Washington, D.C. 20549
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
This Report on Form 6-K is incorporated by reference into the Registration Statement on Form F-3 of the Registrant filed with the Securities and Exchange Commission on August 6, 2018 (File 333-226611).
Unless otherwise specified or the context requires otherwise in this quarterly report:
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions, strategies, future events or performance (often, but not always, through the use of words or phrases such as may result, are expected to, will continue, is anticipated, believe, will, could,
should, would, estimated, may, plan, potential, future, projection, goals, target, outlook, predict and intend or words of similar meaning) are not statements of historical facts and may be forward looking. Such statements occur throughout this
report and include statements with respect to our expected trends and outlook, potential market and currency fluctuations, occurrence and effects of certain trigger and conversion events, our capital requirements, changes in market price of our
shares, future regulatory requirements, the ability to identify and/or consummate future acquisitions on favorable terms, reputational risks, divergence of interests between our company and that of our largest shareholder, tax and insurance
implications, and more. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, important factors included in Part I, Item
3D. Risk Factors in our Annual Report (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on our operations and financial results, and
could cause our actual results to differ materially from those contained or implied in forward-looking statements made by us or on our behalf in this quarterly report, in presentations, on our website, in response to questions or otherwise. These
forward-looking statements include, but are not limited to, statements relating to:
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or
circumstances, including, but not limited to, unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such
factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.
Amounts in thousands of U.S. dollars
Consolidated condensed statements of financial position as of September 30, 2020 and December 31, 2019
Amounts in thousands of U.S. dollars
Consolidated condensed income statements for the nine-month periods ended September 30, 2020 and 2019
Amounts in thousands of U.S. dollars
Consolidated condensed statements of comprehensive income for the nine-month periods ended September 30, 2020 and 2019
Consolidated condensed statements of changes in equity for the nine-month periods ended September 30, 2020 and 2019
Amounts in thousands of U.S. dollars
Consolidated condensed cash flows statements for the nine-month periods ended September 30, 2020 and 2019
Amounts in thousands of U.S. dollars
* Includes proceeds for $7.4 million and $14.8 million for the nine-month period ended September 30, 2020 and September 30, 2019 respectively, related to the amounts Solana received from Abengoa further
to Abengoa´s obligation as EPC Contractor.
Note 1. - Nature of the business
Atlantica Sustainable Infrastructure plc (“Atlantica” or the “Company”) 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).
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.
Algonquin Power & Utilities (“Algonquin”) is the largest shareholder of the Company and currently owns a 44.2% stake in Atlantica. Algonquin’s 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 41.5% and the difference between Algonquin´s ownership and 41.5% will vote replicating non-Algonquin’s shareholders vote.
Algonquin does not consolidate the Company in its consolidated financial statements.
During the nine-month period ended September 30, 2020, the Company completed the following acquisitions:
The following table provides an overview of the main assets the Company owned or had an interest in as of September 30, 2020:
Cadonal
|
Renewable
(Wind)
|
100%
|
Uruguay
|
USD
|
50 MW
|
BBB/Baa2/BBB-(12)
|
2014
|
15
|
|
|
|
|
|
|
|
|
|
Melowind
|
Renewable
(Wind)
|
100%
|
Uruguay
|
USD
|
50 MW
|
BBB/Baa2/BBB-
|
2015
|
16
|
|
|
|
|
|
|
|
|
|
Mini-Hydro
|
Renewable
(Hydraulic)
|
100%
|
Peru
|
USD
|
4 MW
|
BBB+/A3/BBB+
|
2012
|
13
|
|
|
|
|
|
|
|
|
|
ACT
|
Efficient
natural gas
|
100%
|
Mexico
|
USD
|
300 MW
|
BBB/ Ba2/
BB-
|
2013
|
13
|
|
|
|
|
|
|
|
|
|
Monterrey
|
Efficient
natural gas
|
30%
|
Mexico
|
USD
|
142 MW
|
Not rated
|
2018
|
19
|
|
|
|
|
|
|
|
|
|
ATN (13)
|
Transmission
line
|
100%
|
Peru
|
USD
|
379 miles
|
BBB+/A3/BBB+
|
2011
|
21
|
|
|
|
|
|
|
|
|
|
ATS
|
Transmission
line
|
100%
|
Peru
|
USD
|
569 miles
|
BBB+/A3/BBB+
|
2014
|
24
|
|
|
|
|
|
|
|
|
|
ATN 2
|
Transmission
line
|
100%
|
Peru
|
USD
|
81 miles
|
Not rated
|
2015
|
13
|
|
|
|
|
|
|
|
|
|
Quadra 1/2
|
Transmission
line
|
100%
|
Chile
|
USD
|
49 miles/
32 miles
|
Not rated
|
2014
|
15/15
|
|
|
|
|
|
|
|
|
|
Palmucho
|
Transmission
line
|
100%
|
Chile
|
USD
|
6 miles
|
BBB+/Baa1/
A-
|
2007
|
18
|
|
|
|
|
|
|
|
|
|
Chile TL3
|
Transmission
line
|
100%
|
Chile
|
USD
|
50 miles
|
A+/A1/A
|
1993
|
Regulated
|
|
|
|
|
|
|
|
|
|
Skikda
|
Water
|
34.2%(4)
|
Algeria
|
USD
|
3.5 M
ft3/day
|
Not rated
|
2009
|
14
|
|
|
|
|
|
|
|
|
|
Honaine
|
Water
|
25.5%(5)
|
Algeria
|
USD
|
7 M ft3/
day
|
Not rated
|
2012
|
18
|
|
|
|
|
|
|
|
|
|
Tenes
|
Water
|
51%(7)
|
Algeria
|
USD
|
7 M ft3/
day
|
Not rated
|
2015
|
20
|
(1) Itochu Corporation, a Japanese trading company, holds 30% of the shares in each of Solaben 2 and Solaben 3.
(2) JGC, a Japanese engineering company, holds 13% of the shares in each of Solacor 1 and Solacor 2.
(3) Kaxu is owned by the Company (51%), Industrial Development Corporation of South Africa (29%) and Kaxu Community Trust (20%).
(4) Algerian Energy Company, SPA owns 49% of Skikda and Sacyr Agua, S.L. owns the remaining 16.83%.
(5) Algerian Energy Company, SPA owns 49% of Honaine and Sacyr Agua, S.L. owns the remaining 25.5%.
(6) Instituto para la Diversificación y Ahorro de la Energía (“Idae”), a Spanish state owned company, holds 20% of the shares in Seville PV.
(7) Algerian Energy Company, SPA owns 49% of Tenes.
(8) 65% of the shares in Chile PV I is held by a renewable energy platform in Chile.
(9) Certain contracts denominated in U.S. dollars are payable in local currency.
(10) Reflects the counterparty’s 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.
(11) Refers to the credit rating of the Republic of South Africa. The offtaker is Eskom, which is a state-owned utility company in South Africa.
(12) Refers to the credit rating of Uruguay, as UTE (Administración Nacional de Usinas y Transmisoras Eléctricas) is unrated.
(13) Including the acquisition of ATN Expansion 1 & 2.
(14) As of December 31, 2019.
(*) Commercial Operation Date.
The project financing arrangement of Kaxu contains cross-default provisions related to Abengoa such that debt defaults by Abengoa, subject to certain threshold
amounts and/or a restructuring process, could trigger a default under the Kaxu project financing arrangement. In March 2017, Atlantica obtained a waiver with respect to its Kaxu project financing arrangement which waived any potential cross-defaults
with Abengoa up to that date, but the waiver did not cover potential future cross-default events. The restructuring process and the pre-insolvency filing by the individual company Abengoa S.A. in August 2020 represent a theoretical event of default
under the Kaxu project finance agreement. Although the Company does not expect the acceleration of debt to be declared by the credit entities, Kaxu did not have contractually as of September 30, 2020 what International Accounting Standards define as
an unconditional right to defer the settlement of the debt for at least twelve months after that date, as the cross-default provisions make that right not unconditional.
Thus, the total debt of Kaxu, which amounts to $324
million as of September 30, 2020, has been presented as current in these consolidated financial statements in accordance with International Accounting Standards 1 (“IAS 1”), “Presentation of Financial Statements”. The Company is currently negotiating
with the creditors a waiver and/or contract modifications in this regard.
Outbreak of COVID-19
The outbreak of the COVID-19 coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization in March 2020 and continues to spread in key markets of the Company. The COVID-19
virus continues to evolve rapidly, and its ultimate impact is uncertain and subject to change. Governmental authorities have imposed or recommended measures or responsive actions, including quarantines of certain geographic areas and travel
restrictions.
Main risks and uncertainties identified by the Company, which may result in a material adverse effect on its business, financial condition, results of operations and cash flows, are:
|
-
|
COVID-19 may affect the operation and maintenance employees of the Company as well as suppliers of operation and maintenance. Furthermore, COVID-19 has caused travel restrictions and significant disruptions to
global supply chains. A prolonged disruption could limit the availability of certain parts required to operate the facilities of the Company and adversely impact the ability of its operation and maintenance suppliers. If the Company were to
experience a shortage of or inability to acquire critical spare parts, it could incur significant delays in returning facilities to full operation.
|
|
-
|
Slowdown of broad sectors of the economy, a general reduction in demand, including demand for commodities and a negative impact on prices of commodities, including electricity, oil and gas. The global outbreak also
caused significant disruption and volatility in the global financial markets, especially from the end of February until the end on May 2020, including the market price of the shares of the Company. Debt and equity markets have also been
affected and there have been weeks with a very low number of new debt and equity issuance transactions. Interest rates for new issuances and spreads with respect to treasury yields increased significantly. Although the revenue of the Company
are generally contracted or regulated, clients may be affected by a reduced demand, lower commodity prices and the turmoil in the credit markets. A reduced demand and low prices persisting over time could cause delays in collections, a
deterioration in the financial situation of the clients of the Company or their bankruptcy.
|
Measures taken by the Company so far have focused on reinforcing safety measures in all its assets while it continues to provide a reliable service to its clients. For example, the Company has
implemented the use of additional protection equipment, reinforced access control to its plants, reduced contact between employees, changed shifts, tested employees, identified and isolated potential cases together with their close contacts and taken
additional measures to increase safety measures for its employees and operation and maintenance suppliers’ employees working at its assets. Furthermore, the Company has adopted additional precautionary measures intended to mitigate potential risks to
its employees, including temporarily requiring all employees to work remotely when their work can be done from home, and suspending all non-essential travel. The Company has also reinforced its physical and cyber-security measures. In May 2020, the
Company started to re-open certain offices at partial capacity and under strict safety measures and since then has decided to close certain offices again, based on health indicators in each region. In addition, the Company has increased the purchase
of spare parts and equipment required for operations, to manage potential disruptions in the supply chain. The Company continues to monitor the situation closely in all assets and offices to take additional action if required.
COVID-19 did not have any material impact on these condensed interim financial statements.
Note 2. - Basis of preparation
The accompanying consolidated condensed interim financial statements represent the consolidated results of the Company and its subsidiaries.
The Company’s annual consolidated financial statements as of December 31, 2019, were approved by the Board of Directors on February 26, 2020.
These consolidated condensed interim financial statements are presented in accordance with International Accounting Standards (“IAS”) 34, “Interim Financial Reporting”. In accordance with IAS 34,
interim financial information is prepared solely in order to update the most recent annual consolidated financial statements prepared by the Company, placing emphasis on new activities, occurrences and circumstances that have taken place during the
nine-month period ended September 30, 2020, and not duplicating the information previously published in the annual consolidated financial statements for the year ended December 31, 2019. Therefore, the consolidated condensed interim financial
statements do not include all the information that would be required in a complete set of consolidated financial statements prepared in accordance with the IFRS-IASB (“International Financial Reporting Standards-International Accounting Standards
Board”). In view of the above, for an adequate understanding of the information, these consolidated condensed interim financial statements must be read together with Atlantica’s consolidated financial statements for the year ended December 31, 2019
included in the 2019 20-F.
In determining the information to be disclosed in the notes to the consolidated condensed interim financial statements, Atlantica, in accordance with IAS 34, has taken into account its materiality in
relation to the consolidated condensed interim financial statements.
The consolidated condensed interim financial statements are presented in U.S. dollars, which is the Company’s functional and presentation currency. Amounts included in these consolidated condensed
interim financial statements are all expressed in thousands of U.S. dollars, unless otherwise indicated.
These consolidated condensed interim financial statements were approved by the Board of Directors of the Company on November 4, 2020.
Application of new accounting standards
a) Standards, interpretations and amendments effective from January 1, 2020 under IFRS-IASB, applied by the Company in the preparation of these condensed interim financial statements:
|
-
|
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.
|
|
-
|
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.
|
|
-
|
IFRS 16. Amendment to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. This amendment is mandatory for annual periods beginning on or after June 1,
2020 under IFRS-IASB.
|
|
-
|
IAS 41. Amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (taxation in fair value measurements) 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 applications of these amendments have not had any material impact on these condensed interim financial statements.
b) Standards, interpretations and amendments published by the IASB that will be effective for periods beginning on or after January 1, 2021:
|
-
|
IAS 1 (Amendment). Classification of liabilities. This amendment is mandatory for annual periods beginning on or after January 1, 2023 under IFRS-IASB.
|
|
-
|
IAS 37. Amendments regarding the costs to include when assessing whether a contract is onerous. This amendment is mandatory for annual periods beginning on or after January 1, 2022 under IFRS-IASB.
|
|
-
|
IFRS 1. Amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (subsidiary as a first-time adopter). This amendment is mandatory for annual periods beginning on or after January 1, 2022 under
IFRS-IASB.
|
|
-
|
IFRS 3. Amendments updating a reference to the Conceptual Framework. This amendment is mandatory for annual periods beginning on or after January 1, 2022 under IFRS-IASB.
|
|
-
|
IFRS 4. Amendments regarding the expiry date of the deferral approach. The fixed expiry date for the temporary exemption in IFRS 4 from applying IFRS 9 is now 1 January 2023.
|
|
-
|
IFRS 4, IFRS 7, IFRS 16, IFRS 9 and IAS 39. Amendments regarding replacement issues in the context of the IBOR reform. This amendment is mandatory for annual periods
beginning on or after January 1, 2021 under IFRS-IASB.
|
|
-
|
IFRS 9. Amendments resulting from Annual Improvements to IFRS Standards 2018–2020. This amendment is mandatory for annual periods beginning on or after January 1, 2022 under IFRS-IASB.
|
|
-
|
IFRS 17. Amendments to address concerns and implementation challenges that were identified after IFRS 17 was published. This amendment is mandatory for annual periods beginning on or after January 1, 2023 under
IFRS-IASB.
|
|
-
|
IAS 16. Amendments prohibiting a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. This
amendment is mandatory for annual periods beginning on or after January 1, 2022 under IFRS-IASB.
|
The Company does not anticipate any significant impact on the consolidated condensed 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, 2021, although it is currently still in the process of evaluating such application.
Use of estimates
Some of the accounting policies applied require the application of significant judgment by management to select the appropriate assumptions to determine these estimates. These assumptions and estimates
are based on the Company´s historical experience, advice from experienced consultants, forecasts and other circumstances and expectations as of the close of the financial period. The assessment is considered in relation to the global economic
situation of the industries and regions where the Company operates, taking into account future development of our businesses. By their nature, these judgments are subject to an inherent degree of uncertainty; therefore, actual results could
materially differ from the estimates and assumptions used. In such cases, the carrying values of assets and liabilities are adjusted.
The most critical accounting policies, which reflect significant management estimates and judgment to determine amounts in these consolidated condensed interim financial statements, are as follows:
•
|
Contracted concessional agreements.
|
•
|
Impairment of contracted concessional assets.
|
•
|
Derivative financial instruments and fair value estimates.
|
•
|
Income taxes and recoverable amount of deferred tax assets.
|
Although these estimates and assumptions are being made using all available facts and circumstances, it is possible that future events may require management to amend such estimates and assumptions in
future periods. Changes in accounting estimates are recognized prospectively, in accordance with IAS 8, in the consolidated income statement of the period in which the change occurs.
The Company decided to reduce the useful life of the CSP plants in Spain from 35 years to 25 years after COD with effective date September 1st, 2020 (Note 6).
Note 3. - Financial risk management
Atlantica’s activities are exposed to various financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Risk
is managed by the Company’s Risk, Finance and Compliance Departments, which are responsible for identifying and evaluating financial risks, quantifying them by project, region and company, in accordance with mandatory internal management rules.
Written internal policies exist for global risk management, as well as for specific areas of risk. In addition, there are official written management regulations regarding key controls and control procedures for each company and the implementation of
these controls is monitored through internal audit procedures.
These consolidated condensed interim financial statements do not include all financial risk management information and disclosures required for annual financial statements and should be read together
with the information included in Note 3 to Atlantica’s annual consolidated financial statements as of December 31, 2019 included in the 2019 20-F.
Note 4. - Financial information by segment
Atlantica’s segment structure reflects how management currently makes financial decisions and allocates resources. Its operating segments are based on the following geographies where the contracted
concessional assets are located:
Based on the type of business, as of September 30, 2020, the Company had the following business sectors:
•
|
Electric transmission lines
|
Atlantica’s Chief Operating Decision Maker (CODM) assesses the performance and assignment of resources according to the identified operating segments. The CODM considers the revenue as a measure of the
business activity and the Adjusted EBITDA as a measure of the performance of each segment. Adjusted EBITDA is calculated as profit/(loss) for the period attributable to the parent company, after adding back loss/(profit) attributable to
non-controlling interests from continued operations, income tax, share of profit/(loss) of associates carried under the equity method, finance expense net, depreciation, amortization and impairment charges of entities included in these consolidated
condensed interim financial statements.
In order to assess performance of the business, the CODM receives reports of each reportable segment using revenue and 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 nine-month periods ended September 30, 2020 and September 30, 2019, Atlantica had four customers with revenue representing more than 10% of the total revenue, three in the renewable energy and
one in the efficient natural gas business sectors.
a) The following tables show Revenue and Adjusted EBITDA by operating segments and business sectors for the nine-month periods ended September 30, 2020 and 2019:
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
|
|
For the nine-month period ended
September 30,
|
|
|
For the nine-month period ended
September 30,
|
|
|
|
($ in thousands)
|
|
Geography
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
North America
|
|
|
267,688
|
|
|
|
273,913
|
|
|
|
233,201
|
|
|
|
254,492
|
|
South America
|
|
|
112,019
|
|
|
|
105,760
|
|
|
|
89,749
|
|
|
|
87,757
|
|
EMEA
|
|
|
389,027
|
|
|
|
418,490
|
|
|
|
286,622
|
|
|
|
308,755
|
|
Total
|
|
|
768,734
|
|
|
|
798,163
|
|
|
|
609,572
|
|
|
|
651,004
|
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
|
|
For the nine-month period ended
September 30,
|
|
|
For the nine-month period ended
September 30,
|
|
|
|
($ in thousands)
|
|
Business sector
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Renewable energy
|
|
|
579,230
|
|
|
|
609,828
|
|
|
|
456,420
|
|
|
|
493,311
|
|
Efficient natural gas
|
|
|
80,118
|
|
|
|
92,891
|
|
|
|
72,412
|
|
|
|
81,668
|
|
Electric transmission lines
|
|
|
79,229
|
|
|
|
77,024
|
|
|
|
64,039
|
|
|
|
65,133
|
|
Water
|
|
|
30,157
|
|
|
|
18,420
|
|
|
|
16,701
|
|
|
|
10,892
|
|
Total
|
|
|
768,734
|
|
|
|
798,163
|
|
|
|
609,572
|
|
|
|
651,004
|
|
The reconciliation of segment Adjusted EBITDA with the profit/(loss) attributable to the Company is as follows:
|
|
For the nine-month period ended
September 30,
($ in thousands)
|
|
|
|
2020
|
|
|
2019
|
|
Profit/(Loss) attributable to the Company
|
|
$
|
61,209
|
|
|
|
60,832
|
|
(Loss)/Profit attributable to non-controlling interests
|
|
|
(3,042
|
)
|
|
|
7,548
|
|
Income tax
|
|
|
25,079
|
|
|
|
46,979
|
|
Share of (profits)/losses of associates
|
|
|
2,248
|
|
|
|
(3,881
|
)
|
Financial expense, net
|
|
|
221,911
|
|
|
|
304,637
|
|
Depreciation, amortization, and impairment charges
|
|
|
302,166
|
|
|
|
234,889
|
|
Total segment Adjusted EBITDA
|
|
$
|
609,572
|
|
|
|
651,004
|
|
b) The assets and liabilities by operating segments (and business sector) as of September 30, 2020 and December 31, 2019 are as follows:
Assets and liabilities by geography as of September 30, 2020:
|
|
North
America
|
|
|
South America
|
|
|
EMEA
|
|
|
Balance as of
September 30,
2020
|
|
|
|
($ in thousands)
|
|
Assets allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted concessional assets
|
|
|
3,112,095
|
|
|
|
1,223,888
|
|
|
|
3,744,662
|
|
|
|
8,080,645
|
|
Investments carried under the equity method
|
|
|
79,959
|
|
|
|
-
|
|
|
|
39,787
|
|
|
|
116,746
|
|
Current financial investments
|
|
|
125,821
|
|
|
|
27,637
|
|
|
|
41,202
|
|
|
|
194,660
|
|
Cash and cash equivalents (project companies)
|
|
|
230,616
|
|
|
|
85,003
|
|
|
|
286,362
|
|
|
|
601,980
|
|
Subtotal allocated
|
|
|
3,545,491
|
|
|
|
1,336,528
|
|
|
|
4,112,013
|
|
|
|
8,994,031
|
|
Unallocated assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,843
|
|
Other current assets (including cash and cash equivalents at holding company level)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
622,239
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
837,082
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,831,113
|
|
|
|
North
America
|
|
|
South America
|
|
|
EMEA
|
|
|
Balance as of
September 30,
2020
|
|
|
|
($ in thousands)
|
|
Liabilities allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term project debt
|
|
|
1,669,969
|
|
|
|
919,248
|
|
|
|
2,691,957
|
|
|
|
5,281,174
|
|
Grants and other liabilities
|
|
|
1,088,322
|
|
|
|
11,404
|
|
|
|
129,504
|
|
|
|
1,229,230
|
|
Subtotal allocated
|
|
|
2,758,291
|
|
|
|
930,652
|
|
|
|
2,821,461
|
|
|
|
6,510,404
|
|
Unallocated liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term corporate debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
959,681
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601,113
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,868
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,678,662
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,189,066
|
|
Equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,642,047
|
|
Total liabilities and equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,320,709
|
|
Total liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,831,113
|
|
Assets and liabilities by geography as of December 31, 2019:
|
|
North
America
|
|
|
South America
|
|
|
EMEA
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Assets allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted concessional assets
|
|
|
3,299,198
|
|
|
|
1,186,552
|
|
|
|
3,675,379
|
|
|
|
8,161,129
|
|
Investments carried under the equity method
|
|
|
90,847
|
|
|
|
-
|
|
|
|
49,078
|
|
|
|
139,925
|
|
Current financial investments
|
|
|
159,267
|
|
|
|
29,190
|
|
|
|
20,673
|
|
|
|
209,131
|
|
Cash and cash equivalents (project companies)
|
|
|
181,458
|
|
|
|
80,909
|
|
|
|
234,097
|
|
|
|
496,464
|
|
Subtotal allocated
|
|
|
3,730,771
|
|
|
|
1,296,652
|
|
|
|
3,979,227
|
|
|
|
9,006,649
|
|
Unallocated assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,553
|
|
Other current assets (including cash and cash equivalents at holding company level)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413,613
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653,166
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,659,815
|
|
|
|
North
America
|
|
|
South America
|
|
|
EMEA
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Liabilities allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term project debt
|
|
|
1,676,251
|
|
|
|
884,835
|
|
|
|
2,291,262
|
|
|
|
4,852,348
|
|
Grants and other liabilities
|
|
|
1,490,679
|
|
|
|
12,864
|
|
|
|
138,209
|
|
|
|
1,641,752
|
|
Subtotal allocated
|
|
|
3,166,930
|
|
|
|
897,699
|
|
|
|
2,429,471
|
|
|
|
6,494,100
|
|
Unallocated liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term corporate debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
723,791
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
564,855
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,213
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,450,859
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,944,959
|
|
Equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,714,856
|
|
Total liabilities and equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,165,715
|
|
Total liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,659,815
|
|
Assets and liabilities by business sector as of September 30, 2020:
|
|
Renewable
energy
|
|
|
Efficient
natural
gas
|
|
|
Electric
transmission
lines
|
|
|
Water
|
|
|
Balance as of
September 30,
2020
|
|
|
|
($ in thousands)
|
|
Assets allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted concessional assets
|
|
|
6,538,840
|
|
|
|
514,998
|
|
|
|
848,749
|
|
|
|
178,058
|
|
|
|
8,080,645
|
|
Investments carried under the equity method
|
|
|
63,302
|
|
|
|
16,379
|
|
|
|
-
|
|
|
|
37,065
|
|
|
|
116,746
|
|
Current financial investments
|
|
|
2,068
|
|
|
|
123,836
|
|
|
|
27,619
|
|
|
|
41,138
|
|
|
|
194,660
|
|
Cash and cash equivalents (project companies)
|
|
|
489,896
|
|
|
|
30,072
|
|
|
|
63,241
|
|
|
|
18,771
|
|
|
|
601,980
|
|
Subtotal allocated
|
|
|
7,094,106
|
|
|
|
685,285
|
|
|
|
939,609
|
|
|
|
275,032
|
|
|
|
8,994,031
|
|
Unallocated assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,843
|
|
Other current assets (including cash and cash equivalents at holding company level)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
622,239
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
837,082
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,831,113
|
|
|
|
Renewable
energy
|
|
|
Efficient
natural
gas
|
|
|
Electric
transmission
lines
|
|
|
Water
|
|
|
Balance as of
September 30,
2020
|
|
|
|
($ in thousands)
|
|
Liabilities allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term project debt
|
|
|
4,007,975
|
|
|
|
510,587
|
|
|
|
642,519
|
|
|
|
120,093
|
|
|
|
5,281,174
|
|
Grants and other liabilities
|
|
|
1,221,684
|
|
|
|
82
|
|
|
|
6,108
|
|
|
|
1,356
|
|
|
|
1,229,230
|
|
Subtotal allocated
|
|
|
5,229,659
|
|
|
|
510,669
|
|
|
|
648,627
|
|
|
|
121,449
|
|
|
|
6,510,404
|
|
Unallocated liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term corporate debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
959,681
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601,113
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,868
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,678,662
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,189,066
|
|
Equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,642,047
|
|
Total liabilities and equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,320,709
|
|
Total liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,831,113
|
|
Assets and liabilities by business sector as of December 31, 2019:
|
|
Renewable
energy
|
|
|
Efficient
natural
gas
|
|
|
Electric
transmission
lines
|
|
|
Water
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Assets allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted concessional assets
|
|
|
6,644,024
|
|
|
|
559,069
|
|
|
|
872,757
|
|
|
|
85,280
|
|
|
|
8,161,129
|
|
Investments carried under the equity method
|
|
|
77,549
|
|
|
|
17,154
|
|
|
|
-
|
|
|
|
45,222
|
|
|
|
139,925
|
|
Current financial investments
|
|
|
13,798
|
|
|
|
148,723
|
|
|
|
28,237
|
|
|
|
18,373
|
|
|
|
209,131
|
|
Cash and cash equivalents (project companies)
|
|
|
421,198
|
|
|
|
11,850
|
|
|
|
53,868
|
|
|
|
9,548
|
|
|
|
496,464
|
|
Subtotal allocated
|
|
|
7,156,568
|
|
|
|
736,796
|
|
|
|
954,862
|
|
|
|
158,423
|
|
|
|
9,006,649
|
|
Unallocated assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,553
|
|
Other current assets (including cash and cash equivalents at holding company level)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413,613
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653,166
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,659,815
|
|
|
|
Renewable
energy
|
|
|
Efficient
natural gas
|
|
|
Electric
transmission
lines
|
|
|
Water
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Liabilities allocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term project debt
|
|
|
3,658,507
|
|
|
|
529,350
|
|
|
|
640,160
|
|
|
|
24,331
|
|
|
|
4,852,348
|
|
Grants and other liabilities
|
|
|
1,634,361
|
|
|
|
146
|
|
|
|
6,517
|
|
|
|
728
|
|
|
|
1,641,752
|
|
Subtotal allocated
|
|
|
5,292,868
|
|
|
|
529,495
|
|
|
|
646,677
|
|
|
|
25,059
|
|
|
|
6,494,100
|
|
Unallocated liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term and short-term corporate debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
723,791
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
564,855
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,213
|
|
Subtotal unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,450,859
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,944,959
|
|
Equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,714,856
|
|
Total liabilities and equity unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,165,715
|
|
Total liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,659,815
|
|
c) The amount of depreciation, amortization and impairment charges recognized for the nine-month periods ended September 30, 2020 and 2019 are as follows:
|
|
For the nine-month period ended
September 30,
|
|
Depreciation, amortization and impairment by geography
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
North America
|
|
|
(162,803
|
)
|
|
|
(88,647
|
)
|
South America
|
|
|
(26,624
|
)
|
|
|
(35,553
|
)
|
EMEA
|
|
|
(112,739
|
)
|
|
|
(110,689
|
)
|
Total
|
|
|
(302,166
|
)
|
|
|
(234,889
|
)
|
|
|
For the nine-month period ended
September 30,
|
|
Depreciation, amortization and impairment by business sectors
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Renewable energy
|
|
|
(253,617
|
)
|
|
|
(215,941
|
)
|
Efficient natural gas
|
|
|
(23,616
|
)
|
|
|
784
|
|
Electric transmission lines
|
|
|
(24,236
|
)
|
|
|
(20,093
|
)
|
Water
|
|
|
(697
|
)
|
|
|
361
|
|
Total
|
|
|
(302,166
|
)
|
|
|
(234,889
|
)
|
Note 5. – Business combinations
For the nine-month period ended September 30, 2020
On April 3, 2020, the Company completed the investment in a 35% stake in a renewable energy platform in Chile for approximately $4 million. The first investment made by the platform has been in a 55 MW
solar PV plant, Chile PV I, located in Chile. Atlantica has control over Chile PV I under IFRS 10, Consolidated Financial Statements. The acquisition of Chile PV I has been accounted for in these consolidated condensed interim financial statements in
accordance with IFRS 3, Business Combinations, showing 65% of Non-Controlling interest.
On May 31, 2020, the Company obtained control over the Board of Directors of Befesa Agua Tenes which owns a 51% stake in Tenes, a water desalination plant in Algeria. On May 31, 2020, the Company also
acquired a series of decision rights at the Tenes level. The total investment, in the form of a secured loan agreement to be reimbursed through a full cash-sweep of all the dividends to be received from the asset, amounted to approximately $19
million as of May 31, 2020. The acquisition has been accounted for in the consolidated financial statements of Atlantica, in accordance with IFRS 3, Business Combinations.
Impact of business combinations in the consolidated financial statements
The amount of assets and liabilities consolidated at the effective acquisition date is shown in the following table:
|
|
Asset Acquisition
for the nine-month period ended September 30, 2020
|
|
Concessional assets
|
|
|
162,489
|
|
Other non-current assets
|
|
|
931
|
|
Cash & cash equivalents
|
|
|
17,646
|
|
Other current assets
|
|
|
29,445
|
|
Non-current Project debt
|
|
|
(150,087
|
)
|
Current Project debt
|
|
|
(8,357
|
)
|
Other current and non-current liabilities
|
|
|
(4,378
|
)
|
Non-controlling interests
|
|
|
(25,079
|
)
|
Asset acquisition - purchase price
|
|
|
(22,610
|
)
|
Net result of the asset acquisition
|
|
|
-
|
|
The purchase price equals the fair value of the net assets acquired.
The amounts indicated above 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 September 30, 2020. The measurement period will not exceed one year from the acquisition dates.
The amount of revenue contributed by the acquisitions performed during the nine-month period ended September 30, 2020 to the consolidated financial statements of the Company as
of September 30, 2020 is $13.3 million, and the amount of profit after tax is $1.7 million. Had the acquisitions been consolidated from January 1, 2020, the consolidated statement of comprehensive income would have included additional revenue of
$16.3 million and additional profit after tax of $2.3 million.
For the year ended December 31, 2019
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 $20 million, controlling the asset from this date. Transfer of the
concession agreement is pending authorization from the Ministry of Energy in Peru. If this authorization were not to be obtained before December 2020, the transaction would be reversed with no penalties to Atlantica. Enel Green Power Perú issued a
bank guarantee to address this potential repayment obligation to Atlantica. The purchase has been accounted for in the consolidated accounts of Atlantica, in accordance with IFRS 3, Business Combinations.
Impact of business combinations in the consolidated financial statements
The amount of assets and liabilities consolidated at the effective acquisition date is shown in the following table:
|
|
Asset Acquisition
for the year ended December 31, 2019
|
|
Concessional assets
|
|
|
28,738
|
|
Current assets
|
|
|
1,503
|
|
Deferred tax liabilities
|
|
|
(2,539
|
)
|
Other current and non-current liabilities
|
|
|
(1,512
|
)
|
Asset acquisition - purchase price
|
|
|
(26,190
|
)
|
Net result of the asset acquisition
|
|
|
-
|
|
The purchase price equals the fair value of the net assets acquired.
Note 6. - Contracted concessional assets
The detail of contracted concessional assets included in the heading ‘Contracted concessional assets’ as of September 30, 2020 and December 31, 2019 is as follows:
|
|
Balance as of
September 30,
2020
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Contracted concessional assets cost
|
|
|
10,576,508
|
|
|
|
10,384,597
|
|
Amortization and impairment
|
|
|
(2,495,863
|
)
|
|
|
(2,223,468
|
)
|
Total
|
|
|
8,080,645
|
|
|
|
8,161,129
|
|
Contracted concessional assets include fixed assets related to service concession arrangements recorded in accordance with IFRIC 12, except for Palmucho, which is recorded in accordance with IFRS 16,
and PS10, PS20, Seville PV, Mini-Hydro, Chile TL3 and Chile PV I, which are recorded as property plant and equipment in accordance with IAS 16. Concessional assets recorded in accordance with IFRIC 12 are either intangible or financial assets. As of
September 30, 2020, contracted concessional financial assets amount to $863.8 million ($819.1 million as of December 31, 2019).
The increase in the contracted concessional assets cost is due to business combination of Tenes and Chile PV I for a total amount of $162 million (Note 5) and to
the higher value of the Euro denominated assets since the exchange rate of the Euro significantly increased against the U.S. dollar since December 31, 2019, partially offset by a lower value of Kaxu asset since the exchange rate of the South African
rand significantly decreased against the U.S. dollar since December 31, 2019.
Solana storage system partial write-off
The availability in the storage system of Solana has been lower than expected during the nine-month period ended September 30, 2020 due to certain leaks identified in the storage system in the first
quarter. The Company has a preliminary plan to replace some elements of the storage system, which have been written off in these consolidated condensed interim financial statements through profit and loss in the line “Depreciation, amortization, and
impairment charges” for an estimated net book value of approximately $48 million. The exact scope and timing of the improvements and repairs are currently under review and still need to be finalized.
Solana triggering event of impairment
The Company identified during the third quarter of 2020 a triggering event of impairment for Solana as a result of the underperformance of the plant in terms of
production. The Company therefore performed an impairment test as of September 30, 2020, 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 3.8% and 4.3%.
An adverse change in the key assumptions which are individually used for the valuation would not lead to future impairment recognition; neither in case of a 5%
decrease in generation over the entire remaining useful life (PPA) of the project nor in case of an increase of 50 basis points in the discount rate.
Change in the useful life of the solar plants in Spain
Further to the recent developments in the Energy and Climate Policy Framework adopted by Spain in 2020, the Company concluded that the expected deep transformation of the electricity sector in Spain
would probably significantly reduce the market price at which the electricity is sold in the mid- to long-term. In particular, the Company believes this may impact the price captured by the Company’s solar plants in Spain after the end of the
regulation in place (2035 to 2038 onwards). As a result, the price captured by the plants after 2035 to 2038 (the end of the 25 years regulatory period) would likely not be sufficient to cover operating costs. In this case, the plants would stop
operating and be dismantled at that point in time.
The Company believes that it is possible that long-term price evolution and technology changes could result in scenarios where the plants may continue to operate after the end of the regulatory period.
Nevertheless, given the information currently available, the Company decided to reduce the useful life of the CSP plants in Spain from 35 years to 25 years after COD. This change of estimate of the useful life, effective September 1st, 2020, is
accounted for as a change in accounting estimate in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
The main impacts recorded in these consolidated condensed interim financial statements are:
|
-
|
an increased amortization charge from September 1st, 2020, considering the reduction in the residual useful life of the plants. The impact is approximately $5 million as of September 30, 2020, recorded
within the line “Depreciation, amortization and impairment charges” in the profit and loss statement.
|
|
-
|
an increase in the discounted value of the dismantling provision, as the dismantling of the plants would occur earlier. The provision increased by approximately $12 million as of September 30, 2020 (Note 16).
|
In addition, reducing the useful life of the solar plants in Spain is a triggering event of impairment, given that the recoverable amount of the asset is negatively impacted if the plants stop operating
in year 25 after COD.
The Company therefore performed an impairment test as of September 30, 2020, which resulted in the recoverable amount (value in use) exceeding the carrying
amount of the assets by 6%. To determine the value in use of the assets, a specific discount rate has been used in each year considering changes in the debt/equity leverage ratio over the useful life of these projects, resulting in the use of a range
of discount rates between 3.3% and 3.8%.
An adverse change in the key assumptions which are individually used for the valuation would not lead to future impairment recognition; neither in case of a 5%
decrease in generation over the entire remaining useful life of the projects nor in case of an increase of 50 basis points in the discount rate.
Palmatir and Cadonal impairment reversals
As part of the triggering event analysis performed for Palmatir and Cadonal assets during the third quarter of 2020, the Company identified factors, such as a reduced discount rate, increasing their
recoverable amount (value in use). The Company therefore performed an impairment test as of September 30, 2020, which resulted in the reversal of impairments previously recorded during the year 2016 for an amount of $15.6 million and $3.1 million in
Cadonal and Palmatir, respectively, recorded within the line “Depreciation, amortization and impairment charges” of the profit and loss statement.
Other matters
Abengoa maintains a number of obligations under O&M and other contracts, as well as indemnities covering certain potential risks. Additionally, Abengoa represented in the past that Atlantica would
not be a guarantor of any obligation of Abengoa with respect to third parties and agreed to indemnify the Company for any penalty claimed by third parties resulting from any breach in such representations. The Company has contingent assets, which
have not been recognized as of September 30, 2020, related to the obligations of Abengoa referred above, which results and amounts will depend on the occurrence of uncertain future events.
No losses from impairment of contracted concessional assets, excluding any change in the provision for expected credit losses under IFRS 9, Financial instruments, were recorded during the nine-month
periods ended September 30, 2020 and 2019. The impairment provision based on the expected credit losses on contracted concessional financial assets increased by $29 million in the nine-month period ended September 30, 2020 (reversal of $3 million in
the nine-month period ended September 30, 2019), primarily in ACT.
Note 7. - Investments carried under the equity method
The table below shows the breakdown of the investments held in associates as of September 30, 2020 and December 31, 2019:
|
|
Balance as of
September 30,
2020
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Evacuación Valdecaballeros, S.L.
|
|
|
947
|
|
|
|
2,348
|
|
Myah Bahr Honaine, S.P.A.(*)
|
|
|
37,064
|
|
|
|
45,222
|
|
Pectonex, R.F. Proprietary Limited
|
|
|
1,547
|
|
|
|
1,391
|
|
ABY Infraestructuras, S.L.
|
|
|
21
|
|
|
|
11
|
|
Ca Ku A1, S.A.P.I. de CV (PTS)
|
|
|
-
|
|
|
|
-
|
|
Evacuación Villanueva del Rey, S.L
|
|
|
-
|
|
|
|
-
|
|
Windlectric Inc (**)
|
|
|
60,614
|
|
|
|
73,693
|
|
Pemcorp SAPI de CV (***)
|
|
|
16,379
|
|
|
|
17,179
|
|
Other renewable energy joint ventures (****)
|
|
|
174
|
|
|
|
81
|
|
Total
|
|
|
116,746
|
|
|
|
139,925
|
|
(*) 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 condensed interim financial statements. Geida
Tlemcen, S.L. is 50% owned by Atlantica.
(**) Windlectric Inc., the project entity, is owned 100% by Amherst Island Partnership which is accounted for under the equity method.
(***) 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 condensed interim financial
statements. Arroyo Netherlands II B.V. is 30% owned by Atlantica.
(****) 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.
Decrease in investments carried under the equity method as of September 30, 2020, is primarily due to distributions received from Honaine and Windlectric and to a decrease in the exchange rate of the
Algerian dinar and Canadian dollar against the U.S. dollar since December 31, 2019.
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. The first investment was in Amherst
Island, a 75 MW wind plant in Canada owned by the project company Windlectric. Atlantica invested $4.9 million and Algonquin invested $92.3 million, both through AYES Canada, which in turn invested those funds in 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” 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 $17
million is an equity investment, and the rest is a shareholder loan classified as financial investments in these consolidated condensed interim financial statements. The acquisition has been accounted for in the consolidated accounts of Atlantica, in
accordance with IAS 28, Investments in Associates.
Note 8. - Financial investments
The detail of Non-current and Current financial investments as of September 30, 2020 and December 31, 2019 is as follows:
|
|
Balance as of
September 30,
2020
|
|
|
Balance as of
December 31,
2019
|
|
|
|
($ in thousands)
|
|
Fair Value through OCI (Investment in Ten West link)
|
|
|
12,896
|
|
|
|
9,874
|
|
Fair Value through Profit and Loss (Investment in Rioglass)
|
|
|
2,617
|
|
|
|
7,000
|
|
Derivative assets (Note 9)
|
|
|
1,493
|
|
|
|
3,182
|
|
Other receivable accounts at amortized cost
|
|
|
49,869
|
|
|
|
71,531
|
|
Total non-current financial investments
|
|
|
66,875
|
|
|
|
91,587
|
|
Contracted concessional financial assets
|
|
|
175,042
|
|
|
|
160,624
|
|
Derivative assets (Note 9)
|
|
|
888
|
|
|
|
2,048
|
|
Other receivable accounts at amortized cost
|
|
|
19,619
|
|
|
|
55,905
|
|
Total current financial investments
|
|
|
195,549
|
|
|
|
218,577
|
|
Investment in Ten West Link is a 12.5% interest in a 114-mile transmission line in the U.S.
Investment in Rioglass corresponds to a 15.12% equity interest in Rioglass, a multinational solar power and renewable energy technology manufacturer.
Note 9. - Derivative financial instruments
The breakdowns of the fair value amount of the derivative financial instruments as of September 30, 2020 and December 31, 2019 are as follows:
|
|
Balance as of September 30, 2020
|
|
|
Balance as of December 31, 2019
|
|
($ in thousands)
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
Interest rate cash flow hedges
|
|
|
1,270
|
|
|
|
313,416
|
|
|
|
1,619
|
|
|
|
298,744
|
|
Foreign exchange derivative instruments
|
|
|
1,111
|
|
|
|
-
|
|
|
|
3,610
|
|
|
|
-
|
|
Notes conversion option (Note 14)
|
|
|
-
|
|
|
|
8,714
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
2,381
|
|
|
|
322,130
|
|
|
|
5,230
|
|
|
|
298,744
|
|
The derivatives are primarily interest rate cash flow hedges. All are classified as non-current assets or non-current liabilities, as they hedge long-term financing agreements.
Additionally, the Company owns the following derivatives instruments:
|
-
|
currency options with leading international financial institutions, which guarantee minimum Euro-U.S. dollar exchange rates. The strategy of the Company is to hedge the exchange rate for the distributions from its
Spanish assets after deducting euro-denominated interest payments and euro-denominated general and administrative expenses. Through currency options, the strategy of the Company is to hedge 100% of its euro-denominated net exposure for the
next 12 months and 75% of its euro denominated net exposure for the following 12 months, on a rolling basis. Hedge accounting is not applied to these options;
|
|
-
|
the conversion option of notes issued in July 2020 (Note 14), which fair value is liability of $9 million as of September 30, 2020.
|
The net amount of the fair value of interest rate derivatives designated as cash flow hedges transferred to the consolidated condensed income statement is a loss of $43.8 million for the nine-month
period ended September 30, 2020 (loss of $41.1 million for the nine-month period ended September 30, 2019).
The after-tax results accumulated in equity in connection with derivatives designated as cash flow hedges as of September 30, 2020 and December 31, 2019 amount to a profit of $81.5 million and $73.8
million, respectively (included under the caption “Other reserves”).
Note 10. - Fair value of financial instruments
Financial instruments measured at fair value are presented in accordance with the following level classification based on the nature of the inputs used for the calculation of fair value:
• Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.
• Level 2: Fair value is measured based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices).
• Level 3: Fair value is measured based on unobservable inputs for the asset or liability.
As of September 30, 2020, and December 31, 2019, all the financial instruments measured at fair value correspond to derivatives and have been classified as Level 2, except for the investments held in
Ten West Link and Rioglass, which have been classified as Level 3.
Note 11. - Related parties
Details of balances with related parties as of September 30, 2020 and December 31, 2019 are as follows:
|
|
Balance as of
September 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Credit receivables (current)
|
|
|
22,942
|
|
|
|
13,350
|
|
Total current receivables with related parties
|
|
|
22,942
|
|
|
|
13,350
|
|
|
|
|
|
|
|
|
|
|
Credit receivables (non-current)
|
|
|
6,264
|
|
|
|
21,355
|
|
Total non-current receivables with related parties
|
|
|
6,264
|
|
|
|
21,355
|
|
|
|
|
|
|
|
|
|
|
Credit payables (current)
|
|
|
14,238
|
|
|
|
23,979
|
|
Total current payables with related parties
|
|
|
14,238
|
|
|
|
23,979
|
|
|
|
|
|
|
|
|
|
|
Credit payables (non-current)
|
|
|
6,499
|
|
|
|
17,115
|
|
Total non-current payables with related parties
|
|
|
6,499
|
|
|
|
17,115
|
|
Current credit receivables as of September 30, 2020 mainly correspond to the short-term portion of the loan to Arroyo Netherland II B.V., the holding company of Pemcorp SAPI de CV., Monterrey´s project
entity (Note 7) for $17.9 million ($4.0 million as of December 31, 2019) and to a dividend to be collected from AIP for $2.0 million as of September 30, 2020 ($5.5 million as of December 31, 2019).
Non-current credit receivables as of September 30, 2020 and December 31, 2019 correspond to the long-term portion of the loan to Arroyo Netherland II B.V.
Credit payables relate to debts with non-controlling interests partners in Kaxu, Solaben 2&3 and Solacor 1&2 for an amount of $18.7 million as of September 30, 2020 ($35.6 million as of December
31, 2019). Current credit payables also include the dividend to be paid from AYES Canada to Algonquin for $1.9 million as of September 30, 2020 ($5.4 million as of December 31, 2019).
The transactions carried out by entities included in these consolidated condensed interim financial statements with related parties not included in the consolidation perimeter of Atlantica, for the
nine-month periods ended September 30, 2020 and 2019 have been as follows:
|
|
For the nine-month period ended
September,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Financial income
|
|
|
1,493
|
|
|
|
391
|
|
Financial expenses
|
|
|
(119
|
)
|
|
|
(150
|
)
|
Note 12. - Trade and other receivables
Trade and other receivables as of September 30, 2020 and December 31, 2019, consist of the following:
|
|
Balance as of
September 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Trade receivables
|
|
|
322,231
|
|
|
|
242,008
|
|
Tax receivables
|
|
|
50,190
|
|
|
|
50,901
|
|
Prepayments
|
|
|
25,977
|
|
|
|
5,150
|
|
Other accounts receivable
|
|
|
12,867
|
|
|
|
19,508
|
|
Total
|
|
|
411,265
|
|
|
|
317,568
|
|
Increase in trade receivables primarily relates to seasonality of sales in some of the assets.
Increase in prepayments is primarily due to the timing of payment of insurances.
As of September 30, 2020, and December 31, 2019, the fair value of trade and other receivables accounts does not differ significantly from its carrying value.
Note 13. - Equity
As of September 30, 2020, the share capital of the Company amounts to $10,160,166 represented by 101,601,662 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 reserves as of September 30, 2020 are made up of share premium account and distributable reserves.
Accumulated deficit primarily include results attributable to Atlantica.
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, by Algonquin Power Co. in AYES Canada, by Algerian Energy Company, SPA in Tenes and by our partners in the Chilean renewable
energy platform in Chile PV I.
On February 26, 2020, the Board of Directors declared a dividend of $0.41 per share corresponding to the fourth quarter of 2019. The dividend was paid on March 23, 2020 for a total amount of $41.7
million.
On May 6, 2020, the Board of Directors declared a dividend of $0.41 per share corresponding to the first quarter of 2020. The dividend was paid on June 15, 2020 for a total amount of $41.7 million.
On July 31, 2020, the Board of Directors declared a dividend of $0.42 per share corresponding to the second quarter of 2020. The dividend was paid on September 15, 2020 for a total amount of $42.7
million.
As of September 30, 2020, there was no treasury stock and there have been no transactions with treasury stock during the nine-month period then ended.
Note 14. - Corporate debt
The breakdown of the corporate debt as of September 30, 2020 and December 31, 2019 is as follows:
|
|
Balance as of
September 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Non-current
|
|
|
935,665
|
|
|
|
695,085
|
|
Current
|
|
|
24,016
|
|
|
|
28,706
|
|
Total Corporate Debt
|
|
|
959,681
|
|
|
|
723,791
|
|
On February 10, 2017, the Company issued Senior Notes due 2022, 2023, 2024 (the “Note Issuance Facility 2017”), in an aggregate principal amount of €275,000 thousand. The Note Issuance Facility 2017
were fully repaid on April 2, 2020.
On July 20, 2017, the Company signed a credit facility (the “2017 Credit Facility”) for up to €10 million, approximately $11.7 million, which is available in euros or U.S. dollars. Amounts drawn down
accrue interest at a rate per year equal to EURIBOR plus 2% or LIBOR plus 2%, depending on the currency. As of September 30, 2020, the Company had drawn down an amount of €9 million (€9 million as of December 31, 2019). The credit facility maturity
is December 13, 2021.
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 year 2019, the amount of the Revolving Credit Facility increased from $215 million to $425 million and the maturity was extended to December 31, 2022. On
September 30, 2020, the total amount of the Revolving Credit Facility is available. On December 31, 2019 the Company had drawn down $84 million which were repaid in the third quarter of 2020.
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 “Note Issuance Facility 2019”). The principal amount was issued on May 24, 2019. The Note Issuance Facility 2019 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 Note Issuance Facility 2019 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 Note Issuance Facility 2019 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 had an original maturity of twelve months and was extended for another twelve-month period on October 8, 2020. 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 September 30, 2020, the Company had €19.5 million issued and outstanding under the program at an average cost of 0.83% (€25
million as of December 31, 2019).
On April 1, 2020, the Company closed the secured 2020 Green Private Placement for €290 million (approximately $340 million). The private placement accrues interest at an annual 1.96% interest, payable
quarterly and has a June 2026 maturity. Net proceeds were primarily used to fully repay the Note Issuance Facility 2017.
On July 8, 2020, the Company entered into a senior unsecured financing (the “Note Issuance Facility 2020”) 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 approximately $164 million which is denominated in euros (€140 million). The Note Issuance Facility 2020 was issued on August 12, 2020, accrues interest at an annual 5.25%
interest, payable quarterly and has a maturity of seven years from the closing date.
On July 17, 2020, the Company issued $100 million aggregate principal amount of 4.00% convertible bonds (the “Green Exchangeable Notes”) due 2025. On July 29, 2020, the Company closed an additional $15
million aggregate principal amount of the Green Exchangeable Notes. The notes mature on July 15, 2025 and bear interest at a rate of 4.00% per annum. The initial exchange rate of the notes is 29.1070 ordinary shares per $1,000 principal amount of
notes, which is equivalent to an initial exchange price of $34.36 per ordinary share. Noteholders may exchange their notes at their option at any time prior to the close of business on the scheduled trading day immediately preceding April 15, 2025,
only during certain periods and upon satisfaction of certain conditions. On or after April 15, 2025, noteholders may exchange their notes at any time. Upon exchange, the notes may be settled, at the election of the Company, into ordinary shares of
Atlantica, cash or a combination thereof. The exchange rate is subject to adjustment upon the occurrence of certain events.
As per IAS 32, “Financial Instruments: Presentation”, the conversion option of the Green Exchangeable Notes is an embedded derivative classified within the line “Derivative liabilities” of these
consolidated condensed interim financial statements (Note 9). It was initially valued at transaction date for $10 million, and prospective changes to its fair value are accounted for through the profit and loss statement. The principal element of the
Green Exchangeable Notes, classified within the line “Corporate debt” of these consolidated condensed interim financial statements, is initially valued as the difference between the consideration received from the holders of the instrument and the
value of the embedded derivative, and thereafter, at amortized cost using the effective interest method as per IFRS 9, “Financial Instruments”.
The repayment schedule for the corporate debt as of September 30, 2020 is as follows:
|
|
Remainder
of 2020
|
|
|
Between
January
and
September
2021
|
|
|
Between
October and
December
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Subsequent
years
|
|
|
Total
|
|
|
|
|
|
|
($ in thousands)
|
|
2017 Credit Facility
|
|
|
5
|
|
|
|
-
|
|
|
|
10,705
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,710
|
|
Note Issuance Facility 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
326,384
|
|
|
|
326,384
|
|
Commercial Paper
|
|
|
18,745
|
|
|
|
4,080
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,825
|
|
2020 Green Private Placement
|
|
|
241
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
336,521
|
|
|
|
336,762
|
|
Note Issuance Facility 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
159,933
|
|
|
|
159,933
|
|
Green Exchangeable Notes
|
|
|
945
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
102,122
|
|
|
|
103,067
|
|
Total
|
|
|
19,936
|
|
|
|
4,080
|
|
|
|
10,705
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
924,960
|
|
|
|
959,681
|
|
The repayment schedule for the corporate debt as of December 31, 2019 was as follows:
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Subsequent
years
|
|
|
Total
|
|
New Revolving Credit Facility
|
|
|
701
|
|
|
|
-
|
|
|
|
81,164
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,865
|
|
Note Issuance Facility 2017
|
|
|
84
|
|
|
|
-
|
|
|
|
101,317
|
|
|
|
100,513
|
|
|
|
100,413
|
|
|
|
-
|
|
|
|
302,327
|
|
2017 Credit Facility
|
|
|
4
|
|
|
|
10,085
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,089
|
|
Notes Issuance Facility 2019
|
|
|
-
|
|
|
|
7,938
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
293,655
|
|
|
|
301,593
|
|
Commercial Paper
|
|
|
27,917
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,917
|
|
Total
|
|
|
28,706
|
|
|
|
18,023
|
|
|
|
182,481
|
|
|
|
100,513
|
|
|
|
100,413
|
|
|
|
293,655
|
|
|
|
723,791
|
|
Note 15. - Project debt
The main purpose of the Company is the long-term ownership and management of contracted concessional assets.
Project debt is generally used to finance contracted assets, exclusively using as guarantee the assets and cash flows of the company or group of companies carrying out the activities financed. In most
of the cases, the assets and/or contracts are set up as guarantee to ensure the repayment of the related financing. Compared with corporate debt, project debt has certain key advantages, including a greater leverage and a clearly defined risk
profile.
This note shows the project debt linked to the contracted concessional assets included in Note 6 of these consolidated condensed interim financial statements.
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 $319 million as of
September 30, 2020 ($339 million as of December 31, 2019).
The breakdown of project debt for both non-current and current liabilities as of September 30, 2020 and December 31, 2019 is as follows:
|
|
Balance as of
September 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Non-current
|
|
|
4,638,584
|
|
|
|
4,069,909
|
|
Current
|
|
|
642,590
|
|
|
|
782,439
|
|
Total Project debt
|
|
|
5,281,174
|
|
|
|
4,852,348
|
|
The increase in total project debt as of September 30, 2020 is primarily due to:
|
-
|
business combinations, being the acquisition of Chile PV I and Tenes for a total amount of $158 million (Note 5).
|
|
-
|
a green project financing agreement entered into by Logrosán Solar Inversiones, S.A.U., the holding company of Spanish assets Solaben 1, 2, 3 and 6, closed on April 8, 2020 for a €140 million nominal amount.
|
|
-
|
a non-recourse project debt refinancing of Helioenergy assets by adding a new long dated tranche of debt from an institutional investor closed on July 10, 2020, providing with a net refinancing proceeds (net
“recap”) of approximately $43 million.
|
|
-
|
a non-recourse, project debt financing closed on July 14, 2020 for approximately €326 million in relation to Helios, with institutional investors, which has refinanced the previous bank project debt with
approximately €250 million outstanding and has canceled legacy interest rate swaps. After transaction costs and cancelation of legacy swaps, net refinancing proceeds (net “recap”) were approximately $30 million. The accumulated impact of the
change in fair value of the interest rate swaps recorded in Other reserves and any difference between the nominal amount of the debt repaid and the amortized cost of the debt have been transferred to the profit and loss in line “Other
financial income/(expense), net” on transaction date for a total amount of $72 million (Note 19).
|
|
-
|
the higher value of debt denominated in Euro given the increase in the exchange rate of the Euro against the U.S. dollar since December 31, 2019.
|
Additionally, on June 12, 2020 the Company refinanced the debt of Cadonal (Uruguay). 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 $3.8 million financial income in the profit and loss statement of the consolidated condensed financial statements (see Note 19).
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 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. On July 1, 2020,
PG&E emerged from Chapter 11. In addition, PG&E paid to Mojave the portion of the invoice corresponding to the electricity delivered for the period between January 1 and January 28, 2019. This invoice was overdue because the services relate
to the pre-petition period and any payment therefore required the approval by the Bankruptcy Court. The technical event of default under the Mojave project finance agreement, which was preventing cash distributions from Mojave to Atlantica, has been
cured and the Company can make distributions from Mojave. As result, as of September 30, 2020, the Company has again an unconditional right to defer the settlement of the debt for at least twelve months, and therefore the debt previously presented as
current has been reclassified as non-current in accordance with the financing agreements in these condensed interim financial statements.
The project financing arrangement of Kaxu contains cross-default provisions related to Abengoa such that debt defaults by Abengoa, subject to certain threshold amounts and/or a restructuring process,
could trigger a default under the Kaxu project financing arrangement. In March 2017, Atlantica obtained a waiver with respect to its Kaxu project financing arrangement which waived any potential cross-defaults with Abengoa up to that date, but the
waiver did not cover potential future cross-default events. The restructuring process and the pre-insolvency filing by the individual company Abengoa S.A. in August 2020 represent a theoretical event of default under the Kaxu project finance
agreement. Although the Company does not expect the acceleration of debt to be declared by the credit entities, Kaxu did not have contractually as of September 30, 2020 what International Accounting Standards define as an unconditional right to defer
the settlement of the debt for at least twelve months after that date, as the cross-default provisions make that right not unconditional. Thus, the total debt of Kaxu, which amounts to $324 million as of September 30, 2020, has been presented as
current in these consolidated financial statements in accordance with International Accounting Standards 1 (“IAS 1”), “Presentation of Financial Statements”. The Company is currently negotiating with the creditors a waiver and/or contract
modifications in this regard.
The repayment schedule for project debt in accordance with the financing arrangements and assuming there will be no acceleration of the Kaxu debt, as of
September 30, 2020, is as follows and is consistent with the projected cash flows of the related projects:
Remainder of 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of
interests
accrued as of
September 30, 2020
|
|
|
Nominal
repayment
|
|
|
Between
January and
September 2021
|
|
|
Between
October and
December 2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Subsequent
Years
|
|
|
Total
|
|
($ in thousands)
|
|
|
60,216
|
|
|
|
153,392
|
|
|
|
124,337
|
|
|
|
153,001
|
|
|
|
320,011
|
|
|
|
345,565
|
|
|
|
360,277
|
|
|
|
3,764,374
|
|
|
|
5,281,174
|
|
The repayment schedule for project debt in accordance with the financing arrangements and assuming there would be no acceleration of the Mojave debt, as of December 31, 2019, was as follows and was consistent with the
projected cash flows of the related projects:
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Subsequent years
|
|
|
Total
|
|
Interest
Repayment
|
|
|
Nominal
repayment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,799
|
|
|
|
256,620
|
|
|
|
262,787
|
|
|
|
293,642
|
|
|
|
319,962
|
|
|
|
335,067
|
|
|
|
3,371,724
|
|
|
|
4,852,348
|
|
Note 16. - Grants and other liabilities
|
|
Balance as of
September 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Grants
|
|
|
1,043,410
|
|
|
|
1,087,553
|
|
Other Liabilities
|
|
|
185,820
|
|
|
|
554,199
|
|
Grant and other non-current liabilities
|
|
|
1,229,230
|
|
|
|
1,641,752
|
|
As of September 30, 2020, 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 $682 million
($707 million as of December 31, 2019), 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 $359 million ($379 million as of December 31, 2019).
Loans with the Federal Financing Bank guaranteed by the Department of Energy for these projects bear interest at a rate below market rates for these types of projects and terms. The difference between proceeds received from these loans and its fair
value, is initially recorded as “Grants” in the consolidated statement of financial position, and subsequently recorded in “Other operating income” starting at the entry into operation of the plants. Total amount of income for these two types of
grants for Solana and Mojave is $44.2 million and $44.3 million for the nine-month periods ended September 30, 2020 and 2019, respectively (Note 20).
Other liabilities included as of December 31, 2019, the investment from Liberty Interactive Corporation (”Liberty”) made on October 2, 2013 for an original amount of $300 million. The liability was
recorded in Grants and other liabilities for a total amount of $380 million as of December 31, 2019 and its current portion was recorded in other current liabilities for $41 million (Note 17). 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. According to the stipulations of IAS 32 and in spite of the fact
that the investment of Liberty was in shares, it did not qualify as equity and had been classified as a liability as of December 31, 2019. This liability had been initially valued at fair value, calculated as the present value of expected cash-flows
during the useful life of the concession, and was then measured at amortized cost in accordance with the effective interest method, considering the most updated expected future cash-flows.
The Company acquired on August 17, 2020 Liberty´s equity interest in Solana for a total estimated purchase price of approximately $290 million, of which $272 million have already been paid. Total price
includes a deferred payment and a performance earn-out based on the average annual net production of the asset in the four calendar years with the highest annual net production during the five calendar years of 2020 through 2024. The difference
between the purchase price and the carrying amount of the liability previously recorded resulted in a $145 million gain recorded within the line “Other financial income/(expense), net” in the profit and loss statement (Note 19).
Additionally, other liabilities include $50.4 million of non-current finance lease liabilities and $75.6 million of dismantling provision as of September 30, 2020 ($53.8 million and $59.7 million as of
December 2019, respectively). The increase in the dismantling provision since December 31, 2019 is primarily due to the reduction of the useful life of the CSP plants in Spain, effective September 1st, 2020 (Note 6).
Note 17. - Trade payables and other current liabilities
Trade payable and other current liabilities as of September 30, 2020 and December 31, 2019 are as follows:
|
|
Balance as of
September 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Trade accounts payable
|
|
|
45,804
|
|
|
|
52,062
|
|
Down payments from clients
|
|
|
473
|
|
|
|
565
|
|
Liberty (Note 16)
|
|
|
-
|
|
|
|
41,032
|
|
Other accounts payable
|
|
|
29,830
|
|
|
|
34,403
|
|
Total
|
|
|
76,107
|
|
|
|
128,062
|
|
Trade accounts payables mainly relate to the operation 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.
Note 18. - Income Tax
The effective tax rate for the periods presented has been established based on Management’s best estimates, taking into account the tax treatment of permanent differences and tax credits.
For the nine-month period ended September 30, 2020, income tax amounted to a $25,079 thousand expense with respect to a profit before income tax of $83,246
thousand. In the nine-month period ended September 30, 2019, income tax amounted to a $46,979 thousand expense with respect to a profit before income tax of $115,359 thousand. The effective tax rate differs from the nominal tax rate mainly due to
permanent differences and treatment of tax credits in some jurisdictions.
Note 19. - Financial income and expenses
Financial income and expenses
The following table sets forth financial income and expenses for the nine-month periods ended September 30, 2020 and 2019:
|
|
For the nine-month period ended September 30,
|
|
Financial income
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Interest income from loans and credits
|
|
|
6,125
|
|
|
|
2,522
|
|
Interest rates benefits derivatives: cash flow hedges
|
|
|
288
|
|
|
|
331
|
|
Total
|
|
|
6,413
|
|
|
|
2,853
|
|
|
|
For the nine-month period ended September 30,
|
|
Financial expenses
|
|
2020
|
|
|
2019
|
|
Expenses due to interest:
|
|
($ in thousands)
|
|
- Loans from credit entities
|
|
|
(186,769
|
)
|
|
|
(196,350
|
)
|
- Other debts
|
|
|
(56,578
|
)
|
|
|
(69,744
|
)
|
Interest rates losses derivatives: cash flow hedges
|
|
|
(46,092
|
)
|
|
|
(44,139
|
)
|
Total
|
|
|
(289,439
|
)
|
|
|
(310,233
|
)
|
Financial income from loans and credits primarily includes a non-monetary financial income of $3.8 million resulting from the refinancing of the debt of Cadonal in the second quarter of 2020 (see Note
15).
Interests from other debts are primarily interests on the notes issued by ATS, ATN, Solaben Luxembourg, Hypesol Solar Inversiones and Atlantica Sustainable Infrastructure Jersey, and interests related
to the investment from Liberty (Note 16). Losses from interest rate derivatives designated as cash flow hedges correspond primarily to transfers from equity to financial expense when the hedged item is impacting the consolidated condensed income
statement.
Other net financial income and expenses
The following table sets out Other net financial income and expenses for the nine-month periods ended September 30, 2020, and 2019:
|
|
For the nine-month period ended September 30,
|
|
Other financial income / (expenses)
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Other financial income
|
|
|
162,984
|
|
|
|
11,412
|
|
Other financial losses
|
|
|
(100,387
|
)
|
|
|
(11,470
|
)
|
Total
|
|
|
62,597
|
|
|
|
(58
|
)
|
Other financial income includes a gain of $145 million further to the purchase of Liberty´s equity interest in Solana (Note 16). Residual items are primarily interests on deposits and loans, including non-monetary
changes to the amortized cost of such loans.
Other financial losses include $72 million of financial expenses further to the refinancing of the Helios 1&2 debts (Note 15). Residual items are primarily guarantees and
letters of credit, other bank fees, non-monetary changes to the fair value of derivatives for which hedge accounting is not applied and of financial instruments recorded at fair value through profit and loss, and other minor financial expenses.
Note 20. - Other operating income and expenses
The table below shows the detail of Other operating income and expenses for the nine-month periods ended September 30, 2020, and 2019:
Other Operating income
|
|
For the nine-month period ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Grants (Note 16)
|
|
|
44,256
|
|
|
|
44,366
|
|
Income from various services and insurance proceeds
|
|
|
31,646
|
|
|
|
29,334
|
|
Total
|
|
|
75,902
|
|
|
|
73,700
|
|
Other Operating expenses
|
|
For the nine-month period ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Raw materials and consumables used
|
|
|
(4,919
|
)
|
|
|
(7,893
|
)
|
Leases and fees
|
|
|
(2,388
|
)
|
|
|
(1,501
|
)
|
Operation and maintenance
|
|
|
(77,133
|
)
|
|
|
(94,573
|
)
|
Independent professional services
|
|
|
(28,509
|
)
|
|
|
(28,934
|
)
|
Supplies
|
|
|
(20,433
|
)
|
|
|
(18,929
|
)
|
Insurance
|
|
|
(27,990
|
)
|
|
|
(18,192
|
)
|
Levies and duties
|
|
|
(30,523
|
)
|
|
|
(25,830
|
)
|
Other expenses
|
|
|
(5,740
|
)
|
|
|
(4,730
|
)
|
Total
|
|
|
(197,635
|
)
|
|
|
(200,582
|
)
|
Note 21. - Earnings per share
Basic earnings per share have been calculated by dividing the profit attributable to equity holders by the average number of shares outstanding.
Diluted earnings per share for the nine-month period ended September 30, 2020 have been calculated considering the potential issuance of 3,347,305 shares on settlement of the Green Exchangeable Notes
(Note 14). Diluted earnings per share equals basic earnings per share for the nine-month period ended September 30, 2019.
Item
|
|
For the nine-month period ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in thousands)
|
|
Profit/ (loss) from continuing operations attributable to Atlantica.
|
|
|
61,209
|
|
|
|
60,832
|
|
Average number of ordinary shares outstanding (thousands) - basic
|
|
|
101,602
|
|
|
|
100,882
|
|
Average number of ordinary shares outstanding (thousands) - diluted
|
|
|
102,499
|
|
|
|
100,882
|
|
Earnings per share from continuing operations (U.S. dollar per share) - basic and diluted
|
|
|
0.60
|
|
|
|
0.60
|
|
Earnings per share from profit/(loss) for the period (U.S. dollar per share) - basic and diluted
|
|
|
0.60
|
|
|
|
0.60
|
|
Note 22. - Subsequent events
On November 4, 2020, the Board of Directors of the Company approved a dividend of $0.42 per share, which is expected to be paid on December 15, 2020.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion and analysis should be read together with, and is qualified in its entirety by reference to, our
Consolidated Condensed Interim Financial Statements and our Annual Consolidated Financial Statements prepared in accordance with IFRS as issued by the IASB and other disclosures including the disclosures under “Part II. Item 1A. Risk Factors” and
“Item 3.D – Risk Factors” in our Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, which are based on assumptions we believe to be reasonable. Our actual results could differ
materially from those discussed in these forward-looking statements. The results shown here are not necessarily indicative of the results expected in any future period. Please see our Annual Report for additional discussion of various factors
affecting our results of operations.
Overview
We are a sustainable infrastructure company that owns and manages renewable energy, efficient natural gas, transmission and transportation infrastructures and water assets. We
currently have operating facilities in North America (United States, Canada and Mexico), 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.
As of the date of this quarterly report, we own or have an interest in a portfolio of diversified assets in terms of type of asset, technology and geographic footprint. Our portfolio
consists of 27 assets with 1,551 MW of aggregate renewable energy installed generation capacity, 343 MW of efficient natural gas-fired power generation capacity, 17.5 M ft3 per day of water desalination and 1,166 miles of electric
transmission lines.
Our assets generally have contracted revenue (regulated revenue in the case of our Spanish assets and one transmission line in Chile). We are focused on long-life facilities as well
as long-term agreements that we expect will produce stable, long-term cash flows. 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 grow our cash available for distribution and our dividend to shareholders through organic growth and by acquiring new assets and/or businesses where revenue may not be fully contracted.
We intend to take advantage of, and leverage our growth strategy on, favorable trends in clean power generation, 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, and 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 is expected in batteries
along with an estimated $11.4 trillion in 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 three water desalination plants with a 17.5 million cubic feet per day capacity.
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. We may 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.
Algonquin, a North American diversified generation, transmission and distribution utility company owns a 44.2% stake in our capital stock. Algonquin created AAGES, a joint venture
designed to invest in the development and construction of contracted clean energy and water infrastructure contracted assets, with whom we have signed a ROFO agreement.
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.
Key Metrics
We regularly review a number of financial measurements and operating metrics to evaluate our performance, measure our growth and make strategic decisions. In addition to traditional
IFRS performance measures, such as total revenue, we also consider Adjusted EBITDA. Our management believes Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides
them with additional tools to compare business performance across companies and across periods. EBITDA 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. Adjusted EBITDA is widely used by other companies in the
same industry.
Adjusted EBITDA is calculated as profit/(loss) for the year attributable to the parent company, after adding back loss/(profit) attributable to non-controlling interest from continued
operations, income tax, share of profit/(loss) of associates carried under the equity method, finance expense net, depreciation, amortization and impairment charges of entities included in the Annual Consolidated Financial Statements and the
Consolidated Condensed Interim Financial Statements.
Until December 31, 2019, we reported Further Adjusted EBITDA as one of our key metrics. Further Adjusted EBITDA is calculated as profit/(loss) for the year attributable to the parent
company, after adding back loss/(profit) attributable to non-controlling interest from continued operations, income tax, share of profit/(loss) of associates carried under the equity method, finance expense net, depreciation, amortization and
impairment charges of entities included in the Annual Consolidated Financial Statements and the Consolidated Condensed Interim Financial Statements, and dividends received from our preferred equity investment in ACBH until 2017. We no longer report
Further Adjusted EBITDA because the Company has not received dividends from our preferred equity investment in ACBH during the period under review or in any of the comparable periods. Our revenue and Adjusted EBITDA by geography and business sector
for the nine-month period ended September 30, 2020 and 2019 are set forth in the following tables:
|
|
Nine-month period ended September 30,
|
|
Revenue by geography
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
North America
|
|
$
|
267.7
|
|
|
|
34.8
|
%
|
|
$
|
273.9
|
|
|
|
34.3
|
%
|
South America
|
|
|
112.0
|
|
|
|
14.6
|
%
|
|
|
105.8
|
|
|
|
13.3
|
%
|
EMEA
|
|
|
389.0
|
|
|
|
50.6
|
%
|
|
|
418.5
|
|
|
|
52.4
|
%
|
Total revenue
|
|
$
|
768.7
|
|
|
|
100
|
%
|
|
$
|
798.2
|
|
|
|
100.0
|
%
|
|
|
Nine-month period ended September 30,
|
|
Revenue by business sector
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Renewable energy
|
|
$
|
579.2
|
|
|
|
75.4
|
%
|
|
$
|
609.8
|
|
|
|
76.4
|
%
|
Efficient natural gas power
|
|
|
80.1
|
|
|
|
10.4
|
%
|
|
|
92.9
|
|
|
|
11.6
|
%
|
Electric transmission lines
|
|
|
79.2
|
|
|
|
10.3
|
%
|
|
|
77.0
|
|
|
|
9.7
|
%
|
Water
|
|
|
30.2
|
|
|
|
3.9
|
%
|
|
|
18.5
|
|
|
|
2.3
|
%
|
Total revenue
|
|
$
|
768.7
|
|
|
|
100
|
%
|
|
$
|
798.2
|
|
|
|
100
|
%
|
|
|
Nine-month period ended September 30,
|
|
Adjusted EBITDA by geography
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
North America
|
|
$
|
233.2
|
|
|
|
87.1
|
%
|
|
$
|
254.5
|
|
|
|
92.9
|
%
|
South America
|
|
|
89.8
|
|
|
|
80.2
|
%
|
|
|
87.8
|
|
|
|
83.0
|
%
|
EMEA
|
|
|
286.6
|
|
|
|
73.7
|
%
|
|
|
308.7
|
|
|
|
73.8
|
%
|
Total Adjusted EBITDA(1)
|
|
$
|
609.6
|
|
|
|
79.3
|
%
|
|
$
|
651.0
|
|
|
|
81.6
|
%
|
|
|
Nine-month period ended September 30,
|
|
Adjusted EBITDA by business sector
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
Renewable energy
|
|
$
|
456.4
|
|
|
|
78.8
|
%
|
|
$
|
493.3
|
|
|
|
80.9
|
%
|
Efficient natural gas power
|
|
|
72.4
|
|
|
|
90.4
|
%
|
|
|
81.7
|
|
|
|
87.9
|
%
|
Electric transmission lines
|
|
|
64.1
|
|
|
|
80.9
|
%
|
|
|
65.1
|
|
|
|
84.5
|
%
|
Water
|
|
|
16.7
|
|
|
|
55.3
|
%
|
|
|
10.9
|
|
|
|
58.9
|
%
|
Total Adjusted EBITDA(1)
|
|
$
|
609.6
|
|
|
|
79.3
|
%
|
|
$
|
651.0
|
|
|
|
81.6
|
%
|
Note:—
(1)
|
Adjusted EBITDA is calculated as profit/(loss) for the period 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 financial statements. Adjusted EBITDA is not a measure of performance under IFRS as
issued by the IASB and you should not consider 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 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. 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.
Adjusted EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results.
|
(2)
|
Adjusted EBITDA Margin is calculated as Adjusted EBITDA for each geography and business sector divided by revenue for each geography and business sector.
|
Recent Acquisitions
In January 2019, we entered into an agreement with Abengoa under the Abengoa ROFO Agreement for the acquisition of Tenes and paid $19.9 million as an advance payment. Closing of the
acquisition was subject to conditions precedent which were not fulfilled. In accordance with the terms of the share purchase agreement, the advance payment was 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 to be received from the asset. In October 2019, we received a first payment of $7.8 million through the cash sweep mechanism. On May 31, 2020, we entered into a new $4.5 million secured
loan agreement with Befesa Agua Tenes. This new loan is expected to be reimbursed no later than May 31, 2032, together with 12% interest per annum, through a full cash-sweep of all the dividends to be received from the asset. In addition, the new
agreement provides us with certain additional decision rights, a call option over the shares of Befesa Agua Tenes at a price of $1 and a majority at the board of directors of Befesa Agua Tenes. Therefore, we have concluded that we have control over
Tenes since May 31, 2020 and as a result we have fully consolidated the asset from that date.
Additionally, 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.
On May 31, 2019, we entered into an agreement with Abengoa to acquire a 15% stake in Rioglass, a multinational manufacturer of solar components. The investment was $7 million, and it
is classified as available for sale.
On August 2, 2019 we acquired a 30% stake in Monterrey, a 142 MW gas-fired engine facility including 130 MW installed capacity and 12 MW battery capacity. 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. We also entered into a ROFO agreement with the seller of the shares for the remaining 70% stake in the asset.
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 22, 2019, we closed the acquisition of ATN Expansion 2 for a total equity investment of approximately $20 million. The off-taker 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 before December 2020, the transaction would be reversed with no penalties to Atlantica.
In October 2018, we reached an agreement to acquire PTS, a natural gas transportation platform located in Mexico, close to ACT, the efficient natural gas plant. PTS has a service
agreement signed in October 2017, which is a “take-or-pay” 11-year term contract starting in 2020, with a possibility of an extension subject to the agreement of both parties. We initially acquired a 5% ownership in the project and have an agreement
to acquire an additional 65% stake subject to the asset entering into commercial operation, non-recourse project financing being closed and final approvals and customary conditions, including the absence of material adverse effects. In addition, our
partner in this asset is negotiating to sell part of its business, which may include the company that renders operation and maintenance services to PTS. This sale may require change of control waivers and may make closing of the acquisition more
difficult. We cannot guarantee that we will close this acquisition or that closing will occur on the terms originally agreed.
On April 3, 2020 we made an investment in the creation of a renewable energy platform in Chile, together with financial partners, where we now own approximately a 35% stake and have a
strategic investor role. The first investment was the acquisition of a 55 MW solar PV plant in an area with excellent solar resource (Chile PV I). This asset, has been in operation since 2016, demonstrating a good operating track record during that
period while selling its production in the Chilean power market. We have concluded that we have control over the asset and we are fully consolidating it since the acquisition date. The platform intends to make further investments in renewable energy
in Chile and sign PPAs with credit worthy off-takers. Our initial contribution was approximately $4 million.
On August 17, 2020 we closed the acquisition of the Liberty Ownership Interest in Solana. Liberty was the tax equity investor in our Solana asset. Total equity investment is expected
to be approximately $290 million of which $272 million has already been paid. Total price includes a deferred payment and a performance earn-out based on the average annual net production of the asset in the four calendar years with the highest
annual net production during the five calendar years of 2020 through 2024.
In October 2020 we reached an agreement to acquire Calgary District Heating (Calgary District Energy Center), an approximately 55 MWt
district heating asset in Canada for a total equity investment of approximately $20 million. Calgary District Heating has been in operation since 2010 and represents our first investment in this sector, which is recognized as key measure for cities
to reduce emissions by the UN Environment Program. The asset provides heating services to a diverse range of government, institutional and commercial customers in the city of Calgary. It has availability-based revenue with inflation indexation and 20 years of weighted average contract life. Contracted capacity and volume payments represent approximately 80% of the total revenue. The asset is an essential infrastructure
and has no commodity risk. Closing is subject to customary conditions precedent and regulatory approvals.
Recent Developments
The outbreak of the COVID-19 coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization in March 2020 and continues to spread in our key markets. The
COVID-19 virus continues to evolve rapidly, and its ultimate impact is uncertain and subject to change. Governmental authorities have imposed or recommended measures or responsive actions, including quarantines of certain geographic areas and travel
restrictions. We have reinforced safety measures in all our assets while we continue to provide a reliable service to our clients. For example, we have implemented the use of additional protection equipment, reinforced access control to our plants,
reduced contact between employees, changed shifts, tested employees, identified and isolated potential cases together with their close contacts therewith and taken additional measures to increase safety measures for our employees and operation and
maintenance suppliers’ employees working at our assets. In addition, we have increased the purchase of spare parts and equipment required for operations, to manage potential disruptions in the supply chain. Although we have not experienced any
material impacts, we are having some delays in certain maintenance activities. Further, we have adopted additional precautionary measures intended to mitigate potential risks to our employees, including temporarily requiring employees to work
remotely in geographies with higher incidence where their work can be done from home, and suspending all non-essential travel. We have also reinforced our on-site and cyber-security measures. In May 2020, we started to re-open certain offices at
partial capacity and under strict safety measures and protocols. However, we have recently decided to close certain offices again based on certain health indicators in each region. We continue to monitor the situation closely in all assets and
offices to take additional action if required.
To date, we have not experienced material operational or financial impacts as a result of COVID-19. We have not experienced any disruptions in availability or production in our assets
due to COVID-19. Our businesses are considered an essential and critical activity in all our geographies, so we have continued operating our assets even in those countries where economic activity has been limited only to essential business for a
certain period of time. In addition, our assets generally have long-term contracts or regulated revenue.
In spite of all of the above, we cannot guarantee that the COVID-19 outbreak will not affect our operations and financial situation (see “Part
II—Item 1.A —Risk Factors”).
On March 23, 2020 we announced that our special committee concluded the review of the strategic alternatives by reaffirming our current strategy.
On April 1, 2020 we closed the secured 2020 Green Private Placement for €290 million (approximately $340 million). The private placement accrues interest at an annual 1.96% interest
rate, payable quarterly and has a June 2026 maturity. Net proceeds were primarily used to repay the Note Issuance Facility 2017.
On April 8, 2020, Logrosan Solar Inversiones, S.A, the subsidiary-holding company of Solaben 1/6 and Solaben 2/3 entered into the Green Project Finance, a green project financing
euro-denominated agreement with ING Bank, B.V. and Banco Santander S.A. The lenders of the new facility have no recourse to Atlantica at the corporate level. After considering transaction costs and reserves, the Green Project Finance has resulted in
a net recap of $143 million that were used to finance new investments in renewable assets. The Green Project Finance was issued in compliance with the 2018 Green Loan Principles and have an unqualified Second Party Opinion delivered by
Sustainalytics.
On July 8, 2020, we entered into the Note Issuance Facility 2020, 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 approximately $164 million which is denominated in euros (€140 million). The notes under the Note Issuance Facility 2020 were issued on August 12, 2020 and have a maturity of
seven years from the closing date. We expect to use the proceeds from the Note Issuance Facility 2020 to finance acquisitions and for general corporate purposes.
On July 10, 2020, we entered into a non-recourse project debt refinancing of Helioenergy, one of the Spanish solar assets, by adding a new long dated tranche of debt from an
institutional investor. The new tranche bears an interest at a fixed rate of approximately 3% per annum and has a 15-year maturity. After transaction costs, net refinancing proceeds (net “recap”) were approximately $43 million.
In addition, on July 14, 2020, we entered into a non-recourse, project debt financing for approximately €326 million in relation to Helios, with institutional investors, pursuant to a
monoline guarantee. The new debt has a 17-year maturity and bears interest at a rate of approximately 2% per annum. This debt has refinanced the previous bank project debt with approximately €250 million outstanding and has canceled legacy interest
rate swaps. After transaction costs and cancelation of legacy swaps, net refinancing proceeds (net “recap”) were approximately $30 million.
On July 17, 2020, we issued $100 million aggregate principal amount of 4.00% Green Exchangeable Notes due 2025. On July 29, 2020, we issued additional $15 million aggregate principal
amount of the Green Exchangeable Notes. The notes mature on July 15, 2025 and bear interest at a rate of 4.00% per annum. The initial exchange rate of the notes is 29.1070 ordinary shares per $1,000 principal amount of notes, which is equivalent to
an initial exchange price of $34.36 per ordinary share. Noteholders may exchange their notes at their option at any time prior to the close of business on the scheduled trading day immediately preceding April 15, 2025, only during certain periods and
upon satisfaction of certain conditions. On or after April 15, 2025, noteholders may exchange their notes at any time. Upon exchange, the notes may be settled, at our election, into ordinary shares of Atlantica, cash or a combination of both. The
exchange rate is subject to adjustment upon the occurrence of certain events. We used the proceeds from the Green Exchangeable Notes to finance the acquisition of new or ongoing assets or projects which meet certain eligibility criteria in accordance
with our Green Finance Framework.
On June 29, 2020, California’s Governor signed AB 85, suspending California Net Operating Losses (“NOL”) utilization and imposing a cap on the amount of business incentive tax credits
companies can utilize, effective for tax years 2020, 2021 and 2022. During these years, Mojave will not be able to use its NOLs to offset its state tax, which is set at approximately 8.9%. The years 2020 to 2022 will not be considered in the
calculation of NOLs expiration, resulting in a suspension rather than a cancellation or shortening of the period of utilization of such NOLs. We expect to utilize the accumulated NOLs from 2022 onwards. However, we expect AB 85 will have a negative
impact, which we estimate in the range of $6 to $7 million per year in distributions expected from Mojave from 2021 to 2023.
On November 4, 2020, our board of directors approved a dividend of $0.42 per share. The dividend is expected to be paid on December 15, 2020, to shareholders of record as of November
30, 2020.
Potential implications of Abengoa developments
Abengoa, which is currently our largest supplier and used to be our largest shareholder, went through a restructuring process which started in November 2015 and ended in March 2017
and obtained approval for a second restructuring in July 2019. On May 19, 2020, Abengoa announced that it was working on a new viability plan that would include new financing under a COVID-19 mitigation program in Spain, as well as renegotiation of
certain existing debt with suppliers and lenders. Within this process on August 18, 2020 Abengoa filed pre-insolvency proceedings for the individual company Abengoa, S.A. According to public communications to the Spanish securities market regulator,
Abengoa believes this filing should not affect the restructuring plan for which Abengoa is currently seeking approval from its creditors. Based on public information filed by Abengoa, we understand that if the outcome of these negotiations is not
successful, Abengoa S.A. and/or the Abengoa group as a whole may enter insolvency proceedings.
As part of that viability plan Abengoa requested that we renegotiate certain obligations it has with us. On September 29, 2020, we reached an agreement which is subject to conditions
precedent, including, among others, closing of Abengoa’s restructuring, including Abengoa S.A. Under this agreement, we have accepted to release Abengoa from certain obligations with Atlantica, including obligations with Solana, in exchange for the
right to receive certain assets.
In addition, the project financing arrangement of Kaxu contains cross-default provisions related to Abengoa such that debt defaults by Abengoa, subject to certain threshold amounts
and/or a restructuring process, could trigger a default under the Kaxu project financing arrangement. In March 2017, Atlantica obtained a waiver with respect to its Kaxu project financing arrangement which waives any potential cross-defaults by
Abengoa up to that date, but the waiver did not cover potential future cross-default events. The restructuring process and the pre-insolvency filing by the individual company Abengoa S.A. in August 2020 represent a theoretical event of default under
the Kaxu project finance agreement. Although we do not expect an acceleration of debt to be declared by the creditors, Kaxu did not have contractually as of September 30, 2020 what International Accounting Standards define as an unconditional right
to defer the settlement of the debt for at least twelve months after September 30, 2020, as the cross-default provisions make that right not unconditional and therefore Kaxu’s total debt, which amounts to $324 million as of September 30, 2020, has
been recorded as current. We are negotiating a waiver from the creditors and/or contractual modifications in this regard.
We expect Abengoa to continue to maintain its contractual obligations under the operation and maintenance agreements. However, a deterioration in the financial situation of Abengoa or
certain Abengoa subsidiaries may result in a material adverse effect on our operation and maintenance agreements. Abengoa and its subsidiaries provide operation and maintenance services for many of our assets. We cannot guarantee that Abengoa will be
able to continue performing under those agreements or with the same level of service. If Abengoa cannot continue performing current services, we may need to renegotiate contracts or change suppliers. This could result in higher cost or different
service levels. We have contingency plans in place to replace Abengoa as the operation and maintenance supplier with respect to some assets if it is required in the future and we believe there are multiple suppliers available and options to
transition if required. However, we cannot guarantee that a potential insolvency filing by Abengoa would not have a negative impact on us (see “Risk Factors—Risks Related to Our Relationship with Algonquin and
Abengoa” in our Annual Report for further discussion of potential implications).
A deterioration in the financial situation of Abengoa or the implementation of a new viability plan may also result in a material adverse effect on Abengoa’s and its subsidiaries’
obligations, warranties and guarantees, and indemnities covering, for example, potential tax liabilities for assets acquired from Abengoa, or any other agreement. In addition, Abengoa represented in the past that we would not be a guarantor of any
obligation of Abengoa with respect to third parties. Abengoa agreed to indemnify us for any penalty claimed by third parties resulting from any breach in Abengoa’s representations. Considering the current financial situation of Abengoa, we cannot
guarantee that these indemnities will be maintained in the future. If the agreement signed with Abengoa on September 29, 2020, became effective, Abengoa would be released from certain of its obligations with Atlantica. In addition, in Mexico, Abengoa
owns a power plant that shares certain infrastructure and has certain back-to-back obligations with ACT. A deterioration in Abengoa’s or this asset’s financial situation may also result in a material adverse effect on ACT or Atlantica. We refer to
the Risk Factors section in the Annual Report.
Currency Presentation and Definitions
In this quarterly report, all references to “U.S. Dollar” and “$” are to the lawful currency of the United States.
Factors Affecting the Comparability of Our Results of Operations
Acquisitions
The results of operations of each acquisition have been consolidated since their respective date except for Monterrey and Amherst, which are recorded under the equity method since
their acquisition date. The acquisitions we have made since the beginning of 2019 and any other acquisitions we may make from time to time, will affect the comparability of our results of operations.
Factors Affecting Our Results of Operations
Interest rates
We incur significant indebtedness at the corporate 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.
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 revenue and expenses are denominated or linked to U.S. dollars. All our companies located in North America, South America
and Algeria have their revenue, and financing contracts signed in, or indexed totally or partially to, U.S. dollars. Our solar power plants in Spain have their revenue and expenses denominated in euros, and Kaxu, our solar plant in South Africa, has
its revenue 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. Impacts associated with fluctuations in
foreign currency are discussed in more detail under “Item 3—Quantitative and Qualitative Disclosure about Market Risk—Foreign exchange risk” in our Annual Report. 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.
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 nor should such amounts be considered in
isolation.
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.
|
|
Volume sold and availability levels
Nine-month period ended September 30,
|
|
Key performance indicator
|
|
2020
|
|
|
2019
|
|
Renewable energy
|
|
|
|
|
|
|
MW in operation(1)
|
|
|
1,551
|
|
|
|
1,496
|
|
GWh produced(2)
|
|
|
2,608
|
|
|
|
2,700
|
|
Efficient natural gas power
|
|
|
|
|
|
|
|
|
MW in operation(3)
|
|
|
343
|
|
|
|
343
|
|
GWh produced(4)
|
|
|
1,932
|
|
|
|
1,481
|
|
Availability (%)(4)(5)
|
|
|
102.4
|
%
|
|
|
92.8
|
%
|
Electric transmission lines
|
|
|
|
|
|
|
|
|
Miles in operation
|
|
|
1,166
|
|
|
|
1,152
|
|
Availability (%)(6)
|
|
|
99.9
|
%
|
|
|
100.0
|
%
|
Water
|
|
|
|
|
|
|
|
|
Mft3 in operation(1)
|
|
|
17.5
|
|
|
|
10.5
|
|
Availability (%)(6)
|
|
|
101.6
|
%
|
|
|
101.6
|
%
|
Note:
(1)
|
Represents total installed capacity in assets owned at the end of the period, regardless of our percentage of ownership in each of the assets.
|
(2)
|
Includes curtailment in wind assets for which we receive compensation.
|
(3)
|
Includes 43MW corresponding to our 30% share of Monterrey since August 2, 2019.
|
(4)
|
GWh produced includes 30% production from Monterrey since August 2019. Major maintenance overhaul held in ACT in Q1 and Q2 2019, as scheduled, which reduced production and electric availability as per the contract.
|
(5)
|
Electric availability refers to operational MW over contracted MW.
|
(6)
|
Availability refers to actual availability divided by contracted availability.
|
Production in the renewable business sector decreased by 3.4% in the nine-month period ended September 30, 2020, compared to the nine-month period ended September 30, 2019. The
decrease was mainly driven by a decrease in production levels in our assets in Spain, where solar radiation in the first half of the year was significantly lower than in the same period of the previous year. However, impact on revenue and Adjusted
EBITDA was limited since in Spain most of the revenue are based on capacity in accordance with existing regulation. Production also decreased in South Africa mainly due to an unscheduled outage due to the fire that occurred in the first quarter in
the electrical room of our Kaxu solar asset, which damaged the electric system. Production was stopped and after repairs, production has been progressively increasing and is now at normal capacity. Damage and business interruption are covered by our
insurance, after customary deductibles. Production in our renewable assets in North America was higher than in the same period of the previous year thanks to better performance by Mojave, offsetting lower solar radiation in the third quarter of 2020
caused by the smoke from the California wildfires. In addition, in Solana, availability in the storage system was lower than expected during the nine-month period ended September 30, 2020 due to certain leaks identified in the storage system in the
first quarter of 2020. Repairs and improvements are required over time and will impact production in 2020 and 2021, with the exact scope and timing of repairs to be determined. Solana has a cash repair reserve account funded with approximately $40
million that we expect to use for this purpose. However, we cannot guarantee that additional funding will not be required or that the repairs will be effective. In our wind assets, production increased by 5.5% due to good wind resource and stable
performance of the assets.
In ACT, our efficient natural gas power asset, availability and production levels during the nine-month period ended September 30, 2020 were higher than during the nine-month period
ended September 30, 2019 due to the scheduled major overhaul held in the first half of 2019.
Our transmission lines and water assets, the two other sectors where our revenue is based on availability, continue to achieve high availability levels.
Results of Operations
The table below illustrates our results of operations for the nine-month periods ended September 30, 2020 and 2019.
|
|
Nine-month period ended September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
% Variation
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
Revenue
|
|
$
|
768.7
|
|
|
$
|
798.2
|
|
|
|
(3.7
|
)
|
%
|
Other operating income
|
|
|
75.9
|
|
|
|
73.7
|
|
|
|
3.0
|
|
%
|
Employee benefit expenses
|
|
|
(37.4
|
)
|
|
|
(20.3
|
)
|
|
|
84.2
|
|
%
|
Depreciation, amortization, and impairment charges
|
|
|
(302.2
|
)
|
|
|
(234.8
|
)
|
|
|
28.7
|
|
%
|
Other operating expenses
|
|
|
(197.6
|
)
|
|
|
(200.6
|
)
|
|
|
(1.5
|
)
|
%
|
Operating profit
|
|
$
|
307.4
|
|
|
$
|
416.2
|
|
|
|
(26.1
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
|
|
|
6.4
|
|
|
|
2.8
|
|
|
|
128.6
|
|
%
|
Financial expense
|
|
|
(289.4
|
)
|
|
|
(310.2
|
)
|
|
|
(6.7
|
)
|
%
|
Net exchange differences
|
|
|
(1.5
|
)
|
|
|
2.8
|
|
|
|
(153.6
|
)
|
%
|
Other financial income/(expense), net
|
|
|
62.6
|
|
|
|
(0.1
|
)
|
|
|
627.0
|
|
%
|
Financial expense, net
|
|
$
|
(221.9
|
)
|
|
$
|
(304.7
|
)
|
|
|
(27.2
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of profit/(loss) of associates carried under the equity method
|
|
|
(2.2
|
)
|
|
|
3.9
|
|
|
|
(156.4
|
)
|
%
|
Profit before income tax
|
|
$
|
83.3
|
|
|
$
|
115.4
|
|
|
|
(27.8
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
(25.1
|
)
|
|
|
(47.0
|
)
|
|
|
(46.6
|
)
|
%
|
Profit for the period
|
|
$
|
58.2
|
|
|
$
|
68.4
|
|
|
|
(14.9
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Profit)/loss attributable to non-controlling interest
|
|
|
3.0
|
|
|
|
(7.6
|
)
|
|
|
139.5
|
|
%
|
Profit for the period attributable to the parent company
|
|
$
|
61.2
|
|
|
$
|
60.8
|
|
|
|
0.7
|
|
%
|
Weighted average number of ordinary shares outstanding (thousands) - basic
|
|
|
101,602
|
|
|
|
100,882
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding (thousands) - diluted
|
|
|
102,499
|
|
|
|
100,882
|
|
|
|
|
|
|
Basic and diluted earnings per share attributable to the parent company (U.S. dollar per share)
|
|
|
0.60
|
|
|
|
0.60
|
|
|
|
|
|
|
Dividend paid per share(1)
|
|
|
1.24
|
|
|
|
1.16
|
|
|
|
|
|
|
Note:
(1)
|
On February 26, 2020, May 6, 2020 and July 31, 2020, our board of directors approved a dividend of $0.41, $0.41 and $0.42 per share corresponding to the fourth quarter of 2019, the first quarter of 2020 and the
second quarter of 2020, respectively, which were paid on March 23, 2020, June 15, 2020, and September 15, 2020 respectively. On February 26, 2019, May 7, 2019 and August 2, 2019, our board of directors approved dividends of $0.37, $0.39 and
$0.40 per share, corresponding to the fourth quarter of 2018, the first quarter of 2019 and the second quarter of 2019, respectively, which were paid on March 22, 2019, June 14, 2019 and September 13, 2019, respectively.
|
Comparison of the Nine-Month Periods Ended September 30, 2020 and 2019.
The significant variances or variances of the significant components of the results of operations are discussed in the following section.
Revenue
Revenue decreased by 3.7% to $768.7 million for the nine-month period ended September 30, 2020, compared to $798.2 million for the nine-month period ended September 30, 2019. On a
constant currency basis, revenue for the nine-month period ended September 30, 2020 was $774.3 million, representing a 3% decrease compared to the nine-month period ended September 30, 2019. The decrease in revenue was primarily due to lower
production in Kaxu caused by the unscheduled outage explained previously. Damage and business interruption are covered by insurance, after customary deductibles, and insurance proceeds are recorded in “Other operating income”. Revenue also decreased
in Spain mainly due to lower solar resource in the first half of 2020 compared to the same period of the previous year and to lower electricity market prices in recent months in Spain, which partially affected our revenue. In addition, revenue also
decreased in ACT mainly due to a positive accounting impact recorded in 2019. In the first quarter of 2019 we recorded a one-time increase in revenue and Adjusted EBITDA of approximately $6 million in ACT with no impact in cash and with no
corresponding amount in the same period of 2020. Revenue also decreased in ACT due to lower revenue in the portion of the tariff related to the operation and maintenance services, driven by lower operation and maintenance costs in 2020. These effects
were partially offset by an increase in revenue from our wind assets in South America and an increase in revenue from our recent acquisitions of transmission, water and solar assets. In our solar assets in North America revenue increased thanks to
better performance by Mojave, offsetting lower solar radiation in the third quarter of 2020 caused by the smoke from the California wildfires.
Other operating income
The following table sets forth our other operating income for the nine-month period ended September 30, 2020 and 2019:
|
|
Nine-month period ended September 30,
|
|
Other operating income
|
|
2020
|
|
|
2019
|
|
|
|
($ in millions)
|
|
Grants
|
|
$
|
44.2
|
|
|
$
|
44.4
|
|
Income from various services
|
|
|
31.7
|
|
|
|
29.3
|
|
Total
|
|
$
|
75.9
|
|
|
$
|
73.7
|
|
Other operating income increased by 3.0% to $75.9 million for the nine-month period ended September 30, 2020, compared to $73.7 million for the nine-month period ended September 30,
2019.
Grants represent the financial support provided by the U.S. government to Solana and Mojave and consist of ITC Cash Grant and an implicit grant related to the below market interest
rates of the project loans with the Federal Financing Bank. Grants were stable in the nine-month period ended September 2020 compared to the same period of the previous year.
In the nine-month period ended September 2020 “Income from various services” corresponded mainly to a $13.7 million insurance income in Kaxu and a $6.0 million insurance income
received in Solana, in compensation for events from previous years. In the nine-month period ended September 2019, this account included approximately $10 million received in the third quarter of 2019 from the EPC contractor in our U.S. solar assets
under their obligations and amounts received from insurance claims in compensation for events from previous years. Income from various services also include other minor amounts received from Abengoa under their obligations in the nine-month periods
ended September 30, 2020 and 2019.
Employee benefits expenses
Employee benefit expenses increased to $37.4 million for the nine-month period ended September 30, 2020, compared to $20.3 million for the nine-month period ended September 30, 2019.
The increase was 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.
Depreciation, amortization and impairment charges
Depreciation, amortization and impairment charges increased by 28.7% to $302.2 million for the nine-month period ended September 30, 2020, compared to $234.8 million for the
nine-month period ended September 30, 2019. As previously explained, certain leaks were identified in the storage system of Solana in the first quarter of 2020. Under our preliminary plan, at this point in time we expect that we will need to replace
some elements of the storage system, which have been written off and had an estimated net book value of approximately $48 million. Improvements and repairs are expected to be required over time, with the exact scope and timing to be determined. The
increase was also due to the increase in the impairment provision of ACT following IFRS 9. IFRS 9 requires impairment provisions to be based on the expected credit losses on financial assets rather than on actual credit losses. ACT recorded an
additional impairment provision of $23.6 million for the nine-month period ended September 30, 2020, following a worsening in its client’s credit risk metrics, while in the nine-month period ended September 30, 2019 there was an impairment reversal
of $0.8 million. These effects were partially offset by an impairment reversal in our wind assets in Uruguay for approximately $18 million after an impairment test update in Cadonal and Palmatir.
Other operating expenses
The following table sets forth our other operating expenses for the nine-month period ended September 30, 2020 and 2019:
|
|
Nine-month period ended September 30,
|
|
Other operating expenses
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Leases and fees
|
|
$
|
(2.4
|
)
|
|
|
3.1
|
%
|
|
$
|
(1.5
|
)
|
|
|
0.2
|
%
|
Operation and maintenance
|
|
|
(77.1
|
)
|
|
|
10.0
|
%
|
|
|
(94.6
|
)
|
|
|
11.9
|
%
|
Independent professional services
|
|
|
(28.5
|
)
|
|
|
3.7
|
%
|
|
|
(28.9
|
)
|
|
|
3.6
|
%
|
Supplies
|
|
|
(20.4
|
)
|
|
|
2.7
|
%
|
|
|
(19.0
|
)
|
|
|
2.4
|
%
|
Insurance
|
|
|
(28.0
|
)
|
|
|
3.6
|
%
|
|
|
(18.2
|
)
|
|
|
2.3
|
%
|
Levies and duties
|
|
|
(30.5
|
)
|
|
|
4.0
|
%
|
|
|
(25.8
|
)
|
|
|
3.2
|
%
|
Other expenses
|
|
|
(5.7
|
)
|
|
|
0.7
|
%
|
|
|
(4.7
|
)
|
|
|
0.6
|
%
|
Raw Materials
|
|
|
(5.0
|
)
|
|
|
0.7
|
%
|
|
|
(7.9
|
)
|
|
|
1.0
|
%
|
Total
|
|
$
|
(197.6
|
)
|
|
|
25.7
|
%
|
|
$
|
(200.6
|
)
|
|
|
25.1
|
%
|
Other operating expenses decreased by 1.5% to $197.6 million for the nine-month period ended September 30, 2020, compared to $200.6 million for the nine-month period ended September
30, 2019. The decrease was mainly due to lower operation and maintenance costs due to the internalization of the operation and maintenance services in our U.S. solar assets since July 30, 2019, as most of these expenses are now recorded in “Employee
benefit expenses” since that date. This decrease was partially offset by an increase in insurance expenses due to higher insurance premiums. Levies and duties have also increased because at the end of 2018, the Spanish government granted a six-month
exemption for the 7% electricity sales tax in our Spanish assets until April 2019, which reduced our costs in the first quarter of 2019.
Operating profit
As a result of the above factors, operating profit for the nine-month period ended September 30, 2020 decreased by 26.1% to $307.4 million, compared to $416.2 million for the
nine-month period ended September 30, 2019.
Financial income and financial expense
|
|
Nine-month period ended September 30,
|
|
Financial income and financial expense
|
|
2020
|
|
|
2019
|
|
|
|
$ in millions
|
|
Financial income
|
|
|
6.4
|
|
|
|
2.8
|
|
Financial expense
|
|
|
(289.4
|
)
|
|
|
(310.2
|
)
|
Net exchange differences
|
|
|
(1.5
|
)
|
|
|
2.8
|
|
Other financial income/(expense), net
|
|
|
62.6
|
|
|
|
(0.1
|
)
|
Financial expense, net
|
|
|
(221.9
|
)
|
|
|
(304.7
|
)
|
Financial income
Financial income increased to $6.4 million for the nine-month period ended September 30, 2020, compared to $2.8 million for the nine-month
period ended September 30, 2019. Financial income primarily includes a non-monetary financial income of $3.8 million resulting from the refinancing of the project debt of Cadonal in the second quarter of 2020 (see Note 15 to our Consolidated
Condensed Interim Financial Statements).
Financial expense
The following table sets forth our financial expense for the nine-month period ended September 30, 2020 and 2019:
|
|
Nine-month period ended September 30,
|
|
Financial expense
|
|
2020
|
|
|
2019
|
|
|
|
($ in millions)
|
|
Interest expense:
|
|
|
|
|
|
|
—Loans from credit entities
|
|
$
|
(186.8
|
)
|
|
$
|
(196.4
|
)
|
—Other debts
|
|
|
(56.6
|
)
|
|
|
(69.7
|
)
|
Interest rates losses derivatives: cash flow hedges
|
|
|
(46.0
|
)
|
|
|
(44.1
|
)
|
Total
|
|
$
|
(289.4
|
)
|
|
$
|
(310.2
|
)
|
Financial expense decreased by 6.7% to $289.4 million in the nine-month period ended September 30, 2020 compared to $310.2 million for the nine-month period ended September 30, 2019.
Interest on loans from credit entities decreased mainly due to a decrease in interest in loans indexed to LIBOR and JIBAR, since the rates of reference were lower in the nine-month
period ended September 30, 2020 compared to the same period from the previous year. Interest in Kaxu were lower also due to the depreciation of the South African rand against the US dollar. This decrease was partially offset by breakage costs in our
corporate refinancings.
Interest on other debt corresponds mainly to interest expense on the notes issued by ATS, ATN and Solaben Luxembourg, interest related to the 2019 Notes until May 2019 and interest
related to the investment of Liberty in Solana until August 2020. The decrease was mainly due to the refinancing of the 2019 Notes with the proceeds of the Note Issuance Facility 2019, since interest for this facility is recorded under Loans from
credit entities. The decrease was also due to the acquisition of Liberty’s equity interest in Solana in August 2020. From an accounting perspective, Liberty’s equity investment in Solana was recorded as a liability with interest accruing in Interest
on other debt.
Losses from interest rate derivatives designated as cash flow hedges correspond primarily to transfers from equity to financial expense when the hedged item was impacting the
consolidated condensed income statement. The increase was due to the decrease in LIBOR and offsets the decrease in interest on Loans from credit entities.
Other financial income/(expense), net
|
|
Nine-month period ended September 30,
|
|
Other financial income /(expense), net
|
|
2020
|
|
|
2019
|
|
|
|
($ in millions)
|
|
Other financial income
|
|
$
|
163.0
|
|
|
$
|
11.4
|
|
Other financial expense
|
|
|
(100.4
|
)
|
|
|
(11.5
|
)
|
Total
|
|
$
|
62.6
|
|
|
$
|
(0.1
|
)
|
Other financial income/(expense), net increased to a financial income of $62.6 million for the nine-month period ended September 30, 2020, compared to a net financial expense of $0.1
million in the same period of the previous year. In the nine-month period ended September 30, 2020, Other financial income includes a non-cash gain of approximately $145 million from the acquisition of Liberty’s equity interest in Solana, which is
the primary reason for the increase. Liberty was the tax equity investor in Solana and although the investment of Liberty was in shares, under IFRS it was recorded as liability. In August 2020, we acquired Liberty’s equity interest in Solana and
recorded a gain corresponding to the difference between book value of Liberty’s equity interest in Solana and the total price expected to be paid to Liberty.
The increase in other financial expenses is primarily due to a one-time non-cash loss of approximately $71.9 million caused by the refinancing of Helios 1/2. In the third quarter of
2020, we entered into a non-recourse, project debt financing for approximately €326 million, which refinanced the previous bank project debt with approximately €250 million outstanding. We canceled the interest rate swaps hedging the old debt, which
caused the reclassification from equity to the income statement of the accumulated impact of the mark-to-market of such derivatives for approximately $44.1 million. In addition, we recorded a $27.8 million loss for the difference between the
accounting value and the nominal value of the old debt.
Other financial expense also includes expenses for guarantees and letters of credit, wire transfers, other bank fees and other minor financial expenses.
Share of profit/(loss) of associates carried under the equity method
Share of profit of associates carried under the equity method decreased to $2.2 million loss in the nine-month period ended September 30, 2020 compared to $3.9 million profit for
nine-month period ended September 30, 2019. The decrease was primarily due to a decrease in Honaine’s profits caused by higher deferred income taxes compared to the same period of the previous year.
Profit/(loss) before income tax
As a result of the factors mentioned above, we reported a profit before income taxes of $83.3 million for the nine-month period ended September 30, 2020, compared to a profit before
income taxes of $115.4 million for the nine-month period ended September 30, 2019.
Income tax
The effective tax rate for the periods presented has been established based on management’s best estimates. For the nine-month period ended September 30, 2020, income tax amounted to
an expense of $25.1 million, with a profit before income tax of $83.3 million. For the nine-month period ended September 30, 2019, income tax amounted to an expense of $47.0 million, with a profit before income tax of $115.4 million. The effective
tax rate differs from the nominal tax rate mainly due to the permanent differences and to the treatment of tax credits in some jurisdictions.
(Profit)/Loss attributable to non-controlling interests
Loss attributable to non-controlling interests was $3.0 million for the nine-month period ended September 30, 2020 compared to a profit of $7.6 million for the nine-month period ended
September 30, 2019. Loss 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, Seville PV, Chile PV I and Tenes) and the loss in
the period was mainly due to a loss in Kaxu, mostly due to the unscheduled outage previously explained and to a loss in Skikda mainly due to higher deferred income taxes compared to the same period of the previous year.
Profit / (loss) attributable to the parent company
As a result of the factors mentioned above, profit attributable to the parent company was $61.2 million for the nine-month period ended September 30, 2020, compared to a profit of
$60.8 million for the nine-month period ended September 30, 2019.
Segment Reporting
We organize our business into the following three geographies where the assets and concessions are located:
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 of electricity from concentrating solar power and wind plants;
|
•
|
Efficient natural gas, 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 gas compression and transportation; and
|
•
|
Water, which includes our activities related to desalination plants.
|
As a result, we report our results in accordance with both criteria.
Revenue and Adjusted EBITDA by geography
The following table sets forth our revenue, Adjusted EBITDA and volumes for the nine-month period ended September 30, 2020 and 2019, by geographic region:
|
|
Nine-month period ended September 30,
|
|
Revenue by geography
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
%
of revenue
|
|
|
$ in
millions
|
|
|
%
of revenue
|
|
North America
|
|
$
|
267.7
|
|
|
|
34.8
|
%
|
|
$
|
273.9
|
|
|
|
34.3
|
%
|
South America
|
|
|
112.0
|
|
|
|
14.6
|
%
|
|
|
105.8
|
|
|
|
13.3
|
%
|
EMEA
|
|
|
389.0
|
|
|
|
50.6
|
%
|
|
|
418.5
|
|
|
|
52.4
|
%
|
Total revenue
|
|
$
|
768.7
|
|
|
|
100
|
%
|
|
$
|
798.2
|
|
|
|
100
|
%
|
|
|
Nine-month period ended September 30,
|
|
Adjusted EBITDA by geography
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
North America
|
|
$
|
233.2
|
|
|
|
87.1
|
%
|
|
$
|
254.5
|
|
|
|
92.9
|
%
|
South America
|
|
|
89.8
|
|
|
|
80.2
|
%
|
|
|
87.8
|
|
|
|
83.0
|
%
|
EMEA
|
|
|
286.6
|
|
|
|
73.7
|
%
|
|
|
308.7
|
|
|
|
73.8
|
%
|
Total Adjusted EBITDA(1)
|
|
$
|
609.6
|
|
|
|
79.3
|
%
|
|
$
|
651.0
|
|
|
|
81.6
|
%
|
Note:
(1)
|
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 our financial statements. Adjusted EBITDA is not a measure of performance under
IFRS as issued by the IASB, and you should not consider 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 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. 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. Adjusted EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results. See “Item 2— Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Key Metrics.”
|
(2)
|
Adjusted EBITDA Margin is calculated as Adjusted EBITDA for each geography and business sector divided by revenue for each geography and business sector.
|
|
|
Volume produced/availability
|
|
|
|
Nine- Month period ended September 30,
|
|
Volume by geography
|
|
2020
|
|
|
2019
|
|
|
|
|
|
North America (GWh) (1)
|
|
|
3,048
|
|
|
|
2,586
|
|
North America availability(1)(2)
|
|
|
102.4
|
%
|
|
|
92.8
|
%
|
South America (GWh) (3)
|
|
|
472
|
|
|
|
383
|
|
South America availability(4)
|
|
|
99.9
|
%
|
|
|
100.0
|
%
|
EMEA (GWh)
|
|
|
1,019
|
|
|
|
1,212
|
|
EMEA availability(4)
|
|
|
101.6
|
%
|
|
|
101.6
|
%
|
Note:
(1)
|
GWh produced includes 30% production from Monterrey since August 2019. Major maintenance overhaul in ACT held in Q1 and Q2 2019, as scheduled, which reduced electric production as per the contract.
|
(2)
|
Electric availability refers to operational MW over contracted MW with Pemex. Major maintenance overhaul held in ACT in Q1 and Q2 2019, as scheduled, which reduced electric availability as per the contract.
|
(3)
|
Includes curtailment in wind assets for which we receive compensation.
|
(4)
|
Availability refers to actual availability divided by contracted availability.
|
North America
Revenue decreased by 2.3% to $267.7 million for the nine-month period ended September 30, 2020, compared to $273.9 million for the nine-month period ended September 30, 2019. The
decrease was mainly due to a decrease in revenue in our Efficient Natural Gas segment, primarily due to a one-time adjustment of approximately $6 million with no impact in cash recorded in ACT in the first quarter of 2019. Our ACT asset is accounted
for under IFRIC 12 following the financial asset model, and a change in future operation and maintenance costs in 2019 increased the value of the asset, resulting in a one-time increase in revenue and Adjusted EBITDA of approximately $6 million.
Additionally, revenue also decreased due to the lower revenue in the portion of the tariff related to the operation and maintenance services, driven by lower operation and maintenance costs in 2020. Revenue in our solar assets in North America
increased by 3.6% mainly due to a better performance by Mojave, compared to the nine-month period ended September 30, 2019, partly offsetting lower solar radiation in the third quarter of 2020 caused by the smoke from the California wildfires.
Adjusted EBITDA decreased by 8.4% to $233.2 million for the nine-month period ended September 30, 2020, compared to $254.5 million for the nine-month period ended September 30, 2019. The decrease was mainly driven by a decrease in Adjusted EBITDA in
our solar assets in North America mostly due to approximately $10 million received in the third quarter of 2019 from the EPC contractor in our U.S. solar assets under their contractual obligations with no corresponding amount in 2020. Adjusted EBITDA
in our Efficient Natural Gas segment also decreased mainly due to the decrease in revenue as previously explained. Adjusted EBITDA margin decreased to 87.1% for the nine-month period ended September 30, 2020, compared to 92.9% for the nine-month
period ended September 30, 2019 due to the events described above.
South America
Revenue increased by 5.9% to $112.0 million for the nine-month period ended September 30, 2020, compared to $105.8 million for the nine-month period ended September 30, 2019. The
revenue increase was primarily due to the contribution of Chile PV I, a solar asset recently acquired through the Chilean renewable energy platform created in the second quarter of 2020 and ATN Expansion 2, acquired in October 2019. Revenue also
increased due to higher production in our wind assets. Adjusted EBITDA increased by 2.3% to $89.8 million for the nine-month period ended September 30, 2020, compared to $87.8 million for the nine-month period ended September 30, 2019. The increase
was mainly due to higher revenue. Adjusted EBITDA margin decreased to 80.2% for the nine-month period ended September 30, 2020, compared to 83.0% for the nine-month period ended September 30, 2019 mainly due to lower than usual operation and
maintenance expenses in our transmission lines in the first quarter of 2019.
EMEA
Revenue decreased by 7.0% to $389 million for the nine-month period ended September 30, 2020, compared to $418.5 million for the nine-month period ended September 30, 2019. On a
constant currency basis, revenue for the nine-month month period ended September 30, 2020 was $394.6 million which represented a decrease of 5.7% compared to the nine-month period ended September 30, 2019. The decrease in revenue was primarily due to
lower production in Kaxu resulting from the unscheduled outage explained above. Damage and business interruption are covered by insurance, after customary deductibles. Revenue also decreased in Spain mainly due to lower solar resource in the first
half of 2020 compared to the same period of the previous year and to lower electricity market prices in recent months in Spain, which partially affected our revenue. This decrease was partially offset by the contribution from Tenes, the water
desalination plant that we started to fully consolidate in the second quarter of 2020. Adjusted EBITDA decreased by 7.2% to $286.6 for the nine-month period ended September 30, 2020 compared to $308.7 million for the nine-month period ended September
30, 2019. On a constant currency basis, Adjusted EBITDA for the nine-month month period ended September 30, 2020 was $292.6 million which represent a decrease of 5.2% compared to the nine-month period ended September 30, 2019. The decrease in
Adjusted EBITDA was mainly due to the events described above and it was lower than the decrease in revenue because insurance proceeds for Kaxu are recorded in “Other operating income”, not in revenue. Adjusted EBITDA margin remained stable at 73.7%
for the nine-month period ended September 30, 2020 and 73.8% for the nine-month period ended September 30, 2019.
Revenue and Adjusted EBITDA by business sector
The following table sets forth our revenue, Adjusted EBITDA and volumes for the nine-month period ended September 30, 2020 and 2019, by business sector:
|
|
Nine-month period ended September 30,
|
|
Revenue by business sector
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
%
of revenue
|
|
|
$ in
millions
|
|
|
%
of revenue
|
|
Renewable energy
|
|
$
|
579.2
|
|
|
|
75.4
|
%
|
|
$
|
609.8
|
|
|
|
76.4
|
%
|
Efficient natural gas power
|
|
|
80.1
|
|
|
|
10.4
|
%
|
|
|
92.9
|
|
|
|
11.6
|
%
|
Electric transmission lines
|
|
|
79.2
|
|
|
|
10.3
|
%
|
|
|
77.0
|
|
|
|
9.7
|
%
|
Water
|
|
|
30.2
|
|
|
|
3.9
|
%
|
|
|
18.5
|
|
|
|
2.3
|
%
|
Total revenue
|
|
$
|
768.7
|
|
|
|
100
|
%
|
|
$
|
798.2
|
|
|
|
100.0
|
%
|
|
|
Nine-month period ended September 30,
|
|
Adjusted EBITDA by business sector
|
|
2020
|
|
|
2019
|
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
|
$ in
millions
|
|
|
Adjusted
EBITDA
Margin (2)
|
|
Renewable energy
|
|
$
|
456.4
|
|
|
|
78.8
|
%
|
|
$
|
493.3
|
|
|
|
80.9
|
%
|
Efficient natural gas power
|
|
|
72.4
|
|
|
|
90.4
|
%
|
|
|
81.7
|
|
|
|
87.9
|
%
|
Electric transmission lines
|
|
|
64.1
|
|
|
|
80.9
|
%
|
|
|
65.1
|
|
|
|
84.5
|
%
|
Water
|
|
|
16.7
|
|
|
|
55.3
|
%
|
|
|
10.9
|
|
|
|
58.9
|
%
|
Total Adjusted EBITDA(1)
|
|
$
|
609.6
|
|
|
|
79.3
|
%
|
|
$
|
651.0
|
|
|
|
81.6
|
%
|
Note:
(1)
|
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 our financial statements. Adjusted EBITDA is not a measure of performance under
IFRS as issued by the IASB, and you should not consider 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 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. 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. Adjusted EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results. See “Item 2— Management’s Discussion and Analysis of
Financial Condition and Results of Operations —Key Metrics.”
|
(2)
|
Adjusted EBITDA Margin is calculated as Adjusted EBITDA for each geography and business sector divided by revenue for each geography and business sector.
|
|
|
Volume produced/availability
|
|
|
|
Year ended September 30,
|
|
Volume by business sector
|
|
2020
|
|
2019
|
|
Renewable energy (GWh) (1)
|
|
|
|
2,608
|
|
|
|
2,700
|
|
Efficient natural gas Power (GWh) (2)
|
|
|
|
1,932
|
|
|
|
1,481
|
|
Efficient natural gas Power availability(3)
|
|
|
|
102.4
|
%
|
|
|
92.8
|
%
|
Electric transmission availability(4)
|
|
|
|
99.9
|
%
|
|
|
100
|
%
|
Water availability(4)
|
|
|
|
101.6
|
%
|
|
|
101.6
|
%
|
Note:
(1)
|
Includes curtailment in wind assets for which we receive compensation.
|
(2)
|
GWh produced includes 30% production from Monterrey since August 2019. Major maintenance overhaul held in Q1 and Q2 2019 in ACT, as scheduled, which reduced electric production, as per the contract.
|
(3)
|
Electric availability refers to operational MW over contracted MW with Pemex. Major overhaul held in Q1 and Q2 2019, as scheduled, which reduced the electric availability as per the contract with Pemex.
|
(4)
|
Availability refers to actual availability divided by contracted availability.
|
Renewable energy
Revenue decreased by 5.0% to $579.2 million for the nine-month period ended September 30, 2020, compared to $609.8 million for the nine-month period ended September 30, 2019. Adjusted
EBITDA decreased by 7.5% to $456.4 million for the nine-month period ended September 30, 2020, compared to $493.3 million for the nine-month period ended September 30, 2019. On a constant currency basis, revenue and Adjusted EBITDA for the period
ended September 30, 2020 were $584.8 and $462.4 million, respectively, which represents a decrease of 4.1% and 6.3%, respectively, compared to the nine-month period ended September 30, 2019. The decrease in revenue was primarily due to lower
production in Kaxu, our South African asset, due to an unscheduled outage, as previously explained. Damage and business interruption are covered by our insurance, after customary deductibles. Revenue also decreased due to lower revenue in Spain, as
previously explained. The decrease was partially offset by the contribution of the recently acquired asset Chile PV I, a solar asset in Chile included within the new renewable energy platform recently created. Revenue in our solar assets in North
America increased by 3.6% mainly thanks to a better performance by Mojave, offsetting lower solar radiation in the third quarter caused by the smoke from the California wildfires. The decrease in Adjusted EBITDA was mainly due to the events described
above and to a decrease of the Adjusted EBITDA in our solar assets in North America mostly due to approximately $10 million received in the third quarter of 2019 from the EPC contractor in our U.S. solar assets under their contractual obligations
with no corresponding amount in 2020.
Efficient natural gas
Revenue decreased by 13.8% to $80.1 million for the nine-month period ended September 30, 2020, compared to $92.9 million for the nine-month period ended September 30, 2019, while
Adjusted EBITDA decreased by 11.3% to $72.4 million for the nine-month period ended September 30, 2020, compared to $81.7 million for the nine-month period ended September 30, 2019. Revenue and Adjusted EBITDA decreased mainly due to a one-time
adjustment recorded in the first quarter of 2019 of approximately $6 million, with no impact in cash in 2019 and with no corresponding amount in 2020. Our ACT asset is accounted for under IFRIC 12 following the financial asset model, and a decrease
in 2019 in future operation and maintenance costs increased the value of the asset, causing a one-time increase in revenue and Adjusted EBITDA in the first quarter of 2019. Additionally, revenue also decreased due to lower operation and maintenance
costs in 2020, since there is a portion of revenue related to operation and maintenance services plus a margin. Adjusted EBITDA margin increased to 90.4% for the nine-month period ended September 30, 2020, from 87.9% for the nine-month period ended
September 30, 2019, mainly due to lower operation and maintenance expenses compared to the same period of the previous year.
Electric transmission lines
Revenue increased by 2.9% to $79.2 million for the nine-month period ended September 30, 2020, compared to $77.0 million for the nine-month period ended September 30, 2019. The
increase in revenue was mainly due to the contribution of ATN Expansion 2 acquired in 2019. Adjusted EBITDA decreased by 1.5% to $64.1 million for the nine-month period ended September 30, 2020 compared to $65.1 million for the nine-month period
ended September 30, 2019, while Adjusted EBITDA margin decreased to 80.9% for the nine-month period ended September 30, 2020 compared to 84.5% for the nine-month period ended September 30, 2019. The decrease in Adjusted EBITDA margin was mainly due
to lower than usual operation and maintenance expenses in our transmission lines in the first quarter of 2019.
Water
Revenue increased by 63.2% to $30.2 million for the nine-month period ended September 30, 2020, compared to $18.5 million for the nine-month period ended September 30, 2019. Adjusted
EBITDA increased by 53.2% to $16.7 million for the nine-month period ended September 30, 2020, compared to $10.9 million for the nine-month period ended September 30, 2019. The increases were mainly due to the contribution from Tenes, the water
desalination plant that we started to consolidate in the second quarter of 2020. Adjusted EBITDA margin decreased to 55.3% for the nine-month period ended September 30, 2020 from 58.9% for the nine-month period ended September 30, 2019 mainly due to
slightly lower Adjusted EBITDA margin in Tenes since its first consolidation date compared to Skikda.
Liquidity and Capital Resources
Our principal liquidity and capital requirements consist of the following:
•
|
debt service requirements on our existing and future debt;
|
•
|
cash dividends to investors; and
|
•
|
investments and acquisitions of new assets, companies and operations (see “Item 4.B—Business Overview—Our Business Strategy” in our Annual Report).
|
As a normal part of our business, depending on market conditions, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes
in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on
acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. In addition, any of the items discussed in detail under “Item
3.D—Risk Factors” in our Annual Report and other factors may also significantly impact our liquidity.
Liquidity position
As of September 30, 2020, our cash and cash equivalents at the Company level were $186.7 million compared to $66.0 million as of December 31, 2019. Additionally, as of September 30,
2020, we had approximately $425 million available under our Revolving Credit Facility after repaying the entire amount drawn down, and therefore a total corporate liquidity of $611.7 million, compared to $407.0 million as of December 31, 2019.
In addition, as of September 30, 2020 cash at the project company level was $602.2 million, of which $318.9 million was restricted. As of December 31, 2019, our cash at the project
company level, including $34.7 million cash classified as short-term financial investments, was $531.5 million, of which $373.6 million were restricted.
Sources of liquidity
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 financings for our various assets and our corporate debt financings, including our recently closed Green Exchangeable Notes, the
Note Issuance Facility 2020, the 2020 Green Private Placement, the Note Issuance Facility 2019, the Revolving Credit Facility, a line of credit with a local bank and our commercial paper program.
Green Exchangeable Notes
On July 17, 2020, we issued $100 million aggregate principal amount of 4.00% Green Exchangeable Notes due 2025. On July 29, 2020, we issued additional $15 million aggregate principal
amount of the Green Exchangeable Notes. The Green Exchangeable Notes are the senior unsecured obligations of Atlantica Jersey, a wholly owned subsidiary of Atlantica, and fully and unconditionally guaranteed by Atlantica on a senior, unsecured basis.
The notes mature on July 15, 2025, unless earlier repurchased or redeemed by Atlantica or exchanged, and bear interest at a rate of 4.00% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15,
2021.
Noteholders may exchange all or any portion of their notes at their option at any time prior to the close of business on the scheduled trading day immediately preceding April 15,
2025, only during certain periods and upon satisfaction of certain conditions. On or after April 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, noteholders may exchange any of their
notes at any time, in multiples of $1,000 principal amount, at the option of the noteholder. Upon exchange, the notes may be settled, at our election, into ordinary shares of Atlantica, cash or a combination of both. The initial exchange rate of the
notes is 29.1070 ordinary shares per $1,000 principal amount of notes (which is equivalent to an initial exchange price of $34.36 per ordinary share). The exchange rate is subject to adjustment upon the occurrence of certain events.
We used the proceeds from the Green Exchangeable Notes to finance the acquisition of new or ongoing assets or projects which meet certain eligibility criteria in accordance with our
Green Finance Framework. The Green Exchangeable Notes comply with the Green Bond Principles and have a second party opinion by Sustainalytics.
Note Issuance Facility 2020
On July 8, 2020, we entered into the Note Issuance Facility 2020, a senior unsecured euro-denominated 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 approximately $164 million (€140 million).
The proceeds of the Note Issuance Facility 2020 are expected to be used to finance acquisitions and for general corporate purposes. The notes under the Note Issuance Facility 2020
were issued on August 12, 2020 and are due on August 12, 2027. Interest on the notes issued under the Note Issuance Facility 2020 accrue at a rate per annum equal to the sum of 3-month EURIBOR plus a margin of 5.25% with a floor of 0% for the
EURIBOR. We have entered into a cap at 0% for the EURIBOR with 3.5 years maturity to hedge interest rate.
Our obligations under the Note Issuance Facility 2020 rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the Note Issuance Facility
2019 and the 2020 Green Private Placement. The notes issued under the Note Issuance Facility 2020 are guaranteed on a senior unsecured basis by our subsidiaries Atlantica Infrastructures, S.L.U., ABY Concessions Peru S.A., ACT Holding, S.A. de C.V.,
ASHUSA Inc., ASUSHI Inc. and Atlantica Investments Limited.
The Note Issuance Facility 2020 contains covenants that, will limit certain of our and the guarantors’ activities. These negative covenants include, among others, limitations on:
(i) creation of liens, (ii) sales, transfers and other dispositions of property and assets, (iii) mergers, consolidations and other fundamental changes, (iv) providing new guarantees, and (v) transactions with affiliates. Additionally, we are
required to comply with a leverage ratio of our indebtedness to our cash available for distribution of 5.00:1.00 (which may be increased under certain conditions to 5.50:1.00 for a limited period in the event we consummate certain acquisitions).
The Note Issuance Facility 2020 also contains customary events of default (subject in certain cases to customary grace and cure periods). Generally, if an event of default occurs
and is not cured within the time periods specified, the agent or the holders of more than 50% of the principal amount of the notes then outstanding may declare all of the notes issued under the Note Issuance Facility 2020 to be due and payable
immediately. In addition, the Note Issuance Facility 2020 includes a cross default with respect to our indebtedness, indebtedness of the guarantors thereunder and indebtedness of our material non-recourse subsidiaries (project-subsidiaries). Pursuant
to the Note Issuance Facility 2020, material non-recourse subsidiaries are those that, as of any date of termination, represent more than 25% of the cash available for distribution distributed in the previous four fiscal quarters most recently ended
prior to such date of determination.
2020 Green Private Placement
On March 20, 2020 we entered into a senior secured note purchase agreement with a group of institutional investors as purchasers providing for the 2020 Green Private Placement. The
transaction closed on April 1, 2020 and we issued notes for a total principal amount of €290 million (approximately $340 million), maturing in June 20, 2026. Interest on the notes issued under the 2020 Green Private Placement accrue at a rate per
annum equal to 1.96%. 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.
Our obligations under the 2020 Green Private Placement rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the Note Issuance Facility
2019 and the Note Issuance Facility 2020. Our payment obligations under the 2020 Green Private Placement are guaranteed on a senior unsecured basis by our subsidiaries Atlantica Infrastructures, S.L.U., ABY Concessions Peru S.A., ACT Holding, S.A. de
C.V., ASHUSA Inc., ASUSHI Inc. and Atlantica Investments Limited. The 2020 Green Private Placement is also secured with a pledge over the shares of the subsidiary guarantors, which collateral is shared with the lenders under the Revolving Credit
Facility.
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 were
primarily used to repay in full and cancel all series of notes issued under the Note Issuance Facility 2017.
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 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% (see “Item 4.B Business Overview —Regulation—Regulation in Spain.” in our Annual Report). 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. We elected to capitalize interest on the notes issued
under the Note Issuance Facility 2019 for the upcoming quarters.
Our obligations under the Note Issuance Facility 2019 rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the Note Issuance Facility
2020 and the 2020 Green Private Placement. The notes issued under the Note Issuance Facility 2019 are guaranteed on a senior unsecured basis by our subsidiaries Atlantica Infrastructures, S.L.U., ABY Concessions Peru S.A., ACT Holding, S.A. de C.V.,
ASHUSA Inc., ASUSHI Inc. and Atlantica Investments Limited.
The proceeds of the notes issued under the Note Issuance Facility 2019 were used to prepay and subsequently cancel in full the 2019 Notes and for general corporate purposes.
Revolving Credit Facility
On May 10, 2018, we entered into a $215 million Revolving Credit Facility with a syndicate of banks with Royal Bank of Canada acting 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 to December 31, 2022, with the remaining $37.5 million maturing on December 31, 2021. On August 28, 2020, National Bank of Canada replaced Barclays
Bank as a lender under the Revolving Credit Facility assuming Barclays Bank’s loans under the same terms and conditions except maturity, which was extended to December 31, 2022. As a result the total limit of $425 million matures on December 31,
2022. As of September 30, 2020, there was no amount outstanding under the Revolving Credit Facility and $425 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.
Our obligations under the Revolving Credit Facility rank equal in right of payment with our outstanding obligations under the 2020 Green Private Placement, the Note Issuance Facility
2019 and the Note Issuance Facility 2020. Our payment obligations under the Revolving Credit Facility are guaranteed on a senior unsecured basis by our subsidiaries Atlantica Infrastructures, S.L.U., ABY Concessions Peru S.A., ACT Holding, S.A. de
C.V., ASHUSA Inc., ASUSHI Inc. and Atlantica Investments Limited. The Revolving Credit Facility is also secured with a pledge over the shares of the subsidiary guarantors, which collateral is shared with the holders of the notes issued under the
2020 Green Private Placement.
Note Issuance Facility 2017
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 $322 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. As of April 1, 2020, all series of notes issued under the Note Issuance Facility 2017 were repaid in full and canceled with the proceeds of the 2020 Green Private
Placement.
Other Credit Lines
In July 2017, we signed a line of credit with a bank for up to €10.0 million (approximately $11.7 million) which is available in euros or U.S. dollars. On December 13, 2019, the
maturity date was extended to December 13, 2021. Amounts drawn accrue interest at a rate per annum equal to EURIBOR plus 2% or LIBOR plus 2%, depending on the currency. As of September 30, 2020, €9.0 million (approximately $10.5 million) were drawn
under this facility.
ESG-linked Financial Guarantee Line
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 using this guarantee line
to progressively release restricted cash in some of our projects, providing additional financial flexibility.
Commercial Paper Program
On October 8, 2019, we filed a euro commercial paper program with the Alternative Fixed Income Market (MARF) in Spain. The program had an original maturity of twelve
months and was extended for another twelve-month period on October 8, 2020. The program allows Atlantica to issue short term notes for up to €50 million, with such notes
having a tenor of up to two years. As of September 30, 2020, we had €19.5 million (approximately $22.9 million) issued and outstanding under the Commercial Paper Program at an average cost of 0.83%.
Project debt refinancing
In addition to our corporate debt, we have closed three project debt financings or refinancings at the project level which represent additional sources of liquidity.
Green Project Finance
On April 8, 2020, Logrosan entered into the Green Project Finance with ING Bank, B.V. and Banco Santander S.A. The new facility has a notional of €140 million of which 25% is
progressively amortized over its 5-year term and the remaining 75% is expected to be refinanced at maturity. After considering transaction costs and reserves, the Green Project Finance has resulted in a net recap of approximately $143 million that we
used to finance new investments in renewable assets. The Green Project Finance is guaranteed by the shares of Logrosan and its lenders have no recourse to Atlantica corporate level. Interest accrue at a rate per annum equal to the sum of 6-month
EURIBOR plus a margin of 3.25% and we have hedged the EURIBOR with a 0% cap for the total amount and the entire life of the loan. The Green Project Finance permits cash distribution to shareholders twice per year if Logrosan sub-holding company debt
service coverage ratio is at least 1.60x and the debt service coverage ratio of the sub-consolidated group of Logrosan and the Solaben 1/6 and Solaben 2/3 assets is at least 1.20x. The Green Project Finance was issued in compliance with the 2018
Green Loan Principles and have an unqualified Second Party Opinion delivered by Sustainalytics.
Helioenergy 1 / 2
On July 10, 2020, we entered into a non-recourse project debt refinancing of Helioenergy by adding a new euro-denominated long dated tranche of debt from an institutional investor.
This new tranche, which is additional to the existing project debt, accrues interest at a fixed interest rate of 3.00% per annum and is due on June 30, 2035. After transaction costs, net refinancing proceeds (net “recap”) were approximately $43
million.
Helios 1/ 2
On July 14, 2020, we entered into a senior secured note facility with a group of institutional investors as purchasers of the notes issued thereunder for a total amount of €325.6
million ($381.6 million approximately). The notes were issued on July 23, 2020 and have a 17-year maturity. Interest on the notes accrue at a fixed rate per annum equal to 1.90%. Debt repayment is semiannual over the 17-year tenor of the debt.
The proceeds of the new Helios project financing were used to fully prepay and cancel the previous bank mini-perm project debt with approximately €250 million outstanding and to
cancel legacy interest rate swaps. After transaction costs and cancelation of legacy swaps, net refinancing proceeds (net “recap”) were approximately $30 million.
The refinancing has permitted an improvement in both cost and tenor. Interest has decreased from approximately 4.2% with spread step-ups to 1.90% and maturity has been extended from
2027 to 2037.
See “Item 5.B –Liquidity and Capital Resources – Financing Arrangements” in our Annual Report for further detail on our financing
arrangements.
Cash dividends to investors
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, our board of directors approved a dividend of $0.37 per share. The dividend was paid on March 22, 2019, to shareholders of record as of March 12, 2019.
|
•
|
On May 7, 2019, our board of directors approved a dividend of $0.39 per share. The dividend was paid on June 14, 2019, to shareholders of record as of June 3, 2019.
|
•
|
On August 2, 2019 our board of directors approved a dividend of $0.40 per share. The dividend was paid on September 13, 2019 to shareholders of record as of August 30, 2019.
|
•
|
On November 5, 2019 our board of directors approved a dividend of $0.41 per share. The dividend was paid on December 13, 2019 to shareholders of record as of November 29, 2019.
|
•
|
On February 26, 2020, our board of directors approved a dividend of $0.41 per share. The dividend was paid on March 23, 2020, to shareholders of record as of March 12, 2020.
|
•
|
On May 6, 2020, our board of directors approved a dividend of $0.41 per share. The dividend was paid on June 15, 2020, to shareholders of record as of June 1, 2020.
|
•
|
On July 31, 2020, our board of directors approved a dividend of $0.42 per share. The dividend was paid on September 15, 2020, to shareholders of record as of August 31, 2020.
|
•
|
On November 4, 2020, our board of directors approved a dividend of $0.42 per share. The dividend is expected to be paid on December 15, 2020, to shareholders of record as of November 30, 2020.
|
Acquisitions
In January 2019, we entered into an agreement with Abengoa under the Abengoa ROFO Agreement for the acquisition of Tenes and paid $19.9 million as an advance payment. Closing of the
acquisition was subject to conditions precedent which were not fulfilled. In accordance with the terms of the share purchase agreement, the advance payment was 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 to be received from the asset. In October 2019, the Company received a first payment of $7.8 million through the cash sweep mechanism. On May 31, 2020, we entered into a new $4.5 million
secured loan agreement with Befesa Agua Tenes. The Loan is expected to be reimbursed no later than May 31, 2032, together with 12% interest per annum, through a full cash-sweep of all the dividends to be received from the asset.
Additionally, 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.
On May 31, 2019, we entered into an agreement with Abengoa to acquire a 15% stake in Rioglass, a multinational manufacturer of solar components. The investment was $7 million, and it
is classified as available for sale.
On August 2, 2019 we acquired a 30% stake in Monterrey, a 142 MW gas-fired engine facility including 130 MW installed capacity and 12 MW battery capacity. We paid $42 million for the
total equity investment. We have also entered into a ROFO agreement with the seller of the shares for the remaining 70% stake in the asset.
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.
In October 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 before December 2020, the transaction would be reversed with no penalties to Atlantica.
In April 2020 we made an investment in the creation of a renewable energy platform in Chile, together with financial partners, where we now own approximately a 35% stake and have a
strategic investor role. The first investment was the acquisition of a 55 MW solar PV plant in an area with excellent solar resource (Chile PV I). This asset, has been in operation since 2016, demonstrating a good operating track record during that
period while selling its production in the Chilean power market. We have concluded that we have control over the asset and we are fully consolidating it since the acquisition date. The platform intends to make further investments in renewable energy
in Chile and sign PPAs with credit worthy offtakers. Our initial contribution was approximately $4 million.
On August 17, 2020 we closed the acquisition of the Liberty Ownership Interest in Solana. Liberty was the tax equity investor in our Solana asset. Total equity investment is expected to be
approximately $290 million, of which $272 million have already been paid. Total equity investment includes a deferred payment and a performance earn-out based on the average annual net production of the asset in the four calendar years with the
highest annual net production during the five calendar years of 2020 through 2024.
Cash flow
The following table sets forth cash flow data for the nine-month period ended September 30, 2020 and 2019:
|
|
Nine-month period ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
($ in millions)
|
|
Gross cash flows from operating activities
|
|
|
|
|
|
|
Profit for the period
|
|
$
|
58.2
|
|
|
$
|
68.4
|
|
Financial expense and non-monetary adjustments
|
|
|
536.5
|
|
|
|
552.8
|
|
Profit for the period adjusted by financial expense and non-monetary adjustments
|
|
$
|
594.7
|
|
|
$
|
621.2
|
|
Variations in working capital
|
|
|
(128.9
|
)
|
|
|
(132.1
|
)
|
Net interest and income tax paid
|
|
|
(162.6
|
)
|
|
$
|
(167.7
|
)
|
|
|
|
|
|
|
|
|
|
Total net cash provided by operating activities
|
|
$
|
303.2
|
|
|
$
|
321.4
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) investing activities(1)
|
|
$
|
18.6
|
|
|
$
|
(147.5
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) financing activities
|
|
$
|
(95.8
|
)
|
|
$
|
(148.5
|
)
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
226.0
|
|
|
|
25.4
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
562.8
|
|
|
|
631.5
|
|
Translation differences in cash or cash equivalents
|
|
|
0.1
|
|
|
|
(15.2
|
)
|
Cash and cash equivalents at the end of the period
|
|
$
|
788.9
|
|
|
$
|
641.7
|
|
Note:
(1)
|
Includes proceeds for $7.4 million and $14.8 million for the nine-month period ended September 30, 2020 and September 30, 2019 respectively, related to the amounts received from Abengoa by Solana further to
Abengoa’s obligation as EPC Contractor.
|
Net cash flows provided by/(used in) operating activities
Net cash provided by operating activities in the nine-month period ended September 30, 2020 was $303.2 million, compared to $321.4 million in the nine-month period ended September 30,
2019. The decrease was mainly due to a lower profit for the period adjusted by finance expense and non-monetary adjustments, mainly caused by lower Adjusted EBITDA as we explain in “Segment reporting”. In addition, variation in working capital was
negative, although lower than in the same period of the previous year, mainly due to lower revenue in the nine-month period ended September 30, 2020 in Spain. In addition, interest payment was lower in the nine-month period ended September 30, 2020
compared to the nine-month period ended September 30, 2019 mainly due to lower interest at the corporate level and to the interest capitalization in one of our corporate debt financings.
Net cash provided by/(used in) investing activities
For the nine-month period ended September 30, 2020, net cash provided by investing activities was $18.6 and included $20.1 million of dividends received from associates under equity
method, of which $14.3 million corresponds to dividends received from AYES Canada and should be considered together with the $13.8 million paid to non-controlling interest and classified as in Net cash provided by financing activities. Net cash
provided by investing activities also included $11.1 million from the acquisition of Tenes, since the cash consolidated from the acquisition date is higher than the payment made under the agreement signed in May 2020.
Net cash used in investing activities for the nine-month period ended September 30, 2019 was $147.5 million and corresponded mainly to the investment in Amherst Island. Atlantica and
Algonquin formed AYES Canada, a vehicle to channel co-investment opportunities and the first investment was in Amherst Island, a 75 MW wind plant in Canada. Atlantica invested $4.9 million and Algonquin invested $92.3 million, both through AYES
Canada. Since Atlantica controls AYES Canada under IFRS 10, we show in Net cash used in investing activities the total $97.2 million invested by AYES Canada in the project company and in Net cash provided by financing activities the $92.3 million
received from Algonquin by AYES Canada. In addition, net cash used in investing activities included $42 million payment for the acquisition of Monterrey and $19.9 million payment for Tenes, which became a financial investment after the conditions
precedent were not fulfilled.
Net cash provided by/(used in) financing activities
For the nine-month period ended September 30, 2020, net cash used in financing activities was $95.8 million and corresponded mainly to the proceeds from the 2020 Green Private
Placement, the Note Issuance Facility 2020, the Green Project Finance, the Green Exchangeable Notes and the project debt refinancings of Helios and Helioenergy, for a total amount of $832.6 million and to the withdrawal of approximately $90.0 million
under the Revolving Credit Facility in the first quarter of 2020. Net cash used in financing activities also includes $266.9 million paid for the acquisition of the Liberty Ownership Interest Solana. These cash inflows were partially offset by the
repayment of $308.8 million of the Note Issuance Facility 2017, the repayment of $174.0 million of our Revolving Credit Facility in the third quarter, the scheduled repayment of principal of our project financing agreements for an approximate amount
of $130.5 million and $146.9 million of dividends paid to shareholders and non-controlling interest.
Net cash used in financing activities for the nine-month period ended September 30, 2019 was $148.5 million and corresponded principally to $456.0 million of principal debt
repayments, of which $259.7 million corresponded to the prepayment of the 2019 Notes, $146.3 million of project debt repayments and $50 million of revolving credit facility repayment. We also received $293.1 million net proceeds under the 2019 Note
Issuance Facility, net of fees, we drew $32.6 million net of fees under our Revolving Credit Facility and we paid $141.4 million of dividends to shareholders. As explained above, we also include $92.3 million corresponding to Algonquin’s
participation in Amherst.
The liquidity and capital resources discussion above contains certain estimates as of the date of this quarterly report of our sources and uses of liquidity (including
estimated future capital resources and capital expenditures) and future financial and operating results. These estimates, while presented with numerical specificity, necessarily reflect numerous estimates and assumptions made by us with
respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to our businesses, all of which are difficult or impossible to predict and many of
which are beyond our control. These estimates reflect subjective judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business, economic, regulatory, financial
and other developments. As such, these estimates constitute forward-looking information and are subject to risks and uncertainties that could cause our actual sources and uses of liquidity (including estimated future capital resources and
capital expenditures) and financial and operating results to differ materially from the estimates made here, including, but not limited to, our performance, industry performance, general business and economic conditions, customer
requirements, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in this quarterly report and our Annual Report. See “Cautionary Statements Regarding Forward Looking Statements.”
In addition, these estimates reflect assumptions of our management as of the time that they were prepared as to certain business decisions that were and are subject to
change. These estimates also may be affected by our ability to achieve strategic goals, objectives and targets over the applicable periods. The estimates cannot, therefore, be considered a guarantee of future sources and uses of liquidity
(including estimated future capital resources and capital expenditures) and future financial and operating results, and the information should not be relied on as such. None of us, or our board of directors, advisors, officers, directors or
representatives intends to, and each of them disclaims any obligation to, update, revise, or correct these estimates, except as otherwise required by law, including if the estimates are or become inaccurate (even in the short-term).
The inclusion of these estimates in this quarterly report should not be deemed an admission or representation by us or our board of directors that such information is
viewed by us or our board of directors as material information of ours. Such information should be evaluated, if at all, in conjunction with the historical financial statements and other information about us contained in this quarterly
report. None of us, or our board of directors, advisors, officers, directors or representatives has made or makes any representation to any prospective investor or other person regarding our ultimate performance compared to the information
contained in these estimates or that forecasted results will be achieved. In light of the foregoing factors and the uncertainties inherent in the information provided above, investors are cautioned not to place undue reliance on these
estimates. Our liquidity plans are subject to a number of risks and uncertainties, some of which are outside of our control. Macroeconomic conditions could limit our ability to successfully execute our business plans and, therefore, adversely
affect our liquidity plans. See “Item 3.D—Risk Factors” in our Annual Report.
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Quantitative and Qualitative Disclosure about Market Risk
Our activities are undertaken through our segments and are exposed to market risk, credit risk and liquidity risk. Risk is managed by our Risk Management and Finance Departments in
accordance with mandatory internal management rules. The internal management rules provide written policies for the management of overall risk, as well as for specific areas, such as exchange rate risk, interest rate risk, credit risk, liquidity
risk, use of hedging instruments and derivatives and the investment of excess cash.
Market risk
We are exposed to market risk, such as movement in foreign exchange rates and interest rates. All of these market risks arise in the normal course of business and we do not carry out
speculative operations. For the purpose of managing these risks, we use a series of swaps and options on interest rates and foreign exchange rates. None of the derivative contracts signed has an unlimited loss exposure.
Foreign exchange risk
The main cash flows from our subsidiaries are cash collections arising generally from long-term contracts with clients and regulated revenue and debt payments arising from project
finance repayment. Given that financing of the projects is always denominated in the same currency in which the contract with the client is signed, a natural hedge exists for our main operations.
Our functional currency is the U.S. dollar, as most of our revenue and expenses are denominated or linked to U.S. dollars. All our companies located in North America, South America
and Algeria have their revenue, and financing contracts signed in, or indexed totally or partially to, U.S. dollars. Our solar power plants in Spain have their revenue and expenses denominated in euros, and Kaxu, our solar plant in South Africa, has
its revenue 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 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.
Interest rate risk
Interest rate risks arise mainly from our financial liabilities at variable interest rate (less than 10% of our total project debt financing). We use interest rate swaps and interest
rate options (caps) to mitigate interest rate risk.
As a result, the notional amounts hedged as of September 30, 2020, contracted strikes and maturities, depending on the characteristics of the debt on which the interest rate risk is
being hedged, are very diverse, including the following:
•
|
Project debt in euro: between 81% and 100% of the notional amount, maturities until 2030 and average guaranteed strike interest rates of between 0.00% and 4.87% and
|
•
|
Project debt in U.S. dollars: between 70% and 100% of the notional amount, maturities until 2034 and average guaranteed strike interest rates of between 1.98% and 5.27%.
|
In connection with our interest rate derivative positions, the most significant impact on our Annual Consolidated Financial Statements are derived from the changes in EURIBOR or
LIBOR, which represents the reference interest rate for the majority of our debt.
In relation to our interest rate swaps positions, an increase in EURIBOR or LIBOR above the contracted fixed interest rate would create an increase in our financial expense which
would be positively mitigated by our hedges, reducing our financial expense to our contracted fixed interest rate. However, an increase in EURIBOR or LIBOR that does not exceed the contracted fixed interest rate would not be offset by our derivative
position and would result in a net financial loss recognized in our consolidated income statement. Conversely, a decrease in EURIBOR or LIBOR below the contracted fixed interest rate would result in lower interest expense on our variable rate debt,
which would be offset by a negative impact from the mark-to-market of our hedges, increasing our financial expense up to our contracted fixed interest rate, thus likely resulting in a neutral effect.
In relation to our interest rate options positions, an increase in EURIBOR or LIBOR above the strike price would result in higher interest expenses, which would be positively
mitigated by our hedges, reducing our financial expense to our capped interest rate, whereas a decrease of EURIBOR or LIBOR below the strike price would result in lower interest expenses.
In addition to the above, 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.
In the event that EURIBOR and LIBOR had risen by 25 basis points as of September 30, 2020, with the rest of the variables remaining constant, the effect in the consolidated income
statement would have been an annual loss of $2.9 million and an annual increase in hedging reserves of $23.2 million. The increase in hedging reserves would be mainly due to an increase in the fair value of interest rate swaps designated as hedges.
Credit risk
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. PG&E had paid all invoices corresponding to the electricity delivered after January 28, 2019. 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. On July 1, 2020, PG&E emerged from Chapter 11. In addition, PG&E paid to Mojave the portion of the invoice corresponding to the
electricity delivered for the period between January 1 and January 28, 2019. This invoice was overdue because the services relate to the prepetition period and any payment therefore required the approval by the Bankruptcy Court. The technical event
of default under our Mojave project finance agreement, which was preventing cash distributions from Mojave to Atlantica, has been cured and we can make distributions from Mojave.
In addition, Eskom’s credit rating has continued to weaken and is currently CCC+ from S&P, B3 from Moody’s and B+ from Fitch. Eskom is the off-taker 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/Ba1/BB by S&P, Moody’s and Fitch, respectively.
Furthermore, the credit rating of Pemex has also weakened and is currently BBB from S&P, Ba2 from Moody’s and BB- from Fitch. We have been experiencing significant delays in
collections from the second half of 2019. See “Item 3.D— Risk Factor— Counterparties to our off-take agreements may not fulfill their obligations and, as our contracts expire, we may not be able to replace them with
agreements on similar terms in light of increasing competition in the markets in which we operate” in our Annual Report.
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 $89.9 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.
COVID-19 and measures taken by governments caused a significant disruption and volatility in the global financial markets. Debt and equity markets have been affected and the number of
transactions in the primary market decreased in March and the beginning of April 2020. In addition, interest rates for new issuances and spreads with respect to treasury yields increased significantly in March, April and the beginning of May 2020.
Debt markets could experience similar disruptions in the upcoming months since COVID-19 continues to have an impact on markets. Although no significant debt matures prior to 2025, if we had to access capital markets for financing we may find
difficulties in issuing new debt or equity. See “Part II—Item 1A—Risk Factors—The outbreak of COVID-19 could have a material adverse impact on our business, financial condition, liquidity, results of operations,
cash flows, cash available for distribution and ability to make cash distributions to its shareholders”.
PART II. OTHER INFORMATION
A number of Abengoa’s subcontractors and insurance companies that issued bonds covering Abengoa’s obligations under such contracts in the U.S. have included some of the non-recourse
subsidiaries of Atlantica in the U.S. as co-defendants in claims against Abengoa. Generally, the subsidiaries of Atlantica have been dismissed as defendants at early stages of the processes. With respect to a claim addressed by a group of insurance
companies to a number of Abengoa’s subsidiaries and to Solana (Arizona Solar One) for Abengoa related losses of approximately $20 million that could increase, according to the insurance companies, up to a maximum of approximately $200 million if all
their exposure resulted in losses. Atlantica reached an agreement with all but one of the above-mentioned insurance companies, under which they agreed to dismiss their claims in exchange for payments of approximately $4.3 million, which were paid in
2018. The insurance company that did not join the agreement has temporarily stopped legal actions against Atlantica, and Atlantica does not expect this particular claim to have a material adverse effect on its business.
In addition, an insurance company covering certain Abengoa obligations in Mexico has claimed certain amounts related to a potential loss. Atlantica has reached an agreement under
which Atlantica´s maximum theoretical exposure would in any case be limited to approximately $35 million, including $2.5 million to be held in an escrow account. In January 2019, the insurance company executed $2.5 million from the escrow account and
Abengoa reimbursed such amount according to the existing indemnities in force between Atlantica and Abengoa. The payments by Atlantica would only happen if and when the actual loss has been confirmed, if Abengoa has not fulfilled its obligations and
after arbitration, if the Company initiates it. This claim is covered by existing indemnities from Abengoa. Considering the current financial situation of Abengoa, we cannot guarantee that these indemnities will be maintained in the future. If the
agreement signed with Abengoa on September 29, 2020 became effective, Abengoa would be released from certain of its obligations with Atlantica.
Atlantica is not a party to any other significant legal proceedings other than legal proceedings arising in the ordinary course of its business. Atlantica is party to various
administrative and regulatory proceedings that have arisen in the ordinary course of business. While Atlantica does not expect these proceedings, either individually or in the aggregate, to have a material adverse effect on its financial position or
results of operations, because of the nature of these proceedings Atlantica is not able to predict their ultimate outcomes, some of which may be unfavorable to Atlantica.
The outbreak of COVID-19 could have a material adverse impact on our business, financial condition, liquidity, results of operations, cash flows, cash available
for distribution and ability to make cash distributions to its shareholders.
The COVID-19 outbreak was declared a pandemic by the World Health Organization in March 2020 and continues to spread in our key markets. The COVID-19 virus continues to evolve
rapidly, and its ultimate impact is uncertain and subject to change. Certain geographies where Atlantica is present are going through subsequent waves of virus incidence and are experiencing a significant increase in the number of cases per 100,000
people. Governmental authorities have imposed or recommended measures or responsive actions, including quarantines of certain geographic areas and travel restrictions.
We cannot guarantee that the COVID-19 outbreak will not affect our operation and maintenance employees. Our operation and maintenance suppliers may also be affected by COVID-19 and
the broader economic downturn. In addition, we may experience delays in certain operation and maintenance activities or certain activities may take longer than usual, or, under a worst case scenario, a potential outbreak in one of our assets may
prevent our employees or our operation and maintenance suppliers’ employees from operating the plant. All these can hamper or prevent the operation and maintenance of our assets, which may result in a material adverse effect on our business,
financial condition, results of operations and cash flows. Furthermore, COVID-19 has caused travel restrictions and significant disruptions to global supply chains. A prolonged disruption could limit the availability of certain parts required to
operate our facilities and adversely impact the ability of our operation and maintenance suppliers. If we were to experience a shortage of or inability to acquire critical spare parts we could incur significant delays in returning facilities to full
operation, which could negatively impact our business, financial condition, results of operations and cash flows.
Further, we have adopted additional precautionary measures intended to mitigate potential risks to our employees, including temporarily requiring all employees to work remotely where
their work can be done from home, and suspending all non-essential travel which could negatively affect our business. In May 2020, we started to re-open certain offices at partial capacity and under strict safety measures. However, we have recently
decided to close certain offices again based on health indicators in each region. We continue to monitor the situation closely in all assets and offices to take additional action if required.
In addition, COVID-19 and measures taken by governments are causing a slowdown of broad sectors of the economy, a general reduction in demand, including demand for commodities and a
negative impact on prices of commodities, including electricity, oil and gas. In Spain, revenue received by our assets under the existing regulation depend to some extent on market prices for sale of electricity. During the first half of 2020,
electricity market prices have been lower than in the same quarter of previous years. If this decline in market prices persisted over time, it could have a material adverse effect on our business, financial condition, results of operations and cash
flows and the value of our renewable energy facilities may be impaired, or their useful life may be shortened.
The global outbreak also caused significant disruption and volatility in the global financial markets, including the market price of our shares, especially in March and April. Debt
markets have also been affected and there have been weeks with a very low number of new debt issuance transactions. Interest rates for new issuances and spreads with respect to treasury yields increased significantly in March until the beginning of
May. Debt and equity markets could continue experiencing similar disruptions in the upcoming months since COVID-19 continues to have an impact on markets. A prolonged period of illiquidity and disruptions in the equity and credit markets could limit
our ability to refinance our debt maturities and to finance our potential acquisitions and execute on our growth strategy. Any prolonged and uncontained outbreak could result in further disruptions in the general economy and illiquidity in the credit
markets. In addition, the progression of and global response to the COVID-19 outbreak could increase the risk of delays in such plans or in obtaining the financing required to close the acquisitions that we have announced.
Although our revenue is generally contracted or regulated, our clients may be affected by a reduced demand, lower commodity prices and the turmoil in the credit markets. A reduced
demand and low prices persisting over time could cause delays in collections, a deterioration in the financial situation of our clients or their bankruptcy. For example, the credit rating of Pemex has weakened and is currently BBB from S&P, Ba2
from Moody’s and BB- from Fitch and its financial situation could worsen considering low oil prices in the last months. We have been experiencing significant delays in collections in ACT since the second half of 2019 and we continue to monitor the
situation closely. Our clients, including utilities, may face reduced revenue and may experience delays in collections from their own clients, as well as bad debt costs. Delays in collections from our clients can cause delays in distributions from
our assets, which can cause a negative impact on our cash available for distributions and on our business, financial condition, results of operations, and cash flows. If our off-takers are unable or unwilling to fulfill their related contractual
obligations, if they refuse to accept delivery of power delivered thereunder, if they otherwise terminate such agreements prior to the expiration thereof, if prices were re-negotiated under a bankruptcy situation, or if they delay payments, then our
business, financial condition, results of operations and cash flows may be materially adversely affected.
We could also experience commercial disputes with our clients, suppliers and partners related to implications of COVID-19 in contractual relations. All the risks referred to can cause
delays in distributions from our assets to the holding company level. In addition, we may experience delays in distributions due to logistic and bureaucratic difficulties to approve those distributions, which can negatively affect our cash available
for distributions, our business, financial condition and cash flows. If we were to experience delays in distributions due to the risks described above and this situation persisted over time, we may fail to comply with financial covenants in our
credit facilities and other financing agreements.
Additionally, many governments have implemented and will continue to implement stimulus measures to reduce the negative impact of COVID-19 in the economy. In many cases, these
measures will increase government spending which may translate into increased tax pressure on companies in the countries where we operate. Changes in corporate tax rates and/or other relevant tax laws may have a material adverse effect on our
business, financial condition, results of operations and cash flows.
We do not yet know the full extent of the virus’ potential effects on our business or the global economy as a whole. We continue to monitor the situation and adjust our current
policies and practices as more information and guidance become available.
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Recent sales of unregistered securities
None.
Use of proceeds from the sale of registered securities
None.
Purchases of equity securities by the issuer and affiliated purchasers
None
Item 3
|
Defaults Upon Senior Securities
|
None.
Not applicable.
Not Applicable.
The following exhibits are filed as part of this quarterly report:
Exhibit
No.
|
|
Description
|
|
|
Fourth Amendment to Credit and Guaranty Agreement, dated August 28, 2020
|
|
|
Amendment No. 2 to Note Issuance Facility Agreement, dated October 23, 2020
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
ATLANTICA SUSTAINABLE INFRASTRUCTURE PLC
|
|
|
Date: November 6, 2020
|
By:
|
/s/ Santiago Seage
|
|
|
Name: Santiago Seage
|
|
|
Title: Chief Executive Officer
|