Atlantica Sustainable Infrastructure Annual Report 2017

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FY2017 Annual Report · Atlantica Sustainable Infrastructure

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Consolidated Annual Report
and Financial Statements

FOR THE YEAR ENDED DECEMBER 31, 2017

Company Registration No. 08818211

Consolidated Annual Report and
Financial Statements

For the year ended 31 December 2017

Atlantica Yield plc

Atlantica Yield plc Consolidated Annual Report and Financial Statements

General information
Adoption of new and revised standards
Significant accounting judgements
Financial information by segment
Changes in the scope of the consolidated financial statements
Auditor’s fees
Staff costs
Other operating income
Finance income and expenses

Strategic Report
Directors’ Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Responsibilities Statement
Independent Auditor’s Report to the Members of Atlantica Yield plc
Consolidated Income Statement
Consolidated Statement of Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
10. Tax
11. Dividends
12. Contracted concessional assets
13.
14. Trade and other receivables
15. Cash and cash equivalents
16. Corporate debt
17. Project debt
18. Grants and other liabilities
19. Trade and other payables
20.
21. Notes to the cash flow statement
Financial instruments by category
22.
23. Derivative financial instruments
Financial risk management
24.
Events after the balance sheet date
25.
26. Related party transactions
27. Contingent liabilities
28. Guarantees and commitments
29.
30.
Company Balance Sheet
Company Statement of Change in Equity
Notes to the Company Financial Statements

Earnings per share
Service concessional arrangements

Investments carried under the equity method

Equity

3
51
58
65
83
85
92
93
94
96
97
98

172
174
175

Strategic Report

This Strategic Report has been prepared to provide information to shareholders to assess the
Group’s strategies and the potential for the strategies to succeed.

The Strategic Report contains certain forward-looking statements. These statements are made by
the directors in good faith based on the information available to them up to the time of their
approval of this report and such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors, underlying any such forward-
looking information.

The directors, in preparing this Strategic Report, have complied with Section 414C of the
Companies Act 2006.

The Strategic Report discusses the following areas:

 Nature of the business.

 Business model, strategy and objectives.

 Fair review of the business.

 Key performance indicators.

 Principal risks and uncertainties.

 Corporate social responsibility.

 Future developments.

 Going concern basis.

Nature of the business

Atlantica Yield plc (hereinafter “we”, “our”, the “Company” or “Atlantica Yield”) was registered in
England and Wales, incorporated in the United Kingdom, 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. Our shares are listed on the NASDAQ
Global Select Market under the symbol “AY”.

We are a total return company that owns, manages, and acquires renewable energy, efficient
natural gas 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 December 31, 2017, we own or have interests in 21 assets, comprising 1,442 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 a project finance agreement in place.

We intend to take advantage of favourable 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 through our existing ROFO agreement with Abengoa S.A.
(“Abengoa”), the announced potential ROFO agreements with AAGES and Algonquin, from third
parties and from potential new future partners.

We have in place an exclusive agreement with Abengoa, which we refer to as the ROFO Agreement,
which provides us with a right of first offer on any proposed sale, transfer or other disposition of
any of Abengoa’s contracted renewable energy, 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.

In the first half of 2017, Abengoa announced its intention to sell the 41.47% stake they own in
Atlantica Yield. On November 1, 2017 Algonquin announced it had reached an agreement to
acquire a 25% stake in Atlantica from Abengoa. In addition, Algonquin and Abengoa signed an
agreement to create a joint venture called AAGES to invest in the development and construction
of clean energy and water infrastructure contracted assets and we signed a non-binding term-
sheet which will serve as a basis of a proposed ROFO agreement with AAGES. Provided that the
transaction between Algonquin and Abengoa closes and we sign the ROFO agreement with AAGES,
we expect this ROFO agreement to be our main source of growth. Additionally, we expect to sign
a ROFO agreement with Algonquin. The closing of the transaction announced between Abengoa
and Algonquin is subject to conditions precedent, most of which depend on third parties and are
beyond our control. The term-sheets entered into with Algonquin, AAGES and Abengoa are non-
binding and while the parties have agreed to negotiate in good faith towards a mutually beneficial
outcome, there is no guarantee that the AAGES ROFO agreement and other agreements will be
entered into, or that any assets will be purchased by Atlantica from Algonquin, AAGES or Abengoa.

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.

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
Abengoa, from AAGES assuming we sign a ROFO agreement with them, from third parties and
potential new future partners.

The address of our registered office is Great West House, GW1, 17th floor, Great West Road,
Brentford, United Kingdom TW8 9DF.

Events during the period

When we closed our initial public offering, Abengoa had a 64.28% interest in us. Following several
divestitures, as of December 31, 2017, Abengoa 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. See the “Directors’ Report-Substantial shareholdings” for information of
shareholders who hold at least 5% of our ordinary shares.

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.

Agreements with Algonquin

On November 1, 2017, Algonquin announced that it had reached an agreement with Abengoa to
acquire a 25% stake in Atlantica from Abengoa. Abengoa has communicated that it intends to sell
its remaining 16.5% stake over the upcoming months in a private transaction, subject to approval
by the U.S. Department of Energy (the “U.S. DOE”). Algonquin has an option to purchase this
remaining stake prior to 31 March 2018. In addition, Algonquin and Abengoa announced that they
also signed an agreement to create a joint venture called AAGES to invest in the development and
construction of clean energy and water infrastructure contracted assets.

In the context of these agreements, Atlantica has signed a non-binding term-sheet with Algonquin
which will serve as the basis of a shareholders’ agreement to be executed on or before the closing

of the purchase of the 25% interest by Algonquin. The term-sheet includes among other initiatives,
a limitation on Algonquin’s ownership to a maximum of 41.5% of our outstanding shares and a
limitation, in any case, on the number of directors they can appoint no more than of 50% of the
board of directors less one; if the resulting number is not a whole number, it shall be rounded up
to the next whole number. In addition, Algonquin proposed 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. Algonquin will also be granted certain
preferred rights when participating in further equity issuances with the possibility of increasing
Algonquin’s ownership in us up to 41.5%. If Algonquin acquired a 16.47% stake in Atlantica
(additional to the 25% initially agreed) and subscribed the incremental equity investment of $100
million previously mentioned, Algonquin would be entitled to temporarily exceed the 41.5% limit.

Additionally, Atlantica agreed to maintain a target pay-out ratio of 80%.

In addition, we have signed a non-binding term-sheet which will serve as the basis of 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
ROFO agreement with AAGES is expected to provide us with a right of first offer on any proposed
sale, transfer or other disposition of any of AAGES’ contracted assets. Some of the assets currently
under construction by Abengoa may be transferred to AAGES and the AAGES ROFO agreement is
expected to include such assets within its scope. Furthermore, Algonquin and Atlantica agreed to
periodically discuss the potential acquisition of assets from Algonquin.

The closing of the transaction announced between Abengoa and Algonquin is subject to conditions
precedent, most of which depend on third-parties and are beyond our control. The term-sheets
entered into with Algonquin, AAGES and Abengoa are non-binding and while the parties agreed
to negotiate in good faith towards a mutually beneficial outcome, there is no guarantee that the
AAGES ROFO agreement and other agreements will be entered into, or that any assets will be
purchased by Atlantica from Algonquin or AAGES.

Cross default provisions in project finance agreements

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.

Change of ownership provisions in project finance agreements

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% of
Atlantica’s shares (30% 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% 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 U.S. 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 an 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 U.S. DOE remedies will not include debt acceleration,
but U.S. 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% to 30%.

In November 2017, in the context of the agreement reached between Abengoa and Algonquin for
the acquisition by Algonquin of 25% of our shares and based on the obligations of Abengoa under
the 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% to 16%, 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 resulting from its
obligations as EPC contractor, for a total amount of $120 million from which, we expect to use
$80.0 million towards partial prepayment of the project debt, $25 million towards current and
potential required additional repairs and $15.0 million towards other Abengoa obligations. In
December 2017, Solana received $42.5 million which was used to repay project finance debt.
Additionally, Abengoa has recognized other obligations with Solana for $6.5 million per semester
over 10 years starting in December 2018.

We have not identified any PPAs or any contracts with off-takers that include any cross-default
provision relating to Abengoa or any minimum ownership provision.

Exchangeable Preferred Equity Investment in Abengoa Concessões Brasil Holding

Since our IPO until 2017 we held an exchangeable preferred equity investment in ACBH, a
subsidiary holding company of Abengoa engaged in the development, construction, investment
and management of contracted concessions in Brazil, comprised mostly of transmission lines, some
of which were in operation and some of which were under construction.

On January 29, 2016, Abengoa informed us that several of its indirect subsidiaries of Abengoa in
Brazil, including ACBH, had initiated an insolvency procedure under Brazilian law (“reorganizaçao
judiciaria”), as a “Pedido de processamento conjunto,” which resulted in the consolidation of the
three main subsidiaries of Abengoa in Brazil, including ACBH. In April 2016, Abengoa presented a
consolidated restructuring plan in the Brazilian Court, including ACBH and two other subsidiaries.
In 2016, we did not receive any preferred dividend from ACBH. Under the contracts in place with
ACBH and Abengoa, we retained dividends payable to Abengoa in 2016 and 2017.

In the third quarter of 2016, we signed an agreement with Abengoa relating to the ACBH preferred
equity investment among other things with the following main consequences:

 Abengoa acknowledged it failed to fulfil its obligations under the agreements related to
the preferred equity investment in ACBH and, as a result, we were recognized as the legal
owner of the dividends that we retained from Abengoa amounting to $10.4 million in 2017,
$19.0 million in 2016 and $9.0 million in 2015.

 Abengoa recognized a non-contingent credit corresponding to the guarantee provided by
Abengoa regarding the preferred equity investment in ACBH, subject to restructuring. On
October 25, 2016, we signed Abengoa’s restructuring agreement and accepted, subject to
implementation of the restructuring, to receive 30% of the amount in the form of tradable
notes to be issued by Abengoa (the “Restructured Debt”). The remaining 70% was agreed
to be received in the form of equity in Abengoa.

 The Restructured Debt was converted into senior status following our participation in
Abengoa’s issuance of asset-backed notes or New Money 1 Tradable Notes, which we
subsequently sold in early April 2017. New Money 1 Tradable Notes are asset-backed notes
issued by Abengoa as part of its restructuring plan.

 Since we received the Restructured Debt and Abengoa equity, we waived, as agreed, all our
rights under the ACBH agreements, including our right to further retain dividends payable
to Abengoa. As a result, in March 2017, we wrote off the accounting value of the ACBH
instrument, which amounted to $30.5 million as of December 31, 2016. We sold most of the
debt and equity instruments we received from Abengoa and we do not expect any
additional value from the ACBH preferred equity investment. We no longer own any shares
in ACBH.

Change of ownership under Section 382 of the U.S. Internal Revenue Code

Under section 382 of the IRC, an “ownership change” would occur if our direct and indirect “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. As a result of
Abengoa’s restructuring and the change in its shareholders’ base, we have experienced a change
of ownership has defined under section 382 of the IRC, which causes an annual limitation on the
use of the pre-ownership change U.S. NOLs generated by our U.S. solar assets 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.” In addition, because we have recorded tax credits for the U.S. tax
losses carryforwards in the past, the limitation to our ability to use net operating loss carryforwards
in the United States has resulted in writing off tax credits previously recognized for an amount of
$96 million. This one-time income tax expense did not have any cash impact in 2017 and we
continue to expect not to pay income taxes in our U.S. solar assets for at least 10 years.

U.S. Tax Reform

December 2017, the TCJA was enacted in the United States. The measures adopted include, among

other measures, a decrease in the federal corporate tax rate from 35% to 21% effective 1st of
January 2018. We therefore adjusted the deferred tax assets and liabilities of its U.S. entities using
the new enacted federal corporate tax rate as of December 31, 2017, resulting in a one-time non-
cash income tax expense of $19 million recorded in the consolidated income statement for the year
ended December 31, 2017.

Asset portfolio

We own a diversified portfolio of contracted assets across the renewable energy, efficient natural
gas 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 13 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.

The following table provides an overview of our current assets as of December 31, 2017:

Assets

Solana ............

Mojave ...........

Type

Renewable
(Solar)

Ownership Location
Arizona
(USA)

100%
Class B(3)

100%

California
(USA)

Currency(1)

Capacity
(Gross)

Off-taker

Counterparty

Credit
Rating (2)

COD(20)

Contract
Years Left

U.S. dollar

280 MW

APS

A-/A3/A-

4Q 2013

U.S. dollar

280 MW

PG&E

A-/A3/A-

4Q 2014

Solaben

2/3(4) ...........

Renewable
(Solar)

Solacor 1/2(6)

PS10/20(8) ......

Renewable
(Solar)

Helioenergy
1/2(9) ...........

Renewable
(Solar)

Helios 1/2(10)

Renewable
(Solar)

Solnova

1/3/4(11) .....

Renewable
(Solar)

70%(5)

Spain

Euro

2x50 MW

87%(7)

Spain

Euro

2x50 MW

100%

Spain

Euro

31 MW

100%

Spain

Euro

2x50 MW

100%

Spain

Euro

2x50 MW

100%

Spain

Euro

3x50 MW

Solaben

1/6(12) .........

Renewable
(Solar)

100%(18)

Spain

Euro

2x50 MW

Seville PV

Kaxu ................

Palmatir .........

Cadonal .........

Renewable
(Solar)

Renewable
(Wind)

ACT .................

Efficient Natural
Gas Power

80%(19)

Spain

Euro

1 MW

51%(13)

South
Africa

Rand

100 MW

Eskom

100%

Uruguay

U.S. dollar

50 MW

Uruguay

100%

Uruguay

U.S. dollar

50 MW

Uruguay

100%

Mexico

U.S. dollar

300 MW

Pemex

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

Wholesale

market/ Spanish
Electric System

BBB+/Baa2/A-

2Q 2012 &
4Q 2012

20 / 19

BBB+/Baa2/A-

2Q 2012 &
4Q 2012

19 / 19

BBB+/Baa2/A-

1Q 2007 &
2Q 2009

14 / 16

BBB+/Baa2/A-

3Q 2011 &
4Q 2011

19 / 19

BBB+/Baa2/A-

2Q 2012 &
3Q2012

2Q 2010 &
2Q 2010 &
3Q 2010

20 / 20

17 / 17 / 18

BBB+/Baa2/A-

3Q 2013

21 / 21

BBB+/Baa2/A-

3Q 2006

BB/Baa3/

BB+(14)

BBB/Baa2/
BBB-(15)

BBB+/A3/
BBB+

1Q 2015

2Q 2014

4Q 2014

2Q 2013

Contract
Years Left

Assets

Type

Ownership Location

Currency(1)

Capacity
(Gross)

Off-taker

100%

Peru

U.S. dollar

362 Miles

100%

Peru

U.S. dollar

569 Miles

Peru

Counterparty

Credit
Rating (2)

BBB+/A3/
BBB+

COD(20)

1Q 2011

1Q 2014

100%

Peru

U.S. dollar

81 miles

Las Bambas

Not rated

2Q 2015

100%

Chile

U.S. dollar

43 Miles

Sierra Gorda

Not rated

2Q 2014

100%

Chile

U.S. dollar

38 Miles

Sierra Gorda

Not rated

1Q 2014

100%

Chile

U.S. dollar

6 Miles

Enel Generation
Chile

BBB+/Baa2/

BBB+

4Q 2007

ATN .................

ATS ..................

ATN2 ..............

Quadra 1 .......

Quadra 2 .......

Palmucho ......

Transmission
Line

Honaine .........

Water

25.5%(16)

Algeria

Skikda ............

Water

34.2%(17)

Algeria

U.S. dollar

7 M ft3/day

Sonatrach

Not rated

3Q 2012

3.5 M
ft3/day

Sonatrach

Not rated

1Q 2009

__________________
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 Interactive Corporation invested $300 million in Class A membership interests 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.

Itochu Corporation, a Japanese trading company, holds 30% of the shares in each of Solaben 2 and Solaben 3.

JGC Corporation, a Japanese engineering company, holds 13% of the shares in each of Solacor 1 and Solacor 2.

(4) Solaben 2 and Solaben 3 are separate special purpose vehicles with separate agreements, but they are treated as a single platform.
(5)
(6) Solacor 1 and Solacor 2 are separate special purpose vehicles with separate agreements but they are treated as a single platform.
(7)
(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) Industrial Development Corporation of South Africa owns 29% and Kaxu Community Trust owns 20% of Kaxu.
(14) Refers to the credit rating of the Republic of South Africa.
(15) Refers to the credit rating of Uruguay, as UTE is unrated.
(16) Algerian Energy Company, SPA owns 49% of Honaine and Valoriza Agua S.L. owns the remaining 25.5%.
(17) Algerian Energy Company, SPA owns 49% of Skikda and Valoriza Agua S.L. owns the remaining 16.8%.
(18) Solaben 1 and Solaben 6 are separate special purpose vehicles with separate agreements, but they are treated as a single platform
(19) Instituto para la Diversificacion y Ahorro de la Energia, or Idea, a Spanish state-owned company holds 20% of the shares in Seville PV.
(20) COD refers to the commercial operation date of the applicable facility.

Business model, strategy and objectives

Atlantica is a total return company that owns, manages, and acquires renewable energy, efficient
natural gas 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.

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.

In this sense, we intend to take advantage of favourable 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 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.

In addition, in November 2017, we signed a non-binding term-sheet for a proposed ROFO
agreement with AAGES. AAGES is the joint venture formed by Algonquin and Abengoa to invest
in the development and construction of renewable energy and water assets. The proposed AAGES
ROFO agreement is subject to the closing of the Algonquin’s stock acquisition. The proposed
AAGES ROFO agreement, once executed, will provide us with a right of first offer on any proposed
sale, transfer or other disposition of any of AAGES’s assets.

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.

In general, we intend to use the following investment guidelines in evaluating prospective
acquisitions in order to successfully execute our accretive growth strategy:

 High quality off-takers, with long-term contracted revenue;

 Project financing for each individual project;

 Operations and maintenance contract in place at each project;

 Management and operational systems and processes at an adequate level;

 Focus on regions and countries that provide an optimal balance between growth opportunities
and security and risk considerations, including the United States, Canada, Mexico, Chile, Peru,
Uruguay, Colombia and the European Union; and

 Preference for U.S. dollar-denominated revenues.

Our plan for executing this strategy includes the following key components:

 Focus on stable, long-term contracted assets in renewable energy, efficient natural gas 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.

Increase cash available for distribution through the acquisition of new assets in renewable
energy, efficient natural gas 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 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 intend to sign a ROFO agreement with
AAGES, which would provide us with a right of first offer on AAGES’s 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 euro 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.

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

 Stable and predictable long-term U.S. and international cash flows with attractive tax profiles

 Highly diversified portfolio by geography and technology

 Strong corporate governance with a majority independent board and an experienced and

incentivised management team

A fair review of the business

The Company is focused on high-quality, newly-constructed and long-life facilities with
creditworthy counterparties that we expect will produce stable, long-term cash flows.

During our first four years of operation, we have focused on three priorities:

1. Creating in the case of new assets and reinforcing the processes and systems required to

manage and control our contracted assets internationally.

2. Maximizing performance of our asset portfolio. This is an area where in 2018 we still need to

continue improving the performance of some assets, including Solana and Kaxu.

3. Acquiring and integrating new contracted assets.

During 2016, we focused our efforts on eliminating the risks associated to Abengoa’s insolvency
process and became a fully independent company with our own IT systems, functions and policies.

In 2017, we obtained waivers from lenders of Kaxu and ACT as well as a consent in the case of
Solana and Mojave (see paragraph “Change of ownership provisions in project finance agreements”
above under “Events during the period”).

In the first half of 2017, Abengoa announced its intention to sell the 41.7% stake they own in
Atlantica Yield. On November 1, 2017 Algonquin announced it had reached an agreement to
acquire a 25% stake in Atlantica from Abengoa. In addition, Algonquin and Abengoa signed an
agreement to create a joint venture called AAGES to invest in the development and construction
of clean energy and water infrastructure contracted assets and we signed a non-binding term-
sheet which will serve as a basis of a proposed ROFO agreement with AAGES. Provided that the
transaction between Algonquin and Abengoa closes and we sign the ROFO agreement with AAGES,
we expect this ROFO agreement to be our main source of growth.

In 2017, the Company and its subsidiaries reported revenues of $1,008.4 million (2016: $971.8
million) and a loss for the year attributable to the parent company of $111.8 million (2016: loss of
$4.9 million). Revenue increased mainly due to higher revenues in our solar assets in Spain. The
increase was mainly due to higher revenue per megawatt-hour produced and higher production
in those assets. The appreciation of the euro against the U.S. dollar for the year ended December
31, 2017 compared to the year ended December 31, 2016 also contributed to the increase. The net
loss of 2017 is mainly due to some one-time non-cash expenses, mainly related to Income taxes.
In 2017, the Company experienced an ownership change under section 382 of the U.S. Internal
Revenue Code, which caused a $96 million tax expense, with no cash impact in cash in 2017. U.S.
tax reform caused an additional $19 million tax expense. Additional detail on the reasons for the
changes in Revenues, Operating profit and Net loss for the year attributable to the parent company
is provided below.

$ in millions

Revenue
Operating Profit
Profit/(loss) for the Year
Loss for the Year Attributable to the Parent Company

2017
1,008.4
458.0
(104.9)
(111.8)

2016
971.8
402.4
1.6
(4.9)

As of 31 December 2017, our cash and cash equivalents at the project company level were $520.8
million as compared with $472.6 million as of 31 December 2016. In addition, our cash and cash
equivalents at the Atlantica Yield level were $148.5 million as of 31 December 2017 compared with
$122.2 million as of 31 December 2016. Additionally, as of December 31, 2017, we had $71 million
available under our Revolving Credit Facility (nil as of December 31, 2016) which made out total
corporate liquidity amount to $219.5 million.

In February 2017, we successfully refinanced Tranche B of our Revolving Credit Facility, which had
a maturity in December 2017 with a Note Issuance Facility entered into with a group of funds
managed by Westbourne Capital as purchasers of the notes.

We expect our ongoing sources of liquidity to include cash on hand, cash generated from our
operations, project debt arrangements, corporate debt and the issuance of additional equity
securities, as appropriate, given market conditions. Our financing agreements consist mainly of the
project-level financings for our various assets, the 2019 Notes, the Credit Facility, the Note Issuance
Facility and the line of credit with a local bank.

On November 17, 2014, we issued the 2019 Notes in an aggregate principal amount of $255 million
maturing in November 15, 2019. The 2019 Notes have a public credit rating for the 2019 Notes
from S&P and Moody’s.

On December 3, 2014, we entered into the Credit Facility in the total amount of up to $125 million.
On December 22, 2014, we drew down $125 million under the Credit Facility, which we refer to as
Tranche A. Loans under Tranche A of the Credit Facility mature on December 22, 2018. Loans
prepaid by us under Tranche A of the Credit Facility may be re-borrowed until their maturity date
of December 22, 2018. In 2017, we prepaid partially the principal outstanding under the Tranche A
of the Credit Facility, leaving a balance of $54 million outstanding and $71 million of Revolving
Credit Facility available as of December 31, 2017. We intend to extend the 2018 maturity during
the year.

On 10 February 2017, we signed a Note Issuance Facility for a total amount of €275 million, the
proceeds of which we used to repay and cancel the Tranche B of our Revolving Credit Facility. The
Note Issuance Facility has three series of notes: Series 1 notes worth €92 million mature in 2022;
series 2 notes worth €91.5 million mature in 2023; and series 3 notes worth €91.5 million mature in
2024.

In July 2017, we signed a line of credit with a local bank for up to €10.0 million (approximately $12.0
million) which is available in euros or U.S. dollars. The credit facility has a maturity date of July 20,
2018 which we intend to extend during the year. The line was fully drawn in 2017.

Based on our current level of operations, we believe our cash flow from operations, available cash
and available borrowings under our financing agreements will be adequate to meet our future
liquidity needs for at least the next twelve months.

In 2017, we paid total dividends of $1.05 per share to our shareholders (see the “Directors’ Report-
Dividends” for amount of each quarterly dividend) and from that amount we retained $10.4 million
of the dividend attributable to Abengoa in accordance with the provisions of the agreements
reached with Abengoa in relation to our preferred equity investment in ACBH. In 2016, we paid
$0.453 per share and from that amount we retained $19.0 million of the dividend attributable to
Abengoa in accordance with the provisions of the agreements reached with Abengoa in relation to
our preferred equity investment in ACBH.

As previously stated within this Consolidated Annual Report, all our assets have contracted
revenues (regulated in the case of Spain) with low-risk off-takers and collectively have a weighted-
average remaining contract life of approximately 19 years as of December 31, 2017. To gain an
overall fair review of the business we enclose below a detailed breakdown of our results of
operations for the years ended as of December 31, 2017 and 2016:

$ in millions
Revenue
Other operating income
Raw materials and consumables used
Employee benefit expenses
Depreciation, amortization and impairment charges
Other operating expenses
Operating profit

Financial income
Financial expense
Net exchange differences
Other financial income/(expense), net
Financial expense, net

Share of profit/(loss) of associates carried under the equity method
$
Profit/(Loss) before income tax

Income tax
Profit/(Loss) for the year

Profit/(loss) attributable to non-controlling interests
Loss for the year attributable to the parent company

Revenues

2017

2016

1,008.4
80.8
(17.0)
(18.8)
(311.0)
(284.5)
458.0 $

971.8
65.5
(26.9)
(14.7)
(332.9)
(260.3)
402.4

3.3
1.0
(408.0)
(463.7)
(9.6)
(4.1)
8.5
18.4
$ (448.4) $ (405.8)
6.7
5.3
3.3
14.9 $
(1.7)
1.6
(6.5)
(4.9)

(6.9)
$ (111.8) $

(119.8)
$ (104.9) $

Revenues increased by 3.8% to $1,008.4 million for the year ended December 31, 2017, compared
with $971.8 million for the year ended December 31, 2016. The increase was mainly due to higher
revenue per MWh and higher production at our solar assets in Spain. The appreciation of the euro
against the U.S. dollar for the year ended December 31, 2017 compared to the year ended
December 31, 2016 also contributed to the increase. This was partially offset by reduced
performance of Kaxu, our solar asset in South Africa after the plant experienced technical problems.
Additionally, ACT continued to deliver robust levels of production and availability. However,
revenues from ACT slightly decreased due to the lower revenues in the portion of the tariff related
to the operation and maintenance services, driven by lower operation and maintenance costs in
2017.

Other operating income

The following table sets forth our other operating income for the years ended December 31, 2017
and 2016:

Other operating income
Grants
Income from various services
Total

Year ended December
31,
2016

2017

$ in millions

59.7
21.1
80.8

59.1
6.4
65.5

“Other operating income” increased by $15.3 million to $80.8 million for the year ended December
31, 2017, compared with $65.5 million for the year ended December 31, 2016. “Income from
various services” increased due to insurance proceeds received in Kaxu and Solana of
approximately $14 million.

Income classified as grants represents the financial support provided by the U.S. Administration to
Solana and Mojave consists of ITC Cash Grants and an implicit grant related to the below market
interest rates of the project loans with the FFB. “Grants” remained stable for the years ended
December 31, 2017 and 2016.

Raw materials and consumables used

“Raw materials and consumables used” decreased by $9.9 million to $17.0 million for the year
ended December 31, 2017, compared with $26.9 million for the year ended December 31, 2016,
primarily due to fewer spare parts and consumables at Solana and Mojave.

Employee benefits expenses

“Employee benefit expenses” increased by $4.1 million to $18.8 million for the year ended
December 31, 2017, compared with $14.7 million for the year ended December 31, 2016. The
increase is mainly due to the transfer of employees previously employed by subsidiaries of
Abengoa who were providing services to us under the support services agreement to our
subsidiaries. The transfer occurred during the first six months of 2016 and the support service
agreement was terminated in the second quarter of 2016.

Depreciation, amortization and impairment charges

“Depreciation, amortization and impairment charges” decreased by 6.6% to $311.0 million for the
year ended December 31, 2017, compared with $332.9 million for the year ended December 31,
2016. The decrease was largely attributable to $20.3 million of impairment in our wind assets that
was recorded in the fourth quarter of 2016 due to lower than expected wind resource in the
previous two years.

Other operating expenses

“Other operating expenses” increased by 9.3% to $284.5 million for the year ended December 31,
2017, compared with $260.3 million for the year ended December 31, 2016. The increase was
largely due to higher costs recorded in Other expenses as well as Levies and duties which were
partially offset by lower costs recorded in Operation and maintenance. Other expenses principally
increased due to provisions for legal expenses in our US assets. Levies and duties increased mainly
due to $8.1 million of a one-time provision for property taxes recorded at certain plants in Spain.
These cost increases were partially offset by the Operation and maintenance cost savings that
resulted mainly from lower operation and maintenance expenses of ACT for the year ended
December 31, 2017 compared to the year ended December 31, 2016, a year when ACT had
scheduled major maintenance.

Operating profit/(loss)

As a result of the above factors, operating profit increased by 13.8% to $458.0 million for the year
ended December 31, 2017, compared with $402.4 million for the year ended December 31, 2016.

Financial income and financial expense

Financial income
Financial expense
Net exchange differences
Other financial income, net
Financial expense, net

Financial expense

Year ended December
31,
2016

2017

$ in millions

1.0
(463.7)
(4.1)
18.4
(448.4)

3.3
(408.0)
(9.6)
8.5
(405.8)

The following table sets forth our financial expense for the years ended December 31, 2017 and
2016:

Financial expense

Expenses due to interest:
Loans with credit entities
Other debts
Interest rates losses derivatives: cash flow hedges
Total

Year ended December
31,
2016

2017

$ in millions

(253.7)
(137.6)
(72.4)
(463.7)

(242.9)
(91.0)
(74.1)
(408.0)

Financial expense increased by 13.7% to $463.7 million for the year ended December 31, 2017,
compared with $408.0 million for the year ended December 31, 2016. This increase was largely
attributable to the increase of expenses due to interest on “Other debts”, mainly due to a one-time
non-monetary expense of $50.1 million resulting from the update in the estimation of Liberty’s tax
equity investment accounting value. Under IFRS, although the investment of Liberty is in ordinary
shares, it does not qualify as equity and has been classified as a liability recorded in “Grants and
other liabilities”, measured at amortized cost in accordance with the effective interest method.

Financial expenses related to “Loans with credit entities” increased mainly due the higher interest
rate for the long-term Note Issuance Facility since February 2017 compared to the lower interest
rate of the short-term Tranche B of the Revolving Credit Facility, which was since paid off.

Interest on other debt is primarily interest on the notes issued by ATS, ATN, ATN2, Solaben 1/6 and
the 2019 Notes.

“Losses from interest rate derivatives designated as cash flow hedges” correspond mainly to
transfers from equity to financial expense when the hedged item is impacting the Annual
Consolidated Financial Statements.

Other financial income/(expense), net

Other financial income/(expenses)

Dividend ACBH (Brazil)
Other financial income
Impairment preferred equity investment in ACBH
Other financial losses
Total

Year ended December
31,
2016

2017

$ in millions

10.4
28.8
-
(20.8)
18.4

28.0
13.0
(22.1)
(10.4)
8.5

“Other financial income/(expense), net” increased to $18.4 million for the year ended December
31, 2017, from $8.5 million for the year ended December 31, 2016 due primarily to the gain resulting
from the cancellation of the Currency Swap with Abengoa in 2017 recorded in “Other financial
income”, as well as to the Impairment of preferred equity investment in ACBH recorded in 2016.

In accordance with the agreement reached with Abengoa with respect to the ACBH investment,
Abengoa acknowledged that we are the legal owner of the dividends we retained from Abengoa.
As a result, we recorded $10.4 million in our financial statements in 2017 and $28.0 million in 2016,
in accordance with the accounting treatment given previously to the ACBH dividend. In addition,
upon completion of Abengoa’s restructuring in March 2017, we received restructured debt and
equity of Abengoa. In exchange, we waived, as agreed, our rights under the ACBH agreements,
including our right to further retain dividends payable to Abengoa and we wrote-off the accounting
value of this instrument. The net impact of the two transactions resulted in a net loss of $5.8 million,
recorded in “Other financial losses”. Additionally, during 2017, we sold a significant portion of the
Abengoa debt and equity instruments we received and recognized a gain of $6.5 million in “Other
financial income”. In addition, “Other financial income” includes a $16.2 million gain resulting from
our cancelation of the Abengoa Currency Swap Agreement in 2017.

“Other financial losses” also include guarantees and letters of credit, wire transfers and other bank
fees and other minor financial expenses.

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

Share of profit of associates carried under the equity method decreased to $5.3 million for the year
ended December 31, 2017, compared with $6.7 million for the year ended December 31, 2016. The
decrease is mainly due lower profits in Honaine.

Profit/(loss) before income tax

As a result of the previously mentioned factors, we reported a profit before income taxes of $14.9
million for the year ended December 31, 2017, compared with a profit before income taxes of $3.3
million for the year ended December 31, 2016.

Income tax

Income tax expense amounted to $119.8 million for the year ended December 31, 2017, compared
with an income tax expense of $1.7 million for the year ended December 31, 2016. The increase is
mainly due to the change of ownership under Section 382 of the U.S. Internal Revenue Code, which
caused a one-time income tax expense of $96 million and to the U.S. Tax Reform which caused a
one-time income tax expense of $19 million.

In 2016, our effective tax rate differs from the average nominal tax rate mainly due to a net of
different effects. Permanent differences in some jurisdictions, particularly in Mexico had a positive
impact in our income tax expense. This effect was offset by tax losses for which we did not record
a tax credit in some jurisdictions, in accordance with IFRS.

Profit/(loss) attributable to the parent company

As a result of the previously mentioned factors, loss attributable to the parent company was $111.8
million for the year ended December 31, 2017, compared with $4.9 million for the year ended
December 31, 2016.

The factors affecting our results of operations are:

 Regulation

 Power purchase agreements and other contracted revenue agreements

 Tax incentives in the United States for renewable energy assets

 Tax accelerated depreciation for Spanish new assets

 Specific corporate income tax rules in Mexico

 Project debt



Interest rates

 Exchange rates

Other factors that affect comparability of our results of operations are listed below and described
in detail in individual paragraphs in “Events during the period:”

 Exchangeable Preferred Equity Investment in Abengoa Concessões Brasil Holding

 Change of ownership under Section 382 of the U.S. Internal Revenue Code

 U.S. Tax Reform

With the fleet of assets that we own, we believe that we have a balanced portfolio in terms of
geographies and technologies that provides the Company the critical mass required to continue
capturing opportunities to (i) continue improving the performance and cash generation of our
assets and (ii) continue growing through acquisitions from Abengoa, from AAGES provided that
the transaction with Algonquin closes and we sign a ROFO agreement with them, third parties or
new potential future partners.

Key performance indicators

In addition to the factors described above, we closely monitor the following key drivers of
our business sectors’ performance to plan for our needs, and to adjust our expectations, financial
budgets and forecasts appropriately.

Renewable Energy
MW in operation1
GWh produced
Efficient Natural Gas Power
MW in operation1
GWh produced2
Availability (%)3
Electric Transmission
Miles in operation
Availability (%)3
Water
Mft3 in operation
Availability (%)3

As of December, 31

2017

2016

1,442
3,167

1,442
3,087

300
2,372
100.5%

300
2,416
99.1%

1,099
97.9% 100.0%

1,099

10.5

101.8% 101.8%

____________________________
1 Represents total installed capacity in assets owned at the end of the period, regardless of our percentage
of ownership in each of the assets.
2 Efficient natural gas availability was impacted by a periodic scheduled major maintenance in February 2016.
3 Availability refers to actual availability divided by contracted availability.

Our Segment Reporting

As of December 31, 2017, we organize our business into the following three geographies where
the contracted assets and concessions are located:

North America;

South America; and

EMEA.

In addition, we have identified the following business sectors based on the type of activity:

Renewable Energy, which includes our activities related to the production electricity from
solar power and wind plants;

Efficient Natural Gas Power, which includes our activities related to the production of
electricity and steam from natural gas;

Electric Transmission, which includes our activities related to the operation of electric
transmission lines; and

Water, which includes our activities related to desalination plants.

As a result, we report our results through the year ended December 31, 2017 in accordance with
both criteria.

Year ended December 31,
2016
2017

Revenue by geography
North America
South America
EMEA
Total revenue

% of

% of
revenue

$ in
millions
332.7
120.8
554.9

revenue
33.0%
12.0%
55.0%

34.7%
12.2%
53.1%
1,008.4 100.0% 971.8 100.0%

$ in
millions
337.0
118.8
516.0

Further Adjusted EBITDA by geography

Year ended December 31,
2016
2017

Further Adjusted EBITDA by geography
North America
South America
EMEA
Further Adjusted EBITDA(1)

Note:—

% of

$ in
millions
282.3
108.8
388.2
779.3

$ in
millions
revenue
284.7
84.9%
124.6
90.0%
70.0%
354.0
77.3% 763.3

% of
revenue

84.5%
104.9%
68.6%
78.5%

(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 the year ended December 31, 2016
and for 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.

Volume by geography

North America (GWh)
South America (miles in operation)
South America (GWh)
EMEA (GWh)
EMEA (capacity in M ft3 per day)

North America

Volume produced/availability
Year ended December 31,

2017

2016

3,695
1,099
325
1,519
10.5

3,684
1,099
296
1,523
10.5

Revenues decreased slightly by 1.3% to $332.7 million for the year ended December 31, 2017
compared with $337.0 million for the year ended December 31, 2016. The decrease was primarily
due to lower revenues at ACT. Although ACT continued to deliver robust levels of production and
availability, revenues in ACT decreased due to lower revenues in the portion of the tariff related to
the operation and maintenance services, driven by lower operation and maintenance costs for the
year ended December 31, 2017. Further Adjusted EBITDA margin remained stable around 84% for
the year 2017 compared to 2016.

South America

Revenues increased slightly by 1.7% to $120.8 million for the year ended December 31, 2017,
compared with $118.8 million for the year ended December 31, 2016 mainly due to higher
production in our wind assets in Uruguay. Further Adjusted EBITDA decreased to $108.8 million
for the year ended December 31, 2017, compared with $124.6 million for the year ended December
31, 2016. According to the agreement reached with Abengoa in the third quarter of 2016, Abengoa
acknowledged that we are the legal owner of the dividends retained from Abengoa. As a result,
we recorded $28.0 million for the year ended December 31, 2016 and $10.4 million for the year
ended December 31, 2017 in accordance with the accounting treatment given previously to the
ACBH dividend. Further Adjusted EBITDA margin decreased to 90.0% for the year ended December
31, 2017 from 104.9% for the year ended December 31, 2016 also due to the accounting treatment
previously given to the ACBH dividend.

EMEA

Revenues increased by 7.5% to $554.9 million for the year ended December 31, 2017, compared
with $516.0 million for the year ended December 31, 2016. The increase was mainly due to higher
revenue per MWh and higher production of our solar assets in Spain, driven by higher solar
radiation levels. The appreciation of the euro against the U.S. dollar for the year ended December
31, 2017 compared to the year ended December 31, 2016 also contributed part of the increase.
This was partially offset by reduced performance of Kaxu, our solar asset in South Africa after the
plant experienced technical problems. The repairs were completed in the fourth quarter of 2017
and insurance payments claimed for repairs of water pumps were collected in the second quarter
of 2017. As a result, Further Adjusted EBITDA increased to $388.2 million for the year ended
December 31, 2017, compared with $354.0 million for the year ended December 31, 2016.

Revenue by business sector

Renewable energy
Efficient natural gas power

Electric transmission lines

Water

Total revenue

Further Adjusted EBITDA by business sector

Renewable energy
Efficient natural gas power

Electric transmission lines

Water

Further Adjusted EBITDA(1)
Note:—

Year ended December 31,
2016
2017

$ in
Millions
767.2
119.8
95.1
26.3

% of
revenue
76.1%
11.9%
9.4%
2.6%
1,008.4 100.0%

$ in
millions
724.3
128.1
95.1
24.3

% of
revenue
74.5%
13.2%
9.8%
2.5%
971.8 100.0%

Year ended December 31,
2016
2017

$ in
Millions

% of
revenue

$ in
millions

% of
revenue

569.2
106.1

74.2%
88.6%

538.4
106.5

74.3%
83.2%

87.7

92.2%

104.8 110.2%

16.3

62.0%

13.6

56.0%

779.3 77.3%

763.3 78.5%

(1)

Volume by business sector
Renewable energy (GWh)
Efficient natural gas power (GWh)
Electric transmission lines (miles in operation)

Renewable energy

Volume produced/availability
Year ended December 31,

2017

2016

3,167
2,372
1,099

3,087
2,416
1,099

Revenue increased by 5.9% to $767.2 million for the year ended December 31, 2017, compared
with $724.3 million for the year ended December 31, 2016. The increase was mainly due to higher

revenue per MWh and higher production of our solar assets in Spain. The appreciation of the euro
against the U.S. dollar for the year ended December 31, 2017 compared to the year ended
December 31, 2016 also contributed part of the increase. As a result of this effect and of the good
performance of our Spanish solar assets, Further Adjusted EBITDA increased to $569.2 million for
the year ended December 31, 2017, which represented an increase of $30.8 million with respect to
the year ended December 31, 2016. Further Adjusted EBITDA margin remained stable for the years
ended December 31, 2017 and 2016.

Efficient natural gas power

Revenue decreased by 6.5% to $119.8 million for the year ended December 31, 2017, compared
with $128.1 million for the year ended December 31, 2016 ACT continued to deliver robust levels
of production and availability, however revenues decreased due to the lower revenues in the
portion of the tariff related to the operation and maintenance services, driven by lower operation
and maintenance costs for the year ended December 31, 2016. Operation and maintenance costs
were lower for the year ended December 31, 2017, since operation and maintenance costs are
typically higher in the months prior to a major maintenance, which took place in the first quarter
of 2016. As a result, Further Adjusted EBITDA margin increased to 88.6% for the year ended
December 31, 2017, from 83.2% for the year ended December 31, 2016.

Electric transmission lines

Revenue remained stable at $95.1 million for the year ended December 31, 2017 and 2016. Further
Adjusted EBITDA decreased by 16.3% mainly due to difference in the amount of the ACBH dividend
recognized in for the year ended December 31, 2016 as compared to the year ended December
31, 2017. In the agreement reached with Abengoa in the third quarter of 2016, Abengoa
acknowledged that we are the legal owner of the dividends retained from Abengoa prior to
Abengoa’s restructuring. As a result, we recorded $28.0 million for the year ended December 31,
2016 and $10.4 million for the year ended December 31, 2017, in accordance with the accounting
treatment given previously to the ACBH dividend.

Water

Revenue amounted to $26.3 million for the year ended December 31, 2017 and Further Adjusted
EBITDA amounted to $16.3 million for the year ended December 31, 2017.

Principal risks and uncertainties

The Company and its underlying assets are subject to a number of risks ranging from operating,
regulatory, financial and connection to Abengoa. The processes and systems implemented have

been designed to mitigate those risks to the extent possible. We include the following table as a
summary of some of those risks and action plans carried out to mitigate them:

Risk

Impact

Poor
performance of
assets

 Loss of revenues and cash flows at
the project company level, which
has subsequent impact on cash
returns to the Company.

 In addition, we rely on third parties
for the supply of services and
equipment,
including
technologically complex equipment
and operation and maintenance
services.

 We use insurance to seek coverage
against inherent risks in our markets.
Insurance policies are subject for
periodic review by our insurers.
Insurance premiums may increase in
the future, or certain types of
insurance coverage may not be
available, or deductibles may
increase. These events could have
an adverse effect on our ability to
comply with our project financing
obligations.

Assessment of change in risk year-
on-year

 In the

last few years, we had
technical problems in Solana and
Kaxu. Repairs and improvements
were carried out at these two assets,
but we cannot guarantee we will
reach expected performance.

received

 We filed several insurance claims in
recent periods. At Solana, we had a
severe wind event in 2016 for which
we
insurance
compensation for damages and loss
of revenue in 2017. Additionally, in
summer 2017, Solana experienced
problems with its transformers for
which significant portion of the
insurance proceeds for property
damages were received in 2017. At
Kaxu, we filed a claim for property
damage and
revenue
following technical problems with
the plants water pumps at the end
of 2016. We received insurance
compensation in 2017.

loss of

 Access
future
acquisitions

 Impede our ability to execute our

growth strategy

 In order to grow, we depend on the
availability of low risk contracted
assets with stable cash flows. Given
that we distribute as dividends a
significant portion of the case we
generate, we also depend on
financing availability
finance
growth, including access to capital
markets.

clean

 In connection with the transaction
announced between Abengoa and
Algonquin for the acquisition by
Algonquin of a 25% stake
in
Atlantica from Abengoa, we have
signed a non-binding term-sheet
which will serve as a basis of a
proposed ROFO agreement with
AAGES, a joint venture formed by
Abengoa and Algonquin to invest in
the development and construction
and water
energy
of
infrastructure contracted assets.
However, the term-sheets entered
into with Algonquin, AAGES and
Abengoa are non-binding and while
the parties have agreed to negotiate
in good faith towards a mutually
beneficial outcome, there
is no
guarantee that the AAGES ROFO
agreement and other agreements
will be entered into, or that any
assets will be purchased by Atlantica
from
or
Abengoa.

Algonquin,

AAGES

Mitigation of risk

 Dedicated

supervisory

and

management teams

 Reporting and monitoring systems

in place

 Proven technology through years of

experience
 Operation

and

maintenance

contracted with specialists

 Tracked down alternative O&M

opportunities in the market

 Use the provisions of the EPC

guarantee where possible

 Maintain ROFO agreement with

Abengoa

 Seek to sign similar agreements or
enter into partnerships with other
developers or asset owners to
acquire assets

 Pursue acquisitions

from

third

parties.
 Dedicated

supervisory
to
teams

and
locate

management
opportunities within the market.

Risk

Impact

Assessment of change in risk year-
on-year

Mitigation of risk

 Regulation

legal,
environmental
general
and
compliance
-
of each asset

 Uncertainty or changes to any such
regulation could adversely affect the
profitability of our current plants
and our ability to refinance projects

 Regulation

Tax

 Uncertainty or changes

tax
regulations could adversely affect
the profitability of our current plants
and our ability to refinance projects

 Strong power purchase agreement
or concession contracts in many
assets

 Investment grade ratings in most of

our assets
 Management
specialized
and
compliance
continuously
teams
tracking down any potential change.

 Reporting and monitoring system.

 According to our analysis, the cash
impact of the U.S. tax reform is
considered
since we
limited
continue to expect not to pay
significant taxes in the U.S. in the
upcoming years.

 NOL limitation under section 382 is
partially mitigated by a certain
portion of any “built-in-gains”.

 Management
specialized
and
compliance
continuously
teams
tracking down any potential change.

 Revenues

parameters

in Spain are mainly
defined by regulation and some of
the
the
revenues are subject to review every
six years, with the next review taking
place at the end of 2019.

defining

 In

the

U.S.,

current
the
administration’s
proposed
environmental and tax policies may
create regulatory uncertainty in the
clean energy sector and may lead to
a reduction or removal of various
clean
and
initiatives designed to curtail climate
change.

programs

energy

 Other markets in which we operate
are subject to different tax regimes.
Changes, such as reduction or
tax benefits, or
elimination of
reduction of
could
tax
adversely affect the market for
investment in our projects by third
parties and limit our ability to grow
our business.

rates

limitation on

 Tax reform recently enacted in the
United States includes, among other
things,
the
interest and a
deductibility of
limitation on the deduction for new
NOLs which could adversely affect
us. In addition, certain measures
included in the tax reform such as a
reduction in the enacted income tax
rate and the new base erosion anti-
abuse tax may impact the cost and
availability of tax equity investors,
which could have a negative impact
in our growth prospects in the U.S.
 A change of ownership as defined
under section 382 of the IRC in the
United States, including direct and
indirect shareholders, may limit our
ability to use net operating loss
carryforwards in the United States,
which could negatively affect our
cash
In 2017, Abengoa
restructuring caused a change of
ownership limiting our ability to use
net operating loss carryforwards in
the United States. The sale by
Abengoa of their stake in us could or
other changes in our shareholders
could cause another change of
ownership.

flows.

 We are also subject to changes in tax
in the rest of the

regulations
jurisdictions where we have assets.

Risk

 Brexit

Impact

Political, social and macroeconomic
uncertainty

 Financing

 Restrictions to distribute cash out of

agreements in
each contract

project companies

 Declare project finance debt to be

due and payable immediately

 Cross-default provisions and change
of ownership provisions related to
Abengoa (see below)

 Connection to

 Our reputation is still closely related

Abengoa

to Abengoa’s reputation

warranties

 Existing operation and maintenance
agreements,
and
guarantees under EPC contracts in
some
cross-default
provisions, minimum ownership
provisions, existing guarantees and
other risks

assets,

 Cross-default provisions related to
future defaults by Abengoa could
trigger default under the project
finance arrangement of Kaxu

 Change of ownership provisions
related to Abengoa could trigger
default under the project finance
arrangement of Solana and Mojave

 We

operation
contracts

and
have
maintenance
with
Abengoa at most of our assets. We
cannot guarantee Abengoa and its
subcontractors will be able
to
continue performing with the same
level of service and under the same
terms and conditions,
including
prices. Although we have long-term
O&M agreements in most of our
assets, if Abengoa cannot continue
performing current services at the
same prices, this could cause a
change of supplier and we cannot
guarantee the prices and conditions
will be maintained.

 The sale process of Abengoa’s stake
can have a negative impact in the
price of our shares.

 If a buyer of Abengoa’s stake in us
(or another investor) acquires more

Mitigation of risk

 Management
specialized
and
compliance
continuously
teams
tracking down any potential change

 Reporting and monitoring system

 Reporting

and monitoring of

covenants in each contract

and

 Management
specialized
compliance
teams
continuously tracking down any
change

legal

and

tax

the

result

impacts

repatriation

Assessment of change in risk year-
on-year
The exit of the United Kingdom from
the EU or prolonged periods of
in
could
uncertainty
deterioration,
macroeconomic
negative
stock
exchanges, decreased GDP in the
regulation
European Union,
affecting
of
dividends, all of which could have an
adverse effect on our operations.
 Kaxu had a reduced production
during the year 2017 due to the
technical problems
it began to
experience in December 2016. As a
result, Kaxu did not reach the
ratios
minimum debt coverage
required by the project financing
which, according to the lending
agreement, represented a technical
default event. Project financing
lenders have agreed to waive the
instance from causing default.

 In March 2017, Abengoa completed
its restructuring process. Abengoa
publicly announced its intention to
sell the stake they own in us in a
private transaction. In November
2017, Algonquin announced the
acquisition of a 25% in our shares
from Abengoa.

 During the year 2017, we have
obtained waivers for cross default
provisions in all the pending assets
except for potential future cross
defaults in the project financing
arrangement of Kaxu.

finance arrangement.

 During the year 2017, we have
obtained waivers for change of
in all the
ownership provisions
assets except for Solana and Mojave
project
In
2016, a
forbearance agreement
signed with the U.S. DOE in 2016
with respect to these assets allowed
reductions of Abengoa’s ownership
under certain circumstances and
eliminated debt acceleration from
the lender’s potential remedies. In
November 2017, we signed a
consent in relation to the Solana and
Mojave projects which reduces the
minimum ownership required by
Abengoa in Atlantica from 30% to
16%, subject to certain conditions
precedent. The main conditions
precedent
several
payments by Abengoa to Solana
and
before December
February 2018 as a result of its
obligations as EPC contractor, for a
total amount of $120 million.

included

2017

 In 2016 we set up our own
independent back office and our
own
from
IT systems separate
Abengoa

 Waivers obtained for most of the
project finance arrangements with
cross default and change of
ownership clauses

 Financial guarantees issued by us for
an amount of $112 million, replacing
guarantees previously provided by
Financial
Abengoa under
Support Agreement.

the

 Contingency plan in each key area
 Corporate governance

Risk

Impact

Assessment of change in risk year-
on-year

Mitigation of risk

the

lending

than a 50% of our shares, we might
need to refinance all or part of our
corporate debt or obtain waivers
from
financial
institutions, due to the fact that they
contain
change of
control provisions. Additionally, we
could see an increase in the yearly
state property
in
Mojave.

tax payment

customary

 Closing of the
Algonquin’s
acquisition of
stake in us and
our
growth
through
AAGES

 The closing of

transaction
between Abengoa and Algonquin is
beyond our control.

the

 There is no guarantee that we may
be able to sign the ROFO agreement
with AAGES or Algonquin, or that
any assets will be purchased from
Algonquin or AAGES.

 Liquidity risk

 Not being able to meet our financial

obligations as they fall due

 At the date of this report, Algonquin
and Abengoa were in the process of
the closing of the transaction for the
in us by
acquisition of 25%
Algonquin
Abengoa.
from
Algonquin also has an option to
purchase the remaining 16.47% until
March 31, 2018.
Atlantica,
Algonquin and AAGES intend to sign
a ROFO agreement upon the closing
of the transaction.

As of December 31, 2017, our
Corporate debt consists of:
 A note issuance facility signed in
February 2017 for €275 million

(approximately $330 million) with

three series maturing in 2022 (€92

million), in 2023 (€91.5 million) and

2024 (€91.5 million).

 The 2019 bonds for $255 million,

maturing in November 2019.

 The revolving credit facility for a
total amount of $125, of which $54

million were drawn as of December

31, 2017 and $71 million were

available.

 A credit line signed in 2017 for €10
$12.0

(approximately

million

rate
foreign

 Interest
and
currency
exchange rate

 Increases in rates would raise our
project

finance
expenses
companies or corporate level

 Revenues and expenses of our solar
assets in Spain and our solar asset in
South Africa are denominated in
euros and South African rand,
respectively. Depreciation in the
value of euro or South African rand
against U.S. dollar may have a
negative impact on our operating
results and our cash available for
distribution.

million), which was fully drawn as of

December 31, 2017 with maturity in

July 2018.

 In 2017 we terminated the currency
swap agreement with Abengoa. 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

 No material changes

the
underlying assets related to interest
rates.

for

 Our participation in the process is
limited and customary to the nature
of the transaction.

 We

continue

seeking growth
through other venues such as third-
party acquisitions and partnerships.

 Cash on hand: as of December 31,
2017, we had $148.5 million at the
corporate level plus $71 million
available under our revolving credit
facility.

 At least 20% of cash flows generated
and distributed by our project
companies to the holding company
are retained at the holding company
level

 Processes and systems in place
 Possibility to change dividend policy
 Refinancing

bullet-maturity

corporate debt

 Refinancing

of
maturities of the revolving facilities

extension

 In our assets revenues, debt and
most of the expenses are always
denominated in the same currency,
creating a natural hedge.

 Our solar power plants in Spain have
expenses

revenues

their

and

denominated

in euros. At

the

corporate

level, we have some

general and administrative expenses

and debt denominated in euros. 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

Risk

Impact

Assessment of change in risk year-
on-year

Mitigation of risk

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.

 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.

 Over 90% of our total interest risk

exposure is fixed or hedged.

 Credit risk

 Not being able to collect our

revenues

 We consider the credit risk with
clients limited as our revenues and
other
contracted
agreements are with electric utilities
and states-owned entities

revenue

 95% of our clients are investment
grade offtakers (based on Moody’s
rating). As of December 31, 2017,
and 2016, we did not have trade
receivables outstanding for more
than three months.

The directors have considered the Group’s relationship with its large shareholder, Abengoa S.A,
and the events that have taken place in the year as discussed in Note 27 to the Consolidated
Financial Statements.

Financial Risk Management

Interest rates

We incur significant indebtedness at the corporate level and in our assets. The interest rate risk
arises mainly from indebtedness with variable interest rates. Most of our debt consists of project
debt. As of December 31, 2017, approximately 93% of our project debt has either fixed interest
rates or has been hedged with swaps or caps.

Regarding our corporate debt, in November 2014, we incurred indebtedness at the corporate level
through the issuance of the 2019 Notes, which have a fixed interest rate of 7.00%. On December 3,
2014, we entered into a revolving credit facility of up to $125 million with maturity in December
2018. The interest rate of the Revolving Credit Facility is hedged by an interest rate swap contracted
with HSBC Bank with maturity date December 24, 2018, which fixes the interest rate at 4.7%. As of
December 31, 2017, the amount drawn under Tranche A of the Revolving Credit Facility amounted
to $54 million and $71 million of Revolving Credit Facility was available. On February 10, 2017, we
signed a Note Issuance Facility, a senior secured note facility with a group of funds managed by
Westbourne Capital as purchasers of the notes issued thereunder for a total amount of € 275
million (approximately $330 million), with three series of notes. Series 1 notes worth €92 million
mature in 2022; series 2 notes worth €91.5 million mature in 2023; and series 3 notes worth €91.5
million mature in 2024. Interest on all three series accrues at a rate per annum equal to the sum of
3-month EURIBOR plus 4.90%. We fully hedged the Note Issuance Facility with a swap that fixed
the interest rate at 5.5%.

To mitigate the interest rate risk, we primarily use long-term interest rate swaps and interest rate

options which, in exchange for a fee, offer protection against a rise in interest rates and we apply
hedge accounting. We estimate that approximately 93% of our total interest risk exposure is fixed
or hedged. Nevertheless, our results of operations can be affected by changes in interest rates with
respect to the unhedged portion of our indebtedness that bears interest at floating rates, which
typically bears a spread over EURIBOR or LIBOR.

Exchange rates

Our functional currency is the U.S. dollar, as most of our revenues and expenses are denominated
or linked to U.S. dollars. All our companies located in North America, South America and Algeria
have their PPAs, or concessional agreements, and financing contracts signed in, or indexed to, U.S.
dollars. Our solar power plants in Spain have their revenues and expenses denominated in euros.
Revenues and expenses of Kaxu, our solar plant in South Africa, are denominated in South African
rand. While fluctuations in the value of the euro and the South African rand may affect our
operating results, we hedge cash distributions from our 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.

In subsidiaries with functional currency other than the U.S. dollar, assets and liabilities are translated
into U.S. dollars using end-of-period exchange rates; revenue, expenses and cash flows are
translated using average rates of exchange. Fluctuations in the value of foreign currencies (the euro
and the South African rand) in relation to the U.S. dollar may affect our operating results.

Credit risk

We consider that we have limited credit risk with clients as revenues are derived from PPAs and
other revenue contracted agreements with electric utilities and state-owned entities.

Liquidity risk

Atlantica Yield’s liquidity and financing policy is intended to ensure that the Company maintains
sufficient funds to meet our financial obligations as they fall due. Project finance borrowing permits
the Company to finance the project through project debt and thereby insulate the rest of its assets
from such credit exposure. The Company incurs in project-finance debt on a project-by-project
basis. The repayment profile of each project is established on the basis of the projected cash flow
generation of the business. This ensures that sufficient financing is available to meet deadlines and
maturities, which mitigates the liquidity risk significantly.

Corporate and social responsibility

Sustainability and health and safety in our business model and activities as key values of
Atlantica

Atlantica creates value for its investors by owning, managing and acquiring a diversified portfolio
of contracted assets in operation in the energy and the environment sectors.

Since its foundation the Company manages a portfolio of renewable, efficient natural gas (which
consists of a cogeneration technology plant) and water assets and transmissions lines. In 2017, we
acquired a transmission line under development in the U.S. as well as reached an agreement to
acquire a renewable hydro asset in Peru, thus, consolidating Atlantica efforts to continue promoting
a low-carbon energy industry and a business model based on a sustainable development. Atlantica
intends to take advantage of favourable trends in the power generation, electric transmission, and
water sectors globally, related to the energy scarcity and a focus on the reduction of carbon
emissions.

We own a geographically diverse portfolio of assets, with a primary focus on North and South
America. Atlantica is committed to create a positive impact in the diverse local communities where
the Company develops its activities. The Company also focuses its efforts in guaranteeing the
integrity and safety of the employees that work and operate in our facilities.

Atlantica has been ranked among the top 100 companies in the Clean 200TM which ranks the largest
publicly listed companies by their total clean energy revenues to help ensure the companies are
indeed building the infrastructure and services needed in a just and equitable way.

In December 2017, Atlantica joined the United Nations Global Compact (“UN Global Compact”),
the world’s largest corporate sustainability initiative with more than 9,700 participating companies
from 160 countries. As part of its commitment with sustainability, Atlantica has formally adopts
the UN Global Compact ten basic principles in the fields of human rights, labour, environment and
anticorruption. We are determined to make the UN Global Compact and its principles an integral
part of the strategy, culture and day-to-day operations of the Company.

Environmental Policy

Sustainability is one of our 5 core values. We are committed to invest in assets that are
environmentally sustainable and we manage them sustainably. We follow policies that analyse,
evaluate and propose measures oriented at minimizing the environmental impacts of our business
activity. Atlantica is committed to growing its business in renewable energy generation, efficient
natural gas power generation, electric transmission and water assets that address energy and water
scarcity and focus on the reduction of carbon emissions.

Environmental management is an integral part of our planning, maintenance and operation of our
asset fleet which, as of December 31, 2017, was comprised of 13 renewable power plants, 1 efficient

natural gas facility, 1,099 miles of transmission lines, and 2 water desalination plants. We strive to
further minimize emissions, water use, waste generation and to improve our environmental
compliance and stewardship. We utilize our Environmental Management System that conforms
with the Environmental Management System standard ISO 14001. Our Quality Management
System holds certification under Quality Management System standard ISO 9001. Our systems
have been certified since 2015 through May 2019. The scope of these certifications applies to
environmental and quality systems for management and acquisition of contracted assets at our
locations in Brentford (United Kingdom), Phoenix (AZ, United States), Madrid and Seville (Spain).

Our integrated management system guarantees that we comply with the regulations in force and
with our policies in each of the markets we operate. In this sense, we measure the environmental
impact of our activities, monitoring, identifying and implementing action plans to reduce that
impact at each of our assets. As part of our certified quality management system, Atlantica sets
quality, environmental and safety targets. The achievement of these targets of followed up by
management committee periodically.

We perform annual audits throughout all assets. Additionally, at the asset level, some of the KPIs
were externally verified for various scope other than for inclusion in this report.

During 2017, we generated 5,539 GWh of electricity, 57% of which is produced by solar plants and
wind farms. We produced electricity equivalent to the energy needs of a city with over 1.5 million
households for a year. Our two desalination plants have a capacity to filer 10.5 million cubic feet
of saline water per day to provide drinking water to 1.5 million inhabitants.

Greenhouse gas emissions

Atlantica is firmly committed to providing clean, low emissions energy.

As a United Kingdom company, Atlantica is subject to, and is in compliance with the requirements
of the Climate Change Act 2008 for greenhouse gas emissions reporting. Additionally, our
greenhouse gas emissions management complies with the requirements of the Commission
Regulation (EU) No 601/2012.

Our current goal for the reduction of carbon emissions is to reduce the CO2/MWh ratio by 10% by
2020. Internally, we measure and benchmark our periodic performance on ongoing basis.
Considering the actual emission in 2017 and 2016, we are on track to meet the goal.

Our focus on renewables and sustainable technologies allows Atlantica to have greenhouse gas
emissions rates at significantly lower levels than those normally produced by fossil fuel-power
generators. In 2017, 1,442MW, or 83% of our installed capacity was represented by solar plants
and wind farms which are naturally low-emission power generating assets. Our 300MW installed
capacity plant in Mexico, ACT, uses natural gas in its highly efficient cogeneration technology to
generate steam and power. The natural gas used at the plant is a waste-grade product provided
free-of-charge by Pemex and upcycled by ACT into thermal power.

Emissions figures on this report are quantified and reported according to the guidelines of the ISO
14064. In accordance with this international standard, which was compiled according to the Green
House Gas Protocol, we classified our emissions into 2 groups:

 Scope 1: Emissions of greenhouse gas from sources that are owned or controlled by the

Company and the Group.

 Scope 2: Indirect emissions of greenhouse gas from consumption of purchased electricity,

heat or steam.

Scope 3 emissions are emissions associated to the supply chain or to transport. At Atlantica they
represent a negligible share of our total emissions, hence we do not include them in this report.
Additionally, they are not required to be reported according to the United Kingdom regulation.

The total carbon dioxide equivalent emissions generated by the Company in 2017 reached 1,847
thousand tons, a 2.6% decrease from 1,8961 thousand tons generated in 2016 which occurred
mainly thanks to the implementation of our initiatives aimed at improving our efficient natural gas
plant in Mexico. As part of the project, we installed heat recovery units to increase the efficiency.

The emissions are calculated based on the criteria defined by the GHG Protocol and includes all
entities under our control. Our reported emissions also include emissions of methane (CH4), and
nitrous oxide (N2O) as CO2 equivalents. We used the GHG inventories conversion factors indicated
by the following organizations:

Intergovernmental Panel on Climate Change (the “IPCC”)

- Department for Environment, Food and Rural Affairs of the United Kingdom

- Comisión Nacional de los Mercados y la Competencia (the “CNMC”) in Spain

The carbon emissions, electricity and gas consumption as well as emission factors of the efficient
natural gas plant in Mexico and solar plants in Spain are subject to external audit by accredited
organizations as required by the rules and regulations governing in those geographies.

Graph 1 shows tons of carbon dioxide equivalent generated in 2017 and 2016 corresponding to
each of the previously described scopes.

1 The 2016 total emissions have been recalculated based on audited 2016 emissions generated by our cogeneration
plant in Mexico. The total emission published in our 2016 Annual Report were based on pre-audit emissions by ACT.
The audit is performed annually by an external environmental auditor licensed by the Mexican government.

Graph 1: Greenhouse gas emissions breakdown by scope1

As shown on the following graph, the rate of emissions per megawatt-hour (the “MWh”) of energy
generation has decreased by 3%, from 0.33 equivalent tons of Carbon Dioxide (“CO2”) per
megawatt-hour in 2016 to 0.321 in 2017. This decrease is explained by lower emissions from our
efficient natural gas plant in Mexico.

Graph 2: Tons of CO2 emissions per MWh by scope

Around 92% of the emissions generated in 2017 come from our efficient natural gas power plant
in Mexico as shown in Graph 3.

Graph 3: Greenhouse Gas emissions breakdown by power technology

As previously stated, generating electricity from renewable resources allows us to have a rate of
emissions that is significantly lower than that of pure fossil fuel-generators, refer to Graph 4. This
implies a total of 2.9 million tons of CO2 equivalent saved from emission to the atmosphere
compared with a 100% fossil fuel-based generation.

(1) Fossil fuels emissions data is published by the U.S. Energy Information Administration and

represents averages of carbon dioxide produced per kilowatt-hour for different fossil fuel sources

Graph 4: Comparison of Atlantica’s GHG emission and fossil fuel-generation GHG emissions

Water management

Efficient use of water is vital for our operations, environment and local communities in the
proximity of which we operate.

There are two main types of water use in our operations: 1) desalination for which our Water
segment assets withdraw sea water and 2) power generation for which our Renewable sector
assets withdraw fresh water from rivers, aquifers and other freshwater sources.

Graph 5: Atlantica’s total water withdrawal sources and discharge destinations

In 2017, we withdrew 227.2 million cubic meters of water of which 95% was sea water. We
discharged 120.4 million cubic meters, of which 117.0 million cubic meters or 98% was returned
back to sea. In 2016, we withdrew 224.7 million cubic meters of water, of which 95% was sea water
and discharged 117.5 million cubic meters of which 114.9 million cubic meters or 98% was returned
to sea.

Desalination

Some parts of the world suffer from current drought conditions which, combined with a water
supply that is unfit for human consumption, can foster disease and death. Scarcity of water also
results in reduced availability for food production. Sea water desalination can provide a climate-
independent source of drinking water.

Our Water segment includes two desalination plants. They withdraw sea water for desalination
purposes as specified in their concession agreements. Thus, in 2017, we withdraw 216.6 million
cubic meters of sea water which went through the desalination process of removal of salt and
minerals in water treatment facilities to prepare it for human use. We returned 117.7 million cubic
meters, or 54% back to the sea. In 2016, we withdrew 213.2 million cubic meters and returned

114.9 million cubic meters, 54% back to the sea. The difference between water withdrawn from
and returned to the sea is the desalinated potable water delivered to the water utility, as specified
by our take-or-pay concession agreements for consumption needs of 1.5 million people.

Graph 8: Our desalination plants’ water withdrawal, discharge and potable water production

Power generation

Renewable segment is another part of our business that utilizes water in its power generation. We
primarily use water for cooling of condensers during power generation in our facilities. The fresh
water is primarily drawn from rivers and aquifers. We hold permits to withdraw water from these
sources and adhere to regulations on water quality. The difference between water withdrawn from
and returned to its source is our water consumption which occurs largely due to evaporation.

The amount of water we withdraw and return is measured by the installed water meters at the
pumping equipment of the plants. The reported volumes represent the total readings measured
by the water meters of all our assets without adjusting for our interest in the assets. The water
meters are sealed and are normally subject to audit by the inspector representing the local water
authorities. We have met the requirements and regulations of the applicable local regulatory

authorities in geographies in which we operate. We report the results of our water statistics to
local water agencies on a periodic basis.

Graph 9: Water withdrawal and discharge ratios

In 2017, we withdrew 10.6 million cubic meters of fresh water at our power generation plants and
we returned 2.6 million cubic meters, or 24% back to the source. In 2016, we withdrew 11.5 million
cubic meters of fresh water and returned 2.6 million cubic meters, or 23% back to the source. The
water returned to the environment is tested by independent external laboratories on a period basis
to ensure its quality.

Our efforts to improve our water management beyond compliance is a main factor behind the
reduction of withdrawal volumes in 2017 compared to 2016. We implemented better practices for
use of water in operation and maintenance of our solar plants, such as adjustments in the operating
cycles of the water cooling towers. In 2017, we withdrew 10.6 million cubic meters which
represented 49% of the limits allowed by our water permits. In 2016, we withdrew 11.5 million

cubic meters which represented 53% of the limits allowed by our water permits. The difference
between the water permit limits and actual water withdrawn represents water savings.

Our actual water withdrawal is significantly below
our allowed limits
(in millions of cubic meters)

-5

2016

2017

Actual withdrawals

Water savings

Graph 10: Water savings of Atlantica in 2017 and 2016

Human rights

We are committed to conducting our business in a manner that respects the rights and dignity of
our employees and the rest of the people related to our activities. We respect internationally
recognized human rights, as set out in the International Bill of Human Rights and the International
Labour Organization´s Declaration on Fundamental Principles and Rights at Work. Labour practice
at Atlantica and the professional activities of its employees, directors and executives are governed
by the United Nations Universal Declaration of Human Rights and its protocols, as well as by
International Agreements signed by the UN and the International Labour Organization (ILO) on
social rights, as well as the principles of the United Nations Global Pact.

We are fully aware of the diversity of the local communities where we operate. In this sense, we are
fully committed to respect and create value in these local communities. We are delivering our
human rights policy by implementing it into the processes that govern our business activities in all
the geographies where we are present. By joining the UN Global Compact, we are determined at
adopting the ten principles, a part of which relate to human rights and we are determined to make
the principles an integral part of our strategy, culture and day-to-day operations. Our code of
conduct references the policy, requiring the employees, officers and directors to report any illegal
behaviour or violations of laws, rules, regulations.

Occupational Health and Safety

Atlantica and its management are committed to prioritize and actively promote the health and
safety as a tool to protect the integrity and health of our employees, subcontractors and partners
involved in our business activity. We promote a safe operating culture across Atlantica and

encourage a preventive culture in the operation and maintenance (“O&M”) activities of the
subcontractors in our assets as reflected in our corporate health and safety policy.

Annually, we conduct internal audit and contract external independent auditors to evaluate our
health and safety management system in accordance with the OHSAS 18001 standard
requirements. These efforts have resulted in the certification for Occupational Health and Safety
obtained in 2015 and the successful renovation in the last two years.

We developed an annual training programme to educate managers and employees on safety
awareness. This annual plan has been designed in accordance with the risk in the work positions
and in the work centres and the country regulations.

In 2017, Atlantica launched the Health and Safety improvement plan “Safety First!”, with the
objective to reduce the number of accidents in the assets. The Safety First! plan was focused on the
following three main areas:

Promotion of health and safety leadership in the organization

 We defined annual objectives and accountability for managers in every geography

where we have our activities

 We established monthly health and safety committees with management and managers

of the Company to monitor our main KPIs and safety actions



We established a direct coordination with our subcontractors through monthly safety

meetings

Improvement of safety conditions

 We performed process safety analysis of our assets to identify hazards and develop

preventive or mitigating strategies in collaboration with O&M

 We enforced safety standards compliance through continuous audits and inspections

in all our assets, identifying deviations and developing corrective plans with our

subcontractors

 We promoted and continue promoting the plan of emergency practices and drills in all

our assets

 We evaluated the effectiveness of subcontractors' safety training and proposed

improvement plan

 We analysed incident investigation reports to identify root causes to implement new

safety measures and obtain lessons learned to prevent future events

Implementation of health and safety best practices

 We developed a Best Practices programme forming part of our management policies

to promote world class safety standards

 We continuously encourage workers’ observation to identify unsafe acts and conditions

in the field as a leading tool in incidents prevention

 We published our safety policies and objectives on safety boards present in all our asset

locations and work centres

 We celebrated “Safety Days” in all our assets with our subcontractors to promote safety

culture and awarded those workers for the best performance and safety commitment

Graph 11: Images from some of the safety days celebrated in 2017 at our assets

We actively monitor main occupational health and safety key performance indicators such as major
injuries, general frequency index (GFI) of accidents, frequency with leave index (FWLI) and total
recordable deviations index (TRDI) for first aid cases, near misses and unsafe acts and conditions
detected through our assets, establishing annual targets for these KPIs.

No major injuries have been recorded in the last three years.

General Frequency Index (GFI) represents the total number of recordable accidents with and
without leave (lost time) recorded in the last 12 months per million of worked hours. We have
been consistently reducing the total recordable accident rate at our assets since the company
foundation, achieving our annual objectives.

Graph 12: Our General Frequency Index

Frequency with Leave Index (FWLI) represents the total number of recordable accidents with
leave (lost time) recorded in the last 12 months per million of worked hours. We have developed a

continuous improvement policy in safety, reducing our annual objectives from year to year. We
successfully identified and implemented adequate programmes and we have been able to achieve
our targets in the last two years.

Graph 13: Our Frequency with Leave Index

As a proof of success of our safety programs and quality performance of our subcontractors, we
find our rate of accidents with leave (FWLI) is below the accidents with leave rate averages of the
U.S. utilities sector for 2016 as sourced from the data published by OSHA (U.S. Occupational Safety
and Health Administration).

Graph 14: Frequency with leave index-comparison between the average rate observed in U.S. utilities and
Atlantica

Total Recordable Deviation Index (TRDI) is the number of first aid case accidents, near-misses
and unsafe acts and conditions recorded in the last 12 months per million of worked hours. We
have developed this KPI to encourage the identification and communication of near misses and
unsafe acts and conditions by employees and subcontractors. It serves us as an early warning of

potentially dangerous situations for workers and facilities. The higher is the rate of the identified
deviations, the better is the likelihood that we prevent an accident.

Graph 15: Our Total Recordable Deviations Index

We monitor a broad range of other occupational health and safety key performance indicators
such as days without accidents, number of lost days per incidents, number of drills and nature of
incidents and near misses to better report, monitor and encourage our employees to continuously
seek improvement.

Business ethics

Atlantica is building a sustainable and successful business for our customers, colleagues, partners
and investors. Integrity, Compliance and Safety is our principal core values which prevails over the
rest. We continuously strive for the highest standards of business conduct, safety and
professionalism even if it means making difficult choices. We are strongly committed to comply
with all rules and regulations.

Atlantica is committed to maintaining the highest standards of honesty, integrity and ethical
conduct. We are also committed to promote ethical business practice and comply with all relevant
laws and regulations. The Company has adopted a Code of Conduct to ensure consistent and
effective commitment with Integrity and Compliance. This Code, applicable to all directors, officers
and employees of Atlantica plc and each of its subsidiaries, wholly owned entities, and joint
ventures, is communicated to everybody on a periodic basis and is intended to help everyone
recognize ethics and compliance issues before they arise and to deal appropriately with those
issues that do occur.

Our Code of Conduct requires the highest standards for honest and ethical conduct and explicitly
states that we do not tolerate bribery and corruption in any of its forms. We also promote and
strengthen the measures to prevent and combat corruption more effectively and efficiently. Our
anti-bribery and corruption policy applies to all Atlantica business.

Whistleblowing channel is an essential part of Atlantica’s commitment to fighting fraud,
irregularities and corruption. We have been operating a whistleblowing channel since our Initial
Public Offering. As outlined in our Code of Conduct, the whistleblowing channel is available on
our website to all employees and stakeholders of the Company and serves as a tool to report any
complaints and concerns about management, as well as any breaches of the Code of Conduct or
any conduct contrary to ethics, law or company’s standards, without any risk of reprisals for any
claims made in good faith. The channel is managed by the Audit Committee comprised of
independent directors who oversee
investigations of the reported matters maintaining
confidentiality and anonymity of complainants. Confidentiality and no reprisal policy may be
suspended only in cases in which a legal claim was filed against Atlantica by the complainant or
claim was not made in good faith.

In addition, Atlantica has subscribed and assumed the document issued by the United Nations (UN)
Convention against Corruption, which was approved by the General Assembly of the UN on
October 31, 2003. We have a responsibility to our shareholders and the countries and communities
in which we do business to be ethical and lawful in all our businesses.

Furthermore, Atlantica has developed and implemented specific quality norms, which are the result
of carrying out activities with knowledge, common sense, rigor, order and responsibility.

In particular, the business activities of Atlantica are governed by laws that prohibit bribery in order
to support global efforts to fight corruption. Specifically, the U.S. Foreign Corrupt Practices Act
(“FCPA”) and the UK Bribery Act 2010 (“UKBA”) make it a criminal offense for companies as well as
their officers, directors, employees, and agents, to pay, promise, offer or authorize the payment of
anything of value to a foreign official, foreign political party, officials of foreign political parties,
candidates for foreign political office or officials of public international organizations for the
purpose of obtaining or retaining business. Similar laws have been, or are being, adopted by other
countries. Payments of this nature are strictly against Atlantica’s policy even if the refusal to make
them may cause Atlantica to lose business.

We also seek to work with third parties who operate under principles that are similar to those set
out in our Code of Conduct. In this sense, the Company has developed a Supplier Code of Conduct
with the minimum standards we expect third parties to adhere to.

Finally, Atlantica is committed to supporting fair and open securities markets. On this purpose,
Directors, Officers or employees are not permitted to deal on the basis of inside information or
engage in any form of market abuse.

Employees

Our values and code of conduct set out the expected qualities and actions of all our people. The
honesty, integrity and sound judgment of our employees, officers and directors is essential to
Atlantica 's reputation and success. We seek employees who have the right skills and who
understand and embody the values and expected behaviours that guide our business activity.

As of December 31, 2017, we had 185 employees compared to 175 employees as of December 31,
2016.

We do not expect significant changes throughout 2018.

The following table shows the number of employees as of December 31, 2017 and 2016 on a
consolidated basis:

Geography
EMEA
North America
South America
Corporate
Total

Year ended December
31,
20161

2017

56
28
15
86
185

53
28
9
85
175

Note:—

(1)

Prior period numbers have been adjusted to conform to the current calculation method.

As of December 31, 2017, 79 of 185 employees were women, representing 43% of the Group
personnel. As of December 31, 2016, 70 of 175 employees were women, or 40% of the total
headcount.

In terms of management, one of 8 members of senior management team, or 13% were women in
both years presented in this report.

In terms of our board of directors, there were no women in our 8-member board as of December
31, 2017. As of December 31, 2016, there was one woman, or 13% of our 8-member board. See
the “Directors’ Report-Directors” for information about the directors.

The graph below summarizes the age and gender diversity of our people as of December 31, 2017:

Employees by age and gender
as of December 31, 2017

110
100
90
80
70
60
50
40
30
20
10
0

Women

Men

Below 30 years

Between 31-40 years

Between 41-50 years

Above 51 years

Below is the table of our senior management team:

Name

Position

Year of birth

Santiago Seage

Chief Executive Officer

Francisco Martinez-Davis Chief Financial Officer

Manuel Silvan

Vice President Taxes, Risk Management and
Compliance

Emiliano Garcia

Vice President North America

Antonio Merino

Vice President South America

David Esteban

Vice President EMEA

Irene M. Hernandez

General Counsel

Stevens C. Moore

Vice President Corporate Strategy and
Development

Our people

1969

1963

1973

1968

1967

1979

1980

1973

We understand that our people are an important driver in the execution of our corporate mission
and meeting our environmental, social and economic goals. The honesty, integrity, skill and sound
judgement of our employees, officers and directors is essential to Atlantica’s reputation and
success. We seek employees who have the right skills and share our values. Our career
development program, performance assessment and skill training programs are aimed at talent
retention.

To receive feedback and engage our employees, we perform periodically an employee climate
surveys to assess employees’ satisfaction. The survey is administered by a third-party and results
are aggregated, shared and discussed with supervisors. Employee confidentiality is maintained.

We utilize a platform, called Meta4, as our global system for human resources management. Meta4
is accessible for all Atlantica employees, regardless of location or position. It is an interactive tool
that allows employees to access and manage their development, reviews, benefits, compensation,
work time planning.

During 2017, we continued to have low employee turnover of 3.8% which declined from 4.1% noted
during 2016. In terms of prolonged absences, 17 of our employees took parental leave in 2017
and 6 employees enjoyed a parental leave in 2016. In both years, all employees returned to work.

Our compensation policy is based on three pillars:

Employee performance and target achievement

Internal salary structure

Market remuneration studies

Our human resources department receives remuneration data from two separate external
consultants for certain positions detailed by position and location.

Atlantica’s code of conduct

Our Board of Directors has adopted a Code of Conduct applicable to all employees, officers and
directors. This Code is aimed to govern their relations with current and potential customers, fellow
employees, competitors, government and self-regulatory agencies, the media, and anyone else
with whom the Company has contact.

The Code of Conduct encompasses the high standards of integrity we are committed to upholding.
It is designed to assist everyone in Atlantica in aligning our actions and decisions with our core
values.

Atlantica Yield’s Board of Directors monitors the Code of Conduct and any inquiries about it are
addressed to Atlantica Yield’s Executive Compliance Committee.

Our Code of Conduct is publicly available on our website at www.atlanticayield.com.

Sustainable suppliers

At Atlantica, we have a strong commitment to operating to the highest standard of corporate
conduct. According to our Code, we also seek to work with third parties who operate under
principles that are similar to those set in the Code of Conduct. We have a Supplier Code of Conduct
and we expect our suppliers to adhere to it. We include our requirements in our contractual
arrangements with suppliers. Nevertheless, we understand that some suppliers may face significant
challenges in immediately meeting every aspect of the Code. In this sense, our commitment is also
to working together over time to help those supplies achieve adherence with this Code.

Our main O&M suppliers are large corporations that, we believe, follow strong corporate policies.
One of the main suppliers of Atlantica is Abengoa who is contracted as an O&M supplier at many

of our assets across geographies (except for ACT, ATN, ATS, Seville PV, Quadra 1, Quadra 2 and
Palmucho). In Mexico our O&M Operators are General Electric and NAES Corp.

Anti-Slavery and Human Trafficking Statement

Given the nature of our business, we believe the risk of modern slavery is low. However, we do not
intend to be complacent and will continue to work to improve our policies and procedures to
ensure slavery and human trafficking is not taking place anywhere in our supply chain.

Our major suppliers are large multinational companies who have their own standards of ethical
behaviour in place.

Atlantica Yield has developed a Supplier Code of Conduct with the minimum standards we expect
third parties to adhere to. This document, that is available on our website, includes a specific
reference to Human Rights and Labour Standards. We expect our suppliers to conduct their
operations respectfully with fundamental human rights, as affirmed by the Universal Declaration of
Human Rights.

In particular, we expect all suppliers and third parties to ensure that operations are free from
exploitation of labour by prohibiting the use of forced labour, whether in the form of slave labour,
indentured labour, bonded labour, coercion of any employee through any means, or any other
forms. No incidents of modern slavery have been identified during 2017.

Future Developments

As previously stated, we intend to grow our business primarily through the improvement of existing
assets and the acquisition of contracted power generation assets, electric transmission lines and
other infrastructure assets, which, we believe, along with the acquisitions carried out in the past will
facilitate the growth of our cash available for distribution and enable us to increase our dividend
per share over time.

As of the date of this report, Algonquin’s 25% stake acquisition from Abengoa was ongoing.
Subject to its closing, our largest shareholder would be Algonquin Power and Utilities, Inc. and of
one of our main sources of growth would come from the AAGES ROFO agreement. Additionally,
we seek to grow through the third-party acquisitions such as the most recently announced
acquisition scheduled to close in the first quarter of 2018 of a purchase of a 4 MW mini-hydro plant
in Peru for $9 million. The plant reached its Commercial Operation Date (“the COD”) in 2012 and
has a fixed price concessional agreement denominated in U.S. dollars and indexed to the U.S.
Consumer Price Index.

Going Concern Basis

The directors have, at the time of approving the Consolidated Financial Statements, a reasonable
expectation that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt the going concern basis of
accounting in preparing the Consolidated Financial Statements.

Directors’ Report

The directors present their Consolidated Annual Report on the affairs of the Company and its
subsidiaries, together with the Consolidated Financial Statements and Auditor’s Report, for the year
ended 31 December 2017.

Details of significant events since the balance sheet date are contained in note 26 to the
Consolidated Financial Statements. An indication of likely future developments in the business of
the Company is included in the Strategic Report.

Information about the use of financial instruments by the Company is given in note 23 to the
Consolidated Financial Statements. Refer to the sections “Principal risks and uncertainties” and
“Financial Risk Management” of our Strategic report for a detailed analysis of risk, including
liquidity, interest rate, foreign exchange and credit risks.

Information related to the corporate and social responsibility such as our greenhouse gas emissions
is given in the “Strategic Report-Corporate and social responsibility-Greenhouse gas emissions.”

Dividends

We expect to distribute a quarterly dividend to our shareholders. Our board of directors may, by
resolution, amend the cash dividend policy at any time. The determination of the amount of the
cash dividends to be paid to holders of our shares will be made by our board of directors and will
depend upon our financial condition, results of operations, cash flow, long-term prospects and any
other matters that our board of directors deem relevant.

On 27 February 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 12 May 2017, our board of directors
approved a quarterly dividend corresponding to the first quarter of 2017 amounting to $0.25 per
share, which was paid on 15 June 2017. On 28 July 2017, our board of directors approved a quarterly
dividend corresponding to the second quarter of 2017 amounting to $0.26 per share, which was
paid on 15 September 2017. On 10 November 2017, our board of directors approved a quarterly
dividend corresponding to the third quarter of 2017 amounting to $0.29 per share, which was paid
on 15 December 2017.

On 27 February 2018, our board of directors approved a dividend of $0.31 per share which is
expected to be paid on or about 27 March 2018 to shareholders of record on 19 March 2018.

We intend to distribute approximately 80% of our cash available for distribution, less all cash
expenses including corporate debt service and corporate general and administrative expenses and
less reserves for the prudent conduct of our business on an annual basis (including for, among
other things, dividend shortfalls as a result of fluctuations in our cash flows).

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

quarters in which we do not generate sufficient cash available for distribution to fund our stated
quarterly cash dividend, if our board of directors so determines, we may use retained cash flow
from other quarters, as well as other sources of cash to pay dividend to our shareholders.

Capital Structure

Details of the authorised and issued share capital, together with details of the movements in the
Company's issued share capital during the year are shown in note 21 to the Consolidated Financial
Statements. The Company has one class of ordinary shares which are listed on the NASDAQ Global
Select Market under the symbol “AY.” Our shares carry no right to fixed income and each share
provides the owner the right to one vote at general meetings of the Company.

As of the latest publicly available information dated March 31, 2017, Abengoa reported beneficial
ownership of an aggregate amount of 41,557,663 of our ordinary shares as of that date, which
represents 41.47%. In the same report filed with the United States Securities and Exchange
Commission, Abengoa disclosed a new secured financing agreement and the transfer of an
aggregate of 41,530,843 shares to ACIL Luxco 1 S.A, a societé annonyme incorporated under the
laws of Luxembourg, and those shares were provided as security for Abengoa’s borrowings under
the secured financing agreements, as part of the restructuring of the Abengoa group.

On 1 November 2017, Algonquin Power & Utilities Corp. (“Algonquin”), a North American
diversified generation, transmission and distribution utility, announced that it had reached an
agreement with Abengoa to acquire a 25.0% of our ordinary shares from Abengoa. Abengoa has
communicated that it intends to sell its remaining ownership of our shares representing 16.47% of
our ordinary shares over the upcoming months in a private transaction, subject to approval by the
U.S. DOE.

The closing of the transaction announced between Abengoa and Algonquin is subject to conditions
precedent, most of which depend on third parties and are beyond our control.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are
both governed by the general provisions of the Articles of Association and prevailing legislation.
The directors are not aware of any agreements between holders of the Company's shares that may
result in restrictions on the transfer of securities or on voting rights.

The Company participates in no employee share schemes. No person has any special rights of
control over the Company's share capital and all issued shares are fully paid.

With regard to the appointment and replacement of directors, the Company is governed by its
Articles of Association, the SEC listing rules, the UK Companies Act 2006 and related legislation.
The Articles of Association may be amended by special resolution of the shareholders. The powers
of directors are described in the Main Board Terms of Reference, copies of which are available upon
request.

Change of Control

If a buyer or another investor acquired 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
customary change of control provisions included in the corporate debt financing agreements.

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.

In addition, in order to protect the Company's know-how and to ensure continuity in terms of
attainment of business objectives, the policy approved by our shareholders at the 2017 Annual
General Shareholders Meeting, introduced certain termination payments to key executives,
including the Chief Executive Officer in the case of a change of control. The Company agreed with
certain executives with strategic and key responsibilities in the Company (“Key Managers”),
including the Chief Executive Officer, to make payments for loss of office or employment in addition
to the severance payment under the prevailing labour and legal conditions in their contracts or
countries where they are employed if they should leave (by loss of office or employment) the
Company within 2 years of a change in control. The payment would represent six months of
remuneration and would be adjusted to ensure that total payment including severance payment
required under prevailing laws represent at least 12 months of remuneration (including salary,
benefits, long-term incentive plans and variable pay), but never more than 24 months of
remuneration, unless required by local law. A change of control means that a third party or
coordinated parties (i) acquire directly or indirectly by any means a number of shares in the
Company which (together with the shares that such party may already hold in the Company)
amount to more than 50% of the share capital of the Company; or (ii) appoint or have the right to
appoint at least half of the members of the Board of Directors of the Company.

Directors

The directors, who served throughout the year since the date indicated, and to the date of this
report, were as follows:

 Daniel Villalba

Director and Chairman of
the Board, independent

 Santiago Seage

Chief Executive Officer

Chairman of the Board: appointed 27 November
2015
Director, independent: appointed 13 June 2014,
re-elected 23 June 2017

Appointed 17 December 2013, re-elected 23 June
2017

 Joaquin Fernandez de

Director

Pierola

Appointed 11 November 2016, re-elected 23 June
2017

 Gonzalo Urquijo

Director

Appointed 22 November 2017

 Maria J. Esteruelas

Director

Appointed 13 June 2014, re-elected 23 June 2017,
replaced 22 November 2017

 Jack Robinson

 Robert Dove

Director, independent

Appointed 13 June 2014, re-elected 23 June 2017

Director, independent

Appointed 23 June 2017

 Andrea Brentan

Director, independent

Appointed 23 June 2017

 Francisco J. Martinez

Director, independent

Appointed 23 June 2017

 Eduardo Kausel

Director, independent

Appointed 13 June 2014, resigned 23 June 2017

 Enrique Alarcon

Director, independent

Appointed 13 June 2014, resigned 23 June 2017

 Juan del Hoyo

Director, independent

Appointed 13 June 2014, resigned 23 June 2017

The Board is committed to promoting the success of the Company. The Board is responsible to
shareholders for its performance and for the strategy and management of the Company, its values
its governance, and its business. It represents the interest of all shareholders and seeks to act fairly
between them.

Each director is obliged to act in good faith in the way he considers to be most likely to promote
the success of the company as a whole for the benefit and in regard of its members.

Main objectives of the Board may be summarized as follows:



Providing entrepreneurial leadership;

Setting strategy;

Ensuring the human and financial resources are available to achieve objectives;

Reviewing management performance;



Setting the company’s values and standards;

Ensuring that obligations to shareholders and other stakeholders are understood and met.

Under English law, the Board of directors of an English corporation is responsible for management,
administration and representation of all matters concerning the relevant business, subject to the
provisions of relevant constitution, statutes and resolutions adopted at general shareholder’s
meetings by a majority vote of the shareholders.

In addition, the Board is entitled to delegate its powers to an executive committee or other
delegated committee or to one or more persons, unless the shareholders, through a meeting, have
specifically delegated certain powers to the Board and have not approved the board of director’s
delegation to others.

The Board has established four principal Board Committees:

 Audit Committee, with responsibilities including monitoring the integrity of the company’s

financial statements, reviewing internal control and risk management system, as well as the

company’s relationship with external auditors;

 Compensation Committee, mainly responsible for setting the remuneration for executive

directors and recommending and monitoring remuneration for senior management.

 Nominating and Corporate Governance Committee, responsible for leading the process for

board appointments.

 Related Party Transactions Committee, responsible for identifying and evaluating existing

relationships between counterparties and transactions with related parties.

The Board has delegated certain responsibilities to these committees. Membership, roles, duties
and authority of these committees are widely described in their Terms of Reference, available in
the website of the Company (www.atlanticayield.com). Terms of Reference are reviewed and
updated by the Board on a yearly basis.

Membership and Attendance

Name

Member since

Role

Attendance(4)

Daniel Villalba

June 2014

Director,
Chairman of the Board

independent

and

14/14

Santiago Seage

December 2013

Chief Executive Officer

Joaquin Fernández de Pierola

Gonzalo Urquijo

Jack Robinson

Robert Dove (1)

Andrea Brentan (1)

Francisco J. Martinez (1)

Maria Jose Esteruelas (3)

Eduardo Kausel (2)

Juan del Hoyo (2)

Enrique Alarcon (2)

November 2016

November 2017

Director

June 2014

June 2017

June 2014

Director, independent

14/14

13/14

1/1

14/14

6/7

7/7

13/13

6/7

7/7

(1) Mr. Robert Dove, Mr Andrea Brentan and Mr. Francisco J. Martinez joined the Board of Directors on June 23, 2017
as Non-Executive Directors;

(2) Mr. Eduardo Kausel, Mr. Juan del Hoyo and Mr. Enrique Alarcon resigned to be members of the Board of Directors
on June 23, 2017. The Board wishes to express its appreciation for the work done during these past years.

(3) Ms. Maria Jose Esteruelas was replaced on November 22, 2017

(4)

Does not include Director’ Written Resolution meetings or Related Party Committee meetings

Senior management attend meetings by invitation of the Board.

2017 Key Activities

In 2017, the Board of Directors held 16 meetings. Additionally, the Board adopted several written
resolutions on specific matters.

Major areas of focus of the Board during 2017 have been as follows:

 Review of health and safety issues;
 Review of the strategy of the Company: growth plan, key priorities and risks;
 Review of assets performance and main technical issues;
 Approval and review of the budget of the Company;
 Review and approval of quarter and annual accounts;
 Approval of significant transactions (acquisitions, partnerships, etc.);
 Review capital markets updates;
 Approval of dividends;

Directors’ indemnities

The company has made qualifying third-party indemnity provisions for the benefit of its directors
which were made during the year and are in force at the date of this report.

Research and Development

The Group did not engage in any research and development activities during the reported period.

Political contributions

No political donations were made during 2017 nor 2016.

Substantial shareholdings

Name

Ordinary
Shares
Beneficially
Owned

Percentage

5% Beneficial Owners
ACIL Luxco 2 S.A.(1) .......................................................................................................
__________________
Note:—
(1) This information is based solely on the Schedule 13D filed with the U.S. Securities and Exchange Commission
on March 31, 2017 with by Abengoa, S.A., a corporation incorporated under the laws of Spain. The direct
beneficial owner of the shares is ACIL Luxco 2 S.A.

41,557,663

41.47%

Auditors

Each person who is a director at the date of approval of this Consolidated Annual Report confirms
that:



so far as the director is aware, there is no relevant audit information of which the company's
auditors are unaware; and

the director has taken all the steps that he/she ought to have taken as a director in order
to make himself/herself aware of any relevant audit information and to establish that the
company's auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section
418 of the Companies Act 2006.

Deloitte S.L. and Deloitte LLP have been our principal accountants providing the audit services to
the Company during 2017.

In 2016, the Audit Committee preselected the Big 4 companies to participate in the audit tender of
Atlantica Yield and its consolidated group for 2017, 2018 and 2019. The Audit Committee decided
to extend the appointment of Deloitte, S.L. and Deloitte LLP for 2017. The preselected audit firm
for 2018, 2019 and 2020 will be proposed in the forthcoming Annual General Meeting.

Audit Committee Report

The objective of this Audit Committee Report is to describe how the Committee has carried out its
responsibilities during 2017. In summary, the purpose of the Audit Committee is to monitor and
review: 1) the integrity of the financial statements; 2) the design, implementation and effectiveness
of the Internal Control and Risk Management systems; 2) the Internal Audit function; 3) the
Whistleblowing Channel of the Company; and 4) the external audit work.

Membership and Attendance

Name

Member since Role

Attendance /
Eligible to attend

Francisco J. Martinez (1)

June 2017

Daniel Villalba

June 2014

Director, independent and
Chairman of the Audit
Committee. Financial Expert

Director, independent and
Chairman of the Board

Jackson Robinson

June 2014

Director, independent

Eduardo Kausel (2)

June 2014

Director, independent

Juan del Hoyo (2)

June 2014

Director, independent

Enrique Alarcon (2)

June 2014

Director, independent

2 / 2

6 / 6

4 / 4

Notes:

(1) Mr. Francisco J. Martinez joined the Audit Committee on July 12, 2017 following his appointment as a Non-
Executive Director on June 23, 2017. He replaced Mr. Daniel Villalba as Chairman of the Audit Committee on
September 27, 2017;

(2) Mr. Eduardo Kausel, Mr. Juan del Hoyo and Mr. Enrique Alarcon resigned as members of the Audit Committee on
June 23, 2017. The Audit Committee wishes to express its appreciation for the work done during these past years.

All members of the Audit Committee are non-executive directors in accordance with the definition
provided by Rule 5605 of the NASDAQ Stock Market (“NASDAQ”) who meet the criteria for
independence set forth in Rule 10A-3(b)(1) under the United States Securities Exchange Act of
1934, as amended.

The Head of Internal Audit, Head of Administration, Consolidation and Control, Head of Investor
Relations, and Chief Financial Officer attend meetings by invitation.

The Audit Committee meets with the External Auditors at least on a quarterly basis.

The Committee Chairman provides regular updates to the Board of Directors on the key issues
discussed at the Committee’s meetings.

Role of the Audit Committee

The Board of Directors approved Terms of Reference for the Audit Committee which are available
on the website of the Company (www.atlanticayield.com).

These Terms of References provide the roles and responsibilities of the Audit Committee, which
are reviewed by the Board of Directors on a yearly basis. In accordance with this document, the
Committee’s responsibilities include, but are not limited, to the following matters:

1. Monitor the integrity of the financial statements of the Company, including its annual and

quarterly reports and reporting to the Board on significant financial reporting issues

2. Review the effectiveness of the Company’s Internal Controls and Risk Management,

including the information to be included in the Annual Report;

3. Evaluate Compliance, Whistleblowing and Fraud policies, procedures and tools

implemented by the Company;

4. Review and evaluate the Internal Audit function’s performance and its effectiveness;

5. Make all decisions regarding the appointment, compensation, retention, oversight and
replacement, if necessary, of the external, independent auditor. The Audit Committee shall
meet external auditors at least once per year.

2017 Key Activities

Financial Reporting

The Audit Committee has reviewed all significant issues concerning the financial statements. The
Committee reviewed all filed quarterly interim financial statements. They have also reviewed the
Annual Report (UK Annual Report) and the Annual Report on Form 20-F.

This review included the accounting policies and significant judgements, estimates and disclosures
underpinning the financial statements.

Particular attention was paid to the following significant issues related to 2017 financial statements:

(3) Recoverability of Contracted Concessional Assets;

(4) Covenants Compliance;

(5) Impact of tax changes in particular geographies;

(6) Significant one-off transactions, including acquisitions, partnerships, etc.

Internal Control System and Risk Management

Atlantica has implemented Risk Management and Internal Control systems. These systems,
therefore, provides reasonable assurance against material misstatements or losses.

The Audit Committee assists the Board of Directors in reviewing the effectiveness of the Risk
Management and Internal Control systems annually. Effective management of risks and
opportunities is essential for the delivery of strategic objectives and meeting the requirement of
good corporate governance.

 Risk Management:

Atlantica Yield has developed Risk Map, a system to identify and assess all business risks
based on a standardized methodology. This system allows the Company to identify different
risk categories (strategic, legal, financial, and operational).

All risks area assessed at the Group and subsidiary levels by likelihood of occurrence and its
potential impact on the Company.

All significant risks have been properly addressed by the Company. Mitigation plans have
been implemented in order to reduce or eliminate, when possible, the exposure to risk. All
risks are re-assessed on a quarterly basis.

 Internal Control System:

The Audit Committee has a primary responsibility for the oversight of the Internal Control
system.

Atlantica has deployed its Internal Control system with Atlantica SOX Procedures, (the “ASP”).
This system is essential to help the Company to meet Sarbanes-Oxley Act requirements. In
particular, the Committee reviews the application of the requirements under Section 404 of
the U.S. Sarbanes-Oxley Act of 2002 with respect to Internal Controls over Financial Reporting
(the “ICFR”).

Atlantica SOX Procedures have been designed in accordance with the internal control
framework developed by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), which is widely used. It is recognized as a leading framework for
designing, implementing and conducting an internal control system and assessing its
effectiveness.

The Audit Committee reviews the process followed by the management to assess the
effectiveness of the Internal Control System. This process includes: i) quarterly self-
assessment performed by control owners regarding the design, ii) implementation and
effectiveness of control activities they are responsible for; and iii) annual certifications by
Senior Management, including the CFO and the CEO.

In order to fulfil its oversight responsibilities in relation to risk management and internal control
systems, the Committee meets regularly with senior management members. In particular the
Committee is assisted by the Internal Audit department.

As a result of the procedures performed and internal assessment, we conclude that the Internal
Control System of the Company is properly designed, implemented and is operating effectively.

Compliance, Whistleblowing and Fraud

In September 2014, following Section 301 in the Sarbanes Oxley Act, the Audit Committee
implemented the Whistleblower Channel for:

a) The receipt, retention and treatment of complaints regarding accounting, internal controls

or auditing matters; and

b) The submission by employees of Atlantica Yield, on a confidential and anonymous basis, of

good faith concerns regarding questionable accounting or auditing matters.

Atlantica’s whistleblower channel is available at Company’s website www.atlanticayield.com.

The Audit Committee is responsible for the management of this Channel. According to the Code
of Conduct, any allegation received through the Whistleblower Channel will be received by the
Chief Compliance Officer, Head on Internal Audit and the Chairman of the Audit Committee.

All allegations are managed by the Executive Compliance Committee. Main procedures performed,
conclusions and proposed corrective measures are communicated to the Audit Committee.

The Audit Committee is also responsible for overseeing procedures performed by the Internal Audit
department:

 Internal Control procedures and activities implemented by management in order to prevent
fraud and corruption, in particular the US Foreign Corrupt Practice Act and the UK Bribery
Act;

 Procedures performed and conclusions reached by Internal Audit in order to detect fraud

and any breach of any regulation.

All the information received through the Whistleblowing Channel in 2017 has been properly
addressed according to the Investigation Protocol adopted by the Executive Compliance
Committee.

Internal Audit

Internal Audit is an independent, objective assurance and consulting function designed to add
value to the Company. The Internal Audit function must be independent, and all internal auditors
must be objective in performing their work. In Atlantica, the Internal Audit function reports to the
Audit Committee.

In accordance to the Audit Committee’s terms of reference, the Committee is responsible for the
supervision of the Internal Audit function.

In particular, the Audit Committee:

 Approves the Internal Audit Plan for the year. This plan is prepared by Internal Audit
according to the conclusions of the Audit Risk Assessment, which is prepared according to
PCAOB Auditing Standards. The Committee also reviews the progress of the Internal Audit
Plan at least quarterly.

 Reviews Internal Audit work, their main findings, recommendations and its implementation
on a periodic basis. The Committee shall review and monitor management’s responsiveness
to the internal auditor’s findings and recommendations.

 Meets regularly with the Head of Internal Audit.

External Audit

The Audit Committee has primary responsibility for overseeing the relationship with the external
auditor. This responsibility includes, at least:

 The selection and appointment of the external auditor. The Committee shall consider and

make recommendations to the Board, to be put to shareholders for approval at the AGM.

At least once every ten years the audit services contract shall be put out to tender.

Deloitte, S.L. and other member firms of Deloitte was appointed as external auditor of the
Group in June 2014. In March 2017, the Audit Committee decided to extend its appointment
for one year.

 The Audit Committee is responsible for overseeing the remuneration of the external auditor

for both audit services and non-audit services. The Audit Committee approves all services

contracted with the external auditor.

The Audit Committee is directly responsible for the compensation of the independent
auditor.

The Committee has established a policy to safeguard the independence and objectivity of
external auditors. In general, external auditors may be engaged to provide services only if
those services do not impair their independence and objectivity.

In September 2014, the Committee considered appropriate to establish the Pre-Approval
Policy for Audit services rendered by the Statutory Auditor. According to this Policy, audit
services, audit-related services, tax services and other services are pre-approved by the
Audit Committee.

All other services must be approved explicitly by the Audit Committee

All services performed by Deloitte are approved by the Audit Committee. All fees received
by Deloitte in 2017 have been approved by the Committee.

 The Audit Committee is responsible for overseeing the work of the external auditor.

In 2017, Deloitte attended four of Audit Committee meetings. Deloitte has communicated
to the Committee all relevant information related to the audit process in accordance to
Auditing Standard Nº16 issued by the PCAOB.

In particular, the following issues were covered in those meetings:

–

Independence issues, services provided to the Group or to be provided;

– Summary of their work (scope, procedures performed, results of their work,

summary of uncorrected misstatements, etc.);

– Significant and/or critical accounting policies applied by the Company;

– New Accounting Standards and new auditing standards applicable; and

– Material written communications.

As a result of the audit procedures performed by Deloitte, they have issued the following audit
reports:

 Unqualified Audit Report on Review of Consolidated Financial Information (IFRS – IASB)

under PCAOB standards (U.S. SEC filing)

 Unqualified Audit Report on Internal Control over Financial Reporting under PCAOB

standards (U.S. SEC filing)

 Unqualified Audit Report on Review of Consolidated Financial Information (IFRS – IASB)

under ISA (UK Companies House filing)

Director’s Remuneration Report

Introduction

This report is on the remuneration of the directors of Atlantica Yield for the period to 31 December
2017. It sets out the remuneration policy and remuneration details for the executive and non-
executive directors of the company. It has been prepared in accordance with Schedule 8 of The
Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as
amended in August 2013.

The report is split into three main areas:



the statement by the chair of the remuneration committee;

the annual report on remuneration; and

the policy report.

The remuneration report and remuneration policy will be submitted to the Annual Shareholders’
Meeting in 2018.

The Companies Act 2006 requires the auditors to report to the shareholders on certain parts of the
Directors’ Remuneration Report and to state whether, in their opinion, those parts of the report
have been properly prepared in accordance with the Regulations. The parts of the Annual Report
on remuneration that are subject to audit are indicated in that report. The statement by the chair
of the remuneration committee and the policy report are not subject to audit.

Atlantica Yield has a Nominating and Corporate Governance Committee, which focuses on
nominations and appointments and a Compensation Committee, which focuses on remunerations.

Statement by the Chair of the Compensation Committee

I am pleased to present the remuneration report for 2017. The constant and transparent dialogue
with shareholders and investors is a vital element in our way of operating and, through this
remuneration report, we aim to increase the awareness of our shareholders of the principles of our
remuneration policy,

The Company´s remuneration policy is set in accordance with the applicable law and reflecting the
principles of the 2016 UK Corporate Governance Code, with the aim of attracting and retaining
highly skilled professional and managerial resources and aligning the interests of management
with the priority objective of value creation for shareholders, for the Company and the members
of the Company as whole in the medium to long term.

During 2017, the Compensation Committee convened three times during the year. All members of
the Committee attended each meeting that they were eligible to attend.

Among the activities conducted by the Compensation Committee, it addressed three key
objectives:

 Periodically reviewing the fixed and variable remuneration for the Chief Executive Officer;
 Periodically reviewing the remuneration policy and overall levels of remuneration for the
management team, including the Chief Executive Officer, in accordance with the following
criteria:

o seeking and alignment between incentives, business performance and creation of

value for shareholders;

o consistency with the principles of the 2016 UK Corporate Governance Code; and
o

retention in the medium to long term of high quality resources for the achievement
of ambitious targets and to face the challenges that the Company will have to face
in the current and future market context.

 Periodically reviewing the remuneration levels of independent non-executive directors;

During the year 2017, most of the objectives defined for the Chief Executive Officer's variable bonus
were met and the Compensation Committee decided to approve a bonus corresponding to 96.25%
of the potential variable compensation, which will be payable in 2018. In 2016 the objectives
defined for the Chief Executive Officer's variable bonus were met and a bonus corresponding to
100% of the potential variable compensation was paid in 2017.

Annual Report on Remuneration

Single total figure of remuneration for each director

The information provided in this part of the report is subject to audit.

Atlantica Yield paid remuneration only to independent non-executive directors and executive
directors. Each independent non-executive director received a total annual compensation of $100
thousand (approximately €88.5 thousand). As the chairman of the board of directors, Mr. Villalba
received $135 thousand (approximately €119.5 thousand). Independent non-executive directors’
fees have not been increased since 2014. Non-executive directors appointed by a shareholder did
not receive any compensation from us.

The total compensation received by our independent non-executive directors and the Chief
Executive Officer/Managing Director from us during 2017 and 2016 is set forth in the table below.

Salary and fees

All taxable benefits

Annual bonuses

Total for 2017

€´000

Name

2017

2016

2017

2016

2017

2016

2017

2016

Santiago Seage

Daniel Villalba

Jackson Robinson

Robert Dove

Andrea Brentan

Francisco J. Martinez

Eduardo Kausel

Enrique Alarcon

Juan del Hoyo

600.0

119.5

88.5

44.3

505.0

122.0

90.4

Total

1,073.8

988.6

0.1

818.1

850.0

1,418.1 1,355.0

119.5

122.0

88.5

44.3

90.4

0.1

818.1

850.0 1,891.9 1,838.6

None of the directors received any pension or long-term incentive remuneration in 2016 nor 2017.

Each member of our board of directors will be indemnified for his actions associated with being a
director to the extent permitted by law.

In 2016 the objectives defined for the Chief Executive Officer's variable bonus were met and a
bonus corresponding to 100% of the potential variable compensation was paid in 2017. During the
year 2017, most the objectives defined for the Chief Executive Officer's variable bonus were met
and the Compensation Committee decided to approve a bonus corresponding to 96.25% of the
potential variable compensation, which will be payable in 2018:

 CAFD (cash available for distribution) – Higher than $167 million

 EBITDA – Higher than $750 million

 Implementing the technical improvement plan

 Obtaining the waivers for the last assets – ACT, Kaxu, Solana and

Mojave

Percentage
weight
(50%)

(10%)

(15%)

(5%)

Achievement

100%

75%

100%

 Launch and implement the new health and safety plan – (Loss

(10%)

100%

Time Injury frequency index below 5.3 and General frequency

index below 17.1)

 Implement improvement plan on key processes and systems

(10%)

100%

The current Long-Term Incentive Plan (LTIP) is a 3-year plan that started in 2016 and will finish in
December 2018. At the end of that period the CEO might or might not accrue amounts payable in
2019 according that plan. The LTIP policy is detailed under the section “Long-Term Incentive Plan”
of this report.

Remuneration of the Chief Executive Officer

The information provided in this part of the report is not subject to audit.

The table enclosed within the “Single total figure of remuneration for each director” sets out the
details for Mr. Seage who serves in the role of the Chief Executive Officer.

In 2017, he accrued €818.1 thousand as a bonus payment in accordance with his services
agreement, payable in 2018. In 2016, Mr. Seage accrued €850 thousand as a bonus payment in
accordance with his services agreement, payable in 2017.

Total Shareholder Return and Chief Executive Officer Pay

The chart below shows the Company’s total shareholder return since June 2014, the date of our
Initial Public Offering (“IPO”), until the end of 2017 compared with the total shareholder return of
the companies in the Russell 2000 Index. The chart represents the progression of the return,
including investment, starting from the time of the IPO at a 100%-point. In addition, dividends are
assumed to have been re-invested at the closing price of each dividend payment date.

We believe the Russell 2000 Index is an adequate benchmark as it represents a broad range of
companies of similar size.

TSR is calculated in US dollars.

100%

104.7%

100.1%

121.3%

95.1%

71.5%

73.4%

139.0%

84.1%

Russell 2000

Atlantica Yield

2014*

2015*

2016*

2017*



Period since the IPO (June 2014) until 31 December 2014, 2015, 2016 and 2017

The table below shows the 2017 and 2016 total remuneration of the Chief Executive Officer and his
bonuses and LTIP grants expressed as a percentage of the maximum he is likely to be awarded.

Year

2017

2016

2015

2014

Total Pay

(€ 000)

1,418.1

1,355.1

1,440.9*

130.9

Bonus

LTIP awards

Percentage

Amount of

Percentage

of maximum

bonus

of maximum

Value

96.25%

100%

818.1

850.0

Includes a 1,189.5 thousand euros termination payment received by Mr. Garoz after leaving the
Company on 25 November 2015.

The chief executive officer did not receive any variable remuneration for services provided to the
Company for the years ended 31 December 2015 and 2014. Santiago Seage occupied that office
between January and May 2015, and again since late November 2015. Meanwhile, Mr. Garoz held
that position between May and November 2015, when he voluntarily left the Company.

In 2016, the Company accrued €850 thousand of the bonus paid to the Chief Executive Officer in
2017. In 2017, the Company accrued €818.1 thousand of the bonus payable to the Chief Executive
Officer in 2018, in accordance with his services agreement.

Chief Executive Officer Pay vs. Employee Pay

The table below sets out the percentage change between the year 2016 and 2017 in salary, benefits
and bonus (determined on the same basis as for the Single Total Figure table) for the Chief Executive
Officer/Managing Director and the average per capita change for employees of the Group as a
whole.

As of 31 December 2016, we had 175 employees2. As of 31 December 2017, we had 185 employees.

Element of remuneration

Percentage change for Chief

Percentage change for

Executive Officer

employees

Salary

Benefits

Bonus

18.8%

(3.8%)

6.4%

n/a

8.0%

Relative Importance of Spend on Pay

The following table sets out the change in overall employee costs, directors’ compensation and
dividends.

2 Prior period numbers have been adjusted to conform current calculation method.

€ in million

Amount in

Spend on pay for all employees of the group

Total remuneration of directors

Dividends paid (*)
(*) Dividend paid does not include amounts retained to Abengoa.

2017

16.7

1.9

84.0

2016

13.3

1.8

24.0

Difference

3.4

0.1

60.0

The company has not made any share repurchases during 2017 nor 2016.

The Group’s personnel headcount increased from 175 employees as of 31 December 20161 to 185
employees as of 31 December 2017.

Directors’ shareholdings

The following table includes information with respect to beneficial ownership of our ordinary shares
as of 31 December 2017 by each of our directors and executive officers as well as their connected
persons.

Those not included in the table do not hold shares.

Santiago Seage

Daniel Villalba

Jackson Robinson

31st December 2017 31st December 2016

20,000

60,000

5,690

20,000

60,000

5,412

There have been no changes in the holdings of the directors between the year end and the date of
issuance of this report.

Directors currently do not hold share options or awards and there are no share ownership
requirements applicable to directors.

Termination Payments

No termination payments were made in 2017 nor 2016. The policy for termination remuneration
are detailed under the section “Policy on payments for loss of office” of this report.

Statement of Implementation of Policy in 2018

The targets for bonuses are detailed under the section “Remuneration Policy” of this report. The
current policy was approved at our 2017 Annual General Meeting, held in June 2017.

For 2018, the bonus measures for the remuneration of the Chief Executive Officer, will focus on 5
areas: financial targets, value creating growth/investments, health and safety, technical
improvements and a succession plan for the Company.

This approach is intended to provide a balanced assessment of how the business has performed
over the course of the year against stated objectives. Targets are aligned with the annual plan and
strategic and operational priorities for the year.

For 2018 the bonus objectives are the following:

 CAFD (cash available for distribution) – Equal or higher than $170 million

 EBITDA– Equal or Higher than $782 million

 Present and close value creating and accretive investment opportunities

 Achieve health and safety targets - (Loss Time Injury frequency index below

5.2 and General frequency index below 16.4) based on reliable targets and

consistent measure metrics

 Improve the technical performance of Solana and Kaxu as per approved plan

 Prepare and implement a complete succession plan

Percentage
weight

(50%)

(10%)

(15%)

(10%)

(5%)

Compensation Committee

The Compensation Committee was created in February 2016, together with the Nominating and
Corporate Governance Committee. These two committees replaced the Appointments and
Remuneration Committee which was in place since the IPO until February 2016.

The Compensation Committee is the commission of the Board of Directors responsible for
determining the remuneration of the Chairman, Executive Directors and members of the
Management Board.

In 2017, the Committee focused its activities on the following key remuneration topics: (i)
periodically reviewing the remuneration policy implemented in 2017, (ii) reviewing the Company’s
2017 results and defining 2018 performance targets in connection with the variable remuneration;
(iii) reviewing the Committee’s terms of reference; and (iv) assessing proposals for initiatives to
retain managerial figures.

Membership and Attendance

All members of the Compensation Committee are Non-Executive Directors. No director or Senior
Manager shall be involved in any decision as to their own remuneration.

During 2017, the composition of the Compensation Committee changed with the appointment of
Mr. Andrea Brentan and Mr. Robert Dove as directors and members of the Committee in June 2017.

The CEO and the Head of Human Resources attend the meetings by invitation.

The Committee Chairman provides regular updates to the Board of Directors on the key issues
discussed at the Committee’s meetings.

The Committee held three meetings during the year 2017 and all its members attended the three
meetings.

Name

Current

Member since and

Role

Attendance / Eligible

Member

until

to attend

Jackson Robinson

Yes

February 2016

the Compensation

Director, Chairman of

Andrea Brentan (1)
Robert Dove (1)

Yes

June 2017

Director, independent

Daniel Villalba (2)

February 2016 until

and Chairman of the

February since

Director, independent

Committee

3 / 3

1 / 1

2 / 2

Eduardo Kausel (3)

February 2016 until

Director, independent

2 / 2

June 2017

February since

Board

June 2017

February since

Juan del Hoyo (3)

February 2016 until

Director, independent

2 / 2

June 2017

Notes:

(1) Mr. Andrea Brentan and Mr. Robert Dove joined the Compensation Committee on June 23,

2017 following their appointment as Non-Executive Directors.

(2) Mr. Daniel Villalba, Chairman of the Board of Directors, resigned from the Compensation
Committee on June 23, 2017. The Compensation Committee wishes to express its appreciation
for the work done during these past years.

(3) Mr. Eduardo Kausel and Mr. Juan del Hoyo resigned from the Compensation Committee on
June 23, 2017. The Compensation Committee wishes to express its appreciation for the work
done during these past years.

Role of the Compensation Committee

The Board of Directors approved Terms of Reference for the Compensation Committee which are
available on the website of the Company (www.atlanticayield.com).

These Terms of References provide the roles and responsibilities of the Committee, which are
reviewed by the Committee itself and the Board of Directors on a yearly basis. In accordance with
this document, the Committee’s responsibilities include, but are not limited, to the following
matters:

1. To analyse, discuss and make recommendations to the Board regarding the setting of the

remuneration policy for all directors and senior management;

2. To analyse and discuss proposals made by the Board regarding the Company’s

remuneration policy within the UK Annual Report;

3. To obtain reliable and updated information about remuneration in other companies of

comparable scale and complexity;

4. CEO remuneration;

5. To review the design of all long-term incentive plans for approval by the board and

shareholders;

6. To review and approve the compensation payable to executive Directors, including Chief
Executive Officer / Managing Director for any loss or termination of office or appointment;

2017 Key Activities

In 2017, the Compensation Committee continued its work on revising our remuneration structure
to ensure that the Company has in place and effective Remuneration Policy which:

 Allows the Company to attract and retain top quality talent; and
 Rewards and compensates sustainable performance to the benefit of both shareholders

and stakeholders

Directors’ Remuneration Analysis

The Committee has re-assessed the Remuneration Policy implemented by the Board of Directors
and approved in the Annual General Meeting. At least once a year, the Compensation Committee
reviews compensation practices for independent non-executive directors in similar companies.

The Board of Directors implemented a “Non-Executive Directors Expenses Policy” aimed to deal
with claims for reimbursement of expenses to directors, including travel, accommodation and
hospitalities. According to this Policy, any expense must be necessary, reasonable, appropriate,
allowable and justifiable. Executive Directors expenses are not regulated in this Policy and will
follow same rules applicable to employees.

Chief Executive Officer and Senior Management Remuneration

The Compensation Committee has the responsibility to propose the remuneration of the Chief
Executive Officer and the overall remuneration of the senior management to the Board of Directors,
including any kind of compensation (fixed salary, performance-related bonuses, long-term
incentive plans, etc.)

Regarding performance-related bonuses or variable remuneration, the Committee has the
following duties:

 Definition of specific targets for the CEO and overall structure for senior management.

 Evaluation of the accomplishment of those objectives in the case of the CEO.

Voting at the 2017 Annual General Meeting

The Company takes an active interest in voting outcomes. In the event of a substantial vote against
a resolution in relation to director´s remuneration, the Company would seek to understand the

reasons for any such vote and would set out in the following Annual Report any actions in response
to it.

At the 2017 Annual General Meeting, votes in relation to the directors’ remuneration policy and
the remuneration report were as follows:

Remuneration Policy

Remuneration Report

 For
 Against
 Withheld

Number of votes
82,508,325
5,472,488
86,346

%
82.3
5.5
0.1

Number of votes
78,426,118
9,584,186
56,855

%
78.3
9.6
0.1

Remuneration Policy

The current policy was approved at our 2017 Annual General Meeting, held in June 2017.

For independent non-executive directors, the Company’s policy is to compensate in cash for the
time dedicated, subject to a maximum total annual compensation for non-executive directors in
aggregate of two million dollars. Once a year, the Compensation Committee reviews compensation
practices for independent non-executive directors in similar companies and the skills and
experience required and may propose an adjustment in the current compensation. For other non-
executive directors, the policy is not to compensate for the time dedicated.

The Chief Executive Officer is currently the only executive director. The policy for the executive
directors is as follows:

Name of
component

Description of
component

Salary/fees

Benefits

Annual bonus

Long Term
Incentive Awards

Fixed remuneration payable
monthly

Opportunity to join existing
plans for employees but
without any
in
remuneration

increase

is paid
Annual bonus
following the end of the
financial
for
performance over the year.
There are no retention or
forfeiture provisions

year

LTIP is paid in early 2019 if
the company achieves its
total
return
shareholder
targets

How does this
component support the
company’s (or group’s)
short and long-term
objectives?

What is the maximum
that may be paid in
respect of the
component?

Helps to recruit and retain
executive directors and forms
the basis of a competitive
remuneration package

Maximum amount €700
thousand, may be
increased by 5% per year

Salary levels for peers are
considered

Framework used to
assess performance

Not applicable

No retention or clawback

Helps to offer a competitive
remuneration package and
align
company’s
objectives

it with

Aligns pay with longer term
returns to shareholders

200% of base salary

50% of CAFD

10% of EBITDA

40% of other operational or
qualitative objectives

No retention or clawback

3-year plan representing a
maximum of 70% of salary
and annual bonus for the
2016-2018 period

50% of
Shareholder’s Return (TSR)

Total Annual

50% of TSR versus peers

No retention or clawback

CAFD, EBITDA and TSR have been selected as key parameters to measure company’s performance
due to their importance for our shareholders. These measures are considered standard indicators
of financial performance in the YieldCo sector.

Committee discretions

The committee has discretion, consistent with market practice, in respect of, but not limited to
participants, timing of payments, size of the award subject to policy, performance measures and
when dealing with special situations, such as change of control or restructuring.

The annual bonus is a variable cash bonus, based on the objectives described above. Those
objectives include Cash Available for Distribution (CAFD), with a 50% weight for executive directors,
and EBITDA, as these are key financial metrics for our industry sector. Additionally, the annual
bonus includes 2-3 objectives that reflect some of the key projects, initiatives or key objectives.

For the management team and key personnel, our policy is to use two external consultants to
estimate market conditions for similar positions in terms of fixed and variable remuneration and,
based on a performance appraisal, set a target remuneration, as a general rule, within that market
practice. Variable payments are based on a number of specific measurable targets in relation to the
measures described herein, which are defined by the remuneration committee at the beginning of
the year. For the rest of its employees, the Company establishes predefined remuneration ranges
for different positions and reviews each individual remuneration depending on performance
appraisal and within two ranges without employee consultation.

Long-Term Incentive Plan

The Company has a Long-Term Incentive Plan for the period 2016-2018 for the executive team
approved at the 2016 Annual General Meeting. The plan includes:

 Approximately 10 executives, including the Chief Executive Officer

 Each executive is entitled to the payment of a LTIP cash bonus payable in March 2019 if the
Company achieves its Total Annual Shareholders’ Return (TSR) objectives in the 2016-2018
period. The committee and the board have considered this metric as the best measure to align
management and shareholders’ interests. Total Annual Shareholders’ Return (TSR) is calculated
over the 2016 - 2018 period. It is defined as the annual return of an investment done the 1st of
January of 2016 at the average stock price of the first 3 months of 2016 (16.90 dollars per share)
and divested on the 31st of December of 2018, including the dividends paid in 2016, 2017 and
2018. Similar to the initial price, the final price to be considered is the average price of the last
3 months of 2018.

 The LTIP award is capped at a 50% (a 70% for the Chief Executive Officer) of the total

remuneration received by an executive in the 2016-2018 period

 50% of the LTIP bonus will be based on the Company’s TSR and the other 50% on the relative
performance in terms of TSR versus other yieldcos selected by the committee. The chart below
presents the percentage amounts to be awarded as LTIP bonus as a function of each of the
parameters considered.

Award based on TSR means the percentage of fulfilment by the Company of the Total Annual
Return to Shareholders target, according to the following performance ranges.

Atlantica Yield TSR (%)

Award based on TSR (%)

Minimum

7.5%

Target

15%

100%

Awards between 0% and 100% will be calculated based on interpolation of the data

Award based on Yieldco TSR means the percentage of fulfilment by the Company with respect
to the target of Relative Total Annual Return to Shareholders of a group of six yieldco peers
during the same period, according to the following performance ranges:

YieldCo TSR Position

Award based on

YieldCo TSR

100%

90%

50%

10%



In case of change of control, the LTIP becomes due and is calculated based on the offer price or
the last price applied in the TSR, up to and including the change of control

In case of retirement, termination without cause, permanent disability or death, the LTIP is to be
pro-rated for the period until that event and paid out at the end of the plan period once the
TSR for the period is known. If an executive leaves the company for other reasons, there would
be no compensation.

Executive directors do not receive any pension contributions.

None of the non-executive directors receive bonuses, long-term incentive awards, pension or other
benefits in respect of their services to the Company.

There are no provisions for the recovery of sums paid or the withholding of any sum.

Chief Executive Officer remuneration policy

The Compensation Committee approved an increase of the fixed remuneration of the Chief
Executive Officer for 2018 from €600 thousand to €650 thousand.

Total remuneration of the only executive director for a minimum, target and maximum
performance in 2018 is presented in the chart below.

Thousand euros. 2018

€1,500

€1,075

40%

60%

57%

43%

€650

100%

Minimum

Target

Maximum

Salary and benefits

Annual bonus

Assumptions made for each scenario are as follows:

 Minimum: fixed remuneration only

 Target:

fixed remuneration plus half of maximum annual bonus

 Maximum: fixed remuneration plus maximum annual bonus

LTIP is not included as it would not be paid until 2019 and is subject to targets.

For 2018 the bonus objectives are the following:

 CAFD (cash available for distribution) – Equal or higher than $170 million

 EBITDA– Equal or Higher than $782 million

 Present and close value creating and accretive investment opportunities

 Achieve health and safety targets - (Loss Time Injury frequency index below

5.2 and General frequency index below 16.4) based on reliable targets and

consistent measure metrics

 Improve the technical performance of Solana and Kaxu as per approved plan

 Prepare and implement a complete succession plan

Approach to recruitment

Percentage
weight

(50%)

(10%)

(15%)

(10%)

(5%)

As previously stated within this report, the recruitment of managers is largely based on the
estimates of two external consultants of the market conditions for similar positions, in terms of
fixed and variable remuneration.

In addition, the remuneration policy reflects the composition of the remuneration package for the
appointment of new executive directors. We expect to offer a competitive fixed remuneration, an
annual bonus not exceeding 200% of the fixed remuneration and a participation in the LTIP plan.

Lastly, whenever needed, the Company can contract a top-tier external advisor to hire key
personnel.

As stated in the “Single total figure of remuneration for each director”, each independent director
receives a total annual compensation of $100 thousand. As a chairman of the board of directors
and a chairman of our audit committee, Mr. Villalba receives an additional $35 thousand per year.
Directors representing Abengoa do not receive any compensation from us.

The stated above remuneration will be offered in recruitment of independent directors.

Policy on payments for loss of office

In order to protect the Company's know-how and to ensure continuity in terms of attainment of
business objectives, the policy approved by our shareholders at the 2017 Annual General
Shareholders Meeting, introduced certain termination payments to key executives, including the
Chief Executive Officer.

The Company has agreed with certain executives with strategic and key responsibilities in the
Company (“Key Managers”), including the Chief Executive Officer, to make payments for loss of
office or employment in addition to the severance payment under the prevailing labour and legal
conditions in their contracts or countries where they are employed if they should leave (by loss of
office or employment) the Company within 2 years of a change in control. The payment will
represent six months of remuneration and will be adjusted to ensure that total payment including
severance payment required under prevailing laws represent at least 12 months of remuneration

(including salary, benefits, long term incentive plans and variable pay), but never more than 24
months of remuneration, unless required by local law.

A change of control means that a third party or coordinated parties (i) acquire directly or indirectly
by any means a number of shares in the Company which (together with the shares that such party
may already hold in the Company) amount to more than 50% of the share capital of the Company;
or (ii) appoint or have the right to appoint at least half of the members of the Board of Directors
of the Company.

No payments will be made to Key Managers for dismissal for breach of contract, breach of fiduciary
duties or gross misconduct, determined (in the event of a dispute) by a court of competent
jurisdiction to reach a final determination.

Consideration of employee conditions elsewhere

For the management team and key personnel, our policy is to use two external consultants to
estimate market conditions for roles of a similar level of managerial responsibilities and complexity
in terms of fixed and variable remuneration and, based on a performance appraisal, set a target
remuneration, as a general rule, within that market practice.

The annual variable remuneration payment is calculated with reference to the achievement of a
number of specific measurable targets defined at the previous year. Each specific target is
measured on a performance scale of 0%-120%.

For the rest of its employees, the Company establishes predefined remuneration ranges for
different positions and reviews each individual remuneration depending on performance appraisal
within two ranges without employee consultation.

The remuneration of all employees, including the members of the management team, may be
adjusted periodically in the framework of the annual salary review process which is carried out for
all employees.

Overall, we expect that, following the implementation of our policies, remunerations of the
Company’s employees will increase in line with the market with the exception of individuals that
have been recently promoted or whose remuneration is above market conditions.

Statement of consideration of shareholder views

There are no comments in respect of directors’ remuneration expressed to the Company by
shareholders. The next Annual Shareholders’ Meeting is expected to be held in May 2018.

Summary of Policy for Non-Executive Directors

Name of component

Independent Non-
Executive Directors:

Fees

How does the component
support the company’s
objective?

Operation

Maximum

retain

Attract and
performing
executive directors

independent

the high-
non-

Reviewed
annually
committee and board

the

lead

The
independent
director/chairman receive additional
fees

Annual total compensation for -
executive directors, in any case, will
not exceed two million dollars

Benefits

Reasonable travel expenses to the
Company’s
registered office or
venues for meetings

Customary control procedures

Real costs of travel with a maximum
of one million dollars for all directors

Other Non-Executive
Directors:

Fees

Attract and
the high-
performing non-executive directors

retain

Directors appointed by shareholders
receive no fees

No prescribed maximum annual
increase

Benefits

Reasonable travel expenses to the
Company’s
registered office or
venues for meetings

Customary control procedures

Real costs of travel

Service Contracts

Mr. Seage has a services contract with Atlantica Yield that includes a 6-month notice period.

The non-executive directors do not have a service contract and have been elected for a period of
three years starting June 2017.

Employee Benefit Trusts

Our policy is not to use any employee trust for share plans.

Directors’ Responsibilities Statement

The directors are responsible for preparing the Consolidated Annual Report and the Consolidated
Financial Statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under
that law the directors are required to prepare the group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the International Accounting
Standards Board (IASB) and Article 4 of the IAS Regulation and have elected to prepare the parent
company financial statements in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework. Under company law the directors must not approve the accounts unless
they are satisfied that they give a true and fair view of the state of affairs of the company and of
the profit or loss of the company for that period.

In preparing the parent company financial statements, the directors are required to:



select suitable accounting policies and then apply them consistently;

 make judgments and accounting estimates that are reasonable and prudent;



state whether Financial Reporting Standard 101 Reduced Disclosure Framework has been
followed, subject to any material departures disclosed and explained in the financial
statements;

prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the company will continue in business.

In preparing the group financial statements, International Accounting Standard 1 requires that
directors:

o properly select and apply accounting policies;

o present information, including accounting policies, in a manner that provides

relevant, reliable, comparable and understandable information;

o provide additional disclosures when compliance with the specific requirements in
IFRSs are insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial position and
financial performance; and

o make an assessment of the company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the company’s transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ATLANTICA YIELD PLC

Report on the audit of the financial statements

Opinion

In our opinion:
•

•

the financial statements give a true and fair view of the state of the group’s and
of the parent company’s affairs as at 31 December 2017 and of the group’s loss
for the year then ended;
the group financial statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB);
the parent company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice
including Financial Reporting Standard 101 “Reduced Disclosure Framework”;
and
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Atlantica Yield plc (the ‘parent company’) and its
subsidiaries (the ‘group’) which comprise:
•
the consolidated income statement;
•
the consolidated statement of comprehensive income;
•
the consolidated and parent company balance sheets;
•
the consolidated and parent company statements of changes in equity;
•
the consolidated cash flow statement;
•
the critical accounting and judgements;
•
the significant accounting policies; and
•
the related notes 1 to 30
•
and company only notes 1 to 7.

The financial reporting framework that has been applied in the preparation of the group
financial statements is applicable law and IFRSs as issued by the IASB. The financial reporting
framework that has been applied in the preparation of the parent company financial statements
is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in the
auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We confirm that the non-audit
services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent
company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.

Summary of our audit approach

Key audit matters

The key audit matters that we identified in the current year were:
•
• Revenue recognition

Impairment of concessional assets

Materiality

Scoping

The materiality that we used for the group financial statements was $40.0m
which was determined on the basis of Earnings, before interest, taxation,
depreciation and amortisation (“EBITDA”).

We consider the individual concessional assets to reflect the components of the
Group and this is how management monitors and controls the business. We
performed specified audit procedures on 23 legal entities and full scope audit
procedures on the parent company, covering 7 countries. Together, these account
for 92% EBITDA.

Conclusions relating to going concern

We are required by ISAs (UK) to report in respect of the following
matters where:
•

We have nothing to
report in respect of these
matters.

•

the directors’ use of the going concern basis of accounting
in preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements
any identified material uncertainties that may cast
significant doubt about the group’s or the parent
company’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised
for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement
team.

These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of concessional assets

Key audit matter
description

The Group holds contracted concessional assets and price purchase agreements
(PPAs), including fixed assets financed through project debt, mainly recorded in
accordance with International Financial Reporting Interpretations Committee 12
(“IFRIC 12”). The total value of these assets at 31 December 2017 was $9,084
million (31 December 2016: $8,924 million).

These underlying assets are held across a range of Environmental infrastructures
(including Renewable Energy) and a range of geographies including the Europe,

Africa, North, Central and South America.

The recoverability of concessional assets is a significant judgement underpinned by
a number of key assumptions and estimates. Key judgements include the discount
rates adopted, the volatility of forecast project cash-flows and macro-economic
assumptions such as future inflation, deposit rates and energy prices.

More information on the impairment review performed by management can be found
on page 26 of the financial statements and on note 3 to the financial statements.

How the scope of
our audit
responded to the
key audit matter

Our audit is directed to considering the evidence available to support these
assumptions and the sensitivity of the recoverability analysis to challenge the
reasonableness of these assumptions. Our procedures included:

•

Identification and challenging of impairment triggering events ;

• For assets where impairment triggers were identified, we challenged the

assumptions used in the impairment model which calculates the
recoverable amount of assets, described in note 3 to the financial
statements. Our challenge focused on;
•

assessing the appropriateness of the design and implementation of
the controls surrounding the impairment model;
assessing the appropriateness of cash flow inputs relative to previous
and future performance; tax; WACC and cost of repairs;
benchmarking against the wider peer group;
recalculating the discount rates and perpetuity rates used; and
challenging management’s sensitivity analysis on the cash flow
projections and discount rates.

•

•
•
•

We checked the mechanical accuracy of the models, performed our own
sensitivity analysis and utilised our internal valuation experts to assist in the
assessment of the appropriateness of the discount rates.

Key observations

We found that the assumptions used were reasonable and had been determined
and applied on a consistent basis across the Group. No additional impairments were
identified from the work performed. For the assets where impairment triggers were
identified, management’s impairment analysis and its key assumptions were within
the reasonable range and no impairment was identified.

Revenue recognition

Key audit matter
description

ISAs (UK) require that, as part of our overall response to the risk of fraud, when
identifying and assessing the risks of material misstatement due to fraud, we
evaluate which types of revenue or revenue transactions might give rise to
potential fraud risks. We have specifically focused this key audit matter to whether
sales of $1,008.4 million are accurate and have been confirmed by a third party.

More information on revenues for the year can be found on page 16 and 22 and notes
2, 3 and 4 of the financial statements.

How the scope of
our audit
responded to the
key audit matter

Our audit response consisted of several procedures including those summarised
below:

•
•

•

Tested the design and operating effectiveness of key controls
Reconciliation of revenue recognised to amounts invoiced to customers
and subsequent receipt of payments from those customers ;
Reconciliation between revenue recognised during the year and
agreements signed with customers ;
Reconciliation of prices included in amounts invoiced to underlying
agreement for the sale of Sale of energy;
Reconciliation of volume of energy included in amounts invoiced to
supporting third party confirmations;

Our procedures performed allowed us to gain a thorough understanding of the
revenue cycle with a variety of procedures performed to analyse the risk
associated to potential fraud.

Key observations

We were satisfied that the revenue had been recognised appropriately.

We noted no material instances of inappropriate revenue recognition arising from
our testing.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our audit work and in evaluating the
results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a
whole as follows:

Group financial statements

Parent company financial
statements

Materiality

$40.0 million

$28.5 million

Basis for
determining
materiality

5% of EBITDA

1% of total assets

Rationale for the
benchmark
applied

We used EBITDA as the metric with the
greatest importance to investors in a yield
company, particularly given is at its early
stages and EBITDA is a more stable
benchmark than profit before tax.

As the parent company is a
non-trading entity and a cost
centre, it is considered
appropriate to use total assets
as the basis for determining
materiality.

We agreed with the Audit Committee that we would report to the Committee all audit differences in
excess of $2.0m for the group, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including
Group-wide controls, and assessing the risks of material misstatement at the Group level.

Based on this assessment, our Group audit scope focused primarily on the audit work at the significant
components which were selected based on our assessment of the identified risks of material misstatement
identified above. These represent the principal business units within the Group’s reportable segments.. We
have performed work on components which comprised 92% of the Group’s EBITDA and 93% of the Group’s
concessional assets.

We requested component teams to complete specified audit procedures and obtained component reporting
for all of them. The remaining components were subject to analytical review procedures by the Group audit
team. Our audit work on components was executed to a lower level of materiality of $16 million.

At the Group level we also tested the consolidation process and carried out analytical procedures to confirm
our conclusion that there were no significant risks of material misstatement in the aggregated financial
information of the remaining subsidiaries not subject to audit of specified account balances.

The Group audit team held a Group wide planning meeting to discuss the risk assessment at the start of the
audit and subsequently hold regular update calls throughout the audit. The Senior Statutory Auditor or
another senior member of the Group audit team participated in all of the close meetings, both at the interim
and final visits, of the Group’s components. The Senior Statutory Auditor or another senior member of the
Group audit team carried out a review of the component auditor files. The Group audit team has initiated a
programme of planned visits that has been designed so that it visits a sample of the Group’s investments
each year with a specific focus on visiting the Group’s largest investments by value. This year the Group
audit team visited 2 of the Group’s investments.

Other information

The directors are responsible for the other information. The other
information comprises the information included in the annual
report including the Strategic Report other than the financial
statements and our auditor’s report thereon.

We have nothing to
report in respect of these
matters.

Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon.

In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and
the parent company’s ability to continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.

Report on other legal and regulatory requirements

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:
•

the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.

•

In the light of the knowledge and understanding of the group and or the parent company and
their environment obtained in the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you
if, in our opinion:

• we have not received all the information and explanations

We have nothing to
report in respect of these
matters.

•

we require for our audit; or
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in
our opinion certain disclosures of directors’ remuneration have
not been made or the part of the directors’ remuneration report
to be audited is not in agreement with the accounting records and
returns.

We have nothing to
report in respect of this
matter.

Other matters

Auditor tenure
The company listed in 2014. The audit was subject to external tender in 2015. We were
appointed by the directors and following an external tender were appointed at the AGM in 2015.
The period of total uninterrupted engagement including previous renewals and reappointments of
the firm is 3 years, covering the years ending 2014 to 2017

Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required
to provide in accordance with ISAs (UK).

Makhan Chahal (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
2 March 2018

Consolidated Income Statement

Amounts in thousands of U.S. dollars

Revenue
Other operating income
Raw materials and consumables used
Employee benefit expenses
Depreciation, amortization, and impairment charges
Other operating expenses

Operating profit

Finance income
Finance expenses
Net exchange gains/(losses)
Net other finance (expenses)/income

Net finance costs

Note (1)

For the year ended December 31,

4
8

7
12

9
9

2017

1,008,381
80,844
(16,983)
(18,854)
(310,960)
(284,461)

2016

971,797
65,538
(26,919)
(14,736)
(332,925)
(260,318)

457,967

402,437

1,007
(463,717)
(4,092)
18,434

3,298
(408,007)
(9,546)
8,505

(448,368)

(405,750)

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

5,351

6,646

Profit/ (Loss) before income tax

14,950

3,333

Income tax

(119,837)

(1,666)

Profit/ (Loss) for the year

(104,887)

1,667

Profit attributable to non-controlling interests

(6,917)

(6,522)

Profit/ (Loss) for the year attributable to owners of the
Company

(111,804)

(4,855)

Weighted average number of ordinary shares outstanding
(thousands)

100,217

Basic and diluted earnings per share (U.S. dollar per share)

(1.12)

(0.05)

(1) Notes 1 to 30 are an integral part of the consolidated financial statements

All results are derived from continuing operations.

Consolidated Statement of other comprehensive income

Amounts in thousands of U.S. dollars

Year
Ended
December
31, 2017

Year
Ended
December
31,2016

Profit / (Loss) for the year

(104,887)

1,667

Items that may be reclassified subsequently to profit or loss:

Change in fair value of cash flow hedges
Less: reclassification adjustments for gains / (losses) transferred
to profit or loss

(28,535)

70,953

(37,480)

72,774

Exchange differences on translation of foreign operations

121,924

(22,150)

Income tax relating to items that may be reclassified
subsequently to profit or loss

(13,312)

(5,639)

Other comprehensive income/(loss) for the year net of tax

151,030

7,505

Total comprehensive income/(loss) for the year

46,143

9,172

Total comprehensive income/ (loss) attributable to:
Owners of the Company
Non-controlling interests

31,370
14,773

(457)
9,629

Consolidated Balance Sheet

Amounts in thousands of U.S. dollars

Assets
Non-current assets

Note (1)

As of
December
31, 2017

As of
December 3
1, 2016

Contracted concessional assets
Investments carried under the equity method
Financial investments
Deferred tax assets

12
13
22
10

Total non-current assets

Current assets

Inventories
Trade and other receivables
Financial investments
Cash and cash equivalents

Total current assets

Total assets

Equity

Share capital
Parent company reserves
Other reserves
Accumulated currency translation reserve
Retained earnings
Equity attributable to the Company

Non-controlling interests

Total equity

Non-current liabilities

Long-term corporate debt
Long-term project debt
Grants and other liabilities
Related parties
Derivative liabilities
Deferred tax liabilities

Total non-current liabilities

Current liabilities

Short-term corporate debt
Short-term project debt
Trade payables and other current liabilities
Income and other tax payables

Total current liabilities

Total equity and liabilities

14&22
22
15&22

16
17
18
26
23
10

16
17
19

(1) Notes 1 to 30 are an integral part of the consolidated financial statements

9,084,270
55,784
45,242
165,136
9,350,432

17,933
244,449
210,138
669,387
1,141,907

8,924,272
55,009
69,773
202,891
9,251,945

15,384
207,621
228,038
594,811
1,045,854

10,492,339

10,297,799

10,022
2,163,229
80,968
(18,147)
(477,214)
1,758,858
136,595
1,895,453

574,176
5,228,917
1,636,060
141,031
329,731
186,583
8,096,498

68,907
246,291
155,144
30,046
500,388

10,022
2,268,457
52,797
(133,150)
(365,410)
1,832,716
126,395
1,959,111

376,340
4,629,184
1,612,045
101,750
349,266
95,037
7,163,622

291,861
701,283
160,505
21,417
1,175,066

10,492,339

10,297,799

Notes to the consolidated financial statements
31 December 2017

Consolidated Statement of changes in equity

Amounts in thousands of U.S. dollars

Share
Capital

Parent
company
reserve

Other
reserves

Retained
earnings

Accumulated
currency
translation
differences

Total
equity
attributable
to the
Company

Non-
controlling
interest

Total
equity

Balance as of January 1, 2017

10,022 2,268,457

52,797

(365,410)

(133,150)

1,832,716

126,395 1,959,111

Profit/(loss) for the year after taxes

Change in fair value of cash flow
hedges

Currency translation differences

Tax effect

Other comprehensive income

Total comprehensive income

Dividend distribution

(111,804)

41,242

(13,071)

28,171

(111,804)

6,917

(104,887)

41,242

1,176

42,418

115,003

6,921

121,924

(13,071)

(241)

(13,312)

115,003

143,174

7,856

151,030

28,171

(111,804)

115,003

31,370

14,773

46,143

(105,228)

(4,573)

(109,801)

Balance as of December 31,2017

10,022 2,163,229

80,968

(477,214)

(18,147)

1,758,858

136,595 1,895,453

Balance as of January 1, 2016

10,022 2,313,885

24,831

(356,524)

(109,582)

1,882,602

140,899 2,023,501

Profit/(loss) for the year after taxes

Change in fair value of cash flow
hedges

Currency translation differences

Tax effect

Other comprehensive income

Total comprehensive income

Acquisition of non-controlling
interest in Solacor 1&2 (a)

Asset acquisition (Sevilla PV) (a)

Dividend distribution

(45,398)

(4,855)

32,944

(4,978)

27,966

(4,855)

32,994

6,522

1,667

2,350

35,294

(23,568)

1,418

(22,150)

(4,978)

(661)

(5,639)

(23,568)

27,966

(4,855)

(23,568)

(4,031)

4,398

(457)

3,107

7,505

9,629

9,172

(4,031)

(15,894)

(19,925)

713

(45,398)

(8,952)

(54,350)

Balance as of December 31, 2016

10,022 2,268,457

52,797

(365,410)

(133,150)

1,832,716

126,395 1,959,111

(a)

See Note 5 for further details.

Notes 1 to 30 are an integral part of the consolidated financial statements

Notes to the consolidated financial statements
31 December 2017

Consolidated Cash flow statement

Amounts in thousands of U.S. dollars

Profit/(Loss) for the year

Non-monetary adjustments

Depreciation, amortization and impairment charges
Finance costs
Fair value (gains)/losses on derivative financial instruments
Shares of (profits)/losses from associates
Income tax
Changes in consolidation and other non-monetary items

Note
(1)

For the year ended

2017

2016

(104,887)

1,667

310,960
443,517
759
(5,351)
119,837
(20,882)

332,925
397,966
(1,761)
(6,646)
1,666
(59,375)

Profit for the year adjusted by non-monetary items

743,953

666,442

Variations in working capital

Inventories
Trade and other receivables
Trade payables and other current liabilities
Financial investments and other current assets/liabilities

Variations in working capital

Income tax received/(paid)
Interest received
Interest paid

(2,548)
(23,799)
22,474
(4,924)

(8,797 )

(4,779)
4,139
(348,893)

(729)
(15,001)
11,422
6,341

2,033

(1,953)
3,342
(335,446)

Net cash provided by operating activities

385,623

334,418

Investments in entities under the equity method
Investments in contracted concessional assets*
Other non-current assets/liabilities
(Acquisitions) / Sales of subsidiaries and other financial instruments

3,003
30,058
8,183
30,124

4,984
(5,952)
(3,637)
(21,754)

Net cash (used in) / provided by investing activities

71,368

(26,359)

Proceeds from Project & Corporate debt
Repayment of Project & Corporate debt
Dividends paid to Company´s shareholders
Purchase of shares to non-controlling interests

296,398
(613,242)
(99,483)
-

11,113
(182,636)
(35,509)
(19,071)

Net cash provided by/(used in) financing activities

(416,327)

(226,103)

Net increase in cash and cash equivalents

40,664

81,956

Cash, cash equivalents and bank overdrafts at beginning of the year

Translation differences cash or cash equivalent

594,811
33,912

514,712
(1,857)

Cash and cash equivalents at the end of the year

669,387

594,811

* Includes proceeds for $42.5 million (See Note 12)

(1)

Notes 1 to 30 are an integral part of the consolidated financial statements

Notes to the consolidated financial statements
31 December 2017

Notes to the consolidated financial statements

1. General information

Atlantica Yield plc. (‘Atlantica Yield’ or the Company) is a company incorporated in the United
Kingdom under the Companies Act. The Company is a public Company limited by shares and is
registered in England and Wales. The address of the registered office is Great West Road,
Brentford TW8 9DF, Greater London (United Kingdom). The nature of the Group’s operations
and its principal activities are set out in the strategic report on pages 3 to 50.

These financial statements are presented in US Dollars because that is the primary currency in
which the Group operates. Foreign operations are included in accordance with the policies set
out in Note 3.

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
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 the supplemental accession period. On March 31, 2017 Abengoa
announced the completion of the restructuring. As a result, Atlantica received Abengoa debt
and equity instruments in exchange of the guarantee previously provided by Abengoa
regarding the preferred equity investment in ACBH. In addition, the Company invested in
Abengoa´s issuance of asset-backed notes (the “New Money 1 Tradable Notes”) in order to
convert the junior status of the Abengoa debt received into senior debt (See Note 22).

The financing arrangement of Kaxu contained as of December 31, 2016 cross-default provisions
related to Abengoa, such that debt defaults by Abengoa, subject to certain threshold amounts
and/or a restructuring process, could trigger defaults under such project financing arrangement.
In March 2017, the Company signed a waiver which gives clearance to cross-default that might
have arisen from Abengoa insolvency and restructuring up to that date but does not extend to
potential future cross-default events.

The financing arrangement of Cadonal also contained cross-default provisions with Abengoa
and a waiver was obtained in 2016, subject to certain conditions. These conditions were met in
October 2017.

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% of Atlantica's shares (30% in the case of Solana and Mojave). Based on the
most recent public information, Abengoa currently owns 41.47% of Atlantica shares and 41.44%
of the outstanding shares have been pledged as guarantee of the New Money 1 Tradable Notes
and loans. On November 1, 2017 Abengoa announced it has reached an agreement with

Notes to the consolidated financial statements
31 December 2017

Algonquin Power & Utilities Corp. (“Algonquin”) to sell a 25% stake in Atlantica subject to
conditions precedent. Additionally, Abengoa has communicated that it intends to sell its
remaining 16.5% stake over the upcoming months in a private transaction subject to approval
by the U.S. Department of Energy (the “DOE”). Algonquin has an option to purchase this
remaining stake until March 2018. If Abengoa ceases to comply with its obligation to maintain
its 30% ownership of Atlantica's shares, such reduced ownership would put the Company in
breach of covenants under the applicable project financing arrangements.

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 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% to 30%. In November 2017, in the context of the agreement reached between
Abengoa and Algonquin for the acquisition by Algonquin of 25% of our shares and based on
the obligations of Abengoa under the EPC contract the Company signed a consent with the DOE
which reduces this minimum ownership required by Abengoa in Atlantica to 16%, subject to
certain conditions precedent most of which are beyond the control of Atlantica (see Note 9).
Conversations between the DOE, Abengoa and the Company are ongoing regarding the waiver
from the DOE to allow Abengoa to sell Atlantica shares below 16%.

In the case of Kaxu, in March 2017 the Company signed a waiver, which allows reduction of
ownership by Abengoa below the 35% threshold if it is done in the context of the restructuring
plan. Additionally, the Company obtained in October 2017 the waiver for ACT.

Additionally, on February 10, 2017, the Company issued senior secured notes (“the “Note
Issuance Facility”) with a group of funds managed by Westbourne Capital as purchasers of the
notes issued thereunder for a total amount of €275 million (approximately $330 million as of
December 31, 2017). The proceeds of the Note Issuance Facility were used to fully repay Tranche
B under the Company´s Credit Facility, which was then cancelled (See Note 16).

2. Adoption of new and revised Standards

a) Standards, interpretations and amendments effective from January 1, 2017 under IFRS-IASB,

applied by the Company in the preparation of these consolidated financial statements:

•

IAS 7 (Amendment) ‘Disclosure Initiative’. Requirements for additional disclosures in
order to provide users with improved financial information.

Notes to the consolidated financial statements
31 December 2017

•

IAS 12 (Amendment) ‘Recognition for Deferred Tax for Unrealized Losses’. Clarification
of recognition of deferred tax assets for unrealized losses.

• Annual Improvements to IFRSs 2014-2016 cycles. Amendments to IFRS 12.

The applications of these amendments have not had any material impact on these
consolidated financial statements except for the reconciliation of liabilities arising from
financial activities that has been included in Note 16 and 17.

b) Standards, interpretations and amendments published by the IASB that will be effective for

periods beginning on or after January 1, 2018:

•

IFRS 9 ’Financial Instruments’. This Standard is applicable for annual periods
beginning on or after January 1, 2018 under IFRS-IASB, earlier application is
permitted.

IFRS 9 (Amendments to IFRS 9): Prepayment Features with Negative Compensation.
This Standard is applicable for annual periods beginning on or after January 1, 2019
under IFRS-IASB, earlier application is permitted.

IFRS 15 ’Revenues from Contracts with Customers’. This Standard is applicable for
annual periods beginning on or after January 1, 2018 under IFRS-IASB, earlier
application is permitted.

IFRS 15 (Clarifications) ’Revenues from Contracts with Customers’. This amendment
is mandatory for annual periods beginning on or after January 1, 2018 under IFRS-
IASB, earlier application is permitted.

IFRS 16 ’Leases’. This Standard is applicable for annual periods beginning on or after
January 1, 2019 under IFRS-IASB, earlier application is permitted.

IFRS 17 ’Insurance Contracts’. This Standard is applicable for annual periods
beginning on or after January 1, 2021 under IFRS-IASB, earlier application is
permitted.

IFRS 2 (Amendment) ‘Classification and Measurement of Share-based Payment
Transactions’. This amendment is mandatory for annual periods beginning on or after
January 1, 2018 under IFRS-IASB, earlier application is permitted.

IFRS 4 (Amendment). Applying IFRS 9 ‘Financial Instruments’ with IFRS 4 ‘Insurance
Contracts’. This amendment is mandatory for annual periods beginning on or after
January 1, 2018 under IFRS-IASB, earlier application is permitted.

100

Notes to the consolidated financial statements
31 December 2017

•

IAS 40 (Amendment). Transfers of Investment Property. This amendment is
mandatory for annual periods beginning on or after January 1, 2018 under IFRS-IASB,
earlier application is permitted.

IAS 19 (Amendment). Amendments to IAS 19: Plan Amendment, Curtailment or
Settlement. This amendment is mandatory for annual periods beginning on or after
January 1, 2019 under IFRS-IASB, earlier application is permitted.

IAS 28 (Amendment). Long-term Interests in Associates and Joint Ventures. This
amendment is mandatory for annual periods beginning on or after January 1, 2018
under IFRS-IASB, earlier application is permitted.

• Annual Improvements to IFRSs 2014-2016 cycles. Other minor amendments and
modifications different from the aforementioned on IFRS 12. This Standard is
applicable for annual periods beginning on or after January 1, 2018 under IFRS-IASB.

• Annual Improvements to IFRSs 2015-2017 cycles. This Standard is applicable for

annual periods beginning on or after January 1, 2018 under IFRS-IASB.

•

IFRIC 22 Foreign Currency Transactions and Advance Consideration. This Standard is
applicable for annual periods beginning on or after January 1, 2018 under IFRS-IASB.

IFRIC 23 Uncertainty over Income Tax Treatments. This Standard is applicable for
annual periods beginning on or after January 1, 2019 under IFRS-IASB.

IFRS 10 and IAS 28. Parent disposes of (or contributes) its controlling interest in a
subsidiary to an existing associate or joint venture. Effective date beginning on or
after a date to be determined by the IASB.

The application of these accounting standards is not expected to have a material impact on the
consolidated financial statements of the Company.

The analysis performed by the Company, relating to the impact of the new relevant accounting
standards is as follows:

IFRS 15 ’Revenues from contracts with Customers’

In May 2014, the IASB (International Accounting Standards Board) published IFRS 15
“Recognition of Revenue from Contracts with Customers”. This Standard brings together all the
applicable requirements and replaces the current standards for recognizing revenue: IAS 11
Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Program, IFRIC 15
Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and
SIC-31 Revenue—Barter Transactions Involving Advertising Services.

101

Notes to the consolidated financial statements
31 December 2017

The new requirements may lead to changes in the current revenue profile, since the Standard's
main principle is that the Company must recognize its revenue in accordance with the transfer
of goods or services to the customers in an amount which reflects the consideration that the
Company expects to receive in exchange for these goods or services. The model laid out by the
Standard is structured in five steps:

 Step 1: Identifying the contract with the customer.

 Step 2: Identifying the performance obligations.

 Step 3: Determining the transaction price.

 Step 4: Assigning the transaction price in the performance obligations identified in the

contract.

 Step 5: Recognition of revenue when (or as) the Company performs the performance

obligations.

Currently, assets recorded in accordance with IFRIC 12 are classified as intangible assets or as
financial assets, depending on the nature of the payment entitlements established in the
contracts.

According to IFRS 15, the Company should assess the goods and services promised in the
contracts with the customers and shall identify as a performance obligation each promise to
transfer to the customer a good or service (or a bundle of goods or services).

In the case of contracts related to financial assets, the Company has identified two performance
obligations (construction and operation of the asset). The contracts state that each service
(construction and operation) has its own transaction price. For this reason, both performance
obligations are separately identifiable in the context of the contract. The Company must allocate
the total consideration to be received by the contract to each performance obligation. As
mentioned above, the different services performed have been identified as two different
performance obligations (construction and operation). Each performance obligation has its own
transaction price stated in the contract. Such transaction prices are agreed in the contract by the
parties in an orderly transaction, with no interrelation between both transaction prices and
therefore correspond to the fair value of the goods and services provided in each case. As a

102

Notes to the consolidated financial statements
31 December 2017

result, for IFRS 15 purposes, the total transaction price will be allocated to each performance
obligation in accordance with the two transaction prices stated within the contract, as they
represent the respective fair values of the identified performance obligations.

For the assets classified as intangible assets, the Company has identified the same performance
obligations, (construction and operation), but in this case the consideration received by the
Company for the construction services is a license. The grantor makes a non-cash payment for
the construction services by giving the operator an intangible asset. When allocating fair value
for IFRS 15 purposes, the Company will recognize as revenue for the first performance obligation
the fair value of the construction services, and the amount corresponding to the sales of energy
as the fair value of second performance obligation (operation).

Additionally, in both cases, the services are satisfied over time. Therefore, the Company satisfies
the performance obligations and recognizes revenue over time. The same conclusion applies to
concessional assets that are classified as tangible assets or leases.

IFRS 15 also incorporates specific criteria to determine which costs relating to a contract should
be capitalized by distinguishing between incremental costs of obtaining a contract and costs
associated with fulfilling a contract. No significant costs of obtaining a contract or compliance
(other than those that are already capitalized) have been identified.

As the current practice for revenue recognition is consistent with the analysis above under IFRS
15, the Company considers that the adoption of this standard will not have impact in the
consolidated financial statements of the Company.

Also, the Company has the intention to adopt IFRS 15 applying the full retrospective method to
each prior reporting period presented, but without changes in the comparative reporting periods
as the adoption of the standard has no effect in the financial statements.

IFRS 9 ’Financial Instruments’

IFRS 9 Financial Instruments issued on 24 July 2014 is the IASB's replacement of IAS 39 Financial
Instruments: Recognition and Measurement. The standard addresses the classification,
measurement and derecognition of financial assets and financial liabilities, introduces new rules
for hedge accounting and a new impairment model for financial assets. The Company will be
adopting the standard as of January 1, 2018, including the new requirements for hedge
accounting (which application is voluntary for 2018). The Company will be adopting
retrospectively without re-stating comparative periods. The analysis performed by the Company
is as follows:

 Classification and measurement of financial instruments:

a) Financial assets IFRS 9 classifies all financial assets that are currently in the scope of
IAS 39 into two categories: amortized cost and fair value. Where assets are measured
at fair value, gains and losses are either recognized entirely in profit or loss (fair value
through profit or loss, “FVTPL”), or recognized in other comprehensive income (fair

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Notes to the consolidated financial statements
31 December 2017

value through other comprehensive income, “FVTOCI”). The new guidance has no
significant impact on the classification and measurement of the financial assets of
the Company as the vast majority of financial assets (except for derivatives) are
currently measured at amortized cost and meet the conditions for classification at
amortized cost under IFRS9. The Company has the intention of maintaining this
classification.

b) Financial liabilities: IFRS 9 does not change the basic accounting model for financial
liabilities under IAS 39. Two measurement categories continue to exist: FVTPL and
amortized cost. Financial liabilities held for trading are measured at FVTPL, and all
other financial liabilities are measured at amortized cost unless the fair value option
is applied. As a result, the Company concluded that there will be no significant impact
on the consolidated financial statements.

 The new impairment model requires the recognition of impairment provisions based on
expected credit losses (“ECL”) rather than only incurred credit losses as is the case under
IAS 39. The Company reviewed its portfolio of financial assets subject to the new model
of impairment under the new methodology (using credit default swaps, rating from credit
agencies and other external inputs in order to estimate the probability of default), and
concluded that initial impact on the consolidated financial statements is not significant.

 The accounting for certain modifications and exchanges of financial liabilities measured
at amortized cost (e.g. bank loans and issued bonds) will change on transition from IAS
39 to IFRS 9. This change arises from a clarification by the IASB in the Basis for
Conclusions of IFRS 9. Under IFRS 9 it is now clear that there can be an effect in the
income statement for modification and exchanges of financial liabilities that are
considered “non-substantial” (when the net present value of the cash flows, including
any fees paid net of any fees received, is lower than 10% different from the net present
value of the remaining cash flows of the liability prior to the modification, both
discounted at the original effective interest rate). The Company reviewed retrospectively
these transactions and concluded that the impact is not significant.



IFRS 9 also introduces changes in hedge accounting. The hedge accounting requirements
in IFRS 9 are optional and tend to facilitate the use of hedge accounting by preparers of
financial statements. As a result, the Company reviewed its portfolio of derivatives and
concluded that there will not be significant impact on its consolidated financial
statements as a result of applying IFRS 9.

 The new standard will require some new disclosures, in particular regarding hedge

accounting, credit risk and ECLs that will be presented in future periods.

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Notes to the consolidated financial statements
31 December 2017

IFRS 16 ’Leases’

The IASB issued a new lease accounting standard, IFRS 16, in January 2016, which will require
the recognition of lease contracts on the consolidated statement of financial position.

IFRS 16 eliminates the classification of leases as either operating leases or finance leases for a
lessee. Instead all leases are treated in a similar way to finance leases applying IAS 17. Leases are
‘capitalized’ by recognizing the present value of the lease payments and showing them either as
lease assets (right-of-use of assets) or together with property, plant and equipment. If lease
payments are made over time, a company also recognizes a financial liability representing its
obligation to make future lease payments.

In the income statement, IFRS 16 replaces the straight-line operating lease expense for those
leases applying IAS 17, with a depreciation charge for the lease asset (included within operating
expenses) and an interest expense on the lease liability (included within finance expenses). IFRS
16 will also have an effect on the presentation of cash flows related to former off-balance sheet
leases.

The Company performed its assessment of the impact on its consolidated financial statements.
The most significant impact identified is that the Company will recognize new assets and
liabilities for its existing operating leases of land rights, buildings, offices and equipment.

The standard is effective for annual periods beginning on or after January 1, 2019, with earlier
application permitted for entities that apply IFRS 15 at or before the date of initial application of
IFRS 16. The Company decided to early adopt the standard as of January 1, 2018.

An entity shall apply this standard using one of the following two methods: full retrospectively
approach or a modified retrospective approach. The Company has chosen the latter and will
account for assets as an amount equal to liability at the date of initial application. The Company
estimates the impact on the consolidated statement of financial position as of January 1, 2018,
is not significant (less than 1% of total assets).

3. Significant accounting judgements

Basis of accounting

The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs) as issued by the IASB, and on a basis consistent with the prior year.

The financial statements have been prepared on the historical cost basis, except for the
revaluation of certain financial instruments that are measured at fair values at the end of each
reporting period, as explained in the accounting policies below. Historical cost is generally based
on the fair value of the consideration given in exchange for goods and services.

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Notes to the consolidated financial statements
31 December 2017

Basis of consolidation

a) Controlled entities

The consolidated financial statements incorporate the financial statements of the Company and
entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control
is achieved when the Company:

 has the power over the investee;



is exposed, or has rights, to variable return from its involvement with the investee; and

 has the ability to use its power to affects its returns.

The Company reassesses whether or not it controls an investee when facts and circumstances
indicate that there are changes to one or more of the three elements of control listed above.

The Company uses the acquisition method to account for business combinations of companies
controlled by a third party. According to this method, identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. Any contingent consideration is recognized at fair value at the
acquisition date and subsequent changes in its fair value are recognized in accordance with IAS
39 either in profit or loss or as a change to other comprehensive income. Acquisition related
costs are expensed as incurred. The Company recognizes any non-controlling interest in the
acquiree either at fair value or at the noncontrolling interest’s proportionate share of the
acquirer’s net assets on an acquisition by acquisition basis.

Acquisitions of businesses from Abengoa were until December 31, 2015not considered business
combinations, as Atlantica Yield was a subsidiary controlled by Abengoa. The assets acquired
constituted an acquisition under common control by Abengoa and accordingly, were recorded
using Abengoa’s historical basis in the assets and liabilities of the Predecessor.

Abengoa has no control over the Company since December 31, 2015. Therefore, any purchase
from Abengoa is accounted for in the consolidated accounts of Atlantica Yield since December
31, 2015, in accordance with IFRS 3, Business Combination.

All assets and liabilities between entities of the group, equity, income, expenses, and cash flows
relating to transactions between entities of the group are eliminated in full.

b) Investments accounted for under the equity method

An associate is an entity over which the Company has significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the investee but is
not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements
using the equity method of accounting. Under the equity method, an investment in an associate
is initially recognized in the statement of financial position at cost and adjusted thereafter to
recognize the Company share of the profit or loss and other comprehensive income of the
associate.

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Notes to the consolidated financial statements
31 December 2017

Going concern

The directors have, at the time of approving the financial statements, a reasonable expectation
that the Company and the Group have adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting
in preparing the consolidated financial statements. Further detail is contained in the Strategic
Report on page 49.

Critical accounting judgements and estimates

The critical judgements which have been made in the process of applying the accounting policies
are detailed below:

 Contracted concessional assets and purchase price agreements

The application of IFRIC 12 requires judgement to (i) the identification of certain infrastructures
and contractual agreements in the scope of IFRIC 12; (ii) the understanding of the nature of the
payments in order to determine the classification as a financial asset or as an intangible asset,
and (iii) the timing and recognition of the revenue for construction and concessional activity.

Key sources of estimation uncertainty

The Group does not have any key assumptions concerning the future, or other key sources of
estimation uncertainty in the reporting period that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial
year.

Contracted concessional Assets and price purchase agreements

Contracted concessional assets and price purchase agreements (PPAs) include fixed assets
financed through project debt, related to service concession arrangements recorded in
accordance with International Financial Reporting Interpretations Committee 12 (“IFRIC 12”),
except for Palmucho, which is recorded in accordance with IAS 17 and PS10, PS20 and Seville
PV, which are recorded as tangible assets in accordance with IAS 16. The infrastructures
accounted for by the Company as concessions are related to the activities concerning electric
transmission lines, solar electricity generation plants, cogeneration plants, wind farms and water
plants. The useful life of these assets is approximately the same as the length of the concession
arrangement. The infrastructure used in a concession can be classified as an intangible asset or
a financial asset, depending on the nature of the payment entitlements established in the
agreement.

The application of IFRIC 12 requires extensive judgment in relation with, among other factors, (i)
the identification of certain infrastructures and contractual agreements in the scope of IFRIC 12,
(ii) the understanding of the nature of the payments in order to determine the classification of

107

Notes to the consolidated financial statements
31 December 2017

the infrastructure as a financial asset or as an intangible asset and (iii) the timing and recognition
of the revenue from construction and concessionary activity.

Under the terms of contractual arrangements within the scope of this interpretation, the
operator shall recognize and measure revenue in accordance with IAS 11 and 18 for the services
it performs. If the operator performs more than one service (i.e. construction or upgrade services
and operation services) under a single contract or arrangement, consideration received or
receivable shall be allocated by reference to the relative fair values of the services delivered,
when the amounts are separately identifiable.

a) Intangible assets

The Company recognizes an intangible asset to the extent that it receives a right to charge final
customers for the use of the infrastructure. This intangible asset is subject to the provisions of
IAS 38 and is amortized linearly, taking into account the estimated period of commercial
operation of the infrastructure which coincides with the concession period.

Once the infrastructure is in operation, the treatment of income and expenses is as follows:

 Revenues from the updated annual revenue for the contracted concession, as well as
operations and maintenance services are recognized in each period according to IAS 18
“Revenue”.

 Operating and maintenance costs and general overheads and administrative costs are
recorded in accordance with the nature of the cost incurred (amount due) in each period.

 Financing costs are expensed as incurred.

b) Financial assets

The Company recognizes a financial asset when demand risk is assumed by the grantor, to the
extent that the concession holder has an unconditional right to receive payments for the asset.
This asset is recognized at the fair value of the construction services provided, considering
upgrade services in accordance with IAS 11, if any.
The financial asset is subsequently recorded at amortized cost calculated according to the
effective interest method. Revenue from operations and maintenance services is recognized in
each period according to IAS 18 “Revenue”. The remuneration of managing and operating the
asset resulting from the valuation at amortized cost is also recorded in revenue.

Financing costs are expensed as incurred.

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Notes to the consolidated financial statements
31 December 2017

c) Property, plant and equipment

Property, plant and equipment includes property, plant and equipment of companies or project
companies. Property, plant and equipment is measured at historical cost, including all expenses
directly attributable to the acquisition, less depreciation and impairment losses, with the
exception of land, which is presented net of any impairment losses. Once the infrastructure is in
operation, the treatment of income and expenses is the same as the one described above for
intangible assets.

Borrowing costs

Interest costs incurred that are directly attributable to the construction of any qualifying asset
are capitalized over the period required to complete and prepare the asset for its intended use.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for
its internal use or sale, which is considered to be more than one year. Remaining borrowing
costs are expensed in the period in which they are incurred.

Asset impairment

Atlantica Yield reviews its contracted concessional assets to identify any indicators of impairment
at least annually.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value
in use, defined as the present value of the estimated future cash flows to be generated by the
asset. In the event that the asset does not generate cash flows independently of other assets,
the Company calculates the recoverable amount of the Cash Generating Unit (‘CGU’) to which
the asset belongs. When the carrying amount of the CGU to which these assets belong is lower
than its recoverable amount, the assets are impaired.

Assumptions used to calculate value in use include a discount rate, growth rate and projections
considering real data based in the contracts terms and projected changes in both selling prices
and costs. The discount rate is estimated by Management, to reflect both changes in the value
of money over time and the risks associated with the specific CGU. For contracted concessional
assets, with a defined useful life and with a specific financial structure, cash flow projections until
the end of the project are considered and no terminal value is assumed.

Contracted concessional assets have a contractual structure that permits the Company to
estimate quite accurately the costs of the project (both in the construction and in the operations
periods) and revenue during the life of the project.

Projections take into account real data based on the contract terms and fundamental
assumptions based on specific reports prepared by experts, assumptions on demand and
assumptions on production. Additionally, assumptions on macro-economic conditions are taken
into account, such as inflation rates, future interest rates, etc. and sensitivity analyses are

109

Notes to the consolidated financial statements
31 December 2017

performed over all major assumptions which can have a significant impact in the value of the
asset.

Cash flow projections of CGUs are calculated in the functional currency of those CGUs and are
discounted using rates that take into consideration the risk corresponding to each specific
country and currency. Taking into account that in most CGUs the specific financial structure is
linked to the financial structure of the projects that are part of those CGUs, the discount rate
used to calculate the present value of cash-flow projections is based on the weighted average
cost of capital (WACC) for the type of asset, adjusted, if necessary, in accordance with the
business of the specific activity and with the risk associated with the country where the project
is performed.

In any case, sensitivity analyses are performed, especially in relation to the discount rate used
and fair value changes in the main business variables, in order to ensure that possible changes
in the estimates of these items do not impact the possible recovery of recognized assets.

Accordingly, the following table provides a summary of the discount rates used (WACC) and
growth rates to calculate the recoverable amount for CGUs with the operating segment to which
it pertains:

Operating segment

Discount

Growth

Rate

EMEA ................................................................................... 4% - 6%

North America................................................................. 4% - 6%

South America................................................................. 5% - 7%

In the event that the recoverable amount of an asset is lower than its carrying amount, an
impairment charge for the difference would be recorded in the income statement under the item
“Depreciation, amortization and impairment charges”. Pursuant to IAS 36, an impairment loss is
recognized if the carrying amount of these assets exceeds the present value of future cash flows
discounted at the initial effective interest rate.

Loans and accounts receivable

Loans and accounts receivable are non-derivative financial assets with fixed or determinable
payments, not listed on an active market. In accordance with IFRIC 12, certain assets under
concessions qualify as financial assets and are recorded as is described in note 12. Pursuant to
IAS 36, an impairment loss is recognized if the carrying amount of these assets exceeds the
present value of future cash flows discounted at the initial effective interest rate. Loans and
accounts receivable are initially recognized at fair value plus transaction costs and are
subsequently measured at amortized cost in accordance with the effective interest rate method.
Interest calculated using the effective interest rate method is recognized under other financial
income within financial income.

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Notes to the consolidated financial statements
31 December 2017

Derivative financial instruments and hedging activities

Derivatives are recorded at fair value. The Company applies hedge accounting to all hedging
derivatives that qualify to be accounted for as hedges under IFRS-IASB.

When hedge accounting is applied, hedging strategy and risk management objectives are
documented at inception, as well as the relationship between hedging instruments and hedged
items. Effectiveness of the hedging relationship needs to be assessed on an ongoing basis.
Effectiveness tests are performed prospectively and retrospectively at inception and at each
reporting date, following the dollar offset method or the regression method, depending on the
type of derivatives and the type of tests performed.

Atlantica Yield applies cash flow hedging. Under this method, the effective portion of changes
in fair value of derivatives designated as cash flow hedges are recorded temporarily in equity
and are subsequently reclassified from equity to profit or loss in the same period or periods
during which the hedged item affects profit or loss. Any ineffective portion of the hedged
transaction is recorded in the consolidated income statement as it occurs.

When interest rate options are designated as hedging instruments, the intrinsic value and time
value of the financial hedge instrument are separated. Changes in intrinsic value which are highly
effective are recorded in equity and subsequently reclassified from equity to profit or loss in the
same period or periods during which the hedged item affects profit or loss. Changes in time
value are recorded as financial income or expense, together with any ineffectiveness.

When the hedging instrument matures or is sold, or when it no longer meets the requirements
to apply hedge accounting, accumulated gains and losses recorded in equity remain as such
until the forecast transaction is ultimately recognized in the income statement. However, if it
becomes unlikely that the forecast transaction will actually take place, the accumulated gains
and losses in equity are recognized immediately in the income statement.

Fair value estimates

Financial instruments measured at fair value are presented in accordance with the following level
classification based on the nature of the inputs used for the calculation of fair value:

 Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

 Level 2: Fair value is measured based on inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).

 Level 3: Fair value is measured based on unobservable inputs for the asset or liability.

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Notes to the consolidated financial statements
31 December 2017

In the event that prices cannot be observed, the management shall make its best estimate of the
price that the market would otherwise establish based on proprietary internal models which, in
the majority of cases, use data based on observable market parameters as significant inputs
(Level 2) but occasionally use market data that is not observed as significant inputs (Level 3).
Different techniques can be used to make this estimate, including extrapolation of observable
market data. The best indication of the initial fair value of a financial instrument is the price of
the transaction, except when the value of the instrument can be obtained from other
transactions carried out in the market with the same or similar instruments or valued using a
valuation technique in which the variables used only include observable market data, mainly
interest rates. Differences between the transaction price and the fair value based on valuation
techniques that use data that is not observed in the market, are not initially recognized in the
income statement.

Atlantica Yield derivatives correspond primarily to the interest rate swaps designated as cash
flow hedges which are classified as Level 2:

Description of the valuation method

Interest rate swap valuations are made by valuing the swap part of the contract and valuing the
credit risk. The methodology used by the market and applied by Atlantica Yield to value interest
rate swaps is to discount the expected future cash flows according to the parameters of the
contract. Variable interest rates, which are needed to estimate future cash flows, are calculated
using the curve for the corresponding currency and extracting the implicit rates for each of the
reference dates in the contract. These estimated flows are discounted with the swap zero curve
for the reference period of the contract.

The effect of the credit risk on the valuation of the interest rate swaps depends on the future
settlement. If the settlement is favourable for the Company, the counterparty credit spread will
be incorporated to quantify the probability of default at maturity. If the expected settlement is
negative for the Company, its own credit risk will be applied to the final settlement.

Classic models for valuing interest rate swaps use deterministic valuation of the future of variable
rates, based on future outlooks. When quantifying credit risk, this model is limited by considering
only the risk for the current paying party, ignoring the fact that the derivative could change sign
at maturity. A payer and receiver swaption model is proposed for these cases. This enables the
associated risk in each swap position to be reflected. Thus, the model shows each agent’s
exposure, on each payment date, as the value of entering into the ‘tail’ of the swap, i.e. the live
part of the swap.

Variables (Inputs)

Interest rate derivative valuation models use the corresponding interest rate curves for the
relevant currency and underlying reference in order to estimate the future cash flows and to

112

Notes to the consolidated financial statements
31 December 2017

discount them. Market prices for deposits, futures contracts and interest rate swaps are used to
construct these curves. Interest rate options (caps and floors) also use the volatility of the
reference interest rate curve.

To estimate the credit risk of the counterparty, the credit default swap (CDS) spreads curve is
obtained in the market for important individual issuers. For less liquid issuers, the spreads curve
is estimated using comparable CDSs or based on the country curve. To estimate proprietary
credit risk, prices of debt issues in the market and CDSs for the sector and geographic location
are used.

The fair value of the financial instruments that results from the aforementioned internal models
takes into account, among other factors, the terms and conditions of the contracts and
observable market data, such as interest rates, credit risk and volatility. The valuation models do
not include significant levels of subjectivity, since these methodologies can be adjusted and
calibrated, as appropriate, using the internal calculation of fair value and subsequently compared
to the corresponding actively traded price. However, valuation adjustments may be necessary
when the listed market prices are not available for comparison purposes.

Trade and other receivables

Trade and other receivables are amounts due from customers for sales in the normal course of
business. They are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest rate method, less allowance for doubtful accounts. Trade receivables
due in less than one year are carried at their face value at both initial recognition and subsequent
measurement, provided that the effect of not discounting flows is not significant.

An allowance for doubtful accounts is recorded when there is objective evidence that the
Company will not be able to recover all amounts due as per the original terms of the receivables.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, cash in bank and other highly-liquid current
investments with an original maturity of three months or less which are held for the purpose of
meeting short-term cash commitments.

Grants

Grants are recognized at fair value when it is considered that there is a reasonable assurance
that the grant will be received and that the necessary qualifying conditions, as agreed with the
entity assigning the grant, will be adequately complied with.

Grants are recorded as liabilities in the consolidated statement of financial position and are
recognized in “Other operating income” in the consolidated income statement based on the
period necessary to match them with the costs they intend to compensate. In addition, grants
correspond also to loans with interest rates below market rates, for the initial difference between
the fair value of the loan and the proceeds received.

Loans and borrowings

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Notes to the consolidated financial statements
31 December 2017

Loans and borrowings are initially recognized at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortized cost and any difference between the
proceeds initially received (net of transaction costs incurred in obtaining such proceeds) and the
repayment value is recognized in the consolidated income statement over the duration of the
borrowing using the effective interest rate method.

Loans with interest rates below market rates are initially recognized at fair value in liabilities and
the difference between proceeds received from the loan and its fair value is initially recorded
within “Grants and Other liabilities” in the consolidated statement of financial position, and
subsequently recorded in “Other operating income” in the consolidated income statement when
the costs financed with the loan are expensed.

Bonds and notes

The Company initially recognizes ordinary notes at fair value, net of issuance costs incurred.
Subsequently, notes are measured at amortized cost until settlement upon maturity. Any other
difference between the proceeds obtained (net of transaction costs) and the redemption value
is recognized in the consolidated income statement over the term of the debt using the effective
interest rate method.

Income taxes

Current income tax expense is calculated on the basis of the tax laws in force as of the date of
the consolidated statement of financial position in the countries in which the subsidiaries and
associates operate and generate taxable income.

Deferred income tax is calculated in accordance with the liability method, based upon the
temporary differences arising between the carrying amount of assets and liabilities and their tax
base. Deferred income tax is determined using tax rates and regulations which are expected to
apply at the time when the deferred tax is realized.

Deferred tax assets are recognized only when it is probable that sufficient future taxable profit
will be available to use deferred tax assets.

Trade payables and other liabilities

Trade payables are obligations arising from purchases of goods and services in the ordinary
course of business and are recognized initially at fair value and are subsequently measured at
their amortized cost using the effective interest method. Other liabilities are obligations not
arising in the normal course of business and which are not treated as financing transactions.
Advances received from customers are recognized as “Trade payables and other current
liabilities”.

Foreign currency transactions

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Notes to the consolidated financial statements
31 December 2017

The consolidated financial statements are presented in U.S. dollars, which is Atlantica Yield
functional and reporting currency. Financial statements of each subsidiary within the Company
are measured in the currency of the principal economic environment in which the subsidiary
operates, which is the subsidiary’s functional currency.

Transactions denominated in a currency different from the subsidiary’s functional currency are
translated into the subsidiary’s functional currency applying the exchange rates in force at the
time of the transactions. Foreign currency gains and losses that result from the settlement of
these transactions and the translation of monetary assets and liabilities denominated in foreign
currency at the year-end rates are recognized in the consolidated income statement, unless they
are deferred in equity, as occurs with cash flow hedges and net investment in foreign operations
hedges.

Assets and liabilities of subsidiaries with a functional currency different from the Company’s
reporting currency are translated to U.S. dollars at the exchange rate in force at the closing date
of the financial statements. Income and expenses are translated into U.S. dollars using the
average annual exchange rate, which does not differ significantly from using the exchange rates
of the dates of each transaction. The difference between equity translated at the historical
exchange rate and the net financial position that results from translating the assets and liabilities
at the closing rate is recorded in equity under the heading “Accumulated currency translation
differences”.

Results of companies carried under the equity method are translated at the average annual
exchange rate.

Equity

The Company has recyclable balances in its equity, corresponding mainly to hedge reserves and
translation differences arising from currency conversion in the preparation of these consolidated
financial statements. These balances have been presented separately in Equity.

Non-controlling interest represents interest from other partners in entities included in these
consolidated financial statements which are not fully owned by Atlantica Yield as of the dates
presented. Parent company reserves together with the Share capital represent the Parent’s net
investment in the entities included in these consolidated financial statements.

Provisions and contingencies

Provisions are recognized when:


there is a present obligation, either legal or constructive, as a result of past events;



it is more likely than not that there will be a future outflow of resources to settle the
obligation; and

the amount has been reliably estimated.

Provisions are initially measured at the present value of the expected outflows required to settle
the obligation and subsequently valued at amortized cost following the effective interest
method. The balance of Provisions disclosed in the Notes reflects management’s best estimate
of the potential exposure as of the date of preparation of the consolidated financial statements.

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Notes to the consolidated financial statements
31 December 2017

Contingent liabilities are possible obligations, existing obligations with low probability of a
future outflow of economic resources and existing obligations where the future outflow cannot
be reliably estimated. Contingences are not recognized in the consolidated statements of
financial position unless they have been acquired in a business combination.

Some companies included in the group have dismantling provisions, which are intended to cover
future expenditures related to the dismantlement of the solar plants and it will be likely to be
settled with an outflow of resources in the long term (over 5 years).
Such provisions are accrued when the obligation for dismantling, removing and restoring the
site on which the plant is located, is incurred, which is usually during the construction period.
The provision is measured in accordance with IAS 37, “Provisions, Contingent Liabilities and
Contingent Assets” and is recorded as a liability under the heading “Grants and other liabilities”
of the Financial Statements, and as part of the cost of the plant under the heading “Contracted
concessional assets.”

4. Financial information by segment

Atlantica Yield’s segment structure reflects how management currently makes financial decisions
and allocates resources. Its operating and reportable segments are based on the following
geographies where the contracted concessional assets are located:

•

North America

South America

EMEA

Based on the type of business, as of December 31, 2017 the Company had the following business
sectors:

Renewable energy: Renewable energy assets include two solar plants in the United
States, Solana and Mojave, each with a gross capacity of 280 MW and located in Arizona and
California, respectively. The Company owns eight solar platforms in Spain: Solacor 1 and 2 with
a gross capacity of 100 MW, PS10 and PS20 with a gross capacity of 31 MW, Solaben 2 and 3
with a gross capacity of 100 MW, Helioenergy 1 and 2 with a gross capacity of 100 MW, Helios
1 and 2 with a gross capacity of 100 MW, Solnova 1, 3 and 4 with a gross capacity of 150 MW,
Solaben 1 and 6 with a gross capacity of 100 MW and Seville PV with a gross capacity of 1 MW.
The Company also owns a solar plant in South Africa, Kaxu with a gross capacity of 100 MW.
Additionally, the Company owns two wind farms in Uruguay, Palmatir and Cadonal, with a gross
capacity of 50 MW each.

116

Notes to the consolidated financial statements
31 December 2017

Efficient natural gas: The Company´s sole efficient natural gas asset is ACT, a 300
MW cogeneration plant in Mexico, which is party to a 20-year take-or-pay contract with Pemex
for the sale of electric power and steam.

Electric transmission lines: Electric transmission assets include (i) three lines in Peru,
ATN, ATS and ATN2, 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.

Water: Water assets include a minority interest in two desalination plants in Algeria,

Honaine and Skikda with an aggregate capacity of 10.5 M ft3 per day.

Atlantica’s Chief Operating Decision Maker (CODM) assesses the performance and assignment
of resources according to the identified operating segments. The CODM considers the revenues
as a measure of the business activity and the Further Adjusted EBITDA as a measure of the
performance of each segment. Further Adjusted EBITDA is calculated as profit/(loss) for the
period attributable to the parent company, after adding back loss/(profit) attributable to non-
controlling interests 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 these consolidated financial statements, and
dividends received from the preferred equity investment in ACBH. Further adjusted EBITDA for
2016 and 2017 includes compensation received from Abengoa in lieu of ACBH dividends.

In order to assess performance of the business, the CODM receives reports of each reportable
segment using revenues and Further Adjusted EBITDA. Net interest expense evolution is
assessed on a consolidated basis. Financial expense and amortization are not taken into
consideration by the CODM for the allocation of resources.

In the years ended December 31, 2017 and December 31, 2016, Atlantica Yield had three
customers with revenues representing more than 10% of the total revenues, i.e., two in the
renewable energy (45% and 11% of total revenues respectively) and one in the efficient natural
gas business sectors (12% of total revenues).

117

Notes to the consolidated financial statements
31 December 2017

a) The following tables show Revenues and Further Adjusted EBITDA by operating segments
and business sectors for the years 2017 and 2016:

Revenue
$’000

Further Adjusted EBITDA
$’000

For the twelve-
month period ended December 31,

Geography

2017

2016

2017

2016

North America

South America

EMEA

Total

332,705

120,797

554,879

337,061

118,764

515,972

282,328

108,766

388,216

284,691

124,599

354,020

1,008,381

971,797

779,310

763,310

Revenue
$’000

Further Adjusted EBITDA
$’000

For the twelve-
month period ended December 31,

Business sector

2017

2016

2017

2016

Renewable energy

Efficient natural gas

Electric transmission
lines
Water

767,226

119,784

95,096

724,325

128,046

95,137

569,193

106,140

87,695

538,427

106,492

104,795

26,275

24,288

16,282

13,596

Total

1,008,381

971,797

779,310

763,310

118

Notes to the consolidated financial statements
31 December 2017

The reconciliation of segment Further Adjusted EBITDA with the loss attributable to the
parent company is as follows:

For the twelve-
month period ended December 31,

2017

$’000

2016

$’000

Loss attributable to the Company
Profit attributable to non-controlling interests
Income tax
Share of profits/(losses) of associates
Dividend from exchangeable preferred equity
investment in ACBH
Financial expense, net
Depreciation, amortization, and
charges

impairment

(111,804)
6,917
119,837
(5,351)
10,383

448,368
310,960

(4,855)
6,522
1,666
(6,646)
27,948

405,750
332,925

Total segment Further Adjusted EBITDA

779,310

763,310

b) The assets and liabilities by operating segments (and business sector) at the end of 2017

and 2016 are as follows:

Assets and liabilities by geography as of December 31, 2017:

North
America

South
America

EMEA

Balance as of
December 31,
2017

Assets allocated

Contracted concessional assets

3,770,169

1,100,778

4,213,323

9,084,270

116,451

149,236

4,035,856

59,831

55,784

31,263

42,548
1,203,157

329,078
4,629,448

Investments carried under the equity method

Current financial investments

Cash and cash equivalents (project companies)

Subtotal allocated

Unallocated assets

Other non-current assets

Other current assets (including cash and cash
equivalents at holding company level)
Subtotal unallocated

Total assets

55,784

207,545

520,862

9,868,461

210,378

413,500

623,878

10,492,339

119

Notes to the consolidated financial statements
31 December 2017

North
America

South
America

EMEA

Balance as of
December 31,
2017

Liabilities allocated

Long-term and short-term project debt

Grants and other liabilities

Subtotal allocated

Unallocated liabilities

Long-term and short-term corporate debt

Other non-current liabilities

Other current liabilities

Subtotal unallocated

Total liabilities

Equity unallocated

Total liabilities and equity unallocated

Total liabilities and equity

1,821,102

1,593,048

876,063

2,778,043

810

42,202
2,820,245

3,414,150

876,873

5,475,208

1,636,060

7,111,268

643,083

657,345

185,190

1,485,618

8,596,886

1,895,453

3,381,071

10,492,339

Assets and liabilities by geography as of December 31, 2016:

North
America

South
America

EMEA

Balance as of
December 31,
2016

Assets allocated

Contracted concessional assets

3,920,106

1,144,712

3,859,454

8,924,272

Investments carried under the equity method

Current financial investments

Cash and cash equivalents (project companies)

136,665

185,970

62,215

40,015

55,009

29,158

246,671

55,009

228,038

472,656

Subtotal allocated

Unallocated assets

Other non-current assets

Other current assets (including cash and cash
equivalents at holding company level)
Subtotal unallocated

Total assets

4,242,741

1,246,942

4,190,291

9,679,975

272,664

345,160

617,824

10,297,799

120

Notes to the consolidated financial statements
31 December 2017

North
America

South
America

EMEA

Balance as of
December 31,
2016

Liabilities allocated

Long-term and short-term project debt

Grants and other liabilities

Subtotal allocated

Unallocated liabilities

Long-term and short-term corporate debt

Other non-current liabilities

Other current liabilities

Subtotal unallocated

Total liabilities

Equity unallocated

Total liabilities and equity unallocated

Total liabilities and equity

1,870,861

1,575,303

895,316

2,564,290

1,512

35,230

3,446,164

896,828

2,599,520

5,330,467

1,612,045

6,942,512

668,201

546,053

181,922

1,396,176

8,338,688

1,959,111

3,355,287

10,297,799

Assets and liabilities by business sectors as of December 31, 2017:

Assets allocated
Contracted concessional assets
Investments carried under
equity method
Current financial investments
Cash and cash equivalents (project
companies)
Subtotal allocated

the

Unallocated assets
Other non-current assets
Other current assets (including cash
and cash equivalents at holding
company level)
Subtotal unallocated

Total assets

Renewable
energy

Efficient
natural gas

Electric
transmission
lines

Water

Balance as of
December
31, 2017

7,436,362
12,419

17,249
452,792

660,387
-

116,430
39,064

897,269
-

59,289
15,325

90,252
43,365

14,577
13,681

9,084,270
55,784

207,545
520,862

7,918,822

815,881

971,883

161,875

9,868,461

210,378
413,500

623,878

10,492,339

121

Notes to the consolidated financial statements
31 December 2017

Renewable
energy

Efficient
natural gas

Electric
transmission
lines

Water

Balance as
of
December
31, 2017

Liabilities allocated
Long-term and short-term project
debt
Grants and other liabilities

Subtotal allocated

4,162,596

579,173

698,346

35,093

5,475,208

1,635,508

5,798,104

552

579,725

698,346

35,093

1,636,060

7,111,268

and

Unallocated liabilities
Long-term
corporate debt
Other non-current liabilities
Other current liabilities

short-term

Subtotal unallocated

Total liabilities

Equity unallocated

liabilities and equity

Total
unallocated
Total liabilities and equity

Assets and liabilities by business sectors as of December 31, 2016:

643,083

657,345
185,190

1,485,618

8,596,886

1,895,453

3,381,071

10,492,339

Assets allocated
Contracted concessional assets
Investments carried under the equity
method
Current financial investments
Cash and cash equivalents (project
companies)
Subtotal allocated

Unallocated assets
Other non-current assets
Other current assets (including cash
and cash equivalents at holding
company level)
Subtotal unallocated

Total assets

Renewable
energy

Efficient
natural gas

Electric
transmission
lines

Water

Balance as
of
December
31, 2016

7,255,308
12,953

13,661
420,215

646,927
-

136,644
30,295

929,005
-

93,032
42,056

8,924,272
55,009

62,215
11,357

15,518
10,789

228,038
472,656

7,702,137

813,866

1,002,577

161,395

9,679,975

272,664
345,160

617,824

10,297,799

122

Notes to the consolidated financial statements
31 December 2017

Liabilities allocated
Long-term and short-term project
debt
Grants and other liabilities

Subtotal allocated

and

Unallocated liabilities
Long-term
corporate debt
Other non-current liabilities
Other current liabilities

short-term

Subtotal unallocated

Total liabilities

Equity unallocated

liabilities

Total
unallocated
Total liabilities and equity

and

equity

Renewable
energy

Efficient
natural gas

Electric
transmission
lines

Water

Balance as
of
December
31, 2016

3,979,096

598,256

711,517

41,598

5,330,467

1,611,067

5,590,163

239

739

598,495

712,256

41,598

1,612,045

6,942,512

668,201

546,053
181,922

1,396,176

8,338,688

1,959,111

3,355,287
10,297,799

c) The amount of depreciation, amortization and impairment charges recognized for
the years ended December 31, 2017 and 2016 are as follows:

Depreciation, amortization and
geography

impairment by

North America
South America

EMEA

Total

For the twelve-month period
ended December 31,

$’000

2017

2016

(123,726)
(40,880)

(146,354)

(129,478)
(62,387)

(141,060)

(310,960)

(332,925)

For the twelve-month period
ended December 31,

$’000

Depreciation, amortization and
business sectors

impairment by

2017

2016

Renewable energy

Electric transmission lines

Total

(282,376)

(28,584)

(304,235)

(28,690)

(310,960)

(332,925)

123

Notes to the consolidated financial statements
31 December 2017

5. Changes in the scope of the consolidated financial statements

For the year ended December 31, 2017

There is no change in the scope of the consolidated financial statement in the year
2017.

For the year ended December 31, 2016

On January 7, 2016, the Company closed the acquisition of a 13% stake in Solacor 1/2 from JGC,
which reduced JGC´s ownership in Solacor 1/2 to 13%. The total purchase price for these assets
amounted to $19,923 thousand.

The difference between the amount of Non-Controlling interest representing the 13% interest
held by JGC accounted for in the consolidated accounts at the purchase date, and the purchase
price has been recorded in equity in these consolidated financial statements, pursuant to IFRS
10, Consolidated Financial Statements.

On August 3, 2016, the Company completed the acquisition of an 80% stake in Seville PV. Total
purchase price paid for this asset amounted to $3,214 thousand. The purchase has been
accounted for in the consolidated accounts of Atlantica Yield, in accordance with IFRS 3, Business
Combinations.

124

Notes to the consolidated financial statements
31 December 2017

6. Auditor’s fees

The analysis of the auditor’s fees is as follows:

Year

ended

2017
$’000

Year

ended

2016
$’000

Fees payable to the company’s auditor and their associates

871

758

for the audit of the company’s annual accounts

Fees payable to the company’s auditor and their associates

for other services to the group

–The audit of the company’s subsidiaries

Total audit fees

- Audit-related services
- Other services

Total non-audit fees

833

798

1,704

303

328

1,556

118

2,032

1,674

125

Notes to the consolidated financial statements
31 December 2017

7. Staff costs

The average monthly number of employees (including executive directors) was:

Executives

Middle Managers

Engineers and Graduates

Assistants and Profesionals

Interims

Their aggregate remuneration comprised:

Wages and salaries

Social security costs

Other staff costs

8. Other operating income

Other Operating income

2017

2016

Number

101

181

141

Year

ended
2017
$’000

Year

ended
2016
$’000

(16,685)

(13,102)

(1,877)

(292)

(1,410)

(224)

(18,854)

(14,736)

For the twelve-
month period
ended December
31, 2017

For the twelve-
month period
ended December
31, 2016

$’000

Grants
Income from various services and insurance
proceeds

59,707
21,137

59,085
6,453

Total

80,844

65,538

Grants income mainly relate to ITC cash grants and implicit grants recorded for accounting purposes in
relation to the FFB loans with interest rates below market rates in Solana and Mojave projects (see Note
18).

126

Notes to the consolidated financial statements
31 December 2017

The increase in other operating income relates primarily to insurance proceeds from claims in respect of
some assets of the Company.

9. Finance income and expenses

The following table sets forth our financial income and expenses for the years ended December 31, 2017
and 2016:

For the twelve-
month period
ended December
31, 2017
$’000

For the twelve-
month period
ended December
31, 2016
$’000

Finance income
Interest income from loans and credits

Profit on interest rate derivatives: cash flow hedges

TOTAL

325
682
1,007

286

3,012

3,298

Finance expenses

Expenses due to interest:

- Loans from credit entities

- Other debts

Losses on interest rate derivatives: cash flow hedges

TOTAL

For the twelve-
month period
ended December
31, 2017
$’000

For the twelve-
month period
ended December
31, 2016
$’000

(253,660)

(137,562)

(72,495)

(463,717)

(242,919)

(90,995)

(74,093)

(408,007)

Interest from other debts are primarily interest on the notes issued by ATS, ATN, ATN2, Atlantica
and Solaben Luxembourg and interest related to the investment from Liberty. The increase in
2017 is primarily due to the higher increase in the amortized cost of the Liberty debt by $50
million compared to the year 2016 (see Note 18). Losses from interest rate derivatives designated
as cash flow hedges correspond primarily to transfers from equity to financial expense when the
hedged item is impacting the consolidated income statement.

127

Notes to the consolidated financial statements
31 December 2017

Other finance income / (expenses)

Dividend from ACBH (Brazil)

Other finance income

Impairment preferred equity investment in ACBH (see Note

22)
Other finance losses

TOTAL

For the twelve-
month period
ended
December 31,
2017
$’000

For the twelve-
month period
ended
December 31,
2016
$’000

10,383

28,809

(20,758)

18,434

27,948

13,027

(22,076)

(10,394)

8,505

According to the agreement reached with Abengoa in the third quarter of 2016, Abengoa
acknowledged that Atlantica is the legal owner of the dividends declared on February 24, 2017. As
a result, the Company retained dividends payable to Abengoa amounting to $10.4 million. As a
result, the Company recorded $10.4 million which is reflected in the profit and loss account as in
accordance with the accounting treatment previously given to the ACBH dividend.

Other financial losses for the year ended December 31, 2017 consist primarily of a loss resulting
from the derecognition of the fair value assigned to ACBH preferred equity investment and
recognition of the Abengoa Debt and Equity Instruments for $5.8 million (see Note 22). Residual
items presented as Other financial losses are guarantees and letters of credit, wire transfers, other
bank fees and other minor financial expenses.

Other financial income consists primarily of $16.2 million income as a result of the termination of
the currency swap agreement with Abengoa (see Note 23) and the profit of $6.5 million resulting
from the sale of the majority of the Abengoa Debt and Equity instruments (see Note 22).

10. Tax

All the companies included in the Company file income taxes according to the tax regulations in
force in each country on an individual basis or under consolidation tax regulations.

The consolidated income tax has been calculated as an aggregation of income tax expenses of each
individual company. In order to calculate the taxable income of the consolidated entities
individually, the accounting profit is adjusted for temporary and permanent differences, recording
the corresponding deferred tax assets and liabilities. At each consolidated income statement date,
a current tax asset or liability is recorded, representing income taxes currently refundable or
payable. Deferred income taxes reflect the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial statement and income tax purposes, as
determined under enacted tax laws and rates.

128

Notes to the consolidated financial statements
31 December 2017

Income tax payable is the result of applying the applicable tax rate in force to each tax-paying
entity, in accordance with the tax laws in force in the country in which the entity is registered.
Additionally, tax deductions and credits are available to certain entities, primarily relating to inter-
company trades and tax treaties between various countries to prevent double taxation.

As of December 31, 2017, and 2016, the analysis of deferred tax assets and deferred tax liabilities
is as follows:

Year
ended
2017
$’000

Year
ended
2016
$’000

Net tax credits for operating losses carryforwards
Temporary differences derivatives financial instruments
Other temporary differences

71,219
93,719
198

102,804
99,930
157

Total deferred tax assets

165,136

202,891

Most of the net tax credits for operating losses carryforwards corresponds to Peru, Kaxu and solar
plants in Spain as of December 31, 2017.

The balance as of December 31, 2016 also included significant net deferred tax assets for Solana
and Mojave, which are now net deferred tax liabilities as of December 31, 2017, due to the
following:

-
In December 2017 a tax reform, the Tax Cuts and Jobs Act, was enacted in the U.S.,
consisting mainly in a decrease in the corporate tax rate from 35% to 21% effective 1st of
January 2018. The Company therefore adjusted the deferred tax assets and liabilities of its
U.S. entities using the new enacted corporate tax rate as of December 31, 2017, resulting in
a loss of $19 million recorded in the consolidated income statement for the year ended
December 31, 2017;

-
In addition, the U.S Internal Revenue Code (“IRC”) Section 382 establishes an annual
limitation on the use of U.S. Net Operating Losses (“NOLs”) as a result of an ownership
change. An “ownership change” would occur if the direct and indirect “5-percent
shareholders”, as defined under Section 382 of the IRC, collectively increased their ownership
in the Company by more than 50 percentage points over a rolling three-year period. The
Company experienced during 2017 an ownership change due to Abengoa´s restructuring and
changes in its shareholders´ base. As a result, the U.S. NOLs carryforwards generated through
the date of change are subject to an annual limitation under Section 382, which resulted in a

129

Notes to the consolidated financial statements
31 December 2017

derecognition of deferred tax assets previously recognized amounting to $96 million
corresponding to an amount of $387 million of NOLs and also taking into consideration the
newly enacted corporate tax rate of 21%. This loss has been recorded in the consolidated
income statement for the year ended December 31, 2017.

Temporary differences for derivatives financial instruments are mainly due to ACT ($18 million)
and solar plants in Spain ($69 million).

In relation to tax loss carryforwards and deductions pending to be used recorded as deferred tax
assets, the entities evaluate its recoverability projecting forecasted taxable income for the
upcoming years and taking into account their tax planning strategy. Deferred tax liabilities
reversals are also considered in these projections, as well as any limitation established by tax
regulations in force in each tax jurisdiction.

Year
ended
2017
$’000

Year
ended
2016
$’000

Temporary differences tax/book amortization
Other temporary differences tax/book value of contracted
concessional assets
Other temporary differences

113,432

28,810

66,247
6,904

61,818
4,409

Total deferred tax liabilities

186,583

95,037

As of December 31, 2017, temporary differences as a result of accelerated tax amortization resulted
in a net deferred tax liability position. These are primarily due to Solana and Mojave ($63 million)
and solar plants in Spain ($51 million). The increase is primarily due to an impact on the U.S. entities
as a result of the tax reform and U.S Internal Revenue Code Section 382 as previously described.

Other temporary differences tax/book value of contracted concessional assets, which resulted in a
net deferred tax liability position relates primarily to ACT in both periods.

130

Notes to the consolidated financial statements
31 December 2017

The movements in deferred tax assets and liabilities during the years ended December 31, 2017
and 2016 were as follows:

Deferred tax assets

As of January 1, 2016

191,314

Increase/decrease through the consolidated income statement 16,033

Increase/decrease through other consolidated comprehensive

income (equity)

Other movements

(5,701 )

1,245

As of December 31, 2016

202,891

Increase/decrease through the consolidated income statement (31,421 )

Increase/decrease through other consolidated comprehensive

income (equity)

Other movements

As of December 31, 2017

Deferred tax liabilities

As of January 1, 2016

(13,312 )

6,978

165,136

79,654

Increase/decrease through the consolidated income statement 16,681

Increase/decrease through other consolidated comprehensive

income (equity)

Other movements

(62 )

(1,236 )

As of December 31, 2016

95,037

Increase/decrease through the consolidated income statement 86,418

Increase/decrease through other consolidated comprehensive

income (equity)

Other movements

5,128

As of December 31, 2017

186,583

131

Notes to the consolidated financial statements
31 December 2017

Details for income tax for the years ended December 31, 2017 and 2016 are as follows:

Current tax

Deferred tax

relating to the origination and reversal of
temporary differences

relating to changes in tax rates

Year
ended
2017
$’000

Year
ended
2016
$’000

(1,998)

(1,018)

(117,839)

(648)

(98,508)

(648)

(19,331)

Total income tax benefit/(expense)

(119,837) (1,666)

The reconciliation between the theoretical income tax resulting from applying an average
statutory tax rate to income/(loss) before income tax and the actual income tax expense
recognized in the consolidated income statements for the years ended December 31, 2017 and
2016 are as follows:

132

Notes to the consolidated financial statements
31 December 2017

Year
ended
2017
$’000

Year
ended
2016
$’000

Profit before tax

14,950

3,333

Tax at the average statutory tax rate of 30% (2016: 30 %)

(4,485)

(1,000)

Tax effect of share of results of associates

Permanent differences

Incentives, deductions, and unrecognized
carryforwards
Change in corporate income tax

1,765

2,110

19,324

11,121

tax

losses

(20,994)

(11,110)

Effect of different tax rates of subsidiaries operating in other
jurisdictions
U.S Internal Revenue Code Section 382

(19,331)

3,304

(4,930)

(96,328)

Other non-taxable income/ (expense)

(3,092)

2,143

Tax charge for the year

(119,837)

(1,666)

Permanent differences in 2017 and 2016 are mainly due to ACT (Mexico).

The main implications derived from the Tax Cuts and Jobs Act in the U.S. entities are:

- A reduction of the Federal income tax rate from 35% to 21%, effective since January 1,
2018. This measure will imply a reduction of the tax burden of the Company. The effect on
the deferred tax assets and liabilities has resulted in a $19 million loss;

- A limitation of the deduction for net interest expense of all businesses in the U.S. The new
limitation is imposed on net interest expense that exceeds 30% of EBITDA from 2018 to
2021, and 30% of EBIT from 2022 onwards. Interests disallowed would be deducted in the
future in the event that those limits are not exceeded. After having considered the impacts
of Section 382 commented above, the Company does not expect significant negative
effects from this net interest expense limitation;

- NOLs arising in tax years beginning after 2017 would be limited to 80% of taxable income.
For new NOLs recognized after 2017, an indefinite carryforward would be allowed. The
limitation of 80% is not applicable for NOLs generated before 2018. For existing NOLs
before 2018, a carryforward of 20 years is still applicable. The new limitation does not
trigger adverse tax effects to the U.S. subsidiaries of the Company considering the amount

133

Notes to the consolidated financial statements
31 December 2017

of NOLs to be generated in upcoming years and the projected amount of taxable income
of these entities after having considered the impacts of Section 382;

- Base erosion anti-abuse tax (BEAT): The BEAT applies to certain U.S. corporations that make
relevant deductible payments to foreign affiliates. The excess of 10% of a corporation’s
taxable income increased by those payments to foreign related parties over its regular tax
liability, will be the base erosion tax due. BEAT provisions do not trigger adverse tax
consequences for the U.S. subsidiaries of the Company considering the amount of
payments made to foreign affiliates for management and support services;

- Potential tax erosion in the U.S.: The Company does not expect to have material adverse
tax consequences in the U.S. subsidiaries as a result of the measures previously described.

11. Dividends

Amounts recognised as distributions to equity holders in
the period:

(109,801)

(54,350)

Year

ended
2017
$’000

Year

ended
2016
$’000

The dividends indicated above primarily relate to the dividends declared by Atlantica Yield Plc.
to its shareholders. These have been declared as follows:

- On February 27, 2017, the Board of Directors declared a dividend of $0.25 per share
corresponding to the four quarter of 2016. The dividend was paid on March 15, 2017.
From that amount, the Company retained $10.4 million of the dividend attributable
to Abengoa;

- On May 15, 2017, the Board of Directors declared a dividend of $0.25 per share
corresponding to the first quarter of 2017. The dividend was paid on June 15, 2017;

- On August 3, 2017, the Board of Directors declared a dividend of $0.26 per share
corresponding to the second quarter of 2017. The dividend was paid on September
15, 2017;

- On November 13, 2017, the Board of Directors declared a dividend of $0.29 per share
corresponding to the third quarter of 2017. The dividend was paid on December 15,
2017.

134

Notes to the consolidated financial statements
31 December 2017

12. Contracted concessional assets

a) The following table shows the movements of contracted concessional assets included in

the heading “Contracted Concessional assets” for 2017:

Cost
At 1 January 2017
Additions
Subtractions
Translation differences

At 31 December 2017

Accumulated amortization losses
At 1 January 2017
Charge
Translation differences

At 31 December 2017

Carrying amount
At 1 January 2017

At 31 December 2017

2017
$’000

10,067,596
15,426
(42,500)
593,247

10,633,769

(1,143,324)
(309,846)
(96,329)

(1,549,499)

8,924,272

9,084,270

During 2017 contracted concessional assets increased primarily due to the effect of appreciation
of the Euro against the U.S. dollar for the year ended December 31, 2017 compared to the year
ended December 31, 2016, this effect has been partially compensated by “the amortization
charge for the year”.

The decrease fully relates to the indemnity received from Abengoa by Solana in December 2017
further to Abengoa´s obligation as EPC Contractor (see Note 26).

No losses from impairment of contracted concessional assets were recorded during the year
ended December 31, 2017.

The Company identified a triggering event of impairment for Solana as a result of the generation
of the plant having been lower than expected during 2017 related to an incident with electric
transformers which took place in July 2017. This project is within the Renewable energy sector

135

Notes to the consolidated financial statements
31 December 2017

and North America geography. The Company therefore performed an impairment test as of
December 31, 2017, which resulted in the recoverable amount (value in use) exceeding the
carrying amount of the asset by 6%. To determine the value in use of the asset, a specific discount
rate has been used in each year considering changes in the debt/equity leverage ratio over the
useful life of this project, resulting in the use of a range of discount rates between 4.7% and
5.0%.

An adverse change in the key assumptions which are individually used for the valuation would
not lead to future impairment recognition; neither in case of a 5% decrease in generation over
the entire remaining useful life (PPA) of the project nor in case of an increase of 50 basis points
in the discount rate.

b) The following table shows the movements of contracted concessional assets included in

the heading “Contracted Concessional assets” for 2016:

Cost
At 1 January 2016
Additions
Translation differences
Changes in scope of the consolidated financial statements
Reclassification and other movements

At 31 December 2016

Accumulated amortization losses
At 1 January 2016
Charge
Translation differences
Changes in scope of the consolidated financial statements

At 31 December 2016

Carrying amount
At 1 January 2016

At 31 December 2016

2016
$’000

10,126,023
6,346
(68,199)
5,876
(2,450)

10,067,596

(825,126)
(332,925)
17,108
(2,381)

(1,143,324)

9,300,897

8,924,272

During 2016 contracted concessional assets decreased primarily due to the amortization charge
for the year.

136

Notes to the consolidated financial statements
31 December 2017

Considering the low level of wind resources recorded since COD in Palmatir and Cadonal projects
and the uncertainty around such level in the future, the Company identified a triggering event
of impairment during the year 2016 in compliance with IAS 36, Impairment of Assets. As a result,
impairment tests have been performed resulting in the recording of an impairment loss of
$17,229 thousand and $3,101 thousand for the Cadonal and Palmatir projects, respectively, as
of December 31, 2016.

The impairment has been recorded within the line “Depreciation, amortization and impairment
charges” of the consolidated income statement, decreasing the amount of “Contracted
concessional assets” pertaining to the Renewable energy sector and South America geography.
The recoverable amount considered is the value in use and amounts to $91,795 thousand and
$123,912 thousand for Cadonal and Palmatir, respectively, as of December 31, 2016. A specific
discount rate has been used in each year considering changes in the debt/equity leverage ratio
over the useful life of this project, resulting in the use of a range of discount rates between 6.7%
and 7.0% for both projects.

An adverse change in the key assumptions which are individually used for the valuation could
lead to future impairment recognition; especially, a 5% decrease in generation over the entire
remaining useful life (PPA) of the project would generate an additional impairment of
approximately $5 million for Cadonal and $7 million for Palmatir. An increase of 50 basis points
in the discount rate would lead to an additional impairment of approximately $3 million for
Cadonal and $4 million for Palmatir.

In addition, the Company identified a triggering event of impairment for Solana as a result of
the generation of the plant having been lower than expected during its first years of operation.
This project pertains to the Renewable energy sector and North America geography. The
Company therefore performed an impairment test as of December 31, 2016, which resulted in
the recoverable amount (value in use) exceeding the carrying amount of the asset by 3%. To
determine the value in use of the asset, a specific discount rate has been used in each year
considering changes in the debt/equity leverage ratio over the useful life of this project, resulting
in the use of a range of discount rates between 4.1% and 5.1%.

An adverse change in the key assumptions which are individually used for the valuation could
lead to future impairment recognition; especially, a 5% decrease in generation over the entire
remaining useful life (PPA) of the project would generate an impairment of approximately $40
million. An increase of 50 basis points in the discount rate would lead to an impairment of
approximately $30 million.

137

Notes to the consolidated financial statements
31 December 2017

13. Investments carried under the equity method

The table below shows the breakdown and the movement of the investments held in associates
for 2017 and 2016:

Investments in associates

Initial balance

Share of profit/(loss)

Dividend distribution

Equity distribution

Currency translation differences

2017
$’000

55,009

5,351

(2,454)

(549)

(1,573)

2016
$’000

56,181

6,646

(3,954)

(3,099)

(765)

Final balance

55,784

55,009

Details of the Group's associates at the end of the reporting period are as follows:

Name of
associate

Principal
activity

Place of
incorporation
and principal place of
business

Proportion of ownership
interest / voting rights held
by the Group

31/12/2017

31/12/2016

Evacuación
Valdecaballero
s, S.L.
Myah
Bahr
Honaine, S.P.A.
Pectonex, R.F.
Proprietary
Limited
Evacuación
Villanueva del
Rey, S.L

Connection
Facilities

Caceres (Spain)

57.16%

Water plant

Dély Ibrahim (Algeria)

25.50%

Connection
Facilities

Pretoria (South Africa)

50.00%

Sevilla (Spain)

40.02%

All of the above associates are accounted for using the equity method in these consolidated
financial statements as set out in the group’s accounting policies in note 3.

There are no significant movement in the investments held in associates during the years 2017
and 2016.

138

Notes to the consolidated financial statements
31 December 2017

The tables below show a breakdown of stand-alone amounts of assets, revenues and profit and
loss as well as other information of interest for the years 2017 and 2016 for the associated
companies:

% Shares Non-

current
assets

Current
assets

Non-
current
liabilities

Current
liabilities

Revenue Operating

profit /
(loss)

Net profit
/ (loss)

Investment
under
equity
method

Evacuación Valdecaballeros,
S.L.

57.16

21,306

841

373

451

298

(708)

(730)

9,175

Myah Bahr Honaine, S.P.A. (*)

25.50

195,275

64,114

91,205

12,649

46,767

28,468

24,464

43,365

Pectonex, R.F. Proprietary
Limited

Evacuación Villanueva del
Rey, S.L

50.00

3,904

40.02

3,526

2,265

190

(206)

3,244

As of December 31, 2017

240,011

65,008

93,843

13,292

47,065

27,591

23,528

55,784

% Shares Non-

Current

Non-

Current

Revenue Operating Net

Investment

current

assets

current

liabilities

profit/

under the

assets

liabilities

(loss)

equity

method

Evacuación Valdecaballeros, S.L.

57.16

19,283

931

306

532

537

(545)

(565)

9,528

Myah Bahr Honaine, S.P.A. (*)

25.50

202,150

67,120

104,704

14,158

52,770

34,247

29,990

42,056

Pectonex,
Limited

R.F.

Proprietary

50.00

3,730

(187)

3,425

Evacuación Villanueva del Rey,
S.L

40.02

3,251

2,118

142

As of December 31, 2016

228,684

68,068

107,128

14,833

53,307

33,546

29,238

55,009

The Company has no control over Evacuación Valdecaballeros, S.L. as all relevant decisions of
this company require the approval of a minimum of shareholders accounting for more than
75% of the shares.

None of the associated companies referred to above is a listed company.

(*) Myah Bahr Honaine, S.P.A., the project entity, is 51% owned by Geida Tlemcen, S.L. which
is accounted for using the equity method in these consolidated financial statements. Share
of profit of Myah Bahr Honaine S.P.A. included in these consolidated financial statements
amounts to $6,238 thousand in 2017 and $7,647 thousand in 2016.

139

Notes to the consolidated financial statements
31 December 2017

14. Trade and other receivables

Trade and other receivables as of December 31, 2017 and 2016, consist of the following:

Trade receivables

Tax receivables

Prepayments

Other accounts receivable

Total

Balance as of
December
31, 2017
$’000

Balance as of
December
31, 2016
$’000

186,728

39,607

6,375

11,739

244,449

151,199

29,705

10,261

16,456

207,621

As of December 31, 2017, and December 31, 2016, the fair value of clients and other accounts
receivable does not differ significantly from its carrying value.

The Group has not provided for these debtors as there are all considered to be fully recoverable.

Trade receivables in foreign currency as of December 31, 2017 and 2016, are as follows:

Euro

Rand

Other

Total

Balance as of
December
31, 2017
$’000

Balance as of
December
31, 2016
$’000

109,165

23,792

7,363

140,320

98,798

12,807

7,151

118,756

The following table shows the maturity of Trade receivables as of December 31, 2017 and 2016:

Up to 3 months

Total

Balance as of
December
31, 2017
$’000

Balance as of
December
31, 2016
$’000

186,728

151,199

140

Notes to the consolidated financial statements
31 December 2017

15. Cash and cash equivalents

The following table shows the detail of cash and cash equivalents as of December 31, 2017 and
2016:

2017
$’000

2016
$’000

Cash and cash equivalents

669,387

594,811

669,387

594,811

Cash includes funds held to satisfy the customary requirements of certain non-recourse debt
agreements within the Company´s projects amounting to $263 million.

The following breakdown shows the main currencies in which cash and cash equivalent balances
are denominated:

US Dollar

Euro

Algerian Dinar

South African Rand

Others

2017
$’000

2016
$’000

319,400

343,954

288,625

196,382

13,628

40,999

6,735

10,736

39,689

4,050

669,387

594,811

141

Notes to the consolidated financial statements
31 December 2017

16. Corporate debt

The breakdown of the corporate debt as of December 31, 2017 and 2016 is as follows:

Non-current

Balance as
of
December
31, 2017
$’000

Balance as

of
December
31, 2016
$’000

Credit Facilities with financial entities

Notes and Bonds

320,783

253,393

123,804

252,536

Total Non-current

574,176

376,340

Current

Balance as
of
December
31, 2017
$’000

Balance as
of
December
31, 2016
$’000

Credit Facilities with financial entities
Notes and Bonds

65,833
3,074

289,035
2,826

Total Current

68,907

291,861

On November 17, 2014, the Company issued the Senior Notes due in 2019 in an aggregate
principal amount of $255,000 thousand (the “2019 Notes”). The 2019 Notes accrue annual
interest of 7.00% payable semi-annually beginning on May 15, 2015 until their maturity date of
November 15, 2019.

On December 3, 2014, the Company entered into a credit facility of up to $125,000 thousand
with 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 (the “Credit Facility
Tranche A”). On December 22, 2014, the Company drew down $125,000 thousand under the
Credit Facility Tranche A. Loans accrue interest at a rate per annum equal to: (A) for Eurodollar
rate loans, LIBOR plus 2.75% and (B) for base rate loans, the highest of (i) the rate per annum
equal to the weighted average of the rates on overnight U.S. Federal funds transactions with
members of the U.S. Federal Reserve System arranged by U.S. Federal funds brokers on such day
plus 1/2 of 1.00%, (ii) the U.S. prime rate and (iii) LIBOR plus 1.00%, in any case, plus 1.75%. The
interest rate on the Credit Facility Tranche A is fully hedged by an interest rate swap contracted
with HSBC Bank with maturity date December 24, 2018, resulting in the Company paying a net
fixed interest rate of 4.7%. Loans under the Credit Facility Tranche A will mature in December

142

Notes to the consolidated financial statements
31 December 2017

2018. Loans prepaid by the Company may be reborrowed. The Credit Facility Tranche A is
secured by pledges of the shares of the guarantors which the Company owns.

$8 million of the loans under the Credit Facility Tranche A were partially repaid on September
25, 2017 and for $63 million on December 27, 2017. As of December 31, 2017, the remaining
$54 million of nominal of the Tranche A has been classified as Current (Non-Current as of
December 31,2016), as its maturity is in December 2018.

On June 26, 2015, the Company increased its existing $125 million Credit Facility with a revolver
tranche B for an amount of $290,000 thousand (the “Credit Facility Tranche B”). On September
9, 2015, Credit Facility Tranche B was fully drawn down and the proceeds were used for the
acquisition of Solaben 1/6. Loans under the Tranche B Credit Facility accrue interest at a rate per
annum equal to: (A) for Eurodollar rate loans, LIBOR plus 2.50% and (B) for base rate loans, the
highest of (i) the rate per annum equal to the weighted average of the rates on overnight U.S.
Federal funds transactions with members of the U.S. Federal Reserve System arranged by U.S.
Federal funds brokers on such day plus 1/2 of 1.00%, (ii) the U.S. prime rate and (iii) LIBOR plus
1.00%, in any case, plus 1.50%. Tranche B of the Credit Facility was signed for a total amount of
$290,000 thousand with Bank of America, N.A., as global coordinator and documentation agent
and Barclays Bank plc and UBS AG, London Branch as joint lead arrangers and joint bookrunners.
The Credit Facility Tranche B was classified as Current for $288,317 thousand as of December 31,
2016 (Non-Current as of December 31,2015) as it matured in December 2017. Loans under the
Credit Facility Tranche B were fully repaid and cancelled on February 28, 2017.

On February 10, 2017, the Company issued Senior Notes due 2022, 2023, 2024 (the “Note
Issuance Facility”), in an aggregate principal amount of €275,000 thousand. The 2022 to 2024
Notes accrue annual interest, equal to the sum of (i) EURIBOR plus (ii) 4.90%, as determined by
the Agent. Interest on the Notes will be payable in cash quarterly in arrears on each interest
payment date. The Company will make each interest payment to the holders of record on each
interest payment date. The interest rate on the Note Issuance Facility is fully hedged by two
interest rate swaps contracted with Jefferies Financial Services, Inc. with effective date March 31,
2017 and maturity date December 31, 2022, resulting in the Company paying a net fixed interest
rate of 5.5% on the Note Issuance Facility. Changes in fair value of these interest rate swaps have
been recorded in the consolidated income statement. The Note Issuance Facility is a €
denominated liability for which the Company applies net investment hedge accounting. When
converted to US$ at US$/€ closing exchange rate, it contributes to reduce the impact in
translation difference reserves generated in the equity of these consolidated financial statements
by the conversion of the net assets of the Spanish solar assets into US$.

On July 20, 2017, the Company signed a credit facility (the “Credit Facility 2017”) for up to €10
million, approximately $11.9 million, which is available in euros or US dollars. Amounts drawn
accrue interest at a rate per year equal to EURIBOR plus 2.25% or LIBOR plus 2.25%, depending
on the currency. The credit facility has a maturity date of July 20, 2018. As of December 31, 2017,
the Company drew down the credit facility in full and used the entire proceeds to prepay a part
of the Tranche A of the Credit Facility.

143

Notes to the consolidated financial statements
31 December 2017

Current corporate debt corresponds to the accrued interest on the Notes, to the outstanding
amount of the Tranche A and to the amount of the Credit Facility obtained in July 2017.

The repayment schedule for the Corporate debt at the end of 2017 is as follows:

2018

2019

2020 2021

2022

Credit Facility Tranche A
Note Issuance Facility
Credit Facility 2017
2019 Notes
Total

53,778
107
11,948
3,074
68,907

— —
— —
— —
—
—

253,393
253,393

—
—
—
—
—

—
107,316
—
—
107,316

Subsequent
years

—
213,467
—
—
213,467

Total

53,778
320,890
11,948
256,467
643,083

The following table details the movement in Corporate debt for the year 2017, split between
cash and non-cash items:

January 1, 2017 Cash Flow Non- cash changes December 31, 2017
643,083

(68,372)

668,201

43,254

Corporate debt

17. Project debt

The main purpose of the Company is the long-term ownership and management of contracted
concessional assets, such as renewable energy, efficient natural gas and electric transmission line
assets, which are financed through project debt. This note shows the project debt linked to the
contracted concessional assets included in note 12 of these consolidated financial statements.

Project debt is generally used to finance contracted assets, exclusively using as guarantee the
assets and cash flows of the company or group of companies carrying out the activities financed.
In most of the cases, the assets and/or contracts are set up as guarantee to ensure the repayment
of the related financing.

Compared with corporate debt, project debt has certain key advantages, including greater
leverage period permitted and a longer tenor.

The variations for 2017 and 2016 of project debt have been the following:

144

Notes to the consolidated financial statements
31 December 2017

Project debt -
long term
$’000

Project debt -
short term
$’000

Total
$’000

Balance as of December 31, 2016

Increases

Decreases

Currency translation differences

Reclassifications

4,629,184

52,027

(42,560)

316,646

273,620

Balance as of December 31, 2017

5,228,917

701,283

304,707

(509,131)

23,052

(273,620)

246,291

5,330,467

356,734

(551,691)

339,698

5,475,208

Project debt -
long term
$’000

Project debt -
short term
$’000

Total
$’000

Balance as of December 31, 2015

3,574,464

1,896,205

5,470,669

Increases

Repayments

36,842

329,434

366,276

(480,969)

Currency translation differences

(64,426)

38,917

(25,509)

Reclassifications

1,082,304

(1,082,304)

Balance as of December 31, 2016

4,629,184

701,283

5,330,467

The line “Increases” includes primarily accrued interest for the year.

Main variations in Project debt during the year 2017 are the result of:

Net decrease primarily due to repayment of debt, considering that interest accrued are
offset by a similar amount of interests paid during the year. Decrease in long-term debt
primarily relates to the partial repayment of Solana debt using the indemnity received
from Abengoa in December 2017 for Usd 42.5 million (see Note 26);

A reclassification of the entire debt of Kaxu and Cadonal projects from short term to long
term during the year 2017 as a result of the waiver obtained for Kaxu in March 2017 and
the completion of certain pending conditions for Cadonal in October 2017.

145

Notes to the consolidated financial statements
31 December 2017

The repayment schedule for Project debt in accordance with the financing arrangements, at
the end of 2017 is as follows and is consistent with the projected cash flows of the related
projects.

2018

2019

2020

2021

2022

Interest
Repayment

Nominal
repayment

Subsequent
years

Total

21,612

224,679

246,471

265,002

280,303

313,559

4,123,582

5,475,208

In 2017, the Company did not enter into any new project debt.

The following table details the movement in Project debt for the year 2017, split between cash
and non-cash items:

Project debt

January 1, 2017 Cash Flow
(248,472)

5,330,467

Non-cash changes December 31, 2017
5,475,208

393,212

Current and non-current loans with credit entities include amounts in foreign currencies for a
total of $2,778,043 thousand as of December 31, 2017 ($2,564,291 thousand as of December
31, 2016).

18.

Grants and other liabilities

Grants
Other liabilities

Balances as of
December 31,
2017

Balances as of
December 31,
2016

$’000

1,225,877
410,183

1,297,755
314,290

Grant and other non-current liabilities

1,636,060

1,612,045

As of December 31, 2017, the amount recorded in Grants corresponds primarily to the ITC Grant
awarded by the U.S. Department of the Treasury to Solana and Mojave for a total amount of
$771 million ($803 million as of December 31, 2016), which was primarily used to fully repay the
Solana and Mojave short-term tranche of the loan with the Federal Financing Bank. The amount
recorded in Grants as a liability is progressively released as other income over the useful life of
the asset.

146

Notes to the consolidated financial statements
31 December 2017

The remaining balance of the “Grants” account corresponds to loans with interest rates below
market rates for Solana and Mojave for a total amount of $452 million ($492 million as of
December 31, 2016). Loans with the Federal Financing Bank guaranteed by the Department of
Energy for these projects bear interest at a rate below market rates for these types of projects
and terms. The difference between proceeds received from these loans and its fair value, is
initially recorded as “Grants” in the consolidated statement of financial position, and
subsequently recorded in “Other operating income” starting at the entry into operation of the
plants. Total amount of income for these two types of grants for Solana and Mojave is $59.8
million and $57.0 million for the year ended December 31, 2017 and 2016, respectively.

Other liabilities mainly relate to the investment from Liberty Interactive Corporation (‘Liberty’)
made on October 2, 2013 for an amount of $300 million. The investment was made in class A
shares of Arizona Solar Holding, the holding of Solana Solar plant in the United States. Such
investment was made in a tax equity partnership which permits the partners to have certain tax
benefits such as accelerated depreciation and ITC.

According to the stipulations of IAS 32 and although the investment of Liberty is in shares, it
does not qualify as equity and has been classified as a liability as of December 31, 2017 and
2016. The liability is recorded in Grants and other liabilities for a total amount of $352 million
($263 million as of December 31, 2016) and its current portion is recorded in other current
liabilities for the remaining amount (see Note 19). This liability has been initially valued at fair
value, calculated as the present value of expected cash-flows during the useful life of the
concession, and is then measured at amortized cost in accordance with the effective interest
method, considering the most updated expected future cash-flows.

19. Trade and other payables

Item

Trade accounts payable
Down payments from clients
Suppliers of
current
Liberty (see Note 18)
Other accounts payable

concessional assets

Total

Balance as of December 31,
2017

Balance as of December 31,
2016

$’000

107,662
6,466
236

-
40,780

155,144

121,527
6,153
380

21,461
10,984

160,505

Trade accounts payables mainly relate to the operating and maintenance of the plants.

147

Notes to the consolidated financial statements
31 December 2017

Nominal values of Trade payable and other current liabilities are considered to approximately
equal to fair values and the effect of discounting them is not significant.

Other account payable primarily include subordinated debt of Mojave with Abener Teyma
Mojave General Partnership (Abener), a related party, with maturity date on October 2018. The
repayment will occur if certain technical conditions are fulfilled.

20. Equity

On June 18, 2014, Atlantica Yield closed its initial public offering issuing 24,850,000 ordinary
shares. The shares were sold at a price of $29 per share and as a result the Company raised
$720,650 thousand of gross proceeds. The Company recorded $2,485 thousand as Share Capital
and $682,810 thousand as Additional Paid in Capital, included in Atlantica Yield reserves as of
December 31, 2016, corresponding to the total net proceeds of the offering. The underwriters
further purchased 3,727,500 additional shares from the selling shareholder, a subsidiary wholly
owned by Abengoa, at the public offering price less fees and commissions to cover over-
allotments (“greenshoe”) driving the total proceeds of the offering to $828,748 thousand.

Atlantica Yield’s shares began trading on the NASDAQ Global Select Market under the symbol
“ABY” on June 13, 2014. The symbol changed to “AY” on November 11, 2017.

On January 22, 2015, Abengoa closed an underwritten public offering and sale in the United States
of 10,580,000 of ordinary shares of the Company for total proceeds of $327,980,000 (or $31 per
share). As a result of such offering, Abengoa reduced its stake in the Company from 64.3% to
51.1% of its shares.

On May 14, 2015 Atlantica Yield issued 20,217,260 new shares at $33.14 per share, which was
based on a 3% discount versus the May 7, 2015 closing price. Abengoa subscribed for 51% of the
newly-issued shares and maintained its previous stake in Atlantica Yield.

On July 14, 2015, Abengoa sold 2,000,000 shares of Atlantica Yield under Rule 144, reducing its
stake to 49.1%.

As of the date hereof, according to Abengoa´s beneficial ownership reporting, Abengoa has
delivered an aggregate of 7,595,639 Ordinary Shares to holders that exercised their option to
exchange the $279,000 thousand principal amount of exchangeable notes due 2017 issued by
Abengoa on March 5, 2015 (the “Exchangeable Notes”) for shares of Atlantica Yield. The
Exchangeable Notes are exchangeable, at the option of their holders, for ordinary shares of
Atlantica Yield. These operations reduced Abengoa´s stake to 41.47% as of December 31, 2017.

As of December 31, 2017, the share capital of the Company amounts to $10,021,726 represented
by 100,217,260 ordinary shares completely subscribed and disbursed with a nominal value of
$0.10 each, all in the same class and series. Each share grants one voting right.

Atlantica Yield reserves as of December 31, 2017 are made up of share premium account and
distributable reserves.

Retained earnings include results attributable to Atlantica Yield, the impact of the Asset Transfer
in equity and the impact of the assets acquisition under the ROFO agreement in equity. The Asset

148

Notes to the consolidated financial statements
31 December 2017

Transfer and the acquisitions under the ROFO agreement were recorded in accordance with the
Predecessor accounting principle, given that all these transactions occurred before December
2015, when Abengoa still had control over Atlantica Yield.

Other reserves relate to the after-tax result accumulated in equity in connection with derivatives
designated as cash flow hedges.

Non-controlling interests fully relate to interests held by JGC in Solacor 1 and Solacor 2, by Idae
in Seville PV, by Itochu Corporation in Solaben 2 and Solaben 3, by Algerian Energy Company,
SPA and Valoriza Agua S.L. in Skikda and by Industrial Development Corporation of South Africa
(IDC) and Kaxu Community Trust in Kaxu Solar One (Pty) Ltd.

Dividends declared during the year 2017:

-
On February 27, 2017, the Board of Directors declared a dividend of $0.25 per share
corresponding to the four quarter of 2016. The dividend was paid on March 15, 2017. From
that amount, the Company retained $10.4 million of the dividend attributable to Abengoa;

On May 15, 2017, the Board of Directors declared a dividend of $0.25 per share

-
corresponding to the first quarter of 2017. The dividend was paid on June 15, 2017;

On August 3, 2017, the Board of Directors declared a dividend of $0.26 per share
-
corresponding to the second quarter of 2017. The dividend was paid on September 15,
2017;

On November 13, 2017, the Board of Directors declared a dividend of $0.29 per share
-
corresponding to the third quarter of 2017. The dividend was paid on December 15, 2017.

In addition, as of December 31, 2017, there was no treasury stock and there have been no
transactions with treasury stock during the period then ended.

21. Notes to the cash flow statement

Analysis of changes in net debt

January 1, 2017
$’000

Cash Flow
$’000

Non monetary
items
$’000

December 31,
2017
$’000

Cash and bank balances

594,811

40,664

33,912

669,387

Borrowings

5,998,668

(316,844)

436,467

6,118,291

Net debt

5,403,857

(357,508)

402,555

5,448,904

149

Notes to the consolidated financial statements
31 December 2017

22. Financial instruments by category

Financial instruments are primarily deposits, derivatives, trade and other receivables and loans.
Financial instruments by category (current and non-current), reconciled with the statement of
financial position as of December 31, 2017 and 2016 are as follows: