20-F 1 form20f.htm 20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
 
Form 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report__________
For the transition period from_________to_________.
Commission file number: 001-36487
 
Atlantica Yield plc
(Exact name of Registrant as specified in its charter)
 
Not applicable
(Translation of Registrant’s name into English)
 
England and Wales
(Jurisdiction of incorporation or organization)
 
Great West House, GW1, 17th floor
Great West Road
Brentford, United Kingdom TW8 9DF
Tel: +44 203 499 0465
(Address of principal executive offices)
 
Santiago Seage
Great West House, GW1, 17th floor
Great West Road
Brentford, United Kingdom TW8 9DF
Tel: +44 203 499 0465
 
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.
 
Title of each class
Name of each exchange on which registered
Ordinary Shares, nominal value $0.10 per share
NASDAQ Global Select Market
 
Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
 



Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 100,217,260 ordinary shares, nominal value $0.10 per share.
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes  No
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP
International Financial Reporting Standards as issued by the International
Other
 
Accounting Standards Board
 
 
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17  Item 18
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
 

ATLANTICA YIELD PLC
TABLE OF CONTENTS
 
    
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ITEM 1.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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ITEM 4A.
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ITEM 5.
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ITEM 6.
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ITEM 7.
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ITEM 8.
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ITEM 9.
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ITEM 10.
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1

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ITEM 11.
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ITEM 12.
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B.
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D.
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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This annual report 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 annual report, 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 annual report 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 “Item 3.D—Risk Factors” and the description of our segments and business sectors in the section entitled “Item 4.B—Business Overview” 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:

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

·
Changes in government regulations providing incentives and subsidies for renewable energy, including reduction of our revenues in Spain, which are mainly defined by regulation through parameters that could be reviewed at the end of each regulatory period;

·
Our ability to acquire solar projects due to the potential increase of the cost of solar panels;

·
Political, social and macroeconomic risks relating to the United Kingdom’s exit from the European Union;

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

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

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

·
Inability to identify and/or consummate future acquisitions, under the AAGES ROFO Agreement, the Abengoa ROFO Agreement or otherwise, on favorable terms or at all;

·
Our ability to identify and reach an agreement with new partners similar to the AAGES ROFO Agreement or Abengoa ROFO Agreement;

·
Our ability to identify and/or consummate future acquisitions from third parties or from potential new partners, including as a result of not being able to find acquisition opportunities at attractive prices;

·
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;

·
Increases in the cost of energy and gas, which could increase our operating costs;

·
Counterparty credit risk and failure of counterparties to our offtake agreements to fulfill their obligations;
 
·
Inability to replace expiring or terminated offtake agreements with similar agreements;

·
New technology or changes in industry standards;

·
Inability to manage exposure to credit, interest rates, foreign currency exchange rates, supply and commodity price risks;

·
Reliance on third-party contractors and suppliers;

·
Risks associated with acquisitions and investments;

·
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, criminal or terrorist acts or cyber-attacks at one or more of our plants;

·
Insufficient insurance coverage and increases in insurance cost;

·
Litigation and other legal proceedings including claims due to Abengoa’s restructuring process;

·
Reputational risk, including damage caused to us by Abengoa’s reputation;

·
The loss of one or more of our executive officers;

·
Failure of information technology on which we rely to run our business;

·
Revocation or termination of our concession agreements or power purchase agreements;

·
Lowering of revenues in Spain that are mainly defined by regulation;
 
·
Risk that the Share Sale will not be completed and the AAGES ROFO Agreement and Algonquin ROFO Agreement will not become effective;

·
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;

·
Exposure to market electricity can impact revenue from our renewable energy and efficient natural gas (previously named “conventional”) power facilities;

·
Changes to national and international law and policies that support renewable energy resources;

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

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

·
Risks associated with maintenance, expansion and refurbishment of electric generation facilities;

·
Failure of our assets to perform as expected, including Solana and Kaxu;

·
Failure to receive dividends from all project and investments, including Solana and Kaxu;

·
Variations in meteorological conditions;
 
·
Disruption of the fuel supplies necessary to generate power at our efficient natural gas (previously named “conventional”) generation facilities;

·
Deterioration in Abengoa’s financial condition;

·
Abengoa’s ability to meet its obligations under our agreements with Abengoa, including operation and maintenance agreements, to comply with past representations, commitments and potential liabilities linked to the time when Abengoa owned the assets, potential clawback of transactions with Abengoa, and other risks related to Abengoa;

·
Failure to meet certain covenants under our financing arrangements;

·
Failure to obtain pending waivers in relation to the minimum ownership by Abengoa and the cross-default provisions contained in some of our project financing agreements;

·
Failure of Abengoa to maintain existing guarantees and letters of credit under the Financial Support Agreement or failure by us to maintain guarantees;

·
Failure of Abengoa to maintain its obligations and production guarantees, pursuant to EPC contracts;

·
Our ability to consummate future acquisitions from AAGES, Algonquin, Abengoa or others;

·
Our ability to close acquisitions under our ROFO agreements with AAGES, Algonquin, Abengoa and others due to, among other things, not being offered with assets that fit in our portfolio or not reaching agreements on prices;

·
Our ability to use U.S. NOLs to offset future income may be limited, including as the result of experiencing an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”);

·
Conflicts of interest which may be resolved in a manner that is not in our best interests or the best interests of our minority shareholders, potentially caused by our ownership structure and certain service agreements in place with our current largest shareholder;

·
The divergence of interest between us and Abengoa, due to Abengoa’s sale of our shares;

·
Potential negative tax implications from an ownership change under section 382 of the Internal Revenue Code;

·
Negative implications from a potential change of control;

·
Negative implications of U.S. federal income tax reform;

·
Impact on our stock price due to the sale by Abengoa of its stake in us and potential negative effects of a potential sale by Abengoa of its stake in us or of a potential change of control or of a potential delay or failure of a sale process;

·
Technical failure, design errors or faulty operation of our assets not covered by guarantees or insurance;

·
Failure to collect insurance proceeds in the expected amounts;

·
Failure to reach an agreement on the extension of the production guarantee period at Solana and Kaxu; and
 
·
Various other factors, including those factors discussed under “Item 3.D—Risk Factors” and “Item 5.A—Operating Results” 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.
 
CURRENCY PRESENTATION AND DEFINITIONS
 
In this annual report, all references to “U.S. dollar,” “$” and “USD” are to the lawful currency of the United States, all references to “euro,” “€” or “EUR” 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 and all references to “South African rand,” “R” and “ZAR” are to the lawful currency of the Republic of South Africa.

Definitions

Unless otherwise specified or the context requires otherwise in this annual report:

·
references to “2019 Notes” refer to the 7.000% Senior Notes due 2019 in an aggregate principal amount of $255 million issued on November 17, 2014, as further described in “Item 5.B—Liquidity and Capital Resources—Financing Arrangements—2019 Notes;”

·
references to “AAGES” refer to the joint venture between Algonquin and Abengoa to invest in the development and construction of clean energy and water infrastructure contracted assets;

·
references to “AAGES ROFO Agreement” refer to the agreement we entered into with AAGES on March 5, 2018, which will become effective upon completion of the Share Sale, that provides us a right of first offer to purchase any of the AAGES ROFO Assets, as amended and restated from time to time;

·
references to “AAGES ROFO Assets” refer to any of AAGES’ contracted assets or proposed contracted assets that we expect to evaluate for future acquisition, with certain exceptions, for which AAGES has provided us a right of first offer to purchase if offered for sale by AAGES;

·
references to “ACBH” refer to Abengoa Concessões Brasil Holding, a subsidiary holding company of Abengoa that was engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines and which is currently undergoing a restructuring process in Brazil;

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

·
references to “Abengoa ROFO Agreement” refer to the agreement we entered into with Abengoa on June 13, 2014, as amended and restated on December 9, 2014, that provides us a right of first offer to purchase any of the present or future contracted assets in renewable energy, efficient natural gas power, electric transmission and water of Abengoa that are in operation, and any other renewable energy, efficient natural gas power, electric transmission and water asset that is expected to generate contracted revenue and that Abengoa has transferred to an investment vehicle that are located 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 expect to evaluate for future acquisition, for which Abengoa will provide us a right of first offer to purchase if offered for sale by Abengoa or an investment vehicle to which Abengoa has transferred them;

·
references to “Algonquin” refer to, as the context requires, either Algonquin Power & Utilities Corp., a North American diversified generation, transmission and distribution utility, together with its subsidiaries;

·
references to “Algonquin ROFO Agreement” refer to the agreement we entered into with Algonquin on March 5, 2018, which will become effective upon completion of the Share Sale, under which Algonquin granted us a right of first offer to purchase any of the assets offered for sale located outside of the United States or Canada as amended from time to time.  See “Item 7.B—Related Party Transactions—Algonquin drop down agreement and Right of First Offer on assets outside the United States or Canada;”
 
·
references to “Annual Consolidated Financial Statements” refer to the audited annual consolidated financial statements as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015, including the related notes thereto, prepared in accordance with IFRS as issued by the IASB (as such terms are defined herein), included in this annual report;

·
references to “Asset Transfer” refer to the transfer of assets contributed by Abengoa prior to the consummation of our initial public offering through a series of transactions;

·
references to “Atlantica” refer to Atlantica Yield plc and, where the context requires, its consolidated subsidiaries;

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

·
references to “cash available for distribution” refer to the cash distributions received by the Company from its subsidiaries minus cash expenses of the Company, including debt service and general and administrative expenses;

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

·
references to “EMEA” refer to Europe, Middle East and Africa;

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

·
references to “Exchange Act” refer to the U.S. Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated by the SEC thereunder;

·
references to “FPA” refer to the U.S. Federal Power Act;
 
·
references to “Federal Financing Bank” refer to a U.S. government corporation by that name;

·
references to “Financial Support Agreement” refer to the Financial Support Agreement we entered into with Abengoa on June 13, 2014, as amended and restated on September 28, 2017, pursuant to which Abengoa agreed to maintain certain guarantees or letters of credit for a period of five years following our IPO;

·
references to the “First Dropdown Assets” refer to (i) a solar power complex in Spain, Solacor 1/2, with a capacity of 100 MW; (ii) a solar power complex in Spain, PS10/20, with a capacity of 31 MW; and (iii) one on-shore wind farm in Uruguay, Cadonal, with a capacity of 50 MW, each as further described in “Item 4.B—Business Overview—Our Operations—Renewable Energy;”

·
references to the “Fourth Dropdown Asset” refer to (i) 74.99% of the shares and a 30-year usufruct of the economic and political rights of the remaining 25.01% of the shares of Solaben 1/6, a 100 MW solar power complex in Spain, (ii) ATN2, an 81-mile transmission line in Peru, and (iii) an additional 13% stake in Solacor 1/2, each as further described in “Item 4.B—Business Overview—Our Operations—Renewable Energy” and “—Our Operations—Electric Transmission;”

·
references to “Further Adjusted EBITDA” have the meaning set forth in “Presentation of Financial Information—Non-GAAP Financial Measures;”

·
references to “GW” refer to gigawatts;
 
·
references to “gross capacity” or “gross MW” refers to the maximum, or rated, power generation capacity, in MW, of a facility or group of facilities, without adjusting for the facility’s power parasitics’ consumption, or by our percentage of ownership interest in such facility as of the date of this annual report;

·
references to “IFRIC 12” refer to International Financial Reporting Interpretations Committee’s Interpretation 12—Service Concessions Arrangements;

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

·
reference to “IPO” refer to our initial public offering of ordinary shares in June 2014;

·
references to “ITC” refer to investment tax credits;

·
references to “M ft3” refer to million cubic feet;

·
references to “MW” refer to megawatts;

·
references to “MWh” refer to megawatt hours;

·
references to “New Money 1 Tradable Notes” refer to asset-backed notes issued by Abengoa as part of its restructuring plan.  The New Money 1 Tradable Notes are senior in status and are secured by a ring-fenced structure that consists of a pledge over the shares Abengoa owns in us and A3T, a cogeneration plant in Mexico;

·
references to “Note Issuance Facility” refer to the senior secured note facility dated February 10, 2017, of €275 million (approximately $330 million), with U.S. Bank as facility agent and a group of funds managed by Westbourne Capital as purchasers of the notes issued thereunder;

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

·
references to “PTC” refer to production tax credits;

·
references to “Revolving Credit Facility” refer to the amended and restated revolving credit and guaranty agreement, dated June 26, 2015 entered into by us, as the borrower, the guarantors from time to time party thereto, HSBC Bank plc, as administrative agent, HSBC Corporate Trust Company (UK) Limited, as collateral agent, Bank of America, N.A., as global coordinator and documentation agent for the Tranche B, Banco Santander, S.A., Bank of America, N.A., Citigroup Global Markets Limited, HSBC Bank plc and RBC Capital Markets, as joint lead arrangers and joint bookrunners for a Tranche A facility, and together with Barclays Bank plc as joint lead arranger and joint bookrunner and UBS AG, London Branch as joint bookrunner for the Tranche B. The Tranche B was prepaid and cancelled in March 2017.  See “Item 5.B—Liquidity and Capital Resources—Financing Arrangements—Revolving Credit Facility;”

·
references to “ROFO” refer to a right of first offer;

·
references to “ROFO Agreements” refer to the AAGES ROFO Agreement, Algonquin ROFO Agreement and Abengoa ROFO Agreement;

·
references to “RPS” refer to renewable portfolio standards adopted by 29 U.S. 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 respective state from eligible renewable generation resources, such as solar or wind generation facilities, by a specific date;

·
references to the “Second Dropdown Assets” refer to (i) a 25.5% and a 34.2% stake, respectively, in the legal entities holding two water desalination plants in Algeria, Honaine and Skikda, with an aggregate capacity of 10.5 M ft3 per day and (ii) a 29.6% stake in the legal entity holding solar power assets in Spain, Helioenergy 1/2, with a capacity of 100 MW, each as further described in “Item 4.B—Business Overview—Our Operations—Water” and “Item 4.B—Business Overview—Our Operations—Renewable Energy;”

·
references to “Share Sale” refer to the sale by Abengoa to Algonquin of 25% of our ordinary shares pursuant to an agreement for the sale that was entered into in November 2017. All conditions precedent have been satisfied and the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days;

·
references to the “Shareholders’ Agreement” refer to the agreement by and among Algonquin Power & Utilities Corp., Abengoa-Algonquin Global Energy Solutions and Atlantica Yield plc, dated March 5, 2018 which will become effective upon completion of the Share Sale;

·
references to “Third Dropdown Assets” refer to (i) Helios 1/2, a 100 MW solar power complex in Spain; (ii) Solnova 1/3/4, a 150 MW solar power complex in Spain; (iii) the remaining 70.4% stake in Helioenergy 1/2, a 100 MW solar power complex in Spain; and (iv) a 51.0% stake in Kaxu, a 100 MW solar power plant in South Africa, each as further described in “Item 4.B—Business Overview—Our Operations—Renewable Energy;”

·
references to “U.K.” refer to the United Kingdom;

·
reference to “U.S.” or “United States” refer to the United States of America;

·
references to “UTE” refer to Administracion Nacional de Usinas y Transmisiones Electricas, the Republic of Uruguay’s state-owned electricity company; and

·
references to “we,” “us,” “our,” “Atlantica” and the “Company” refer to Atlantica Yield plc and its subsidiaries, unless the context otherwise requires.
 
PRESENTATION OF FINANCIAL INFORMATION

The selected financial information as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 is derived from, and qualified in its entirety by reference to, our Annual Consolidated Financial Statements, which are included elsewhere in this annual report and prepared in accordance with IFRS as issued by the IASB. The selected financial information as of December 31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and 2013 is derived from, and qualified in its entirety by reference to, the annual consolidated financial statements as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014, which are included in the annual report on Form 20-F filed with the SEC on February 28, 2017, and prepared in accordance with IFRS as issued by the IASB.

On June 18, 2014, we closed our IPO. Prior to the consummation of our IPO, Abengoa contributed, through a series of transactions, which we refer to collectively as the “Asset Transfer,” certain contracted and concessional assets and liabilities described in this annual report, certain holding companies and a preferred equity investment in ACBH. For all periods prior to our IPO, the financial information herein represents the combination of the assets that we acquired and was prepared using Abengoa’s historical basis in the assets and liabilities and the term “Atlantica Yield” (or “Abengoa Yield,” our former name) represents the accounting predecessor, or the combination of the acquired businesses. For all periods subsequent to our IPO, the financial information herein represents our and our subsidiaries’ annual consolidated financial results.

Certain numerical figures set out in this annual report, 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 annual report 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 “Item 5—Operating and Financial Review and Prospects” are calculated using the numerical data in our Annual Consolidated Financial Statements or the tabular presentation of other data (subject to rounding) contained in this annual report, as applicable, and not using the numerical data in the narrative description thereof.

Non-GAAP Financial Measures

This annual report contains non-GAAP financial measures including Further Adjusted EBITDA.

Further Adjusted EBITDA is calculated as profit/(loss) for the year attributable to the parent company, after adding back loss/(profit) attributable to non-controlling interest from continued operations, income tax, share of profit/(loss) of associates carried under the equity method, finance expense net, depreciation, amortization and impairment charges of entities included in the Annual Consolidated Financial Statements, and dividends received from our preferred equity investment in ACBH. Further Adjusted EBITDA for 2014, includes preferred dividends received from ACBH for the first time during the third and fourth quarters of 2014. Further Adjusted EBITDA for 2016 and for first quarter of 2017 includes compensation received from Abengoa in lieu of ACBH dividends.

Our management believes Further Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. This measure is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. This measure is widely used by other companies in the same industry,

Our management uses Further Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our board of directors, shareholders, creditors, analysts and investors concerning our financial performance.
 
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;

·
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 Further Adjusted EBITDA does not reflect any cash requirements that would be required for such replacements;

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

·
the fact that other companies in our industry may calculate Further Adjusted EBITDA differently than we do, which limits their usefulness as comparative measures.

PRESENTATION OF INDUSTRY AND MARKET DATA

In this annual report, 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 annual report were obtained from internal surveys, market research, governmental and other publicly available information, independent industry publications and reports prepared by industry consultants. 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.

Elsewhere in this annual report, 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 annual report 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 annual report. We have not independently verified the information and cannot guarantee its accuracy.

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.

PART I

ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

  Not applicable.

ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE

 Not applicable.

ITEM 3.
KEY INFORMATION

A.
Selected Financial Data

The tables below present selected consolidated financial and business level information for Atlantica Yield as of and for each of the years ended December 31, 2017, 2016, 2015, 2014 and 2013.

The selected financial information as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 is derived from, and qualified in its entirety by reference to, our Annual Consolidated Financial Statements, which are included elsewhere in this annual report and prepared in accordance with IFRS as issued by the IASB. The selected financial information as of December 31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and 2013, is derived from, and qualified in its entirety by reference to, the annual consolidated financial statements as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014, which are included in the annual report on Form 20-F with the SEC on February 28, 2017, and prepared in accordance with IFRS as issued by the IASB.
 
On June 18, 2014, we closed our IPO. Prior to the consummation of our IPO, Abengoa contributed, through a series of transactions, which we refer to collectively as the “Asset Transfer,” certain contracted and concessional assets and liabilities described in this annual report, certain holding companies and a preferred equity investment in ACBH. For all periods prior to our IPO, the financial information herein represents the combination of the assets or the combination of businesses that we acquired and was prepared using Abengoa’s historical basis in the assets and liabilities and the term “Atlantica Yield” (or “Abengoa Yield,” our former name) represents the accounting predecessor, or the combination of the acquired businesses. For all periods subsequent to our IPO, the financial information herein represents our and our subsidiaries’ annual consolidated financial results.

The selected financial information as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 is not intended to be an indicator of our financial condition or results of operations in the future. You should review such selected financial information together with our Annual Consolidated Financial Statements and notes thereto, included elsewhere in this annual report.

The following tables should be read in conjunction with “Item 5—Operating and Financial Review and Prospects” and our Annual Consolidated Financial Statements and related notes included elsewhere in this annual report.
 
Consolidated income statements for the years ended December 31, 2017, 2016, 2015, 2014 and 2013
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
Revenue
   
1,008.4
     
971.8
     
790.9
     
362.7
     
210.9
 
Other operating income
   
80.8
     
65.5
     
68.8
     
79.9
     
379.6
 
Raw materials and consumables used
   
(17.0
)
   
(26.9
)
   
(23.2
)
   
(9.4
)
   
(6.2
)
Employee benefit expense
   
(18.7
)
   
(14.8
)
   
(5.8
)
   
(1.7
)
   
(2.4
)
Depreciation, amortization and impairment charges
   
(311.0
)
   
(332.9
)
   
(261.3
)
   
(125.5
)
   
(46.9
)
Other operating expenses
   
(284.5
)
   
(260.3
)
   
(224.9
)
   
(132.7
)
   
(423.4
)
Operating profit/(loss)
   
458.0
     
402.4
     
344.5
     
173.3
     
111.6
 
Financial income
   
1.0
     
3.3
     
3.5
     
4.9
     
1.2
 
Financial expense
   
(463.7
)
   
(408.0
)
   
(333.9
)
   
(210.3
)
   
(123.8
)
Net exchange differences
   
(4.1
)
   
(9.6
)
   
3.9
     
2.1
     
(0.9
)
Other financial income/(expense), net
   
18.4
     
8.5
     
(200.2
)
   
5.9
     
(1.7
)
Financial expense, net
   
(448.4
)
   
(405.8
)
   
(526.7
)
   
(197.4
)
   
(125.2
)
Share of profit/(loss) of associates carried under the equity method
   
5.3
     
6.7
     
7.8
     
(0.8
)
   
 
Profit/(loss) before income tax
   
14.9
     
3.3
     
(174.4
)
   
(24.9
)
   
(13.6
)
Income tax benefit/(expense)
   
(119.8
)
   
(1.7
)
   
(23.8
)
   
(4.4
)
   
11.8
 
Profit/(loss) for the year
   
(104.9
)
   
1.6
     
(198.2
)
   
(29.3
)
   
(1.8
)
Profit/(loss) attributable to non-controlling interest
   
(6.9
)
   
(6.5
)
   
(10.8
)
   
(2.3
)
   
(1.6
)
Loss for the year attributable to the parent company
   
(111.8
)
   
(4.9
)
   
(209.0
)
   
(31.6
)
   
(3.4
)
Less Predecessor Loss prior to Initial Public Offering on June 12, 2014
   
     
     
     
(28.2
)
   
 
Net profit/(loss) attributable to the parent company subsequent to Initial Public Offering
   
     
     
     
(3.4
)
   
 
Weighted average number of ordinary shares outstanding (millions)
   
100.2
     
100.2
     
92.8
     
80.0
     
 
Basic earnings per share attributable to the parent company (U.S. dollar per share) (1)
   
(1.12
)
   
(0.05
)
   
(2.25
)
   
(0.04
)
   
 
Dividend paid per share(2)
   
1.05
     
0.4530
     
1.4292
     
0.2962
     
 
 

Notes:—

(1)
Earnings per share has been calculated for the period subsequent to our IPO, considering net profit/(loss) attributable to equity holders of Atlantica Yield generated after our IPO divided by the number of shares outstanding. Basic earnings per share equals diluted earnings per share for the periods presented.

(2)
2017: On February 27, 2017, the board of directors declared a dividend of $0.25 per share corresponding to the fourth quarter of 2016, which was paid on March 15, 2017.  From that amount, we retained $10.4 million of the dividend attributable to Abengoa. On May 12, 2017, the board of directors declared a dividend of $0.25 per share corresponding to the first quarter of 2017 which was paid on June 15, 2017.  On July 28, 2017, the board of directors declared a dividend of $0.26 per share corresponding to the second quarter of 2017 which was paid on August 31, 2017.  On November 10, 2017, the board of directors declared a dividend of $0.29 per share corresponding to the third quarter of 2017 which was paid on December 15, 2017.
 
2016: In February 2016, taking into consideration the uncertainties resulting from the situation of Abengoa, the board of directors decided to postpone the decision whether to declare a dividend in respect of the fourth quarter of 2015 until the second quarter of 2016. In May 2016, considering the uncertainties in Abengoa’s situation, our board of directors decided not to declare a dividend in respect of the fourth quarter of 2015 and to postpone the decision on whether to declare a dividend in respect of the first quarter 2016 until we had obtained greater clarity on cross default and change of ownership issues. On August 3, 2016, based on waivers or forbearances obtained to that date, our board of directors decided to declare a dividend of $0.145 per share for the first quarter of 2016 and a dividend of $0.145 per share for the second quarter of 2016. The dividend was paid on September 15, 2016, to shareholders of record August 31, 2016.  From that amount, we retained $12.3 million of the dividend attributable to Abengoa. On November 11, 2016, our board of directors, based on waivers or forbearances obtained to that date, decided to declare a dividend of $0.163 per share, paid on December 15, 2016, to shareholders of record on November 30, 2016, and from that amount we retained $6.7 million of the dividend attributable to Abengoa in accordance with the provisions of the parent support agreement and an agreement reached with Abengoa in relation to the ACBH preferred equity investment.

2015: On March 16, 2015 we paid a dividend of $0.2592 per share to shareholders of record February 28, 2015. On June 15, 2015 we paid a dividend of $0.34 per share to shareholders of record May 29, 2015. On September 15, 2015 we paid a dividend of $0.40 per share to shareholders of record May 29, 2015. On December 16, 2015, we paid a dividend of $0.43 per share to shareholders of record as of November 30, 2015, corresponding to the third quarter of 2015, and from that amount we retained $9 million of the dividend attributable to Abengoa in accordance with the provisions of the parent support agreement and an agreement reached with Abengoa in relation to the ACBH preferred equity investment. See “Item 4.B—Business Overview—Electric Transmission—Exchangeable Preferred Equity Investment in Abengoa Concessões Brasil Holding.”

2014: On December 15, 2014 we paid a dividend of $0.2962 per share that consisted of $0.2592 per share announced by our board of directors on November 14, 2014 and $0.0370 per share of the pro-rata for the days from IPO on June 18, 2014 to June 30, 2014.
 
Consolidated statements of financial position as of December 31, 2017, 2016, 2015, 2014 and 2013
 
         
As of December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
Non-Current assets:
                             
Contracted concessional assets
   
9,084.2
     
8,924.2
     
9,300.9
     
6,725.2
     
4,418.1
 
Investments carried under the equity method
   
55.8
     
55.0
     
56.2
     
5.7
     
387.3
 
Financial investments
   
45.3
     
69.8
     
93.8
     
373.6
     
28.9
 
Deferred tax assets
   
165.1
     
202.9
     
191.3
     
124.2
     
52.8
 
Total non-current assets
   
9,350.4
     
9,251.9
     
9,642.2
     
7,228.7
     
4,887.1
 
Current assets:
                                       
Inventories
   
17.9
     
15.5
     
14.9
     
22.0
     
5.2
 
Clients and other receivables
   
244.4
     
207.6
     
197.3
     
129.7
     
97.6
 
Financial investments
   
210.1
     
228.0
     
221.4
     
229.4
     
266.4
 
Cash and cash equivalents
   
669.4
     
594.8
     
514.7
     
354.2
     
357.7
 
Total current assets
   
1,141.9
     
1,045.9
     
948.3
     
735.3
     
726.9
 
Total assets
   
10,492.3
     
10,297.8
     
10,590.5
     
7,964.0
     
5,614.0
 
Total equity
   
1,895.4
     
1,959.1
     
2,023.5
     
1,839.6
     
1,287.2
 
Non-current liabilities:
                                       
Long-term corporate debt
   
574.2
     
376.3
     
661.3
     
376.2
     
 
Long-term project debt
   
5,228.9
     
4,629.2
     
3,574.5
     
3,491.9
     
2,842.3
 
Other liabilities
   
2,292.9
     
2,158.1
     
2,238.4
     
1,675.3
     
1,209.5
 
Total non-current liabilities
   
8,096.5
     
7,163.6
     
6.474.2
     
5,543.4
     
4,051.8
 
Current liabilities:
                                       
Short-term corporate debt
   
68.9
     
291.9
     
3.2
     
2.3
     
 
Short-term project debt
   
246.3
     
701.3
     
1,896.1
     
331.2
     
52.4
 
Other liabilities
   
187.0
     
181.9
     
193.5
     
247.5
     
222.6
 
Total current liabilities
   
500.4
     
1,175.1
     
2,092.8
     
581.0
     
275.0
 
Equity and total liabilities
   
10,492.3
     
10,297.8
     
10,590.5
     
7,964.0
     
5,614.0
 
 
Consolidated cash flow statements for the years ended December 31, 2017, 2016, 2015, 2014 and 2013
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
Gross cash flows from operating activities
                             
Profit/(loss) for the year
   
(104.9
)
   
1.6
     
(198.2
)
   
(29.3
)
   
(1.8
)
Adjustments to reconcile after-tax profit to net cash generated by operating activities
   
848.8
     
664.8
     
734.9
     
290.6
     
92.4
 
Profit for the year adjusted by non-monetary items
   
743.9
     
666.4
     
536.7
     
261.3
     
90.6
 
Net interest / taxes paid
   
(349.5
)
   
(334.0
)
   
(310.2
)
   
(149.7
)
   
(62.4
)
Variations in working capital
   
(8.8
)
   
2.0
     
73.1
     
(68.0
)
   
9.2
 
Total net cash flow provided by/(used in) operating activities
   
385.6
     
334.4
     
299.6
     
43.6
     
37.4
 
Net cash flows from investing activities
                                       
Investments in entities under the equity method
   
3.0
     
5.0
     
4.4
     
(44.5
)
   
(240.6
)
Investments in contracted concessional assets(1)
   
30.1
     
(6.0
)
   
(106.0
)
   
(57.0
)
   
(401.7
)
Other non-current assets/liabilities
   
8.2
     
(3.6
)
   
5.7
     
(21.3
)
   
(52.3
)
Acquisitions / sales of subsidiaries and other financial instruments
   
30.1
     
(21.7
)
   
(834.0
)
   
(222.4
)
   
 
Total net cash flows provided by/(used in) investing activities
   
71.4
     
(26.3
)
   
(929.9
)
   
(345.2
)
   
(694.6
)
Net cash flows provided by/(used in) financing activities
   
(416.3
)
   
(226.1
)
   
810.9
     
304.4
     
914.9
 
Net increase/(decrease) in cash and cash equivalents
   
40.7
     
82.0
     
180.6
     
2.9
     
257.7
 
Cash, cash equivalents and bank overdrafts at beginning of the year
   
594.8
     
514.7
     
354.2
     
357.7
     
97.5
 
Translation differences cash or cash equivalents
   
33.9
     
(1.9
)
   
(20.1
)
   
(6.4
)
   
2.5
 
Cash and cash equivalents at the end of the year
   
669.4
     
594.8
     
514.7
     
354.2
     
357.7
 
 

Note:—

(1)
Includes proceeds for $42.5 million and investments for $12.4 million.  See note 6 of the Annual Consolidated Financial Statements.
 
Geography and business sector data

Revenue by geography
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
North America
   
332.7
     
337.0
     
328.1
     
195.5
     
114.0
 
South America
   
120.8
     
118.8
     
112.5
     
83.6
     
25.4
 
EMEA
   
554.9
     
516.0
     
350.3
     
83.6
     
71.5
 
Total revenue
   
1,008.4
     
971.8
     
790.9
     
362.7
     
210.9
 
 
Revenue by business sector
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
Renewable energy
   
767.2
     
724.3
     
543.0
     
170.7
     
82.7
 
Efficient natural gas power
   
119.8
     
128.1
     
138.7
     
118.8
     
102.8
 
Electric transmission
   
95.1
     
95.1
     
86.4
     
73.2
     
25.4
 
Water
   
26.3
     
24.3
     
22.8
     
     
 
Total revenue
   
1,008.4
     
971.8
     
790.9
     
362.7
     
210.9
 
Non-GAAP Financial Data

Further Adjusted EBITDA by geography
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
North America
   
282.3
     
284.7
     
279.6
     
175.4
     
96.7
 
South America
   
108.8
     
124.6
     
110.9
     
77.2
     
19.0
 
EMEA
   
388.2
     
354.0
     
233.7
     
55.4
     
42.8
 
Further Adjusted EBITDA(1)
   
779.3
     
763.3
     
624.2
     
308.0
     
158.5
 
 
Further Adjusted EBITDA by business sector
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
Renewable energy
   
569.2
     
538.4
     
414.0
     
137.8
     
55.8
 
Efficient natural gas power
   
106.1
     
106.5
     
107.7
     
101.9
     
83.3
 
Electric transmission
   
87.7
     
104.8
     
89.0
     
68.3
     
19.4
 
Water
   
16.3
     
13.6
     
13.5
     
     
 
Further Adjusted EBITDA(1)
   
779.3
     
763.3
     
624.2
     
308.0
     
158.5
 


Note:—
 
(1)
Further Adjusted EBITDA is calculated as profit/(loss) for the year attributable to the parent company, after adding back loss/(profit) attributable to non-controlling interest from continued operations, income tax, share of profit/(loss) of associates carried under the equity method, finance expense net, depreciation, amortization and impairment charges of entities included in the Annual Consolidated Financial Statements, and dividends received from our preferred equity investment in ACBH. Further Adjusted EBITDA for 2014, includes preferred dividends by ACBH for the first time during the third and fourth quarters of 2014. Further Adjusted EBITDA for 2016 and the first quarter of 2017 includes compensation received from Abengoa in lieu of ACBH dividends. Further Adjusted EBITDA is not a measure of performance under IFRS as issued by the IASB and you should not consider Further Adjusted 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 Further Adjusted 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. Further Adjusted 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. Further Adjusted EBITDA may not be indicative of our historical operating results, nor is it 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 Further Adjusted EBITDA to our profit/(loss) for the year from continuing operations:

Reconciliation of profit/(loss) for the year to Further Adjusted EBITDA
 
   
Year ended December 31,
 
   
2017
   
2016
   
2015
   
2014
   
2013
 
   
($ in millions)
 
Profit/(loss) for the year attributable to the parent company
   
(111.8
)
   
(4.9
)
   
(209.0
)
   
(31.6
)
   
(3.4
)
Profit/(loss) attributable to non-controlling interest from continued operations
   
6.9
     
6.5
     
10.8
     
2.3
     
1.6
 
Income tax
   
119.8
     
1.7
     
23.8
     
4.4
     
(11.8
)
Share of loss/(profit) of associates carried under the equity method
   
(5.3
)
   
(6.7
)
   
(7.8
)
   
0.8
     
 
Financial expenses, net
   
448.4
     
405.8
     
526.7
     
197.4
     
125.2
 
Operating profit/(loss)
   
458.0
     
402.4
     
344.5
     
173.3
     
111.6
 
Depreciation, amortization and impairment charges
   
311.0
     
332.9
     
261.3
     
125.5
     
46.9
 
Dividend from preferred equity investment
   
10.3
     
28.0
     
18.4
     
9.2
     
 
Further Adjusted EBITDA
   
779.3
     
763.3
     
624.2
     
308.0
     
158.5
 
 
The following table sets forth a reconciliation of Further Adjusted EBITDA to our net cash generated by or used in operating activities:

 Reconciliation of Further Adjusted EBITDA to net cash generated by operating activities
 
    Year ended December 31,   
   
2017
   
2016
   
2015
   
2014
   
2013
 
 
($ in millions)
 
Net cash generated by operating activities
   
385.6
     
334.4
     
299.6
     
43.6
     
37.4
 
Interests (paid)/received
   
344.7
     
332.1
     
310.2
     
149.3
     
62.3
 
Income tax (paid)/received
   
4.8
     
2.0
     
(0.5
)
   
0.4
     
0.1
 
Variations in working capital
   
8.8
     
(2.0
)
   
(73.1
)
   
68.0
     
(9.2
)
Non-monetary adjustments, other cash finance costs and other
   
35.4
     
96.8
     
88.0
     
46.7
     
67.9
 
Further Adjusted EBITDA
   
779.3
     
763.3
     
624.2
     
308.0
     
158.5
 
 
B.
Capitalization and Indebtedness

Not applicable.

C.
Reasons for the Offer and Use of Proceeds

Not applicable.
 
D.
Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information contained in this annual report, including our Annual Consolidated Financial Statements and related notes, included elsewhere in this annual report, before making any investment decision. The risks described below may not be the only risks we face. We have described only those risks that we currently consider to be material and there may be additional risks that we do not currently consider to be material or of which we are not currently aware. 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 securities 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 and corporate 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, volatile oil and gas prices, 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 have in the past precipitated economic slowdowns and led to a recent 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 volatile oil prices, interest rates, 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. 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, increased lately by the uncertainty of the Catalonia political situation, which we believe could adversely affect our operations in the future. The effects on the European and global economy of the exit of the United Kingdom from the European Union or of any other member states 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. Various European political parties who question the recent austerity policies implemented in certain European countries have added political instability to the region. Additionally, political changes in key geographies, including the United States, could affect our business in the United States or in other countries including, for example, Mexico.
 
The global capital and credit markets have experienced in the past and may continue to experience periods of extreme volatility and disruption. 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 debt and equity capital to make further acquisitions or access to project debt, which we may use to fund or refinance many of our projects and corporate level debt, 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 acquisitions or capital expenditures.

Government regulations providing incentives and subsidies for renewable energy could change at any time, including pursuant to the proposed environmental and tax policies of the current administration in the United States, and such changes may negatively impact our current business and our growth strategy

Our strategy to grow our business through the acquisition of renewable energy projects partly depends on current government policies that promote and support renewable energy and enhance the economic viability of owning solar and wind energy projects. Renewable energy projects currently benefit from various U.S. federal, state and local governmental incentives, such as ITCs, PTCs, loan guarantees, RPS programs, modified accelerated cost-recovery system of depreciation, or MACRS, for depreciation and new expensing rules under the “Tax Cuts and Jobs Act” (the “TCJA”) along with other incentives. These policies have had a significant impact on the development of renewable energy and they could change at any time, especially in the event that the current administration was to embark on further significant changes in federal energy policy. Additionally, many of these government incentives, including the ITCs and the PTCs, are subject to phase-out and/or expiration.  These incentives make the development of renewable energy projects more competitive by providing tax credits, accelerated depreciation and expensing for a portion of the development costs, decreasing the costs associated with developing such projects or creating demand for renewable energy assets through RPS programs. A loss or reduction in such incentives or the value of such incentives or a reduction in the capacity of potential investors to benefit from such incentives could decrease the attractiveness of solar or renewable energy projects to project developers, and the attractiveness of solar energy systems to utilities, retailers and customers, which could reduce our acquisition opportunities. Such a loss or reduction could also reduce our willingness to pursue renewable energy projects due to higher operating costs or lower revenues from offtake agreements.
 
The current administration’s environmental and tax policies may create regulatory uncertainty in the clean energy sector and may lead to a reduction or removal of various clean energy programs and initiatives designed to curtail climate change. Such a reduction or removal of incentives may diminish the market for future renewable energy offtake agreements and reduce the ability for renewable developers to compete for future energy offtake agreements, which may reduce incentives for project developers, including AAGES and Abengoa, to develop such projects. To the extent that these policies are changed in a manner that reduces the incentives or the value of such incentives or reduces the capacity of potential investors to benefit from such incentives that benefit our projects, they could generate reduced revenues and reduced economic returns, result in increased financing costs and difficulty obtaining financing.

The TCJA reduced the U.S. corporate tax rates and imposed significant additional limitations on the deductibility of interest.  The reduction in the corporate tax rate could diminish the benefit of tax incentives for potential investors and reduce the value of accelerated depreciation deductions and expensing certain capital expenditures. The current administration has also made public statements regarding overturning or modifying policies of, or regulations enacted by, the prior administration that placed limitations on coal and gas electric generation, mining and/or exploration. Any effort to overturn federal and state laws, regulations or policies that are supportive of existing or new solar energy generation or that remove costs or other limitations on other types of generation that compete with solar energy projects could materially and adversely affect our business.  We currently have two financing arrangements with the Federal Financing Bank with a guarantee from the DOE and our projects benefitted from ITCs. Unilateral changes to these agreements could materially and adversely affect our business.
 
Additionally, some U.S. states with RPS targets have met, or in the near future will meet, their renewable energy targets. For example, California, which has among the most aggressive RPS laws in the United States, is poised to meet its current mandate of 33.0% renewable energy by 2020 with already-proposed new renewable energy projects, though significant additional investments will be required to meet the higher 50.0% renewable energy mandate that was adopted in 2015. If, as a result of achieving these targets, these and other U.S. states do not increase their targets in the near future, demand for additional renewable energy could decrease.

Potential acquisition of solar projects could be more challenging taking into account that the cost of solar panels has stabilized and could increase in the future, including as a result of increases in the cost of solar panels or tariffs on imported solar panels imposed by the U.S. government

The U.S. government has imposed tariffs on solar cells manufactured in China which is a large producer of solar cells. These tariffs have increased the price of solar panels containing Chinese-manufactured solar cells. The purchase price of solar panels containing solar cells manufactured in China reflects these tariff penalties. While solar panels containing solar cells manufactured outside of China are not subject to these tariffs, the prices of these solar panels are, and may continue to be, more expensive than panels produced using Chinese solar cells, before giving effect to the tariff penalties.

In addition, the U.S. government is conducting trade investigations relating to solar modules manufactured in China (with cells from other countries) and cells manufactured in Taiwan. In early January 2015, the U.S. government announced its affirmative final determinations in both the countervailing duty and anti-dumping cases against China and in the anti-dumping case again Taiwan. The new preliminary tariffs do not apply to modules with Chinese solar cells. Those modules are still covered by the existing tariffs from the first 2012 trade case.

The declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the pricing of solar energy systems and customer adoption of this form of renewable energy. With the stabilization or increase of solar panel and raw materials prices, our growth could slow. Although we do not purchase solar panels directly, higher cost solar panels could make future purchases of solar assets more difficult.

We are exposed to political, social and macroeconomic risks relating to the United Kingdom’s exit from the European Union

On June 23, 2016, the United Kingdom voted in a national referendum to withdraw from the European Union, or the EU, and the UK government invoked article 50 of the Lisbon Treaty related to withdrawal on March 29, 2017. Under article 50, the Treaty on the European Union and the Treaty on the Functioning of the European Union cease to apply in the relevant state from the date of entry into force of a withdrawal agreement or, failing that, two years after the notification of intention to withdraw, although this period may be extended in certain circumstances. Regardless of the eventual timing or terms of the United Kingdom’s exit from the EU, the result of the June referendum continues to create significant political, social and macroeconomic uncertainty.

There are a number of areas of uncertainty in connection with the future of the United Kingdom and its relationship with the EU and the negotiation of the United Kingdom’s exit terms and related matters may take several years. Given this uncertainty and the range of possible outcomes, it is not currently possible to determine the impact that the United Kingdom’s departure from the EU and/or any related matters may have on general economic conditions in the United Kingdom. The exit of the United Kingdom (or any other country) from the EU or prolonged periods of uncertainty relating to any of these possibilities could result in significant macroeconomic deterioration, including, but not limited to, further decreases in global stock exchange indices, increased foreign exchange volatility, decreased GDP in the European Union or other markets in which the Group operates, and further sovereign credit downgrades. In addition, there could be changes to tax regulation affecting the repatriation of dividends from other countries, which may negatively affect us. Additionally, the impact of potential changes to the United Kingdom’s migration policy could adversely impact our employees of non-UK nationality currently working in the United Kingdom, all of which could have an adverse effect on our operations.
 
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 North America (the United States and Mexico), South America (Peru, Chile and Uruguay), and EMEA (Spain, Algeria and South Africa), and we may expand our operations to certain countries within these core regions. 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 U.S. dollar-denominated contracts in Algeria, Mexico, Chile and Peru are payable in local currency at the exchange rate of the payment date and our contract for Kaxu in South Africa is denominated and payable in South African rand. 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 and Africa frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations. Governmental actions in certain Latin American and African 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. Policies supporting the development of renewable energy have had a significant effect on the growth of investments in renewable energy and they could change at any time. Government subsidies and incentives make the development of renewable projects more competitive by providing tax credits and accelerated depreciation for a portion of the development costs, decreasing the costs associated with developing such projects or creating demand for renewable energy assets through RPS programs. A loss or reduction in such incentives could decrease the attractiveness of renewable energy projects to project developers and the attractiveness of renewable energy to utilities, which could reduce our acquisition opportunities. Such a loss or reduction could also reduce our willingness to pursue renewable energy projects due to higher operating costs or lower revenues. The reduction or elimination of subsidies or incentives 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.
 
Pursuant to our cash dividend policy, we expect to distribute a high percentage of our cash available for distribution after cash interest payments through regular quarterly distributions and dividends, and our ability to grow and make acquisitions through cash on hand could be limited
 
Our dividend policy is to distribute a high percentage of our cash available for distribution, after corporate general and administrative expenses and cash interest payments and less reserves for the prudent conduct of our business, each quarter and to rely primarily upon external financing sources, including the issuance of debt and equity securities as well as borrowings under credit facilities to fund our acquisitions and potential growth capital expenditures. Our target payout ratio is 80% of the cash available for distribution we generate, on an annual basis. See “Item 8.A—Consolidated Statements and Other Financial Information—Dividend Policy.” 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 “Item 8.A—Consolidated Statements and Other Financial Information—Dividend Policy—Our Ability to Grow our Business and Dividend.”

We intend to, whenever possible, make regular quarterly cash distributions to our shareholders in an amount representing 80% of the cash available for distribution generated on an annual basis, taking into account reserves for the prudent conduct of our business. 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 are no limitations in our articles of association on our ability to issue equity securities, including securities ranking senior to our shares. The issuance of additional debt securities and/or the incurrence of additional bank borrowings or other debt by us or by intermediate subsidiaries or by our project-level subsidiaries to finance our growth strategy could result in increased interest expense and the imposition of additional or more restrictive covenants, which, in turn, may impact the cash distributions we receive from our subsidiaries.

Our board of directors may change our dividend policy at any point in time or modify the dividend for specific quarters following prevailing conditions.

We may not be able to identify and reach agreements with new partners similar to the AAGES and Abengoa ROFO Agreements

We intend to enter into an agreement or agreements with new partners that own or develop renewable energy, electric transmission or water assets in the geographies in which we operate. Any such new partner would be a source of assets in addition to AAGES and Abengoa. We cannot be certain that we will be successful in identifying or reaching an agreement with new partners. We also cannot be certain that any agreement with a new partner will have terms similar to the AAGES and Abengoa ROFO Agreements and such terms may be less favorable to us. Even if we do reach an agreement with a new partner, we cannot be certain that we will be able to acquire assets from any such partner in the future.

If we are unable to identify and reach an agreement on favorable terms with new partners with suitable assets, and unable to consummate future acquisitions from any such sponsor, it may limit our ability to execute our growth strategy and limit our ability to increase the amount of dividends paid to holders of our shares.

We may not be able to arrange the required or desired financing for accretive acquisitions

Our ability to effectively consummate future acquisitions will also depend on our ability to arrange the required or desired financing for acquisitions or to refinance existing corporate debt. We may not have access to the capital markets to issue new equity or debt securities or sufficient availability under our credit facilities or have access to project-level financing on commercially reasonable terms when acquisition opportunities arise. During the second half of 2015 and first half of 2016, our access to financing was curtailed by market conditions and other factors. These adverse market conditions could recur in 2018, thereby preventing us from accessing the capital markets in a manner that would permit us to make an accretive acquisition.
 
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, debt securities 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 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. If we are unable to obtain financing necessary for accretive 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.

The Share Sale may not be completed
 
We cannot assure you that the closing of the Share Sale announced between Abengoa and Algonquin will be completed in the first quarter of 2018, or at all.  Although all conditions precedent for the Share Sale have been satisfied and the parties have commenced the process for the transfer of our shares, if the Share Sale does not take place, the AAGES and Algonquin ROFO Agreements will not become effective and we will not derive the benefits of having a new strategic partner.

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

Our business strategy includes growth through the acquisition of additional revenue-generating operational assets. This strategy depends on our ability to successfully identify and evaluate acquisition opportunities and consummate acquisitions on favorable terms. However, the number of acquisition opportunities may be limited. We cannot be certain that AAGES, Algonquin or Abengoa will offer us assets under the ROFO Agreements that fit within our portfolio of assets or contribute to our growth strategy. The Atacama project in Chile is currently owned by APW-1, an investment vehicle initially created by Abengoa as a joint venture with EIG and currently fully owned by EIG, an investment fund; although the Atacama project is subject to our ROFO agreement with APW-1, we cannot be certain that APW-1 will wish to sell the Atacama project at an attractive price or at all.  See “Item 4.B—Business Overview—Our Growth Strategy.”

Our ability to acquire future renewable energy projects depends on the viability of renewable energy projects generally. These projects currently are largely contingent on public policy mechanisms including, among others, ITCs, cash grants, loan guarantees, accelerated depreciation, expensing for certain capital expenditures, carbon trading plans, environmental tax credits and R&D incentives, as discussed in “Item 4.B—Business Overview—Regulation—Regulation in the United States—Federal Considerations for Renewable Energy Generation Facilities.” These mechanisms have been implemented at the U.S. federal and state levels and in certain 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.

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 FPA in respect of acquisitions in the United States; or any other approvals in the countries in which we may purchase assets in the future. 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.

Additionally, acquisitions 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.
 
Furthermore, we will compete with other companies for 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.

Our ability to consummate future acquisitions also depends on the availability of financing.  See “We may not be able to arrange the required or desired financing for accretive acquisitions” above.

Finally, demand for renewable energy may be affected by the cost of other energy sources, including nuclear, coal, natural gas and oil. For example, low natural gas prices have led, in some instances, to increased natural gas consumption in lieu of other energy sources. To the extent renewable energy becomes less cost-competitive cheaper alternatives or otherwise, demand for renewable energy could decrease. Slow growth or a long-term reduction in the energy demand could cause a reduction in the development of renewable energy programs projects. Decreases in the prices of electricity could affect our ability to acquire accretive assets, as renewable energy developers may not be able to compete with providers of other energy sources at such lower prices. Our inability to acquire accretive assets could have a material adverse effect on our ability to execute our growth strategy.

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 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 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. 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 South Africa 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. See “Item 4.B—Business Overview—Regulation.” 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 energy 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;

·
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 occasions, 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 clean-up 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 increase the operating costs in some of our assets

Some of our activities require some consumption of energy and gas, and we are vulnerable to material fluctuations in their prices. For example, our Spanish solar assets produced a small percentage of their electricity using natural gas in 2017. 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 an 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, the transmission capacity we have, and our desalination capacity is sold under long-term offtake agreements with public utilities, industrial or commercial end-users or governmental entities, with a weighted average remaining duration of approximately 19 years as of December 31, 2017.

If, for any reason, including, but not limited to, a deterioration in their financial situation, any of the purchasers of power, transmission capacity or desalination 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 affected. Furthermore, to the extent any of our power, transmission capacity or desalination capacity purchasers are, or are controlled by, governmental entities, our facilities may be subject to sovereign risk or 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 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 “Item 5.A—Operating Results—Results of Operations—Factors Affecting our Results of Operations—Interest rates.”

In addition, although most of our long-term contracts are denominated in, indexed or hedged to U.S. dollars, we conduct our business and incur certain costs in the local currency of the countries in which we operate. In addition, the revenues, costs and debt of our solar assets in Spain are denominated in euros. Since the beginning of 2017, we have euro-denominated debt at the corporate level. Interest payments in euros and our euro denominated general and administrative expenses create a natural hedge for a portion of the distributions from Spanish assets. Our strategy is to hedge the exchange rate for the distributions from our Spanish assets after deducting euro-denominated interest payments and euro-denominated general and administrative expenses. Through currency options, we hedge 100% of the net euro net exposure for the next 12 months and 75% of the net euro net exposure for the following 12 months.  See “Item 5.A—Operating Results—Results of Operations—Factors Affecting our Results of Operations—Exchange Rates” and “Item 11.—Quantitative and Qualitative Disclosures about Market Risk—Foreign exchange rate risk.”

As we continue expanding our business into existing markets such as South America, Europe or other markets, an increasing percentage of our revenue and cost of sales may be denominated in currencies other than our reporting currency, the U.S. dollar. Under that scenario, we would 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.

In addition, we seek to actively work with lending financial institutions to mitigate our interest rate risk exposure and to secure lower interest rates by entering into interest rate options and swaps. As a matter of policy, we seek to cover at least 70% of our outstanding long-term project debt.

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.
The performance of our assets 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, including technologically complex equipment and software which we subcontract to Abengoa or other third-party suppliers in order to meet our contractual obligations under our contracted concessions. We rely on the equipment, design and technology of third parties to operate our assets. In circumstances where key components of our equipment, including but not limited to turbines, water pumps or transformers, fail because of design failures or faulty operation or for any other reason, we rely on third parties to continue operating our assets. In some cases, the replacement of damaged equipment can take a long period of time, which can cause our plants to curtail or cease operations during such time, which could have a negative impact in our results of operations and cash flows. We had significant interruptions in 2017 at Kaxu as a result of water pump failures and at Solana in 2017 as a result of transformer failures. In addition, in the last quarter of 2017 and the first quarter of 2018, we had temporary unavailability in some of our plants due to technical inspections of the turbines  that were requested by the supplier of the turbines. Similar interruptions could happen again at Kaxu or Solana or at other plants due to failures in key equipment.  Design failures, technical inspections by suppliers or need to replace key equipment can require unexpected capital expenditures and/or outages in our plants, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, 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, which in some cases are subsidiaries of Abengoa, for the provision of equipment, technology, fuel, transportation of fuel, and/or other services required for the operation of certain of our facilities. In addition, certain of our suppliers, including Abengoa and its subsidiaries, 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 equipment, technology or fuel and other required services, we would seek to purchase the related goods or services at market prices, exposing us to the risk of unavailability and market price volatility. 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 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. We hold a minority stake in Honaine and do not have control over the operation of that asset. 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. Similarly, the approval of other shareholders or partners may be required to acquire AAGES’, Algonquin’s, Abengoa’s or third parties’ interests in potential acquisitions. 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 Agreements 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, including tax equity investors, may be unable, or unwilling, to fulfill their obligations under the relevant shareholder agreements, may experience financial or other difficulties or might sell their position to third parties that we did not choose, which may adversely affect our investment in a particular joint venture or adversely affect us. 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 may approve acquisitions and investments at any time. This could result in our making acquisitions or investments in assets that are located in different jurisdictions and are different from, and possibly riskier than, those jurisdictions that are described in this annual report. 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, together with the operations and maintenance supplier, are responsible for safety and, accordingly, must implement safe practices and safety procedures, which are also applicable to on-site subcontractors. If we or the operations and maintenance supplier fail to design and implement such practices and procedures or if the practices and procedures 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 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 or our suppliers 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, 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.
 
The operation and maintenance of most of our assets is labor intensive, work stoppages by employees could harm our business

The operation and maintenance of most of our assets is labor intensive and our operators’ employees are covered by collective bargaining agreements. A dispute with a union or employees represented by a union could result in production interruptions caused by work stoppages. If a strike or work stoppage were to occur, our results of operations could be adversely affected.

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, extreme weather conditions (including severe wind), earthquakes or other natural disaster, adverse weather conditions, drought, terrorism, power loss or other catastrophe, or if unexpected geological or other adverse physical conditions (including earthquakes) 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 concentrating solar power 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 insurance premiums were to increase in the future, if certain types of insurance coverage were to become unavailable or there was an increase in deductibles for damages and/or loss of production, it could have an adverse effect on our ability to comply with our obligations to the lenders in our project finance agreements. In addition, 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, requests for arbitration as well as regulatory enforcement actions in the ordinary course of our business and otherwise, including claims against our subsidiaries related to Abengoa or its subsidiaries not meeting its obligations. 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 “Item 4.B—Business Overview—Legal Proceedings.”
 
We are subject to reputational risk, and our reputation is closely related to that of Abengoa and Algonquin
 
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.

Our reputation is still affected by Abengoa’s reputation. The public image and reputation of Abengoa have suffered as a result of its financial condition and its restructuring process. We have been adversely affected due to our relationship with Abengoa. Any further developments with respect to Abengoa’s financial condition or operating performance or any failure by Abengoa to satisfactorily resolve the proceedings discussed below could further harm our reputation, which could have an adverse effect on our business, financial condition and results of operations. See “Item 3D.—Risks Related to Our Relationship with Abengoa.”

In addition, Algonquin will become our largest shareholder upon completion of the Share Sale, for which all conditions precedent have been satisfied and for which the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days. As a result of Algonquin becoming or largest shareholder and sponsor, our reputation is also affected by Algonquin’s reputation. If the public image or reputation of Algonquin were to be damaged as a result of adverse publicity, poor financial or operating performance, changes in financial condition, decline in the price of its shares or otherwise, we could be adversely affected, which could have an adverse effect on our business, financial condition and results of operations.

The loss of one or more of our executive officers or key employees may adversely affect our ability to effectively manage our projects

We depend on our experienced management team and the loss of one or more key executives may negatively affect our business. We also depend on our ability to retain and motivate key employees and attract qualified new employees. We may not be able to replace departing members of our management team or key employees. Integrating new executives into our management team and training new employees with no prior experience in our industry could prove disruptive to our projects, require a disproportionate amount of resources and management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient technical and managerial personnel could limit our ability to effectively manage our projects, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We utilize information technology and communications systems to run our business, the failure of which could significantly impact our operations and business

We are dependent upon information technology systems in the conduct of our operations. Our information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks, phishing attacks, natural disasters and defects in design. Recently, energy facilities are experiencing an increased number of cyber-attacks. Cybersecurity incidents, in particular, are evolving and include malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. Various measures have been implemented to minimize our risks related to information technology systems and network disruptions. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to production downtimes, operational delays, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.

 We maintain global information technology and communication networks and applications to support our business activities. Information technology security processes may not prevent future malicious actions, denial-of-service attacks, or fraud, resulting in corruption of operating systems, theft of commercially sensitive data, misappropriation of funds and business and operational disruption. Material system breaches and failures could result in significant interruptions that could in turn affect our operating results and reputation.
 
Risks Related to Our Assets
 
The concession agreements or power purchase 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 operating targets 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 being revoked, 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, electric transmission or water. 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.
 
Revenues in our solar assets in Spain are mainly defined by regulation and some of the parameters defining the remuneration are subject to review every six years
 
In 2013, the Spanish government modified regulations applicable to renewable energy assets, including solar power. According to Royal Decree 413/2014, solar electricity producers in Spain receive: (i) the pool price for the power they produce and (ii) a payment based on the standard investment cost for each type of plant (without any relation whatsoever to the amount of power they generate). This payment based on investment (in €/MW of installed capacity) is supplemented, in the case of solar plants, by an “operating payment” (in €/MWh produced).
 
The principle driving this economic regime is that the payments received by a renewable energy producer should be equivalent to the costs that they are unable to recover on the electricity pool market where they compete with non-renewable technologies. This economic regime seeks to allow a “well-run and efficient enterprise” to recover the costs of building and running a plant, plus a reasonable return on investment (project investment rate of return). This reasonable return is currently calculated as the average yield on Spanish government 10-year bonds on the secondary market in a 24-month period preceding the new regulatory period, plus a spread depending on the Government’s decision based on the following indicative criteria:
 
·
Appropriate profit for this specific type of renewable electricity generation and electricity generation as a whole, considering the financial condition of the Spanish electricity system and Spanish prevailing economic conditions; and
 
·
Borrowing costs for electricity generation companies using renewable energy sources with regulated payment systems, which are efficient and well run, within Europe.
 
Payment criteria are based on prevailing economic conditions in Spain, demand for electricity and reasonable profits for electricity generation activities and can be revised every six years at the end of each regulatory period. The first regulatory period commenced on July 14, 2013, the date on which Royal Decree-law 9/2013 came into force and will end on December 31, 2019. The values of parameters used to calculate the payments can be changed at the end of each regulatory period, except for a plant’s useful life and the value of a plant’s initial investment. Unless reviewed, payment criteria will be considered to be extended for the subsequent regulatory period.
 
If the payments for renewable energy plants are revised to lower amounts in the next regulatory period starting on January 1, 2020 until December 31, 2025, this could have a material adverse effect on our business, financial condition, results of operations and cash flows. As a reference, assuming our Spanish assets continue to perform as expected and assuming no additional changes of circumstances, with the information currently available we estimate that a reduction of 100 basis points in the reasonable rate of return on investment set by the Spanish government could cause a reduction in our cash available for distribution of approximately €18 million per year. This estimate is subject to certain assumptions, which may change in the future.
 
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 PPA, we are required to deliver power at a fixed rate for the contract period, in some cases with predefined 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 profitability. 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 additional compliance costs or interfere with our existing financial and business planning.
 
Revenue from our renewable energy and efficient natural gas (previously named “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
 
Certain countries, such as the United States, a market that is one of our principal markets, have in recent years 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 ITCs in the United States). See “Item 4.B—Business Overview—Regulation—Regulation in the United States—Federal Considerations for Renewable Energy Generation Facilities—Section 1603 U.S. Treasury Grant Program.”
 
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, particularly if the cost of renewable energy exceeds the cost of generation of energy from other means. Accordingly, we cannot guarantee that such government support will be maintained in full, in part or at all. See “—Government regulations providing incentives and subsidies for renewable energy could change at any time, including pursuant to the proposed environmental and tax policies of the current administration in the United States, and such changes may negatively impact our growth strategy.”
 
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.
 
The results of the 2016 U.S. presidential and congressional elections have created regulatory uncertainty for the alternative energy sector
 
U.S. political developments have created regulatory uncertainty in the renewable energy sector. President Trump has withdrawn the United States from the U.N. Framework Convention on Climate Change designed to curtail global warming. If President Trump and/or the U.S. Congress take further action or publicly speak out about the need to eliminate or further reduce legislation, regulations and incentives supporting renewable energy, such actions may result in a decrease in demand for renewable energy in the United States and may materially harm our business, financial condition and operating results.
 
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 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 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, efficient natural gas (previously named “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 may not perform as expected
 
Our expectations regarding the operating performance of certain assets, particularly Solana and Kaxu, 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. Our projections regarding our ability to generate cash available for distribution and to pay dividends to holders of our shares assume facilities perform in accordance to our expectations. However, the ability of these facilities to meet our performance expectations is subject to the risks inherent in 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.
 
In the case of Solana, we have a partnership with Liberty Interactive Corporation, or Liberty, pursuant to which Liberty agreed to invest $300 million in the parent company of the project entity, in exchange for the right to receive 61.20% of taxable losses and distributions until such time as Liberty reaches a certain rate of return, or the “Flip Date,” and 22.60% of taxable losses and distributions thereafter. Given the underperformance of the asset in the last years, we cannot assure the Flip Date will occur or when it will occur. If the Flip Date never occurs or if there is a delay, this can adversely affect the cash flows expected from that project.
 
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 structures, 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. As climate change increases the frequency and severity of severe weather conditions and may have the long-term effect of changing meteorological conditions at our project sites, such impairments may increase in frequency and/or severity.
 
We base our investment decisions with respect to each renewable generation facility on the findings of related wind and solar studies conducted on-site by third parties prior to construction or based on historical conditions at existing facilities. However, actual climatic conditions at a facility site, particularly wind conditions, which are sometimes severe, 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 efficient natural gas (previously named “conventional”) generation facilities
 
Delivery of fossil fuels to fuel our efficient natural gas and some 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.
 
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 efficient natural gas 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 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 recently completed a restructuring and we cannot guarantee that they will be successful
 
On November 27, 2015, Abengoa reported that it filed a communication pursuant to article 5 bis of the Spanish Insolvency Law 22/2003 with the Mercantile Court of Seville nº 2.
 
On September 24, 2016, Abengoa announced that it signed a restructuring agreement with a group of investors and creditors, which included a commitment from investors and banks to contribute new money to Abengoa. On March 31, 2017, Abengoa announced the completion of the restructuring. In addition, Abengoa has announced publicly that it has arranged a process for the divestiture of the shares it owns in us. See “Item 4.A History and Development of the Company–Our largest shareholders Algonquin and Abengoa.”
 
As of December 31, 2016, the financing arrangement of Kaxu contained cross-default provisions related to Abengoa such that debt defaults by Abengoa, subject to certain threshold amounts and/or a restructuring process, could trigger default under such project financing arrangement. In March 2017, we obtained a waiver in our Kaxu project financing arrangement which waives any potential cross-defaults with Abengoa up to that date, but it does not cover potential future cross-default events.
 
In addition, as of December 31, 2016, the financing arrangements of Kaxu, ACT, Solana and Mojave contained a change of ownership clause that would be triggered if Abengoa ceased to own at least 35.0% of Atlantica’s shares (30.0% in the case of Solana and Mojave). If Abengoa ceased to comply with its obligation to maintain a minimum ownership of Atlantica’s shares, such reduced ownership would put us in breach of covenants under the project financing arrangements.
 
• In the case of Kaxu, in March 2017, we and Kaxu’s lenders entered into a waiver that allows a reduction of ownership by Abengoa below the 35.0% threshold if it occurs in the context of Abengoa’s restructuring plan, which includes the sale to Algonquin.
 
• In the case of ACT, in October 2017, we obtained a waiver from the lenders of the project finance agreement. The financing agreement was amended to delete the minimum ownership clause related to Abengoa.
 
• In the case of Solana and Mojave, a forbearance agreement signed with the DOE in 2016 with respect to these assets allows reductions of Abengoa’s ownership of our shares if it results from (i) a sale or other disposition at any time pursuant to and in connection with a subsequent insolvency proceeding by Abengoa, or (ii) capital increases by us. In other events of reduction of ownership by Abengoa below the minimum ownership threshold such as sales of shares by Abengoa, the available DOE remedies will not include debt acceleration, but DOE remedies available could include limitations on distributions to us from Solana and Mojave. In addition, the minimum ownership threshold for Abengoa’s ownership of our shares has been reduced from 35.0% to 30.0%. In November 2017, in the context of the agreement reached between Abengoa and Algonquin for the acquisition by Algonquin of 25.0% of our shares and based on the obligations of Abengoa under an EPC contract, we signed a consent in relation to the Solana and Mojave projects which reduces the minimum ownership required by Abengoa in us from 30.0% to 16.0%, subject to certain conditions precedent. In Solana, the EPC guarantee period expired without reaching the expected production. As the EPC supplier, Abengoa agreed to provide certain compensations. As a result, the main conditions precedent included several payments by Abengoa to Solana before December 2017 and February 2018 (subsequently postponed to May 2018), for a total amount of $120 million. Additionally, Abengoa has recognized other obligations to Solana for $6.5 million per half-year over 10 years starting in December 2018. In December 2017, Solana received $42.5 million which was used to repay project finance debt. Solana is expected to receive in March 2018 an additional $77.5 million. From this amount $52.5 million are expected to be used to repay project debt and $25 million are expected to cover other current and potential future Abengoa obligations. We cannot guarantee Abengoa will be able to fulfil its obligations to Solana for $6.5 million per half-year over 10 years starting in December 2018. If Solana does not receive the payments agreed and/or if Abengoa does not deliver on its existing obligations as an EPC supplier, Solana may have a negative financial impact or may not reach its target production, which could have a material adverse effect on our results of operations and cash flows.
 
Based on the most recent public information, Abengoa currently owns 41.47% of our shares and upon completion of the Share Sale, will own 16.47% of our shares, all of which are pledged as collateral under their New Money 1 Tradable Notes and loans. If Abengoa ceases to maintain its 16.0% ownership of Atlantica’s shares, such reduced ownership would put us in breach of covenants under the Solana and Mojave project financing arrangements.
 
We have not identified any PPAs or any contracts with offtakers that include any cross-default provision relating to Abengoa or any minimum ownership provision.
 
Neither our Revolving Credit Facility nor our Note Issuance Facility includes a cross-default provision related to Abengoa. They include, however, a cross-default provision related to a default by our project subsidiaries in their financing arrangements, such that a payment default by one or more of our non-recourse subsidiaries representing more than 20% of the cash available for distribution distributed in the previous four fiscal quarters could trigger a default under our Revolving Credit Facility and our Note Issuance Facility. Additionally, under the terms of our Revolving Credit Facility, we are required to comply with (i) a maintenance leverage ratio of our indebtedness at the holding level to our cash available for distribution of 5.00:1.00 on and after January 1, 2018, and (ii) an interest coverage ratio of 2.00:1.00 of cash available for distribution to debt service payments for the duration of the Agreement. Under the terms of our Note Issuance Facility, we are required to comply with (i) a maintenance leverage ratio of our indebtedness to our cash available for distribution of 5.00:1.00 on and after January 1, 2017, and of 4.75:1.00 on and after January 1, 2020, and (ii) a debt service coverage ratio of 2.00:1.00 of cash available for distribution to debt service payments. A payment default in several of our project companies or restrictions in distributions from several of our project companies may trigger these covenants.
 
Furthermore, although we have separated our IT systems from Abengoa’s, we still rely on some of Abengoa’s operational IT systems and communications systems in some of our assets. If Abengoa is unsuccessful in its restructuring, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
Abengoa’s financial condition could affect its ability to maintain existing guarantees and letters of credit under the Financial Support Agreement
 
We expect that Abengoa’s financial condition could affect its ability to comply with its obligations under the Financial Support Agreement. Any failure by Abengoa to meet its obligations under such agreement 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 depend on Abengoa to maintain certain existing guarantees and letters of credit in our favor under the Financial Support Agreement. Even if Abengoa were to sell our shares, it would still be liable under these agreements. If Abengoa were to fail to provide the requisite financial support, we would need to replace the financial guarantees provided by Abengoa and we may be unable to substitute guarantees and letters of credit from a third party on comparable terms, without undue delay or at all. In July 2017, we issued financial guarantees amounting to $112 million in favor of the off-takers of some of our projects, which were previously issued by Abengoa. In addition, as disclosed in our Annual Consolidated Financial Statements, we have current and future collection rights with certain subsidiaries of Abengoa. Additionally, Abengoa has a number of obligations which have resulted or could result in additional liability obligations to us or our assets. Inability of Abengoa to pay their obligations when due would have a negative impact on our current or future cash position.
 
Abengoa’s financial condition could affect its ability to satisfy its obligations under operation and maintenance agreements, warranties and guarantees in certain assets, including production guarantees, pursuant to EPC contracts, as well as other contracts in place
 
In spite of its recent restructuring, a decline in the financial situation of Abengoa and of certain of its subsidiaries could result in a material adverse effect on our operation and maintenance agreements. Abengoa provides operation and maintenance services for many of our assets. We cannot guarantee that Abengoa and/or its subcontractors will be able to continue performing with the same level of service and under the same terms and conditions, and at the same prices. Although we have long-term operation and maintenance agreements with Abengoa for many of our assets, if Abengoa cannot continue performing current services at the same prices, we may need to renegotiate contracts and pay higher prices or have a change in services. In addition, this could cause us to change suppliers, or to pay higher prices or change the level of services. This could have a material adverse effect on our business, results of operations, financial situation and cash flows.
 
A decline in the financial situation of Abengoa could also result in a material adverse effect on Abengoa’s and its subsidiaries’ obligations, warranties and guarantees, including production guarantees, pursuant to certain EPC contracts, the Financial Support Agreement or any other agreement. In addition, Abengoa represented that further to the accession to the restructuring agreement, Atlantica would not be a guarantor of any obligation of Abengoa with respect to third parties and agreed to indemnify the Company for any penalty claimed by third parties resulting from any breach in such representations.
 
There may be unanticipated consequences of further restructuring by Abengoa or ongoing bankruptcy proceedings by Abengoa’s subsidiaries that we have not yet identified. Although we have engaged in extensive contingency plans, we have also hired specialized external counsel in several jurisdictions and to the best of our knowledge, the risks of a potential bankruptcy by Abengoa are known and disclosed, nevertheless, there are uncertainties as to how any further bankruptcy proceeding would be resolved and how our relationship with Abengoa would be affected following the initiation or resolution of any such proceedings.
 
Algonquin and Abengoa are our largest shareholders and exercise substantial influence over us
 
Upon completion of the Share Sale, for which all conditions precedent have been satisfied and for which the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days, Algonquin will beneficially own and will be entitled to vote approximately 25.0% of our ordinary shares and Abengoa will beneficially own and will be entitled to vote approximately 16.47% of our ordinary shares. As a result of this ownership, Algonquin and Abengoa will have substantial influence on our affairs and its ownership interest and voting power constitute a significant percentage of the shares eligible to vote on any matter requiring the approval of our shareholders. Such matters include the election of directors, the adoption of amendments to our articles of association and approval of mergers or sale of all or a high percentage of our assets. This concentration of ownership may also have the effect of discouraging others from making tender offers for our shares. There can be no assurance that the interests of Algonquin or Abengoa will coincide with the interests of the purchasers of our shares or that Algonquin or Abengoa will act in a manner that is in our best interests. If either Algonquin or Abengoa sells its shares of Atlantica Yield to a single shareholder, that new shareholder could continue to exercise substantial influence and could seek to influence or change our strategy or corporate governance or could take effective control of us. In addition, we did not have a prior relationship with Algonquin and we have limited knowledge and visibility of their operations and plans.
 
We may not be able to consummate future acquisitions from AAGES, Algonquin or Abengoa
 
Our ability to grow through acquisitions depends, in part, on AAGES’ and Abengoa’s ability to present us with acquisition opportunities. Abengoa has undergone a restructuring process in recent years. See “Item 4.A—History and Development of the Company—Our largest shareholders Algonquin and Abengoa.” AAGES or Abengoa may have financial and resource constraints limiting or eliminating their ability to continue building the contracted assets which are currently under construction and may have financial and resource constraints limiting or eliminating their ability to develop and build new contracted assets. In addition, AAGES or Abengoa may sell assets under development and, in the case of Abengoa, under construction, before they reach their commercial operation date.
 
In addition, AAGES and Algonquin may not offer us assets at all or may not offer us assets that fit within our portfolio or contribute to our growth strategy.  Only certain assets outside the United States and Canada are included in the Algonquin ROFO.  Furthermore, Algonquin can terminate its ROFO agreement with us with a 180-day notice.
 
Additionally, we may not reach an agreement on the price of assets offered by AAGES, Algonquin or Abengoa.  For these reasons, we may not be able to consummate future acquisitions from AAGES, Algonquin or Abengoa and restrict our ability to grow.
 
Abengoa may be forced to initiate a bankruptcy filing under Spanish Insolvency law and, as a result, it may be subject to insolvency claw-back actions in which transactions may be set aside
 
Under Spanish insolvency law, the transactions a company has entered into during the two years prior to the opening of insolvency proceedings can be set aside, irrespective of whether there was intent to defraud, if those transactions are considered materially damaging to the insolvency estate. Material damage is assessed on the basis of the circumstances at the time the transaction was carried out, without the benefit of hindsight and without considering subsequent events or occurrences, including events in relation to insolvency proceedings or the request to set-aside the transaction.  Though we could be considered a “connected person” for purposes of Spanish bankruptcy proceedings (which triggers a presumption of damage), transactions we have entered into with Abengoa in the previous two years before it is declared insolvent (if such action were to take place) would not automatically be set aside. The court would consider if the transactions were detrimental to Abengoa on the terms on which they were made and the suitability of the transactions at the time they were entered into, if the transaction followed market standards and prices, had real economic value and if a transaction was carried out on the same conditions as it would have been by independent parties.
 
In practice, transactions that are subject to claw-back that usually affect companies in the same group relate to: (a) unjustified payments or advances from the insolvent company to another group company, (b) transfers of assets or rights by the insolvent company to another group company at below market value, (c) payment-in-kind arrangements in which the property another group company receives in payment is higher in value than the debt owed to it, and (d) security provided by the insolvent company for another group company’s obligations. This determination will be a question of fact before a Spanish court if Abengoa initiates a bankruptcy filing in Spain, however if any of the transactions entered into between ourselves and Abengoa, including those related to drop-downs assets, were declared invalid by a Spanish court, unless it is determined we acted in bad faith, such transaction would be unwound and we would receive back the cash paid, which could have a material adverse effect on our business, prospects, results of operations and financial condition.
 
The outcome of any bankruptcy proceedings that may be initiated by Abengoa would be difficult to predict given that Abengoa is incorporated in Spain and has assets and operations in several countries around the world. In the event of any bankruptcy or similar proceeding involving Abengoa or any of its subsidiaries, bankruptcy laws other than those of Spain could apply. The rights of Abengoa’s creditors may be subject to the laws of a number of jurisdictions and such multi-jurisdictional proceedings are typically complex and often result in substantial uncertainty. In addition, the bankruptcy and other laws of such jurisdictions may be materially different from, or in conflict with, one another. If Abengoa is subject to U.S. bankruptcy law, bankruptcy courts in the United States may seek to assert jurisdiction over all of its assets, wherever located, including property situated in other countries.
 
A bankruptcy filing by Abengoa may permanently affect Abengoa’s operations. We cannot predict how any bankruptcy proceeding would be resolved or how our relationship with Abengoa will be affected following the initiation of any such proceedings or after the resolution of any such proceedings. Any bankruptcy proceedings initiated by Abengoa may have material adverse effects on our business, prospects, results of operations and financial condition.
 
Our ownership structure and certain service agreements 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 our minority shareholders
 
Our ownership structure involves a number of relationships that may give rise to certain conflicts of interest between us, Algonquin, Abengoa and the rest of our shareholders. Three of our directors are affiliated with Abengoa and will be affiliated with Algonquin or Abengoa upon completion of the Share Sale. Additionally, operation and maintenance services are provided by subsidiaries of Abengoa for many of our assets, and some of our subsidiaries still have back-office services agreements in place with subsidiaries of Abengoa.
 
Upon completion of the Share Sale, for which all conditions precedent have been satisfied and for which the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days, AAGES, Abengoa and Algonquin will  be related parties under the applicable securities laws governing related party transactions and may have interests that 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 paid by us, 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 transaction between us and AAGES, Algonquin or Abengoa (including the acquisition of any ROFO assets) is subject to our related party transaction policy, which requires prior approval of such transaction by a majority of the non-conflicted directors, typically our independent directors (as discussed in “Item 7.B—Related Party Transactions—Related Party Transactions Policy—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest”). The existence 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.
 
Abengoa’s sales of our shares may increase the risk of divergence of interest between us and Abengoa
 
As a result of its reduction of its ownership of us, Abengoa has less incentive than previously to advance our interests. Even if Abengoa sells all of our shares that it owns, Abengoa is still required to continue to satisfy its contractual obligations under the current contracts with us including the operation and maintenance agreements, the Financial Support Agreement and limited support service agreements in Peru and South Africa. If Abengoa fails to comply with its obligations or terminates operation and maintenance agreements, we would need to find alternative suppliers or alternative ways to perform those services and we cannot be certain that the service level, payment conditions or cost would be comparable to the current O&M contracts with Abengoa, especially in regard to assets with “all in” pricing arrangements. Abengoa also has a number of obligations in several assets as an EPC supplier irrespective of its ownership in us. In Kaxu and Solana, the EPC guarantee periods have expired without reaching the guaranteed production. In Kaxu, we have reached an agreement with Abengoa and the lenders under the project financing agreement to extend the production guarantee until October 2018.
 
A change of control may have negative implications for us
 
Abengoa has communicated that, once the Share Sale is complete, it intends to sell its 16.47% stake in us; if the buyer of Abengoa’s stake in us (or another investor) acquires more than 50.0% of our shares, we might need to refinance all or part of our corporate debt or obtain waivers from the lending financial institutions, due to the fact that they contain customary change of control provisions. Additionally, we could see an increase in the yearly state property tax payment in Mojave, which would be evaluated by the tax authority at the time the change of control potentially occurred. Our best estimate with current information available and subject to further analysis is that we could have an incremental annual payment of property tax of approximately $12 to $14 million annually, which could potentially decrease progressively over time as the asset depreciates.
 
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, 2017, we had approximately (i) $5,475.2 million of total indebtedness under various project-level debt arrangements and (ii) $643.1 million of total indebtedness under our corporate arrangements, which include the 2019 Notes and our drawdowns under the Revolving Credit Facility and the Note Issuance Facility. Our substantial debt could have important negative consequences on our financial condition, including:
 
·
increasing our vulnerability to general economic and industry conditions;
 
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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;
 
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limiting our ability to enter into long-term power sales, fuel purchases and swaps which require credit support;
 
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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;
 
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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;
 
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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
 
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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 operating and financial restrictions and covenants in the indenture governing the 2019 Notes, the credit agreement governing the Revolving Credit Facility, and the facility agreement governing the Note Issuance Facility may adversely affect our ability to finance our future operations or capital needs, to engage in other business activities that may be in our interest and to execute our business strategy as we intend to do so.
 
The indenture governing the 2019 Notes contains covenants that limit certain of our and the guarantors’ activities, including those relating to: incurring additional indebtedness; paying dividends on, redeeming or repurchasing our capital stock; prepaying subordinated indebtedness; making certain investments; imposing certain restrictions on the ability of subsidiaries to pay dividends or other payments; creating certain liens; transferring or selling assets; merging or consolidating with other entities; entering into transactions with affiliates; and engaging in unrelated businesses. Each of the covenants is subject to a number of important exceptions and qualifications. In addition, certain of the covenants listed above will terminate before the 2019 Notes mature if at least two of the specified rating agencies assign the 2019 Notes an investment grade rating in the future and no events of default under the indenture governing the 2019 Notes exist and are continuing. Any covenants that cease to apply to us as a result of achieving investment grade ratings will not be restored, even if the credit ratings assigned to the 2019 Notes later fall below investment grade. The indenture governing the 2019 Notes also contains customary events of default (subject in certain cases to customary grace and cure periods). Generally, if an event of default occurs and is not cured within the time periods specified, the trustee or the holders of at least 25.0% in principal amount of the 2019 Notes then outstanding may declare all of the 2019 Notes to be due and payable immediately.
 
The Revolving Credit Facility contains covenants that limit certain of our and the guarantors’ activities, including those relating to: mergers; consolidations; the ability to incur additional indebtedness; sales, transfers and other dispositions of property and assets; providing new guarantees; investments; granting additional security interests, transactions with affiliates and our ability to pay cash dividends is also subject to certain standard restrictions. Additionally, we are required to comply with (i) a maintenance leverage ratio of our indebtedness at the holding level to our cash available for distribution of 5.00:1.00 from January 1, 2018 and (ii) an interest coverage ratio of cash available for distribution to debt service payments of 2.00:1.00 for the duration of the agreement. The Revolving Credit Facility also contains customary events of default, the ability of the lenders to declare the unpaid principal amount of all outstanding loans, and interest accrued thereon, to be immediately due and payable. In addition, our Revolving Credit Facility includes a cross-default provision related to a default by our project subsidiaries in their financing arrangements, such that a payment default by one or more of our non-recourse subsidiaries representing more than 20.0% of the cash available for distribution distributed in the previous four fiscal quarters could trigger a default under our Revolving Credit Facility.
 
Additionally, the Note Issuance Facility contains covenants that limit certain of our and the guarantors’ activities, including those relating to: mergers; consolidations; the ability to incur additional indebtedness; sales, transfers and other dispositions of property and assets; providing new guarantees; investments; granting additional security interests, transactions with affiliates and our ability to pay cash dividends is also subject to certain standard restrictions. Additionally, we are required to comply with (i) a maintenance leverage ratio of our indebtedness (including that of our subsidiaries) to our cash available for distribution of 5.00:1.00 from January 1, 2017, and of 4.75:1.00 from January 1, 2020, and (ii) a debt service coverage ratio of 2.00:1.00 of cash available for distribution to debt service payments.
 
 If we violate any of these covenants, a default may result, which, if not cured or waived, could result in the acceleration of our debt and could limit our ability to pay dividends.
 
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 extent of the restrictions on our subsidiaries’ ability to transfer assets to us through loans, advances or cash dividends without the consent of third parties is significant. 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 some of our assets prohibits distributions until 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, including covenants under our 2019 Notes, the Revolving Credit Facility and the Note Issuance Facility, may entitle the related noteholders or lenders, as applicable, 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 the 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:
 
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general economic and capital market conditions;
 
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credit availability from banks and other financial institutions;
 
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investor confidence in us, our partners: Algonquin, as our largest shareholder upon the completion of the Share Sale, for which all conditions precedent have been satisfied and for which the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days, and Abengoa as a shareholder and a supplier;
 
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final outcome of Abengoa’s insolvency proceedings;
 
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our financial performance and the financial performance of our subsidiaries;
 
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our level of indebtedness and compliance with covenants in debt agreements;
 
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maintenance of acceptable project credit ratings or credit quality;
 
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cash flow; and
 
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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 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, Abengoa or other persons could adversely affect us
 
Our project subsidiaries’ financing agreements are primarily 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 “project debt.” As of December 31, 2017, we had $5,475.2 million of outstanding indebtedness under various project-level debt arrangements.
While the lenders under our project debt 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:
 
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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;
 
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causing us to record a loss in the event the lender forecloses on the assets of the project company; and
 
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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.
 
The financing arrangements of some of our project subsidiaries contained cross-default provisions related to Abengoa, such that debt defaults by Abengoa could trigger defaults under such project financing arrangements. In addition, some of our project financing arrangements contained a change of control provision that would be triggered if Abengoa ceases to own at least 35.0% of Atlantica Yield’s shares. During the years 2015, 2016 and 2017, waivers and forbearances have been obtained for most of our project financing agreements from all the parties of these project financing arrangements containing such covenants.
 
In March 2017, we obtained a waiver in our Kaxu project financing arrangement which waives any potential cross-defaults with Abengoa up to that date, but it does not cover potential future cross-default events.
 
In the case of Solana and Mojave, a forbearance agreement signed with the DOE in 2016 with respect to these assets allows reductions of Abengoa’s ownership of our shares if it results from (i) a sale or other disposition at any time pursuant to and in connection with a subsequent insolvency proceeding by Abengoa, or (ii) capital increases by us. In other events of reduction of ownership by Abengoa below the minimum ownership threshold such as sales of shares by Abengoa, the available DOE remedies will not include debt acceleration, but DOE remedies available could include limitations on distributions to us from Solana and Mojave. In addition, the minimum ownership threshold for Abengoa’s ownership of our shares has been reduced from 35.0% to 30.0%. In November 2017, in the context of the agreement reached between Abengoa and Algonquin for the acquisition by Algonquin of 25.0% of our shares and based on the obligations of Abengoa under an EPC contract, we signed a consent in relation to the Solana and Mojave projects which reduces the minimum ownership required by Abengoa in us from 30.0% to 16.0%, subject to certain conditions precedent. In Solana, the EPC guarantee period expired without reaching the expected production. As the EPC supplier, Abengoa agreed to provide certain compensations. As a result, the main conditions precedent included several payments by Abengoa to Solana before December 2017 and February 2018 (subsequently postponed to May 2018), for a total amount of $120 million. Additionally, Abengoa has recognized other obligations to Solana for $6.5 million per half-year over 10 years starting in December 2018. In December 2017, Solana received $42.5 million which was used to repay project finance debt. Solana is expected to receive in March 2018 an additional $77.5 million. From this amount $52.5 million are expected to be used to repay project debt and $25 million are expected to cover other current and potential future Abengoa obligations.
 
Neither our Revolving Credit Facility nor our Note Issuance Facility include a cross-default provision related to Abengoa. They both include, however, a cross-default provision related to a default by our project subsidiaries in their financing arrangements. Under the Revolving Credit Facility, a payment default by one or more of our non-recourse subsidiaries representing more than 20.0% of the cash available for distribution distributed in the previous four fiscal quarters could trigger a default under our Revolving Credit Facility. In addition, our Note Issuance Facility includes a cross-default provision related to a payment default by (i) us or our subsidiaries, other than our non-recourse subsidiaries, with respect to indebtedness for more than $75 million, or (ii) our non-recourse subsidiaries with respect to indebtedness for more than $100 million.
Any of these events could have a material adverse effect on our financial condition, results of operations or 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:
 
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the level and timing of capital expenditures we make;
 
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the level of our operating and general and administrative expenses;
 
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seasonal variations in revenues generated by the business;
 
·
operational performance of our assets;
 
·
potential capital expenditure requirements in our assets in the case there were technical problems not covered by the EPC contractor guarantee or by insurance;
 
·
our debt service requirements and other liabilities;
 
·
fluctuations in our working capital needs;
\
·
our ability to borrow funds;
 
·
restrictions contained in our debt agreements (including our project-level financing);
 
·
changes in our revenues due to delays in collections from our offtakers, legal disputes regarding contact terms or adjustments contemplated in existing regulation or changes in regulation or taxes in the countries in which we operate;
 
·
potential restrictions on payment of dividends arising from cross-default provisions with Abengoa or change of ownership provisions included in certain of our project financing agreements; 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, the 2019 Notes, the Revolving Credit Facility, the Note Issuance Facility 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.
 
In 2016, our board of directors decided not to pay a dividend with respect to the first quarter, and declared a reduced dividend in the following quarters, based on the fact that certain of our assets contain cross default provisions and change of ownership provisions with Abengoa.  In 2017, with the receipt of most waivers, we progressively increased our dividends. However, we cannot assure you that our board of directors will not take similar measures in upcoming periods.
 
Our cash available for distribution will likely fluctuate from quarter to quarter, in some cases significantly, due to seasonality. See “Item 4.B—Business Overview—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 wit 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. Our board of directors may change our dividend policy at any point in time or modify the dividend for specific quarters following prevailing conditions. For a description of additional restrictions and factors that may affect our ability to pay cash dividends, please see “Item 8.A—Consolidated Statements and Other Financial Information—Dividend Policy.”
 
We are a holding company and our only material assets are our interests 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 consist of our interests in our subsidiaries. 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 our corporate debt services, corporate general and administrative expenses, 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. A continued increase in market interest rates, which are still at relatively low levels compared to historical rates, may lead prospective purchasers of our shares to expect a higher dividend yield. In the United States, interest rates, and expectations of still higher interest rates, have increased over the past year in the markets. During the first two months of 2018, equities in the United States have experienced a downturn which has also affected utilities and the yieldco sector, partially due to expectations of interest rates increases. The low price of our shares might make our dividend per share growth more difficult, since acquisitions financed with equity could be less accretive. 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.
 
Market volatility may affect the price of our shares and the value of your investment
 
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, Africa 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. In the past there has been correlation between the price of our shares, the price of oil and the price of shares of master limited partnerships, or MLPs, and a decline in the price of oil or MLP shares could cause a decline in the price of our shares. The price of our shares can also be affected by our peers’ share price. 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 of our shares.
 
In addition, the market price of our shares may fluctuate in the event of negative developments at Abengoa, Algonquin, the termination of the AAGES, Algonquin or Abengoa ROFO Agreements, uncertainty on the sale process of the remaining 16.47% stake of Abengoa in us, or additions or departures of our key personnel, changes in market valuations of similar companies, Algonquin or Abengoa and/or speculation in the press or investment community regarding us, Algonquin or Abengoa.
 
You may experience dilution of your ownership interest due to the future issuance of additional shares
 
In order to finance the growth of our business through future acquisitions, we may require additional funds from further equity or debt 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 any of our previous 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, Algonquin, Abengoa, 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 Algonquin, Abengoa or its lenders may cause the price of our shares to fall
 
The market price of our shares could decline as a result of future sales by Algonquin or Abengoa of its shares in the market, or the perception that these sales could occur. Upon the completion of the Share Sale, Algonquin will own 25.0% or our ordinary shares, and Abengoa will own 16.47% of our ordinary shares.  The shares owned by Abengoa are pledged to financial institutions as collateral for borrowings under financing arrangements.
 
Abengoa has communicated that it intends to sell its remaining 16.47% stake in us over the upcoming months in a private transaction, subject to approval by the DOE.  Algonquin has an option to purchase this remaining stake until March 2018, according to public information.  If Abengoa defaults on any of these financing arrangements, such lenders may foreclose on the shares and sell the shares in the market. 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 the number of shares being offered for sale in the market and depress the trading price of our shares.
 
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.
If we were to lose our “foreign private issuer” status, we would no longer be exempt from certain provisions of the U.S. securities laws we would be required to commence reporting on forms required of U.S. companies, and we could incur increased compliance and other costs, among other consequences.
 
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.
 
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. 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.
 
In addition, under the Shareholders Agreement that will become effective upon completion of the Share Sale, for which all conditions precedent have been satisfied and for which the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days, AAGES or Algonquin or both of them may subscribe in cash for (i) up to 100.0% of our ordinary shares if the purpose of the issuance is to fund our acquisition of assets under the AAGES or Algonquin ROFO Agreement; and (ii) up to 66.0% of our ordinary shares if the purpose of the issuance is to fund our acquisition of assets under the Abengoa ROFO Agreement. If we issue ordinary shares for any other purpose, AAGES or Algonquin may subscribe in cash for our ordinary shares in a pro rata amount of such AAGES’ or Algonquin’s aggregate holding of voting rights in us.
 
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 UK 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 “Item 10.B—Memorandum and Articles of Association.”
 
Provisions in the UK 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 UK 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 UK tax authorities. Under the Takeover Code, the Takeover Panel will 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 Atlantica 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 Atlantica 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 net operating loss carryforwards sufficient to offset our taxable income
 
We expect to generate net operating losses and net operating loss carryforwards (collectively, “NOLs”) 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 10 years, with the exception of ACT in Mexico, where we do not expect to pay significant income taxes until the fifth or sixth year after our IPO (i.e. until 2019 or 2020) once we use existing NOLs.
 
While we expect these NOLs 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 NOLs 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
 
We have generated significant U.S. NOLs. We generally are able to carry U.S. NOLs forward to reduce our tax liability in future years. Federal U.S. NOLs generated on or before December 31, 2017 can generally be carried back two years and carried forward for up to twenty years and can be applied to offset 100% of taxable income in such years. Under the TCJA, however, federal U.S. NOLs incurred in 2018 and in future years may be carried forward indefinitely but may not be carried back and the deductibility of such federal U.S. NOLs is limited to 80% of taxable income in such years. It is uncertain how various states will respond to the newly enacted federal tax law.
 
In addition, our ability to use U.S. NOLs generated is subject to the rules of Sections 382 of the IRC. This section generally restricts the use of U.S. NOLs if we were to experience an “ownership change” as defined under Section 382 of 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 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, and increased by a certain portion of any “built-in-gains.”
 
The Abengoa restructuring has caused a change of ownership under Section 382 of the IRC, which has limited in part our ability to use net operating loss carryforwards.  See “Item 5.A—Operating Results—Results of Operations—Factors affecting the comparability of our results of operations—Change of ownership under Section 382 of the IRC.” The potential total or partial sale by Abengoa of its stake in us may have caused or may cause another change of ownership, which may limit further our ability to use net operating loss carryforwards in the United States. Future sales by our largest shareholders, future equity issuances and in general the activity of our direct or indirect shareholders may limit further our ability to use net operating loss carryforwards in the United States, which could have a potential adverse effect on cash flows from U.S. projects expected in the future.
In addition, because we have recorded tax credits for the U.S. tax losses carryforwards in the past, a limit to our ability to use net operating loss carryforwards in the United States could result in writing off tax credits, which could cause a substantial non-cash Income tax expense in our financial statements.
 
U.S. federal income tax reform could adversely affect us
 
On December 22, 2017, the United States enacted new tax legislation, the TCJA, which provides for substantial changes to the U.S. taxation of businesses and individuals.  The TCJA, among other things, significantly reduces the U.S. federal tax rate applicable to corporations, imposes significant additional limitations on the deductibility of interest, temporarily allows for the expensing of certain capital expenditures, limits the deduction for NOLs to 80% of current year taxable income and eliminates NOL carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such NOLs may be carried forward indefinitely). We do not expect tax reform to have a material impact on our projection of minimal cash taxes or on our net operating losses. Our net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate rate, and the impact has been recognized in our tax expense for 2017.  See “Item 5.A—Operating Results—Results of Operations—Factors affecting the comparability of our results of operations—U.S. Tax Reform.” Additionally, while the ITC and the PTC available for renewable energy investments in the United States were left unchanged, the lower corporate tax rate and the new base erosion anti-abuse tax (intended to prevent international groups from ‘earnings stripping’ through certain payments to foreign affiliates) may impact the cost and availability of tax equity financing, which could have a negative effect on our growth prospects in the United States. We continue to examine the impact this tax reform legislation may have on our business. The impact of this tax reform on stockholders is uncertain and could be adverse. We urge prospective investors to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our shares.
 
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 “Item 10.E—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 we were a “passive foreign investment company” within the meaning of Section 1297 of the IRC (a “PFIC”) for any taxable year during which a U.S. Holder held our shares, certain adverse U.S. federal income tax consequences may apply to the U.S. Holder. We do not believe that we were a PFIC for our 2017 taxable year and do not expect to be a PFIC for U.S. federal income tax purposes for the 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 25.0% 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 we 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 distributions, interest charges on certain taxes treated as deferred, and additional reporting requirements. See “Item 10.E—Taxation—Material U.S. Federal Income Tax Considerations—Passive foreign investment company rules.”
 
Changes in tax regimes may affect us adversely
 
We have assets in different jurisdictions, which are subject to different tax regimes. Changes in tax regimes such as the reduction or elimination of tax benefits, or the reduction of tax rates overall in markets where we operate could adversely affect the market for investments in our projects by third parties. A reduction in corporate tax rates could make investments in renewable projects less attractive to potential tax equity investors, in which case we may not be able to obtain third-party financing on terms as beneficial as in the past, or at all, which could limit our ability to grow our business.  Limitations on the deductibility of interest expense could reduce our ability to deduct the interest we pay on our debt.  These and other potential changes in tax regulations could have a material adverse effect on our results and cash flows.
 
ITEM 4.
INFORMATION ON THE COMPANY
 
A.
History and Development of the Company
 
We were incorporated in England and Wales as a private limited company on December 17, 2013 under the name “Abengoa Yield Limited.” On March 19, 2014, we were re-registered as a public limited company, under the name “Abengoa Yield plc.” On January 7, 2016, we changed our corporate brand to Atlantica Yield. At our annual shareholders meeting held in May 2016, we changed our legal name to Atlantica Yield plc.
 
The address of our principal executive offices is Great West House, GW1, 17th floor, Great West Road, Brentford, United Kingdom TW8 9DF, and our phone number is +44 203 499 0465.
 
We are a total return company that owns, manages, and acquires renewable energy, efficient natural gas (previously named “conventional”) power, electric transmission lines and water assets, focused on North America (the United States and Mexico), South America (Peru, Chile and Uruguay) and EMEA (Spain, Algeria and South Africa). We intend to expand maintaining North America, South America and Europe as our core geographies.
 
On June 18, 2014, we completed our IPO and listed our shares on the NASDAQ Global Select Market under the symbol “ABY.” On November 14, 2017, the ticker symbol was changed to “AY.”
 
 Prior to the consummation of our IPO, Abengoa transferred to us ten assets representing an initial portfolio comprising 710 MW of renewable energy generation, 300 MW of efficient natural gas (previously named “conventional”) power generation and 1,018 miles of electric transmission lines and an exchangeable preferred equity investment in ACBH. The assets in the initial portfolio consisted of:
 
·
Renewable energy assets in the initial public offering consisted of (i) two 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) a solar power complex in Spain, Solaben 2/3, with a gross capacity of 100 MW.
 
·
Efficient natural gas power assets consisting of ACT Energy Mexico, or ACT, a 300 MW cogeneration plant in Mexico.
 
·
Electric transmission lines consisting of (i) two lines in Peru, ATN and ATS, spanning a total of 931 miles; and (ii) three lines in Chile, Quadra 1, Quadra 2, and Palmucho, spanning a total of 87 miles.
 
Upon our IPO, we signed an exclusive agreement with Abengoa, which we refer to as the Abengoa 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, efficient natural gas 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, the Middle East and Asia.
 
On November 1, 2017, Algonquin agreed to acquire 25.0% of our shares from Abengoa at a price of $24.25 per share, and upon completion of the share sale, will become our largest shareholder.  All conditions precedent have been satisfied and the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days. In addition, Algonquin and Abengoa have created a joint venture, AAGES, to jointly invest in the development and construction of clean energy and water infrastructure contracted assets. On March 5, 2018 we also entered into a ROFO agreement with AAGES, which provides us with a right of first offer on any proposed sale, transfer or other disposition of AAGES ROFO Assets.  Some of the assets currently under construction by Abengoa may be transferred to AAGES and our ROFO agreement with AAGES will include these assets.  We also have entered into a ROFO agreement with Algonquin covering certain of their non-U.S. and non-Canadian assets.
 
Acquisitions
 
On February 3, 2015, we completed the acquisition of a 25.5% stake in Honaine and a 34.2% stake in Skikda, two desalination plants in Algeria with an aggregate capacity of 10.5 M ft3 per day. On February 23, 2015, we completed the acquisition of a 29.6% stake in Helioenergy 1/2, a solar power asset in Spain with a capacity of 100 MW.
 
On May 13, 2015, we completed the acquisition of Helios 1/2, a 100 MW solar complex located in Spain. On May 14, 2015, we completed the acquisition of Solnova 1/3/4, a 150 MW solar complex located in Spain.  On May 25, 2015, we completed the acquisition of the remaining 70.4% stake in Helioenergy 1/2, a 100 MW solar complex in Spain. On July 30, 2015, we completed the acquisition of Kaxu, a 100 MW solar plant in South Africa.
 
On June 25, 2015, we completed the acquisition of ATN2, an 81-mile transmission line in Peru from Abengoa and Sigma, a third-party financial investor in the project. On September 30, 2015, we completed the acquisition of Solaben 1/6, a 100 MW solar complex in Spain. On January 7, 2016, we completed the acquisition of a 13% stake in Solacor 1/2, a 100 MW solar complex where we already owned a 74.0% stake.
 
On August 3, 2016, we completed the acquisition of an 80.0% stake in Seville PV, a 1MW PV plant located next to Solnova 1/3/4.
 
On February 28, 2017, we completed the acquisition of a 12.5% interest in a 114-mile transmission line in the U.S. from Abengoa at cost. We expect our total investment to be up to $10 million in the coming three years, including the initial amount invested at cost.
 
On February 28, 2018, we completed the acquisition of a 4 MW mini-hydroelectric power plant in Peru for $9 million. The plant reached COD in 2012. It has a fixed-price concession agreement denominated in U.S. dollars with the Ministry of Energy of Peru and the price is adjusted annually in accordance with the U.S. Consumer Price Index. We financed the acquisition with available cash on hand.
 
Our largest shareholders Algonquin and Abengoa
 
When we closed our initial public offering, Abengoa had a 64.28% interest in us. Following several divestitures, since the end of 2015 Abengoa has beneficially owned 41,557,663 of our shares (a 41.47% interest) of which 41,530,843 shares were pledged under the secured New Money 1 Tradable Notes.
 
In 2015, Abengoa filed a communication pursuant to article 5 bis of the Spanish Insolvency Law 22/2003 with the Mercantile Court of Seville nº 2. On November 8, 2016, the Judge of the Mercantile Court of Seville declared judicial approval of Abengoa’s restructuring agreement, extending the terms of the agreement to those creditors who had not approved the restructuring agreement. On February 3, 2017, Abengoa announced it obtained approval from creditors representing 94% of its financial debt after a supplemental accession period. On March 31, 2017, Abengoa announced the completion of its financial restructuring.
 
On November 1, 2017, Algonquin announced that it had reached an agreement with Abengoa to acquire 25.0% of our shares from Abengoa. Upon completion of the Share Sale, Algonquin will acquire a 25.0% interest in our shares from Abengoa in a private transaction with an option to acquire the remaining 16.47% held by Abengoa prior to March 31, 2018, according to public information.  All conditions precedent for the Share Sale have been satisfied and the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days. Abengoa has publicly stated that it intends to sell its remaining 16.47% stake in us over the upcoming months in a private transaction, subject to approval by the DOE, should Algonquin not exercise its option.  As of the date of the most recent public information, Abengoa owns 41,557,663 shares of us, (41.47%) which are entirely pledged.
 
In the context of the Algonquin transaction, we signed the Shareholders Agreement with Algonquin, which will become effective upon completion of the Share Sale, which limits Algonquin’s ownership in us to a maximum of 41.47% of our outstanding shares (with a certain exception where such ownership may be temporarily increased up to 46%) and limits the number of directors they can appoint to a maximum of 50% less one (if the resulting number is not a whole number, it shall be rounded up to the next whole number). In addition, Algonquin has agreed to provide, subject to board approval, incremental equity investment of up to $100 million through the subscription of our ordinary shares for the acquisition of new assets during 2018 and 2019 and has been granted certain preferred rights when participating in further equity issuances with the possibility of increasing Algonquin’s ownership in us up to 41.47% (and up to 46% in certain cases).  Additionally, we have agreed to maintain a target payout ratio of 80%.  We agreed with Algonquin to periodically discuss the potential acquisition of assets from Algonquin pursuant to the Algonquin ROFO agreement.  See “Item 7.B Related Party Transactions.”
 
We have also signed a ROFO agreement with AAGES, the joint venture created between Algonquin and Abengoa to invest in the development and construction of clean energy and water infrastructure contracted assets. The AAGES ROFO Agreement, which will become effective upon completion of the Share Sale, provides us with a right of first offer on any proposed sale, transfer or other disposition of AAGES ROFO Assets. Some of the assets currently under construction by Abengoa may be transferred to AAGES and the AAGES ROFO agreement will include such assets within its scope. Additionally, we have entered into a ROFO agreement with Algonquin, which will become effective upon completion of the Share Sale, pursuant to which Algonquin has agreed to periodically discuss the possibility of the sale to us of interests in certain assets owned by Algonquin in Canada and the United States and which provides us with a right of first offer on any proposed sale, transfer or other disposition of Algonquin’s assets located outside of the United States and Canada, which are developed under expected long-term revenue agreements or concession agreements. See “Item 7.B—Related Party Transactions.”
 
B.
Business Overview
 
Overview
 
We are a total return company that owns, manages, and acquires renewable energy, efficient natural gas (previously named “conventional”) power, electric transmission lines and water assets, focused on North America (the United States and Mexico), South America (Peru, Chile and Uruguay) and EMEA (Spain, Algeria and South Africa). We intend to expand, maintaining North America, South America and Europe as our core geographies.
 
As of the date of this annual report, we own or have interests in 22 assets, comprising 1,446 MW of renewable energy generation, 300 MW of efficient natural gas power generation, 10.5 M ft3 per day of water desalination and 1,099 miles of electric transmission lines. All of our assets have contracted revenues (regulated revenues in the case of our Spanish assets) with low-risk off-takers and collectively have a weighted average remaining contract life of approximately 19 years as of December 31, 2017. Most of the assets we own have project-finance agreements in place.
 
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, offers us a lower cost of capital than that of a traditional engineering and construction company or independent power producer and provides us with a significant competitive advantage with which to execute our growth strategy.
 
We are focused on high-quality, newly-constructed and long-life facilities with creditworthy counterparties that we expect will produce stable, long-term cash flows. We will seek to grow our cash available for distribution and our dividend to shareholders through organic growth and by acquiring new contracted assets from AAGES, Abengoa, third parties and potential new future partners.
 
We have in place an exclusive agreement with Abengoa, which we refer to as the Abengoa 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, efficient natural gas 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, the Middle East and Asia. See “Item 4.B—Business Overview—Our Growth Strategy” and “Item 7.B—Related Party Transactions—Abengoa Right of First Offer.”
 
In addition, on March 5, 2018 we entered into a ROFO agreement with AAGES, which we refer to as the AAGES ROFO Agreement, that will become effective upon completion of the Share Sale, for which all conditions precedent have been satisfied and for which the parties have commenced the process for the transfer of our shares, which we expect to close in the upcoming days, AAGES is the joint venture formed by Algonquin and Abengoa to develop and invest renewable energy and water assets. The AAGES ROFO Agreement provides us with a right of first offer on any proposed sale, transfer or other disposition of AAGES’ ROFO Assets. See “Item 4.B—Business Overview—Our Growth Strategy” and “Item 7.B—Related Party Transactions—Right of First Offer.”
 
Additionally, we plan to sign similar agreements or enter into partnerships with other developers or asset owners to acquire assets in operation. We may also invest directly or through investment vehicles with partners in assets under development or construction, ensuring that such investments are always a small part of our total investments. Finally, we also expect to acquire assets from third parties leveraging the local presence and network we have in the geographies and sectors in which we operate.
 
With this business model, our objective is to pay a consistent and growing cash dividend to shareholders that is sustainable on a long-term basis. We expect to distribute a significant percentage of our cash available for distribution as cash dividends and we 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. Pursuant to our cash dividend policy, we intend to pay a cash dividend each quarter to holders of our shares.
 
Based on the acquisition opportunities available to us, we believe that we will have the opportunity to grow our cash available for distribution in a manner that would allow us to increase our cash dividends per share over time. Prospective investors should read “Item 5.B—Liquidity and Capital Resources—Cash dividends to investors” and “Item 3.D—Risk Factors,” including the risks and uncertainties related to our forecasted results, acquisition opportunities and growth plan, in their entirety.
 
Purpose of Atlantica Yield
 
We intend to create value for our shareholders by seeking to (i) achieve recurrent and growing dividends to investors valuing long-term contracted assets and (ii) grow our cash available for distribution and our cash dividends paid to shareholders by acquiring new contracted assets from AAGES, Abengoa, third parties and potential new future partners.
 
Current Operations
 
We own a diversified portfolio of contracted assets across the renewable energy, efficient natural gas (previously named “conventional”) power, electric transmission line and water sectors in North America (the United States and Mexico), South America (Peru, Chile and Uruguay) and EMEA (Spain, Algeria and South Africa). We intend to expand, maintaining North America, South America and Europe as our core geographies. Our portfolio consists of 14 renewable energy assets, a natural gas-fired cogeneration facility, several electric transmission lines and minority stakes in two water desalination plants, all of which are fully operational.  All of our assets have contracted revenues (regulated revenues in the case of our Spanish assets) with low-risk offtakers and collectively have a weighted average remaining contract life of approximately 19 years as of December 31, 2017. We expect that the majority of our cash available for distribution over the next three years will be in U.S. dollars, indexed to the U.S. dollar or in euros. We intend to maintain a ratio of over 80% of our cash available for distribution denominated in U.S. dollars or euros and to hedge the euros for the upcoming 24 months on a rolling basis strategy. Approximately 93% 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.
 
The following table provides an overview of our current assets:
 
Assets
 
Type
 
Ownership
Location
 
Currency(1)
 
Capacity 
(Gross)
 
Offtaker
 
Counterparty
Credit
Rating(2)
 
COD
 
Contract
Years Left
Solana
 
Renewable (Solar)
 
100% Class B(3)
Arizona (USA)
 
USD
 
280 MW
 
APS
 
A-/A3/A-
 
4Q 2013
 
26
Mojave
 
Renewable (Solar)
 
100%
California (USA)
 
USD
 
280 MW
 
PG&E
 
A-/A3/A-
 
4Q 2014
 
22
Solaben 2/3(4)
 
Renewable (Solar)
 
70%(5)
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2012 & 2Q 2012
 
20 / 19
Solacor 1/2(6)
 
Renewable (Solar)
 
87%(7)
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
1Q 2012 & 1Q 2012
 
19 / 19
PS10/20(8)
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
31 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
1Q 2007 & 2Q 2009
 
14 / 16
Helioenergy 1/2(9)
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2011 & 4Q 2011
 
19 / 19
Helios 1/2(10)
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
2Q 2012 & 3Q2012
 
20 / 20
Solnova 1/3/4(11)
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
3x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
2Q 2010 & 2Q 2010 & 3Q 2010
 
17 / 17 / 18
Solaben 1/6(12)
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2013
 
21 / 21
Seville PV
 
Renewable (Solar)
 
80%(13)
Spain
 
EUR
 
1 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2006
 
18
Kaxu
 
Renewable (Solar)
 
51%(14)
South Africa
 
ZAR
 
100 MW
 
Eskom
 
BB/Baa3/ BB+(15)
 
1Q 2015
 
17
Palmatir
 
Renewable (Wind)
 
100%
Uruguay
 
USD
 
50 MW
 
Uruguay
 
BBB/Baa2/ BBB-(16)
 
2Q 2014
 
16
Cadonal
 
Renewable (Wind)
 
100%
Uruguay
 
USD
 
50 MW
 
Uruguay
 
BBB/Baa2/ BBB-(16)
 
4Q 2014
 
17
Mini-hydro Peru
 
Renewable (Hydro)
 
100%
Peru
 
USD
 
4 MW
 
Peru
 
BBB+/A3/ BBB+
 
2Q 2012
 
15
ACT
 
Efficient Natural Gas Power(19)
 
100%
Mexico
 
USD
 
300 MW
 
Pemex
 
BBB+/A3/ BBB+
 
2Q 2013
 
15
ATN
 
Transmission Line
 
100%
Peru
 
USD
 
362 miles
 
Peru
 
BBB+/A3/ BBB+
 
1Q 2011
 
23
ATS
 
Transmission Line
 
100%
Peru
 
USD
 
569 miles
 
Peru
 
BBB+/A3/ BBB+
 
1Q 2014
 
26
ATN2
 
Transmission Line
 
100%
Peru
 
USD
 
81 miles
 
Minera Las Bambas
 
Not rated
 
2Q 2015
 
15
Quadra 1/2
 
Transmission Line
 
100%
Chile
 
USD
 
49 miles/32 miles
 
Sierra Gorda
 
Not rated
 
2Q 2014/ 1Q 2014
 
17/17
Palmucho
 
Transmission Line
 
100%
Chile
 
USD
 
6 miles
 
Enel Generacion Chile
 
BBB+/Baa2/ BBB+
 
4Q 2007
 
20
Honaine
 
Water
 
25.5%(17)
Algeria
 
USD
 
7 M ft3/day
 
Sonatrach
 
Not rated
 
3Q 2012
 
20
Skikda
 
Water
 
34.2%(18)
Algeria
 
USD
 
3.5 M ft3/day
 
Sonatrach
 
Not rated
 
1Q 2009
 
16
 
Notes:—
 
(1)
Certain contracts denominated in U.S. dollars are payable in local currency.
(2)
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.
(3)
On September 30, 2013, Liberty agreed to invest $300 million in Class A shares of Arizona Solar Holding, the holding company of Solana, in exchange for a share of the dividends and the taxable loss generated by Solana. See note 1 to our Annual Consolidated Financial Statements.
(4)
Solaben 2 and Solaben 3 are separate special purpose vehicles with separate agreements, but they are treated as a single platform.
(5)
Itochu Corporation, a Japanese trading company, holds 30.0% of the shares in each of Solaben 2 and Solaben 3.
(6)
Solacor 1 and Solacor 2 are separate special purpose vehicles with separate agreements but they are treated as a single platform.
(7)
JGC Corporation, a Japanese engineering company, holds 13.0% of the shares in each of Solacor 1 and Solacor 2.
(8)
PS10 and PS20 are separate special purpose vehicles with separate agreements but they are treated as a single platform.
(9)
Helioenergy 1 and Helioenergy 2 are separate special purpose vehicles with separate agreements but they are treated as a single platform.
(10)
Helios 1 and Helios 2 are separate special purpose vehicles with separate agreements but they are treated as a single platform.
(11)
Solnova 1, Solnova 3 and Solnova 4 are separate special purpose vehicles with separate agreements but they are treated as a single platform.
(12)
Solaben 1 and Solaben 6 are separate special purpose vehicles with separate agreements, but they are treated as a single platform.
(13)
Instituto para la Diversificacion y Ahorro de la Energia, or IDEA, a Spanish state-owned company, holds 20.0% of the shares in Seville PV.
(14)
Industrial Development Corporation of South Africa owns 29.0% and Kaxu Community Trust owns 20.0% of Kaxu.
(15)
Refers to the credit rating of the Republic of South Africa.
(16)
Refers to the credit rating of Uruguay, as UTE is unrated.
(17)
Algerian Energy Company, SPA owns 49.0% of Honaine and Valoriza Agua, S.L., subsidiary of Sacyr S.A., owns the remaining 25.5%.
(18)
Algerian Energy Company, SPA owns 49.0% of Skikda and Valoriza Agua, S.L., subsidiary of Sacyr S.A., owns the remaining 16.8%.
(19)
Previously named “Conventional Power.”
 
Our assets and operations are organized into the following four business sectors:

Renewable Energy
 
Our renewable energy assets include two 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 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 reached COD on December 1, 2014.
 
Additionally, we own the following solar power plants in Spain with a total gross capacity of 682 MW: (i) Solaben 2/3, a 100 MW solar power complex; (ii) Solacor 1/2, a 100 MW solar power complex; (iii) PS10/20, a 31 MW solar power complex; (iv) Helioenergy 1/2, a 100 MW solar power complex; (v) Helios 1/2, a 100 MW solar power complex; (vi) Solnova 1/3/4, a 150 MW solar power complex; (vii) 74.99% of the shares and a 30-year usufruct of the economic rights of the remaining 25.01% of the shares of Solaben 1/6, a 100 MW solar power complex in Spain, which usufruct does not expire until September 2045; and (viii) an 80% stake in Seville PV, a 1 MW solar photovoltaic plant in Spain. All such projects receive market and regulated revenues under the economic framework for renewable energy projects in Spain.
 
We also own two onshore wind farms in Uruguay: Palmatir and Cadonal, each with a gross capacity of 50 MW. Each wind farm is subject to a 20-year U.S. dollar-denominated PPA with a state-owned utility company in Uruguay.
 
We also own 51.0% of Kaxu, a 100 MW solar power plant in South Africa. Kaxu is a party to a 20-year PPA with Eskom, the state-owned utility company in South Africa.
 
Finally, we own a 4 MW hydro in Peru.  Mini-hydro has a 20-year concession agreement with the Peruvian Ministry of Energy.
 
Efficient Natural Gas Power
 
Our efficient natural gas (previously named “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 sale of electric power and steam. 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) three lines in Peru, ATN, ATN2 and ATS, spanning a total of 1,012 miles and (ii) three lines in Chile, Quadra 1, Quadra 2 and Palmucho, spanning a total of 87 miles.
 
ATN and ATS are subject to a U.S. dollar-denominated 30-year contract with the Peruvian Ministry of Energy. ATN2 is subject to a U.S. dollar-denominated 18-year contract with Minera Las Bambas mining company, which is owned by a partnership consisting of subsidiaries of China Minmetals Corporation, Guoxin International Investment Co. Ltd and CITIC Metal Co. Ltd and reached COD in June 2015. Quadra 1 and Quadra 2 are subject to a concession contract with Sierra Gorda SCM, a mining company owned by Sumitomo Corporation, Sumitomo Metal Mining and KGHM Polska Mietz. Palmucho is a six-mile electric transmission line and substation subject to a private concession agreement with a utility, Endesa Chile.
 
Water
 
Our water assets consist of (i) minority stakes in two desalination plants in Algeria, Honaine and Skikda, with an aggregate capacity of 10.5 M ft3 per day, which we acquired in February 2015. Each asset has a 30-year take-or-pay water purchase agreement with Sonatrach/Algerienne des Eaux.
 
Our Business Strategy
 
We are a company focused on owning and operating contracted assets across the renewable energy, efficient natural gas (previously named “conventional”) power, electric transmission line and water sectors in North America, South America and EMEA. We intend to grow our business, maintaining North America, South America and Europe as our core geographies.
 
We currently own or have interests in 22 assets, comprising 1,446 MW of renewable energy generation, 300 MW of efficient natural gas (previously named “conventional”) power generation, 10.5 M ft3 per day of water desalination and 1,099 miles of electric transmission lines. All of our assets have contracted revenues (regulated revenues in the case of our Spanish assets) with low-risk off-takers and collectively have a weighted average remaining contract life of approximately 19 years as of December 31, 2017.
 
Our primary business strategy is to generate stable cash flows with our portfolio of assets. With this, we intend to distribute a stable cash dividend to holders of our shares that we intend to grow over time, while ensuring the ongoing stability of our business.
 
We intend to grow our business mainly through acquisitions of contracted assets in operation, in the segments where we are already present, maintaining renewable energy as our main segment and with a focus in North and South America. We may complement this strategy by dedicating a limited portion of our growth to projects in development.
 
Our plan for executing this strategy includes the following key components:
 
Focus on stable, long-term contracted assets in renewable energy, efficient natural gas (previously named “conventional”) power generation, electric transmission lines and water assets
 
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.
 
Maintain geographic diversification across three principal geographic areas
 
Our focus on three core geographies, North America, South America and Europe, helps to ensure exposure to markets in which we believe the renewable energy, efficient natural gas power and electric transmission sectors will continue growing significantly.
 
Increase cash available for distribution by optimizing our existing assets
 
Some of our assets have not reached their target production levels yet 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. See “Item 3.D—Risk Factors—Risks Related to Our Assets—Certain of our facilities may not perform as expected.”
 
Increase cash available for distribution through the acquisition of new assets in renewable energy, efficient natural gas (previously named “conventional”) power and electric transmission
 
We will seek to grow our cash available for distribution and our dividend to shareholders by acquiring new contracted assets from AAGES, Abengoa, from third parties and from potential new future partners or sponsors. We have an exclusive ROFO agreement with Abengoa, which provides us with a right of first offer on certain Abengoa’s assets in operation. In addition, we have a ROFO agreement with AAGES, which provides us with a right of first offer on AAGES’ assets. We plan to sign similar agreements with other developers or asset owners or enter into partnerships with such developers or asset owners in order to acquire assets in operation or to invest directly or through investment vehicles in assets under development or construction, ensuring that such investments are always a small part of our total investments. Finally, we expect to acquire assets from third parties leveraging the local presence and network we have in the geographies and sectors where we operate. 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.
 
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 80% of cash available for distribution in U.S. dollars or euros, hedging euros for the upcoming 24 months on a rolling basis and proven technologies in which we have significant experience, located in countries where we believe conditions to be stable and safe.
 
In certain situations, we could invest in assets before they enter into operation, in assets with shorter contracted revenue period or in assets with revenue contracted in currencies other than U.S. dollar or euro.
 
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. 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 cash flows with attractive tax profiles
 
We believe that our recently-developed 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. Additionally, our facilities have minimal to no fuel risk. The offtake agreements for our assets have a weighted average remaining duration of approximately 19 years as of December 31, 2017, providing long-term cash flow stability and visibility. Additionally, our business strategy and hedging policy is intended to ensure a minimum of 80% of cash available for distribution in U.S. dollar or in euros, and to hedge the euro for the upcoming 24 months on a rolling basis. Furthermore, due to the fact that we are a U.K. 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 U.K. taxation due to the U.K.’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 10 years due to existing net operating losses, or NOLs, except for ACT in Mexico, where we do not expect to pay significant income taxes until the fifth or sixth year after our IPO (i.e., until 2019 or 2020) once we use existing NOLs. See “Item 3.D—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,” “Item 3.D—Risk Factors—Risks Related to Taxation—Our ability to use U.S. NOLs to offset future income may be limited” and “Item 3.D—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 the jurisdictions in which we operate. See “Item 3.D—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.”
 
Highly diversified portfolio by geography and technology
 
We believe that our strategic exposure to international markets will allow us to pursue greater growth opportunities and achieve higher returns than we would if we had a narrow geographic or technological focus. 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.
 
Strong corporate governance with a majority independent board and an experienced and incentivized management team
 
Five of the eight members of our board of directors are independent from us and from Algonquin and Abengoa. Once the Share Sale is complete and the Shareholders Agreement comes into effect, Algonquin or AAGES will have the right to appoint two directors and thus the majority of the board of directors will be independent. We require a majority vote by our independent directors in connection with related party transactions, including acquisitions under the AAGES ROFO Agreement, the Abengoa ROFO Agreement and the Algonquin ROFO Agreement. Our management team has significant and valuable expertise in developing, financing, operating and managing renewable energy, efficient natural gas power and electric transmission assets. We believe 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 management team to ensure that they focus on stable, long-term cash flow generation.
 
Our Operations
 
Renewable energy
 
The following table presents our renewable energy assets, all of which are operational:
 
Assets
 
Type
 
Ownership
Location
 
Currency
 
Capacity 
(Gross)
 
Offtaker
 
Counterparty
Credit
Rating(1)
 
COD
 
Contract
Years Left
Solana
 
Renewable (Solar)
 
100% Class B
Arizona (USA)
 
USD
 
280 MW
 
APS
 
A-/A3/A-
 
4Q 2013
 
26
Mojave
 
Renewable (Solar)
 
100%
California (USA)
 
USD
 
280 MW
 
PG&E
 
A-/A3/A-
 
4Q 2014
 
22
Solaben 2/3
 
Renewable (Solar)
 
70%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2012 & 2Q 2012
 
20 / 19
Solacor 1/2
 
Renewable (Solar)
 
87%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
1Q 2012 & 1Q 2012
 
19 / 19
PS10/20(8)
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
31 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
1Q 2007 & 2Q 2009
 
14 / 16
Helioenergy 1/2
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2011 & 4Q 2011
 
19 / 19
Helios ½
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
2Q 2012 & 3Q2012
 
20 / 20
Solnova 1/3/4
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
3x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
2Q 2010 & 2Q 2010 & 3Q 2010
 
17 / 17 / 18
Solaben 1/6
 
Renewable (Solar)
 
100%
Spain
 
EUR
 
2x50 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2013
 
21 / 21
Seville PV
 
Renewable (Solar)
 
80%
Spain
 
EUR
 
1 MW
 
Wholesale market/Spanish Electric System
 
BBB+/Baa2/A-
 
3Q 2006
 
18
Kaxu
 
Renewable (Solar)
 
51%
South Africa
 
ZAR
 
100 MW
 
Eskom
 
BB/Baa3/ BB+(2)
 
1Q 2015
 
17
Palmatir
 
Renewable (Wind)
 
100%
Uruguay
 
USD
 
50 MW
 
Uruguay
 
BBB/Baa2/ BBB-(3)
 
2Q 2014
 
16
Cadonal
 
Renewable (Wind)
 
100%
Uruguay
 
USD
 
50 MW
 
Uruguay
 
BBB/Baa2/ BBB-(3)
 
4Q 2014
 
17
Mini-hydro Peru
 
Renewable (Hydro)
 
100%
Peru
 
USD
 
4 MW
 
Peru
 
BBB+/A3/ BBB+
 
2Q 2012
 
15

Notes:—
  (1)
Reflects counterparty’s issuer credit ratings issued by S&P, Moody’s and Fitch.
  (2)
Refers to the credit rating of the Republic of South Africa.
  (3)
Refers to the credit rating of Uruguay, as UTE is unrated.
 
Solana
 
Overview. The Solana Solar Project, or Solana, is a 250 MW net (280 MW gross) solar electric generation facility located in Maricopa County, Arizona, approximately 70 miles southwest of Phoenix. Arizona Solar One LLC, or Arizona Solar, owns the Solana project. Solana includes a 22-mile 230kV transmission line and a molten salt thermal energy storage system. The construction of Solana commenced in December 2010 and Solana reached COD on October 9, 2013.
 
Solana relies on a conventional parabolic trough solar power system to generate electricity. The parabolic trough technology has been utilized for over 25 years at the Solar Electric Generating Systems, SEGS, facilities located in the Mojave Desert in Southern California. Our 13 50-MW parabolic trough facilities in Spain have also used this technology since 2010. Solana produces electricity by means of an integrated process using solar energy to heat a synthetic petroleum-based fluid in a closed-loop system that, in turn, heats water to create steam to drive a conventional steam turbine. Solana employs a two-tank molten salt thermal energy storage system that provides an additional six hours of solar dispatchability to increase its efficiency.
 
ASUSHI Inc., the entity through which we indirectly invest in Solana, is not expected to pay U.S. federal income taxes in the next 10 years due to the relevant NOLs and NOL carryforwards generated by the application of tax incentives established in the United States, in particular MACRS accelerated depreciation.
 
Power Purchase Agreement. Solana has a 30-year, fixed-price PPA with Arizona Public Service Company, or APS, for at least 110% of the output of the project. The PPA provides for the sale of electricity at a fixed base price approved by the Arizona Corporation Commission with annual increases of 1.84% per year. The PPA includes on-going performance obligations and is intended to provide Arizona Solar with consistent and predictable monthly revenues that are sufficient to cover operating costs and debt service and to earn an equity return.
 
APS is a load serving utility based in Phoenix, Arizona. APS has senior unsecured credit ratings of A- from S&P, A3 from Moody’s and A- from Fitch.
 
The PPA was initially executed in February 2008 and received final approval from the Arizona Corporation Commission in December 2008. The PPA was most recently amended and restated in December 2010. The PPA expires on October 9, 2043.
 
Engineering, Procurement and Construction Agreements. The construction of Solana was carried out by subsidiaries of Abengoa under an arm’s-length, fixed-price and date-certain engineering, procurement and construction contract, or an EPC contract, that was executed on December 20, 2010. Abengoa completed construction of Solana on October 9, 2013. Abengoa constructed Solana using equipment from leading suppliers, including two 140 MW (gross) steam turbines supplied by Siemens.

Arizona Solar’s EPC contract contains warranties that protect Arizona Solar against defects in design, materials and workmanship for one year after completion and under these warranties Abengoa is required to conduct certain repairs and improvements to ensure the plant reaches its technical capacity. Solana has not yet achieved its technical capacity on a continuous basis. During 2016, 2017 and 2018, repairs and improvements were and will be conducted on three plant systems: the steam generator, the water plant and the storage heat exchangers. In July 2016, the solar field was damaged after a severe wind event and in 2017, we received insurance compensation for damages and loss of revenue.  In July 2017, there was an incident with electric transformers, which caused the plant to produce at a reduced capacity during July and part of August. All the necessary repairs were completed in August and we received a significant portion of the insurance compensation in 2017. Additionally, due to the repairs to the heat exchangers of the storage system, we plan to replace one of the heat exchangers during 2018. In November 2017, in the context of the agreement reached between Abengoa and Algonquin for the acquisition by Algonquin of 25.0% of our shares and based on the obligations of Abengoa under an EPC contract, the DOE signed a consent in relation to the Solana and Mojave projects which reduces the minimum ownership required by Abengoa in us from 30.0% to 16.0%, subject to certain conditions precedent. The main conditions precedent included several payments by Abengoa to Solana before December 2017 and March 2018 as a result of its obligations as EPC contractor, for a total amount of $120 million. Additionally, Abengoa has recognized other obligations with Solana for $6.5 million per half-year over 10 years starting in December 2018. In December 2017, Solana received $42.5 million which was used to repay project finance debt.  Solana is expected to receive in March 2018 an additional $77.5 million.  From this amount $52.5 million is expected to be used to repay project debt and $25 million is expected to cover other current and potential future Abengoa obligations.
 
Operations & Maintenance. ASI Operations LLC, or ASI Operations, a wholly-owned subsidiary of Abengoa, provides operations and maintenance, or O&M, services for Solana, focused exclusively on personnel. ASI Operations has agreed to operate the facility in accordance with prudent utility practices, to ensure compliance with all applicable government and agency permits, licenses, approvals and PPA terms, and to assist Arizona Solar in connection with the procurement of all necessary support and ancillary services. The Operations and Maintenance Agreement, or an O&M agreement, executed on December 20, 2010 between ASI Operations and Arizona Solar is a 30-year cost-reimbursable contract plus a fixed fee, which is indexed to U.S. CPI.  A variable fee is to be paid in periods when the project’s annual net operating profits exceed the target annual net operating profit. Payments to third-party suppliers are made directly by Arizona Solar. We expect that the variable fee will provide ASI Operations with a significant long-term interest in the success of the project, which we expect will align its interests with those of Arizona Solar.
 
Project Level Financing. Arizona Solar executed a loan guarantee agreement with the DOE on December 20, 2010, to provide a loan guarantee in connection with a two-tranche loan of approximately $1.445 billion from the FFB. The FFB loan had a short-term tranche of $450 million as of December 31, 2013, that was repaid in April 2014 with the proceeds from the Investment Tax Credit Cash Grant, or ITC Cash Grant, that the project received from the U.S. Treasury. The FFB loan has a long-term tranche payable over a 29-year term with the cash generated by the project. The principal balance of this tranche was $882 million as of December 31, 2017. The loan is denominated in U.S. dollars. The FFB loan has a fixed average interest rate of 3.67%.
 
The financing arrangement permits dividend distributions on a semi-annual basis as long as the debt service coverage ratio for the previous four fiscal quarters is at least 1.20x (1.30x debt service coverage ratio and operating performance above certain thresholds for distributions before December 31, 2019) and the projected debt service coverage ratio for the next four fiscal quarters is at least 1.20x.
 
Partnerships. On September 30, 2013, Abengoa entered into an agreement with Liberty, pursuant to which Liberty agreed to invest $300 million in Class A membership interests of ASO Holdings Company LLC, the parent of Arizona Solar, in exchange for the right to receive 61.20% of taxable losses and distributions until such time as Liberty reaches a certain rate of return, or the Flip Date. Given that Solana has not performed as expected, Liberty will require additional distributions in order to reach the agreed rate of return. After the Flip Date, Liberty will be entitled to receive 22.60% of taxable losses and distributions.  During the year 2017, we agreed with Liberty to increase their information rights and their participation in decisions for Arizona Solar. All figures in this annual report take into account Liberty’s share of dividends. We indirectly own 100% of the Class B membership interests in ASO Holdings Company LLC.
 
Mojave
 
Overview. The Mojave Solar Project, or Mojave, is a 250 MW net (280 MW gross) solar electric generation facility located in San Bernardino County, California, approximately 100 miles northeast of Los Angeles. Abengoa commenced construction of Mojave in September 2011. Mojave completed construction and reached COD on December 1, 2014. Mojave Solar LLC, or Mojave Solar, owns the Mojave project.
 
Mojave relies on a conventional parabolic trough solar power system to generate electricity and is similar to Solana with respect to technology and general design. The main difference between Solana and Mojave is that Mojave does not have a molten salt storage system, as the offtaker did not require one.
 
ASHUSA Inc., the entity through which we indirectly invest in Mojave, is not expected to pay federal income tax in the next 10 years due to the relevant NOLs and NOL carryforwards generated by the application of tax incentives established in the United States, in particular MACRS accelerated depreciation.
 
Power Purchase Agreement. Mojave has a 25-year, fixed-price PPA with Pacific Gas & Electric Company, or PG&E, for 100% of the output of Mojave. The PPA began on COD. The PPA provides for the sale of electricity at a fixed base price with seasonal adjustments and adjustments for time of delivery. Mojave Solar can deliver and receive payment for at least 110% of contracted capacity under the PPA.
 
PG&E, a utility based in San Francisco, is one of the largest integrated natural gas and electric utilities in the United States. PG&E has senior unsecured credit ratings of A-  from S&P, A3 from Moody’s and A- from Fitch.
 
Engineering, Procurement and Construction Agreement. The construction of Mojave was carried out by subsidiaries of Abengoa, or the contractor, under an arm’s-length, fixed-price EPC contract that was executed on September 12, 2010. Mojave issued a “full notice to proceed” on March 7, 2012, and, as mentioned above, reached COD on December 1, 2014.  Mojave’s key equipment has been supplied by leading companies, including two twin turbines from General Electric.  Under the EPC agreement with Mojave, since construction ended after the scheduled date, Abengoa paid certain amounts in the form of subordinated debt, which would only need to be reimbursed if during or at the end of the guarantee period certain conditions are met. Otherwise these amounts would become liquidated damages.  We are currently evaluating if those conditions have been met.
 
Operations & Maintenance. ASI Operations provides O&M services for Mojave focused exclusively on personnel. Under the terms of the O&M agreement between ASI Operations and Mojave Solar, ASI Operations has agreed to operate the facility in accordance with prudent utility practices, to ensure compliance with all applicable government and agency permits, licenses, approvals and PPA terms, and to assist Mojave Solar in connection with the procurement of all necessary support and ancillary services. The O&M agreement is a cost-reimbursable contract plus a combination of fixed and variable fees. Payments to third-party suppliers are made directly by Arizona Solar. The fixed fee increases by 2.5% each year. Mojave Solar pays the variable fee in periods when the project’s annual net operating profits exceed the target annual net operating profit. We expect that the variable fee will provide ASI Operations with a significant long-term interest in the success of the project, which we expect will align its interests with those of Mojave Solar.
 
Project Level Financing. Mojave Solar executed a Loan Guarantee Agreement with the DOE on September 12, 2011, to provide a loan guarantee in connection with a two-tranche FFB loan of approximately $1,202 million. The FFB loan had a short-term tranche of $336 million as of December 31, 2014 that Mojave Solar repaid in October 2015 with the proceeds from the ITC Cash Grant that the project received from the U.S. Treasury. The FFB loan has a long-term tranche payable over a 25-year term with the cash generated by the project. The principal balance of this tranche was $758 million as of December 31, 2017. The loan is denominated in U.S. dollars. The FFB loan has an average fixed interest rate of 2.75% and each disbursement is linked to the U.S. Treasury bond with the maturity of that disbursement.
 
The financing arrangement permits dividend distributions on a semi-annual basis after the first principal repayment of the long-term tranche, as long as the debt service coverage ratio for the previous four fiscal quarters is at least 1.20x and the projected debt service coverage ratio for the next four fiscal quarters is at least 1.20x.
 
Solaben 2/3
 
Overview. The Solaben 2 and Solaben 3 projects are two 50 MW solar power plants located in the municipality of Logrosan, Spain. Solaben 2 reached COD in July 2012 and Solaben 3 reached COD in May 2012. Solaben Electricidad Dos, S.A., or SE2, owns Solaben 2 and Solaben Electricidad Tres, S.A., or SE3, owns Solaben 3.
 
Solaben 2 and Solaben 3 each rely on a conventional parabolic trough solar power system to generate electricity. The technology is similar to the technology used in other solar power plants that we own in the United States and Spain.
 
Solaben 2 and Solaben 3 benefit from the tax accelerated depreciation regime established by the Spanish Corporate Income Tax Act and the plants are not expected to pay significant income taxes in the next 10 years.
 
Regulation. Renewable energy projects in Spain sell the power they produce into the wholesale electricity market and receive additional payments from the Comision Nacional de los Mercados y de la Competencia, or CNMC, the Spanish state-owned regulator.
 
Solar power plants receive, in addition to the revenues from the sale of electricity in the market, two monthly payments. These payments consist of: (i) a fixed monthly payment based on installed capacity and (ii) a variable payment based on net electricity produced. There is a maximum number of production hours per year beyond which no variable payment is received. The regulation also includes a minimum number of yearly hours of generation, under which the plant would receive no regulated payments for that year and another higher threshold below which regulated payments would be reduced for a certain year. Those numbers are 35.0% and 60.0% of the maximum yearly hours, respectively. We expect that a plant would fail to achieve these thresholds only in cases of major breakdowns. See “Item 4.B—Business Overview—Regulation—Regulation in Spain.”
 
Spain has senior unsecured credit ratings of BBB+ from S&P, Baa2 from Moody’s and A- from Fitch.
 
Operations & Maintenance. Abengoa Solar Espana, S.A., or ASE, is the contractor for O&M services at Solaben 2/3. ASE has agreed to operate the facility in accordance with prudent utility practices, ensure compliance with all applicable government and agency permits, licenses and approvals, and feed-in tariff terms, and to assist Solaben 2/3 in connection with the procurement of all necessary support and ancillary services. Each O&M agreement is a 20-year, all-in contract that expires on the 20th anniversary of the COD, under certain circumstances the contract can be terminated by us before the expiration date.
 
Project Level Financing. SE2 and SE3 each entered into a 20-year loan agreement with a syndicate of banks formed by the Bank of Tokyo-Mitsubishi, Mizuho, HSBC and Sumitomo Mitsui Banking Corporation on December 16, 2010. Each loan is denominated in euros. The loan for Solaben 2 was for €169.3 million and the loan for Solaben 3 was for €171.5 million. The banks providing these loans obtained commercial and political risk insurance from Nippon Export and Investment Insurance, which allowed for lower financing costs. The interest rate for each loan is a floating rate based on EURIBOR plus a margin of 1.5%.  Each loan was initially 80% hedged with the same banks providing the financing. The hedge was structured 50% through a swap set at approximately 3.7% and 50% through a cap with a 3.75% strike. In November 2013, SE2 and SE3 hedged through 2017 the remaining 20% exposure through a cap with a 0.75% strike.  Furthermore, in 2017, we contracted additional caps with a 1% strike covering 19.1% of the principal of Solaben 2 and 20% of the principal of Solaben 3.  Both caps hedge the interest rate from the middle of 2017 through 2025.
 
The outstanding amount of these loans as of December 31, 2017 was €136 million for Solaben 2 and €139 million for Solaben 3.
 
The financing arrangements permit cash distribution to shareholders once per year if the audited financials for the prior fiscal year indicate a debt service coverage ratio of at least 1.10x.
 
Partnerships. Itochu Corporation, a Japanese trading company, holds a 30% stake in the economic rights of each of Solaben 2 and Solaben 3.
 
Solacor 1/2
 
Overview. The Solacor 1/2 project is a 100 MW solar power complex located in the municipality of El Carpio, Spain. Abengoa commenced construction of Solacor 1/2 in September 2010. COD was reached in February 2012 for Solacor 1 and in March 2012 for Solacor 2. JGC Corporation, or JGC, a Japanese engineering company, currently owns 13% of Solacor 1/2.
 
Solacor 1/2 relies on a conventional parabolic trough solar power system to generate electricity. The technology is similar to the technology used in other solar power plants that we own in Spain.
 
We hold 87% of the shares of the entity holding Solacor 1 and Solacor 2.
 
Solacor 1 and Solacor 2 benefit from the tax accelerated depreciation regime established by the Spanish Corporate Income Tax Act.  Most plants in Spain are part of the tax consolidation group that is not expected to pay significant income taxes in the next 10 years.
 
Regulation. Renewable energy projects in Spain sell the power they produce into the wholesale electricity market and receive additional payments from the CNMC.
 
Solar power plants receive, in addition to the revenues from the sale of electricity in the market, two monthly payments. These payments consist of: (i) a fixed monthly payment based on installed capacity and (ii) a variable payment based on net electricity produced. There is a maximum number of production hours per year beyond which no variable payment is received. The regulation also includes a minimum number of yearly hours of generation, under which the plant would receive no regulated payments for that year and another higher threshold below which regulated payments would be reduced for a certain year. Those numbers are 35.0% and 60.0% of the maximum yearly hours, respectively. We expect that a plant would fail to achieve these thresholds only in cases of major breakdowns. See “Item 4.B—Business Overview—Regulation—Regulation in Spain.”
 
Spain has senior unsecured credit ratings of BBB+ from S&P, Baa2 from Moody’s and A- from Fitch.
 
Operations & Maintenance. ASE is the contractor for O&M services at Solacor 1/2. ASE has agreed to operate the facility in accordance with prudent utility practices, ensure compliance with all applicable government and agency permits, licenses and approvals, and feed-in tariff terms, and to assist Solacor 1/2 in connection with the procurement of all necessary support and ancillary services. Each O&M agreement is a 25-year, all-in contract that expires on the 25th anniversary of the COD, under certain circumstances the contract can be terminated by us before the expiration date.
 
Project Level Financing. Solacor 1/2 entered into 20-year loan agreements with a syndicate of banks formed by BNP Paribas, Mizuho, HSBC and SMBC on August 6, 2010. The loans are denominated in euros. The loans for Solacor 1/2 totaled €353 million. The banks providing these loans obtained commercial and political risk insurance from Nippon Export and Investment Insurance, which allowed for lower financing costs. The interest rate for the loans is a floating rate based on EURIBOR plus a margin of 1.5%.  The loans were initially approximately 82% hedged with the same banks providing the financing. The hedge was structured 54% through a swap set at approximately 3.20% and 28% through a cap with a 3.25% strike. Furthermore, in 2017, we contracted additional caps with a 1% strike covering 19.3% of the principal of Solacor 1 and 18.2% of the principal of Solacor 2.  Both caps hedge the interest rate from the middle of 2017 through 2025.  The total outstanding amount of these loans as of December 31, 2017 was €275 million.
 
These financing arrangements permit cash distribution to shareholders once per year if the audited financials for the prior fiscal year indicate a debt service coverage ratio of at least 1.10x.
 
Partnerships. On December 31, 2015, JGC Corporation, a Japanese engineering company, held a 26% stake in the economic rights in Solacor 1/2. On January 7, 2016, we closed the acquisition of 13% of the shares of Solacor 1/2 from JGC Corporation, which reduced their ownership in Solacor 1/2 to 13%.
 
PS10/20
 
Overview. PS10/20 is a 31 MW solar power complex located in the municipality of Sanlucar la Mayor, Spain. PS10 reached COD in March 2007 and PS20 reached COD in May 2009.
 
PS10/20 benefits from the tax accelerated depreciation regime established by the Spanish Corporate Income Tax Act applicable to the tax consolidated group into which the plants are included.

Regulation. Renewable energy projects in Spain sell the power they produce into the wholesale electricity market and receive additional payments from CNMC.

Solar power plants receive, in addition to the revenues from the sale of electricity in the market, two monthly payments. These payments consist of: (i) a fixed monthly payment based on installed capacity and (ii) a variable payment based on net electricity produced. There is a maximum number of production hours per year beyond which no variable payment is received. The regulation also includes a minimum number of yearly hours of generation, under which the plant would receive no regulated payments for that year and another higher threshold below which regulated payments would be reduced for a certain year. Those numbers are 35.0% and 60.0% of the maximum yearly hours, respectively. We expect that a plant would fail to achieve these thresholds only in cases of major breakdowns. See “Item 4.B—Business Overview—Regulation—Regulation in Spain.”

Spain has senior unsecured credit ratings of BBB+ from S&P, Baa2 from Moody’s and A- from Fitch.

Operations & Maintenance. ASE is the contractor for O&M services at PS10/20. ASE has agreed to operate the facility in accordance with prudent utility practices, ensure compliance with all applicable government and agency permits, licenses and approvals, and feed-in tariff terms, and to assist PS10/20 in connection with the procurement of all necessary support and ancillary services. Each O&M agreement is a 21-year all-in contract that expires on the 21st anniversary of COD.

Project Level Financing. PS10 entered into a 21.5-year loan agreement with a syndicate of banks formed by Bankia and Natixis on November 17, 2006. On June 14, 2007, the loan agreement was entered into a novation in order to include in the syndicate of banks the European Investment Bank and Caja de Ahorros del Mediterraneo, which was later acquired by Banco Sabadell, S.A. The loan was for €43.4 million. The interest rate for the loan is a floating rate based on EURIBOR plus a margin of 1.0% to 1.10% (depending on the level of the debt service coverage ratio). The loan was initially 100% hedged with the same banks providing the financing. The hedge was structured 30% through a swap set at approximately 4.07% and 70% through a cap with a 4.25% strike. Furthermore, in 2017, we contracted an additional cap with a 1% strike covering 35.0% of the principal of PS10 from the middle of 2017 through 2025.  The outstanding amount of this loan as of December 31, 2017 was €27 million.

PS20 entered into a 24.5-year loan agreement with a syndicate of banks formed by Bankia and Natixis Banques Populaires, Spanish Branch on November 17, 2006. On June 14, 2007, the loan agreement was entered into a novation in order to include in the syndicate of banks the European Investment Bank and Caja de Ahorros del Mediterraneo, which was later acquired by Banco Sabadell, S.A. The loan was for €94.6 million. The interest rate for the loan is a floating rate based on EURIBOR plus a margin of 1.0% to 1.10% (depending on the level of the debt service coverage ratio). The loan was initially 100% hedged with the same banks providing the financing. The hedge was structured 30% through a swap set at approximately 4.07% and 70% through a cap with a 4.5% strike.  Furthermore, in 2017, we contracted additional caps with a 1%  strike covering 35.0% of the principal of PS20 from the middle of 2017 through 2025. The outstanding amount of this loan as of December 31, 2017 was €67 million.

These financing arrangements permit cash distribution to shareholders once per year if the audited financials for the prior fiscal year indicate a debt service coverage ratio of at least 1.10x.

Helios 1/2

Overview. The Helios 1/2 project is a 100 MW concentrating solar power facility located in the municipality of Arenas de San Juan, Puerto Lapice and Villarta de San Juan, Spain. Helios 1 reached COD in the second quarter of 2012 and Helios 2 reached COD in the third quarter of 2012. We indirectly own 100% of Helios 1/2.
 
Helios 1/2 relies on a conventional parabolic trough concentrating solar power system to generate electricity. This technology is similar to the technology used in other solar power plants that we own in Spain.

Helios 1/2 benefits from the tax accelerated depreciation regime established by the Spanish Corporate Income Tax Act applicable to the tax consolidated group into which the plants are included.

Regulation. Renewable energy projects in Spain sell the power they produce into the wholesale electricity market and receive additional payments from CNMC.

Solar power plants receive, in addition to the revenues from the sale of electricity in the market, two monthly payments. These payments consist of: (i) a fixed monthly payment based on installed capacity and (ii) a variable payment based on net electricity produced. There is a maximum number of production hours per year beyond which no variable payment is received. The regulation also includes a minimum number of yearly hours of generation, under which the plant would receive no regulated payments for that year and another higher threshold below which regulated payments would be reduced for a certain year. Those numbers are 35.0% and 60.0% of the maximum yearly hours, respectively. We expect that a plant would fail to achieve these thresholds only in cases of major breakdowns. See “Item 4.B—Business Overview—Regulation—Regulation in Spain.”

Spain has senior unsecured credit ratings of BBB+ from S&P, Baa2 from Moody’s and A- from Fitch.

Operation & Maintenance. ASE is the contractor for O&M services at Helios 1/2. ASE has agreed to operate the facility in accordance with prudent utility practices, ensure compliance with all applicable government and agency permits, licenses and approvals, and feed-in tariff terms, as well as to assist Helios 1/2 in connection with the procurement of all necessary support and ancillary services. The O&M agreement is a 25-year, all-in contract that expires on the 25th anniversary of the COD.

Project Level Financing. On June 6, 2011, Helios 1 entered into a 20-year loan agreement for €144.2 million with a syndicate of banks formed by Santander, Caixa Bank, Banif Investment Bank, Bankia, Kfw IPEX-Bank, Helaba and ICO. The interest rate for the loan is a floating rate based on EURIBOR (six months) plus a margin of 3.50% until August 12, 2016, plus a margin of 3.75% from August 10, 2016 to August 10, 2018 and plus a margin of 4.25% from August 10, 2018. The loan was initially approximately 75% hedged with the same banks providing the financing. The hedge was structured 100% through a swap set at approximately 3.85%

On June 6, 2011, Helios 2 entered into a 20-year loan agreement for €145.1 million with a syndicate of banks formed by Santander, Caixa Bank, Banif Investment Bank, Bankia, Kfw IPEX-Bank, Helaba and ICO. The interest rate for the loan is a floating rate based on EURIBOR (six months) plus a margin of 3.50% until August 12, 2016, plus a margin of 3.75% from August 10, 2016 to August 10, 2018 and plus a margin of 4.25% as of August 10, 2018. The loan was initially approximately 75% hedged with the same banks providing the financing. The hedge was structured 100% through a swap set at approximately 3.85%. Furthermore, in 2017, we contracted additional caps with a 1% strike covering 12.5% of the principal of both Helios 1 and Helios 2 from the middle of 2017 through 2025.

The total outstanding amount of these loans as of December 31, 2017 was €251 million.

The financing agreements of both plants permit cash distributions to shareholders once per year if the audited financials for the prior fiscal year indicate a debt service coverage ratio of at least 1.15x.

Helios 1/2 projects have a “cash-sweep” mechanism in the financing agreements by which all the cash generated by the projects from 2019 will be paid directly to the lenders. We expect to refinance Helios 1/2 before 2019 although we cannot guarantee it.
 
Helioenergy 1/2

Overview. Helioenergy 1/2 is a 100 MW solar power complex located in Ecija, Spain and reached COD in the second half of 2011. We indirectly own 100% of Helioenergy 1/2.