Atlantica Sustainable Infrastructure Annual Report 2019

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FY2019 Annual Report · Atlantica Sustainable Infrastructure

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Consolidated Annual Report
and Financial Statements

FOR THE YEAR ENDED DECEMBER 31, 2019

Company Registration nº 08818211

Atlantica Yield plc

Atlantica Yield plc Consolidated Annual Report
and Financial Statements

Contents
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 Financial Statement
Company Financial Statements

Page
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217

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:

(cid:131) Nature of the business.

(cid:131) Business model, strategy and objectives.

(cid:131) Fair review of the business.

(cid:131) Key performance indicators.

(cid:131) Principal risks and uncertainties.

(cid:131) Environment, Social and Governance.

(cid:131) Section 172 statement.

(cid:131) Going concern basis.

Nature of the business

Atlantica Yield plc (hereinafter “we”, “our”, the “Company” or “Atlantica”), a Company registered in
England and Wales and incorporated in the United Kingdom, is a sustainable infrastructure
company that owns and manages renewable energy, efficient natural gas power, transmission and
transportation infrastructures and water assets. We currently have operating facilities in North
America (United States, Mexico and Canada), South America (Peru, Chile and Uruguay) and EMEA
(Spain, Algeria and South Africa). The Company intends to expand its portfolio, maintaining North
America, South America and Europe as our core geographies.

As of December 31, 2019, we own or have an interest in a portfolio of high-quality and diversified
assets in terms of type of asset, technology and geographic footprint. Our portfolio consists of 25
assets with 1,496 MW of aggregate renewable energy installed generation capacity, 343 MW of
efficient natural gas-fired power generation capacity, 10.5 M ft3 per day of water desalination and
1,166 miles of electric transmission lines.

All of our assets have contracted revenues (regulated revenues in the case of our Spanish assets
and Chile TL3) and are underpinned by long-term contracts. As of December 31, 2019, our assets
had a weighted average remaining contract life of approximately 18 years. Most of the assets we
own or in which we have an interest have project-finance agreements in place.

We intend to take advantage of, and leverage our growth strategy on, favorable trends in the clean
power generation, transmission and transportation infrastructures and water sectors globally,
including energy scarcity and the focus on the reduction of carbon emissions. Our portfolio of
operating assets and our strategy focus on sustainable technology including renewable energy,
efficient natural gas, water infrastructure, and transmission networks as enablers of a sustainable
power generation mix. Renewable energy is expected to represent in most markets the majority of
new investments in the power sector in most markets, according to Bloomberg New Energy Finance
2019. Approximately 50% of the world’s power generation by 2050 is expected to come from
renewable sources, which indicates that renewable energy is becoming mainstream. Global
installed capacity is expected to shift from 57% fossil fuels today to approximately two-thirds
renewables by 2050. A 12-terawatt expansion of generating capacity is estimated to require
approximately $13.3 trillion of new investment between now and 2050 – of which approximately
77% is expected to go to renewables. Another approximately $843 billion of investment goes to
batteries along with an estimated $11.4 trillion expected to go to transmission and distribution
during that period. We believe regions will need to complement investments in renewable energy
with investments in efficient natural gas, in transmission networks and in storage. We believe that
we are well positioned to benefit from the expected transition towards a more sustainable power
generation mix. In addition, we believe that water is going to be the next frontier in a transition
towards a more sustainable world. New sources of water are needed worldwide and water
desalination and water transportation infrastructure should help make that possible. We currently
participate in two water desalination plants with a 10 million cubic feet capacity and we have
reached an agreement to acquire a third.

We are focused on high-quality and long-life facilities as well as long-term agreements that we
expect will produce stable, long-term cash flows. We intend to grow our cash available for
distribution and our dividend to shareholders through organic growth and by acquiring new assets
and/or businesses where revenues may not be fully contracted.

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

2019 acquisitions

In January 2019, we entered into an agreement with Abengoa under the Abengoa Right of First
Offer Agreement (“ROFO Agreement”) for the acquisition of Befesa Agua Tenes, a holding company
which owns a 51% stake in Tenes, a water desalination plant in Algeria that is similar in several
aspects to our Skikda and Honaine plants. The price agreed for the equity value was $24.5 million,
of which $19.9 million was paid in January 2019 as an advanced payment. Closing of the acquisition
was subject to conditions precedent, including approval by the Algerian administration. The
conditions precedent set forth in the share purchase agreement were not fulfilled as of September
30, 2019. Therefore, in accordance with the terms of the share purchase agreement the advanced

payment has been converted into a secured loan to be reimbursed by Befesa Agua Tenes, together
with 12% per annum interest, through a full cash-sweep of all the dividends generated to be
received from the asset. The share purchase agreement requires that the repayment occurs no later
than September 30, 2031. In October 2019, we received a first payment in the amount of $7.8
million through the cash sweep mechanism.

In April 2019, we entered into an agreement to acquire a 30% stake in Monterrey, a 142 MW gas-
fired engine facility including 130 MW installed capacity and 12 MW battery capacity. The
acquisition closed on August 2, 2019 and we paid $42 million for the total equity investment. The
asset, located in Mexico, has been in operation since 2018 and represents our first investment in
electric batteries. It has a U.S. dollar-denominated 20-year PPA with two international large
corporations engaged in the car manufacturing industry as well as a 20-year contract for the natural
gas transportation from Texas with a U.S. energy company. The PPA also includes price escalation
factors. The asset is the sole electricity supplier for the off-takers, it has no commodity risk and also
has the possibility to sell excess energy to the North-East region of the country once the plant is
connected to the grid. We have also entered into a ROFO agreement with the seller of the shares
for the remaining 70% stake in the asset.

On May 24, 2019, Atlantica and Algonquin formed AYES Canada, a vehicle to channel co-
investment opportunities in which Atlantica holds the majority of voting rights. AYES Canada’s first
investment was in Amherst Island, a 75 MW wind plant in Canada owned by the project company
Windlectric, Inc. (“Windlectric”). Atlantica invested $4.9 million and Algonquin invested $92.3
million, both through AYES Canada, which in turn invested those funds in Amherst Island
Partnership, the holding company of Windlectric. Since Atlantica has control over AYES Canada
under IFRS 10 “Consolidated Financial Statements”, its consolidated financial statements initially
showed a total investment in the Amherst Island project of $97.2 million, accounted for as
“Investments carried under the equity method” (see Note 13 to the Consolidated Financial
Statements) and Algonquin’s portion of that investment of $92.3 million as “Non-controlling
interest”. In addition, and under certain circumstances considered remote by both companies,
Atlantica and Algonquin have options to convert shares of AYES Canada currently owned by
Algonquin into Atlantica ordinary shares in exchange for a higher stake in the plant, subject to the
provisions of the standstill and enhanced collaboration agreements with Algonquin.

On May 31, 2019, we entered into an agreement with Abengoa to acquire a 15% stake in Rioglass,
a multinational manufacturer of solar components in order to secure certain Abengoa obligations.
The investment was $7 million, and it is classified as available for sale and is expected to generate
interest income for us once divested.

On August 2, 2019, we closed the acquisition of ASI Operations, the company that performs the
operation and maintenance services to Solana and Mojave plants. The consideration paid was $6
million. Additionally, we have internalized part of the operation and maintenance activities
contracted in two wind assets, maintaining a direct relationship with the supplier for the turbine
maintenance services.

On October 2, 2019, we closed the acquisition of ATN Expansion 2, as previously announced, for a
total equity investment of approximately $20 million. The offtaker is Enel Green Power Peru.
Transfer of the concession agreement is pending authorization from the Ministry of Energy in Peru.

If this authorization were not to be obtained within an eight-month period, the transaction would
be reversed with no penalties to Atlantica.

Chapter 11 by PG&E, the off-taker of our Mojave plant

On January 29, 2019, PG&E, the off-taker for Atlantica Yield with respect to the Mojave plant, filed
for reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of California (the “Bankruptcy Court”). As a consequence, PG&E did not pay the
portion of the invoice corresponding to the electricity delivered for the period between January 1
and January 28, 2019, which was due on February 25, given that the services relate to the pre-
petition period and any payment therefore would require approval by the Bankruptcy Court.
However, Mojave Solar filed a 503(b)(9) claim for the portion of energy delivered 20 days prior to
the PG&E filing, which was approved by an order of the Bankruptcy Court on August 15, 2019.
Mojave Solar filed a general unsecured claim on October 17, 2019 for the remaining outstanding
balance of energy. Further, PG&E has paid all invoices due to Atlantica Yield corresponding to the
electricity delivered after January 28. Due to the PG&E Chapter 11 filings, a default of the PPA
agreement with PG&E occurred. Since PG&E failed to assume the PPA within 180 days from the
commencement of PG&E’s Chapter 11 proceeding, a technical event of default was triggered under
our Mojave project finance agreement in July 2019. Although we do not expect the acceleration of
debt to be declared by the DOE, the project debt agreement does not have what International
Accounting Standards define as an unconditional right to defer the settlement of the debt for at
least twelve months, as the event of default provision make that right not totally unconditional,
and therefore the debt has been presented as current in our financial statements. As of December
31, 2019, Mojave had $707 million outstanding under its project financing agreement with the
Federal Financing Bank, with a guarantee from the DOE (US Department of Energy). Additionally,
Mojave represented approximately 13.5% of 2018 project level cash available for distribution.
Chapter 11 bankruptcy is a complex process and we do not know at this time whether PG&E will
seek to reject the PPA or not. However, PG&E has continued to be in compliance with the
remaining terms and conditions of the PPA, including with all payment terms of the PPA up through
the date hereof with the exception of services for prepetition services that became due and payable
after the chapter 11 filing date. It remains possible that at any time during the chapter 11
proceeding, PG&E may decide to cease performing under the PPA and attempt to reject or
renegotiate the terms of its contract with us. If PG&E rejected the contract and stopped making
payments in accordance with the PPA, Mojave could fail in servicing its debt under its project
finance agreement, which would also cause a default under the project finance agreement. If not
cured or waived, an event of default in the project finance agreement could result in debt
acceleration and, if such amounts were not timely paid, the DOE could decide to foreclose on the
asset. Further, it is possible that the current timetable for confirmation could be delayed due to
various matters relating to the treatment of claims, including claims that may arise during the
Chapter 11 case. The PG&E bankruptcy has heightened the risk that project level cash distributions
could be restricted for an undetermined period of time, thereby impacting our corporate liquidity
and corporate leverage. Mojave project cash distributions to the corporate level normally take place
at the end of the year. The last distribution received at the corporate level took place in December
2018. Unless the technical event or default is cured or waived, distributions may not be made during
the pendency of the bankruptcy. Such events may have a material adverse effect on our business,
financial condition, results of operations and cash flows.

On January 29, 2020, one year following its chapter 11 bankruptcy filing, PG&E announced that the
majority of stakeholders were supportive of PG&E's proposed plan of reorganization and a
schedule to confirm the plan by May 27, 2020 was filed with the Bankruptcy Court. PG&E's
proposed plan is contingent upon having access to a California state-run wildfire fund, with such
access contingent on several factors including approval from the California governor.

Although Atlantica did not receive any distribution from Mojave in 2019, we have compensated
these distributions through two measures:

(1) On April 30, 2019, we entered into the Note Issuance Facility 2019, a senior unsecured
financing with Lucid Agency Services Limited, as agent, and a group of funds managed by
Westbourne Capital as purchasers of the notes issued thereunder for a total amount of the
euro equivalent of $300 million. The proceeds were used to prepay and subsequently cancel
in full the 2019 Notes1 and for general corporate purposes. The Note Issuance Facility 2019
provides that we may elect to, subject to the satisfaction of certain conditions, capitalize
interest on the notes issued thereunder for a period of up to two years from closing at our
discretion, subject to certain conditions. We elected to capitalize interest on the notes issued
under the Note Issuance Facility 2019 for the upcoming quarters

(2)

In June 2019, we signed our first ESG-linked financial guarantee line with ING Bank, N.V. The
guarantee line has a limit of approximately $39 million. The cost is linked to Atlantica’s
environmental, social and governance performance under Sustainalytics, a leading
sustainable rating agency. The green guarantees will be exclusively used for renewable assets.
We are using and expect to continue use this guarantee line to progressively release
restricted cash in some of our projects, providing additional financial flexibility.

Agreement with Algonquin

On May 9, 2019, Algonquin, Abengoa-Algonquin Global Energy Solutions (“AAGES”) and Atlantica
entered into the Enhanced Cooperation Agreement, and Algonquin and Atlantica entered into a
subscription agreement pursuant to which, among other things, Atlantica agreed to permit
Algonquin to acquire, and Algonquin agreed to purchase, a 1.4% stake in Atlantica. Algonquin
completed this on May 22, 2019. On May 31, 2019, AAGES (AY Holdings) B.V. entered into an
accelerated share purchase transaction with Morgan Stanley & Co. LLC, pursuant to which AAGES
acquired 2,000,000 ordinary shares, bringing its total equity interest in Atlantica up to 44.2%. Under
this agreement, we agreed with Algonquin to analyze jointly during the next six months
Algonquin’s contracted assets portfolio in the U.S. and Canada to identify assets where a drop
down could add value for both parties, according to each company’s key metrics. This process is
taking longer than initially expected and we cannot guarantee that it will result in investments.
Furthermore, the Shareholders Agreement has been amended to allow Algonquin to increase its
shareholding in Atlantica up to a 48.5% without any change in corporate governance. Algonquin’s
voting rights and rights to appoint directors are limited to a 41.5% and the difference between
Algonquin’s ownership and 41.5% will vote replicating non-Algonquin’s shareholders vote.

1 On November 17, 2014, we issued the 2019 Notes in an aggregate principal amount of $255 million with an original
maturity date of November 15, 2019. On May 31, 2019 we prepaid the 2019 Notes before maturity in accordance with
the terms thereof with the proceeds of the notes issued under the Note Issuance Facility 2019.

On November 1, 2017, Algonquin agreed to acquire 25.0% of our shares from Abengoa and upon
completion of this acquisition, became our largest shareholder. In addition, Algonquin and
Abengoa created a joint venture, Abengoa-Algonquin Global Energy Solutions or “AAGES”, to
jointly invest in the development and construction of clean energy and water infrastructure
contracted assets. On March 5, 2018 we entered into a ROFO agreement with AAGES, which
provides us with a right of first offer on any proposed sale, transfer or other disposition of AAGES
ROFO Assets. In addition, we entered into a ROFO agreement with Algonquin covering certain of
their non-U.S. and non-Canadian assets. Additionally, on November 27, 2018, Algonquin acquired
from Abengoa the remaining 16.5% of our shares previously held by Abengoa and in 2019,
Algonquin progressively increased its stake in our shares up to 44.2%.

Abengoa S.A. (“Abengoa”) was until 2018 our largest shareholder and is currently our largest
supplier. Abengoa has been undergoing a debt restructuring process. In addition, Abengoa was
the engineering, procurement and construction (“EPC”) supplier in most of our assets and
maintains certain obligations with some of our assets under those EPC agreements.

Financing Agreements

On April 30, 2019, we entered into the Note Issuance Facility 2019, a senior unsecured financing
with Lucid Agency Services Limited, as agent, and a group of funds managed by Westbourne
Capital as purchasers of the notes issued thereunder for a total amount of the euro equivalent of
$300 million. The notes under the Note Issuance Facility 2019 were issued in May 2019 and are due
on April 30, 2025. The Note Issuance Facility 2019 includes an upfront fee of 2% paid upon
drawdown. From their issue date to December 31, 2019 interest on the notes issued under the Note
Issuance Facility 2019 accrued at a rate per annum equal to the sum of 3-month EURIBOR plus a
margin of 4.65%. The principal amount of the notes issued under the Note Issuance Facility 2019
was hedged with an interest rate swap, resulting in an all-in interest cost of 4.4%. Starting January
1, 2020, the applicable margin for the determination of interest on the notes issued under the Note
Issuance Facility 2019 decreased to 4.50% resulting in an all-in interest cost of 4.24, following
satisfaction of the requirements set forth in the Note Issuance Facility 2019 for such margin
decrease, including the effectiveness of the Spanish Royal Decree-law 17/2019 which approved a
reasonable rate of return higher than 7%. The Note Issuance Facility 2019 provides that we may
elect to, subject to the satisfaction of certain conditions, capitalize interest on the notes issued
thereunder for a period of up to two years from closing at our discretion, subject to certain
conditions. We elected to capitalize interest on the notes issued under the Note Issuance Facility
2019 for the upcoming quarters.

The notes issued under the Note Issuance Facility 2019 are guaranteed on a senior unsecured basis
by our subsidiaries ABY Concessions Infrastructures, S.L.U., ABY Concessions Perú S.A., ACT Holding,
S.A. de C.V., ASHUSA Inc., ASUSHI Inc. and Atlantica Investments Limited. If we fail to make
payments on the notes issued under the 2019 Note Issuance Facility, the guarantors are requested
to repay on a joint and several basis.

The proceeds of the notes issued under the 2019 Note Issuance Facility were used to prepay and
subsequently cancel in full the 2019 Notes and for general corporate purposes.

On May 10, 2018, we entered into a $215 million Revolving Credit Facility with a syndicate of banks
with Royal Bank of Canada as administrative agent and Royal Bank of Canada and Canadian

Imperial Bank of Commerce, as issuers of letters of credit. This facility was increased by $85 million
to $300 million in January 2019. In addition, on August 2, 2019 the facility was further increased by
$125 million to a total limit of $425 million and the maturity of a portion of loans in a principal
amount of $387.5 million extended from December 31, 2022, with the remaining $37.5 million
maturing on December 31, 2021. As of December 31, 2019, we had $84 million outstanding under
the Revolving Credit Facility and $341.0 million available.

Regulation in Spain

Revenues in our solar assets in Spain are mainly defined by regulation and some of the parameters
defining the remuneration are subject to review every six years.

According to Spanish Royal Decree 413/2014, solar electricity producers in Spain receive: (i) the
pool price for the power they produce and (ii) a payment based on the standard investment cost
for each type of plant. This payment based on investment (in €/MW of installed capacity) is
supplemented, in the case of solar plants, by an “operating payment” (in €/MWh produced). This
economic regime seeks to allow a “well-run and efficient enterprise” to recover the costs of building
and running a plant, plus a reasonable return on investment (project investment rate of return).
The rate applicable during the first regulatory period was 7.398%. The first regulatory period ended
on December 31, 2019. The values of parameters used to calculate the payments can be changed
at the end of each regulatory period.

On July 27, 2018, CNMC (the regulator for the electricity system in Spain) issued a draft proposal
for the calculation of the reasonable rate of return for the regulatory period 2020-2025. On
November 2, 2018, CNMC issued its final report with a proposed reasonable rate of return of 7.09%.
In December 2018 the government issued a draft project law proposing a reasonable rate of return
of 7.09%, with the possibility of maintaining the 7.398% reasonable rate of return under certain
circumstances On November 24, 2019, the Spanish government approved Royal Decree-law
17/2019 setting out a 7.09% rate of reasonable return applicable from January 1, 2020 until
December 31, 2025 as a general rule and the possibility, under certain circumstances including not
having any ongoing legal proceeding against the Kingdom of Spain, of maintaining the 7.398%
reasonable rate of return for two consecutive regulatory periods. The reasonable return is no longer
calculated by reference to the Spanish government 10-year bonds but by reference to the weighted
average cost of capital (WACC). The WACC is the calculation method that most of the European
regulators apply in most of the cases to determine the return rates applicable to regulated activities
within the energy sector. As a result, some of the assets in our Spanish portfolio are receiving a
remuneration based on a 7.09% reasonable rate of return until December 31, 2025 while others are
receiving a remuneration based on a 7.398% reasonable rate of return until December 31, 2031.
We estimate the impact of this change to be approximately € 3 million per year reduction in our
cash available for distribution.

Asset portfolio and operations

Our portfolio consists of 15 renewable energy assets, a natural gas-fired cogeneration facility, a
minority stake in a 142 MW gas-fired engine facility with battery storage, several electric
transmission lines and minority stakes in two water desalination plants, all of which are fully
operational. We expect that the majority of our cash available for distribution over the next three

years will be in U.S. dollars, indexed to the U.S. dollar or in euros. We intend to maintain a ratio of
over 80% of our cash available for distribution denominated in U.S. dollars or euros and to hedge
the euros for the upcoming 24 months on a rolling basis. As of December 31, 2019, approximately
92% of our project-level debt was hedged against changes in interest rates through an underlying
fixed rate on the debt instrument or through interest rate swaps, caps or similar hedging
instruments. The following table provides an overview of our current assets as of December 31,
2019:

Counterparty

Contract

Capacity

Credit

Years

Assets

Type

Ownership Location Currency(1)

(Gross) Offtaker

Rating(2)

COD(3)

Left(4)

Solana

Renewable

100% Class

(Solar)

B(5)

Mojave

Renewable

100%

(Solar)

Arizona
(USA)

California
(USA)

USD

280 MW

APS

A-/A2/A-

2013

USD

280 MW

PG&E

D/WR/WD

2014

Solaben 2/3(6) Renewable

70%(7)

Spain

EUR

2x50 MW

Wholesale

A/Baa1/A-

2012

18 / 17

(Solar)

market/Spanish
Electric System

Solacor 1/2(8) Renewable

87%(9)

Spain

EUR

2x50 MW

Wholesale

A /Baa1/A-

2012

17 / 17

(Solar)

market/Spanish
Electric System

PS10/20(10)

Renewable

100%

Spain

EUR

31 MW

Wholesale

A /Baa1/A-

(Solar)

market/Spanish
Electric System

2007 &
2009

12 / 14

Helioenergy
1/2(11)

Renewable

100%

Spain

EUR

2x50 MW

Wholesale

A /Baa1/A-

2011

17 / 17

(Solar)

market/Spanish
Electric System

Helios ½(12)

Renewable

100%

Spain

EUR

2x50 MW

Wholesale

A /Baa1/A-

2012

18 / 18

(Solar)

market/Spanish
Electric System

Solnova
1/3/4(13)

Renewable

100%

Spain

EUR

3x50 MW

Wholesale

A /Baa1/A-

2010

15 / 15 / 16

(Solar)

market/Spanish
Electric System

Solaben 1/6(14) Renewable

100%

Spain

EUR

2x50 MW

Wholesale

A /Baa1/A-

2013

19 / 19

(Solar)

market/Spanish
Electric System

Seville PV

Renewable

80%(15)

Spain

EUR

1 MW

Wholesale

A /Baa1/A-

2006

(Solar)

market/Spanish
Electric System

Kaxu

Renewable

51%(16)

(Solar)

South
Africa

ZAR

100 MW

Eskom

BB/Baa3/

2015

BB+(17)

Palmatir

Renewable

100%

Uruguay

USD

50 MW

Uruguay

BBB/Baa2/

2014

(Wind)

BBB-(18)

Cadonal

Renewable

100%

Uruguay

USD

50 MW

Uruguay

BBB/Baa2/

2014

(Wind)

BBB-(18)

Melowind

Renewable

100%

Uruguay

USD

50 MW

Uruguay

BBB/Baa2/

2015

Mini-hydro
Peru

(Wind)

BBB-(207)

Renewable

100%

USD

4 MW

Peru

BBB+/A3/ BBB+

2012

(Hydro)

Peru

ACT

Efficient

99.99%(19)

Mexico

USD

300 MW

Pemex

BBB+/ Baa3/

2013

Natural

Gas

BB+

Monterrey

Efficient Natural
Gas

30%

Mexico

USD

142 MW

Industrial
Customers

Not rated

2018

ATN

Transmission

100%

Peru

USD

379 miles

Peru

BBB+/A3/

2011

Line

BBB+

ATS

Transmission

100%

Peru

USD

569 miles

Peru

BBB+/A3/

2014

Line

BBB+

ATN2

Transmission

100%

Peru

USD

81 miles

Minera

Not rated

2015

Line

Quadra 1/2

Transmission

100%

Chile

USD

Line

miles/32

miles

Las

Bambas

Sierra

Gorda

Not rated

2014

15 / 15

Palmucho

Transmission

100%

Chile

USD

6 miles

Enel

BBB+/Baa2/

2007

Line

Generacion

BBB+

Chile TL3

Transmission

100%

Chile

USD

50 miles

Line

Chile

CNE (National
Energy Commision)

A+/A1/A

1993

Regulated

Honaine

Water

25.5%(19)

Algeria

USD

7 M

Sonatrach/ADE

Not rated

2012

Skikda

Water

34.2%(20)

Algeria

USD

3.5 M

Sonatrach/ADE

Not rated

2009

ft3/day

Notes:

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Certain contracts denominated in U.S. dollars are payable in local currency.

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.

COD stands for Commercial Operation Date

Number of years remaining on contract as at December 31, 2019.

On September 30, 2013, Liberty agreed to invest $300 million in Class A shares of Arizona Solar Holding, the
holding company of Solana, in exchange for a share of the dividends and the taxable loss generated by Solana.

Solaben 2 and Solaben 3 are separate special purpose vehicles with separate agreements, but they are treated as
a single platform.

Itochu Corporation, a Japanese trading company, holds 30.0% of the shares in each of Solaben 2 and Solaben 3.

Solacor 1 and Solacor 2 are separate special purpose vehicles with separate agreements but they are treated as a
single platform.

(9)

JGC Corporation, a Japanese engineering company, holds 13.0% of the shares in each of Solacor 1 and Solacor 2.

(10) PS10 and PS20 are separate special purpose vehicles with separate agreements but they are treated as a single

platform.

(11) Helioenergy 1 and Helioenergy 2 are separate special purpose vehicles with separate agreements but they are

treated as a single platform.

(12) Helios 1 and Helios 2 are separate special purpose vehicles with separate agreements but they are treated as a

single platform.

(13) Solnova 1, Solnova 3 and Solnova 4 are separate special purpose vehicles with separate agreements but they are

treated as a single platform.

(14) Solaben 1 and Solaben 6 are separate special purpose vehicles with separate agreements, but they are treated as

a single platform.

(15)

Instituto para la Diversificacion y Ahorro de la Energia, or IDEA, a Spanish state-owned company, holds 20.0% of
the shares in Seville PV.

(16)

Industrial Development Corporation of South Africa owns 29.0% and Kaxu Community Trust owns 20.0% of Kaxu.

(17) Refers to the credit rating of the Republic of South Africa.

(18) Refers to the credit rating of Uruguay, as UTE is unrated.

(19) 1 share is owned by Abengoa México, S.A. de C.V. and 1 share is owned by Abener Energía, S.A., both wholly

owned by Abengoa.

(20) Algerian Energy Company, SPA owns 49.0% of the shares in Honaine and Sacyr Agua, S.L. and a subsidiary of Sacyr

S.A. owns the remaining 25.5%.

(21) Algerian Energy Company, SPA owns 49.0% of the shares in Honaine and Sacyt Agua, S.L., and a subsidiary of

Sacyr S.A. owns the remaining 25.5%.

Business model, strategy and objectives

Atlantica is a sustainable infrastructure company that owns and manages renewable energy,
efficient natural gas power, transmission and transportation infrastructures and water assets. We
currently have operating facilities in, North America (United States, Mexico and Canada), South
America (Peru, Chile and Uruguay) and EMEA (Spain, Algeria and South Africa). We intend to
expand our portfolio, maintaining North America, South America and Europe as our core
geographies.

Our primary business strategy is to generate stable cash flows through our portfolio of assets under
long term contracts or under regulation. We intend to distribute a stable cash dividend to our
shareholders. Our objective is to increase the dividend, while ensuring the ongoing stability and
sustainability of our business.

We will seek to grow our cash available for distribution and our dividend to shareholders through
organic growth and by acquiring new assets. We believe that our diversification by business sector
and geography provides us with access to different sources of growth. We expect to deliver organic
growth through the optimization of the existing portfolio and through investments in the
expansion of our current assets, particularly in our transmission lines sector. In addition, we expect
to acquire assets from AAGES. We expect to complement this with acquisitions from third parties
and potential new future partnerships. We intend to grow our business 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 intend to take advantage of, and leverage our growth strategy on, favorable trends in the clean
power generation, transmission and transportation infrastructure and water sectors globally,
including energy scarcity and the focus on the reduction of carbon emissions. Our portfolio of
operating assets and our strategy focuses on sustainable technology including renewable energy,
efficient natural gas, and transmission networks as enablers of a sustainable power generation mix
and on water infrastructure. Renewable energy is expected to represent in most markets the
majority of new investments in the power sector, according to Bloomberg New Energy Finance
2019, approximately 50% of the world’s power generation by 2050 is expected to come from
renewable sources, which indicates that renewable energy is becoming mainstream. Global

installed capacity is expected to shift from 57% fossil fuels today to approximately two-thirds
renewables by 2050. A 12-terawatt expansion of generating capacity is estimated to require
approximately $13.3 trillion of new investment between now and 2050 – of which approximately
77% is expected to go to renewables. Another approximately $843 billion of investment goes to
batteries along with an estimated $11.4 trillion to expected to go to transmission and distribution
during that period. We believe regions will need to complement investments in renewable energy
with investments in efficient natural gas, in transmission networks and in storage. We believe that
we are well positioned to benefit from the expected transition towards a more sustainable power
generation mix. In addition, we believe that water is going to be the next frontier in a transition
towards a more sustainable world. New sources of water are needed worldwide and water
desalination and water transportation infrastructure should help make that possible. We currently
participate in two water desalination plants with a 10 million cubic feet capacity and we have an
investment in a third desalination plant through a loan.

We are focused on stable, long-term contracted or regulated assets in the power and water sectors,
including renewable energy, efficient natural gas generation and transmission and transportation
infrastructures, as well as water sectors. We intend to grow our cash available for distribution and
our dividend to shareholders through organic growth and by acquiring new assets and/or
businesses where revenues may not be fully contracted.

We believe we can achieve organic growth through the optimization of the existing portfolio, price
escalation factors in many of our assets and the expansion of current assets, particularly our
transmission lines, to which new assets can be connected. We currently own three transmission
lines in Peru and four in Chile. We believe that current regulations in Peru and Chile provide a
growth opportunity by expanding transmission lines to connect new clients. Additionally, we
should have repowering opportunities in certain existing generation assets.

Additionally, we expect to acquire assets from third parties leveraging the local presence and
network we have in geographies and sectors in which we operate. We have also entered into and
intend to enter into agreements or partnerships with developers or asset owners to acquire assets
in operation, construction or development. 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.

In addition, we have in place exclusive agreements with AAGES and Algonquin. The AAGES ROFO
Agreement provides us with a right of first offer on any proposed sale, transfer or other disposition
of certain of AAGES’s assets. The Algonquin ROFO Agreement provides us a right of first offer on
any proposed sale, transfer or other disposition of any of Algonquin’s contracted facilities or with
infrastructure facilities located outside of the United States or Canada which are developed under
expected long-term revenue agreements or concession agreements.

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 through the acquisition of assets.
Pursuant to our cash dividend policy, we intend to pay a cash dividend each quarter to holders of
our shares.

We intend to use the following investment guidelines in evaluating prospective acquisitions in
order to successfully execute our growth strategy:

(cid:120) generally high quality offtakers or regulated revenues with long-term contracted revenue;
(cid:120)
limited exposure to assets under construction or development, generally co-investing with

partners;

(cid:120) project financing in place at each project or mechanisms to obtain it at COD;
(cid:120) management and operational systems and processes at an adequate level;
(cid:120)

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

(cid:120) preference for U.S. dollar-denominated revenues, but we could also acquire assets or

business that generate revenues in other currencies.

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

(1) Focus on stable, long-term contracted or regulated assets in the power and water sectors,
including renewable energy, efficient natural gas generation and transmission and
transportation infrastructures, as well as water sectors. We intend to focus on owning and
operating stable, long-term contracted sustainable infrastructures, for which we believe we
possess 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. We intend to maintain a diversified portfolio in
the future, maintaining a large majority of our revenues from low-carbon footprint assets, as
we believe these technologies will undergo significant growth in our targeted geographies.

(2) 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 and transmission and
transportation sectors will continue growing significantly.

(3)

Increase cash available for distribution through the optimization of the existing portfolio and
through the investments in the expansion of our current assets, particularly in our transmission
lines, to which new assets can be connected. We intend to grow our cash available for
distribution to shareholders through organic growth that we expect to deliver through the
optimization of the existing portfolio, price escalation factors in many of our assets as well as
through investments in the expansion of our current assets, particularly in our transmission
lines sector. We intend to increase production in our assets through further management and
optimization initiatives and in some cases through repowering. We currently own three
transmission lines in Peru and four in Chile. Current regulations in Peru and Chile provide a
growth opportunity by expanding transmission lines to connect new clients. We have identified
several opportunities to grow organically in Peru and Chile by expanding our current assets.
These opportunities consist of (i) new clients that need to use our current assets, in situations
where virtually no investments are required from us, while we will get additional revenues from
these new business opportunities and (ii) expansion of current transmission lines to grant
access to new clients. In this case, certain investments are required to build new assets that

connect the new clients to our current backbone transmission lines. We would expect that in
some cases these new assets would become part of our concession assets contract with the
State, for which we would be remunerated.

(4)

Increase cash available for distribution through the acquisition of new sustainable
infrastructure, including renewable energy, efficient natural gas and transmission and
transportation infrastructures, as well as water assets. We will seek to grow our cash available
for distribution to shareholders by acquiring new assets, typically contracted or regulated. We
have an exclusive ROFO agreement with AAGES and Algonquin. We further expect to execute
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. We have already executed some
partnerships. 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 assist us in realizing our growth plans.

(5) Foster a low-risk approach. We intend to maintain a portfolio of contracted assets with a low-
risk profile for all or part of our revenues by engaging with creditworthy offtake counterparties
and entering into long-term contracted revenue agreements. Over 80% of cash available for
distribution is in U.S. dollars or euros, and we hedge euros for the upcoming 24 months on a
rolling basis. We further mitigate the risk of our investments by pursuing 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, or co-invest with partners, in assets
before they enter into operation, in assets with shorter or partially contracted revenue periods,
or subject to regulation, or in assets with revenue 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 are
obligated to review monthly throughout the life of the asset. Our policy is to insure all of our
assets whenever economically feasible.

(6) Maintain financial strength and flexibility. We intend to maintain a solid financial position

through a combination of cash on hand and undrawn credit facilities.

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

(cid:131) Stable and predictable long-term cash flows with attractive tax profiles.

(cid:131) Highly diversified portfolio by geography and technology.

(cid:131) A sustainable growth strategy

A fair review of the business

During 2019, our renewable assets continued to generate solid operating results. Production in
Spain increased year-on-year due to higher solar radiation in the first half of the year. In South
Africa, Kaxu continued to deliver strong performance and increased production with respect to the
previous year. These increases were partially offset by lower energy generation in the United States
resulting from lower solar radiation in the first half of 2019, longer than expected maintenance
stops in the first quarter and reduced capacity in Mojave in the second half of the year. Production
from Atlantica’s wind assets increased significantly as a result of the contribution of Melowind,
which was acquired in December 2018. Regarding Atlantica’s assets for which revenue is based on
availability, they continue to deliver solid performance with high availability levels in ACT, our
efficient natural gas plant, in transmission lines and in water assets.

Factors that affect comparability of our results of operations

(cid:131) Acquisitions mentioned previously and acquisitions closed during the year 2018.

(cid:131) 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 totally or partially indexed to, U.S. dollars. Our solar power plants in Spain have
their revenues and expenses denominated in euros, and Kaxu, our solar plant in South Africa,
has its revenues and expenses denominated in South African Rand.

Our strategy is to hedge cash distributions from our Spanish assets. We 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 have hedged 100% of our euro-denominated net exposure for the next 12 months
and 75% of our euro-denominated net exposure for the following 12 months. We expect to
continue with this hedging strategy on a rolling basis.

Although we hedge cash-flows in euros, fluctuations in the value of the euro in relation to the
U.S. dollar may affect our operating results. In subsidiaries with a 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 the South African rand in relation to the U.S. dollar may
also affect our operating results.

Apart from the impact of translation differences described above, the exposure of our income
statement to fluctuations of foreign currencies is limited, as the financing of projects is typically
denominated in the same currency as that of the contracted revenue agreement. This policy
seeks to ensure that the main revenue and expenses in foreign companies are denominated in
the same currency, limiting our risk of foreign exchange differences in our financial results.

(cid:131)

In our discussion of operating results, we have included foreign exchange impacts in our
revenue by providing constant currency revenue growth. The constant currency presentation is
not a measure recognized under IFRS and excludes the impact of fluctuations in foreign

currency exchange rates. We believe providing constant currency information provides valuable
supplemental information regarding our results of operations. We calculate constant currency
amounts by converting our current period local currency revenue using the prior period foreign
currency average exchange rates and comparing these adjusted amounts to our prior period
reported results. This calculation may differ from similarly titled measures used by others and,
accordingly, the constant currency presentation is not meant to substitute for recorded
amounts presented in conformity with IFRS as issued by the IASB/EU nor should such amounts
be considered in isolation.

(cid:131) Agreement to repurchase long-term operation and maintenance variable services

The operation and maintenance services received in some of our Spanish solar assets include a

variable portion payable in the long-term. On April 26, 2018, we purchased from Abengoa the

long-term operation and maintenance payable accrued until December 31, 2017, which

amounted to $57.3 million. We paid $18.3 million for this payable and as a result, in the second

quarter of 2018, we recorded a one-time gain for the difference, amounting to $39.0 million

which was recorded in “Other Operating Income”.

(cid:131) Project debt refinancing

In the second quarter of 2018, we refinanced Helios 1/2 and Helioenergy 1/2. Under the new
IFRS 9, when there is a refinancing with a non-substantial modification of the original debt,
there is a gain or loss recorded in the income statement. This gain or loss is equal to the
difference between the present value of the cash flows under the original terms of the former
financing and the present value of the cash flows under the new financing, each discounted at
the original effective interest rate. As a result, we recorded non-cash financial income of $36.6
million in the second quarter of 2018.

(cid:131)

Impairment of Solana

In the fourth quarter of 2018, we recorded an impairment of $42.7 million relating to Solana
due to the underperformance of the plant in the past few years and the uncertainty of the
production level expected in the future. See Note 3 and 12 of our Annual Consolidated Financial
Statements.

Detail of the changes in Revenue, Operating Profit and Profit for the Year attributable to the Parent
Company are detailed below:

$ in millions

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

2019

2018

1,011.5
500.5
74.6

62.1

1,043.8
487.9
55.3

41.6

Operating Profit increased by 2.6% to $500.5 for the year ended December 31, 2019, compared to
$487.9 million for the year ended December 31, 2018. The increase was mainly due to a decrease
of Depreciation and amortization expenses primarily because in 2018 there was a $42.7 million
impairment related to Solana with no corresponding amount in 2019. In addition, Other Operating
Expenses were lower in 2019 due to lower O&M costs in ACT, since a major overhaul took place
during the first half of 2019. Operation and maintenance costs in ACT are higher in the quarters
prior to the major overhaul. The decrease of expenses was partially offset by a decrease in other
operating income corresponding to a one-time income of $39 million recorded in 2018 with no
corresponding amount in 2019.

Profit attributable to the parent company increased by 49.3% to $62.1 million for the year ended
December 31, 2019, compared to a profit of $41.6 million for the year ended December 31, 2018.
This is mainly due the increased in Operating Profit as per described above and a lower income tax
expense in 2019.

Liquidity

As of December 31, 2019, our cash and cash equivalents at the project company level were $496.8
million compared to $524.8 million as of December 31, 2018. In addition, our cash and cash
equivalents at the Company level were $66.0 million as of December 31, 2019 compared to $105.0
million as of December 31, 2018. Additionally, as of December 31, 2019, we had approximately
$341 million available under our Revolving Credit Facility and therefore a total corporate liquidity
of $407 million. On August 2, 2019, we entered into an amendment to our Revolving Credit Facility,
which increased the commitments thereunder by an additional amount of $125 million, which
represents a total amount of $425 million.

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, and given market conditions. Our financing agreements consist mainly
of the project-level financing for our various assets, the Note Issuance Facility 2019, the Revolving
Credit Facility, the Note Issuance Facility 2017, overdraft with a local bank and our commercial
paper program.

On February 10, 2017, we entered into the Note Issuance Facility 2017, a senior secured note facility
with Elavon Financial Services DAC, UK Branch, as gent, and a group of funds managed by
Westbourne Capital as purchasers of the notes issued thereunder for a total amount of €275 million
(approximately $308.4 million), with three series of notes: series 1 notes worth €92 million which
mature in 2022; series 2 notes worth €91.5 million which mature in 2023; and series 3 notes worth
€91.5 million which mature in 2024. Interest on all series accrues at a rate per annum equal to the
sum of 3-month EURIBOR plus 4.90%. We fully hedged the principal amount of the notes issued
under the Note Issuance Facility 2017 with a swap that fixed the interest rate at 5.50%. We expect
to repay in full and cancel all series of notes issued under the Note Issuance Facility 2017 with the

proceeds of the 2020 Green Private Placement.

In July 2017, we signed a line of credit with a bank for up to €10.0 million (approximately $11.2
million) which is available in euros or U.S. dollars. Amounts drawn accrue interest at a rate per
annum equal to EURIBOR plus 2.25% or LIBOR plus 2.25%, depending on the currency. On
December 13, 2019, the terms of the credit facility have been modified and the maturity date has
been extended from July 4, 2020 to December 13, 2021 and the new interest rate per year set is
EURIBOR plus 2% or LIBOR plus 2%, depending on the currency. As of December 31, 2019, the
Company had drawn down an amount of $10.1 million.

On April 30, 2019, we entered into the Note Issuance Facility 2019, a senior unsecured financing
with Lucid Agency Services Limited, as agent, and a group of funds managed by Westbourne
Capital as purchasers of the notes issued thereunder for a total amount of the euro equivalent of
$300 million. The notes under the Note Issuance Facility 2019 were issued in May 2019 and are due
on April 30, 2025. The 2019 Note Issuance Facility includes an upfront fee of 2% paid upon
drawdown. From their issue date to December 31, 2019 interest on the notes issued under the Note
Issuance Facility 2019 accrued at a rate per annum equal to the sum of 3-month EURIBOR plus a
margin of 4.65%. The principal amount of the notes issued under the Note Issuance Facility 2019
was hedged with an interest rate swap, resulting in an all-in interest cost of 4.4%. Starting January
1, 2020, the applicable margin for the determination of interest on the notes issued under the Note
Issuance Facility 2019 decreased to 4.50% resulting in an all-in interest cost of 4.24, following
satisfaction of the requirements set forth in the Note Issuance Facility 2019 for such margin
decrease, including the effectiveness of the Royal Decree-law 17/2019 which approved a
reasonable rate of return higher than 7%. The Note Issuance Facility 2019 provides that we may
elect to, subject to the satisfaction of certain conditions, capitalize interest on the notes issued
thereunder for a period of up to two years from closing at our discretion, subject to certain
conditions. We elected to capitalize interest on the notes issued under the Note Issuance Facility
2019 for the upcoming quarters.

On May 10, 2018, we entered into a $215 million Revolving Credit Facility with a syndicate of banks
with Royal Bank of Canada as administrative agent and Royal Bank of Canada and Canadian
Imperial Bank of Commerce, as issuers of letters of credit. This facility was increased by $85 million
to $300 million in January 2019. In addition, on August 2, 2019 the facility was further increased by
$125 million to a total limit of $425 million and the maturity of a portion of loans in a principal
amount of $387.5 million extended from December 31, 2022, with the remaining $37.5 million
maturing on December 31, 2021. As of December 31, 2019, we had $84 million outstanding under
the Revolving Credit Facility and $341.0 million available. Loans under the facility accrue interest at
a rate per annum equal to: (A) for Eurodollar rate loans, LIBOR plus a percentage determined by
reference to our leverage ratio, ranging between 1.60% and 2.25% 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 prime rate of the administrative agent
under the Revolving Credit Facility and (iii) LIBOR plus 1.00%, in any case, plus a percentage
determined by reference to our leverage ratio, ranging between 0.60% and 1.00%.

In June 2019, we signed our first ESG-linked financial guarantee line with ING Bank, N.V.. The
guarantee line has a limit of approximately $39 million. The cost is linked to Atlantica’s
environmental, social and governance performance under Sustainalytics, a leading sustainable
rating agency. The green guarantees will be exclusively used for renewable assets. We are using

and expect to continue to use this guarantee line to progressively release restricted cash in some
of our projects, providing additional financial flexibility.

On October 8, 2019, we filed a euro commercial paper program with the Alternative Fixed Income
Market (MARF) in Spain. The program allows Atlantica to issue short term notes over the next
twelve months for up to €50 million, with such notes having a tenor of up to two years. As of the
date of this report we have issued €25 million under the program at an average cost of 0.66%.

On February 6, 2020, we completed the pricing of a total amount of €290 million (approximately
$320 million), senior secured notes maturing in June 20, 2026, (2020 Green Private Placement)
which are expected to be issued under a senior secured note purchase agreement to be entered
into with a group of institutional investors as purchasers. Interest on the notes to be issued under
the 2020 Green Private placement is expected to accrue at a rate per annum equal to 1.96%. Signing
of the note purchase agreement is expected to occur on or about April 1, 2020 and closing is
expected to occur promptly thereafter, subject to certain conditions. We cannot guarantee the such
conditions will be satisfied and that closing will occur. In the case the transaction is closed, if at any
time the rating of such senior secured notes is below investment grade, the interest rate thereon
would increase by 100 basis points until such notes are rated again investment grade.

The 2020 Green Private Placement complies with the Green Bond Principles and has a second party
opinion by Sustainalytics. The proceeds of the 2020 Green Private Placement are expected to be
used to repay in full and cancel all series of notes issued under the Note Issuance Facility 2017.As
previously mentioned, on January 29, 2019, PG&E, the off-taker of Mojave filed for reorganization
under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court. The PG&E bankruptcy has
heightened the risk that project level cash distributions could be restricted for an undetermined
period of time, thereby impacting our corporate liquidity and corporate leverage. Mojave project
cash distributions to the corporate level normally takes place at the end of the year, the last
distribution received at the corporate level took place in December 2018. Unless the event or
default is cured or waived, distributions may not be made during the pendency of the bankruptcy.

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 2019, we paid total dividends of $1.57 per share to our shareholders (see the “Directors’ Report-
Dividends” for amount of each quarterly dividend). In 2018, we paid $1.33 per share.

As previously stated within this Consolidated Annual Report, all our assets have contracted
revenues (regulated in the case of Spain and Chile TL3) and collectively have a weighted-average
remaining contract life of approximately 18 years as of December 31, 2019. 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, 2019 and 2018:

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

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

Share of profit of associates carried under the equity method
Profit before income tax

Income tax
Profit/(Loss) for the year

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

Revenue

2019

2018

1,043.8
1,011.5
132.5
93.8
(15.1)
(32.2)
(362.7)
(310.8 )
(261.8 )
(310.6)
500.5 $ 487.9

4.1
(408.0)
2.7
(1.1)

36.4
(425.0)
1.6
(8.2)
(402.3 ) $ (395.2)
5.2
97.9
(42.6)
55.3
(13.7)
41.6

7.4
105.6 $

(12.5 )
62.1 $

(31.0 )
74.6 $

Revenue decreased by 3.1% to $1,011.5 million for the year ended December 31, 2019, compared
to $1,043.8 million for the year ended December 31, 2018. The decrease was primarily due to the
effect of the depreciation of the euro and the South African rand against the U.S. dollar. On a
constant currency basis, revenue for the year ended December 31, 2019 would have remained
stable at $1,043.6 million, compared to year ended December 31, 2018. Although we hedge our
net cash flow exposure to the euro, variations in the euro to U.S. dollar exchange rate affect our
revenues and Further Adjusted EBITDA. The decrease in revenue was also due in part to lower
production from our U.S. solar assets, resulting from lower solar radiation in the first half of 2019,
longer than expected maintenance stops in the first quarter and reduced capacity in Mojave in the
second half of the year. These effects were partially offset by an increase in revenues from our
recent acquisitions of wind and transmission assets and solid operational performance in the rest
of our assets.

The constant currency presentation is an Alternative Performance Measure, not a measure
recognized under IFRS and excludes the impact of fluctuations in foreign currency exchange rates.
We believe providing constant currency information provides valuable supplemental information
regarding our results of operations. We calculate constant currency amounts by converting our
current period local currency revenue using the prior period foreign currency average exchange
rates and comparing these adjusted amounts to our prior period reported results. This calculation
may differ from similarly titled measures used by others and, accordingly, the constant currency
presentation is not meant to substitute for recorded amounts presented in conformity with IFRS as
issued by the IASB/EU nor should such amounts be considered in isolation.

Other operating income

The following table sets forth our other operating income for the years ended December 31, 2019
and 2018:

Other operating income
Grants

Income from various services

Income from purchase of long-term O&M payable

Total

Year ended December 31,

2019

2018

$ in millions

59.1

34.7

93.8

59.4

34.2

39.0

132.6

Other operating income decreased by 29% to $93.8 million for the year ended December 31, 2019,
compared to $132.5 million for the year ended December 31, 2018. The decrease was mainly due
to the one-time gain we recorded in the second quarter of 2018 in relation to the purchase from
Abengoa of the long-term operation and maintenance payable accrued until December 31, 2017,
which amounted to $57.3 million. We paid $18.3 million for this and as a result in the second quarter
of 2018 we recorded a one-time gain equal to the difference, amounting to $39.0 million. Excluding
this one-time impact, other operating income for the year ended December 31, 2019 was in line
with the same period of 2018.

Grants represent the financial support provided by the U.S. government to Solana and Mojave and
consist of investment tax credit cash grant (“ITC Cash Grant”) and an implicit grant related to the
below market interest rates of the project loans with the Federal Financing Bank. Income from
various services include amounts received for our U.S. solar assets from our EPC contractor under
their obligations and amounts received from insurance claims.

Employee benefits expenses

Employee benefit expenses increased by 113% to $32.2 million for the year ended December 31,
2019, compared to $15.1 million for the year ended December 31, 2018. The increase is primarily
due to the internalization of operation and maintenance services in our U.S. solar assets, following
the acquisition of ASI Operations on July 30, 2019. The operation and maintenance costs for these
assets were mainly recorded as “Other operating expenses” until July 30, 2019. We expect this
internalization to result in a cost reduction of $0.5 million to $0.6 million per year, which
corresponds to the margin fee previously paid to Abengoa. The increase of employee benefit
expenses is also due to a $4.7 million reversal in the fourth quarter of 2018 of the accrual of the
2016-2018 LTIP. The plan covered the three-year period 2016 to 2018 and was paid in March 2019.

Depreciation, amortization and impairment charges

Depreciation, amortization and impairment charges decreased by 14.3% to $310.8 million for the
year ended December 31, 2019, compared with $362.7 million for the year ended December 31,
2018, mainly due to the recognition of a $42.7 million impairment relating to Solana during the
fourth quarter of 2018 with no corresponding amount in 2019. The decrease is also due to a reversal
of the impairment provisions in ACT in 2019 as a result of the application of IFRS 9. IFRS 9 requires
impairment provisions to be based on the expected credit losses on financial assets rather than on

actual credit losses and the expected loss decreased in the year ended December 31, 2019. This
decrease was partially offset by the increase resulting from the new assets acquired at the end of
2018.

Other operating expenses

The following table sets forth our other operating expenses for the years ended December 31, 2019
and 2018:

Other operating expenses

Raw Materials
Leases and fees
Operation and maintenance
Independent professional services
Supplies
Insurance
Levies and duties
Other expenses
Total

Year ended December 31,

2019

2018

$ in
millions

% of
revenue

$ in
millions

% of
revenue

9.7
1.9
116.0
41.6
25.8
24.0
34.8
8.0
261.8

1.0%
0.2%
11.5%
4.1%
2.6%
2.4%
3.4%
0.8%
26.0%

10.6
1.7
145.8
43.2
26.0
24.2
37.5
21.6
310.6

1.0%
0.2%
13.8%
4.1%
2.3%
2.6%
3.5%
2.0%
29.0%

“Other operating expenses” decreased by 16% to $261.8 million for the year ended December 31,
2019, compared to $310.6 million for the year ended December 31, 2018. This decrease was mainly
due to lower costs in ACT since a major overhaul took place during the first half of 2019. Operation
and maintenance costs in ACT are higher in the quarters prior to the major overhaul. The decrease
was also due in part to the internalization of the operation and maintenance services in our U.S.
solar assets which commenced on July 30, 2019, given most of the costs have been recorded in
“Employee benefit expenses” since that date.

Operating profit

As a result of the above factors, operating profit increased by 2.6% to $500.5 million for the year
ended December 31, 2019, compared with $487.9 million for the year ended December 31, 2018.

Financial income and financial expense

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

Financial expense, net

Year ended December 31,

2019

2018

$ in millions
4.1
(408.0)
2.7
(1.1)

(402.3)

36.4
(425.0)
1.6
(8.2)

(395.2)

Financial income

“Financial income” decreased to $4.1 million for the year ended December 31, 2019, compared to
$36.4 million for the year ended December 31, 2018, mainly due to a non-cash financial income of
$36.6 million recorded in the second quarter of 2018, resulting from the refinancing of Helios 1/2
and Helioenergy 1/2. Under the new IFRS 9, when there is a refinancing with a non-substantial
modification of the original debt, there is a gain or loss recorded in the income statement. This
gain or loss is equal to the difference between the present value of the cash flows under the original
terms of the former financing and the present value of the cash flows under the new financing,
discounted both at the original effective interest rate.

Financial expense

The following table sets forth our financial expense for the years ended December 31, 2019 and
2018:

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

Total

Year ended December 31,

2019

2018

$ in millions

(259.4)
(89.3)
(59.3)
(408.0)

(256.7)
(100.1)
(68.2)
(425.0)

Financial expense decreased by 4% to $408.0 million for the year ended December 31, 2019,
compared to $425.0 million for the year ended December 31, 2018. The decrease is mainly due to
the decrease in interest on other debts, which consists of interest on the notes issued by ATS, ATN
and Solaben Luxembourg and interests related to the investments from Liberty. Decrease in 2019
in interest and other debt is primarily due to a lower financial cost related to the Liberty liability
compared to the previous year. In 2018 we updated the accounting model used to calculate this
liability taking into account the past underperformance of Solana and recorded a non-cash
expense. This decrease was partially offset by the increase in interest from loans with credit entities
due to cancelation costs and fees related to the prepayment in full of the 2019 Notes in the second
quarter of 2019 and to the increase and extension of the Revolving Credit Facility signed on August
2, 2019.

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
condensed income statement.

Other financial income/(expense), net

Other financial income/(expenses)
Other financial income
Other financial losses

Total

Year ended December 31,

2019

2018

$ in millions
14.2
(15.3)

(1.1)

14.4
(22.6)

(8.2)

“Other financial income/(expense), net” decreased to an expense of $ 1.1 million for the year ended
December 31, 2019 compared to a net expense of $8.2 million for the year ended December 31,
2018. Other financial income in 2019 is primarily interest on deposits. Other financial expense
primarily corresponds to expenses for guarantees and letters of credit, wire transfers, other bank
fees and other minor financial expenses. The decrease in other financial expense was mostly due
to $6.2 million cost recorded in the second quarter of 2018 in relation to the cancelation of project
guarantees in Mojave.

Share of profit of associates carried under the equity method

Share of profit of associates carried under the equity method increased by 43% to $7.5 million in
the year ended December 31, 2019 compared to $5.2 million in the year ended December 31, 2018.
This includes the results of Honaine and Monterrey, which are recorded under the equity method.
The increase was primarily due to an increase in the contribution from Honaine.

Profit/(loss) before income tax

As a result of the previously mentioned factors, we reported a profit before income taxes of $105.6
million for the year ended December 31, 2019, compared to a profit before income taxes of $97.9
million for the year ended December 31, 2018.

Income tax

The effective tax rate for the periods presented has been established based on management’s best
estimates. For the year ended December 31, 2019, income tax amounted to an expense of $30.9
million, with a profit before income tax of $105.6 million. For the year ended December 31, 2018,
income tax amounted to a $42.6 million of expense, with a profit before income tax of $97.9 million.
The effective tax rate differs from the nominal tax rate mainly due to permanent differences and
treatment of tax credits in some jurisdictions.

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests was $12.5 million for the year ended December 31,
2019 compared to $13.7 million for the year ended December 31, 2018. Profit attributable to non-
controlling interest corresponds to the portion attributable to our partners in the assets that we
consolidate (Kaxu, Skikda, Solaben 2/3, Solacor 1/2 and Seville PV).

Profit / (loss) attributable to the parent company

As a result of the previously mentioned factors, profit attributable to the parent company was $62.1
million for the year ended December 31, 2019, compared to a profit of $41.6 million for the year
ended December 31, 2018.

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 produced2
Efficient Natural Gas Power
MW in operation3
GWh produced2
Availability (%)4
Electric Transmission
Miles in operation1
Availability (%)5
Water
Mft3 in operation1
Availability (%)5

As of December, 31
2019

2018

1,496
3,236

1,496
3,058

300
343
2,090
2,318
95.0% 99.8%

1,166

1,152
100.0% 99.9%

10.5

10.5
101.2% 102.0%

1Represents total installed capacity in assets owned at the end of the period, regardless of our percentage of
ownership in each of the assets.
2 Includes curtailment in wind assets for which we receive compensation.
3 Includes 43MW corresponding to our 30% share of Monterrey since August 2, 2019.
4Major maintenance overhaul held in Q1 and Q2 2019, as scheduled, reduced production and electric availability as
per the contract. GWh produced in 2019 also includes 30% production from Monterrey since August 2019.
5 Electricity availability refers to operational MW over contracted MW.
6 Availability refers to actual availability divided by contracted availability.

During 2019, our renewable assets continued to generate solid operating results. Production in
Spain increased year-on-year due to higher solar radiation in the first half of the year. In South
Africa, Kaxu continued to deliver strong performance and increased production. These increases
were partially offset by lower energy generation in the United States resulting from lower solar
radiation in the first half of 2019, longer than expected maintenance stops in the first quarter and
reduced capacity in Mojave in the second half of the year. In Mojave certain improvements in one
of our turbines carried out by General Electric in late 2018 resulted in technical difficulties in 2019,
which has caused the plant to produce at reduced capacity in the second half of 2019. Production
from Atlantica’s wind assets increased significantly as a result of the contribution of Melowind,
which was acquired in December 2018. Regarding Atlantica’s assets for which revenue is based on
availability, they continue to deliver solid performance with high availability levels in our efficient
natural gas plant ACT, in transmission lines and in water assets.

Total installed capacity increased by 43 MW in our Efficient Natural Gas Power assets due to the
acquisition of Monterrey. Since August 2, 2019 we include our 30% share of the asset. We also
increased our miles in operation to 1,166 miles in December 2019 compared to 1,152 miles in
December 2018. The increase corresponds to the acquisition of ATN Expansion 2.

In addition to what we disclose on the table above, our main KPIs are Revenues and Further
Adjusted EBITDA, discussed below.

Our Segment Reporting

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 in accordance with both criteria.

In our segment discussion, we use Further Adjusted EBITDA, which is an Alternative Performance
Measure. Our management believes Further Adjusted EBITDA is useful to investors and other users
of our financial statements in evaluating our operating performance because it provides them with
an additional tool to compare business performance across companies and across periods. This
measure is widely used by investors to measure a company’s operating performance without
regard to items such as interest expense, taxes, depreciation and amortization, which can vary
substantially from company to company depending upon accounting methods and book value of
assets, capital structure and the method by which assets were acquired. This measure is widely used
by other companies in the same industry. Our management uses Further Adjusted EBITDA as a
measure of operating performance to assist in comparing performance from period to period on
a consistent basis and to readily view operating trends, as a measure for planning and forecasting
overall expectations and for evaluating actual results against such expectations, and in
communications with our board of directors, shareholders, creditors, analysts and investors
concerning our financial performance.

Reconciliation of profit/(loss) for the year to Further Adjusted EBITDA
Profit/(loss) for the year attributable to the parent company
Profit/(loss) attributable to non-controlling interest from continued
operations
Income tax
Share of loss/(profit) of associates carried under the equity method
Financial expenses, net
Operating profit/(loss)
Depreciation, amortization and impairment charges
Further Adjusted EBITDA

12.5

30.9
(7.5)
402.3
500.5
310.8
811.2

As of December 31,

2019
($ in millions)
62.1

2018

41.6

13.7

42.6
(5.2)
395.2
487.9
362.7
850.6

Revenue by geography
North America
South America
EMEA
Total revenue

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

Year ended December 31,
2018
2019

% of

% of
revenue

$ in
millions
333.0
142.2
536.3

revenue
32.9 %
14.1 %
53.0 %

34.2 %
11.8 %
54.0 %
1,011.5 100.0 % 1,043.8 100.0 %

$ in
millions
357.2
123.2
563.4

Year ended December 31,
2018
2019

$ in
millions
305.1
115.3
390.8

% of

revenue
91.6 %
81.1 %
72.9 %

$ in
millions
308.8
100.2
441.6

% of
revenue

86.4 %
81.3 %
78.4 %

811.2

80.2 % 850.6

81.5 %

Note:

(1)

Further Adjusted EBITDA is an Alternative Performance Measure. 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. Further Adjusted EBITDA is not a measure of performance under
IFRS as issued by the IASB/EU, and you should not consider Further Adjusted EBITDA as an alternative to operating
income or profits or as a measure of our operating performance, cash flows from operating, investing and
financing activities or as a measure of our ability to meet our cash needs or any other measures of performance
under generally accepted accounting principles. We believe that Further Adjusted EBITDA is a useful indicator of
our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to
evaluate us. Further Adjusted EBITDA and similar measures are used by different companies for different purposes
and are often calculated in ways that reflect the circumstances of those companies. Further Adjusted EBITDA may
not be indicative of our historical operating results, nor is it meant to be predictive of potential future results. See
“Presentation of Financial Information—Non-GAAP Financial Measures.”

Volume by geography
North America (GWh)(1)
North America availability(1) (2)
South America (GWh) (3)
South America availability(4)
EMEA (GWh)
EMEA availability(4)

Note:

Volume produced/availability
Year ended December 31,
2018
2019

3,397
95.0%

516

100.0%
1,413
101.2%

3,700
99.8%
349
100.0%
1,326
102.0%

(1) Major maintenance overhaul conducted in Q1 and Q2 2019 in ACT, as scheduled, which reduced electric
production, as per the contract. GWh produced in 2019 also includes 30% production from Monterrey since
August 2019
Electric availability refers to operational MW over contracted MW with Pemex
Includes curtailment production in wind assets for which we receive compensation
Availability refers to actual availability divided by contracted availability

(2)
(3)
(4)

North America

Revenue decreased by 6.8% to $333 million for the year ended December 31, 2019, compared to
$357.2 million for the year ended December 31, 2018. The decrease was primarily due to lower
production from our U.S. solar assets, mainly as a result of lower solar radiation in the first half of
2019, longer than expected maintenance stops in the first quarter and reduced capacity in Mojave
in the second half of the year. Further Adjusted EBITDA margin increased to 91.6% in the year
ended December 31, 2019, compared to 86.4% from the previous year. The increase was mainly
due to ACT, where a major scheduled overhaul took place in the first half of 2019, as operation and
maintenance costs are higher in the quarters prior to such major overhauls.

South America

Revenue increased by 15.4% to $142.2 million for the year ended December 31, 2019, compared
to $123.2 million for the year ended December 31, 2018. Production increased by 51.8% and
availability remained in line with the same period of last year. Further Adjusted EBITDA increased
by 15.1% to $115.3 million for the year ended December 31, 2019 compared to $100.2 million for
the year ended December 31, 2018. Production, revenue and Further Adjusted EBITDA increase was
primarily a result of the contribution of the newly acquired assets in the region consisting of
Melowind, Chile TL3 and ATN Expansion 1 and since October 2019 ATN Expansion 2. Further
Adjusted EBITDA margin remained stable in the year ended December 31, 2019 compared to the
previous year.

EMEA

Revenue decreased by 4.8% to $536.3 million for the year ended December 31, 2019, compared to
$563.4 million for the year ended December 31, 2018. This revenue decrease was mainly due to the
depreciation of the euro and the South African rand against the U.S. dollar for the year ended

December 31, 2019 compared to the previous year. On a constant currency basis, revenue for the
year ended December 31, 2019 would have been $568.4 million, representing a 0.9% increase
compared to the period ended December 31, 2018. The decrease is also due to lower electricity
prices in Spain, which affects a small portion of our revenues in accordance with the regulation in
place. This decrease was partially offset by increased production in Spain and South Africa, where
our assets continue to deliver solid operational performance. Further Adjusted EBITDA decreased
by 11.5% to $390.8 million for the year ended December 31, 2019 compared to $441.6 million for
the period ended December 31, 2018. Further Adjusted EBITDA margin decreased to 72.9% for the
year ended December 31, 2019 compared to 78.4% for the previous year. The decrease was mainly
due to the $39 million one-time gain we recorded in the second quarter of 2018.

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,
2019

2018

$ in
Millions
761.1
122.3
103.5
24.6

% of
revenue
75.2%
12.1%
10.2%
2.4%

$ in
millions
793.5
130.8
96.0
23.5

% of
revenue
76.0%
12.5%
9.2%
2.3%

1,011.5 100.0%

1,043.8 100.0%

Year ended December 31,
2019

2018

$ in
Millions
603.7
107.5
85.6
14.4

% of
revenue
79.3%
87.9%
82.7%
58.5%
811.2 80.2%

$ in
millions
664.4
93.9
78.4
13.9

% of
revenue
83.7%
71.8%
81.7%
59.1%
850.6 81.5%

(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. Further Adjusted EBITDA

is not a measure of performance under IFRS as issued by the IASB/EU, and you should not consider Further

Adjusted EBITDA as an alternative to operating income or profits or as a measure of our operating performance,

cash flows from operating, investing and financing activities or as a measure of our ability to meet our cash needs

or any other measures of performance under generally accepted accounting principles. We believe that Further

Adjusted EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist securities

analysts, investors and other parties to evaluate us. Further Adjusted EBITDA and similar measures are used by

different companies for different purposes and are often calculated in ways that reflect the circumstances of those

companies. Further Adjusted EBITDA may not be indicative of our historical operating results, nor is it meant to

be predictive of potential future results. See “Presentation of Financial Information—Non-GAAP Financial

Measures.”

Volume by business sector
Renewable energy (GWh)(1)
Efficient natural gas power (GWh) (2)
Efficient natural gas power availability(3)
Electric transmission availability(4)
Water availability(4)

Note:

Volume produced/availability

Year ended December 31,

2019

2018

3,235
2,090
95%
100%
101%

3,049
2,318
99.8%
99.9%
102%

Includes curtailment production in wind assets for which we receive compensation

(1)
(2) Major maintenance overhaul conducted in Q1 and Q2 2019 in ACT, as scheduled, which reduced electric
production, as per the contract. GWh produced in 2019 also includes 30% production from Monterrey since
August 2, 2019
Electric availability refers to operational MW over contracted MW with Pemex. Major overhaul held in Q1and Q2
2019, as scheduled, which reduced the electric availability as per the contract with Pemex
Availability refers to actual availability divided by contracted availability

(3)

(4)

Renewable energy

Revenue decreased by 4.1% to $761.1 million for the year ended December 31, 2019, compared to
$793.5 million for the year ended December 31, 2018. Further Adjusted EBITDA decreased by 9.1%
to $603.7 million for the period ended December 31, 2019, compared to $664.4 million for the
period ended December 31, 2018. Revenue decreased mainly due to the depreciation of the euro
and the South African rand against the U.S. dollar during 2019 compared to 2018. On a constant
currency basis, revenue for period ended December 31, 2019 would have been $793.2 million,
stable compared to December 31, 2018 revenue. The decrease was also due to lower production
in our solar assets in the United States, mainly due to lower solar radiation in 2019, longer than
expected maintenance stops in the first quarter and reduced capacity in Mojave in the second half
of 2019. This decrease was partially offset by an increase in production in Spain and Kaxu, which
continue to deliver solid operational performance and by an increase resulting from the
contribution of the newly acquired Melowind asset. Further Adjusted EBITDA and Further Adjusted
EBITDA margin decrease were due to the factors mentioned above as well as to the $39 million
one-time gain recorded in 2018 described in “Other Operating Income”. See “Comparison of the
Years Ended December 31, 2019 and 2018 Other operating income”.

Efficient natural gas

Revenue decreased by 6.5% to $122.3 million for the year ended December 31, 2019, compared to
$130.8 million for the year ended December 31, 2018, while Further Adjusted EBITDA increased by
14.5% to $107.5 million for the period ended December 31, 2019, compared to $93.9 million for
the period ended December 31, 2018. Further Adjusted EBITDA margin increased to 87.9% in the
year ended December 31, 2019 from 71.8% in the year ended December 31, 2018. A major overhaul
held in 2019, as scheduled, which reduced the electric availability as per the contract with Pemex
(Petroleos Mexicanos is the offtaker from Atlantica’s efficient natural gas asset ACT) without
causing a reduction in Further Adjusted EBITDA, since it was scheduled. Further Adjusted EBITDA
increased mainly due to the major overhaul previously mentioned, since operation and
maintenance costs are higher in the quarters prior to such major overhauls. In addition, Further

Adjusted EBITDA also increased also due to a one-time adjustment in the financial model of
approximately $6 million, with no impact in cash in 2019. Our ACT asset is accounted for under
IFRIC 12 following the financial asset model, and a decrease in future operation and maintenance
costs has increased the value of the asset, causing a one-time increase in Revenues and Further
Adjusted EBITDA.

Electric transmission lines

Revenue increased by 7.8% to $103.5 million for the year ended December 31, 2019, compared to
$96.0 million for the year ended December 31, 2018, while Further Adjusted EBITDA increased by
9.2% to $85.6 million for the year ended December 31, 2019, compared to $78.4 million for the
year ended December 31, 2018. Further Adjusted EBITDA margin increased to 82.7% in the year
ended December 31, 2019 from 81.7% in the year ended December 31, 2018. Both revenue and
Further Adjusted EBITDA increases were mainly due to the contribution from the recently acquired
transmission assets consisting of Chile TL3, ATN Expansion 1 and since October 2019 from ATN
Expansion 2, with no corresponding contribution in the previous year.

Water

Revenue and Further Adjusted EBITDA remained stable for the year ended December 31, 2019,
amounting to $24.6 million and $14.4 million, respectively, compared to $23.5 million and $13.9
million, respectively, for the year ended December 31, 2018. Further Adjusted EBITDA margin
decreased to 58.5% in the year ended December 31, 2019 from 59.1% in the year ended December
31, 2018.

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 Algonquin and 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

(cid:131) 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.

losses

(cid:131) We use insurance to seek coverage
against inherent risks in our markets.
Insurance policies are subject to
periodic review by our insurers. Our
property damage and business
interruption policies have exclusions
with respect to some equipment
which, if damaged, could result in
financial
and business
interruptions. Some of our project
finance
include
arrangements
conditions regarding coverage that
we could need to modify. If we were
to incur a serious uninsured loss or a
loss that significantly exceeded the
coverage limits established in our
insurance policies,
the resulting
costs could have a material adverse
effect on our business, financial
condition, results of operations and
cash flows.

(cid:131) Liquidity risk

(cid:131) Not being able to meet our financial

obligations as they fall due

(cid:131) Credit risk

(cid:131) Not being able to collect our

revenues.

Assessment of change in risk
year-on-year
(cid:131) In the last few years, we had
technical problems
in Solana.
Repairs and improvements were
carried out. In 2019 we completed
implementation of certain
the
improvements
heat
exchangers proposed by the EPC
contractor and the replacement of
one of the six heat exchangers and
we acquired an additional one as
back-up. We cannot assure that the
and
repairs,
replacements made will
be
effective or sufficient.

improvements

the

transformers

(cid:131) We filed several insurance claims in
recent periods. In summer 2017,
Solana experienced problems with
its
for which a
significant portion of the insurance
proceeds for property damages
were received in 2017. At Kaxu, we
filed a claim for property damage
and
loss of revenue following
technical problems with the plants
water pumps at the end of 2016.
insurance
We
compensation in 2017. In 2019 we
renewed our property damage and
business interruption policies with
certain exclusions with respect to
some equipment.

received

As of December 31, 2019, our
Corporate debt consists of:

(cid:131) The 2019 Note Issuance Facility
for $302 million (approximately

€268 million), maturing in April

2025.

(cid:131) A note issuance facility signed in
February 2017 for €275 million

(approximately

$308 million)

with three series maturing in

2022 (€92 million), in 2023 (€91.5

million) and 2024 (€91.5 million).
(cid:131) A $425 million Revolving Credit
Facility maturing in 2021 ($37.5

million) and 2022 ($387.5 million)

On December 31, 2019,

the

Company had drawn down a total

amount of $81.1 million.

(cid:131) A

euro

commercial

paper

program for up to €50 million with

a tenor of up to two years.

(cid:131) Other smaller credit lines in-place.
(cid:131) On January 29, 2019, PG&E, the
off-taker of Mojave,
for
reorganization under Chapter 11 of
the Bankruptcy Code in the U.S. A

filed

Mitigation of risk

(cid:131) Dedicated

supervisory

and

management teams.

(cid:131) Reporting and monitoring systems in

place.

(cid:131) Proven technology through years of

experience.

(cid:131) Operation and maintenance in house

or contracted with specialists.

(cid:131) Tracked down alternative O&M

opportunities in the market.

(cid:131) Use

the provisions of
guarantee where possible.

the EPC

(cid:131) On-going dialogue with project

finance lenders.

(cid:131) On-going analysis of
alternatives in the market.

insurance

(cid:131) Cash on hand: as of December 31,
2019, we had $66.0 million at the
corporate level plus $341 million
available under our revolving credit
facility.

(cid:131) A portion of cash flows generated
and distributed by our project
companies to the holding company
are retained at the holding company
level.

(cid:131) Processes and systems in place.
(cid:131) Possibility to change dividend policy.
(cid:131) Refinancing
of
or
maturities of the revolving facilities.
restricted
project

(cid:131) Substitute

extension

accounts for corporate guarantees

(cid:131) Many of our clients are investment

grade off-takers.

(cid:131) The main

for PG&E’s
reason
bankruptcy is the California wildfires

Risk

Impact

Assessment of change in risk
year-on-year

Mitigation of risk

default of the PPA agreement with
PG&E occurred with the PG&E
bankruptcy
filing. Since PG&E
failed to assume the PPA within
180 days from the commencement
of PG&E’s Chapter 11 proceeding,
a technical event of default was
triggered under our Mojave project
finance agreement in July 2019. If
not cured or waived, an event of
default in the project finance could
result in debt acceleration and, if
such amounts were not timely paid,
the DOE could decide to foreclose
on the asset. In addition, we are
experiencing restrictions to make
cash distributions from Mojave to
the holding level. Such events may
have a material adverse effect on
our business, financial condition,
results of operations and cash
flows. On January 29, 2020, one
its Chapter 11
year
bankruptcy
PG&E
filing,
announced that the majority of
stakeholders were supportive of
of
PG&E's
reorganization and a schedule to
confirm the plan by May 27, 2020
was filed with the Bankruptcy
Court. PG&E's proposed plan is
contingent upon having access to a
California state-run wildfire fund,
with such access contingent on
several factors including approval
from the California governor.

proposed

following

plan

including with all

in 2017 and 2018. PG&E has
continued to be in compliance with
the remaining terms and conditions of
the PPA,
the
payments terms of the PPA up
through the date hereof with the
exception of prepetition services
payable after the bankruptcy filing
date. According
information
publicly disclosed by PG&E, they are
working on their Chapter 11 process
with a target of exiting this process by
June 30, 2020. Since we are
experiencing delays in distributions
from Mojave, we decided
to
implement two measures:

On April 30, 2019, we entered
into the 2019 Note Issuance
Facility
refinance another
corporate debt. The 2019 Note
Issuance Facility provides that we
may capitalize at our choice
interest on the notes issued
thereunder for a period of up to
two years from closing at our
discretion, subject to certain
conditions and we have decided
to capitalize
interest for the
upcoming quarters until we have
further visibility on the PG&E
situation.

In June 2019, we signed our first
ESG-linked financial guarantee
line and we are using and expect
to continue use this guarantee
line
release
restricted cash in some of our
projects, providing additional
financial flexibility.

to progressively

(cid:131) During recent months, the credit
rating of Eskom has also weakened

(cid:131)

the case of Kaxu, Eskom’s

payment guarantees to our solar

and is currently CCC+ from S&P

plant Kaxu are underwritten by the

Global Rating (“S&P”), B3 from

South African Department of

Moody’s

Investor Service

Inc.

Energy, under the terms of an

(“Moody’s”) and BB- from Fitch

implementation agreement. The

Ratings Inc. (“Fitch”). Eskom is the

credit rating of the Republic of

offtaker of our Kaxu solar plant, a

South Africa as of the date of this

state-owned,

limited

liability

report BB/Baa3/BB+ by S&P,

company, wholly owned by the

Moody’s and Fitch, respectively.

government of the Republic of

South Africa. Eskom’s payment

guarantees to our solar plant Kaxu

are underwritten by the South

African Department of Energy,

under

the

terms

implementation agreement. The

credit ratings of the Republic of

(cid:131) We maintain a diversified portfolio
where the weight of each client is
limited. In addition, we expect that
our growth strategy will further
permit us to dilute the weight of
each client.

Risk

Impact

Mitigation of risk

Assessment of change in risk
year-on-year

South Africa as of the date of this

report are BB/Baa3/BB+ by S&P,

Moody’s and Fitch, respectively.

(cid:131) In addition, the credit rating of
Pemex, our offtaker to the ACT

agreement, has also weakened and

is currently BBB+ from S&P, Baa3

from Moody’s and BB+ from Fitch.

We have been experiencing delays

in collections

in the

last

few

months. Although we believe they

are partially due to changes in

personnel following the elections

last year, we continue to monitor

the situation closely.

(cid:131) Climate
change

(cid:131) Climate change is causing according
to experts, an increasing number of
severe and extreme weather events
which are a risk to our facilities,
including days of extremely high
temperatures, severe winds and
rains, hurricanes, droughts, fires,
cyclones and floods, among others.
(cid:131) Our business may be adversely
affected
mean
temperatures caused by climate
change.

rising

are

lines. We

(cid:131) A large majority of our business is
clean, including renewable electricity
generation, water desalination and
transmission
a
sustainable company and intend to
continue to be sustainable. In order to
have a positive impact on climate
change, we have a set a limit of 80%
from
of our revenues generated
renewables,
and
transportation
transmission infrastructures and water
assets.

(cid:131) We target to reduce our emission rate
per unit of energy generated by 10%
by 2030.

(cid:131) We intend to set an internal system to
identify, monitor and manage climate
related risks and opportunities.

(cid:131) Our geographic VPs and our
corporate Operations team monitor
weather conditions closely and we
have developed protocols to take
protective measures when necessary.
For example, if winds are forecasted,
our solar fields are placed in a defence
mode.

(cid:131) According

and

experts,

intensity

rising
temperatures are increasing the
of
frequency
droughts and risk of fire. For
example, in California, the size of
fires seem
increased
to have
significantly in the last 20 years,
which have also been very hot and
dry years. California wildfires have
catastrophic,
been
especially
fatalities and
causing human
significant material
losses. Our
including
transmission
transmission lines and substations
which are part of our solar assets,
could cause fires, which can create
significant
liabilities
if the fire
damaged third parties.

lines,

(cid:131) Severe floods could damage our
plants, especially our transmission
lines or our generation assets.
(cid:131) Severe winds could cause damage
in the solar fields in our solar
assets.

restrictions

(cid:131) Severe droughts could result in
water
a
deterioration of water properties.
(cid:131) Changes in temperature extremes
could also affect to the feed water
process
in
desalination plants, causing an
increase of the chemical products
consumption and generating a risk
of growth of algae and molluscs
within the facilities.

temperature

(cid:131) Storms with

intense

lightning
activity could damage our plants,
especially our wind assets. Our
in Uruguay have
wind
already
some
experienced
damages in the past and our assets
could be affected again.

farms

(cid:131) Furthermore, components of our
system, such as structures, mirrors,

Risk

Impact

Mitigation of risk

Assessment of change in risk
year-on-year
absorber tubes, blades, PV panels
or transformers are susceptible to
being damaged by severe weather,
including
In
addition, replacement and spare
parts for key components may be
difficult or costly to acquire or may
be unavailable

for example hail.

Although we have insurance in place
which cover these types of events, it
is extremely difficult to assess the
economic financial impact this may
have. All these events could cause a
material adverse effect
in our
business, results of operations and
cash flows.

costs.

cause

previously,
could

In addition, to the physical risks
rising
mentioned
temperatures
an
in our operation and
increase
maintenance
Rising
temperatures are associated to the
reduction of the cycle efficiency of
our turbines, a reduction of efficiency
in solar photovoltaic modules, lower
efficiency in wind facilities and higher
consumption of chemicals used for
operational
our
desalination plants, among others.

purposes

(cid:131) Access
future
acquisitions.

(cid:131) Impede our ability to execute our

growth strategy.

(optimizing

(cid:131) We have diversified our sources of
growth, which now include organic
opportunities
the
existing portfolio, price escalation
factors and through expansions of
and
our
acquisitions from third parties, as well
as our ROFO agreements.

partnerships

assets),

(cid:131) Dedicated local management teams

to identify opportunities.

and

policy

energy

number

evaluate

(cid:131) Our growth strategy depends on
our ability to successfully identify
acquisition
and
opportunities
complete
acquisitions on favourable terms.
The
acquisition
opportunities may be limited. Our
ability to acquire future renewable
energy projects or businesses
the viability of
depends on
projects
renewable
generally. These projects currently
are in many cases contingent on
public
mechanisms
including, among others, ITCs, cash
In
grants,
addition, we cannot be certain that
AAGES or Algonquin will offer us
ROFO
assets
under
Agreements or propose
co-
to us.
investments attractive
Furthermore, we will compete with
other companies for acquisition
opportunities from third parties,
which may increase our cost of
making acquisitions or cause us to
refrain from making acquisitions
from third parties. Some of our
competitors for acquisitions are
much
than us, with
substantially greater resources.

guarantees.

larger

loan

the

Risk

Impact

Mitigation of risk

Assessment of change in risk
year-on-year
(cid:131) In order to grow, we depend on
including

financing availability,
access to capital markets.

(cid:131) In order to grow our business, we
may acquire assets and businesses
which may have a higher risk
profile than the assets we currently
own. We may consider investing in
assets which are not currently in
operation and which are subject to
development and construction risk.
In addition, we may consider
acquiring businesses which are not
contracted,
regulated
including
businesses, which are subject to
demand risk. We may also consider
acquiring assets which are not
contracted or not fully contracted,
or subject
risk.
Furthermore, we may consider
acquiring assets with revenues not
denominated
in US dollars or
Euros, which would increase our
exposure to local currency.

to merchant

(cid:131) International
operations
including
emerging
markets.

the

We operate our activities in a range of
international locations and we may
expand our operations to certain
countries within the regions where we
are already present. Accordingly, we
face a number of risks including
adapting
regulatory
requirements of such countries, the
uncertainty of judicial processes, and
the absence, loss or non-renewal of
favourable
similar
treaties,
agreements, with local authorities or
political,
economic
social
and
and
instability. Our
activities
investments
in emerging markets
involve a number of risks that are
more prevalent than in developed
markets, such as economic and
governmental
the
possibility of significant amendments
to, or changes in, the application of
governmental
the
nationalization and expropriation of
private property, payment collection
difficulties,
problems,
social
substantial fluctuations in interest and
exchange rates, changes in the tax
framework or the unpredictability of
enforcement
contractual
of
provisions, currency control measures,
limits on the repatriation of funds and
other unfavorable interventions or

regulations,

instability,

agreement with

(cid:131) In 2019 we entered into a political risk
insurance
the
Multinational Investment Guarantee
Agency
insurance
for Kaxu. The
provides protection for breach of
contract up to $98.6 million in the
event the South African Department
of Energy does not comply with its
obligations as guarantor. We have
also
in our
political risk insurance for our assets
in Algeria with CESCE up to $38.2
million, including 2 years dividend
coverage. This insurance policy does
not cover credit risk

increased coverage

(cid:131) We intend to grow our portfolio
mainly in countries that we consider
stable in North America, Europe and
South America. We expect
that
in countries with a
investments
higher risk profile such as Algeria and
South Africa represent always a small
portion of our portfolio.

(cid:131) Local presence and knowledge of

each region.

(cid:131) Health & safety experienced teams.

addition, potential

(cid:131) In Chile violent social unrest started
in October 2019. Several social
measures were approved; however,
the social crisis has not been
resolved yet. Protests could have
an adverse effect on our business.
In
social
measures could also have an
adverse effect on our business.
Furthermore, in Algeria, protests
started in February 2019 after the
former president announced that
he would run for a fifth term in
office. Although the president quit
several
later,
weeks
demonstrations and protests have
been
and political
instability remains.

ongoing

(cid:131) Other downturns or disruptions
provoked by social unrest in the

countries where we operate, like

those we have seen in Chile or

Algeria, or diseases like the COVID-

19 could have a material adverse

impact in our business.

Risk

Impact

Assessment of change in risk
year-on-year

Mitigation of risk

imposed by public

restrictions
authorities.
(cid:131) Uncertainty or changes to any such
regulation could adversely affect the
profitability of our current plants
and our ability to refinance projects.

(cid:131) Regulation

legal,
environmental
general
and
compliance
-
of each asset

(cid:131) Regulation

Tax

(cid:131) Uncertainty or changes

tax
regulations could adversely affect
the profitability of our current plants
and our ability to refinance projects.
We are subject to changes in tax
regulation in all the jurisdictions
where we have assets.

(cid:131) Strong power purchase agreement or
concession contracts in many assets.
(cid:131) Investment grade credit ratings in

many of our clients.
(cid:131) Local management.
(cid:131) Reporting and monitoring system.

(cid:131) Management and specialized teams
(cid:131) Support of external advisors.

(cid:131) Revenues

in Spain are mainly
defined by regulation. Revenues
are based on a “reasonable of
reviewed
return” which was
following a proposal by
the
Spanish regulator CNMC based on
the weighted average cost of
capital (WACC). The WACC is the
calculation method that most of
the European regulators apply in
most of the cases to determine the
return rates applicable to regulated
activities within the energy sector.
Parameters have been reviewed at
the end of 2019 and have been set
for a six-year or twelve-year period
starting
January 1, 2020,
depending on each asset within
our portfolio. We estimate the
impact of this change to be
approximately € 3 million per year
reduction in its cash available for
distribution.

(cid:131) We have a transmission line in Chile
with revenues based on regulation,
which is also sensitive to changes in
regulation.

(cid:131) In general, changes in regulation in
all the geographies where we are
present may affect all our assets.
(cid:131) 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

carry forwards in the United States,

which could negatively affect our

cash flows. In 2017, the Abengoa

restructuring caused a change of

ownership limiting our ability to

use Net Operating Loss (NOLs)

carried forwards

in the United

States. In addition, changes in our

shareholder base during 2019 may

have

triggered an ownership

change under Section 382 of the

IRC.

In addition,

the

Internal

Revenue Service recently issued

proposed

regulations

for

the

calculation of built-in gains and

losses under Section 382.

enacted, these new regulations,

may significantly limit our annual

use of pre-ownership change U.S.

NOLs in the event a new ownership

Risk

Impact

Mitigation of risk

Assessment of change in risk
year-on-year
change occurs after the new rule is

in place.

(cid:131) According to public information,
the government of Spain has

proposed a modification to the tax

legislation

limit

certain

deductions and

introduces a

minimum tax rule in the Corporate

Income

Tax.

The

proposed

modification

would

also

contemplate a reduction in the tax

exemption on dividends received

from affiliates from 100% to 95%

exemption. This modification

subject to approval by Parliament

and could be changed in the future.

In addition, the details of the new

regulation

are

still

largely

unknown. Based on available public

information we do not expect a

significant impact in cash flows

from our Spanish solar assets in the

upcoming years.

(cid:131) The Chilean Congress

recently

approved

the

tax

reform bill

proposed by the local government

to increase taxes that would fund

the new social agenda, announced

after recent social protests. After a

preliminarily analysis, we do not

expect a significant impact in cash

flows from our Chilean assets.
(cid:131) In 2019 the Mexican Congress
approved the tax bill proposed by
the new government, which
introduces new provisions in the
Income Tax Law and Value Added
Tax Law, among others. The tax
reform introduced an additional
limitation to the deduction of
interest for tax purposes up to 30%
of the adjusted EBITDA. However,
this
limitation might not be
applicable to debt granted to
finance public infrastructure works,
construction and land located in
Mexico, exploration, extraction,
and other projects of the extractive
transport, storage or
industry,
and
distribution
hydrocarbons,
the
generation, transmission or storage
of electricity or water. Based on the
type of infrastructures held by
Atlantica in Mexico, we do not
expect a significant impact of this
measure in our cash flows.

oil
for

Risk

Impact

Assessment of change in risk
year-on-year

Mitigation of risk

(cid:131) Brexit

Political, social and macroeconomic
uncertainty.

(cid:131) Management and specialized

compliance teams continuously
tracking down any potential
change.

(cid:131) Reporting and monitoring system.

things,

impacts

negotiate

terms of

The exit of the United Kingdom
from the EU or prolonged periods
of uncertainty could result
in
deterioration,
macroeconomic
negative
stock
exchanges and decreased GDP in
the European Union. On January
31, 2020, the U.K. ceased to be part
of the European Union and entered
into a transition period to, among
other
an
agreement with the EU on the
future
the United
Kingdom’s relationship with the
European Union. The transition
period is currently expected to end
on December 31, 2020. As of the
date of this report, the United
Kingdom and the European Union
have not reached an agreement.
Therefore, the impact of the United
Kingdom’s departure from, and
future
the
European Union are uncertain.
There is the potential that the
United Kingdom and the European
Union may not agree
to a
withdrawal arrangement before
the date the United Kingdom
European
leaves
Union. Regardless of the eventual
timing or terms of the United
Kingdom’s exit from the EU, the
result of the 2016 referendum
to create significant
continues
political,
and
macroeconomic uncertainty

relationship with,

regulatory

the

longer

through

affecting

EU exit negotiations continue to
have limited impact to our markets.
However,
term effects
remain difficult to predict. Our
business operates
its
owned assets mainly outside the
UK, therefore we have not been
required to consider any changes
to our business model.
There could be changes to tax
the
regulation
repatriation of dividends
from
countries, which may
other
negatively affect us. Additionally,
the impact of potential changes to
the United Kingdom’s migration
policy could adversely impact our
employees of non-U.K. nationality
currently working in the United
Kingdom as well as have an
uncertain impact on cross-border
labour, all of which could have an
adverse effect on our operations.

Mitigation of risk

(cid:131) As previously explained, we have
measures in place to mitigate impacts
from PG&E Chapter 11. In addition,
we have a plan in place to improve
performance in Solana. In Kaxu, we
expect to obtain financial completion
in the upcoming months. In the case
of Cadonal, we expect to refinance
the asset.
(cid:131) Reporting

and monitoring

covenants in each contract

(cid:131) Management
compliance
continuously
change.

and

specialized
and
teams
tracking down any

legal

(cid:131) Algonquin has the right to appoint
their

directors proportionally
ownership.

(cid:131) Any transaction between us and
AAGES or Algonquin (including the
acquisition of any ROFO assets or any
co-investment with AAGES or
Algonquin or any investment on an
Algonquin asset) is subject to our
related party
transaction policy,
which requires prior approval of such
transaction by a majority of the non-
conflicted directors, typically our
independent directors.

Risk

Impact

(cid:131) Financing

(cid:131) Potential restrictions to distribute

agreements in
each contract

cash out of project companies

(cid:131) Declare project finance debt to be
due and payable immediately if
there is an event of default

(cid:131) Connection to
Algonquin

(cid:131) Our reputation is closely related to

Algonquin’s reputation.

Assessment of change in risk
year-on-year
(cid:131) In 2019, the bankruptcy of PG&E
resulted in an event of default
under
financing
the project
agreement (see details above).
(cid:131) As of December 31, 2019, Solana
met the minimum debt service
coverage ratio, however it did not
meet certain operating thresholds
applicable in 2019 for distributions.
The asset may not meet ratios or
other conditions in 2020 or future
years.

(cid:131) Kaxu had a reduced production
during the year 2017. In 2018,
although Kaxu’s debt coverage
reached the minimum threshold,
distributions were delayed as a
consequence of
the planned
finalization of the guarantee period
in late 2018. In 2019, Kaxu made
distributions after obtaining bank
approvals, since the asset has not
fulfilled all bank requirements to
reach financial completion, which is
expected to be obtained in the
upcoming months.

(cid:131) As of December 31, 2019, Cadonal
did not meet the minimum ratio for
distributions nor the minimum
the project
ratio
finance lenders. We obtained a
waiver from the lenders before
December 31, 2019.

required by

(cid:131) Algonquin beneficially owns 44.2%
of our ordinary shares and
is
entitled
to vote approximately
41.5% of our ordinary shares. As a
result of this ownership, Algonquin
has substantial influence on our
affairs and their ownership interest
and voting power constitute a
significant percentage of
the
shares eligible to vote on any
matter requiring the approval of
our shareholders. Such matters
include the election of directors,
the adoption of amendments to
our articles of association and
approval of mergers or sale of all or
a high percentage of our assets.
There can be no assurance that the
interests of Algonquin will coincide
with the interests of the rest of
shareholders or that Algonquin will
act in a manner that is in our best
interests.

(cid:131) Our ownership structure may give
rise to certain conflicts of interest
between us, Algonquin, and the
rest of our shareholders. Currently,

Risk

Impact

Assessment of change in risk
year-on-year

Mitigation of risk

spend

two of our directors are affiliated
with Algonquin. Regardless of the
merits of such claims, we may be
required
significant
management time and financial
resources in the defense thereof.
The existence of our related party
transaction approval policy may
not insulate us from derivative
claims related to related party
transactions and the conflicts of
interest described in this risk factor.
Additionally, to the extent we fail to
appropriately deal with any such
conflicts, it could negatively impact
our reputation and ability to raise
additional
the
funds
willingness of counterparties to do
business with us, all of which may
have a material adverse effect on
our business, financial condition,
results of operations and cash
flows.

and

(cid:131) Connection to

Abengoa

rate
foreign

(cid:131) Interest
and
currency
exchange rate

contracts

(cid:131) Abengoa has obligations with us
under operation and maintenance
agreements,
certain obligations
originally based on EPC agreements,
as well as other indemnities and
obligations. We have operation and
maintenance
with
Abengoa in some of our assets. We
cannot guarantee that 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.

(cid:131) Cross-default provisions related to
future defaults by Abengoa could
trigger default under the project
finance arrangement of Kaxu.

(cid:131) Increases in rates would raise our
project

finance
expenses
companies or corporate level.

that performs

(cid:131) Although certain relations remain,
Abengoa is no longer our largest
shareholder. In 2019 we closed the
acquisition of ASI Operations, the
company
the
operation
and maintenance
services to Solana and Mojave
plants. Additionally, we have
internalized part of the operation
and
activities
contracted in two wind assets,
maintaining a direct relationship
with the supplier for the turbine
maintenance services.

maintenance

(cid:131) No material changes.

(cid:131) Revenues and expenses of our solar
assets in Spain and our solar asset in
South Africa are denominated in
euros and South African Rands,
respectively. Depreciation in the
value of euro or South African rand

(cid:131) In 2019 we have

reduced our
exposure to Abengoa as our main
O&M supplier.

for

operation

(cid:131) We believe we could find alternative
suppliers
and
maintenance services if required, as
we have already done in certain
countries.
(cid:131) Internalized

O&M
agreements previously performed by
Abengoa.

several

the

(cid:131) In our assets revenues, debt and most
of
always
expenses
denominated in the same currency,
creating a natural hedge.

are

(cid:131) 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

Risk

Impact

Assessment of change in risk
year-on-year

Mitigation of risk

against U.S. dollar may have a
negative impact on our operating
results and our cash available for
distribution.

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

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.

(cid:131) We intend to maintain a ratio of over
for

80% of our cash available

distribution denominated

in U.S.

dollars or euros and to hedge the

euros for the upcoming 24 months

on a rolling basis strategy.

(cid:131) Over 90% of our total interest risk

exposure is fixed or hedged.

Financial Risk Management

Interest rates

We incur significant indebtedness at the corporate level and asset level. The interest rate risk arises
mainly from indebtedness with variable interest rates. Most of our debt consists of project debt. As
of December 31, 2019, approximately 92% of our project debt has either fixed interest rates or has
been hedged with swaps or caps.

On November 17, 2014, we issued the 2019 Notes in an aggregate principal amount of $255 million
with an original maturity date of November 15, 2019. On May 31, 2019 we prepaid the 2019 Notes
before maturity in accordance with the terms thereof with the proceeds of the notes issued under
the Note Issuance Facility 2019.

On April 30, 2019, we entered into the Note Issuance Facility 2019, a senior unsecured financing
with Lucid Agency Services Limited, as agent, and a group of funds managed by Westbourne
Capital as purchasers of the notes issued thereunder for a total amount of the euro equivalent of
$300 million. The notes under the Note Issuance Facility 2019 were issued in May 2019 and are due
on April 30, 2025. The 2019 Note Issuance Facility includes an upfront fee of 2% paid upon
drawdown. From their issue date to December 31, 2019 interest on the notes issued under the Note
Issuance Facility 2019 accrued at a rate per annum equal to the sum of 3-month EURIBOR plus a
margin of 4.65%. The principal amount of the notes issued under the Note Issuance Facility 2019
was hedged with an interest rate swap, resulting in an all-in interest cost of 4.4%. Starting January
1, 2020, the applicable margin for the determination of interest on the notes issued under the Note
Issuance Facility 2019 decreased to 4.50% resulting in an all-in interest cost of 4.24, following
satisfaction of the requirements set forth in the Note Issuance Facility 2019 for such margin
decrease, including the effectiveness of the Royal Decree-law 17/2019 which approved a
reasonable rate of return higher than 7% . The Note Issuance Facility 2019 provides that we may
elect to, subject to the satisfaction of certain conditions, capitalize interest on the notes issued
thereunder for a period of up to two years from closing at our discretion, subject to certain
conditions. We elected to capitalize interest on the notes issued under the Note Issuance Facility
2019 for the upcoming quarters.

On February 10, 2017, we entered into the Note Issuance Facility 2017, a senior secured note facility
with Elavon Financial Services DAC, UK Branch as agent and a group of funds managed by
Westbourne Capital as purchasers of the notes issued thereunder for a total amount of €275 million
(approximately $308.4 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 series accrues at a rate per annum equal to the sum of 3-month
EURIBOR plus 4.90%. We fully hedged the principal amount of the notes issued under the Note
Issuance Facility 2017 with a swap that fixed the interest rate at 5.5%. We expect to repay in full
and cancel all series of notes issued under the Note Issuance Facility 2017 with the proceeds of the
2020 Green Private Placement.

$125 million to a total limit of $425 million and the maturity of a portion of loans in a principal
amount of $387.5 million extended from December 31, 2022, with the remaining $37.5 million
maturing on December 31, 2021. As of December 31, 2019, we had $84 million outstanding under
the Revolving Credit Facility and $341.0 million available. Loans under the facility accrue interest at
a rate per annum equal to: (A) for Eurodollar rate loans, LIBOR plus a percentage determined by
reference to our leverage ratio, ranging between 1.60% and 2.25% 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 prime rate of the administrative agent
under the Revolving Credit Facility and (iii) LIBOR plus 1.00%, in any case, plus a percentage
determined by reference to our leverage ratio, ranging between 0.60% and 1.00.

On February 6, 2020, we completed the pricing of a total amount of €290 million (approximately
$319 million), senior secured notes maturing in June 20, 2026 (Green Private Placement), which are
expected to be issued under a senior secured note purchase agreement to be entered into with a
group of institutional investors as purchasers. Interest on the notes is expected to accrue at a rate
per annum equal to 1.96%. Signing of the Note Purchase Agreement 2020 is expected to occur on
or about April 1, 2020 and closing is expected expected to occur promptly thereafter, subject to
certain conditions. We cannot guarantee the such conditions will be satisfied and that closing will
occur. In the case the transaction is closed, if at any time the rating of such senior secured notes is
below investment grade, the interest rate thereon would increase by 100 basis points until such
notes are rated again investment grade. The 2020 Green Private Placement complies with the Green
Bond Principles and has a second party opinion by Sustainalytics. The proceeds of the 2020 Green
Private Placement are expected to be used to repay in full and cancel of all series of notes issued
under the Note Issuance Facility 2017.

To mitigate 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. We estimate
that approximately 91% of our total interest risk exposure was fixed or hedged as of December 31,
2019. 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 totally
or partially to, U.S. dollars. Our solar power plants in Spain have their revenues and expenses
denominated in euros, and Kaxu, our solar plant in South Africa, has its revenues and expenses
denominated in South African Rands.

Our strategy is to hedge cash distributions from our Spanish assets. We 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 have
hedged 100% of our euro-denominated net exposure for the next 12 months and 75% of our euro-
denominated net exposure for the following 12 months. We expect to continue with this hedging
strategy on a rolling basis.

Although we hedge cash-flows in euros, fluctuations in the value of the euro in relation to the U.S.
dollar may affect our operating results. 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 the South African rand in relation to the U.S. dollar may also affect our operating
results.

Apart from the impact of translation differences described above, the exposure of our income
statement to fluctuations of foreign currencies is limited, as the financing of projects is typically
denominated in the same currency as that of the contracted revenue agreement. This policy seeks
to ensure that the main revenue and expenses in foreign companies are denominated in the same
currency, limiting our risk of foreign exchange differences in our financial results.

Credit risk

Eskom’s credit rating has also weakened and is currently CCC+ from S&P, B3 from Moody’s and
BB- from Fitch. Eskom is the offtaker of our Kaxu solar plant, a state-owned, limited liability
company, wholly owned by the government of the Republic of South Africa. Eskom’s payment
guarantees to our solar plant Kaxu are underwritten by the South African Department of Energy,
under the terms of an implementation agreement. The credit ratings of the Republic of South Africa
as of the date of this report are BB/Baa3/BB+ by S&P, Moody’s and Fitch, respectively.

In addition, the credit rating of Pemex has also weakened and is currently BBB+ from S&P, Baa3
from Moody’s and BB+ from Fitch. We have been experiencing delays in collections in the last few
months. Although we believe they are partially due to changes in personnel following the elections
last year, we continue to monitor the situation closely.

Apart from these situations, we consider that in general 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.

In addition, in 2019 we entered into a political risk insurance agreement with the Multinational
Investment Guarantee Agency for Kaxu. The insurance provides protection for breach of contract
up to $98.6 million in the event the South African Department of Energy does not comply with its
obligations as guarantor. We have also increased coverage in our political risk insurance for our
assets in Algeria with CESCE up to $38.2 million, including 2 years dividend coverage. These
insurance policies do not cover credit risk.

Liquidity risk

The objective of our financing and liquidity policy is to ensure that we maintain sufficient funds to
meet our financial obligations as they fall due.

Project finance borrowing permits us to finance projects through project debt and thereby insulate
the rest of our assets from such credit exposure. We incur 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

Environment, Social and Governance

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

We believe that climate change is already having an impact in our activities. Scientists have stated
that the world will suffer significant negative impacts if the overall society, governments and
corporations do not take the right steps to reduce greenhouse gas emissions. A special report
published in October 2018 by the Intergovernmental Panel on Climate Change showed that global
CO2 concentration since 2000 has increased 10 times faster than any sustained rise in CO2 during
the past 800,000 years. In this sense, by limiting global warming we can also help to reduce risks
caused by climate change such as natural disasters or extreme droughts. At Atlantica we plan to
continue contributing to these goals.

Atlantica has been firmly committed to sustainability since its incorporation. Sustainability is one
of our five Core Values and for us, it represents a holistic approach that includes operational, health
and safety, environmental, social, governance and financial performance. We believe that by
investing in sustainable sectors and managing our assets in a sustainable manner we will create
more value over time to all our stakeholders.

Our strategy is focused on climate change solutions in the power and water sectors and we
therefore see sustainability and climate change as a growth opportunity for us. As such, we are
committed to maintain 80% of our revenues generated from low-carbon footprint including our
renewable, transportation and transmission infrastructures and water assets and, to reduce our
emission rate per unit of energy generated by 10% by 2030.

We produce clean electricity, desalinated water and provide electricity transmission in a safe,
reliable and environmentally responsible way. We focus mainly on greenhouse gas emissions, water
and waste management, health & safety, human capital and governance.

In June 2019, we signed our first ESG-linked financial guarantee with ING. The guarantee line has a
limit of approximately $39 million and the cost is linked to Atlantica’s environmental, social and
governance performance under a leading sustainable rating agency (Sustainalytics). The green
guarantees will be exclusively used for renewable assets.

In 2019, we co-invested with Algonquin in a 75 MW wind plant in Canada and we closed the
acquisition for the previously announced acquisition of ATN Expansion 2, two transmission lines
that connect a solar and a wind plant to our transmission line. Thus, we continue promoting a low-
carbon energy industry and a business model based on a sustainable development. Additionally,
we successfully incorporated in our portfolio the 50 MW capacity wind farm and the mini-hydro
asset that we acquired in 2018 in Uruguay and Peru, respectively.

At Atlantica, we intend 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.

In January 2020, the Carbon Disclosure Project (“CDP”) issued Atlantica’s 2019 ESG rating. We were
rated a “B”, increasing two notches compared to our 2018 evaluation.

In February 2020, Sustainalytics’ issued Atlantica’s 2019 ESG Risk Rating. We were rated as the top
company within both renewables and utilities, and in the top 1% in the global ratings universe.

Atlantica is a signatory to the United Nations Global Compact (“UNGC”), the world’s largest
corporate sustainability initiative with more than 9,700 participating companies from 160 countries.
The UNGC is an initiative which encourages companies and organizations worldwide to adopt
sustainable and socially-responsible policies. The participation in the UN Global Compact is
voluntary and those entities who sign it pledge to uphold and disseminate the principles and report
on their progress once they apply them in their management. By joining the UNGC, business, as a
primary driver of globalization, can help ensure that markets, commerce, technology and finance
advance in ways that benefit economies and societies everywhere.

As part of its commitment with sustainability, Atlantica has formally adopted 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.

Atlantica is committed to orient its action to 6 of the 17 Sustainable Development Goals: Climate
action, Affordable and clean energy, Clean water and sanitation, Decent work and economic
growth, Gender equality and Life on land.

In December 2019, we updated and issued several key documents following our long-term
strategy:

- Updated all our Compliance documents, including the Code of Conduct and the Supplier Code

of Conduct

Issued a Diversity and Inclusion policy

- Updated the Environmental policy
-
-
-
-

Issued a Biodiversity policy

Issued an Asset Management policy

Issued a Community Development and Involvement policy

Further details on these policies are provided in this report.

Environmental Policy

At Atlantica, we are determined to be part of the solution to climate change as a key pillar of our
long-term strategy:

- We are committed to invest in renewable energy assets, and in transmission, natural gas and

storage as enablers of the energy transition.

- Environment will remain as a priority in planning our business through: (i) innovation and eco-
efficiency initiatives and, (ii) the gradual reduction of environmental impacts of all our activities.

We have set goals related to: (i) maintain a very significant amount of our revenues generated from
low-carbon footprint assets (i.e., renewable energy, transportation and transmission infrastructures
and water assets) and, (ii) reduce our emission rate per unit of energy.

Through this policy, we commit to:

- Protect the environment in the areas where we operate and integrate environmental protection

in the decision-making processes.

- Comply with environmental laws, regulations, permit requirements and internal policies in each

of the markets where we operate.

- Continue to increase environmental awareness.
- Reduce our GHG emissions over time and disclose GHG initiatives, targets, deadlines,

monitoring and periodic audits.

- Analyze and implement internal energy efficiency measures in our operating assets.
- Maintain and periodically review our environmental management system.
- Foster using natural resources more efficiently.
- Maintain the necessary indicators to obtain quantifiable information to measure and monitor
the environmental performance and impacts of our activities and, define and implement action
plans to reduce such impact in relation with:
- Emissions: calculating and monitoring our Scope 1, 2 and 3 GHG emissions.
- Water: calculating and monitoring our water usage by promoting a rational and sustainable

use.

- Waste: calculating and monitoring our waste and implementing initiatives aimed at

minimization and improvement of waste management.

- Appropriately manage environmental risks and opportunities. We have developed a risk
analysis methodology based on ISO 31000 and common market practices. As such, we commit
to maintain a robust risk analysis process that at least contains:

- Risk identification: identify the causes that may turn into a risk situation, classifying those

potential causes in natural, human, intentional, accidental and technological.

- Risk assessment: evaluate the risk including an analysis of the potential frequency and

impact.

- Risk management plan: manage the risk in order to mitigate the effects that it may cause.
- Consult and collaborate with environmental third-party oriented stakeholders when
appropriate and foster discussions and partnerships on environmental issues with public and
private entities.
Identify relevant non-GHG air emissions, analyze initiatives and appropriately implement
measures to reduce such emissions.
Implement and share best practices when appropriate.

-
- Report key measures taken towards the conservation of environment in the areas where we

operate.

The Board of Directors of Atlantica is responsible for the oversight of environmental risks and
opportunities as well as overseeing the implementation of specific initiatives.

Atlantica’s senior management monitors the accomplishment of this Environmental Policy in the
Environment, Social and Governance (ESG) Committee.

Our Environmental and Quality Management System complies with the standards ISO 14001 and
ISO 9001. These certifications cover management and acquisition of contracted assets. They were
obtained for the first time in 2015 and are valid until May 2021. Our Environmental and Quality
Management System is audited annually by an external third party (DNV GL).

Our 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 and monitor the
environmental impact of our activities and we analyse plans to reduce our emissions, water and
waste.

We perform annual internal audits in our assets aimed at reviewing compliance with our best
practices and promoting constant improvement. These audits are focused on a broad range of
areas of asset management and include the environmental aspects. The purpose of these audits is
to review the operational, maintenance, health and safety, and environmental indicators, as well as
compliance and reporting requirements. We intend to assure compliance with our best practices.
In 2019, 11 of our assets were audited and 206 improvement actions were identified. Action plans
have been set to reach the internal standards required and are currently ongoing.

Greenhouse Gas Emissions

Atlantica complies with the requirements of the United Kingdom Climate Change Act 2008 for
greenhouse gas emissions reporting and with the requirements of the Commission Regulation (EU)
No 601/2012. The emissions data presented in this section corresponds to emissions in the annual
periods ended December 31, 2019 and 2018.

Our focus on renewables and sustainable technologies allows us to have greenhouse gas emissions
rates per unit of electricity produced significantly lower than those traditional utilities whose
portfolio is mainly based in fossil fuels. As of December 31, 2019 81% of our installed capacity

corresponds to renewable assets and 19% mainly corresponds mainly to ACT, our efficient natural
gas plant in Mexico.

ACT has the status of an “efficient cogeneration facility” according to the Comision Reguladora de
Energia (CRE), the Mexican energy regulator. The CRE categorises as efficient plants those facilities
which can deliver energy above a defined efficiency threshold. This status, at the same level of
renewables according to the Mexican regulation, allows ACT to benefit from certain favorable
conditions with regard to interconnection and transmission.

Renewables
81%

Efficient Natural Gas
19%

Installed capacity in generation assets, MW

If we compare our emissions with emissions rates of traditional utilities where generation is based
in fossil fuels, approximately 4.7 million tons of equivalent CO2 are saved to the atmosphere
compared with a 100% fossil fuel-based generation.

0.71

h
W
M
/
e
2
O
C
f
o
s
n
o
t

0.9

0.6

0.3

0.0

0.18

Atlantica Yield emissions

Electricity-related emissions
factor (AVERT)

Comparison of Atlantica’s GHG emission ratio2 and fossil-fired generation GHG emissions ratio 3

Emissions figures on this report are quantified and reported according to the guidelines of the
Greenhouse Gas (GHG) Protocol, as follows:

(cid:120) Scope 1: Emissions of greenhouse gas from sources that are owned or controlled by the

Company.

(cid:120) Scope 2: Indirect emissions of greenhouse gas from consumption of purchased electricity, heat

or steam.

(cid:120) Scope 3: Indirect emissions of greenhouse gas not included in scope 2 that occur in the value
chain of the company, including both upstream and downstream emissions, as well as the
emissions of our non-consolidated affiliates.

Scope 1 emissions from our solar plants in Spain and scope 1 and 2 emissions from our efficient
natural gas asset have been verified by external auditors. These externally verified emissions
represent approximately 92% of Atlantica’s Scope 1 and 2 emissions, and a 65% of total emissions.
The verification includes information used for its calculation, such as emission factors and activity
data.

The emissions are calculated based on the criteria defined by the Greenhouse Gas Protocol,
according to the operational control approach. Our reported emissions include emissions of
methane (CH4), and nitrous oxide (N2O) as CO2 equivalents. We use the GHG inventories conversion
factors indicated by the organizations listed below:

Intergovernmental Panel on Climate Change (the “IPCC”)

- United States Environmental Protection Agency (the “EPA”)

- 2019 GHG National Inventory from the Ministry of Ecological Transition in Spain

Scope 3 emissions have been calculated considering an economic input-output analysis and key
emission factors from CEDA’s 5.0 database. Additionally, Scope 3 emissions have been calculated
using the (i) fuel consumption activity data and (ii) emission factors disclosed at WTT DEFRA 2018.

88% of the total GHG emissions generated in 2019 come from our natural gas plant in Mexico.

2 Emission rate calculated taking into account Scope 1 and 2 GHG emissions and energy generation of our power assets,
both electric and thermal energy.

3 The Greenhouse Gas Equivalences Calculator uses the Avoided Emissions and Generation Tool (AVERT) U.S. national
weighted average CO2 marginal emissions rate to convert reductions of Kilowatt-hours into avoided units of carbon
dioxide emissions.

Efficient Natural
Gas 88%

Others 12%

GHG emissions by Technology

Atlantica is committed to promote a low-carbon generation in its portfolio. We plan to reduce our
carbon emissions footprint mainly with the acquisition of renewable assets that will increase our
generation base keeping emission rates controlled. We intend to maintain an 80% of our revenues
generated from low-carbon footprint including our renewable, transportation and transmission
infrastructures and water assets.

Given that our largest business sector since our incorporation is renewable energy, our GHG
emissions have always been significantly lower than those of a company generating electricity from
fossil fuel sources. As previously explained, the emissions of our generation assets are 0.18 tons of
CO2 per MWh of electricity produced, compared to 0.71 tons of CO2 per MWh in a 100% fossil
fuel-based generation. Reducing emissions is significantly more challenging for a renewable
business than, for example, for a traditional utility with a business largely based on fossil fuel
generation transitioning progressively to renewables. Our goal is to reduce our emission rate per
unit of energy generated by 10% by 2030.

Greenhouse gas emissions in 2019 and 2018 have been as follows:

e
2
O
C
f
o
s
n
o
t

0
0
0

3,000

2,500

2,000

1,811

1,533

1,500

1,000

500

793

719

145

123

2,749

2,376

2018

2019

Scope 1

Scope 2

Scope 3

Total

Greenhouse gas emissions breakdown by scope

Total carbon dioxide equivalent emissions generated by the Company in 2019 reached 2,376
thousand tons, compared to 2,749 thousand tons generated in 2018. This 16% GHG emissions
decrease is mainly due to a reduction of our natural gas consumption in ACT. In 2019, our efficient
natural gas plant had major overhaul in February and May. As a result, production was lower, and
emissions were lower as well.

0.40

0.30

0.20

0.19

0.17

h
W
M
/
e
2
O
C
f
o
s
n
o
t

0.10

0.00

0.27

0.25

2018

2019

0.07

0.01

Scope 1

Scope 2

Scope 3

Total

Greenhouse gas emissions ratio from generation assets per energy generation by scope4

The rate of equivalent tons of Carbon Dioxide (CO2) emissions per energy generation is 0.25 in
2019 versus 0.27 in 2018. This ratio is calculated considering generation assets (renewable energy
and efficient natural gas). The decrease is mainly due to the reduction of ACT’s emissions as well
as the reduction of the aggregated generation in all our assets.

Water management

We are committed to make an efficient use of water in our operations. There are two main types
of water use in our operations:

1. Power generation in our renewable assets, which use cycle water in the turbine circuit and in

refrigeration processes.

2. Generation of drinking water for local communities and industries through desalination of

seawater.

1. Power generation

Our renewable segment utilizes water in its power generation process. 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

4 The ratio has been calculated considering electric and thermal energy generated by our efficient natural gas plant

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.

As an example, we have implemented an air-dry cooling system, instead of cooling towers, to
refrigerate the condensers in one of our solar plants. This plant is placed in an area with water
scarcity problems and this system reduces the water demand.

Water Withdrawal and Discharges in Power Generation

h
W
M

r
e
p
3

3.41

3.39

2018

2019

0.66

0.57

Withdrawal

Discharges

Water withdrawal and discharge ratios

In 2019, we withdrew 11.0 million cubic meters of fresh water at our power generation plants and
we returned 1.9 million cubic meters (17%) back to the source. In 2018, we withdrew 10.4 million
cubic meters of fresh water and returned 2.2 million cubic meters (21%) 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 related to the electric production of our assets in 2019 compared
to 2018. We implemented better water-use practices in operation and maintenance of our solar
plants, such as adjustments in the operating cycles of the water-cooling towers. In 2019, we
withdrew 11.0 million cubic meters which represented 50% of the limits allowed by our water

permits. The difference between the water permit limits and actual water withdrawn represents
water savings.

2. 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. We withdraw sea water for desalination
purposes as specified in the concession agreements of our two desalination plants.

In 2019, we withdraw 228.7 million cubic meters of sea water, which went through the desalination
process of salt and minerals removal in our water treatment facilities to prepare it for human use.
We produced 101.2 million cubic meters of desalination water and returned 127.5 million cubic
meters (56%) back to the sea. In 2018, we withdrew 220.2 million cubic meters and returned 120.4
million cubic meters (55%) 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 approximately 2.2 million
people.

Waste management

Our assets produce two main types of waste, hazardous and non-hazardous. The waste included
in the category of hazardous are those from industrial processes related with the use of chemical
products. On the other hand, all material that does not contain substances that might be harmful
to human health or the environment are non-hazardous waste. Atlantica has a comprehensive
waste control to ensure they are correctly managed.

The increase in 2019 in hazardous waste is mainly due to an environmental accident in one of our
solar assets in Spain. We undertook all necessary measures to minimize its impact, informed public
authorities, performed a root-cause analysis, implemented corrective actions to remediate
contaminated soils, hence reducing its impacts and, internally shared the lessons learnt.

The non-hazardous waste corresponds to the waste water treatment plants and the reuse of the
waste water before the discharges.

s
e
t
s
a
w

f
o
s
n
o
t

25,000

20,000

15,000

10,000

5,000

10,543

2,483

21,769

19,836

2018

2019

Hazardous

Non-Hazardous
Hazardous and Non-hazardous Waste removed

We are committed to improve our waste management.

Biodiversity Policy

For Atlantica, the protection of the ecosystem is a critical issue for global sustainability and we
intend to promote its conservation as an essential mean for environmental, economic and social
progress.

With the implementation of this policy we emphasize our commitment to protecting biodiversity
and consequently, minimizing and having “no net loss” or a “net positive impact” on biodiversity
conservation in areas where we operate.

At Atlantica, we are aware that our assets can cause interactions with various ecosystems,
landscapes and species. The Company therefore commits to promoting the biodiversity of the
ecosystems, allowing balanced co-existence, and conserving, protecting and promoting the
development and growth of the natural ecosystem.

Our goal is to minimize and/or compensate any potential negative impacts that our activities may
have on biodiversity.

We commit to:

-
Identify biodiversity priority areas and avoid operating in areas with the highest diversity value.
- Maintain the preservation of biodiversity in the strategy of the Company, including in

investment decisions.

- Apply a preventive approach to minimize the impacts of new infrastructure on biodiversity,

bearing in mind the entire life cycle of the asset.

- Promote the offset of impacts caused by the Company’s activities and the restoration of natural
resources. “No net loss” or “net positive impact” on biodiversity conservation in the
communities where we operate (e.g., through land rehabilitation)

- Continuously supervise and assess our impact on biodiversity to minimize our impact.
- Work to meet or exceed laws and regulations related to biodiversity.

- Continue identifying and implementing best practices appropriately.
- Collaborate with governments, local communities, civil organizations and other biodiversity

stakeholders in biodiversity conservation, awareness and research when appropriate.

- Transparently report key measures taken on biodiversity.

Finally, some of our plants will eventually need to be dismantled. As such, we commit to:

- Update the closure plan on an as needed basis.
- Set aside funds to cover closure and rehabilitation following the contractual obligations.
- Have our senior management responsible and accountable for dismantling activities and

rehabilitation.

- Consult local communities in closure planning.
- Report on closure implementation and site rehabilitation.

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 respect personal dignity, privacy and personal rights of every individual. We do not tolerate
discrimination against anyone based on any personal characteristic (ethnic background, culture,
religion, sexual identity, races, gender, etc.)

Freedom of association is a human right as defined by international declarations and
conventions. In this context, freedom of association refers to the right of employers and workers
to form, to join and to run their own organizations without prior authorization or interference by
the state or any other entity. The right of workers to collectively bargain the terms and conditions
of work is also an internationally recognized human right. Collective bargaining refers to all
negotiations which take place between one or more employers or employers' organizations, on the
one hand, and one or more workers' organizations (trade unions), on the other, for determining
working conditions and terms of employment or for regulating relations between employers and
workers.

Atlantica joined the United Nations Global Compact, whose principles derivate from, among others,
the Universal Declaration of Human Rights and the International Labour Organization’s Declaration
on Fundamental Principles and Rights at Work. By joining the UN Global Compact, we are
determined to adopt the ten principles and is committed to orient its action to 6 of the 17
Sustainable Development Goals. 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 or
regulations.

Finally, 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
on our human rights policy by implementing it into the processes that govern our business
activities in all the geographies where we are present.

Employees

At Atlantica, Collaborative Environment is one of our core values. Respect, teamwork and
empowerment are key principles to build strong teams.

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.

We have built strong standardized processes for evaluating performance, training and developing
our employees. We have in-place a career development program, performance assessments and
skill training programs aimed at talent retention and development.

To retain our employees, we offer a compensation package that includes monetary and in-kind
remuneration.

In 2019 and 2018 our compensation policy was based on these four pillars:

1. Predefined remuneration structure ranges based on market surveys provided by external

consultants.

2. Annual performance appraisal to 100% of our employees.
3. Variable compensation based on company targets, department targets and specific targets.
4. Long term incentive plan for management.

We offer six categories of training to our employees to improve different set of skills, make them
feel part of Atlantica’s team and culture, and as a measure to retain talented employees:

- Atlantica: all new employees must take our “Introduction to Atlantica” course during their
induction period. In addition, all the employees receive training about our compliance policies

and management policies

- Management skills: are soft-skill courses offered to improve negotiation, team-working, team-

building, decision-making, leadership and communication, among other skills.

- Technical knowledge courses are specific to each technical field.
-

Languages: to allow our employees to effectively operate in the international setting, we offer

a number of language courses

- Health & Safety is a key part of our culture and philosophy, and we offer a number of trainings

to both our employees and O&M personnel to reinforce it.

In 2019, the number of employees has increased significantly with respect to the previous year,
from 217 as of December 31, 2018 to 425 as of December 31, 2019. The increase is a result of the
internalization of our operation and maintenance in the United States. In August 2019, we acquired
ASI Operations, the company providing O&M services to the US solar assets. This subsidiary
brought 199 new employees, of which approximately 155 were blue collar employees and
approximately 90% were men. In the information below we are providing average number of
employees during the year following UK regulations.

The average number of employees for the year 2019 was 306 compared to 207 in 2018.

The following table shows the average number of employees for the year 2019 and 2018 on a
consolidated basis:

Average Number of Employees per Geography
North America
South America
EMEA
Corporate
Total

2019
112
41
55
98
306

2018
30
33
57
87
207

Average Number of Employees per Category

2019

2018

Management
Middle Management
Engineers and Graduates
Assistants and Professionals
Asset Operations Employees

Total

Average Number of Employees per Gender
Male
Female

Total

16
49
151
17
73

306

2019

211
95

306

16
39
115
15
22

207

2018

122
85

207

The increase in the average number of employees for the year ended December 31, 2019 as
compared to the year ended December 31, 2018 is primarily driven by the acquisition of ASI
Operations. ASI Operations employees consist mostly of blue-collar workforce, out of which
approximately 90% are men.

In 2019, 95 out of 306 average employees were women, representing 31% of the Group personnel.
In 2018, 85 out of 207 employees were women, or 41% of the total headcount.

Our objectives encompass removing any barriers we might have, empowering women and ensuring
women develop with the same opportunities as men. In 2019, we did not receive any
communication with respect to incidents relating to potential situations of discrimination.

In 2019 our consolidated employee benefit expense was $32.2 million, of which $27.6 million
corresponded to wages and salaries, $3.0 to social security costs incurred by the Company and the
rest, to other expenses. In 2018 our consolidated employee benefit expense was $15.1 million, of
which $12.5 million corresponded to wages and salaries, $2.1 to social security costs incurred by
the Company and the rest, to other expenses. The increase mainly comes from the acquisition of
the operation and maintenance services in our U.S. solar assets in July 2019 and the reversal of the
accrual corresponding to the 2016-2018 Long-Term Incentive Plan.

The graphs below summarize the age and gender diversity of our people as of December 31, 2019
and 2018:

2018

2019

100%

80%

60%

40%

20%

1%
11%

24%

Women

19%

29%

Men

100%

80%

60%

40%

20%

4%
12%

17%

Women

13%

15%

23%

12%

Men

Below 30

31-40

41-50

Above 51

Below 30

31-40

41-50

Above 51

Below is the table of our key management team:

Name

Position

Year of birth

Santiago Seage

Chief Executive Officer

Francisco Martinez-Davis Chief Financial Officer

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

1969

1963

1968

1967

1979

1980

1973

There are no potential conflicts of interest between the private interests or other duties of the
members of the key management listed above and their duties to Atlantica Yield. There are no
family relationships among any of our executive officers or directors.

Diversity and Inclusion Policy

At Atlantica, we are convinced that the diversity of our workforce is an asset that enriches the
Company with different ideas, perspectives and experiences. We acknowledge the contribution
from people from different genders, nationalities, cultures, races, professional backgrounds,
abilities, socio-economic backgrounds and ages. We believe that employees with diverse skills
represent an important resource, which increases our chances to identify innovative solutions and
ultimately results in a positive impact on our business performance as well as in our stakeholders.

We promote diversity and provide a work environment free of discrimination, intimidation and
harassment where everyone can fully participate in the success of the business and where all
employees are valued for the distinctive skills and experiences they can bring to the Company.

Our goal is to build a workplace which allows for a prosperous workforce where everybody is
treated equally and respected. We believe that a collaborative environment and good corporate
climate is necessary to achieve the full potential of our people and improve the efficiency of our
teams. Thus, enhancing our performance to meet stakeholder expectations via innovation and
creativity.

At Atlantica, “Collaborative Environment” is one of our core values. Our values define who we are
and how we behave both as individuals and as a company. As such, we commit through our
diversity and inclusion policy to:

- Tolerate no discrimination in employment, including discrimination based on nationality,
ethnicity, religion, caste, age, disability, gender, marital status, sexual orientation, union

membership, political affiliation, health, disability, pregnancy, smoking habits, or any other

characteristic protected by law, is prevented and not allowed.

- Zero tolerance of any form of abuse or harassment.
- Comply with all mandatory legal, regulatory or contractual obligations that could have a direct

or indirect impact on diversity or inclusion.

- Create a supportive and understanding workplace environment in which all employees feel
welcome, respected and listened to, and where they can realize their full potential regardless

of their race, color, sex, age, religion, ethnicity, nationality, or disability.

- Continuously provide equal opportunities to all employees and to create an inclusive workforce
by promoting employment equality integrity, rigor, individual responsibility and teamwork.

- Perform targeted recruitment according to legal, regulatory and contractual obligations.
- Provide attractive opportunities for professional development to outstanding employees and
foster effective programs for managing employees’ talents to attract and retain the best-in-

class talent. Promote the highest levels of teamwork and thus, improve the Company’s

performance.

- Foster an open and honest communication at all levels by encouraging employees to share
their opinions and concerns, and further, animating employees who hold divergent opinions to

voice their views.

- Maintain adequate and regular communication channels to identify, avoid and/or resolve

potential issues that may arise. In this sense:

- Atlantica’s Code of Conduct shall be published on our website.
- Atlantica’s employees shall receive periodic training on the Company’s Code of Conduct,

values, policies, processes and procedures.

- Atlantica shall maintain an email address (compliance@atlanticayield.com and/or
whistleblower@atlanticayield.com) and a section within the company’s webpage

(https://www.atlanticayield.com/web/en/company-overview/corporate-

governance/whistleblower-channel/index.html) to anonymously report breaches to the

Code of Conduct.

- Consider implementing employee affinity groups, diversity councils, networking groups and/or

mentorship programs taking into account Atlantica’s workforce size.

- Regularly and transparently report key metrics and initiatives taken to support our workforce’s

diversity and inclusion.

The monitoring and accomplishment of this Diversity and Inclusion Policy is reviewed by senior
management in the Human Resources Committee.

Our people

Our values and code of conduct set out the expected qualities and actions of all our people. The
honesty, integrity 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 who
understand and embody the values and expected behaviours that guide our business activity.

We believe that by providing a good quality of life for our employees, and by enhancing social and
professional development we will retain and attract new employees. Employees are a core
component of our future success. As such, we have in-place high potential (HIPO) employee
programs, performance assessment and skill training programs aimed at talent retention and
development.

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

To improve communication with our people we have implemented several measures:

- Our CEO updates Atlantica’s employees on the main priorities in open sessions with Q&A on

an annual basis.

- Our senior management participates in “Atlantica’s Management Model” training to discuss
with all employees about our long-term strategy and our business model, Atlantica’s recent

milestones, our growth strategy and our values, policies and procedures. An informal, open and

free environment is promoted to foster discussions with the employees in groups less than 20.

Employees are able to express their ideas and concerns without any sort of evaluation nor

retaliation. The feedback is analysed and shared with Atlantica’s management in monthly

management meetings. If applicable, action plans are defined and one or several managers are
assigned responsible for their implementation.
- Periodically publish news in Atlantica’s intranet.

During 2019, we had an employee turnover of 11.1%, which increased from 5.8% in 2018. This is
due to the low unemployment and common rotation in U.S. workforce. If we exclude the effect of
ASI Operations since August 2019, date of the acquisition, our employee turnover would have
remained at 5.8%.

In terms of prolonged absences, 26 of our employees took parental leave in 2019, of which 15 were
men and 11 were women, and 7 employees enjoyed parental leave in 2018 (4 men and 3 women).
In both years, all employees returned to work.

Our compensation policy is based on four pillars:

(cid:120) Predefined remuneration structure ranges based on market surveys provided by several

external consultants.

(cid:120) Annual performance appraisal to 100% of our employees.
(cid:120) Variable compensation based on company targets, department targets and specific

targets.

(cid:120) Long-term incentive plan for certain employees

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

The compensation package offered by Atlantica includes monetary and in-kind remuneration in
accordance with employees’ position, as well as with local practices in each of the countries where
we operate. In addition, we offer flexible compensation in certain geographies, which are tax
exempt for the employee. We offer pension plans to our employees in North America and UK. We
also finance totally or in a high percentage health insurance in most of the countries where we are
based. Lastly, we implemented healthy-habit initiatives providing fruit to our employees in our
offices and, partially supporting the employees’ gym costs in certain geographies.

Community Development and Involvement Policy

The Community Development and Involvement Policy sets the financial and non-financial
contribution to help local communities promote their environmental, economic and social
progress.

At Atlantica, we acknowledge that our day-to-day activities have impacts on nearby communities
(our assets occupy large areas of land, we generate waste, we foster communities’ economic
prosperity through local purchasing, hiring local employees, etc.). Additionally, we recognize that
the communities where we operate are where some of our employees and other stakeholders live
and raise their families, and where part of our future workforce is educated and trained. As such, it
is key for us to be both proactive and a valued member of our communities.

We are committed to supporting long-term development of the communities where we operate
as part of our culture at Atlantica. Particularly, we commit to:

- Comply with all mandatory legal, regulatory or contractual obligations to the communities.
- Have our

local senior executives responsible for

leading community relations and

implementing: (i) consultation guidelines ad-hoc to each community (including consultation

conducted at early stages of the project if we control the project) and, (ii) a formal system for

identifying local stakeholders or community interest. In other words, we commit to consult with

local communities to understand the expectations of our stakeholders, to analyze initiatives our

communities care about most and, to participate with local stakeholders in community

development planning and monitoring.

Implement efficient programs to monitor community development programs.

-
- Maintain adequate and regular communication channels to identify, avoid and/or resolve

potential issues that may arise.

- Dedicate time and efforts to generate added value initiatives to both the communities and

Atlantica.

- Transparently reporting key measures taken to support the communities where we operate.

The monitoring and accomplishment of this Community Development and Involvement Policy is
reviewed by senior management in the Business Committees.

Atlantica is a sustainable infrastructure company. Our business is to own, manage and operate
sustainable assets in a sustainable way. As such, asset management is the core of our business.
Asset management involves health and safety (H&S), environmental matters, compliance,
operation and maintenance, financial, economic and other practices applied to the physical assets.

At Atlantica, Asset Managers manage day-to-day activities of each of our assets and report to Vice-
Presidents, who have full responsibility and accountability for the assets they manage. Additionally,
there is an Operations team that supports Asset Managers and audits the assets’ operational, H&S
and environmental performance and implements best practices. The Internal Audit department
audits the asset records, processes and procedures.

Occupational Health and Safety

Within Atlantica’s Values, the first one is “Integrity, Compliance and Safety”. Atlantica and its
management are committed to prioritize and actively promote 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 our subcontractors as reflected in our
corporate health and safety policy.

Annually, we conduct internal and external audits to evaluate our health and safety management
system in accordance with the OHSAS:18001 standard requirements. The external audit is carried
out by an independent third party. These efforts have resulted in the continuation of the
certification of the Occupational Health and Safety Management System in OHSAS: 18001 obtained
in 2015. This certification has been successfully renewed in the last four years. Additionally, we

perform periodic health and safety audits to our asset O&M contractors to monitor the compliance
with legal regulations, contractual requirements and our safety best practices.

We also develop an annual training programs to train managers and employees on safety
awareness. This annual plan is designed in accordance with local regulations and risk assessment
at every work position and work centre as well as in accordance with local regulations.

One of our key tools is our Health & Safety Best Practices programme. This program includes new
practices based on lessons learned from our peers, contractors and suppliers. In 2019, we
implemented the following new practices:

Health:

(cid:120) Most of our employees and O&M contractors attended to first aid training sessions in all our

offices and assets.

(cid:120) Automatic External Defibrillators were installed in all our assets and offices. We organized

specific training with our employees and O&M contractors.

(cid:120) Basic medical information was voluntarily shared by employees to be potentially used in

medical emergencies.

Safety Culture:

(cid:120) VPs for each geography have been actively involved in all our lost time accident investigations.
(cid:120) A written procedure was published on the O&M employees’ safety roles and their safety

responsibility.

(cid:120) Sharing the lessons learned was incorporated as a best practice in all our assets. 8 Safety

Bulletins and 2 Safety Campaigns were released throughout 2019.

(cid:120)

Increased workers safety observations (Walks & Talks) to promote O&M employees to identify

unsafe acts and conditions in our assets. In 2019, we awarded more than 50 prizes (32 in 2018)

to O&M employees based on Walks & Talks.

(cid:120) A zero accidents policy is promoted. We celebrated with our operation and maintenance
suppliers the achievement of 2,750, 2,000, 1,500 and 1,000 days without loss-time injury

accidents in a Peruvian transmission line, Helioenergy, Melowind and Solana, respectively.
(cid:120) A Safety Day was celebrated in our assets jointly with our O&M contractors to promote and
increase safety culture and share lessons learnt. During the Safety Days, 17 O&M employees

were awarded because of their commitment with Safety.

2019 Safety Day pictures

Safety conditions improvement

(cid:120) A safety assessment was performed in all our assets to identify hazards, thus design and

implement preventive actions in collaboration with O&M contractors.

(cid:120) Fire prevention protocol was implemented to avoid the fire risks derived from O&M activities.
(cid:120) Lockout Tagout (LOTO) boards were installed in all our assets to appropriately implement safety
procedures to ensure that dangerous machines are properly shut-off and not able to be started

up again prior to the completion of the maintenance work.

(cid:120) Atlantica and O&M employees attended specific emergency training.
(cid:120) 91 emergency drills were performed in our assets to evaluate the effectiveness of the plant’s
response against emergencies. Different emergencies trainings were also performed by

Atlantica employees and O&M workers.

Safety App

In 2019 Atlantica developed and launched a new Safety App for mobile devices for employees and
O&M workers. This user-friendly app was implemented to raise safety awareness in all our assets.
It provides valuable safety information on safety rules, information on protective personal
equipment to use in hazardous activities, emergency instructions and first aid procedures. The app
also serves as an important communication channel with internal and external workers to improve
safety through lessons learned.

Atlantica’s Safety App has 9 modules with
safety information. It offers the possibility to
launch notifications regarding relevant news or
lessons learned and promotes risk awareness
through the interactive quiz module.

Periodical questions to test “how much do you
know about safety” allow users to test their
knowledge in safety. In 2019 we awarded 11
prizes to O&M employees who correctly
answered the quizzes.

Fatality rate continues to be zero since Atlantica’s incorporation. In addition, no major injuries have
been recorded since our creation.

Our General Frequency Index (GFI) represents the total number of recordable accidents with and
without leave (lost time injury) recorded in the last 12 months per million of worked hours. We
ended 2019 at 6.0, representing a 22% improvement versus 2018.

x
e
d
n

y
c
n
e
u
q
e
r
F

a
r
e
n
e
G

10.0

7.7

6.0

2017

2018

2019

General Frequency Index

Our Frequency with Leave Index (FWLI) represents the total number of recordable accidents with
leave (lost time injury) recorded in the last 12 months per million of worked hours. We ended 2019
at 1.4, representing a 39% decrease versus 2018.

4.7

x
e
d
n

e
v
a
e
L

h
t
i

w
y
c
n
e
u
q
e
r
F

2.3

1.4

2017

2018

2019

Frequency with Leave Index

We also monitor near-misses and unsafe acts and conditions through our Total Recordable
Deviation Index (TRDI). This index represents the number of near-misses and unsafe acts and
conditions recorded in the last 12 months per million of worked hours. The goal of this KPI is to
encourage the identification and communication of near misses and unsafe acts and conditions by
the employees of our O&M subcontractors. As it serves to identify risks and to implement adequate
preventive measures, the higher the rate is, the better. The following graph shows a significant
improvement against last years.

The index was 1,177.6, significantly increasing the risk identification and communication in our
assets.

x
e
d
n

s
n
o
i
t
a
i
v
e
D
e
b
a
d
r
o
c
e
R

a
t
o
T

1,200

1,000

800

600

400

200

1,177.6

458.3

246.0

2017

2018

2019

Our Total Recordable Deviations Index

In 2019 we have continued improving our H&S performance, finalising the year with the lower key
H&S indexes in the last 4 years, achieving a reduction of the accident rates of a 70% in the
Frequency with Leave Index (FWLI) and 45% in the General Frequency Index (GFI). We also

multiplied the number of identified near-misses and unsafe acts and conditions by 4 in the last
three years.

By 2019 year-end, 80% of our assets had achieved more than 500 days without lost time accidents.
In 2020, we will continue devoting our time and efforts to continue promoting a health and safety
culture. We will seek to continue improving our H&S performance with the use of our existing tools
and the implementation of new ones.

Business ethics

Atlantica is building a sustainable and successful business for our customers, colleagues, partners
and investors. This success must be delivered in the right way, doing the right things.

Integrity, Compliance and Safety are our main core values and they prevail 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.

In this regard, the Company has adopted a Code of Conduct to ensure consistent and effective
commitment with Integrity and Compliance. The Code is applicable to all directors, officers and
employees of Atlantica Yield plc and each of its subsidiaries, wholly owned entities, and joint
ventures.

The Whistleblowing channel is an essential part of Atlantica’s commitment to fighting fraud,
irregularities and corruption. The Whistleblowing Channel, which has been in operation since the
Initial Public Offering, is available on our website in English and Spanish to all employees and
stakeholders of the Company. It 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 retaliation are the essential operating principles of the Channel. These
principles may be suspended only in cases where the claim was not made in good faith.

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 apply to all Atlantica business.

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 make it a criminal offense for companies as well as their

officers, directors, employees, and agents, (or any other person) to give, request, promise, offer or
authorize the payment of anything of value (such as money, any advantage, benefits in kind, or
other benefits) 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. Private bribery is also illegal under U.S. laws, the UK Bribery Act, and the laws of other
jurisdictions. Payments of this nature are strictly against Atlantica’s policy even if the refusal to
make them may cause Atlantica to lose business.

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.

Atlantica’s code of conduct

“We always do what is right. We continuously strive for the highest standards of business conduct,
safety, professionalism and governance 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 committed to promoting ethical business practice and complying with all relevant
laws and regulations but also to behave fairly with colleagues, customers, partners and investors.

The Company has adopted a Code of Conduct to ensure consistent and effective commitment with
Integrity and Compliance. The Code of Conduct is intended to help everyone recognize ethics and
compliance issues before they arise and to deal appropriately with those issues that do occur.

The Code applies to all directors, officers and employees of Atlantica and each of its subsidiaries,
wholly owned entities, and in joint ventures (“JVs”) to the extent possible and reasonable given
Atlantica ´s level of participation.

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

No one has authority to order or approve any action contrary to this Code or against the law. This
Code and its standards will never be compromised for the sake of business performance or results.

Our Code of Conduct encompasses the high standards of integrity we are committed to upholding
including principles on:

(cid:23) Personal & Business Integrity (Conflicts of interest, Bribery & Corruption, Insider Trading,

Travel, Entertainment and Gifts);

(cid:23) Human & Labour Rights (Dignity & Respect, Equality & Diversity, Labour Standards,

Occupational Health & Safety, Environmental Sustainability);

(cid:23) Corporate Assets & Financial Integrity (Accounting & Reporting, Anti-Money Laundering and

Related Offences, Confidentiality & Information Security, Protection of Assets)

The Code of Conduct includes, as well, information on the channels available to report or
communicate a breach of the Code of Conduct.

The Code of Conduct was approved by the Board of Directors and 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 some
of our assets across geographies. In Mexico, our O&M Operators are General Electric and NAES
Corp.

In 2019 we reinforced the environmental certification of our suppliers through a two-step process:

Internal homologation process: Atlantica’s internal compliance team reviews the suppliers’
financial information, environmental initiatives, tax compliance, and bank account certificates,
etc.

2. External homologation process: We have engaged the services of the external provider Ecovadis
to evaluate our key suppliers in terms of: (i) environment, (ii) fair labor & human rights, (iii)
ethics, and (iv) sustainable procurement.

Ecovadis’ applies an in-house methodology built on international CSR standards including the
Global Reporting Initiative, the United Nations Global Compact, and the ISO 26000 and issues
a rating per supplier. This evaluation is renewed on a yearly basis enabling us to periodically
monitor and track-down the suppliers’ improvements in terms of i) environment, (ii) fair labor
& human rights, (iii) ethics, and (iv) sustainable procurement.

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. In November
2018 the Board of Directors approved the “UK Anti Modern Slavery & Human Trafficking
Statements” under which we have carried out an analysis of our supply chains across the
jurisdictions in which we operate.

Most of our suppliers are financial and professional services organizations, including operation and
maintenance services providers for our plants, banks, legal advisors, accountants, consultants and
insurers. Other suppliers include providers of information technologies, software, office and
stationary equipment, office cleaning and other facilities management providers. Since our
activities do not directly involve operations where modern slavery or human trafficking are known
to occur, we consider the risk of modern slavery and/or human trafficking in our supply chains and
procurement processes to be very low. In fact, the goods and services providers are mainly large
multinational companies who have their own ethical standards of behavior in place.

All new suppliers, however, are subject to internal due diligence and required to confirm that their
organization will comply with our Supplier Code of Conduct (available at www.atlanticayield.com),
which includes expectations with regards to sustainable development in the following areas:
business integrity and ethical standards, human rights and labor standards, environmental
sustainability, and reporting concerns and compliance monitoring. Through our Supplier Code of
Conduct, Atlantica encourages its suppliers to conduct their operations respectfully with
fundamental human rights, as affirmed by the Universal Declaration of Human Rights. In this regard,
Atlantica joined the United Nations Global Compact (the “UNGC”) initiative in January 2018 and
formally adopted the UN Global Compact Ten Principles in the fields of human rights, labor,
environment and anticorruption. We are determined to make the UNGC and its principles an
integral part of the strategy, culture and day-to-day operations of Atlantica and its suppliers.

We further provide our employees, shareholders and others with the whistleblower channel
(available at www.atlanticayield.com), a specific channel of communication with management and
the governing bodies that serves as an instrument to report any misconduct, instances of non-
compliance with our compliance policy framework, as well as unethical or unlawful behavior,
including any suspected or actual form of modern slavery taking place within the business or supply
chain.

Atlantica has a zero-tolerance approach to modern slavery and thus we are proud of the effective
steps we have taken to combat slavery and human trafficking that allow us to confirm that no
incidents of modern slavery were reported or identified during 2019.

We have also provided training in 2019 to members of senior management as part of our annual
training on our Code of Conduct and corporate policies, which includes specific content related to
human and labor rights, in order to promote the policy throughout our organization.

Additionally, all employees are required to read, understand and commit to follow our corporate
governance policies.

Section 172 Statement

Our Directors are fully aware of their responsibilities to promote the success of the Company in
accordance with section 172 of the Companies Act 2006 and have acted in accordance with these
responsibilities during the year. Atlantica’s first value is Integrity, Compliance and Safety and the
Company wants to maintain a reputation for high standards of business conduct. The Directors
have considered the broader implications of their decisions not only for shareholders but for a
wider group of stakeholders. The Directors have considered the likely consequences of any decision
in the long term, the interest of the Company’s employees, the need to foster the Company's

business relationships with suppliers, customers and other stakeholders and the impact of the
Company’s operations on the community and the environment.

Whilst the importance of giving due consideration to our stakeholders is not new, we are explaining
in more detail this year how the Board engages with our stakeholders, in compliance with the
statutory requirement to include a statement setting out how our Directors have discharged this
duty. The Board has identified that its key stakeholders are: investors, workforce, suppliers,
communities and the environment. Effective engagement with stakeholders at Board level is crucial
to fulfilling Atlantica’s strategy. This ensures we can appropriately consider their interests in
decision making.

Our people

Our people are fundamental for the long-term success of the Company. We are committed to
prioritize and actively promote 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 our employees and subcontractors as reflected in our corporate
health and safety policy.

We engage with our workforce to ensure that we are fostering an environment where they are
happy to work in and that best supports their well-being.

We perform an employee climate survey every three years to assess employees’ satisfaction and
intend to increase frequency. The goal is to receive feedback as well as engage our employees. The
survey is confidential, it is managed by a third-party and results are aggregated, shared and
discussed with supervisors. The last survey was performed in 2017, participation was approximately
90% and general engagement with the Company was 77%, above the average for similar
organizations. Atlantica received very high score (above 80%) in several sections, including Health
and Safety, Confidence in the Company, Strategic Focus and Diversity and Engagement. This survey
also helped us identify certain areas with potential improvement, which we have since been
working on and expect to see progress in the next survey. The Board receives reports on the results
of the survey together with action plans that management intend to take forward.

In addition, our CEO updates Atlantica’s employees on the main priorities in open sessions with
Q&A on an annual basis and feedback is actively encouraged. Our senior management participates
in “Atlantica’s Management Model” training to discuss with all employees about our long-term
strategy and our business model, Atlantica’s recent milestones, our growth strategy and our values,
policies and procedures. An informal, open and free environment is promoted to foster discussions
with the employees in groups less than 20 people. Feedback is encouraged and employees are able
to express their ideas and concerns. The feedback is analyzed and shared with Atlantica’s
management in monthly management meetings. Action plans are defined and one or several
managers are assigned responsibility for their implementation.

Regarding Health & Safety, as we discuss in this report, it is a key priority for the Company. While
managing health & safety we consider our own employees and all the contractors working in our
plants providing operation and maintenance services.

The key metrics followed by the Board are:

- Health and Safety: General Frequency Index, Frequency with Leave Index, and Near Misses
- Employee turnover
- Total benefits to employees
- Percentage of women

For further information we refer to the disclosure within this Strategic Report.

Our investors

The support and engagement of our shareholders, potential shareholders and capital markets more
generally is key for the future success of our business. Continued access to capital is of vital
importance to the long-term success of our business, especially considering that our strategy
includes distributing as dividend a high portion of the cash we generate and growing that dividend
through acquisitions and investments. Through our engagement activities, we strive to effectively
communicate our strategic objectives and how we go about executing them. We are seeking to
promote an investor base that is interested in a long-term holding of the Company.

In all the decisions, the Board has ensured they act fairly with regard to all our investors.
Engagement with investors is achieved through:

(cid:120) Dialogue with shareholders, prospective shareholders and analysts, led by the Chief Executive

Officer, Chief Financial Officer and Director of Investor Relations

(cid:120) The Chairman and Independent Directors being available to meet institutional shareholders

The Board receives feedback periodically on the views of our shareholders is made aware of their
main issues and concerns. The Board also receives reports from sector analysts on the Company.
They periodically review the list of largest shareholders.

Major investor relations engagement activities carried out during the year 2019 have been:

(cid:120) More than 150 meetings with existing and potential investors
(cid:120) 4 roadshows in United States, Europe and Canada
(cid:120) Attendance to 17 investor conferences in 7 cities

In addition, we intend to organize an investor day every two years.

Investors can contact our Director of Investor Relations or access all public information in our
website.

The Annual General Meeting (“AGM”) is also an important part of effective engagement and
communication with shareholders. All shareholders have the opportunity to ask questions at our
AGM meetings. The Chairs of the Audit, Nominations and Remuneration Committees will be
available to answer questions at that meeting.

We also maintain a dialogue with one of the main proxy advisory agencies covering Atlantica to
explain the main resolutions included in the notice to our AGM and answer any question they may
have. In 2019, we explained the proposed changes to our remuneration policy.

The key metrics followed by the Board are:

- Dividend per share
- Cash Available For Distribution
- Total Shareholder Return

The environment and the community

Our Board of Directors believes climate change is a reality which can have significant risks and
opportunities for the Company, our environment and our stakeholders. We intend to play an active
role to reduce climate change. Our strategy is focused on climate change solutions in the power
and water sectors and we therefore see sustainability and climate change as a growth opportunity
for us.

In 2019, we approved an updated Environmental Policy and set goals. For example, we are
committed to maintain 80% of our revenues generated from low-carbon footprint including our
renewable, transportation and transmission infrastructures and water assets and, by 2030, to reduce
our emission rate per unit of energy generated by 10%. Our Board takes into consideration these
targets while making decisions including capital allocation.

In 2019, we have approved our biodiversity policy. We are aware that our assets can cause
interactions with various ecosystems, landscapes and species. The Company therefore commits to
promoting the biodiversity of the ecosystems, allowing balanced co-existence, and conserving,
protecting and promoting the development and growth of the natural ecosystem.

In addition, we acknowledge that our day-to-day activities have impacts on nearby communities
(our assets occupy large areas of land and we generate waste). We recognize that the communities
where we operate are where some of our employees and other stakeholders live and raise their
families, and where part of our future workforce is educated and trained. We foster communities’
economic prosperity through local purchasing and hiring local employees. As such, it is key for us
to be both proactive and a valued member of our communities.

The key metrics followed by the Board are:

- GHG emissions, including scope 1, scope 2 and since 2019 scope 3
- Water withdrawal and discharges
- Hazardous and non-hazardous waste

In addition, the Board annually reviews a summary of all the activities developed with local
communities within the ESG report.

Our suppliers

We aim to work responsibly with our suppliers. 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. The Board reviews our Supplier Code of Conduct on an ongoing basis, at least once per
year. We have a Modern Slavery and Human Trafficking Statement which sets out the steps taken
to prevent modern slavery in our business and supply chains.

We work very closely with the suppliers in charge of the operation and maintenance of our assets.
They are included in all health and safety initiatives, indicators, awards and safety days at the same
level as our own operation and maintenance employees, as we describe in section “Occupational
health and safety”.

Main decisions

Dividends

In 2019, the Board decided to pay total dividends of $1.57 per share to our shareholders in
quarterly dividends, starting with $0.37 per share (paid in March 2019) and progressively increasing
to $0.41 per share (paid in December 2019).

Details of the dividend policy are included in Directors’ Report, where we explain our long-term
approach to dividends.

The Board decides the dividend on a quarterly basis. The Directors took into account the long-term
dividend per share growth target publicly communicated to investors, available cash, available
liquidity under our financing arrangements and investment plans of the Company. The Directors
also considered the net liability position of the Company.

Acquisitions

In 2019, our Board approved the acquisition of Monterrey, a natural gas plant in Mexico, ATN
Expansion 2, a transmission line in Peru connecting two renewable assets to one of our backbone
transmission lines and a co-investment in a wind asset in Canada.

While deciding these acquisitions, the Board considered our long-term growth plan, returns
expected for each acquisition, impact on GHG emissions and environment targets, synergies with
existing assets, risks involved in each asset acquisition (operational, geography, off-taker credit risk,
etc), potential negative impacts to communities and the environment. The Board also considered
resources available to finance these acquisitions in the context of our broader growth plan.

Greenhouse gas commitment

In 2019, the Board approved a goal, by 2030, to reduce our emission rate per unit of energy
generated by 10% and a goal to maintain 80% of our revenues generated from low-carbon
footprint including our renewable, transportation and transmission infrastructures and water
assets.

While deciding these targets, the Board considered our strategy focused on climate change
solutions, our medium-term dividend per share targets, which require to achieve target returns in
our acquisitions, and our medium-term growth targets.

The achievement of these targets is reviewed by top management in our Environment Committee,
which is held once a month. We also report to our Board at every meeting on the progress of our
ESG plan and semi-annually on the main environmental indicators (GHG, water and waste).

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.

The Group has a formal process of budgeting, reporting and review, which provides information to
the directors which is used to ensure the adequacy of resources available for the Group to meet its
business objectives.

The Company’s business activities, together with the factors likely to affect its future development,
performance and position are set out within this report. During the period, the Group generated
$363.6 million from operating activities, used $118.2 million from investing activities and $310.2
million in financing activities. All of these resulted in a $64.8 million decrease on our cash position
by the year end, with a closing cash position of $562.8 million.

As of December 31, 2019, all our debt has long-term maturity except for $28.7 million of corporate
debt corresponding to $27.9M to notes and bonds and $0.7 million corresponding credit facilities.
Additionally, we have short-term project debt that amounts to $782 million, out of which $707
million corresponds to the reclassification of Mojave’s long-term project debt to the short term
following accounting rules. We do not expect the acceleration of debt to be declared by the DOE.
As of December 31, 2018, all our debt had long-term maturity except for $268.9 million
corresponding to $11.6 million drawn under a credit line with a local bank and $257.3 million
corresponding to the 2019 Notes that had a maturity date of November 15, 2019. Project debt
amounted to $265 million.

The directors believe that this cash position as of December 31, 2019 is above the level of cash
needed to operate the business for the foreseeable future and to meet the Group’s liabilities as
they fall due, as well as to be a significant source of funding of future acquisitions.

Approval

This Strategic Report was approved by the board of directors on February 26, 2020 and signed on
its behalf by Santiago Seage, Director and Chief Executive Officer.

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Director and Chief Executive Officer

Santiago Seage

March 6, 2020(cid:3)

(cid:3)

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 December 31, 2019.

Details of significant events since the balance sheet date are contained in note 25 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 24 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 intend to distribute to holders of our shares a significant portion 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 (including,
among other things, dividend shortfall as a result of fluctuations in our cash flows), on an annual
basis. We intend to distribute a quarterly dividend to 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. Our cash available for distribution is likely
to fluctuate from quarter to quarter and, in some cases significantly, as a result of the seasonality
of our assets, the terms of our financing arrangements maintenance and outage schedules among
other factors. Accordingly, during quarters in which our projects generate cash available for
distribution in excess of the amount necessary for us to pay our stated quarterly dividend, we may
reserve a portion of the excess to fund cash distributions in 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.

On February 26, 2019, the board of directors declared a dividend of $0.37 per share corresponding
to the fourth quarter of 2018, which was paid on March 22, 2019. On May 7, 2019, our board of
directors declared a quarterly dividend corresponding to the first quarter of 2019 amounting to
$0.39 per share, which was paid on June 14, 2019. On August 2, 2019, our board of directors
approved a quarterly dividend corresponding to the second quarter of 2019 amounting to $0.40
per share, which was paid on September 13, 2019. On November 5, 2019, our board of directors
approved a quarterly dividend corresponding to the third quarter of 2019 amounting to $0.41 per
share, which was paid on December 13, 2019.

On February 26, 2020, our board of directors approved a dividend of $0.41 per share which is
expected to be paid on or about March 23, 2020 to shareholders of record on March 12, 2020.

On May 11, 2018, the Company’s Annual General Meeting approved a redemption of the share
premium account of the Company that intended to reduce the share premium account by $
500,000 thousand and increase distributable reserves (Capital reserves) by the same amount.
Pursuant to the Companies Act 2006, the Company's capital reduction is effective upon
confirmation of the reduction by the High Court. High Court confirmation of the capital reduction
was obtained on May 7, 2019. In addition, no interim financial statements showing sufficient
distributable reserves were filed with Companies House. Both these matters mean that dividends
paid since the second half of 2018 were made otherwise than in accordance with the Companies
Act 2006. Note 7 of the Financial Statements of the Parent Company describes the amendment
made to the Share premium account and Capital reserve account as of December 31, 2018.

To remedy the potential consequences of the dividend payments indicated in the preceding
paragraph, a special resolution will be proposed at the Annual General Meeting in May 2020 to
authorise the appropriation of distributable reserves to the payment of the said dividends and
release any claims the Company may have in connection with the said dividends against
shareholders and directors (the “Directors Release”). The Directors Release will constitute a related
party transaction under IFRS. The overall effect of the special resolution will be to put all parties in
the position, so far as possible, in which they would have been, had the said dividends been paid
in full compliance with the Companies Act 2006.

Risks Regarding Our Cash Dividend Policy

There is no guarantee that we will pay quarterly cash dividends to our shareholders. We do not
have a legal obligation to pay any dividend. While we currently intend to grow our business and
increase our dividend per share over time, our cash dividend policy is subject to all the risks inherent
in our business and may be changed at any time as a result of certain restrictions and uncertainties,
including the following:

(cid:120) The amount of our quarterly cash available for distribution could be impacted by restrictions
on cash distributions contained in our project-level financing arrangements, which require

that our project-level subsidiaries comply with certain financial tests and covenants in order

to make such cash distributions. Generally, these restrictions limit the frequency of

permitted cash distributions to semi-annual or annual payments, and prohibit distributions

unless specified debt service coverage ratios, historical and/or projected, are met. When

forecasting cash available for distribution and dividend payments we have aimed to take

these restrictions into consideration, but we cannot guarantee future dividends. In addition,

restrictions or delays on cash distributions could also happen if our project finance

arrangements are under an event of default. On January 29, 2019, PG&E, the off-taker for

Atlantica with respect to the Mojave plant, filed for reorganization under Chapter 11 of the

Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of California. This

situation is causing and could continue to cause, among other consequences, restrictions

to make cash distributions to the holding company.

(cid:120) Additionally, indebtedness we have incurred under the Revolving Credit Facility, the
Issuance Facility 2017, the Issuance Facility 2019 and, if closed, the 2020 Green Private

Placement contain, among other covenants, certain financial incurrence and maintenance

covenants, as applicable. In addition, we may incur debt in the future to acquire new

projects, the terms of which will likely require commencement of commercial operations

prior to our ability to receive cash distributions from such acquired projects. These

agreements likely will contain financial tests and covenants that our subsidiaries must satisfy

prior to making distributions. Should we or any of our project-level subsidiaries be unable

to satisfy these covenants or if any of us are otherwise in default under such facilities, we

may be unable to receive sufficient cash distributions to pay our stated quarterly cash

dividends notwithstanding our stated cash dividend policy.

(cid:120) We and our board of directors have the authority to establish cash reserves for the prudent
conduct of our business and for future cash dividends to our shareholders, and the

establishment of or increase in those reserves could result in a reduction in cash dividends

from levels we currently anticipate pursuant to our stated cash dividend policy. These

reserves may account for the fact that our project-level cash flows may vary from year to

year based on, among other things, changes in prices under offtake agreements,

operational costs and other project contracts, compliance with the terms of project debt

including debt repayment schedules, the transition to market or recontracted pricing

following the expiration of offtake agreements, working capital requirements and the

operating performance of the assets. Our board of directors may increase reserves to

account for the seasonality that has historically existed in our assets’ cash flows and the

variances in the pattern and frequency of distributions to us from our assets during the

year. Furthermore, our board of directors may in the future increase reserves in light of the

uncertainty associated with potential negative outcomes resulting from PG&E bankruptcy

filing on January 29, 2019, which triggered a technical event of default under our Mojave

project finance agreement in July 2019. If not cured or waived, an event of default in the

project finance could result in debt acceleration and, if such amounts were not timely paid,

the DOE could decide to foreclose on the asset. If not cured or waived, an event of default

could also result in restrictions to make cash distributions from Mojave to the holding level.

Our board of directors may increase reserves in light of the uncertainty associated with

Abengoa’s financial condition to account for potential costs that we may incur or limitations

that may be imposed upon us as a result of cross-defaults under our Kaxu project financing

arrangements.

(cid:120) We may lack sufficient cash to pay dividends to our shareholders due to cash flow shortfalls
attributable to a number of operational, commercial or other factors, including low

availability, unexpected operating interruptions, legal liabilities, costs associated with

governmental regulation, changes in governmental subsidies, delays in collections from our

off-takers, changes in regulation, as well as increases in our operating and/or general and

administrative expenses, principal and interest payments on our and our subsidiaries’

outstanding debt, income tax expenses, failure of Abengoa to comply with its obligations

under the agreements in place, working capital requirements or anticipated cash needs at

our project-level subsidiaries.

(cid:120) We may pay cash to our shareholders via capital reduction in lieu of dividends in some

years.

(cid:120) Our project companies’ cash distributions to us (in the form of dividends or other forms of
cash distributions such as shareholder loan repayments) and, as a result, our ability to pay

or grow our dividends, are dependent upon the performance of our subsidiaries and their

ability to distribute cash to us. The ability of our project-level subsidiaries to make cash

distributions to us may be restricted by, among other things, the provisions of existing and

future indebtedness, applicable corporation laws and other laws and regulations.

(cid:120) Our board of directors may, by resolution, amend the cash dividend policy at any time. Our
board of directors may elect to change the amount of dividends, suspend any dividend or

decide to pay no dividends even if there is ample cash available for distribution.

Our Ability to Grow our Business and Dividend

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

We expect that we will rely primarily upon external financing sources, including commercial bank
borrowings and issuances of debt and equity securities, to fund any future growth capital
expenditures. To the extent we are unable to finance growth externally, our cash dividend policy
could significantly impair our ability to grow because we do not currently intend to reserve a
substantial amount of cash generated from operations to fund growth opportunities. If external
financing is not available to us on acceptable terms, our board of directors may decide to finance
acquisitions with cash from operations, which would reduce or even eliminate our cash available
for distribution and, in turn, impair our ability to pay dividends to our shareholders. To the extent
we issue additional shares to fund our business, our growth or for any other reason, the payment
of dividends on those additional shares may increase the risk that we will be unable to maintain or
increase our per share dividend level. Additionally, the incurrence of additional commercial bank

borrowings or other debt to finance our growth would result in increased interest expense, which
in turn may impact our cash available for distribution and, in turn, our ability to pay dividends to
our shareholders.

Capital Structure

Details of the share capital, together with details of the movements in the Company's issued share
capital during the year are shown in note 20 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.

When Algonquin acquired a 25% stake in our equity, Atlantica signed a Shareholders Agreement
with Algonquin, which sets forth that, if and to the extent provided in our articles of association,
Algonquin will have the right to appoint to our board the maximum number of directors that
corresponds to Algonquin’s holding of voting rights as per articles of association but in no event
more than (i) such number of directors as corresponds to 41.5% of our voting securities; and (ii)
50% of our board less one, and if the resulting number is not a whole number, it shall be rounded
up to the next whole number.

On May 9, 2019, Algonquin and the Company entered into an Enhanced Cooperation Agreement
pursuant to which, among other things, the Company agreed to waive the standstill provision of
the Shareholders Agreement to allow Algonquin to increase its ownership of the total voting
securities of the Company up to 48.5% without any change in corporate governance and to permit
Algonquin to acquire, and Algonquin agreed to purchase, approximately 1.3 million of ordinary
shares. On May 31, 2019, Algonquin entered into a purchase agreement with Morgan Stanley &
Co. LLC (“Morgan Stanley”) pursuant to which on the same date Morgan Stanley delivered 2 million
shares to Algonquin, bringing its total equity interest in Atlantica to 44.2%. Algonquin’s voting
rights and rights to appoint directors are limited to 41.5%, the remaining will vote replicating the
non-Algonquin shareholders vote. Apart from the above-mentioned agreements, 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.

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.

Change of Control

If any investor acquires more than 50.0% of our shares or if our ordinary shares cease to be listed
in NASDAQ or a similar stock exchange, we may be required to refinance all or part of our corporate
debt or obtain waivers from the related noteholders or lenders, as applicable, due to the fact that
all of our corporate financing agreements contain customary change of control provisions and

delisting restrictions . If we fail to obtain such waivers and the related noteholders or lenders, as
applicable, elect to accelerate the relevant corporate debt, we may not be able to repay or refinance
such debt (on favorable terms or at all), which may have a material adverse effect on our business,
financial condition results of operations and cash flows. Additionally, in the event of a change of
control we could see an increase in the yearly state property tax payment in Mojave, which would
be reassessed by the tax authority at the time the change of control potentially occurred. Our best
estimate with current information available and subject to further analysis is that we could have an
incremental annual payment of property tax of approximately $12 million to $14 million, which
could potentially decrease progressively over time as the asset depreciates. Additionally, an
ownership change under section 382 could be triggered and could have a significant negative
impact on our tax positions in the U.S.

Furthermore, 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 (“Board”).

In addition, if there is a change in control, all awards under long-term incentives shall vest in full
on the date of the change in control.

Directors

The directors, who served throughout the year 2019, and to the date of this report, were as follows:

(cid:131) Daniel Villalba

Director and Chairman of
the Board, independent

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

(cid:131) Santiago Seage

Director and Chief
Executive Officer

Appointed on December 17, 2013, resigned
March 9, 2018, re-appointed December 18, 2018

(cid:131) Ian Robertson

Director

(cid:131) Christopher Jarratt

Director

Director: Appointed March 12, 2018, and elected
on May 11, 2018

Director: appointed March 12, 2018, and elected
on May 11, 2018.

(cid:131) Jackson Robinson

Director, independent

Appointed June 13, 2014, and elected on June 23,
2017

(cid:131) Robert Dove

(cid:131) Andrea Brentan

Director, independent

Appointed on June 23, 2017

Director, independent

Appointed on June 23, 2017

(cid:131) Francisco J. Martinez

Director, independent

Appointed on June 23, 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.

Directors are obliged, among other duties, to act in the way they consider, in good faith, would be
most likely to promote the success of the Company for the benefit of its members as a whole. All
directors are expected to spend the time and effort necessary to properly discharge their
responsibilities.

Main objectives of the Board may be summarized as follows:

(cid:120) Providing entrepreneurial leadership;
(cid:120) Setting strategy;
(cid:120) Ensuring the human and financial resources are available to achieve objectives;
(cid:120) Reviewing management performance;
(cid:120) Setting the company’s values and standards; and
(cid:120) Ensuring that obligations to shareholders and other stakeholders are understood and met.

Under English law, the board of directors is responsible for management, administration and
representation of all matters concerning the relevant business, subject to the provisions of relevant
constitutional documents, applicable law and regulations, and resolutions duly adopted at general
shareholders’ meetings.

In addition, the board of directors 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 Board Committees:

(cid:120) 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;

(cid:120) Compensation Committee, mainly responsible for setting the remuneration for executive

directors and recommending and monitoring remuneration for senior management;

(cid:120) Nominating and Corporate Governance Committee, responsible for leading the process for

board appointments; and

(cid:120) 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 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.

On February 13, 2019, we announced that our board of directors had formed a strategic review
committee ("Special Committee") with the purpose of evaluating a wide range of strategic
alternatives available to us to optimize our value and to improve returns to shareholders. Our
Special Committee has been evaluating a number of strategic alternatives and its work continues.
Our Special Committee now comprises our five independent directors: Robert Dove, Daniel Villalba,
Andrea Brentan, Francisco Jose Martinez and Jackson Robinson.

The duties and functions of our Special Committee are to (a) investigate, study and evaluate the
current strategy, business model and cost of capital for ourselves, our peers and other companies;
(b) develop and present to the Board alternative strategies which may be available for execution
by us to enhance shareholder value and, if considered necessary, improve our cost of capital; and
(c) review, negotiate, and make recommendations to the Board as to whether or not to pursue,
offers and proposed transactions that would result in a sale of Atlantica and any strategic
alternative available to Atlantica (each, a "Strategic Alternative").

Membership and Attendance

Director

Membership

Since

Until

Role

Attendance /
Eligible to attend (1)

Mr. Daniel Villalba

Jun'14

n.a

Director, Independent
and Chairman of the
Board

Mr. Jackson Robinson

Jun'14

n.a

Director, Independent

Mr. Andrea Brentan

Jun'17

n.a

Director, Independent

Mr. Robert Dove

Jun'17

n.a

Director, Independent

Mr. Francisco J. Martinez

Jun'17

n.a

Director, Independent

Mr. Santiago Seage

Dec'18

n.a

Director and Chief
Executive Officer

Mr. Ian Robertson

Mar'18

n.a

Director

Mr. Christopher Jarratt

Mar'18

n.a

Director

(1) Does not include matters approved by Director’s Written Resolution;

Senior management attend meetings by invitation of the Board.

2019 Key Activities

15 / 15

13 / 15

15 / 15

In 2019, the Board of Directors held 15 meetings and adopted one written resolution.

Major areas of focus of the Board during 2019 have been as follows:

(cid:120) Review of health and safety issues;
(cid:120) Review the action plan to continue improving in ESG (Environmental, Social and Governance);
(cid:120) Review and approval of the strategy of the Company: growth plan, key priorities and risks;
(cid:120) Review of assets performance and main technical issues;
(cid:120) Approval and review of the budget of the Company;
(cid:120) Review and approval of quarterly and annual accounts;
(cid:120) Approval of significant transactions (acquisitions, partnerships, etc.);
(cid:120) Review of capital markets updates; and
(cid:120) 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 2019 nor 2018.

Substantial shareholdings

Name

Ordinary
Shares
Beneficially
Owned

Percentage

5% Beneficial Owners
Algonquin (AY Holdco) B.V.” (1)., .......................................................................
44.2%
Morgan Stanley Investment Management Inc.(2) ………………………………… 7,321,982 7.3%

44,942,065

Note:
1. This information is based solely on the Schedule 13D filed with the U.S. Securities and Exchange Commission
on May 31, 2019 by Algonquin Power & Utilities Corp, a corporation incorporated under the laws of Canada.
The direct beneficial owner of the shares is ”Algonquin (AY Holdco) B.V.

2. This information is based solely on the Schedule 13G filed on February 12, 2020 by Morgan Stanley, corporation
incorporated under the laws of Delaware. The registered address of Morgan Stanley is 1585 Broadway New York,
NY 10036.

Corporate Governance statement

Atlantica, as a non-premium listed company, is not required to implement the provisions of the UK
Corporate Governance Code (the “Code”) and has chosen to follow the requirements of the Nasdaq
Listing Rules in terms of corporate governance. However, we have reported on our corporate
governance arrangements by drawing upon best practice available, including aspects of the Code
we consider to be relevant to the Company and best practice.

Our Board is responsible collectively for providing leadership within a framework of appropriate
and effective controls that enable to assess the risk and then manage it promoting the success of
the Company. The Board is also responsible for the effective oversight of the Company’s strategy
and performance, financial reporting, internal control and risk management framework, and
corporate governance processes. It is also ultimately accountable to shareholders for the long-term
performance of the Company and the delivery of sustainable shareholder and stakeholder value.

The Board has put in place a clear and robust corporate governance framework in order to facilitate
the oversight role that it provides in these areas. This includes a schedule of matters reserved for
the approval of the Board, such as the approval of acquisitions, the Company strategy and budgets,
major capital expenditure, the Company’s financial statements and its dividend policy. With the aim

of allowing the Board appropriate time to focus on these key matters within the constraints of its
annual programme, a number of its other responsibilities have been delegated to four principal
committees. Such responsibilities are set out within the Terms of Reference for each Committee,
which can be found on our website at www.atlanticayield.com.

Auditors

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

(cid:120)(cid:3) So far as the director is aware, there is no relevant audit information of which the company's

auditor is unaware; and

(cid:120)(cid:3) The director has taken all the steps that he ought to have taken as a director in order to make
himself aware of any relevant audit information and to establish that the company's auditor is
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.

Ernst & Young S.L. and Ernst & Young LLP have been our principal accountants providing the audit
services to the Company during 2019. Ernst & Young S.L. and other member firms of EY were
appointed as external auditor of the Group in February 2019 for the period 2019 – 2022. Prior to
this appointment, Deloitte, S.L. had been our auditors for the years ended December 31, 2018, 2017
and 2016. There was no disagreement whatsoever relating to these years nor the period from
January 1, 2019 through February 28, 2019 with Deloitte, S.L. on any accounting principles or
practices, financial statement disclosure, or auditing scope or procedure matters.

Events after the balance sheet date

On February 26, 2020, our board of directors approved a dividend of $0.41 per share which is
expected to be paid on or about March 23, 2020 to shareholders of record on March 12, 2020.

This report was approved by the board of directors on February 26, 2020 and signed on its behalf
by Santiago Seage, Director and Chief Executive Officer.

(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)
(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66) (cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66) (cid:66)

Director and Chief Executive Officer

Santiago Seage

March 6, 2020

(cid:3)

Audit Committee Report

The objective of this Audit Committee Report is to describe how the Committee has carried out its
responsibilities during 2019.

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; 3) the Internal Audit function; 4) the Whistleblowing Channel of the
Company; and 5) the external audit work.

Membership and Attendance

Director

Mr. Francisco J.
Martinez

Membership

Since

Until

Jun'17

n.a

Mr. Daniel Villalba

Jun'14

n.a

Role

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

Mr. Jackson
Robinson

Notes:

Jun'14

n.a

Director, Independent

(1) Does not include matters approved by Audit Committee’s Written Resolutions

Attendance /
Eligible to
attend (1)

4/4

All members of the Audit Committee are independent 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.

Senior management, such as the Head of Internal Audit, Head of Consolidation, 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 Reference 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. In 2019 the Audit Committee has met external auditors
4 times.

2019 Key Activities

Financial Reporting

The Audit Committee has reviewed all significant issues concerning the financial statements and
how these issues were addressed. 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 2019 financial statements:

(1) Recoverability of Contracted Concessional Assets;

(2) Covenant Compliance; and

(3) Significant one-off transactions, including acquisitions, partnerships and other significant

agreements, etc.

Internal Control System and Risk Management

- Atlantica has implemented a Risk Management system to provide reasonable assurance against

material losses.

- Atlantica has implemented an Internal Control system to provide reasonable assurance against

material misstatements.

- 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.

(cid:23) Risk Management:

Atlantica has developed a 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, climate change, legal, financial, and operational).

All risks are 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.

(cid:23) Internal Control System:

The Audit Committee has 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. This framework is organized into five interrelated components:

o Control Environment
o Risk Assessment
o Control Activities
o
o Monitoring Activities

Information & Communication

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 Chief Financial Officer and the Chief Executive Officer.

The Internal Control system is updated on a yearly basis. In 2019, the Atlantica SOX
Procedures have been enhanced to include new control activities implemented to mitigate
new risks or to increase the effectiveness of the system.

In order to fulfil its oversight responsibilities, 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 conducted by Internal Audit, the
Audit Committee concludes that the Internal Control System of the Company is properly designed,
implemented and that it has been operating effectively during 2019.

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, 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 in
both English and Spanish.

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
Chairman of the Audit Committee, the General Counsel and the Head of Internal Audit.

All allegations are managed by the Compliance Committee according to a specific Fraud Response
Protocol. 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:

(cid:23) 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; and

(cid:23) Procedures performed and conclusions reached by Internal Audit in order to detect fraud

and any breach of any regulation.

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.

The Internal Audit team has a well-balanced experience and education according to the
department roles and objectives. In this sense, the professionals on the team combine finance, IT
and legal backgrounds, have more than 10 years of Audit experience per person on average and
include Associated Certified Fraud Examiners (ACFE), COSO qualified as well as several Certified
Public Accountants. In accordance with the Auditing Standard 2201, this department performs a
top-down analysis to identify major audit risks and internal control. All identified risks are classified
depending on its materiality and the likelihood of impacting the financial statements. As a result of
this test, the Internal Audit Scope for the year is established.

As a new feature in 2019, the Internal audit department has built a new set of audit procedures to
assess all the financial and internal control audits conclusions to enforce impartiality and
homogeneity. The new methodology is based on qualitative and quantitative criteria that help
identifying critical or deficient areas.

EY has audited Atlantica as external auditor for the first time in 2019. A transition plan was designed
in 2018 to assist the new external auditor needs in all the geographies.

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

In particular, the Audit Committee:

(cid:23) Approves the Internal Audit Plan for the year.
(cid:23) This plan is prepared in accordance with 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 on a quarterly basis.

(cid:23) Reviews Internal Audit work, their main findings, recommendations and its implementation on

a periodic basis.

(cid:23) Reviews and monitors management’s responsiveness to the internal auditor’s findings and

recommendations.

(cid:23) 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:

(cid:120) 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 Annual General

Meeting (AGM). At least once every ten years the audit services contract shall be put out to

tender.

(cid:120) Ernst & Young (EY) and other member firms of EY was appointed and approved as external
auditor of the Group for the period 2019 – 2022 in the AGM held on May 11st, 2018. 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. Prior to this appointment, Deloitte, S.L. had been our auditors for the years

ended December 31, 2018, 2017 and 2016. There was no disagreement whatsoever relating to

these years nor the period from January 1, 2019 through February 28, 2019 with Deloitte, S.L.

on any accounting principles or practices, financial statement disclosure, or auditing scope or

procedure matters.

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 their
independence and objectivity are not impaired. In September 2014, the Committee considered

it 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 EY are approved by the Audit Committee. All fees received by EY in
2019 have been approved by the Committee.

In thousand USD
Audit Fees
Audit-Related Fees*
Tax Fees
All Other Fees
Total

Other

Total

1,293
481
406
271
2,451

61
-
-
-
61

1,354
481
406
271
2,512

(*) Audit-Related Fees include fees paid to EY during 2019 in relation to our major shareholder’s capital market

transactions. The full amount was re-invoiced.

(cid:120) The Audit Committee is responsible for overseeing the work of the external auditor.

In 2019, EY attended the four Audit Committee meetings held during the year. EY has
communicated to the Committee all relevant information related to the audit process in
accordance to Auditing Standard Nº16 issued by the PCAOB.

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

(cid:23) Unqualified Audit Report on Review of Consolidated Financial Information (IFRS – IASB/EU)

under PCAOB standards (U.S. SEC filing);

(cid:23) Unqualified Audit Report on Internal Control over Financial Reporting under PCAOB standards

(U.S. SEC filing); and

(cid:23) Unqualified Audit Report on Review of Consolidated Financial Information (IFRS – IASB/EU)

under ISA (UK Companies House filing).

Directors’ Remuneration Report

Introduction

This report is on the remuneration of the directors of Atlantica for the period to 31 December 2019.
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 and July 2018.

The report is split into three main areas:

(cid:131)

the statement by the chair of the Compensation 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 2020.

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 Compensation Committee and the policy report are not subject to audit.

Atlantica has a Nominating and Corporate Governance Committee, responsible for reviewing the
structure, size and composition of the Board and succession planning for directors and senior
executives. It also reviews and advises the Board on the strategy and corporate governance
responsibility objectives of the Company. The Compensation Committee is mainly focused on
setting the remuneration policy for directors and senior management.

Statement by the Chair of the Compensation Committee

I am pleased to present the remuneration report for 2019. 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 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 a whole in the medium to long term.

During 2019, 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:

(cid:190) Periodically reviewing the fixed and variable remuneration for the Chief Executive Officer;
(cid:190) Periodically reviewing the remuneration policy and overall levels of remuneration for the Chief
Executive Officer and senior management team, including the long-term incentive plans, in
accordance with the following criteria:
o seeking an alignment between incentives, business performance and creation of value for

shareholders;

o consistency with the principles of the 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.

(cid:190) Periodically reviewing the remuneration levels of independent non-executive directors;

In 2018, most of the objectives defined for the Chief Executive Officer's variable bonus were met
and a bonus corresponding to 101.8% of the target variable compensation was paid in 2019. To
finalise, I would like to thank our shareholders for their strong vote in favour of approving the
directors’ remuneration report last year, demonstrating their support on Atlantica’s remuneration
arrangements. I look forward to welcoming you and receiving your support again at the annual
general meeting this year.

Annual Report on Remuneration

Single total figure of remuneration for each director (audited)

Atlantica paid remuneration only to independent non-executive directors and Santiago Seage
(Chief Executive Officer and Executive Director). Other directors were not paid remuneration. Since
April 2019, each independent non-executive director receives an annual compensation of $150.0
thousand (approximately €134.0 thousand). As chairman of the board of directors, Mr. Villalba
receives an additional $75.0 thousand (approximately €67.0 thousand) per year. As chairman of the
audit committee, Mr. Francisco J. Martinez receives an additional $15.0 thousand (approximately
€13.4 thousand) per year. As chairman of the Nominating and Corporate Governance Committee
and Compensation Committee, Mr. Dove and Mr. Robinson receive an additional $10.0 thousand
(approximately €8.9 thousand) per year.

Until March 2019, each non-executive independent director received a total annual compensation
of $134.0 thousand (approximately €119.7 thousand) and as chairman of the board of directors,
Mr. Villalba received an additional $61.0 thousand (approximately €54.5 thousand) per year. As
chairman of the audit committee, Mr. Francisco J. Martinez received an additional $15.0 thousand
per year (approximately €13.4 thousand) per year. As chairman of the Nominating and Corporate

Governance Committee and Compensation Committee, Mr. Dove and Mr. Robinson receive an
additional $10.0 thousand (approximately €8.9 thousand) per year.

In 2019, each independent director received a total annual compensation detailed in the table
below. The CEO’s total annual compensation is also detailed in this table.

Non-executive directors appointed by Algonquin did not receive any compensation from us.

The table below provides a breakdown of the various elements of Director pay for the year ended
31/12/2019 and for prior years. This comprises the total remuneration earned in respect of the
period from 01/01/2019 to 31/12/2019 and from the period 01/01/2018 to 31/12/2018. For non-
executive independent directors, compensation is approved in U.S. Dollars and is translated to
Euros to align it with the CEO’s compensation, which is approved in Euros.

Salary and fees

€´000

All taxable

benefits

€´000

2016-2018 LTIP

Annual bonuses

Total for 2019

€´000

Name

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Santiago Seage

650.0

Daniel Villalba

194.3

135.5

Jackson Robinson

139.3

100.2

Robert Dove

139.3

100.2

Andrea Brentan

130.4

96.7

Francisco J. Martinez

143.8

101.9

Total

1,397.1 1,184.5

655.0 855.5

865.3

1,505.5

2,170.3

194.3

135.5

139.3

100.2

139.3

100.2

130.4

96.7

143.8

101.9

655.0 855.5 865.3

2,252.6 2,704.8

Only directors who received remuneration are included in the table above.

None of the directors received any pension remuneration in 2018 nor 2019. The CEO received the
2016-2018 LTIP compensation in 2018, paid in March 2019. No long-term awards have vested in
2019.

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

During the year 2019, most of the objectives defined for the Chief Executive Officer's variable bonus
were met or exceeded and the Compensation Committee decided to approve a bonus
corresponding to 100.7% of the target variable compensation, which will be payable in 2020. In
2018, 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 101.8% of the target
variable compensation, which was paid in 2019:

Percentage

Achievement

(cid:120) CAFD (cash available for distribution) – Equal or higher

than $190 million

(cid:120) EBITDA– Equal or Higher than $827 million

(cid:120) Present and close value creating and accretive investment

opportunities

(cid:120) Lead the works of the strategic review and plan
(cid:120) Achieve health and safety targets - (Frequency with Leave /
Lost Time Index below 4.5 and General frequency index
below 13.8) based on reliable targets and consistent
measure metrics

weight
40%

10%

15%

20%
10%

100%

99%

100%

100%
120%

(cid:120) Implement the succession plan

75%

Cash Available for Distribution refers to the cash distributions received by the Company from its
subsidiaries minus cash expenses of the Company, including debt service and general and
administrative expenses.

The Chief Executive Officer’s maximum potential bonus could be 120% of such bonus (€1,020
thousand).

The 2016-2018 Long-Term Incentive Plan (LTIP) was in place for the three-year period from 2016
to 2018. The award corresponding to the Chief Executive Officer was 21.95% of the maximum
potential award, which amounted to €655 thousand, which was paid in 2019.

A new remuneration policy, including long-term incentive awards was approved at our 2019 Annual
General Meeting held in June 2019. Following that policy, we have yearly long-term incentive plans
which are detailed under the section “Long-term Incentive Awards” 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 2019, he accrued €855.5 thousand as a bonus payment in accordance with his service agreement,
payable in 2020. In 2018, Mr. Seage accrued €865.3 thousand in accordance with his service
agreement, which was paid in 2019.

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 2019 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.

100

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%
100%

96%

74%

116%

76%

149%

121%

133%

119%

87%

85%

160%

140%

120%

100%

80%

60%

40%

20%

2014

2015

2016

2017

2018

2019

Atlantica

Russell

The table below shows the total remuneration of the Chief Executive Officer and his bonuses and
2016-2018 LTIP grants expressed as a percentage of the maximum he is likely to be awarded. We
have also included an additional reference point to show the maximum remuneration receivable
assuming a share price appreciation of 50%.

Bonus

2016-2018 LTIP awards

Year

Total Pay

Percentage

(€ 000)

2019

2018

2017

2016

2015

2014

1,505.5

2,170.3

1,418.1
1,329.1
1,440.9(1)

130.9

maximum

100.7%

101.8%

96.25%

100%

Amount of

bonus

855.5

865.3

818.1

850.0

Percentage

Value

maximum

21.95%

655.0

(1)

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

The Chief Executive Officer did not receive any variable remuneration for service provided to the
Company for the years ended December 31st, 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 left the Company.

In 2017, the Company accrued €818.1 thousand of the bonus paid to the Chief Executive Officer in
2018. In 2018, the Company accrued €865.3 thousand of the bonus paid to the Chief Executive
Officer in 2019, in accordance with his service agreement.

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If from January 1st, 2019 to December 31st, 2019 the share price had increased by 50%, the
remuneration for the CEO for the year 2019 would have been €1,505.5 million, the same as the
amount actually received since no long-term incentives related to the share price have vested in
2019.

In 2019, the Company accrued €855.5 thousand of the bonus payable to the Chief Executive Officer
in 2020.

Chief Executive Officer Pay vs. Employee Pay

The table below sets out the percentage change between the year 2018 and 2019 in salary, benefits
and bonus (determined on the same basis as for the Single Total Figure table) for the Chief Executive
Officer and the average per capita change for employees of the Group as a whole, excluding the
Chief Executive Officer.

Element of remuneration

Percentage change for Chief

Percentage change for

Executive Officer

employees excluding the CEO

Salary

Benefits

Bonus

n/a

1.1%

5.1%

n/a

5.6%

The percentage change for employees excluding the CEO has been calculated considering the same
average number of employees in both 2019 and 2018. This is the most appropriate methodology
to reflect how much the salary and bonus changed on a year-to-year basis as it excludes the effect
of new hired employees (mainly ASI Ops personnel).

Relative Importance of Spend on Pay

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

€ in million

Spend on pay for all employees of the
group(1)

Total remuneration of directors

Dividends paid

Amount in

2019

2018

Difference

24.7

12.8

11.9

2.3

142.0

2.7

112.8

(0.4)

29.2

(1) The increase is mainly due to the acquisition of ASI Operations, the company that performs
the operation and maintenance services to our Solana and Mojave plants

The company has not made any share repurchases during 2019 nor 2018.

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The average number of employees in 2019 in the Group was 306 employees, compared to 207
employees in 2018.

The €11.9 million increase in spend on pay is due to the acquisition in July 2019 of ASI Operations,
the company that performs the operation and maintenance services to the Solana and Mojave
plants. In addition, in 2018, the amount effectively payable under the long-term incentive plan
corresponding to the 2016-2018 period was lower than the amount accrued, so we recorded a
reversal of the accrual, which also explains the increase in spend on pay.

The €0.4 million decrease in total remuneration of directors is due to the CEO’s 2016-2018 long-
term incentive plan that became payable as of December 31, 2018. In 2019, the CEO did not vest
any LTIP amounts.

Directors’ shareholdings (audited)

The following table includes information with respect to beneficial ownership of our ordinary shares
as of December 31, 2019 by each of our directors and executive officers as well as their connected
persons.

Directors not included in the table below do not hold shares.

Santiago Seage

Daniel Villalba

Jackson Robinson

Francisco J. Martinez

Robert Dove

Ian Robertson

Andrea Brentan

December 31, 2019 December 31, 2018

20,000

60,000

10,688

6,703

11,079

2,500

1,300

20,000

60,000

8,647

5,700

10,347

2,500

1,300

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 with the exception of the CEO.

The CEO did not exercise any of the share options in 2019.

On July 31, 2018, the Board approved a share ownership requirement applicable to independent
non-executive directors pursuant to which they shall achieve within a period of three years a
minimum share ownership in the Company equal in value to 1.5 times the annual retainer paid to
independent directors.

Under the LTIP 2019, the CEO holds 46,987 share units, convertible into shares in the future and
122,080 options. In addition, the CEO holds 43,606 share units under the one-off plan.

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Termination Payments (audited)

No termination payments were made to the Chief Executive Officer or any other director in 2019
nor 2018. The policy for termination remuneration is detailed under the section “Policy on
payments for loss of office” of this report.

Statement of Implementation of Policy in 2019

The targets for bonuses are detailed under the section “Remuneration Policy” of this report. The
current policy was approved at our 2019 Annual General Meeting, held in June 2019.

For 2020, the bonus measures for the remuneration of the Chief Executive Officer, will focus on
four areas: financial targets, value creating growth/investments, health and safety and a succession
plan.

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 2020 the bonus objectives are the following:

Percentage
weight

CAFD – Equal of higher than the CAFD budgeted in the 2020 budget
EBITDA – Equal or higher than the EBITDA budgeted in the 2020 budget
Close accretive acquisitions for the Company
Achieve health and safety targets - (Frequency with Leave / Lost Time
Index below 3.5 and General Frequency Index below 11.0) based on
reliable targets and consistent measure metrics
Implement the succession plan

40%
15%
20%
10%

15%

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.

The Compensation Committee is responsible for determining the remuneration policies and the
remuneration of the Chief Executive Officer and other senior members of management.

In 2019, the Committee focused its activities on the following key remuneration topics:

(cid:23) Periodically reviewing Long Term Incentive Plans;
(cid:23) Deciding on the Chief Executive Officer’s remuneration;
(cid:23) Reviewing Independent non-executive director’s remuneration; and
(cid:23) Analysing peers and comparable remuneration structures.

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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.

Director

Membership

Since

Until

Role

Attendance /
Eligible to attend

Mr. Jackson Robinson

Mr. Andrea Brentan

Jun'14

Jun'17

Mr. Christopher Jarratt

Mar'18

n.a

Director, Independent

Director

2/2

The Chief Executive Officer and members of senior management, such as the Head of Human
Resources, may 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 two meetings during the year 2019.

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 Reference 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;

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

comparable scale and complexity;

4. To review the Chief Executive Officer’s annual compensation package and performance

objectives;

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

and

6. To review and approve the compensation payable to executive Directors, and the Chief

Executive Officer for any loss or termination of office or appointment.

2019 Key Activities

In 2019, the Compensation Committee continued its work on revising our remuneration structure
to ensure that the Company has in place an effective Remuneration Policy which:

(cid:23) Allows the Company to attract and retain top quality talent; and

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(cid:23) Rewards and compensates sustainable performance to the benefit of both shareholders and

stakeholders.

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 Committee has been particularly focused on reviewing the remuneration for independent non-
executive directors and Chief Executive Officer, based on the information collected from external
consultants that provided independent advice on remuneration best practices and market practice
on directors´ minimum ownership requirements.

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:

(cid:23) Definition of specific targets for the Chief Executive Officer and overall structure for senior

management.

(cid:23) Evaluation of the accomplishment of those objectives in the case of the Chief Executive Officer.

Long Term Incentive Awards

The Company had a long-term incentive plan for the period 2016-2018 (the “2016-2018 Long-
Term Incentive Plan” or “2016-2018 LTIP”) for the executive team approved at the 2016 Annual
General Meeting. The 2016-2018 LTIP ended in 2018 and the amount payable under the LTIP
amounts to 21.95% of the maximum potential amount, which resulted in a total payment of €1,411
thousand that was paid in March 2019.

In April 2018, the Board of Directors approved the implementation of a new remuneration policy
including LTIP awards. The first long-term incentive plan for the 2019 period permits the grant of
share options and restricted stock units to the executive team of the Company. The LTIP applies to
approximately 14 executives and the Board of Directors also proposed to include the Chief
Executive Officer, who is also a Director. The Chief Executive Officer’s participation in LTIPs was
approved by shareholders at the 2019 annual general meeting in June 2019.

In addition to the LTIP 2019 and following the remuneration policy approved at our 2019 Annual
General Meeting, in December 2019 the Board of Directors approved the implementation of a long-
term incentive plan for the 2020 period in the same terms as the LTIP. The 2020 LTIP applies to
approximately 13 executives including the Chief Executive Officer.

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Voting at the 2019 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 2019 Annual General Meeting, votes in relation to the directors’ remuneration report for the
year ended December 31, 2018 were as follows:

Remuneration Report

Number of votes

For
Against
Withheld*

71,288,396
1,063,617
929,614

98.5
1.5
-

In addition, votes at the 2019 Annual General Meeting in relation to the directors’ remuneration
policy for the year ended December 31, 2018 were as follows:

Remuneration Policy

Number of votes

For
Against
Withheld*

65,047,910
7,293,557
940,160

89.9
10.1
-

* A vote “withheld” is not a vote in law and is not counted in the calculation of the proportion of
votes for and against the resolution.

Remuneration Policy

The current policy was approved at our 2019 Annual General Meeting, held in June 2019.

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.

Until December 31, 2019, the policy was not to compensate other non-independent non-executive
directors for the time dedicated. As further discussed below, the remuneration to non-independent
non-executive directors is a change to our remuneration policy approved by the Compensation
Committee and by the Board of Directors. The Company is seeking shareholder approval to
compensate non-independent non-executive directors on the same terms as we compensate
independent non-executive directors.

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The policy for executive directors, which is only applicable to the Chief Executive Officer as the only
executive director so far, is as follows:

Name of
component

Description of
component

Salary/fees

Benefits

Annual bonus

Fixed remuneration payable
monthly

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

increase

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

year

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

200% of base salary

40%-50% of CAFD

Long Term
Incentive Awards

Restricted stock units and
share options subject to
certain vesting periods

Align executive directors and
shareholders interests

70% of target annual salary
+ bonus

Special one-off plan in 2019
for 50% of 2019 salary +
bonus

10% of EBITDA

40%-50%
other
operational or qualitative
objectives

No retention or clawback

75% share units subject to
5% average annual TSR,
25% options

Share units

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 our 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) 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 Compensation 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.

108

2016-2018 Long-Term Incentive Plan

The Company had a Long-Term Incentive Plan for the period 2016-2018 for the executive team
approved at the 2016 Annual General Meeting. The plan included twelve executives, including our
Chief Executive Officer, who were eligible under the 2016-2018 Long-Term Incentive Plan. The
2016-2018 Long-Term Incentive Plan provided that each eligible executive would be entitled to the
payment of a long-term incentive cash bonus in March 2019 calculated as a function of Total
Annual Shareholder’s Return, or TSR, objectives over the 2016-18 period, a metric intended to align
management and shareholder interests. The maximum bonus would be 50% (or, in the Chief
Executive Officer’s case, 70%) of the total remuneration received by the executive over the period
from 2016-18. Specifically, 50% of the bonus would be based on our TSR and 50% on the relative
performance in terms of TSR versus a group of similarly structured companies selected by the
Compensation Committee. The amount payable under the 2016-2018 LTIP amounted to 21.95% of
the maximum potential amount, which amounts to €1,411 thousand in total and which was paid in
March 2019.

Long-Term Incentive Awards

A new remuneration policy including long-term incentive awards was approved at our 2019 Annual
General Meeting held in June 2019.

In April 2018, the Board of Directors approved the implementation of a remuneration policy
including LTIP awards. The first long-term incentive plan for the 2019 period (the “Long-Term
Incentive Plan 2019” or “LTIP 2019”) permits the grant of share options and restricted stock units
(“Awards”) to the executive team of the Company (the “Executives”). The LTIP applies to
approximately 14 executives and the Board of Directors proposed to include the Chief Executive
Officer, who is also a Director. The Chief Executive Officer’s participation in the LTIP was approved
by shareholders at the 2019 annual general meeting in June 2019.

The purpose of this LTIP is to attract and retain the best talent for positions of substantial
responsibility in the Company, to encourage ownership in the Company by the executive team
whose long-term service the Company considers essential to its continued progress and, thereby,
encourage recipients to act in the shareholders’ interest and to promote the success the Company.

The aggregate number of shares which may be reserved for issuance under the LTIP must not
exceed 2% of the number of the shares outstanding at the time of the Awards are granted but is
expected to be significantly less. However, the Company may decide that, instead of issuing or
transferring shares, the Executives may be paid in cash.

The value of the Awards will be defined as 50% of the Executives’ total annual compensation for
the year closed before the date upon which an Award is granted and, in the case of the Chief
Executive Officer, would be 70% of the same previous year total compensation at the grant date
(“Awards Value”). The share options will represent 25% of the Award Value and the restricted stock
units will represent 75% of the Award Value.

In addition to the LTIP 2019 and following the remuneration policy approved at our 2019 Annual
General Meeting, in December 2019 the Board of Directors approved the implementation of a long-
term incentive plan for the 2020 period (the “2020 Long-Term Incentive Plan” or “2020 LTIP”) in the

109

same terms as the LTIP. The 2020 LTIP applies to approximately 13 executives including the Chief
Executive Officer.

Main terms of the LTIP

Share Options

Restricted Stock Units

Nature

Option cost shall be calculated by
a third party using the Black-
scholes or some other accepted
methodology.

Exercisability
and
period

vesting

One-third of the total number of
options awarded shall vest on each
anniversary of the date upon
which an award was granted.

Ownership
and dividends

The Company will decide at
vesting if cash or shares are given
as payment.

The participant shall have the
rights of a shareholder only as to
shares acquired upon the exercise
of an option and not as to
unexercised options.

Until the Shares are issued or
transferred, no right to vote at any
meeting or to receive dividends or
any other rights as a shareholder
shall exist.

Conditions shall be based on
continuing employment
(or
other service relationship) and
achievement of a minimum 5%
average
total
shareholders return (“TSR”).

annual

The shares will vest on the third
anniversary of the grant date
but only if the total annual
shareholders return (“TSR”) has
least a 5% yearly
been at
average over
such 3-year
period.

The participant will be entitled
to receive, for each share unit, a
the
payment equivalent
amount of any dividend or
distribution paid on one share
between the grant date and the
date on which the share unit
vests.

Effect on termination of employment

If a participant’s employment terminates by reason of involuntary termination (death, disability,
retirement dismissal rendered unfair, etc.), any portion of his/her Award shall thereafter continue
to vest and become exercisable according to the terms of the LTIP but such participant shall be no
longer entitled to be granted Awards under the LTIP.

If a participant incurs a termination of employment for cause or voluntary resignation or
withdrawal, options that have vested on the termination date will be exercisable within the period
of 30 days from such termination date but any unvested Awards (options or restricted stock units)
shall lapse.

110

Change in control

If there is a change in control, all Awards shall vest in full on the date of the change in control. The
participants must exercise their options within a period of 30 days.

Delisting

If the Company is delisted, all outstanding Awards shall vest in full on the date of delisting and will
be settled in cash. The cash payment for restricted stock units will be the last quoted share price of
the Company and the cash payment for any outstanding share options will be the difference
between the last quoted share price and the exercise price for the applicable option. Such cash
payments will be made after applicable tax deductions within 30 days of the delisting.

In addition, in February 2019 the Board of Directors approved a special one-off plan which
permitted the grant of stock units to certain members of the Management and certain members
of the Middle Management5, consisting of approximately 25 managers including the Chief
Executive Officer. The value of the award was defined as 50% of 2019 target remuneration
(including salary and variable bonus). The share units vest over 3 years, one third each year starting
in 2020, provided that the manager is still an employee of the company. This was approved by
shareholders at the 2019 annual general meeting.

The executive director does 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 a fixed remuneration of €663 thousand for the Chief
Executive Officer for 2020, a 2% increase versus 2019.

Total remuneration of the only executive director for a minimum, target and maximum
performance in 2019 is presented in the chart below.

5 Middle Management consists of employees who (i) manage a specific area, (ii) supervise a group of employees or, (iii)
are considered key personnel within the organization.

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Thousand euros. 2020

€ 1,536

57%

43%

€ 1,961

44%

22%

34%

€ 2,556

34%

40%

26%

Minimum

Target

Maximum

Salary and Benefits

Annual Bonus

LTIP and Special One-Off

Assumptions made for each scenario are as follows:

(cid:131) Minimum: fixed remuneration plus portion of LTIP and one-off plans vesting in 2020.

(cid:131) Target:

fixed remuneration plus portion of LTIP and one-off plans vesting in 2020 plus half
of maximum annual bonus

(cid:131) Maximum: fixed remuneration plus portion of LTIP and one-off plans vesting in 2020 plus

maximum annual bonus

LTIP and one-off plans have been included for the amounts vesting in 2020, assuming a share price
of $31.24 (February 26, 2020 share price).

112

For 2020 the bonus objectives are the following:

Percentage
weight

CAFD – Equal or higher than the CAFD budgeted in the 2020 budget
EBITDA – Equal or Higher than the EBITDA budgeted in the 2020
budget
Close accretive acquisitions for the Company
Achieve health and safety targets - (Frequency with Leave / Lost Time
Index below 3.5 and General Frequency Index below 11.0) based on
reliable targets and consistent measure metrics
Implement the succession plan

40%
15%

20%
10%

15%

Approach to recruitment

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 an external advisor to hire key personnel.

As stated in the “Single total figure of remuneration for each director”, since April 2019, each
independent director receives an annual compensation of $150.0 thousand (approximately €134.0
thousand). The chairman of the Audit Committee receives an additional $15.0 thousand
(approximately €13.4 thousand) per year. The chairman of the Nominating and Corporate
Governance Committee and the chairman of the Compensation Committee receive an additional
$10.0 thousand (approximately €8.9 thousand) per year. The chairman of the Board of Directors
receives an additional $75.0 thousand (approximately €67.0 thousand) per year.

Until March 2019, each independent director received a total annual compensation of $134.0
thousand (approximately €119.7 thousand) and the chairman of the board of directors received an
additional $61.0 thousand (approximately €54.5 thousand) per year. The chairman of the Audit
Committee received an additional $15.0 thousand (approximately €13.4 thousand) per year and
the chairman of the Nominating and Corporate Governance Committee and the chairman of the
Compensation Committee received an additional $10.0 thousand (approximately €8.9 thousand)
per year.

Compensation for independent non-executive directors is defined in U.S. Dollars. Amounts in euros
are provided for information purposes.

Nominee directors did not receive any compensation from us.

113

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 2019 Annual General
Shareholders Meeting, introduced certain termination payments to key executives, including the
Chief Executive Officer.

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 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 would 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.

114

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 2020.

Summary of Policy for Non-Executive Directors

Name of component

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 of the Board and
the chair of each committee receive
additional fees

Annual total compensation for -
independent
non-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

Until December 31, 2019, the policy was not to compensate non-independent non-executive
directors for the time dedicated. The Company is seeking shareholder approval to compensate
non-independent non-executive directors on the same terms as we compensate independent non-
executive directors. The remuneration to non-independent non-executive directors is a change to
our remuneration policy approved by the Compensation Committee and by the Board of Directors.

Service Contracts

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

The non-executive directors do not have a service contract and were elected for a period of three
years starting June 2017. Each of the independent non-executive directors will be submitted for re-
election by shareholders at the 2020 annual general meeting.

Employee Benefit Trusts

The Company has not established employee trusts for share plans.

Statement of Voting at General Meetings

The remuneration report and the remuneration policy will be submitted to the Annual
Shareholders’ Meeting in 2020.

115

Approval

This report was approved by the board of directors on February 26, 2020 and signed on its behalf
by Santiago Seage, Director and Chief Executive Officer.

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Director and Chief Executive Officer

Santiago Seage

March 6, 2020

(cid:3)

116

(cid:3)

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)/European Union (EU) 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:

(cid:131)

select suitable accounting policies and then apply them consistently;

(cid:131) make judgments and accounting estimates that are reasonable and prudent;

(cid:131)

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.

117

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(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:87)(cid:68)(cid:78)(cid:72)(cid:81)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:72)(cid:15)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:15)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:183)(cid:86)(cid:3)
(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:17)(cid:3)

(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:72)(cid:69)(cid:85)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3)(cid:21)(cid:25)(cid:15)(cid:3)(cid:21)(cid:19)(cid:21)(cid:19)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:86)(cid:3)
(cid:86)(cid:76)(cid:74)(cid:81)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:69)(cid:92)(cid:29)(cid:3)

(cid:37)(cid:92)(cid:3)(cid:82)(cid:85)(cid:71)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)

(cid:3)

(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)

(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)

(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)

(cid:54)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:74)(cid:82)(cid:3)(cid:54)(cid:72)(cid:68)(cid:74)(cid:72)(cid:3)

(cid:41)(cid:85)(cid:68)(cid:81)(cid:70)(cid:76)(cid:86)(cid:70)(cid:82)(cid:3)(cid:48)(cid:68)(cid:85)(cid:87)(cid:76)(cid:81)(cid:72)(cid:93)(cid:16)(cid:39)(cid:68)(cid:89)(cid:76)(cid:86)(cid:3)

(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:25)(cid:15)(cid:3)(cid:21)(cid:19)(cid:21)(cid:19)(cid:3)

(cid:3)

(cid:20)(cid:20)(cid:27)(cid:3)

(cid:3)

Independent Auditor’s Report to the Members of Atlantica
Yield plc

Opinion

In our opinion:

(cid:120)

Atlantica Yield plc’s group financial statements and parent company financial statements (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 2019 and of the group’s profit for the year then ended;

the group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;

the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and

the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.

We have audited the financial statements of Atlantica Yield plc which comprise:

Group
Consolidated Balance Sheet as at 31 December 2019
Consolidated Income Statement for the year then
ended
Consolidated Statement of other comprehensive
income for the year then ended
Consolidated Statement of changes in equity for the
year then ended

Consolidated Cash flow statement for the year then
ended
Related notes 1 to 30 to the financial statements,
including a summary of significant accounting policies

Parent company
Balance Sheet as at 31 December 2019
Statement of changes in equity for the
year then ended

Related notes 1 to 7 to the financial
statements including a summary of
significant accounting policies

The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. 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 below. We are independent of
the group and 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 entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.

119

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

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us
to report to you where:

(cid:120)

the directors’ use of the going concern basis of accounting in the 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.

Overview of our audit approach

Key audit
matters

(cid:120) Recoverability assessment of contracted concessional assets

(cid:120) Determination of distributable reserves (parent company only)

Audit scope

(cid:120) We performed an audit of the complete financial information of 4

components and audit procedures on specific balances for a further 18
components.

(cid:120)

The components where we performed full or specific audit procedures
accounted for 87% of Earnings before interest and tax (EBIT), 91% of
Revenue and 92% of Total contracted concessional assets.

Materiality

(cid:120) Overall group materiality of $25m which represents 5% of group EBIT.

Key audit matters

Key audit matters are those matters that, in our professional judgment, 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 our opinion thereon, and we do not provide a separate opinion on
these matters.

120

Key observations
communicated to
the Audit
Committee

Based on the audit
procedures
performed, we
conclude that the
review of the
impairment
indicators analysis is
appropriate and
results in no material
impairment triggers
for any of the group’s
contracted
concessional assets.

Risk

Our response to the risk

Recoverability assessment of
contracted concessional assets ($8,161
million value of risk, PY comparative
$8,549 million)

Refer to the Audit Committee Report
(section 2.1 page 13); Accounting
policies (Note 3 of the Consolidated
Financial Statements page138); and Note
12 of the Consolidated Financial
Statements (page 167)

At December 31, 2019, the Company’s
revenues, totalling $1,011 million, were
derived exclusively from its assets across
a different range of geographies. The
most significant assets and technologies
of the Company are renewable energy,
efficient natural gas, transmission lines
and water assets. As described in Note
2.3 to the consolidated financial
statements, these assets are referred to
as “contracted concessional assets”
which are classified mostly, as intangible
assets or as financial assets, depending
on the nature of the payment
entitlements established in the
agreement. Revenue derived from the
Company’s contracted concessional
assets are governed by power purchase
agreements (PPAs) with the Company’s
customers, known as “off-takers” or by
regulation.

As indicated in Note 2.5 to the
consolidated financial statements, the
Company reviews its contracted
concessional assets for impairment
indicators whenever events or changes
in circumstances (“triggering events”)
indicate that the carrying amounts of the
assets or group of assets may not be
recoverable. In addition, as indicated in
Note 6, the company updated Solana
impairment test confirming the
conclusions reached in the triggering
event analysis.

Auditing the Company’s recoverability
assessment related to the contracted

We obtained an understanding
of the Company’s process
related to the recoverability
assessment of the Company’s
contracted concessional assets.
We evaluated the design and the
operating effectiveness of the
controls for identifying and
evaluating potential impairment
indicators or triggering events.

To test the Company’s
impairment indicators identified
for all contracted concessional
assets, our audit procedures
included, among others,
validating the inputs and
assumptions used by
management by comparing
actual energy generated versus
budget, obtaining updates on
regulatory matters on all
significant locations and
evaluating the financial situation
of the off-takers.

In relation to the Solana US
plant, in which the company
updated the impairment test to
confirm the conclusions reached
within the triggering event
analysis, we evaluated the
design and operating
effectiveness of controls over
the significant assumptions
updated in current year
impairment test, mainly the
production and the discount
rate.

As a part of our testing
procedures, we assessed the
appropriateness of the main
inputs included in the updated
impairment test, mainly by
evaluating the consistency of the
actual incomes and costs versus
budget for the year 2019, as well
as the estimations related to the

121

concessional assets involves significant
judgment in determining whether a
triggering event occurred and, if an
event did occur, in the assumptions used
by management in the determination if
an impairment should be recorded. The
main inputs considered when evaluating
the triggering events include the
performance of the plants in relation to
external conditions such as weather and
technology changes, as well as legal and
tax changes and financial conditions,
among others. Significant assumptions
used for the update of the impairment
calculation of Solana, include, discount
rates and projections considering real
data based on energy generation.

Determination of distributable
reserves

This Key Audit Matter relates to the
parent company only.

The Company needs to ensure it has
sufficient distributable reserves within
the stand-alone parent company to
declare dividends in accordance with the
UK law.

The legal framework applicable to UK
companies for determining profits
available for distribution is contained in
both the Companies Act 2006 (“The
Act”) and complementary technical
guidance, including that issued by the
Institute of Chartered Accountants in
England and Wales.

The Act requires companies to make
distributions out of distributable
reserves by reference to relevant
accounts. Where the relevant accounts
do not show sufficient distributable
reserves, the company has to file interim
accounts before it can make a
distribution.

The Annual General Meeting of Atlantica
Yield plc, approved a share premium
redemption of $500m in May 2018 for
which the Company only obtained
approval by the High Court of England

future energy generation. For
the discount rate, we involved
our specialists to assist us in
recalculating and developing a
range of discount rates, which
we compared to those used by
the Company. Finally, we
developed an independent
sensitivity analysis through the
performance of various stress
tests on the primary
assumptions used by
management, including energy
generation and discount rates
used in the model. We
performed full audit procedures
over this risk area for all relevant
locations, which covered 100%
of the risk amount.

We recommended that the
Company obtain legal advice
and inspected the advice
provided by the Company’s
lawyers. We discussed the legal
requirements for distributions
directly with the Company’s
external lawyers. We also
discussed the steps required by
the company to remediate this
legal issue.

We inspected records at
Companies House to identify
compliance with the UK laws
and regulations relevant to the
distributions.

We analysed transactions that
impacted the distributable
reserves of the parent company
and considered whether any of
these transactions did not meet
the criteria of distributable
reserves. We also reperformed
the calculation of parent
company distributable profits
available for distribution and
audited the roll-forward of
profits available for distribution
from 1 January 2014 to 31
December 2019.

122

We consider the
impact of the various
transactions during
the year on
distributable reserves
to be appropriately
considered and the
reserves available for
distribution to be
satisfactorily
disclosed. We
considered
disclosures made in
respect of not filing
relevant accounts for
the interim dividend
distributions and
share premium
redemptions and
concluded these to
be appropriate.

We reviewed disclosures made
in respect of this matter,
including the related party
disclosures and the amendment
of prior year share premium and
capital reserves balances which
have no impact on the
company´s total equity, for
appropriateness and compliance
with UK GAAP. The amendment
has no impact on the
consolidated financial
statements.

We performed full audit
procedures over this risk area,
which covered 100% of the risk
amount.

and Wales in May 2019. The transfer
between the Share Premium Account
and distributable reserves recorded in
the 2018 financial statements should not
have been recorded until May 2019 and
hence the $500m did not become
distributable until May 2019. Further,
the company should have filed interim
accounts for dividends paid in August
2018 and subsequently. Hence the
dividends declared and paid by
management from August 2018 until
June 2019 were not in compliance with
the Companies Act 2006 requirements.

In respect of the interim dividends
distributed from June 2019 management
had declared interim dividends without
complying with the Companies Act
requirement to file interim accounts with
Companies House.

Given the technical and administrative
oversights which led to distributions
made otherwise than in accordance with
the Companies Act 2006, we consider
the risk in this area to have increased
and have therefore included this as a Key
Audit Matter for the first time.

An overview of the scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each entity within the Group. Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of
the group and effectiveness of group wide controls and changes in the business environment.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had
adequate quantitative coverage of significant accounts in the financial statements, of the 64 reporting
components of the Group, we selected 22 components covering entities within Spain, México, USA, Peru,
South Africa and UK, which represent the principal business units within the Group.

Of the 22 components selected, we performed an audit of the complete financial information of 4
components (“full scope components”) which were selected based on their size or risk characteristics. For
the remaining 18 components (“specific scope components”), we performed audit procedures on specific
accounts within that component that we considered had the potential for the greatest impact on the
significant accounts in the financial statements either because of the size of these accounts or their risk
profile.

The reporting components where we performed audit procedures accounted for 89% of the Group’s
Earnings before interest and tax “EBIT” used to calculate materiality, 91% of the Group’s Revenue and 92%

123

of the Group’s Total contracted concessional assets. For the current year, the full scope components
contributed 46% of the Group’s EBIT, 42% of the Group’s Revenue and 46% of the Group’s Total contracted
concessional assets. The specific scope component contributed 43% of the Group’s EBIT, 49% of the Group’s
Revenue and 46% of the Group’s Total contracted concessional assets. The audit scope of these
components may not have included testing of all significant accounts of the component but will have
contributed to the coverage of significant accounts tested for the Group.

Of the remaining 42 components that together represent 11% of the Group’s EBIT, none are individually
greater than 3% of the Group’s EBIT. For these components, we performed other procedures, including
analytical review, testing of consolidation journals and intercompany eliminations and foreign currency
translation recalculations to respond to any potential risks of material misstatement to the Group financial
statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Integrated team structure

The overall audit strategy is determined by the UK senior statutory auditor, Stephney Dallmann and Spanish
senior auditor Ambrosio Arroyo Fernandez-Rañada. Atlantica Yield plc Group is based in the UK, however,
due to the structure of the Atlantica Yield PLC ownership, the Group team includes members from both the
UK and Spain. The UK auditor travelled to Spain during the current year’s audit and members of the Group
audit team in both jurisdictions worked together as an integrated team. Both partners attended certain
Audit Committee meetings during the course of the audit and concluded on key judgements.

Involvement with component teams

In establishing our overall approach to the Group audit, we determined the type of work that needed to be
undertaken at each of the components by us, as the primary audit engagement team, or by component
auditors from other EY global network firms operating under our instruction. Of the 4 full scope
components, significant audit areas procedures were performed on 3 of these directly by the primary audit
team. For the 18 specific scope components, where the work was performed by component auditors, we

124

determined the appropriate level of involvement to enable us to determine that sufficient audit evidence
had been obtained as a basis for our opinion on the Group as a whole.

During the current year’s audit cycle, visits were undertaken by the Group audit team to component teams
in the UK, Spain, Mexico, the United States, South Africa, Chile, Peru and Uruguay. These visits involved
discussing the audit approach with the component team and any issues arising from their work, meeting
with local management and reviewing key audit working papers. The primary team interacted regularly
with the component teams where appropriate during various stages of the audit, reviewed key working
papers and were responsible for the scope and direction of the audit process. This, together with the
additional procedures performed at Group level, gave us appropriate evidence for our opinion on the
Group financial statements.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the financial statements. Materiality provides
a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Group to be $25 million, which is 5% of earnings before interest and tax.
We believe that this materiality basis provides us with the best assessment of the requirements of the users
of the financial statements. The auditors in the prior period determined materiality for the Group to be $40
million in the comparative period, which was five per cent of earnings before interest, tax, depreciation and
amortization (EBITDA).

We determined materiality for the Parent Company to be $32 million, which is 2% of Equity.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control
environment, our judgement was that performance materiality was 50% of our planning materiality, namely
$12.5m. We have set performance materiality at this percentage due to the additional complexities
associated with a first year audit

Audit work at component locations for the purpose of obtaining audit coverage over significant financial
statement accounts is undertaken based on a percentage of total performance materiality. The
performance materiality set for each component is based on the relative scale and risk of the component to
the Group as a whole and our assessment of the risk of misstatement at that component. In the current
year, the range of performance materiality allocated to components was $2m to $6m.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in
excess of $1.2m, which is set at 5% of planning materiality, as well as differences below that threshold that,

125

in our view, warranted reporting on qualitative grounds. The auditors in the prior period reported
differences in excess of $2m in the comparative period.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report set out on pages 2 to 118,
other than the financial statements and our auditor’s report thereon. The directors are responsible for the
other information.

Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this 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
the other information, we are required to report that fact.

We have nothing to report in this regard.

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:

(cid:120)

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 directors’ report have been prepared in accordance with applicable legal
requirements.

Matters on which we are required to report by exception

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

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:

(cid:120)

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 and the part of the directors’ remuneration report to be
audited are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

(cid:120) we have not received all the information and explanations we require for our audit

126

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 117, 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 and 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 https://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.

Stephney Dallmann (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
10 March 2020

Notes:

The maintenance and integrity of the Atlantica Yield plc web site is the responsibility of the directors;

1.
the work carried out by the auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the financial statements since
they were initially presented on the web site.

Legislation in the United Kingdom governing the preparation and dissemination of financial

2.
statements may differ from legislation in other jurisdictions.

127

Consolidated Financial Statement

Consolidated Income Statement

Amounts in thousands of U.S. dollars

Revenue
Other operating income
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
8

9
9

2019

1,011,452
93,774
(32,246)
(310,755)
(261,776)

2018

1,043,822
132,557
(15,130)
(362,697)
(310,642)

500,449

487,910

4,121
(407,990)
2,674
(1,153)

36,444
(425,019)
1,597
(8,235)

(402,348)

(395,213)

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

7,457

5,231

Profit before income tax

105,558

97,928

Income tax

(30,950)

(42,659)

Profit/ (Loss) for the year

74,608

55,269

Profit attributable to non-controlling interests

(12,473)

(13,673)

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

62,135

41,596

Weighted average number of ordinary shares outstanding
(thousands)

101,063

100,217

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

0.61

0.42

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

All results are derived from continuing operations.

128

Consolidated Statement of other comprehensive income

Amounts in thousands of U.S. dollars

Note (1)

Year
Ended
December
31, 2019

Year
Ended
December
31, 2018

Profit / (Loss) for the year

74,608

55,269

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

(81,713)

55,765

(40,220)

67,519

Exchange differences on translation of foreign operations

(22,284)

(57,628)

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

6,147

(10,685)

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

(42,085)

(41,014)

Total comprehensive income for the year

32,523

14,255

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

20,094
12,429

2,301
11,954

(1)

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

129

Consolidated Balance Sheet
Amounts in thousands of U.S. dollars

Note (1)

As of
December
31, 2019

As of
December
31, 2018

Assets
Non-current assets

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

8,161,129
139,925
91,587
147,966
8,540,607

8,549,181
53,419
52,670
136,066
8,791,336

14&22
22
15&22

20,268
317,568
218,577
562,795
1,119,208

18,924
236,395
240,834
631,542
1,127,695

9,659,815

9,919,031

10,160
1,900,800
73,797
(90,824)
(385,457)
1,508,476
206,380
1,714,856

695,085
4,069,909
1,641,752
17,115
298,744
248,996
6,971,601

28,706
782,439
128,062
34,151
973,358

10,022
2,029,940
95,011
(68,315)
(449,274)
1,617,384
138,728
1,756,112

415,168
4,826,659
1,658,126
33,675
279,152
211,000
7,423,780

268,905
264,455
192,033
13,746
739,139

9,659,815

9,919,031

16
17
18
26
22
10

16
17
19

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

130

(cid:3)

The consolidated financial statements of Atlantica Yield plc, company registration no. 08818211,
were approved by the board of directors and authorised for issue on 26 February 2020.

They were signed on its behalf by:

(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)
(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66)(cid:66) (cid:66)

Director and Chief Executive Officer

Santiago Seage

March 6, 2020

131

(cid:3)

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, 2019

10,022

2,029,940

95,011

(449,274)

(68,315)

1,617,384

138,728 1,756,112

Profit for the year after taxes

Change in fair value of cash flow
hedges

Currency translation differences

Tax effect

Other comprehensive income /(loss)

Total comprehensive income/(loss)

Capital reduction

Capital increase (Note 20)

138

29,862

Change in the scope of
consolidation (Note 5)

Dividend distribution

(159,002)

62,135

(27,947)

1,682

62,135

12,473

74,608

(26,265)

317

(25,948)

6,733

(22,509)

225

(22,284)

6,733

(586)

6,147

(21,214)

1,682

(22,509)

(42,041)

(44)

(42,085)

(21,214)

63,817

(22,509)

20,094

12,429

32,523

(2,688)

30,000

92,303

(159,002)

(34,392)

(193,394)

Balance as of December 31,2019

10,160

1,900,800

73,797

(385,457)

(90,824)

1,508,476

206,380 1,714,856

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

Application of new accounting
standards effective January 1, 2018

1,326

(11,812)

(10,486)

Balance as of January 1, 2018

10,022

2,163,229

82,294

(489,026)

(18,147)

1,748,372

136,595 1,884,967

Loss for the year after taxes

Change in fair value of cash flow
hedges

Currency translation differences

Tax effect

Other comprehensive income/(loss)

Total comprehensive income/(loss)

Dividend distribution

41,596

21,474

(236)

41,596

13,673

55,269

21,238

6,061

27,299

(50,168)

(7,460)

(57,628)

(8,757)

(1,608)

(10,365)

(320)

(10,685)

12,717

(1,844)

(50,168)

(39,295)

(1,719)

(41,014)

12,717

39,752

(50,168)

2,301

11,954

14,255

(133,289)

(9,821)

(143,110)

Balance as of December 31, 2018

10,022

2,029,940

95,011

(449,274)

(68,315)

1,617,384

138,728 1,756,112

*Parent company reserve consists of both Capital reserves as well as the Share Premium. Refer to Note 20 for more details.
(1) Notes 1 to 30 are an integral part of the consolidated financial statements

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 losses on derivative financial instruments
Shares of (profits)/losses from associates
Income tax
Changes in consolidation and other non-monetary items

For the year ended

Note (1)

2019

12
9
9

74,608

310,755
405,634
(613)
(7,457)
30,950
(37,432)

2018

55,269

362,697
396,411
399
(5,231)
42,659
(99,280)

Profit for the year adjusted by non-monetary items

776,445

752,924

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 paid
Interest received
Interest paid

Net cash provided by operating activities

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

(1,343)
(71,505)
(36,533)
(3,970)

(1,991)
5,564
(4,898)
(17,019)

(113,351)

(18,344)

(23)
10,135
(309,625)

(12,525)
6,726
(327,738)

363,581

401,043

30,443
22,009
2,703
(173,366)

4,432
68,048
(16,668)
(70,672)

Net cash (used in) / provided by investing activities

(118,211)

(14,860)

Proceeds from Project & Corporate debt
Repayment of Project & Corporate debt
Dividends paid to Company´s shareholders
Dividends paid to Non-controlling interests
Non-controlling interests capital contribution
Capital increase

16&17
16&17

358,826
(603,070)
(159,002)
(29,239)
92,303
30,000

123,767
(385,964)
(133,289)
(9,745)
-
-

Net cash used in financing activities

(310,182)

(405,231)

Net increase / (decrease) in cash and cash equivalents

(64,812)

(19,048)

Cash and cash equivalents at beginning of the year

Translation differences cash and cash equivalents

631,542
(3,935)

669,387
(18,797)

Cash and cash equivalents at the end of the year

562,795

631,542

* Includes proceeds for $22.2 million and $72.6 million for the years ended December 31, 2019 and 2018,
respectively (Note 12)

(1)

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

133

Notes to the consolidated financial statements
31 December 2019

Notes to the consolidated financial statements

1. General information

Atlantica Yield plc. (‘Atlantica’ 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 Company is the ultimate parent company of the
Group. Atlantica is a sustainable total return infrastructure company that owns, manages and
acquires renewable energy, efficient natural gas, electric transmission lines and water assets
focused on North America (the United States, Mexico and Canada), South America (Peru, Chile
and Uruguay) and EMEA (Spain, Algeria and South Africa).

These financial statements are presented in US Dollars. Foreign operations are included in
accordance with the policies set out in Note 3. Amounts included in these financial statements are
rounded to the nearest thousand, except when otherwise indicated.

On March 9, 2018 and on November 27, 2018, Algonquin Power & Utilities (“Algonquin”)
announced that it completed the acquisition from Abengoa S.A, (“Abengoa”) of a 25% and 16.47%
equity interest in Atlantica, respectively. Algonquin is the largest shareholder of the Company and
currently owns a 44.2% stake in Atlantica. Algonquin’s voting shareholding in Atlantica may be
increased up to a 48.5% without any change in corporate governance. Algonquin’s voting rights
and rights to appoint directors are limited to a 41.5% and the additional 7% would vote replicating
non-Algonquin’s shareholders vote. Algonquin does not consolidate the Company in its
consolidated financial statements.

In January 2019, the Company entered into an agreement with Abengoa under the Abengoa
ROFO Agreement for the acquisition of Befesa Agua Tenes, a holding company which owns a 51%
stake in Tenes, a water desalination plant in Algeria, similar in several aspects to Skikda and
Honaine plants. The price agreed for the equity value was $24.5 million, of which $19.9 million
were paid in January 2019 as an advanced payment. Closing of the acquisition was subject to
conditions precedent, including approval by the Algerian administration. The conditions
precedent set forth in the share purchase agreement were not fulfilled as of September 30, 2019.
Therefore, in accordance with the terms of the share purchase agreement the advanced payment
has been converted into a secured loan to be reimbursed by Befesa Agua Tenes, together with
12% per annum interest, through a full cash-sweep of all the dividends generated to be received
from the asset. These dividends would be guaranteed by a right of usufruct over the economic
rights and certain political rights and a pledge over the shares of Befesa Agua Tenes, granted by
Abengoa to the Company. The share purchase agreement requires that the repayment occurs no
later than September 30, 2031. In October 2019 the Company received a first payment of $7.8
million through the cash sweep mechanism.

On April 15, 2019, the Company entered into an agreement to acquire a 30% stake in Monterrey,
a 142 MW gas-fired engine facility including 130 MW installed capacity and 12 MW battery
capacity (“Monterrey”). The acquisition was closed on August 2, 2019, after conditions precedent
were fulfilled, and the Company paid $42 million for the total investment. The asset, located in

134

Notes to the consolidated financial statements
31 December 2019

Mexico, has been in operation since 2018 and represents the first investment in electric batteries
for the Company. It has a U.S. dollar-denominated 20-year PPA with two international large
corporations engaged in the car manufacturing industry as well as a 20-year contract for the
natural gas transportation with a U.S. energy company. The PPA also includes price escalation
factors. The asset is the sole electricity supplier for the off-takers, it has no commodity risk and
also has the possibility to sell excess energy to the North-East region of the country. The
Company also entered into a ROFO agreement with the seller of the shares for the remaining 70%
stake in the asset.

On May 9, 2019, the Company entered into a partnership agreement with Algonquin, investing
$4.9 million in the equity of a wind farm, Amherst Island, with a 75 MW installed capacity, owned
and operated by Algonquin in Canada.

On August 2, 2019, the Company closed the acquisition of ASI Operations LLC (“ASI Ops”), the
company that performs the operation and maintenance services to Solana and Mojave plants. The
consideration paid was $6 million.

On October 22, 2019, the Company closed the acquisition of ATN Expansion 2 from Enel Green
Power Perú, for a total equity investment of approximately $20 million, controlling the asset from
this date. Transfer of the concession agreement is pending authorization from the Ministry of
Energy in Peru. If this authorization were not to be obtained within an eight-month period from
the acquisition date, the transaction would be reversed with no penalties to Atlantica. Enel Green
Power Perú issued a bank guarantee to face this potential repayment obligation to Atlantica.

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as issued by the IASB (`IFRS-IASB´) as well as adopted by the European Union
(`IFRS-EU´) and the Article 4 of the IAS Regulation, 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.

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:

(cid:120) has the power over the investee;

(cid:120)

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

(cid:120) has the ability to use its power to affects its returns.

135

Notes to the consolidated financial statements
31 December 2019

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 IFRS
9 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 non-controlling interest’s proportionate share of the acquirer’s net
assets on an acquisition by acquisition basis.

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.

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 78.

2. Adoption of new and revised Standards

a) Standards, interpretations and amendments effective from January 1, 2019 under IFRS-
IASB/IFRS-EU, applied by the Company in the preparation of these consolidated financial
statements:

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.

136

Notes to the consolidated financial statements
31 December 2019

IAS 19 (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.

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-EU.

IAS 28 (Amendment). Long-term Interests in Associates and Joint Ventures. This
amendment is mandatory for annual periods beginning on or after January 1, 2019
under IFRS-IASB, earlier application is permitted.

- Amendments

resulting

Improvements 2015–2017 Cycle
(remeasurement of previously held interest). This amendment is mandatory for
annual periods beginning on or after January 1, 2019 under IFRS-IASB/IFRS-EU.

from Annual

The applications of these amendments have not had any material impact on these consolidated
financial statements.

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

periods beginning on or after January 1, 2020:

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 3 (Amendment). Definition of Business. This amendment is mandatory for
annual periods beginning on or after January 1, 2020 under IFRS-IASB, earlier
application is permitted.

IAS 1 and IAS 8 (Amendment). Definition of Material. This amendment is mandatory
for annual periods beginning on or after January 1, 2020 under IFRS-IASB, earlier
application is permitted.

IAS 1 (Amendment). Classification of liabilities. This amendment is mandatory for
annual periods beginning on or after January 1, 2022 under IFRS-IASB.

IFRS 7 and IFRS 9. Amendments regarding pre-replacement issues in the context
of the IBOR reform. These amendments are mandatory for annual periods
beginning on or after January 1, 2020 under IFRS-IASB.

- Amendments to References to the Conceptual Frameworks in IFRS Standards. This
Standard is applicable for annual periods beginning on or after January 1, 2020
under IFRS-IASB.

The Company does not anticipate any significant impact on the consolidated financial statements
derived from the application of the new standards and amendments that will be effective for
annual periods beginning on or after January 1, 2020, although it is currently still in the process
of evaluating such application.

137

Notes to the consolidated financial statements
31 December 2019

3. Significant accounting policies

Critical accounting judgements and estimates

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

(cid:120) 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.

(cid:120) Recoverability assessment of contracted concessional assets

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

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 – Service
Concession Arrangements (“IFRIC 12”), except for Palmucho, which is recorded in accordance with
IFRS 16, Leases and PS10, PS20, Mini-Hydro, Chile TL 3 and Seville PV, which are recorded as
tangible assets in accordance with IAS 16 Property, Plant and Equipment. The infrastructure assets
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 including, among other factors, (i) the
identification of certain infrastructure assets 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 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.

138

Notes to the consolidated financial statements
31 December 2019

Under the terms of contractual arrangements within the scope of this interpretation, the operator
shall recognize and measure revenue in accordance with IFRS 15 – Revenue from Contracts with
Customers for the services it performs.

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 Intangible Assets 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:

(cid:120) Revenues from the updated annual revenue for the contracted concession, as well as
operations and maintenance services are recognized in each period according to IFRS 15
“Revenue from contracts with customers”.

(cid:120) 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.

(cid:120) 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 Construction Contracts, 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 IFRS 15. The income from managing and operating the asset resulting
from the valuation at amortized cost is also recorded in revenue.

Financing costs are expensed as incurred.

According to IFRS 9, Atlantica recognises an allowance for expected credit losses (ECLs) for all
debt instruments not held at fair value through profit or loss. ECLs are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash flows due
in accordance with the contract and all the cash flows that the Company expects to receive.

There are two main approaches to applying the ECL model according to IFRS 9: the general
approach which involves a three-stage approach, and the simplified approach, which can be
applied to trade receivables, contract assets and lease receivables. Atlantica has elected to apply
the simplified approach. Under this approach, there is no need to monitor for significant increases

139

Notes to the consolidated financial statements
31 December 2019

in credit risk and entities will be required to measure lifetime expected credit losses at the end of
each reporting period.

The key elements of the ECL calculations are the following:

the Probability of Default (“PD”) is an estimate of the likelihood of default over a given
time horizon. Atlantica calculates PD based on Credit Default Swaps spreads (“CDS”);

the Exposure at Default (“EAD”) is an estimate of the exposure at a future default date;

the Loss Given Default (“LGD”) is an estimate of the loss arising in the case where a
default occurs at a given time. It is based on the difference between the contractual
cash flows due and those that the Company would expect to receive. It is expressed
as a percentage of the EAD.

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.

d) Right-of-use assets

Main right of use agreements correspond to land rights. The Company recognizes right-of-use
assets at the commencement date of the lease (i.e., the date the underlying asset is available for
use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments
made at or before the commencement date less any lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful
lives of the assets.

The right-of-use assets are also subject to assets impairment.

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.

140

Notes to the consolidated financial statements
31 December 2019

Asset impairment

Atlantica reviews its contracted concessional assets to identify any indicators of impairment at
least annually. When impairment indicators exist, the Company calculates the recoverable amount
of the asset.

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
accurately the costs of the project 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 internally and supported by specialists, 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 performed over all major assumptions which can have a significant impact in the
value of the assets.

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 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:

141

Notes to the consolidated financial statements
31 December 2019

Operating segment

Discount

Growth

Rate

EMEA ................................................................................... 4% - 6%

North America ................................................................. 4% - 5%

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 - Impairment of Assets,
an impairment loss is recognized by the Company 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
IFRS 9, Financial instruments, 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.

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/IFRS-EU.

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 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 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.

142

Notes to the consolidated financial statements
31 December 2019

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 and time 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. Any
ineffectiveness is recorded as financial income or expense as it occurs.

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:

(cid:120) Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

(cid:120) 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).

(cid:120) Level 3: Fair value is measured based on unobservable inputs for the asset or liability.

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 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 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

143

Notes to the consolidated financial statements
31 December 2019

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
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.

144

Notes to the consolidated financial statements
31 December 2019

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.
The Company has established a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic
environment.

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

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.

Lease liabilities are recognized by the Company at the commencement date of the lease at the
present value of lease payments to be made over the lease term. The lease payments include the
exercise price of a purchase option reasonably certain to be exercised by the Company and
payments of penalties for terminating the lease, if the lease term reflects the Company exercising
the option to terminate. In calculating the present value of lease payments, the Company uses its
incremental borrowing rate at the lease commencement date considering that the interest rate
implicit in the lease is not readily determinable.

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

145

Notes to the consolidated financial statements
31 December 2019

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

The consolidated financial statements are presented in U.S. dollars. 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

146

Notes to the consolidated financial statements
31 December 2019

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. Other reserves
primarily include hedge reserves.

Non-controlling interest represents interest from other partners in entities included in these
consolidated financial statements which are not fully owned by Atlantica 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:

(cid:120)

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.

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”

147

Notes to the consolidated financial statements
31 December 2019

of the Financial Statements, and the corresponding entry as part of the cost of the plant under
the heading “Contracted concessional assets.”

4. Financial information by segment

Atlantica’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 (the United States, Mexico and Canada)

· South America

· EMEA (Europe, middle east and Africa)

Based on the type of business, as of December 31, 2019 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 three wind farms in Uruguay, Palmatir, Cadonal and
Melowind, with a gross capacity of 50 MW each, and a hydroelectric power plant in Peru with
a gross capacity of 4 MW.

Efficient natural gas: Efficient natural gas assets include (i) 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, and (ii) a minority interest in Monterrey, a 142 MW gas-fired engine
facility including 130MW installed capacity and 12 MW battery capacity.

Electric transmission lines: Electric transmission assets include (i) three lines in Peru, ATN,
ATS and ATN2, spanning a total of 1,029 miles; and (ii) four lines in Chile, Quadra 1, Quadra 2,
Palmucho and Chile TL3, spanning a total of 137 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

148

Notes to the consolidated financial statements
31 December 2019

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.

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, 2019 and December 31, 2018 Atlantica had four customers
with revenues representing each more than 10% of the total revenues, three in the renewable
energy and one in the efficient natural gas business sectors.

a) The following tables show Revenues and Further Adjusted EBITDA by operating segments
and business sectors for the years 2019 and 2018:

149

Notes to the consolidated financial statements
31 December 2019

Revenue
$’000

Further Adjusted EBITDA
$’000

For the twelve-
month period ended December 31,

Geography

2019

2018

2019

2018

North
America
South
America
EMEA

332,965

142,207

536,280

357,177

305,085

308,748

123,214

115,346

100,234

563,431

390,774

441,625

Total

1,011,452

1,043,822

811,204

850,607

Revenue
$’000

Further Adjusted EBITDA
$’000

For the twelve-
month period ended December 31,

2019

2018

2019

2018

761,090

122,281

103,453

793,557

603,666

664,428

130,799

107,457

95,998

85,657

93,858

78,461

24,629

23,468

14,424

13,860

Business
sector

Renewable
energy
Efficient
natural gas
Electric
transmission
lines
Water

Total

1,011,452

1,043,822

811,204

850,607

The reconciliation of segment Further Adjusted EBITDA with the loss attributable to the parent
company is as follows:

150

Notes to the consolidated financial statements
31 December 2019

For the twelve-
month period ended December 31,

2019

$’000

2018

$’000

Profit/(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

62,135
12,473
30,950
(7,457)
-

402,348
310,755

41,596
13,673
42,659
(5,231)
-

395,213
362,697

Total segment Further Adjusted EBITDA

811,204

850,607

b) The assets and liabilities by operating segments (and business sector) at the end of 2019 and

2018 are as follows:

Assets and liabilities by geography as of December 31, 2019:

North
America

South
America

EMEA

$’000

Balance as of
December 31,
2019
$’000

Assets allocated

Contracted concessional assets

3,299,198

1,186,552

3,675,379

8,161,129

Investments carried under the equity method

Current financial investments

Cash and cash equivalents (project companies)

90,847

159,267

181,458

29,190

80,909

49,078

20,673

234,097

139,925

209,131

496,464

Subtotal allocated

Unallocated assets

Other non-current assets

Other current assets (including cash and cash
equivalents at holding company level)
Subtotal unallocated

Total assets

3,730,771

1,296,652

3,979,227

9,006,649

239,553

413,613

653,166

9,659,815

151

Notes to the consolidated financial statements
31 December 2019

North
America

South
America

EMEA

$’000

Balance as of
December 31,
2019
$’000

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

1,676,251

1,490,679

884,835

2,291,262

12,864

138,209
2,429,471

3,166,930

897,699

4,852,348

1,641,752

6,494,100

723,791

564,855

162,213

1,450,859

7,944,959

1,714,856

3,165,715

9,659,815

Assets and liabilities by geography as of December 31, 2018:

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

North
America

South
America

EMEA

$’000

Balance as of
December 31,
2018
$’000

3,453,652

1,210,624

3,884,905

8,549,181

147,213

195,678

3,796,543

61,959

53,419

30,080

41,316
1,313,899

287,456
4,255,860

53,419

239,252

524,450

9,366,302

188,736

363,993

552,729

9,919,031

152

Notes to the consolidated financial statements
31 December 2019

North
America

South
America

EMEA

$’000

Balance as of
December 31,
2018
$’000

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

1,725,961

1,527,724

900,801

2,464,352

7,550

122,852
2,587,204

3,253,685

908,351

5,091,114

1,658,126

6,749,240

684,073

523,827

205,779

1,413,679

8,162,919

1,756,112

3,169,791

9,919,031

Assets and liabilities by business sectors as of December 31, 2019:

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

$’000

Efficient
natural
gas
$’000

Electric
transmission
lines
$’000

Water

$’000

Balance as of
December
31, 2019
$’000

6,644,024
77,549

13,798
421,198

559,069
17,154

148,723
11,850

872,757
-

28,237
53,868

85,280
45,222

18,373
9,548

8,161,129
139,925

209,131
496,464

7,156,568

736,796

954,862

158,423

9,006,649

239,553
413,613

653,166

9,659,815

153

Notes to the consolidated financial statements
31 December 2019

Renewable
energy

$’000

Efficient
natural
gas
$’000

Electric
transmission
lines
$’000

Water

$’000

Balance as of
December
31, 2019
$’000

3,658,507

529,350

640,160

24,331

4,852,348

Liabilities allocated
Long-term and short-term project
debt
Grants and other liabilities

1,634,361

146

6,517

728

Subtotal allocated

5,292,868

529,495

646,677

25,059

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

1,641,752

6,494,100

723,791

564,855
162,213

1,450,859

7,944,959

1,714,856

3,165,715
9,659,815

Assets and liabilities by business sectors as of December 31, 2018:

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

$’000

Efficient
natural
gas
$’000

Electric
transmission
lines
$’000

Water

$’000

Balance as of
December
31, 2018
$’000

6,998,020

580,997

882,980

87,184

8,549,181

10,257
15,396

453,096

7,476,769

-
147,192

45,625

773,814

-
61,102

43,162
15,562

53,419
239,252

14,043

958,125

11,686
157,594

524,450

9,366,302

188,736

363,993

552,729

9,919,031

154

Notes to the consolidated financial statements
31 December 2019

Renewable
energy

$’000

Efficient
natural
gas
$’000

Electric
transmission
lines
$’000

Water

$’000

Balance as of
December
31, 2018
$’000

3,868,626

545,123

647,820

29,545

5,091,114

Liabilities allocated
Long-term and short-term project
debt
Grants and other liabilities

1,656,146

161

1,025

794

Subtotal allocated

5,524,772

545,284

648,845

30,339

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

1,658,126

6,749,240

684,073
523,827
205,779

1,413,679

8,162,919

1,756,112

3,169,791

9,919,031

e) The amount of depreciation, amortization and impairment charges recognized for the

years ended December 31, 2019 and 2018 are as follows:

For the twelve-month period
ended December 31,

$’000

impairment by

2019

2018

(116,232)
(47,844)
(146,679)

(310,755)

(166,046)
(42,368)
(154,283)

(362,697)

For the twelve-month period
ended December 31,

$’000

2019
(286,907)

(27,490)

3,102

541

2018

(323,538)

(28,925)

(10,334)

100

(310,755)

(362,697)

Depreciation, amortization and
geography
North America
South America

EMEA

Total

Depreciation, amortization and
business sectors

impairment by

Renewable energy

Electric transmission lines

Efficient natural gas

Water

Total

155

Notes to the consolidated financial statements
31 December 2019

5. Changes in the scope of the consolidated financial statements

For the year ended December 31, 2019

On May 24, 2019, Atlantica and Algonquin formed Atlantica Yield Energy Solutions Canada Inc.
(“AYES Canada”), a vehicle to channel co-investment opportunities in which Atlantica holds the
majority of voting rights. The first investment was in Amherst Island, a 75 MW wind plant in
Canada owned by the project company Windlectric, Inc. (“Windlectric”). Atlantica invested $4.9
million and Algonquin invested $92.3 million, both through AYES Canada, which in turn invested
those funds in Amherst Island Partnership (“AIP”), the holding company of Windlectric. Atlantica
accounts for the investment in AIP and ultimately Windlectric under the equity method as per IAS
28, Investments in Associates and Joint Ventures. Since Atlantica has control over AYES Canada
under IFRS 10 “Consolidated Financial Statements”, its consolidated financial statements initially
showed a total investment in the Amherst Island project of $97.2 million, accounted for as
“Investments carried under the equity method” (Note 13) and Algonquin’s portion of that
investment of $92.3 million as “Non-controlling interest”.

On August 2, 2019, the Company closed the acquisition of a 30% stake in Monterrey, a 142 MW
gas-fired engine facility with batteries. The total investment amounted to $42 million, out of which
$17 million is an equity investment, and the rest is a shareholder loan classified as financial
investments in these consolidated financial statements. The acquisition has been accounted for in
the consolidated accounts of Atlantica, in accordance with IAS 28, Investments in Associates.

On August 2, 2019, the Company closed the acquisition of a 100% stake in ASI Operations LLC
(“ASI Ops”), the company that performs the operation and maintenance services for the Solana
and Mojave plants. The total equity investment amounted to $6 million. The acquisition has been
accounted for in the consolidated financial statements of Atlantica, in accordance with IFRS 3,
Business Combinations.

On October 22, 2019, the Company closed the acquisition of ATN Expansion 2 from Enel Green
Power Perú, for a total equity investment of $20 million controlling the asset from this date.
Transfer of the concession agreement is pending authorization from the Ministry of Energy in
Peru. If this authorization were not to be obtained within an eight-month period from the
acquisition date, the transaction can be reversed with no penalties to Atlantica. Enel Green Power
Perú issued a bank guarantee to face this potential repayment obligation to Atlantica. The
purchase has been accounted for in the consolidated accounts of Atlantica, in accordance with
IFRS 3, Business Combinations.

Impact of changes in the scope in the consolidated financial statements

The amount of assets and liabilities integrated at the effective acquisition date for the aggregated
change in scope is shown in the following table:

156

Notes to the consolidated financial statements
31 December 2019

Asset Acquisition
for the year ended December 31, 2019
$‘000

Concessional assets (Note 12)

Investments carried under the equity

method (Note 13)

Other non-current assets

Current assets

Deferred tax liabilities (Note 10)

Other current and non-current liabilities

Non-controlling Interests

Asset acquisition - purchase price - Cash

Net result of the asset acquisition

28,738

113,897

25,342

1,503

(2,539)

(1,512)

(92,303)

(73,126)

The allocation of the purchase prices is provisional as of December 31, 2019 for some of the
acquisitions. As such, the amounts indicated may be adjusted during the measurement period to
reflect new information obtained about facts and circumstances that existed at the acquisition
date that, if known, would have affected the amounts recognized as of December 31, 2019. The
measurement period will not exceed one year from the acquisition dates.

The amount of revenue contributed by the acquisitions performed during 2019 to the
consolidated financial statements of the Company for the year 2019 is $0.3 million, and the
amount of profit after tax is $0.5 million. Had the acquisitions been consolidated from January 1,
2019, the consolidated statement of comprehensive income would have included additional
revenue of $2.3 million and additional loss after tax of $2.4 million.

For the year ended December 31, 2018

On February 28, 2018, the Company completed the acquisition of a 100% stake in Hidrocañete,
S.A. (Mini-Hydro). Total purchase price for this asset amounted to $9.3 million. The purchase has
been accounted for in the consolidated accounts of Atlantica, in accordance with IFRS 3, Business
Combinations.

On October 10, 2018, the Company completed the acquisition of a 5% stake in Gas CA-KU-A1,
S.A.P.I de C.V. (Pemex Transportation System or “PTS”). The purchase has been accounted for in
the consolidated accounts of Atlantica, in accordance with IAS 28, Investments in Associates.
Consideration for the initial 5%, will amount to approximately $7 million and will be disbursed
progressively. The project is expected to enter operation in the first half of 2020.

157

Notes to the consolidated financial statements
31 December 2019

On December 11, 2018, the Company completed the acquisition of a transmission line in Chile
(Chile TL3). The total purchase price for this asset amounted to $6.0 million. The purchase has
been accounted for in the consolidated accounts of Atlantica, in accordance with IFRS 3, Business
Combinations.

On December 13, 2018, the Company completes the acquisition of a 100% stake in Estrellada, S.A.
(Melowind). Total purchase price for this asset amounted to $45.3 million. The purchase has been
accounted for in the consolidated accounts of Atlantica, in accordance with IFRS 3, Business
Combinations.

On December 28, 2018, the Company completed the acquisition of a power substation and two
small transmission lines in Peru, being an expansion of the ATN transmission line (“ATN expansion
1”). Total purchase price for this asset amounted to $16.0 million. The purchase has been
accounted for in the consolidated accounts of Atlantica, in accordance with IFRS 3, Business
Combinations.

Impact of changes in the scope in the consolidated financial statements

The amount of assets and liabilities integrated at the effective acquisition date for the aggregated
change in scope is shown in the following table:

Asset Acquisition
for the year ended December 31, 2018
$‘000

Concessional assets (Note 12)

Investments carried under the equity

method (Note 13)

Current assets

Project debt long term (Note 17)

Deferred tax liabilities (Note 10)

Project debt short term (Note 17)

Other current and non-current liabilities

Asset acquisition - purchase price

Net result of the asset acquisition

155,909

5,646

(79,016)

(590)

(2,346)

(3,000)

(76,604)

The allocation of the purchase prices was provisional as of December 31, 2018 for some of the
acquisitions that were made effective near to year end. No significant adjustments were made in
2019 to the amounts indicated in the table above during the measurement period (one year from
the acquisition dates).

158

Notes to the consolidated financial statements
31 December 2019

The amount of revenue contributed by the acquisitions performed during 2018 to the
consolidated financial statements of the Company for the year 2018 is $1.8 million, and the
amount of loss after tax is $0.3 million. Had the acquisitions been consolidated from January 1,
2018, the consolidated statement of comprehensive income would have included additional
revenue of $13.3 million and additional loss after tax of $0.7 million.

6. Auditor’s remuneration

The analysis of the auditor’s remuneration is as follows:

Year

ended

2019
$’000

Year

ended

2018
$’000

Fees payable to the company’s auditor and their associates
for the audit of the company’s annual accounts

596

891

Fees payable to the company’s auditor and their associates
for other services to the group

–The audit of the company’s subsidiaries

758

905

Total audit fees

- Audit-related services

- Tax services
- Other services

Total non-audit fees

1,354

1,796

481

406

271

1,158

705

751

2,512

2,547

“Audit Fees” are the aggregate fees billed for professional services in connection with the audit
of the Annual Consolidated Financial Statements, quarterly reviews of the Company interim
financial statements and statutory audits of the subsidiaries’ financial statements under the
rules of England and Wales and the countries in which subsidiaries are organized. The decrease
in audit fees is mainly due to the change of external auditors in 2019.

“Audit-Related Services” include fees charged for services that can only be provided by the
auditor of the Company, such as consents and comfort letters of non-recurring transactions,
assurance and related services that are reasonably related to the performance of the audit or
review of the Company financial statements. Fees paid during 2019 related to comfort letters
and consents required for capital market transactions of the major shareholder are also
included in this category. The Audit Committee approved all of the services provided by Ernst
& Young S.L and by other member firms of EY.

159

Notes to the consolidated financial statements
31 December 2019

“Tax Services” include mainly fees charged for transfer pricing services and tax compliance
services in the Company US subsidiaries.

“Other Services” comprises fees billed in relation to financial advisory and due diligence
services and other services which cannot be included under other categories.

7. Staff costs

The average monthly number of employees (including executive directors) was:

Executives

Middle Managers

Engineers and Graduates

Assistants and Professionals

Plant technicians

Their aggregate remuneration comprised:

Wages and salaries

Social security costs

Other staff costs

2019

2018

Number

152

73
306

115

207

Year

ended
2019
$’000

Year

ended
2018
$’000

(27,596)

(2,983)

(1,667)

(12,677)

(2,082)

(371)

(32,246)

(15,130)

160

Notes to the consolidated financial statements
31 December 2019

8. Other operating income and expenses

Other Operating income

For the twelve-
month period
ended December
31, 2019

For the twelve-
month period
ended December
31, 2018

$’000

Grants
Income from various services and insurance
proceeds

Income from the purchase of the long-term
operation and maintenance payable
to
Abengoa

59,142

59,421

34,632

34,181

38,955

Total

93,774

132,557

Grants income mainly relate to Investment Tax Credits (´ITC´) cash grants and implicit grants
recorded for accounting purposes in relation to the Federal Financing Bank (´FFB´) loans with
interest rates below market rates in Solana and Mojave projects (see Note 18).

Other operating income in 2018 includes $39.0 million one-time gain in relation to the
purchase from Abengoa of the long-term operation and maintenance payable accrued for the
period up to December 31, 2017.

Other Operating expenses

Raw materials and consumables used
Leases and fees
Operation and maintenance
Independent professional services
Supplies
Insurance
Levies and duties
Other expenses

For the twelve-
month period
ended December
31, 2019

For the twelve-
month period
ended December
31, 2018

$’000

(9,719)
(1,850)
(116,018)
(41,579)
(25,823)
(23,971)
(34,844)
(7,971)

(10,648)
(1,716)
(145,857)
(43,229)
(25,947)
(24,227)
(37,439)
(21,579)

Total

(261,776)

(310,642)

161

Notes to the consolidated financial statements
31 December 2019

9. Finance income and expenses

The following table sets forth financial income and expenses for the years ended December 31,
2019 and 2018:

For the twelve-
month period
ended December
31, 2019
$’000

For the twelve-
month period
ended December
31, 2018
$’000

Finance income
Interest income from loans and credits

Profit on interest rate derivatives: cash flow hedges

TOTAL

3,665
456
4,121

36,296

148

36,444

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, 2019
$’000

For the twelve-
month period
ended December
31, 2018
$’000

(259,416)
(89,256)
(59,318)

(407,990)

(256,736)

(100,057)

(68,226)

(425,019)

Financial income from loans and credits in 2018 primarily includes a non-monetary financial
income of $36.6 million resulting from the refinancing of the debts of Helios 1&2 and
Helioenergy 1&2 in the second quarter of 2018.

Interest from other debts is primarily interest on the notes issued by ATS, ATN and Solaben
Luxembourg and interest related to the investment from Liberty. The decrease in 2019 and 2018
is primarily due to a lower increase of the amortized cost of the Liberty debt compared to the
previous year for $16 million and $23 million respectively (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.

162

Notes to the consolidated financial statements
31 December 2019

Other finance income / (expenses)

Other finance income

Other finance expenses

TOTAL

For the twelve-
month period
ended
December 31,
2019
$’000

For the twelve-
month period
ended
December 31,
2018
$’000

14,152

(15,305)

(1,153)

14,431

(22,666)

(8,235)

Other finance income in 2019 and 2018 are primarily interests on deposits and on loan granted to
third parties.

Other financial losses primarily include expenses for guarantees and letters of credit, wire transfers,
other bank fees and other minor financial expenses.

10. Tax

Atlantica Parent Company and its subsidiaries 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.

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.

The Company offsets deferred tax assets and deferred tax liabilities in each entity where the latter
has a legally enforceable right to set off current tax assets against current tax liabilities, and the
deferred tax assets and liabilities relate to income taxes levied by the same taxation authority.

As of December 31, 2019, and 2018, the analysis of deferred tax assets and deferred tax liabilities is
as follows:

163

Notes to the consolidated financial statements
31 December 2019

Year
ended
2019
$’000

Year
ended
2018
$’000

Net tax credits for tax losses carried forward
Temporary differences on derivative financial instruments
Other temporary differences

61,693
86,096
177

55,835
79,865
366

Total deferred tax assets

147,966

136,066

Most of the net tax credits for operating losses carried forward corresponds to Peru, South Africa
and solar plants in Spain as of December 31, 2019.

Temporary differences for derivative financial instruments are mainly due to ACT ($17 million) and
solar plants in Spain ($61 million).

In relation to tax losses carried forward and deductions pending to be used recorded as deferred
tax assets, the entities evaluate their recoverability projecting forecasted taxable income for the
upcoming years and taking into account their tax planning strategy. Deferred tax liability reversals
are also considered in these projections, as well as any limitation established by tax regulations in
force in each tax jurisdiction.

Year
ended
2019
$’000

Year
ended
2018
$’000

Temporary differences tax/book amortization
Other temporary differences tax/book value of contracted
concessional assets
Other temporary differences

145,166
83,481

126,792
73,793

20,349

10,415

Total deferred tax liabilities

248,996

211,000

As of December 31, 2019 and 2018, temporary differences as a result of accelerated tax amortization
resulted for some entities in a net deferred tax liability position. These are primarily due to Solana
and Mojave ($45 million in 2019 and $55 million in 2018) and solar plants in Spain ($100 million in
2019 and $74 million in 2018).Other temporary differences between the tax and book value of
contracted concessional assets, which resulted in a net deferred tax liability position relate primarily

164

Notes to the consolidated financial statements
31 December 2019

to ACT in both years.

The movements in deferred tax assets and liabilities during the years ended December 31, 2019 and
2018 were as follows:

Deferred tax assets

As of December 31, 2017

First application of IFRS 9 effective January 1, 2018

Increase/(decrease) through the consolidated income statement

Increase/(decrease) through other consolidated comprehensive income (equity)

Other movements

As of December 31, 2018

Increase/(decrease) through the consolidated income statement

Increase/(decrease) through other consolidated comprehensive income (equity)

Other movements

As of December 31, 2019

Deferred tax liabilities

As of December 31, 2017

First application of IFRS 9 effective January 1, 2018

Increase/(decrease) through the consolidated income statement

Change in the scope of the consolidated financial statements (Note 5)

Other movements

As of December 31, 2018

Increase/(decrease) through the consolidated income statement

Change in the scope of the consolidated financial statements (Note 5)

Other movements

As of December 31, 2019

Amount

165,136

11,811

(24,195)

(10,685)

(6,001)

136,066

5,809

6,147

(56)

147,966

Amount

186,583

8,849

17,996

590

(3,018 )

211,000

31,678

2,539

3,779

248,996

Details of income tax for the years ended December 31, 2019 and 2018 are as follows:

165

Notes to the consolidated financial statements
31 December 2019

Current tax

Deferred tax

Year
ended
2019
$’000

Year
ended
2018
$’000

(5,081)

(468 )

(25,869) (42,191 )

relating to the origination and reversal of
temporary differences

(25,869)

(42,191)

Total income tax benefit/(expense)

(30,950)

(42,659 )

The reconciliation between the theoretical income tax resulting from applying an average statutory
tax rate to profit/(loss) before income tax and the actual income tax expense recognized in the
consolidated income statements for the years ended December 31, 2019 and 2018 are as follows:

Profit before tax

Average statutory tax rate

Tax at the average statutory tax rate

Tax effect of share of results of associates

Permanent differences

Incentives, deductions, and unrecognized tax losses carried
forward
Effect of different tax rates of subsidiaries operating in other
jurisdictions
Other non-taxable income/(expense)

Year
ended
2019
$’000

Year
ended
2018
$’000

105,558

97,928

25%

30%

(26,390)

(29,378)

1,808

11,220

1,639

5,385

(14,161)

(22,972)

(7,076)

752

3,649

1,915

Tax charge for the year

(30,950)

(42,659)

The average statutory tax rate used by the Company changed in 2019 considering some changes
in the statutory tax rate of some geographies over the past years.

Permanent differences in 2019 and 2018 are mainly due to ACT (Mexico).

166

Notes to the consolidated financial statements
31 December 2019

11. Dividends

Year

ended
2019
$’000

Year

ended
2018
$’000

Amounts recognised as distributions to equity holders in
the period:

(159,002)

(133,289)

The dividends indicated above fully relate to the dividends declared by Atlantica Yield Plc. to its
shareholders. These have been declared as follows:

-On February 26, 2019, the Board of Directors declared a dividend of $0.37 per share
corresponding to the fourth quarter of 2018. The dividend was paid on March 22, 2019 for
a total amount of $37.1 million

-On May 7, 2019, the Board of Directors of the Company approved a dividend of $0.39 per
share corresponding to the first quarter of 2019. The dividend was paid on June 14, 2019
for a total amount of $39.6 million.

-On August 2, 2019, the Board of Directors of the Company approved a dividend of $0.40
per share corresponding to the second quarter of 2019. The dividend was paid on
September 13, 2019 for a total amount of $40.6 million.

-On November 5, 2019, the Board of Directors declared a dividend of $0.41 per share

corresponding to the third quarter of 2019. The dividend was paid on December 13, 2019

for a total amount of $41.7 million.

Please refer to Note 7 of the Parent Company financial statements for further disclosures on the
dividends.

In addition, as of December 31, 2019, there was no treasury stock and there have been no
transactions with treasury stock during the period then ended.

12. Contracted concessional assets

Contracted concessional assets include fixed assets financed through project debt, related to
service concession arrangements recorded in accordance with IFRIC 12, except for Palmucho,
which is recorded in accordance with IFRS 16, Leases, and PS10, PS20, Seville PV, Mini-Hydro
and Chile TL3 which are recorded as property plant and equipment in accordance with IAS 16,
and which amount to $125,662 thousand as of December 31, 2019 ($137,211 thousand as of
December 31, 2018). Concessional assets recorded in accordance with IFRIC 12 are either
intangible or financial assets. As of December 31, 2019, contracted concessional financial
assets amount to $819,146 thousand ($843,291 thousand as of December 31, 2018).

167

Notes to the consolidated financial statements
31 December 2019

a) The following table shows the movements of contracted concessional assets

included in the heading “Contracted Concessional assets” for 2019:

2019
$’000

Cost
At 1 January 2019
Additions
Decreases
Change in the scope of the consolidated financial statements
(Note 5)
Translation differences
Reclassification and other movements

At 31 December 2019

Accumulated amortization losses
At 1 January 2019
Additions
Change in the scope of the consolidated financial statements
(Note 5)
Translation differences

At 31 December 2019

Carrying amount
At 1 January 2019

At 31 December 2019

10,475,828
1,431
(23,186)

28,738
(81,941)
(16,273)

10,384,597

(1,926,647)
(310,755)

15,778

(1,844)

(2,223,468)

8,549,181

8,161,129

During 2019, contracted concessional assets decreased primarily due to the effect of the
depreciation of the Euro against the U.S. dollar for the year ended December 31, 2019 compared
to the year ended December 31, 2018 and to the amortization charge for the year.

Other relevant movements in the cost of contracted concessional assets are an increase for the
acquisition of new concessional assets (see Note 5), offset by a decrease for the payments received
from Abengoa by Solana in January, June and December 2019 further to Abengoa´s obligation as
EPC Contractor for a total of $22.2 million.

The decrease included in “Reclassification and other movements” is mainly due to the
reclassification from the long to the short term of the current portion of the contracted
concessional financial assets.

168

Notes to the consolidated financial statements
31 December 2019

Rights of use, as a result of applying IFRS 16, Leases from January 1, 2018, amounts to $54.0
million as of December 31, 2019 ($57.5 million at December 31, 2018). The decrease is mainly due
to the amortization for the year.

The Company has not identified any triggering event of impairment for its contracted
concessional assets, and consequently, no losses from impairment of contracted concessional
assets were recorded during the year ended December 31, 2019. Likewise, during 2019, and as
part of the triggering event analysis, Solana impairment test was updated, confirming the
conclusions reached.

b) The following table shows the movements of contracted concessional assets included in

the heading “Contracted Concessional assets” for 2018:

2018
$’000

Cost
At 1 January 2018
Additions
Application of IFRS 16 – Leases effective 1 January, 2018
Decreases
Change in the scope of the consolidated financial statements
(Note 5)
Translation differences
Reclassification and other movements

At 31 December 2018

Accumulated amortization losses
At 1 January 2018
Adjustments arising from application of IFRS9 - Expected Credit
Losses effective 1 January, 2018
Additions
Change in the scope of the consolidated financial statements
(Note 5)
Translation differences

At 31 December 2018

Carrying amount
At 1 January 2018

At 31 December 2018

169

10,633,769
10,463
62,982
(92,814)

170,040
(280,680)
(27,932)

10,475,828

(1,549,499)

(53,048)

(362,697)

(14,131)

52,728

(1,926,647)

9,084,270

8,549,181

Notes to the consolidated financial statements
31 December 2019

During 2018, contracted concessional assets decreased primarily due to the effect of the
depreciation of the Euro against the U.S. dollar for the year ended December 31, 2018 compared
to the year ended December 31, 2017 and to the amortization charge for the year.

Other relevant movements in the cost of contracted concessional assets are an increase for the
acquisition of new concessional assets (see Note 12), the impact of the application of IFRS 16,
´Leases´ from January 1, 2018, partially offset by a decrease for the payments received by Solana
from Abengoa in March and December 2018 further to Abengoa´s obligation as EPC Contractor.

Amortization and impairment amount includes the recognition of impairment provisions based
on expected credit losses due to the application of IFRS 9, ´Financial instruments´ from January 1,
2018.

Considering the lower production compared with the run-rate production expected for Solana
due to the technical issues experienced since Commercial Operation Date (´COD´) in the asset and
the uncertainty around level of production in the future, the Company identified a triggering event
of impairment during the year 2018 in compliance with IAS 36, Impairment of Assets. As a result,
an impairment test has been performed resulting in the recording of an impairment loss of
$42,721 thousand as of December 31, 2018.

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 North America geography.
The recoverable amount considered is the value in use and amounts to $1,141,209 thousand for
Solana, as of December 31, 2018. 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 5.0% and 5.8%. An adverse change in the key assumptions
which are individually used for the valuation could lead to future impairment recognition;
specifically, a 5% decrease in generation over the entire remaining useful life (PPA) of the project
would generate an additional impairment of approximately $72 million. An increase of 50 basis
points in the discount rate would lead to an additional impairment of approximately $50 million.

In addition, the Company identified a triggering event for impairment of Mojave as a result of the
negative credit outlooks of Pacific Gas and Electric Company, the off-taker of the plant, as of
December 31, 2018. This project is within the Renewable energy sector and North America
geography. The Company therefore performed an impairment test as of December 31, 2018,
which resulted in the recoverable amount (value in use) exceeding the carrying amount of the
asset by 10%. 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 4.6% and 5.8%.

An adverse change in the key assumptions which are individually used for the valuation would not

170

Notes to the consolidated financial statements
31 December 2019

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.

13. Investments carried under the equity method

The table below shows the breakdown and the movement of the investments held in
associates for 2019 and 2018:

Investments in associates

Initial balance

Share of profit/(loss)

Dividend distribution

Equity distribution (Capital reduction)

Change in the consolidation scope (Note 5)

Currency translation differences

2019
$’000

53,419

7,457

(30,528)

(6,252)

113,897

1,932

2018
$’000

55,784

5,231

(4,463)

(122)

(3,011)

Final balance

139,925

53,419

Details of the Group's associates at the end of the reporting period are as follows:

Name
associate

Principal
activity

incorporation
Place of
and principal place of
business

Proportion of ownership
interest / voting rights held
by the Group

31/12/2019

31/12/2018

Evacuación
Valdecaballero
s, S.L.
Myah
Bahr
Honaine, S.P.A.
Pectonex, R.F.
Proprietary
Limited
Evacuación
Villanueva del
Rey, S.L
Ca
Ku A1,
S.A.P.I de CV
(PTS)

Connection
Facilities

Caceres (Spain)

57.16%

Water plant

Dely Ibrahim (Algeria)

25.50%

Connection
Facilities

Efficient

natural gas

Pretoria (South Africa)

50.00%

Seville (Spain)

40.02%

Mexico D.F. (Mexico)

5.00%

171

Notes to the consolidated financial statements
31 December 2019

natural gas

Efficient

Holding

Pemcorp SAPI
de CV
ABY
Infraestructura
s S.L.U.
AC Renovables
Renewable
Energy
Sol 1 SAS Esp
Renewable
PA Renovables
Energy
Sol 1 SAS Esp
SJ Renovables
Renewable
Energy
Sun 1 SAS Esp
Windlectric Inc Electric

Amsterdam (Netherlands)

30.00%

Seville (Spain)

20.00%

Bogota (Colombia)

50.00%

Bogota (Colombia)

50.00%

Bogota (Colombia)

50.00%

Ontario (Canada)

30.00%

Transmission
Line

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.

During 2019, investments carried under the equity method increase primarily due to the acquisition
of Amherst Island ($97.2 million) and Monterrey ($16.6 million) (Note 5). The increase has been partially
offset by the dividend distributions of Amherst Island Partnership ($25.9 million) and Geida Tlemcen
S.L. ($4.6 million).

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 2019 and 2018 for the associated companies:

% 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

18,584

1,268

13,145

783

694

(277)

(303)

2,348

Myah Bahr Honaine, S.P.A. (*)

25.50

184,332

63,148

71,614

13,562

51,504

33,372

30,186

45,222

Pectonex, R.F. Proprietary
Limited

Evacuación Villanueva del
Rey, S.L

50.00

3,074

40.02

2,946

107

1,841

225

Ca Ku A1, S.A.P.I de CV (PTS)

5.00

486,179

55,423

543,077

(190)

1,391

(39)

(495)

Pemcorp SAPI de CV (**)

30.00

125,301

72,669

197,324

5,090

32,302

5,737

(10.073)

17,179

ABY Infraestructuras S.L.U.

20.00

(104)

(101)

Windlectric Inc (***)

30.00

319,041

10,655

232,938

22,424

24,867

11,125

(6,537)

73,693

renewable

Other
projects (****)

energy

As of December 31, 2019

50.00

146

(46)

139,925

172

Notes to the consolidated financial statements
31 December 2019

% 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

19,679

820

381

420

320

(668)

(693)

8,773

Myah Bahr Honaine, S.P.A. (*)

25.50

186,484

63,224

81,942

13,184

50,118

25,778

22,193

43,161

Pectonex, R.F. Proprietary
Limited

Evacuación Villanueva del
Rey, S.L

50.00

3,186

Ca Ku A1, S.A.P.I de CV (PTS)

5.00

50,547

As of December 31, 2018

40.02

3,190

257

2,021

383

50,625

(209)

1,485

(83)

(624)

53,419

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 $7,697
thousand in 2019 and $5,659 thousand in 2018.

(**) Pemcorp SAPI de CV, Monterrey´s project entity, is 100% owned by Arroyo Netherlands II B.V.
which is accounted for under the equity method in these consolidated financial statements (Note 5).
Arroyo Netherlands II B.V. is 30% owned by Atlantica. Share of profit of Pemcorp SAPI de CV included
in these consolidated financial statements amounts to $521 thousand in 2019.

(***) Windlectric Inc., the project entity, is owned 100% by Amherst Island Partnership which is
accounted for under the equity method (Note 5).

(****) Other renewable energy joint ventures correspond to investments made in the following
entities located in Colombia: AC Renovables Sol 1 SAS Esp, PA Renovables Sol 1 SAS Esp, SJ
Renovables Sun 1 SAS Esp and SJ Renovables Wind 1 SAS Esp.

173

Notes to the consolidated financial statements
31 December 2019

14. Trade and other receivables

Trade and other receivables as of December 31, 2019 and 2018, consist of the following:

Trade receivables

Tax receivables

Prepayments

Other accounts receivable

Total

Balance as of
December
31, 2019
$’000

Balance as of
December
31, 2018
$’000

242,008

50,901

5,150

19,508

163,856

54,959

5,521

12,059

317,568

236,395

As of December 31, 2019, and 2018, the fair value of trade and other accounts receivable does
not differ significantly from its carrying value.

The increase in trade receivables as of December 31, 2019 is primarily due to delays in the
collection of receivables from Pemex (ACT) and the Comision Nacional de los Mercados y de la
Competencia or “CNMC” (Spanish solar assets).

Trade receivables in foreign currency as of December 31, 2019 and 2018, are as follows:

Balance as of
December
31, 2019
$’000

Balance as of
December
31, 2018
$’000

108,280

24,289

4,001

136,570

91,303

25,193

9,884

126,380

Euro

South African Rand

Other

Total

15. Cash and cash equivalents

The following table shows the detail of cash and cash equivalents as of December 31, 2019 and
2018:

2019
$’000

2018
$’000

Cash at bank and on hand - non-restricted
Cash at bank and on hand - restricted

223,867
338,928

335,114
296,428

Total

562,795

631,542

174

Notes to the consolidated financial statements
31 December 2019

Restricted cash includes funds held to satisfy the customary requirements of certain non-recourse
debt agreements within the Company´s projects amounting to $339 million as of December 31,
2019 ($296 million as of December 31, 2018).

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

2019
$’000

2018
$’000

313,678

328,716

181,961

228,036

9,301

47,679

10,176

11,602

55,257

7,931

562,795

631,542

16. Corporate debt

The breakdown of the corporate debt as of December 31, 2019 and 2018 is as follows:

Non-current

Balance as
of
December
31, 2019
$’000

Balance as

of
December
31, 2018
$’000

Credit Facilities with financial entities

695,085

415,168

Total Non-current

695,085

415,168

Current

Credit Facilities with financial entities
Notes and Bonds

Balance as
of
December
31, 2019
$’000

789
27,917

Balance as
of
December
31, 2018
$’000

11,580
257,325

Total Current

28,706

268,905

175

Notes to the consolidated financial statements
31 December 2019

On November 17, 2014, the Company issued the Senior Notes due 2019 in an aggregate principal
amount of $255,000 thousand (the “2019 Notes”). The 2019 Notes accrued annual interest of
7.00% payable semi-annually beginning on May 15, 2015. The 2019 Notes were fully repaid on
May 31, 2019.

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 are payable in cash quarterly in arrears on each interest payment date. The
Company pays interest 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 “2017 Credit Facility”) for up to €10
million, approximately $11.2 million, which is available in euros or U.S. dollars and was fully drawn
down in 2017. Amounts drawn down accrue interest at a rate per year equal to EURIBOR plus
2.25% or LIBOR plus 2.25%, depending on the currency. On December 13, 2019, the terms of the
credit facility have been modified and the maturity date has been extended from July 4, 2020 to
December 13, 2021 and the new interest rate per year set is EURIBOR plus 2% or LIBOR plus 2%,
depending on the currency. As of December 31, 2019, the Company had drawn down an amount
of $10.1 million.

On May 10, 2018, the Company entered into a $215 million revolving credit facility (the “New
Revolving Credit Facility”) with Royal Bank of Canada, as administrative agent and Royal Bank of
Canada and Canadian Imperial Bank of Commerce, as issuers of letters of credit. Amounts drawn
down accrue interest at a rate per year equal to (A) for Eurodollar rate loans, LIBOR plus a
percentage determined by reference to the leverage ratio of the Company, ranging between
1.60% and 2.25% 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 ½ of 1.00%,
(ii) the U.S. prime rate and (iii) LIBOR plus 1.00%, in any case, plus a percentage determined by
reference to the leverage ratio of the Company, ranging between 0.60% and 1.00%. Letters of
credit may be issued using up to $70 million of the Revolving Credit Facility. During the month of
January 2019, the amount of the Revolving Credit Facility increased from $215 million to $300
million. On August 2, 2019, the amount of the Revolving Credit Facility increased from $300 million
to $425 million and the maturity was extended to December 31, 2022 for $387.5 million, while the
remaining $37.5 million matures on December 31, 2021. On December 31, 2019, the Company
had drawn down a total amount of $81.1 million (net of debt issuance cost).

176

Notes to the consolidated financial statements
31 December 2019

On April 30, 2019, the Company entered into a senior unsecured note facility with a group of
funds managed by Westbourne Capital as purchasers of the notes issued thereunder for a total
amount of €268 million (the “2019 Note Issuance Facility”). The principal amount was issued in
May 24, 2019 and was used to prepay and subsequently cancel in full the aforementioned 2019
Notes and for general corporate purposes. The 2019 Note Issuance Facility includes an upfront
fee of 2% paid on drawdown and its maturity date is April 30, 2025. Interest accrue at a rate per
annum equal to the sum of 3-month EURIBOR plus 4.50%. The interest rate on the 2019 Note
Issuance Facility is fully hedged by an interest rate swap with effective date June 28, 2019 and
maturity date June 30, 2022, resulting in the Company paying a net fixed interest rate of 4.24%.
The 2019 Note Issuance Facility provides that the Company may capitalize interest on the notes
issued thereunder for a period of up to two years from closing at the Company´s discretion,
subject to certain conditions.

On October 8, 2019, the Company filed a euro commercial paper program (the “Commercial
Paper”) with the Alternative Fixed Income Market (MARF) in Spain. The program allows Atlantica
to issue short term notes over the next twelve months for up to €50 million, with such notes
having a tenor of up to two years. As of the date of this report the Company has issued €25 million
under the program at an average cost of 0.66%.

The repayment schedule for the Corporate debt at the end of 2019 is as follows:

2020

2021

2022

2023

2024

Subsequent
years

New Revolving Credit Facility
Note Issuance Facility
2017 Credit Facility
2019 Notes Issuance Facility
Commercial Paper
Total

701
84
4
-
27,917
28,706

-
-
10,085
7,938
-
18,023

81,164
101,317
-
-
-
182,481

-
100,513
-
-
-

-
100,413
-
-
-

100,513

100,413

-
-
-
293,655
-
293,655

Total

81,865
302,327
10,089
301,593
27,917
723,791

The following table details the movement in Corporate debt for the year 2019, split between cash
and non-cash items:

Corporate debt

January 1, 2019
684,073

Cash Flow

6,620

Non- cash changes December 31, 2019
723,791

33,098

The non-cash changes primarily relate to interests accrued and to currency translation differences.

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 lines

177

Notes to the consolidated financial statements
31 December 2019

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 a 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 a guarantee to ensure the repayment
of the related financing. In addition, the cash of the Company´s projects includes funds held to
satisfy the customary requirements of certain non-recourse debt agreements and other restricted
cash for an amount of $339 million as of December 31, 2019 ($296 million as of December 31,
2018).

Compared with corporate debt, project debt has certain key advantages, including a greater
leverage and a clearly defined risk profile.

The variations for 2019 and 2018 of project debt have been the following:

Balance as of December 31, 2018

Increases

Decreases

Currency translation differences

Reclassifications

Balance as of December 31, 2019

Project debt -
long term
$’000

Project debt -
short term
$’000

4,826,659

53,222

(19,272)

(33,718)

(756,981)

4,069,909

264,455

280,005

(516,147)

(2,855)

756,981

782,439

Total
$’000

5,091,114

333,226

(535,418)

(36,574)

4,852,348

The line “Increases” includes primarily accrued interest for the year.

The decrease of Project debt during the year 2019 is primarily due to the contractual payments
of debt for the year and the partial repayment of Solana debt using the indemnity received
from Abengoa for $22.2 million. Interest accrued is offset by a similar amount of interest paid
during the year.

Due to the PG&E Corporation and its regulated utility subsidiary, Pacific Gas and Electric
Company (“PG&E”), chapter 11 filings in January 2019, a default of the PPA agreement with
PG&E occurred. Since PG&E failed to assume the PPA conditions within 180 days from the
commencement of the PG&E’s chapter 11 proceedings, a technical event of default was
triggered under the Mojave project finance agreement in July 2019. Although the Company
does not contemplate the scenario under which the US Department of Energy (´DOE´) would
declare the acceleration of debt repayment, the project debt agreement does not have an
unconditional right to defer the settlement of the debt for at least twelve months as of
December 31, 2019, as the event of default provision makes that right not totally unconditional,

178

Notes to the consolidated financial statements
31 December 2019

and therefore the debt has been presented as current in these consolidated financial
statements in accordance with International Accounting Standards 1 (“IAS 1”), “Presentation of
Financial Statements”.

Project debt -
long term
$’000

Project debt -
short term
$’000

Balance as of December 31, 2017

Increases

Decreases

First time application of IFRS 9 effective 1
January, 2018
Debt refinancing IFRS 9 impact

Change in the scope of the consolidated
financial statements (Note 5)
Currency translation differences

Reclassifications

5,228,917
105,466

(98,450)

(39,599)

(36,642)

79,016

(150,019)

(262,030)

246,291
288,541

(522,317)

2,346

(12,436)

262,030

Total
$’000

5,475,208
394,007

(620,767)

(39,599)

(36,642)

81,362

(162,455)

Balance as of December 31, 2018

4,826,659

264,455

5,091,114

The line “Increases” includes primarily accrued interest for the year.

Main variations in Project debt during the year 2018 were the result of:

A net decrease primarily due to the contractual payments of debt for the year and the
partial repayment of Solana debt using the indemnity received from Abengoa during the
year 2018 for $61.5 million. Interests accrued are offset by a similar amount of interest paid
during the year;

The impact of the first application of IFRS 9, ´Financial instruments´ from January 1, 2018;

The impact of the refinancing of the debts of Helios 1&2 and Helioenergy 1&2 on May 18,
2018 and June 26, 2018 respectively. The terms of the new debts are not substantially
different from the original debts refinanced and therefore the exchange of debts
instruments does not qualify for an extinguishment of the original debts under IFRS 9,
´Financial instruments´. When there is a refinancing with a non-substantial modification of
the original debt, there is a gain or loss recorded in the income statement. This gain or loss
is equal to the difference between the present value of the cash flows under the original
terms of the former financing and the present value of the cash flows under the new
financing, discounted both at the original effective interest rate. In this respect, the
Company recorded a $36.6 million financial income in the profit and loss statement of the
consolidated financial statements (see Note 9);

The acquisition of assets and the consolidation of its debt during the year (see Note 5).

179

Notes to the consolidated financial statements
31 December 2019

The repayment schedule for project debt in accordance with the financing arrangements and
assuming there will be no acceleration of the Mojave debt, as of December 31, 2019, is as follows
and is consistent with the projected cash flows of the related projects:

2020

2021

2022

2023

2024

Interest
Repayment

Nominal
repayment

Subsequent
years

Total

12,799

256,620

262,787

293,642

319,962

335,067

3,371,471

4,852,348

The following table details the movement in Project debt for the year 2019, split between cash
and non-cash items:

Project debt

January 1, 2019
5,091,114

Cash Flow
(531,726)

Non- cash changes December 31, 2019

292,960

4,852,348

The non-cash changes primarily relate to interest accrued and to currency translation differences.

The equivalent in U.S. dollars of the most significant foreign-currency-denominated debts held by
the Company is as follows:

Currency

Euro
Algerian Dinar
South African Rand

Total

Balance as of December 31,
2019

Balance as of December 31,
2018

$’000

1,882,618
24,331
384,313

2,291,262

2,049,892
29,545
384,915

2,464,352

All of the Company’s financing agreements have a carrying amount close to its fair value.

18. Grants and other liabilities

Grants
Other liabilities

Balances as of
December 31,
2019

Balances as of
December 31,
2018

$’000

1,087,553
554,199

1,150,805
507,321

Grant and other non-current liabilities

1,641,752

1,658,126

180

Notes to the consolidated financial statements
31 December 2019

As of December 31, 2019, 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
$707 million ($739 million as of December 31, 2018), 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 recorded as other income over the useful life of
the asset.

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 $379 million ($410 million as of
December 31, 2018). 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 their 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 $59.0
million and $59.3 million for the year ended December 31, 2019 and 2018, 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 the parent
company of the project entity, in exchange for the right to receive a large part of taxable losses
and distributions until such time when Liberty reaches a certain rate of return, or the Flip Date.
Given the underperformance of the asset in the last years, the Company cannot assure the Flip
Date will occur or when it will occur. The company expects potential cash distributions from
Solana to go mostly or entirely to Liberty in the upcoming years. If the Flip Date never occurs or
if there is a delay longer than currently anticipated, this will adversely affect the cash flows the
Company expected from that project. In addition, the Company signed an option to acquire,
until April 30, 2020, Liberty’s equity interest in Solana.

According to the stipulations of IAS 32 and in spite of the fact that the investment of Liberty is
in shares, it does not qualify as equity and has been classified as a liability as of December 31,
2019 and 2018. The liability is recorded in Grants and other liabilities for a total amount of $380
million ($358 million as of December 31, 2018) 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.

Additionally, other liabilities include $54 million of finance lease liabilities and $60 million of
dismantling provision as of December 31, 2019 ($57 million and $57 million as of December
31,2018, respectively).

181

Notes to the consolidated financial statements
31 December 2019

19. Trade and other payables

Item

Trade accounts payable
Down payments from clients
Liberty (see Note 18)
Other accounts payable

Total

Balance as of December 31,
2019

Balance as of December 31,
2018

$’000

52,062
565
41,032
34,403

128,062

109,430
6,289
37,119
39,195

192,033

Trade accounts payable mainly relate to the operating and maintenance of the plants.

Nominal values of Trade payables and other current liabilities are considered to approximately
equal to fair values and the effect of discounting them is not significant.

20. Equity

Atlantica’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.

As of December 31, 2019, the share capital of the Company amounts to $10,160,167
represented by 101,601,666 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.

Algonquin completed in 2018 the acquisition from Abengoa of its entire stake in Atlantica,

41.47% of the total shares of the Company, becoming the largest shareholder of the Company.

On May 22, 2019, the Company issued an additional 1,384,402 ordinary shares, which were fully

subscribed by Algonquin for a total amount of $30,000,000, increasing the stake of Algonquin

to 42.27%. Additionally, Algonquin purchased 2,000,000 ordinary shares on May 31, 2019,

increasing its stake in Atlantica to 44.2%.

Atlantica´s parent company reserves as of December 31, 2019 are made up of share premium

account and Capital reserves.

Retained earnings primarily include results attributable to Atlantica.

Other reserves primarily include hedge reserves.

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 Sacyr Agua S.L. in Skikda, by Industrial Development Corporation of South Africa (IDC)

and Kaxu Community Trust in Kaxu and by Algonquin Power Co. in AYES.

182

Notes to the consolidated financial statements
31 December 2019

Dividends declared during the year 2019:

- On February 26, 2019, the Board of Directors declared a dividend of $0.37 per share

corresponding to the fourth quarter of 2018. The dividend was paid on March 22, 2019 for a

total amount of $37.1 million.

- On May 7, 2019, the Board of Directors of the Company approved a dividend of $0.39 per

share corresponding to the first quarter of 2019. The dividend was paid on June 14, 2019 for

a total amount of $39.6 million.

- On August 2, 2019, the Board of Directors of the Company approved a dividend of $0.40

per share corresponding to the second quarter of 2019. The dividend was paid on September

13, 2019 for a total amount of $40.6 million.

- On November 5, 2019, the Board of Directors declared a dividend of $0.41 per share

corresponding to the third quarter of 2019. The dividend was paid on December 13, 2019

for a total amount of $41.7 million.

Please refer to Note 7 of the Parent Company financial statements for further disclosures on the
dividends.

In addition, as of December 31, 2019, 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, 2019
$’000

Cash Flow
$’000

Non monetary
items
$’000

December 31,
2019
$’000

Cash and bank balances

631,542

(64,812)

(3,935)

562,795

Borrowings

5,775,187

(525,106)

326,058

5,576,139

Net debt

5,143,645

(460,294)

329,993

5,013,344

183

Notes to the consolidated financial statements
31 December 2019

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, 2019 and 2018 are as follows: