with the financial statements and the accompanying notes thereto included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We believe that we have a reasonable basis for these assumptions and that our actual results of operations will approximate those reflected in our forecast, but we can give no assurance that our forecasted results will be achieved. The assumptions and estimates underlying the forecast, as described below under “—Assumptions and Considerations,” are inherently uncertain and, although we consider

 

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them reasonable as of the date of this prospectus, they are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from forecasted results, including, among others, the risks and uncertainties described in “Risk Factors.” Any of the risks discussed in this prospectus, to the extent they occur, could cause actual results of operations to vary significantly from those that would enable us to generate sufficient cash available for distribution to allow us to pay the aggregate annualized regular quarterly dividend on all outstanding shares for the twelve months ending June 30, 2015 and 2016, calculated at the initial quarterly dividend rate of $0.2592 per share per quarter (or $1.04 per share on an annualized basis). Accordingly, there can be no assurance that the forecast will be indicative of our future performance or that actual results will not differ materially from those presented in the forecast. If our forecasted results are not achieved, we may not be able to pay a regular quarterly dividend to our shareholders at our initial quarterly dividend level or at all. Inclusion of the forecast in this prospectus should not be regarded as a representation by us, the underwriters or any other person that the results contained in the forecast will be achieved.

Forecasted Financial Information

We do not as a matter of course make public projections as to future sales, earnings or other results. However, our management has prepared the prospective financial information set forth below to present the cash available for distribution during the twelve months ending June 30, 2015 and 2016. The accompanying prospective financial information was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, our expected course of action and future financial performance. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information. Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the prospective financial information. The assumptions and estimates underlying the forecasted financial information are inherently uncertain and, though considered reasonable by our management as of the date of its preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective financial information, including, among others, risks and uncertainties. See “Risk Factors.” Accordingly, there can be no assurance that the prospective results are indicative of our future performance or that actual results will not differ materially from those presented in the forecasted financial information. Inclusion of the forecasted financial information in this prospectus should not be regarded as a representation by any person that the results contained in the forecasted financial information will be achieved. We do not generally publish our business plans and strategies or make external disclosures of our anticipated financial position or results of operations. Accordingly, we do not intend to update or otherwise revise the forecasted financial information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, we do not intend to update or revise the forecasted financial information to reflect changes in general economic or industry conditions. Additional information relating to the principal assumptions used in preparing the projections is set forth below. See “Risk Factors” for a discussion of various factors that could materially affect our financial condition, results of operations, business, prospects and securities.

The statement that we believe that we will have sufficient cash available for distribution to allow us to pay the full regular quarterly dividend on all of our outstanding shares immediately after the consummation of this offering for each quarter in the twelve months ending June 30, 2015 and 2016 (based on our initial quarterly dividend rate of $0.2592 per share per quarter (or $1.04 per share on an annualized basis)) should not be regarded as a representation by us, the underwriters or any other person that we will pay such dividends. Therefore, you are cautioned not to place undue reliance on this information.

 

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The table below sets forth our forecasted cash available for distribution for the twelve months ending June 30, 2015 and 2016:

 

     Twelve months ending  
(in millions of U.S. dollars)    June 30,
2015
    June 30,
2016
 

Operating revenues

    

Total operating revenues

   $ 492      $ 576   

Operating costs and expenses

    

Costs of operations

     (119     (132

Depreciations and amortization

     (163     (174

General and administration

     (5     (5
  

 

 

   

 

 

 

Total operating costs and expenses

   $ (287   $ (310
  

 

 

   

 

 

 

Operating income

   $ 205      $ 266   

Other income/(expense)

    

Interest income

     2        2   

Interest expense

     (175     (177
  

 

 

   

 

 

 

Total other income/(expense)

   $ (173   $ (175
  

 

 

   

 

 

 

Cash distribution from unconsolidated affiliates

     18        18   

Income before income taxes

     50        109   

Income tax expense

     (3     (5

Net income

   $ 47      $ 104   

Less:

    

Interest income

     2        2   

Add:

    

Depreciation and amortization

     163        174   

Interest expense

     175        177   

Income tax expense

     3        5   

Adjusted EBITDA

   $ 386      $ 458   
  

 

 

   

 

 

 

Changes in other assets and liabilities

     (32     1   

Non-cash revenue linked to U.S. cash grants

     (25     (31

Less:

    

Minorities dividend

     20        24   

Cash interest paid

     166        165   

Principal amortization of indebtedness

     51        87   

Cash taxes

     1        2   
  

 

 

   

 

 

 

Add:

    

Temporary financial investment interests

     1        1   
  

 

 

   

 

 

 

Estimated cash available for distribution to shareholders after investing and funding activities

   $ 92      $ 150   
  

 

 

   

 

 

 

Annual dividend per ordinary share

     1.04        1.68   

Ordinary shares (in millions)

     80        80   

Aggregate annual dividend

     83        135   

Excess/(Shortfall) of cash available for distribution over aggregated annualized quarterly distributions

   $ 9      $ 15   

 

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The following tables provide a reconciliation of net income to Adjusted EBITDA by geography for the twelve months ending June 30, 2015 and 2016:

 

(in millions of U.S. dollars)    Twelve months ending June 30, 2015  
     North
America
     South
America(1)
     Europe      Corporate     Total  

Net income

   $ 44       $ 5       $ 2       $ (5   $ 47   

Less:

             

Interest income

     0         1         0         0        2   

Add:

             

Depreciation and amortization

     103         36         24         0        163   

Interest expense

     96         57         22         0        175   

Income tax expense

     0         2         1         0        3   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 243       $ 99       $ 49       $ (5   $ 386   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

 

(1)

South America includes cash distributions from unconsolidated affiliates of $18 million.

 

(in millions of U.S. dollars)    Twelve months ending June 30, 2016  
     North
America
     South
America(1)
     Europe      Corporate     Total  

Net income

   $ 101       $ 6       $ 2       $ (5   $ 104   

Less:

             

Interest income

     0         1         1         0        2   

Add:

             

Depreciation and amortization

     114         36         24         0        174   

Interest expense

     100         55         22         0        177   

Income tax expense

     0         4         1         0        5   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 314       $ 100       $ 49       $ (5   $ 458   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

 

(1)

South America includes cash distributions from unconsolidated affiliates of $18 million.

The following tables provide a reconciliation of net income to Adjusted EBITDA by business sector for the twelve months ending June 30, 2015 and 2016:

 

(in millions of U.S. dollars)    Twelve months ending June 30, 2015  
     Renewable
Energy
    Conventional
Power
     Electric
Transmission(1)
     Corporate     Total  

Net income

   $ (16   $ 67       $ 1       $ (5   $ 47   

Less:

            

Interest income

     1        0         1         0        2   

Add:

            

Depreciation and amortization

     134        0         29         0        163   

Interest expense

     82        41         52         0        175   

Income tax expense

     1        0         2         0        3   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 200      $ 108       $ 83       $ (5   $ 386   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

 

(1)

Electric Transmission includes cash distributions from unconsolidated affiliates of $18 million.

 

 

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(in millions of U.S. dollars)    Twelve months ending June 30, 2016  
     Renewable
Energy
     Conventional
Power
     Electric
Transmission(1)
     Corporate     Total  

Net income

   $ 38       $ 69       $ 3       $ (5   $ 104   

Less:

             

Interest income

     1         0         1         0        2   

Add:

             

Depreciation and amortization

     145         0         29         0        174   

Interest expense

     86         40         50         0        177   

Income tax expense

     1         0         4         0        5   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 269       $ 109       $ 85       $ (5   $ 458   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

 

(1)

Electric Transmission includes cash distributions from unconsolidated affiliates of $18 million.

Assumptions and Considerations

Set forth below are the material assumptions that we have made to demonstrate our ability to generate our estimated Adjusted EBITDA and estimated cash available for distribution for the twelve months ending June 30, 2015 and June 30, 2016. The forecast has been prepared by and is the responsibility of our management. Our forecast reflects our judgment of the conditions we expect to exist and the course of action we expect to take during the forecast period. While the assumptions disclosed in this prospectus are not all inclusive, such assumptions are those that we believe are material to our forecasted results of operations. We believe we have a reasonable basis for these assumptions. We believe that our historical results of operations will approximate those reflected in our forecast. However, we can give no assurance that our forecasted results will be achieved. There will likely be differences between our forecasted and our historical results, and those differences may be material. While we believe that the assumptions underlying the forecast are reasonable in light of management’s current expectations concerning future events, we can give no assurance that our assumptions will be realized or that we will generate cash available for distribution during the forecast periods at the levels forecasted, in which event we may not be able to pay cash dividends on our shares at our initial dividend level or at all.

Assumptions and estimates underlying the forecast are inherently uncertain and our future operating results are subject to a wide variety of risks and uncertainties, including significant business, economic and competitive risks and uncertainties described under the headings “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements” elsewhere in this prospectus.

 

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The following table presents the forecasted Adjusted EBITDA and cash available for distribution by geography and business sector for the twelve months ending June 30, 2015 and June 30, 2016 (in millions):

 

(in millions of U.S. dollars)    Twelve months ending  
     June 30, 2015     June 30, 2016  
     Adjusted
EBITDA
    Estimated
Cash
Available
for
Distribution
    Adjusted
EBITDA
    Estimated
Cash
Available
for
Distribution
 

Split by Geography

        

North America

   $   243      $   28      $   314      $ 95   

South America(1)

     99        46        100        50   

Europe

     49        23        49        10   

Corporate

     (5     (5     (5     (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 386      $ 92      $ 458      $   150   
  

 

 

   

 

 

   

 

 

   

 

 

 

Split by Business sector

        

Renewable Energy

   $ 200      $ 31      $ 269      $ 95   

Conventional Power

     108        19        109        19   

Electric Transmission(1)

     83        46        85        41   

Corporate

     (5     (5     (5     (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 386      $ 92      $ 458      $ 150   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Includes cash distributions from unconsolidated affiliates of $18 million.

Potential Risks

Our business is exposed to numerous risks that could have a material adverse effect on our business, financial condition, results of operations or cash available for distribution. However, we have assumed that no such risks will materialize for the purposes of preparing the forecast. Nevertheless, when we have estimated dividends to be paid, we have used a 90% payout ratio for the twelve months ending June 30, 2015 and June 30, 2016. For a discussion of the important factors that could cause actual results to differ materially from our forecast, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this prospectus.

Initial Public Offering

The forecast assumes that the proceeds of this offering will be used as described in “Use of Proceeds” elsewhere in this prospectus and that in connection with the completion of this offering, the other transactions contemplated upon under the heading “Summary—Asset Transfer” will have been consummated (other than the exercise by the underwriters of their option to purchase additional shares).

Our Projects and Investment

The forecast assumes that our projects and investment will be comprised, during the relevant periods, of the projects set forth in the table under “Business—Our Operations” and our preferred equity investment in ACBH. All projects are currently in operation, with the exception of Palmatir and Mojave, which have both substantially completed construction. We expect to reach COD of Palmatir by June 2014 and COD of Mojave by October 2014 and our forecast assumes we reach COD by these dates. Although making acquisitions is part of our strategy, we have assumed that we will not make any further acquisitions during the forecasted period.

 

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Asset assumptions

Renewable Energy Assets

Revenues and expenses reflect the terms specified in the fixed-priced (including, in the case of Solana, a yearly fixed tariff increase) offtake agreements for 100% of energy production or, in the case of our Spanish assets (Solaben 2 and Solaben 3), a regulated revenue for 100% of energy production (see “Business—Our Operations—Renewable Energy—Solaben 2 and Solaben 3” for additional information). Our forecast assumes production based on solar and wind resource assessments of a 1-year P-50 output probability for each asset adjusted by our experience in typical ramp-up periods. Production based on a 1-year P-50 output probability is defined as the output level that has a greater than 50% probability of being exceeded in any given year. Our forecast for the solar facilities assumes an EBITDA of approximately $133 per MWh for the twelve months ending June 30, 2015; an EBITDA of approximately $145 per MWh for the twelve months ending June 30, 2016; an average capacity factor of approximately 24.0% for the twelve months ending June 30, 2015; and an average capacity factor of approximately 30.2% for the twelve months ending June 30, 2016. Our forecast for our wind facility assumes an EBITDA of approximately $90 per MWh for the twelve months ending June 30, 2015; an EBITDA of approximately $89 per MWh for the twelve months ending June 30, 2016; and an average capacity factor of 39.8% for the twelve months ending June 30, 2015 and 2016.

Conventional Power Asset

Revenues and expenses reflect the terms specified in the Pemex Conversion Services Agreement under which ACT is required to deliver all of the plant’s thermal and electrical output to the Nuevo Pemex Gas Processing Facility. The price is fixed and will be adjusted annually, part of it according to inflation and part according to a mechanism agreed in the contract that on average over the life of the contract reflects expected inflation. Our forecast assumes an average EBITDA margin of approximately 80%. The Conversion Services Agreement requires Pemex to supply, free of charge, the facility with the fuel and water necessary to operate the Cogeneration Plant and produce electrical energy and steam requested by the Pemex Purchasers based on the expected levels of efficiency. See “Business—Our Operations—Conventional Power—Abengoa Cogeneracion Tabasco” for additional information.

Transmission Lines Assets

Revenues and expenses for electric transmission assets reflect fixed price concession agreements with inflation adjustment mechanisms and negotiated and/or regulated rates independent from the effective utilization of the transmission lines and substations related to the projects. Our forecast assumes an EBITDA margin of approximately 85%.

Total Operating Revenue

We estimate that we will generate total operating revenue of $492 million for the twelve months ending June 30, 2015 and $576 million for the twelve months ending June 30, 2016, compared to $210.9 million for the twelve months ended December 31, 2013. This increase in our forecasted periods from the historical period is primarily attributed to the contributions from several assets that started or are expecting to start operations in late 2013 or 2014, including Solana, Mojave, ATS, Quadra 1, Quadra 2 and Palmatir. The increase in the forecast period for the twelve months ending June 30, 2016 over the twelve months ending June 30, 2015 is primarily attributed to a full twelve months of generation from Mojave.

Cost of Operations

We estimate that we will incur a cost of operations expense of $119 million for the twelve months ending June 30, 2015 and $132 million for the twelve months ending June 30, 2016, compared to $52 million for the

 

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twelve months ended December 31, 2013. This increase in our forecasted period ending June 30, 2015 from the historical period is primarily attributed to the contributions from projects that started operations in late 2013 or early 2014. The increase in the forecast period for the twelve months ending June 30, 2016 over the twelve months ending June 30, 2015 is primarily attributed to a full twelve months of generation from Mojave.

Depreciation and Amortization

We estimate that we will incur depreciation and amortization expense of $166 million for the twelve months ending June 30, 2015 and $177 million for the twelve months ending June 30, 2016, compared to $47 million for the twelve months ended December 31, 2013. This increase in our forecasted periods from the historical period is primarily attributed to the contributions from projects that started operations in late 2013 or early 2014 and the commencement of operations at Mojave. Forecasted depreciation and amortization expense reflects management’s estimates, which are based on consistent average depreciable asset lives and depreciation methodologies under IFRS.

General and Administrative Expenses

We estimate that we will incur general and administrative expenses, or G&A expenses, of $4.5 million for the twelve months ending June 30, 2015 and $4.6 million for the twelve months ending June 30, 2016. G&A expenses include certain shared services and administrative expenses, including our services payments to Abengoa under the Executive Services Agreement and the Support Services Agreement and specifically for the forecasts, together with the aforementioned expenses, and certain costs associated with being a public company.

Capital Expenditures

We expect our maintenance capital and operating expenditures to be minimal since they are generally limited by O&M agreements.

Any growth capital expenditures, such as new asset acquisitions, will be funded through retained cash or external financing sources (which may be debt or equity), and will not affect our cash available for distribution forecast.

Financing and Other

We estimate that interest expense will be $175 million for the twelve months ending June 30, 2015 and $177 million for the twelve months ending June 30, 2016, compared to $123.8 million for the twelve months ended December 31, 2013. The increase is primarily attributed to additional indebtedness incurred to fund the construction of Mojave. Forecasted interest expense is based on the following assumptions:

 

   

We estimate that our net debt level will be approximately $3.4 billion as of June 30, 2015 and $3.3 billion as of June 30, 2016; and

 

   

We estimate that our borrowing costs will average 5.2% and 5.4% for the twelve months ending June 30, 2015 and June 30, 2016, respectively.

We estimate that principal amortization of indebtedness will be $51 million for the twelve months ending June 30, 2015 and $87 million for the twelve months ending June 30, 2016. The increase is primarily attributed to Mojave.

On November 14, 2013, Abengoa finalized its application for cash grant proceeds on behalf of Solana under the American Recovery and Reinvestment Act of 2009 Section 1603 (Cash Grant Program), or the 1603 Cash Grant Program, which provides a cash payment from the federal government in lieu of ITCs for eligible renewable generation sources, and will finalize its application under the same 1603 Cash Grant Program on

 

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behalf of Mojave by December 2014 or earlier. Based on recent estimates announced by the U.S. Office of Management and Budget, or OMB, for fiscal year 2014, we estimate a 7.2% reduction for awards. Assuming receipt of proceeds under the 1603 Cash Grant Program, or 1603 Cash Grant Proceeds, after giving effect to sequestration, we estimate that a portion of such proceeds will be used to pay down the amount outstanding under the cash grant bridge loan. Any remaining amount of the 1603 Cash Grant Proceeds, after giving effect to the sequestration, will be received by us.

As we classify 1603 Cash Grant Proceeds as one-time items, we have excluded the excess proceeds distributable to us from our forecasted cash available for distribution. We intend to retain such excess proceeds for general corporate purposes and to potentially fund future acquisitions of assets (whether Abengoa ROFO Assets or otherwise).

Exchange Rates

The forecast assumes that the average exchange rate between the U.S. dollar and the Euro will be approximately €1: U.S.$1.35 and €1: U.S.$1.36 for the twelve months ending June 30, 2015 and June 30, 2016, respectively.

Significant Accounting Policies

In preparing the forecast, we have applied the accounting policies used in the preparation of our financial statements shown elsewhere in this prospectus. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the notes to our financial statements included elsewhere in this prospectus.

Regulatory, Industry and Economic Factors

Our estimated results of operations for the forecasted period are based on the following assumptions related to regulatory, industry and economic factors:

 

   

no material nonperformance or credit-related defaults by customers, suppliers, Abengoa Concessions, S.L. or any of our commercial customers;

 

   

no new or material amendments to United States (federal, state or local), UK, Mexican, Peruvian, Chilean, Brazilian, Uruguayan, Spanish or any other laws or regulations, or interpretation or application of existing laws or regulation, that in either case will be materially adverse to our business or to the business of our suppliers, Abengoa Concessions, S.L. or any of our commercial customers or the ability of our subsidiaries to pay dividends or make other distributions to us;

 

   

no material adverse effects to our business, industry or the business of our suppliers, Abengoa Concessions or any of our commercial customers on account of natural disasters;

 

   

no material adverse change resulting from supply disruptions or reduced demand for electricity; and

 

   

no material adverse changes in market, regulatory and overall economic conditions.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and combined capitalization as of December 31, 2013:

 

   

on a historical basis;

 

   

as adjusted to give effect to (i) the transfer of the preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines (see “Summary—Asset Transfer”), which is not included in the historical financial information and (ii) the contribution of certain related party loans and repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of the offering. See “Unaudited Pro Forma Combined Financial Information”; and

 

   

as further adjusted to give effect to the offering and the use of proceeds set forth under the heading “Use of Proceeds.”

You should read the following table in conjunction with the sections entitled “Use of Proceeds,” “Selected Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Information” and our Annual Combined Financial Statements included elsewhere in this prospectus.

 

     As of December 31, 2013(1)  
(in millions of U.S. dollars)    Historical      As
Adjusted(2)
     As Further
Adjusted(3)
 

Cash and cash equivalents

   $ 357.7       $ 172.7       $ 182.7   

Short-term financial investments

     266.4         284.8         284.8   
  

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents and short-term financial investments

     624.1         457.5         467.5   
  

 

 

    

 

 

    

 

 

 

Borrowings

     2,786.1         2,690.4         2,690.4   

Notes and bonds

     108.6         108.6         108.6   
  

 

 

    

 

 

    

 

 

 

Non-recourse project financing (long- and short-term)

     2,894.7         2,799.0         2,799.0   
  

 

 

    

 

 

    

 

 

 

Total equity

     1,287.2         1,900.3         1,910.3   

Total capitalization

   $ 4,181.9       $ 4,699.3       $ 4,709.3   
  

 

 

    

 

 

    

 

 

 

 

(1)

We have prepared the information presented in the “as adjusted” and “as further adjusted” columns for illustrative purposes only. The information presented in the “as adjusted” and “as further adjusted” columns addresses pro forma situations and, therefore, does not represent our actual financial position or results. Consequently, such information may not be indicative of our total capitalization as of the date of this prospectus. Investors are cautioned not to place undue reliance on this pro forma information.

(2)

As adjusted to give effect to the transfer of a preferred instrument in ACBH and to the repayment of debt held by General Electric of $95.7 million and reduction of equity by $89 million that we expect to occur prior to the consummation of the offering. We estimate the fair value of the preferred equity investment in ACBH to be $263 million, of which $18.4 million has been classified as a short-term financial investment, as that amount is expected to be collected in the next twelve months. In addition, prior to the consummation of this offering, we expect to capitalize debt with related parties of $439.4 million.

(3)

As further adjusted to give effect to $10 million of proceeds from the offering added to cash and cash equivalents.

 

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DILUTION

Dilution is the amount by which the offering price per share paid by the purchasers of shares sold in this offering will exceed the pro forma net tangible book value per share. Pro forma net tangible book value per share as of a particular date represents the amount of our total tangible assets (which excludes intangible assets from pro forma combined assets) less pro forma combined liabilities divided by the number of shares outstanding as of that date. See “Unaudited Pro forma Combined Financial Information.”

Dilution Information

As of December 31, 2013, our pro forma combined net tangible value was $(3,253.7) million or $             per share. After deducting underwriting fees and commissions, purchasers of our shares in this offering will experience an immediate dilution in net tangible book value per share of $             per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares sold in the offering and the pro forma combined net tangible book value per share immediately after the offering of the shares. The following table illustrates this per share dilution:

 

Initial public offering price

   $                

Pro forma combined net tangible book value per share as of December 31, 2013

  

Increase in net tangible book value per share attributable to existing investors

  
  

 

 

 

Dilution per share to new investors

   $     
  

 

 

 

If the underwriters exercise their option to purchase additional shares in full, the net tangible book value per share after giving effect to the offering would be $             per share. This represents an increase in net tangible book value of $             per share to our existing shareholder, Abengoa, and dilution in net tangible book value of $             per share to purchasers in this offering.

The following table sets forth the number of shares (as applicable) purchased, the total consideration paid, or to be paid to us, and the average price per share paid, or to be paid, by our existing shareholder immediately and by the new investors, at the initial public offering price of $             per share, before deducting underwriting fees and commissions.

 

     Shares Purchased    Total Consideration     
     Number    Percent    Amount    Percent    Average Price
per Share
               (in $)         (in $)

Existing shareholder (Abengoa)(1)

              

New investors in this offering

              
  

 

  

 

  

 

  

 

  

 

Total

              
  

 

  

 

  

 

  

 

  

 

 

(1)

The assets contributed by Abengoa in the Asset Transfer will be recorded at historical cost. The book value of the consideration to be provided by Abengoa in the Asset Transfer as of December 31, 2013 was approximately $             million.

If the initial public offering price were to increase or decrease by $1.00 per share, then dilution in net tangible book value per share would equal $             and $            , respectively.

Supplemental Dilution Information

For the reasons set forth below, we believe that it is useful for investors that we present supplemental dilution information that does not exclude intangible service concession agreements from the calculation of pro forma combined net tangible book value and pro forma combined net tangible book value per share. We refer to these measures which have been calculated to include intangible service concession agreements, as supplemental pro forma combined net tangible book value and supplemental pro forma combined net tangible book value per share.

 

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Some of our service concession agreements are accounted for as intangible assets in accordance with IFRIC 12, representing the right to future cash flows under existing concession arrangements, for a net amount of $3,695.1 million as of December 31, 2013 (see Notes 1, 2, 5, 10 and 18 and Appendix III to our Annual Combined Financial Statements) and $5,154.0 million on a pro forma basis as of December 31, 2013. Contracted concessional assets should be contemplated in the same way for calculations of “net tangible book value,” irrespective of whether they are recorded as financial assets or intangible assets for accounting purposes. Contracted concessional assets are our productive assets, which constitute the value of our company and the recovery of the book value of these assets is not subject to significant uncertainty or illiquidity. As a result, management believes that it is appropriate to include intangible service concession agreements in the calculation of pro forma combined net tangible book value and pro forma combined net tangible book value per share.

Had combined pro forma net tangible book value and pro forma combined net tangible book value per share been calculated so as to include intangible service concession agreements in these calculations, supplemental pro forma combined net tangible book value as of December 31, 2013 would have been $1,900.3 million, or $             per share. Furthermore, following the sale by us of shares in the offering at the initial public offering price of $             per share and the receipt of the net proceeds of $             million after deducting the underwriting discounts and commissions, supplemental pro forma combined net tangible book value as of December 31, 2013 as adjusted, would have been $             per share. This would have represented an immediate increase in supplemental pro forma combined net tangible book value to existing stockholders of $             per share and an immediate dilution to new investors of $             per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares sold in the offering and supplemental combined net tangible book value per share, as adjusted for the offering of the shares. The following table illustrates this per share dilution:

 

Initial public offering price

   $                

Pro forma combined net tangible book value per share as of December 31, 2013

  

Increase in net tangible book value per share attributable to existing investors

  

Supplemental pro forma combined net tangible book value per share, as adjusted for this offering

  
  

 

 

 

Dilution per share to new investors

   $     
  

 

 

 

 

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information sets forth the unaudited pro forma combined income statement of Abengoa Yield for the year ended December 31, 2013 and the year ended December 31, 2012 as well as the unaudited pro forma combined statement of financial position of Abengoa Yield as of December 31, 2013 to give effect to the consolidation of Mojave, to the transfer of a preferred equity investment in ACBH, to the contribution of certain related party loans and to the repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of this offering.

Unaudited pro forma combined financial information has been derived from, and should be read in conjunction with the Annual Combined Financial Statements of our accounting predecessor as of and for the year ended December 31, 2013 and for the year ended December 31, 2012 prepared in accordance with IFRS as issued by the IASB, included elsewhere in this prospectus.

We have included the unaudited pro forma combined financial information to illustrate the following, on a pro forma basis:

 

  (a)

The consolidation of Mojave Solar, LLC, once we assume control over Mojave Solar, LLC, which is expected to occur when Mojave achieves COD. Mojave is currently recorded as an associate under the equity method in our Annual Combined Financial Statements. The entry into operation of Mojave, and thereby its full consolidation, is a highly probable event that will have a significant impact on our total assets and financial position. Therefore, such disclosure is considered material for investors.

 

  (b)

The transfer of a preferred equity investment in ACBH, a Brazilian company that owns 15 electric transmission lines in Brazil (as described in “Business—Our Operations—Exchangeable Preferred Equity Investment in Abengoa Concessoes Brasil Holding”) which is not included in the historical combined financial statements as part of the Asset Transfer because such preferred equity investment was not made during the period covered by such financial statements.

 

  (c)

The contribution of certain related party loans and the repayment of debt to third parties and reduction of equity that have occurred or we expect to occur prior to the consummation of this offering.

We have elected to account for the Asset Transfer, which includes the assets mentioned above, using the predecessor values, given that these will be transactions between entities under common control. Any difference between the consideration given and the aggregate book value of the assets and liabilities of the acquired entities as of the date of the transaction will be reflected as of adjustment to equity. We present herein pro forma income statements for the years ended December 31, 2013 and 2012, which are the same periods included in the Annual Combined Financial Statements.

The events above are described in more detail in notes 1 to 3 to this “Unaudited Pro Forma Combined Financial Information.”

We have assumed that the above transactions have been completed on:

 

   

January 1, 2013 for the purpose of presenting the Unaudited Pro Forma Combined Income Statement for the year ended December 31, 2013.

 

   

January 1, 2012 for the purpose of presenting the Unaudited Pro Forma Combined Income Statement for the year ended December 31, 2012.

 

   

December 31, 2013 for the purpose of presenting the Unaudited Pro Forma Combined Statement of Financial Position as of December 31, 2013.

The unaudited pro forma combined financial information is presented for illustrative purposes only and reflects estimates and certain assumptions made by our management that are considered reasonable under the

 

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circumstances as of the date of this prospectus and which are based on the information available at the time of the preparation of the unaudited pro forma combined financial information. Actual adjustments may differ materially from the information presented herein. The unaudited pro forma combined financial information does not purport to represent what our combined income statement and combined statement of financial position would have been if the relevant transactions had occurred on the dates indicated and is not intended to project our consolidated results of operations or consolidated financial position for any future period or date.

We have calculated earnings per share assuming a total of 80,000,000 shares outstanding after the consummation of this offering. Since our predecessor is a combination of entities under common control of Abengoa and did not have any share capital as of December 31, 2013 and 2012, we have not calculated earnings per share on an historical basis.

Unaudited Pro Forma Combined Income Statement for the year ended December 31, 2013

 

     Historical
combined

information
    Pro Forma
adjustment

for Mojave
consolidation(1)
    Pro Forma
adjustment for
the preferred
shares of
ACBH(2)
     Pro Forma
adjustments
for
repayments(3)
     Pro Forma
Abengoa
Yield
 
     (in millions of U.S. dollars)  

Revenue

     210.9        —          —           —           210.9   

Other operating income

     379.6        —          —           —           379.6   

Raw materials and consumables used

     (8.7     —          —           —           (8.7

Employee benefit expenses

     (2.4     —          —           —           (2.4

Depreciation, amortization, and impairment charges

     (46.9     —          —           —           (46.9

Other operating expenses

     (420.9     (0.1     —           —           (421.0
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Operating Profit/(loss)

   $ 111.6      $ (0.1     —           —         $ 111.5   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Financial income

     1.2        —          18.4            19.6   

Financial expenses

     (123.8     (0.1     —           37.6         (86.3

Net exchange differences

     (0.9     —          —           —           (0.9

Other financial income/expenses, net

     (1.7     0.3        —           —           (1.4
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Financial expense, net

   $ (125.2   $ 0.1      $ 18.4       $ 37.6       $ (69.1

Share of (loss)/profit of associates carried under the equity method

   $ —          —          —           —         $ —     

Profit/(Loss) before income tax

   $ (13.6   $ —        $ 18.4       $ 37.6       $ 42.4   

Income tax

     11.8        —          —           —           11.8   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Profit/(Loss) for the year

   $ (1.8   $ 0.1      $ 18.4       $ 37.6       $ 54.2   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Profit attributable to non-controlling interests

     (1.6     —          —           —           (1.6
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Profit/(Loss) for the year attributable to the combined group

   $ (3.4   $ 0.1      $ 18.4       $ 37.6       $ 52.6   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Number of ordinary shares outstanding (millions)

               80.0   

Earnings per share (U.S.$ per share)

             $ 0.657   

 

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Unaudited Pro Forma Combined Income Statement for the year ended December 31, 2012

 

    Historical
combined

information
    Pro Forma
adjustment

for Mojave
consolidation(1)
    Pro Forma
adjustment for
the preferred
shares of
ACBH(2)
    Pro Forma
adjustments
for
repayments(3)
    Pro Forma
Abengoa
Yield
 
    (in millions of U.S. dollars)  

Revenue

    107.2        —          —          —          107.2   

Other operating income

    560.4        —          —          —          560.4   

Raw materials and consumables used

    (4.3     —          —          —          (4.3

Employee benefit expenses

    (1.8     —          —          —          (1.8

Depreciation, amortization, and impairment charges

    (20.2     —          —          —          (20.2

Other operating expenses

    (573.5     (0.4     —          —          (573.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Profit/(loss)

  $ 67.7      $ (0.4     —          —        $ 67.4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial income

    0.7        —          18.4          19.1   

Financial expenses

    (64.1     —          —          10.2        (53.9

Net exchange differences

    0.4        —          —          —          0.4   

Other financial income/expenses, net

    (0.2     —          —          —          (0.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial expense, net

  $ (63.2     —        $ 18.4      $ 10.2      $ (34.6

Share of (loss)/profit of associates carried under the equity method

  $ (0.4     —          —          —        $ (0.4

Profit/(Loss) before income tax

  $ 4.2      $ (0.4   $ 18.4      $ 10.2      $ 32.4   

Income tax

    (4.0     —          —          —          (4.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit/(Loss) for the year

  $ 0.1      $ (0.4   $ 18.4      $ 10.2      $ 28.4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit attributable to non-controlling interests

    1.2        —          —          —          1.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit/(Loss) for the year attributable to the combined group

  $ 1.3      $ (0.4   $ 18.4      $ 10.2      $ 29.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Number of ordinary shares outstanding (millions)

            80.0   

Earnings per share (U.S.$ per share)

          $ 0.369   

Unaudited Pro Forma Combined Statement of Financial Position as of December 31, 2013

 

     Historical
Combined
Information
     Pro Forma
adjustments
for Mojave
consolidation(1)
    Pro Forma
adjustments
for the
preferred
shares of
ACBH(2)
     Pro Forma
adjustments
for
repayments(3)
    Abengoa
Yield Pro
Forma
 
     (in millions of U.S. dollars)  

Non-current assets

            

Contracted concessional assets

     4,418.1         1,458.9        —           —          5,877.0   

Investments carried under the equity method

     387.3         (381.2     —           —          6.1   

Financial investments

     28.9         11.1        244.6         —          284.5   

Deferred tax assets

     52.8         —          —           —          52.8   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Non-Current Assets

   $ 4,887.1       $ 1,088.8      $ 244.6         —        $ 6,220.5   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Current assets

            

Inventories

     5.2         —          —           —          5.2   

Clients and other receivables

     97.6         1.6        —           —          99.2   

Financial investments

     266.4         20.3        18.4         —          305.0   

Cash and cash equivalents

     357.7         0.5        —           (185.0     173.2   

Total Current Assets

     726.9         22.4        18.4         (185.0     582.7   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Assets

   $ 5,614.0       $ 1,111.2      $ 263.0         (185.0     6,803.2   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     Historical
Combined
Information
     Pro Forma
adjustments
for Mojave
consolidation(1)
     Pro Forma
adjustments
for the
preferred
shares of
ACBH(2)
     Pro Forma
adjustments
for
repayments(3)
    Abengoa
Yield Pro
Forma
 
     (in millions of U.S. dollars)  

Equity and Liabilities

             

Total Equity

   $ 1,287.2       $ —         $ 263.0       $ 350.1        1,900.3   

Non-current liabilities

             

Long-term non-recourse (project financing)

     2842.4         791.0         —           (95.7     3,537.7   

Grants and other liabilities

     650.9         262.7         —           —          913.6   

Related parties

     492.5         —           —           (439.4     53.1   

Derivative liabilities

     44.2         —           —           —          44.2   

Deferred tax liabilities

     21.8         —           —           —          21.8   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Non-Current Liabilities

   $ 4,051.8       $ 1,053.7       $ —         $ (535.1   $ 4,570.4   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Current Liabilities

             

Short-term non-recourse (project financing)

     52.4         1.2         —           —          53.6   

Trade payables and other current liabilities

     204.0         56.3         —           —          260.3   

Income and other tax payables

     18.6         —           —           —          18.6   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Current Liabilities

   $ 275.0       $ 57.5       $ —         $ —        $ 332.5   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Equity and Liabilities

   $ 5,614.0       $ 1,111.2       $ 263.0       $ (185.0     6,803.2   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1)

Reflects the impact of consolidating Mojave Solar LLC, the company that holds our Mojave project, which is recorded under the equity method during its construction period. We have derived the pro forma adjustments in the pro forma combined income statement for Mojave’s consolidation from Mojave’s income statement for the year ended December 31, 2013 and the year ended December 31, 2012; we have not made any adjustments to reflect the construction in progress performed by related parties in 2013 and 2012 because Mojave will be operational when it is consolidated. Mojave is expected to enter into operation during 2014 and will be fully consolidated once we obtain control over Mojave Solar LLC.

We reassess whether or not we control an investee when facts and circumstances indicate that there are changes to the elements that determine control (power over the investee, exposition to variable returns of the investee and ability to use its power to affect its returns). We concluded that during the construction phase of Mojave all the relevant decisions were subject to the control and approval of a third party. As a result, we did not have control over Mojave during the construction period. IFRS 10 (B80) provides that control requires a continuous assessment and that we shall reassess if it controls an investee if facts and circumstances indicate that there are changes to the elements of control. Once Mojave enters into operation, the decision-making process will change, the investee will be controlled and it will be fully consolidated. Because during the construction period the assets were included under the scope of IFRIC 12, we estimate that the book value of consolidated assets and liabilities will be similar to its fair value.

(2)

Reflects a preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines. This investment is not reflected in our historical combined financial statements; as a result it has been included as an adjustment in the unaudited pro forma combined financial statements. We estimate the expected annual dividend to be $18.4 million, and we estimate the expected fair value of this instrument to be $263 million.

(3)

Reflects the contribution of certain loans with related parties of $439.4 million as of December 31, 2013 ($164.0 million as of December 31, 2012) and the purchase of the 15% interest in ACT held by General Electric, and a preferred interest in ACT also held by General Electric which is considered debt from an accounting perspective given the characteristics of the investment. This debt amounted to $95.7 million as of December 31, 2013 ($66.7 million as of December 31, 2012) and reduction of equity for an amount of $89.3 million. The acquisition of General Electric’s interests occurred on March 21, 2014.

 

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SELECTED FINANCIAL INFORMATION

The selected combined financial information as of and for the years ended December 31, 2013 and 2012, and as of January 1, 2012, is not intended to be an indicator of our financial condition or results of operations in the future. You should review such selected combined financial information together with our Annual Combined Financial Statements and notes thereto, included elsewhere in this prospectus.

The following tables should be read in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Annual Combined Financial Statements and related notes included elsewhere in this prospectus.

Combined Income Statement

 

(in millions of U.S. dollars)    Year ended December 31,  
     2013     2012  

Operating revenues and costs

    

Revenue

   $ 210.9      $ 107.2   

Other operating income

     379.6        560.4   

Raw materials and consumables used

     (8.7     (4.3

Employee benefit expense

     (2.4     (1.8

Depreciation, amortization and impairment charges

     (46.9     (20.2

Other operating expenses

     (420.9     (573.6
  

 

 

   

 

 

 

Operating profit

   $ 111.6      $ 67.7   
  

 

 

   

 

 

 

Finance income

     1.2        0.7   

Finance expense

     (123.8     (64.1

Net exchange differences

     (0.9     0.4   

Other financial income/(expense), net

     (1.7     (0.2
  

 

 

   

 

 

 

Finance expense, net

   $ (125.2   $ (63.2
  

 

 

   

 

 

 

Share of (loss)/profit of associates carried under the equity method

     —          (0.4
  

 

 

   

 

 

 

Profit before income tax

   $ (13.6   $ 4.2   
  

 

 

   

 

 

 

Income tax benefit/(expense)

     11.8        (4.0
  

 

 

   

 

 

 

Profit/(loss) for the year

   $ (1.8   $ 0.1   
  

 

 

   

 

 

 

Profit/(loss) attributable to non-controlling interest

     (1.6     1.2   
  

 

 

   

 

 

 

Profit/(loss) for the year attributable to the combined group

   $ (3.4   $ 1.3   
  

 

 

   

 

 

 

 

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Table of Contents

Combined Statement of Financial Position

 

(in millions of U.S. dollars)    As of December 31,      As of January 1,  
     2013      2012      2012  

Non-current assets:

        

Contracted concessional assets

   $  4,418.1       $  2,058.9       $  1,546.8   

Investments in associates carried under the equity method

     387.3         734.1         180.2   

Financial investments and other

     28.9         13.7         9.4   

Deferred tax assets

     52.8         60.2         44.1   
  

 

 

    

 

 

    

 

 

 

Total non-current assets

   $ 4,887.1       $ 2,866.9       $ 1,780.5   
  

 

 

    

 

 

    

 

 

 

Current assets:

        

Inventories

   $ 5.2       $ —         $ —     

Clients and other receivables

     97.6         106.1         124.8   

Financial investments

     266.4         127.6         101.7   

Cash and cash equivalents

     357.7         97.5         40.2   
  

 

 

    

 

 

    

 

 

 

Total current assets

   $ 726.9       $ 331.2       $ 266.7   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 5,614.0       $ 3,198.1       $ 2,047.2   
  

 

 

    

 

 

    

 

 

 

Total equity

     1,287.2         1,139.8         583.9   

Non-current liabilities:

        

Long-term non-recourse project financing

     2,842.4         1,320.0         1,003.2   

Other liabilities

     1,209.4         502.2         214.6   
  

 

 

    

 

 

    

 

 

 

Total non-current liabilities

   $ 4,051.8       $ 1,822.2       $ 1,217.8   
  

 

 

    

 

 

    

 

 

 

Current liabilities:

        

Short-term non-recourse project financing

     52.4         48.9         78.7   

Other liabilities

     222.6         187.2         166.8   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     275.0         236.1         245.5   
  

 

 

    

 

 

    

 

 

 

Equity and Total liabilities

   $ 5,614.0       $ 3,198.1       $ 2,047.2   
  

 

 

    

 

 

    

 

 

 

Combined Cash Flow Statement

 

(in millions of U.S. dollars)    Year ended December 31,  
     2013     2012  

Gross cash flows from operating activities

    

Profit for the year

   $ (1.8   $ 0.1   

Adjustments to reconcile after-tax profit to net cash generated by operating activities

     92.4        22.8   

Net interest/taxes paid

     (62.4     (41.6

Variations in working capital

     9.2        66.6   
  

 

 

   

 

 

 

Total net cash flow generated by (used in) operating activities

   $ 37.4      $ 47.9   
  

 

 

   

 

 

 

Net cash flows from investment activities

    

Investments

     (694.6     (1,098.7

Disposals

     —          —     
  

 

 

   

 

 

 

Total net cash flows used in investment activities

   $ (694.6   $ (1,098.7
  

 

 

   

 

 

 

Net cash flows generated by finance activities

   $   914.9      $   1,107.3   
  

 

 

   

 

 

 

Net increase/(decrease) in cash and cash equivalents

     257.7        56.5   

Cash and cash equivalents at the beginning of the year

     97.5        40.2   

Currency translation difference on cash and cash equivalents

     2.5        0.8   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the year

   $ 357.7      $ 97.5   
  

 

 

   

 

 

 

 

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Table of Contents

Geography and business sector data

Revenue by geography

 

(in millions of U.S. dollars)    Year ended December 31,  
     2013      2012  

North America

   $ 114.0       $ 62.3   

South America

     25.4         17.0   

Europe

     71.5         27.9   
  

 

 

    

 

 

 

Total revenue

   $  210.9       $  107.2   
  

 

 

    

 

 

 

Revenue by business sectors

 

(in millions of U.S. dollars)    Year ended December 31,  
     2013      2012  

Renewable Energy

   $ 82.7       $ 27.9   

Conventional Power

     102.8         62.3   

Electric Transmission

     25.4         17.0   
  

 

 

    

 

 

 

Total revenue

   $  210.9       $  107.2   
  

 

 

    

 

 

 

Non-GAAP Financial Data

EBITDA by geography

 

(in millions of U.S. dollars)    Year ended December 31,  
     2013      2012  

North America

   $ 96.7       $ 61.1   

South America

     19.0         10.2   

Europe

     42.8         16.7   
  

 

 

    

 

 

 

Combined EBITDA(1)

   $  158.5       $  88.0   
  

 

 

    

 

 

 

EBITDA by business sectors

 

(in millions of U.S. dollars)    Year ended December 31,  
     2013      2012  

Renewable Energy

   $ 55.8       $  16.1   

Conventional Power

     83.3         61.1   

Electric Transmission

     19.4         10.8   
  

 

 

    

 

 

 

Combined EBITDA(1)

   $  158.5       $ 88.0   
  

 

 

    

 

 

 

 

(1)

EBITDA is calculated as profit for the year from continuing operations, after adding back income tax expense, share of (loss)/profit of associates, finance expense net and depreciation, amortization and impairment charges of the combined entities. EBITDA is not a measurement of performance under IFRS as issued by the IASB, and you should not consider EBITDA as an alternative to operating income or profits or as a measure of our operating performance, cash flows from operating, investing and financing activities or as a measure of our ability to meet our cash needs or any other measures of performance under generally accepted accounting principles. We believe that EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to evaluate us. EBITDA and similar measures are used by different companies for different purposes and are often calculated in ways that reflect the circumstances of those companies. EBITDA may not be indicative of our historical operating results, and is not are meant to be predictive of potential future results. See “Presentation of Financial Information—Non-GAAP Financial Measures.”

 

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The following table sets forth a reconciliation of EBITDA to our profit for the year from continuing operations:

 

(in millions of U.S. dollars)   Year ended December 31,  
    2013     2012  

Reconciliation of profit for the year to EBITDA

   

Profit/(loss) for the year attributable to the combined group

  $ (3.4   $ 1.3   

Profit attributable to non-controlling interest from continued operations

    1.6        (1.2)   

Income tax expenses/(benefits)

    (11.8)        4.0   

Share of loss/(profit) of associated companies

    —          0.4   

Financial expenses, net

    125.2        63.2   
 

 

 

   

 

 

 

Operating profit

  $ 111.6      $ 67.7   
 

 

 

   

 

 

 

Depreciation, amortization and impairment charges

    46.9        20.2   
 

 

 

   

 

 

 

Combined EBITDA (unaudited)

  $ 158.5      $ 88.0   
 

 

 

   

 

 

 

The following table sets forth a reconciliation of EBITDA to our net cash generated by operating activities:

 

(in millions of U.S. dollars)   Year ended December 31,  
    2013      2012  

Reconciliation of EBITDA to net cash generated or used from operating activities

    

Combined EBITDA (unaudited)

  $  158.5       $ 88.0   

Other cash finance costs and other

    (67.9)         (65.0)   

Variations in working capital

    9.2         66.6   

Income tax (paid)/received

    (0.1)         (0.3)   

Interests (paid)/received

    (62.3)         (41.4)   
 

 

 

    

 

 

 

Net cash generated or used from operating activities

  $ 37.4       $ 47.9   
 

 

 

    

 

 

 

Unaudited Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information sets forth the unaudited pro forma combined income statement of Abengoa Yield for the year ended December 31, 2013 and the year ended December 31, 2012 as well as the unaudited pro forma combined statement of financial position of Abengoa Yield as of December 31, 2013 to give effect to the consolidation of Mojave, to the transfer of a preferred equity investment in ACBH, to the contribution of certain related party loans and to the repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of this offering.

We have calculated earnings per share assuming a total of 80,000,000 shares outstanding after the consummation of this offering. Since our predecessor is a combination of entities under common control of Abengoa and did not have any share capital as of December 31, 2013 and 2012, we have not calculated earnings per share on an historical basis.

 

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Unaudited Pro Forma Combined Income Statement for the years ended December 31, 2013 and 2012

 

    Pro Forma
Abengoa Yield for
the years ended
December 31,
 
    2013     2012  

Revenue

  $ 210.9      $ 107.2   

Other operating income

    379.6        560.4   

Raw materials and consumables used

    (8.7     (4.3

Employee benefit expenses

    (2.4     (1.8

Depreciation, amortization, and impairment charges

    (46.9     (20.2

Other operating expenses

    (421.0     (573.9
 

 

 

   

 

 

 

Operating Profit/(loss)

  $ 111.5      $ 67.4   
 

 

 

   

 

 

 

Financial income

    19.6        19.1   

Financial expenses

    (86.3     (53.9

Net exchange differences

    (0.9     0.4   

Other financial income/expenses, net

    (1.4     (0.2
 

 

 

   

 

 

 

Financial expense, net

  $ (69.1 )    $ (34.6 ) 

Share of (Loss)/Profit of Associates carried under the equity method

  $ —        $ (0.4 ) 

Profit/(Loss) before Income Tax

  $ 42.4      $ 32.4   

Income tax

    11.8        (4.0
 

 

 

   

 

 

 

Profit/(Loss) for the year

  $ 54.2      $ 28.4   
 

 

 

   

 

 

 

Profit attributable to non-controlling interests

    (1.6     1.2   
 

 

 

   

 

 

 

Profit/(Loss) for the Year attributable to the combined group

  $ 52.6      $ 29.6   
 

 

 

   

 

 

 

Number of ordinary shares outstanding (millions)

    80.0        80.0   

Earnings per Share (U.S.$ per share)

  $ 0.657      $ 0.369   

 

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Unaudited Pro Forma Combined Statement of Financial Position as of December 31, 2013

 

     Abengoa
Yield Pro
Forma
 

Non-current assets

  

Contracted concessional assets

   $ 5,877.0   

Investments carried under the equity method

     6.1   

Financial investments

     284.5   

Deferred tax assets

     52.8   
  

 

 

 

Total Non-Current Assets

   $ 6,220.5   
  

 

 

 

Current assets

  

Inventories

     5.2   

Clients and Other Receivables

     99.2   

Financial Investments

     305.0   

Cash and Cash Equivalents

     173.2   

Total Current Assets

     582.7   
  

 

 

 

Total Assets

   $ 6,803.2   
  

 

 

 

Equity and Liabilities

  

Total Equity

   $ 1,900.3   

Non-Current Liabilities

  

Long-term Non-Recourse (Project Financing)

     3,537.7   

Grants and other liabilities

     913.6   

Related parties

     53.1   

Derivative liabilities

     44.2   

Deferred tax liabilities

     21.8   
  

 

 

 

Total Non-Current Liabilities

   $ 4,570.4   
  

 

 

 

Current Liabilities

  

Short-term Non-Recourse (Project Financing)

     53.6   

Trade Payables and Other Current Liabilities

     260.3   

Income and other tax payables

     18.6   
  

 

 

 

Total Current Liabilities

   $ 332.5   
  

 

 

 

Total Equity and Liabilities

   $ 6,803.2   
  

 

 

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Annual Combined Financial Statements appearing elsewhere in this prospectus were prepared on a “carve-out” basis from Abengoa and are intended to represent the financial results during those periods of a portfolio of renewable energy, conventional power and electric transmission line assets in North America (the United States and Mexico), South America (Peru, Chile and Uruguay) and Europe (Spain) that will be contributed to us as part of the Asset Transfer.

The following discussion should be read together with, and is qualified in its entirety by reference to, our Annual Combined Financial Statements, included elsewhere in this prospectus, which have been prepared in accordance with IFRS as issued by the IASB. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, which are based on assumptions we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Overview

We are a dividend growth-oriented company formed to serve as the primary vehicle through which Abengoa will own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue-generating assets, initially focused on North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as Europe (Spain). In the future, we intend to expand this presence to selected countries in Africa and the Middle East.

We believe we are well positioned to be a premier company for investors seeking a total return based on stable and growing dividend income from a diversified portfolio of low-risk, high-quality assets, and for investors with a key objective of accretive dividend growth.

We intend to take advantage of favorable trends in the power generation and electric transmission sectors globally, including energy scarcity and a focus on the reduction of carbon emissions. To that end, we believe that our cash flow profile, coupled with our scale, diversity and low-cost business model, will offer us a lower cost of capital than that of a traditional engineering or construction company and independent power producer and provide us with a significant competitive advantage with which to execute our growth strategy.

With this business model, our objective is to pay a consistent and growing cash dividend to holders of our shares that is sustainable on a long-term basis. We expect to target a payout ratio of 90% of our cash available for distribution and will seek to increase such cash dividends over time through organic growth and as we acquire assets with characteristics similar to those in our current portfolio. We will focus on high-quality, newly-constructed and long-life facilities with creditworthy counterparties that we expect will produce stable, long-term cash flows.

Upon consummation of this offering, we will own eleven assets, comprising 710 MW of renewable energy generation, 300 MW of conventional power generation and 1,018 miles of electric transmission lines and an exchangeable preferred equity investment in ACBH. Each of the assets we own has a project-finance agreement in place. Our project-level debt was approximately $2,895 million as of December 31, 2013.

We have signed an exclusive agreement with Abengoa, referred to as the ROFO Agreement, which provides us with a right of first offer on any proposed sale, transfer or other disposition of any of Abengoa’s contracted renewable energy, conventional power, electric transmission lines or water assets in operation and located in North America, Chile, Peru, Uruguay, Brazil, Colombia and the European Union, as well as four assets in selected countries in Africa and the Middle East. We refer to the contracted assets subject to the ROFO Agreement as the “Abengoa ROFO Assets.” See “Related Party Transactions—Right of First Offer.” Based on the acquisition opportunities available to us, which include the Abengoa ROFO Assets as well as any third-party acquisitions we

 

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pursue, we believe that we will have the opportunity to grow our cash available for distribution in a manner that would allow us to further increase our cash dividends per share over time. Prospective investors should read “Cash Dividend Policy,” including our financial forecast and related assumptions, and “Risk Factors,” including the risks and uncertainties related to our forecasted results, acquisition opportunities and growth plan, in their entirety.

We own a diversified portfolio of renewable energy, conventional power and electric transmission line contracted assets in North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as in Spain. Our portfolio consists of five renewable energy assets, a cogeneration facility and several electric transmission lines, all of which are fully operational, with the exception of Palmatir and Mojave, where the construction of each asset is substantially complete and which are expected to be fully operational by June 2014 and October 2014, respectively. In addition, we own an exchangeable preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, consisting mostly of transmission lines. All of our assets have contracted revenues (regulated revenues in the case of the Spanish assets) with low-risk offtakers and collectively have an average remaining contract life of approximately 26 years as of December 31, 2013. Over 90% of cash available for distribution from these assets in each of the next four years will be in U.S. dollars or indexed to the U.S. dollar and our policy is to use currency coverage contracts if required to maintain that ratio. Over 90% of our project-level debt is hedged against changes in interest rates through an underlying fixed rate on the debt instrument or through interest rate swaps, caps or similar hedging instruments.

Our revenue and EBITDA by geography and business sector for the years ended December 31, 2013 and 2012 are set forth in the following tables:

 

     Year ended December 31,  

Revenue by geography

   2013     2012  
     $ in
millions
     % of
revenue
    $ in
millions
     % of
revenue
 

North America

   $ 114.0         54.1   $ 62.3         58.1

South America

     25.4         12.0     17.0         15.9

Europe

     71.5         33.9     27.9         26.0
  

 

 

      

 

 

    

Total revenue

   $ 210.9         100.0   $ 107.2         100.0
  

 

 

      

 

 

    

 

     Year ended December 31,  

Revenue by business sector

   2013     2012  
     $ in
millions
     % of
revenue
    $ in
millions
     % of
revenue
 

Renewable Energy

   $ 82.7         39.2   $ 27.9         26.0

Conventional Power

     102.8         48.7     62.3         58.1

Electric Transmission

     25.4         12.1     17.0         15.9
  

 

 

      

 

 

    

Total revenue

   $ 210.9         100.0   $ 107.2         100.0
  

 

 

      

 

 

    

 

     Year ended December 31,  

EBITDA by geography

   2013     2012  
     $ in
millions
     % of
revenue
    $ in
millions
     % of
revenue
 

North America

   $ 96.7         84.8   $  61.1         98.1

South America

     19.0         74.8     10.2         60.0

Europe

     42.8         59.9     16.7         59.9
  

 

 

      

 

 

    

Combined EBITDA

   $ 158.5         75.2   $ 88.0         82.1
  

 

 

      

 

 

    

 

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     Year ended December 31,  

EBITDA by business sector

   2013     2012  
     $ in
millions
     % of
revenue
    $ in
millions
     % of
revenue
 

Renewable Energy

   $ 55.8         67.5   $ 16.1         57.7

Conventional Power

     83.3         81.0     61.1         98.1

Electric Transmission

     19.4         76.4     10.8         63.5
  

 

 

      

 

 

    

Combined EBITDA

   $ 158.5         75.2   $ 88.0         82.1
  

 

 

      

 

 

    

Factors Affecting our Results of Operations

Commencement of operations of projects

The comparability of our results of operations is significantly influenced by the volume of projects that become operational during a particular year. The number of projects becoming operational and the length of lead times for projects under construction significantly affect our revenue and operating profit, which makes the comparison of periods difficult.

The following table sets forth our assets that were in or commenced operation during each of the years ended December 31, 2013 and 2012, and those expected to commence in 2014, including the quarter in which operations began or are expected to begin:

 

Geography

Segment