Details of balances with related parties as of June 30, 2018 and December 31, 2017 are as follows:
|
|
Balance as of
June 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
($ in thousands)
|
|
Credit receivables (current)
|
|
|
13,153
|
|
|
|
10,544
|
|
Total current receivables with related parties
|
|
|
13,153
|
|
|
|
10,544
|
|
|
|
|
|
|
|
|
|
|
Trade payables (current)
|
|
|
44,318
|
|
|
|
63,409
|
|
Total current payables with related parties
|
|
|
44,318
|
|
|
|
63,409
|
|
|
|
|
|
|
|
|
|
|
Credit payables (non-current)
|
|
|
80,300
|
|
|
|
141,031
|
|
Total non-current payables with related parties
|
|
|
80,300
|
|
|
|
141,031
|
|
Trade payables (current) primarily relate to payables for Operation and Maintenance services. Credit payables (non-current) primarily relate to project
companies’ payables with partners accounted for as non-controlling interests in these consolidated financial statements and payables for Operation and Maintenance services. The operation and maintenance services received in some of the Spanish
solar assets of the Company include a variable portion payable in the long term. On April 26, 2018, Atlantica Yield plc purchased from Abengoa the long-term operation and maintenance payable accrued for the period up to December 31, 2017, which was
recorded for an amount of $57.3 million at the date of repayment. The Company paid $18.3 million for this extinguishment of debt and accounted for the difference of $39.0 million with the carrying amount of the debt as an income in the profit and
loss statement.
The transactions carried out by entities included in these consolidated condensed financial statements with related parties not included in the
consolidation perimeter of Atlantica, primarily with Abengoa and with subsidiaries of Abengoa, during the six-month periods ended June 30, 2018 and 2017 have been as follows:
|
For the six-month period ended
June 30,
|
|
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Services rendered
|
|
|
-
|
|
|
|
2,625
|
|
Services received
|
|
|
(56,619
|
)
|
|
|
(51,086
|
)
|
Financial income
|
|
|
1,819
|
|
|
|
25
|
|
Financial expenses
|
|
|
(690
|
)
|
|
|
(598
|
)
|
Services received primarily include operation and maintenance services received by some assets.
The figures detailed in the table above do not include the compensation received from Abengoa in lieu of dividends from ACBH for $10.4 million, recorded as
financial income in these consolidated condensed interim financial statements for the six-month period ended June 30, 2017.
In addition, Abengoa maintains a number of obligations under EPC, O&M and other contracts, as well as indemnities covering certain potential risks.
Additionally, Abengoa represented that further to the accession to the restructuring agreement, Atlantica Yield 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 June 30, 2018, related to the obligations of Abengoa referred above, which result and amounts will
depend on the occurrence of uncertain future events. In particular as of April 26, 2018 Abengoa agreed to pay Atlantica certain amounts subject to conditions which are beyond the control of the Company.
As explained in Note 1, the Company signed a consent in November 2017, which has then been amended during the following months, in relation to the Solana
and Mojave projects, which reduced the minimum ownership required by Abengoa in Atlantica Yield to 16%, subject to certain conditions precedent most of which were beyond the control of the Company, including several payments by Abengoa to Solana
before December 2017 and May 2018. These payments for a total of $120 million were related to Abengoa’s obligations as EPC contractor in Solana and were used to repay Solana project debt ($95 million) and for a reserve to cover required additional
repairs in the plant ($25 million). Additionally, Abengoa has recognized other obligations with Solana for $6.5 million per semester over 8.5 years starting in December 2018. Solana received $42.5 million in December 2017 and $77.5 million in March
2018. The $42.5 million collected in December 2017 and $52.5 million of the amount collected in March 2018 have been used to repay Solana project debt. The aforementioned amounts are based on the EPC Contract guarantee for liquidated damages
considering the average production during the first three years of ramp-up period of the plant which is a service-concession arrangement under IFRIC 12 (intangible asset). For the aforementioned amounts, the Company reduced the value of the
intangible asset since this amount was a variable consideration. In addition, the amortization of the plant is adjusted accordingly.
The Company entered into a Financial Support Agreement on June 13, 2014 under which Abengoa agreed to maintain any guarantees and letters of credit that
have been provided by it on behalf of or for the benefit of Atlantica Yield and its affiliates for a period of five years. As of June 30, 2018, the aforementioned guarantees amounted to $31 million. In the context of that agreement in July 2017,
Atlantica replaced guarantees amounting to $112 million previously issued by Abengoa, out of which $55 million were canceled in June 2018.
Note 12. - Clients and other receivable
Clients and other receivable as of June 30, 2018 and December 31, 2017, consist of the following:
|
Balance as of
June 30,
2018
|
|
|
Balance as of
December 31,
2017
|
|
|
($ in thousands)
|
|
Trade receivables
|
|
|
204,223
|
|
|
|
186,728
|
|
Tax receivables
|
|
|
29,685
|
|
|
|
39,607
|
|
Prepayments
|
|
|
12,927
|
|
|
|
6,375
|
|
Other accounts receivable
|
|
|
13,406
|
|
|
|
11,739
|
|
Total
|
|
|
260,241
|
|
|
|
244,449
|
|
As of June 30, 2018, and December 31, 2017, the fair value of clients and other receivable accounts does not differ significantly from its carrying value.
Note 13. - Equity
As of June 30, 2018, the share capital of the Company amounts to $10,021,726 represented by 100,217,260 ordinary shares completely subscribed and disbursed
with a nominal value of $0.10 each, all in the same class and series. Each share grants one voting right. Algonquin completed the acquisition from Abengoa of a 25% equity interest in Atlantica on March 9, 2018, becoming the largest shareholder of
the Company. Residual equity interest of Abengoa in Atlantica is 16.5%.
Atlantica reserves as of June 30, 2018 are made up of share premium account and distributable reserves.
Retained earnings include results attributable to Atlantica, the impact of the Asset Transfer in equity and the impact of the assets acquisition under the
ROFO agreement in equity. The Asset Transfer and the acquisitions under the ROFO agreement were recorded in accordance with the Predecessor accounting principle, given that all these transactions occurred before December 2015, when Abengoa still
had control over Atlantica.
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 Sadyt in Skikda and by Industrial Development Corporation of South Africa (IDC) and Kaxu Community Trust in Kaxu Solar One (Pty) Ltd.
On February 27, 2018, the Board of Directors declared a dividend of $0.31 per share corresponding to the fourth quarter of 2017. The dividend was paid on
March 27, 2018.
On May 11, 2018, the Board of Directors of the Company approved a dividend of $0.32 per share corresponding to the first quarter of 2018. The dividend was
paid on June 15, 2018.
In addition, as of June 30, 2018, there was no treasury stock and there have been no transactions with treasury stock during the period then ended.
Note 14. - Corporate debt
The breakdown of the corporate debt as of June 30, 2018 and December 31, 2017 is as follows:
|
|
Balance as of
June 30,
|
|
|
Balance as of
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
($ in thousands)
|
|
Non-current
|
|
|
624,163
|
|
|
|
574,176
|
|
Current
|
|
|
14,878
|
|
|
|
68,907
|
|
Total Corporate Debt
|
|
|
639,041
|
|
|
|
643,083
|
|
The repayment schedule for the corporate debt as of June 30, 2018 is as follows:
|
|
Remainder
of 2018
|
|
|
Between
January and
June 2019
|
|
|
Between
July and
December
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
Subsequent
years
|
|
|
Total
|
|
New Revolving Credit Facility
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57,586
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57,586
|
|
Note Issuance Facility
|
|
|
49
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
104,632
|
|
|
|
208,127
|
|
|
|
312,808
|
|
2017 Credit Facility
|
|
|
11,705
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,705
|
|
2019 Notes
|
|
|
3,124
|
|
|
|
-
|
|
|
|
253,818
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
256,942
|
|
Total
|
|
|
14,878
|
|
|
|
-
|
|
|
|
253,818
|
|
|
|
-
|
|
|
|
57,586
|
|
|
|
104,632
|
|
|
|
208,127
|
|
|
|
639,041
|
|
On November 17, 2014, the Company issued the Senior Notes due 2019 in an aggregate principal amount of $255,000 thousand (the “2019 Notes”). The 2019 Notes
accrue annual interest of 7.00% payable semi-annually beginning on May 15, 2015 until their maturity date of November 15, 2019.
On December 3, 2014, the Company entered into a credit facility of up to $125,000 thousand with Banco Santander, S.A., Bank of America, N.A., Citigroup
Global Markets Limited, HSBC Bank plc and RBC Capital Markets, as joint lead arrangers and joint bookrunners (the “Former Revolving Credit Facility” or ”Former RCF”). On December 22, 2014, the Company drew down $125,000 thousand under the Former
RCF. Loans accrued interest at a rate per annum equal to: (A) for Eurodollar rate loans, LIBOR plus 2.75% and (B) for base rate loans, the highest of (i) the rate per annum equal to the weighted average of the rates on overnight U.S. Federal funds
transactions with members of the U.S. Federal Reserve System arranged by U.S. Federal funds brokers on such day plus 1/2 of 1.00%, (ii) the U.S. prime rate and (iii) LIBOR plus 1.00%, in any case, plus 1.75%. $8,000 thousand of the loans under the
Former RCF were partially repaid on September 25, 2017 and for $63,000 thousand on December 27, 2017. The remaining $54,000 of nominal of the Former RCF has been entirely repaid on May 16, 2018 and the credit facility canceled.
On February 10, 2017, the Company issued Senior Notes due 2022, 2023, 2024 (the “Note Issuance Facility”), in an aggregate principal amount of €275,000
thousand. The 2022 to 2024 Notes accrue annual interest, equal to the sum of (i) EURIBOR plus (ii) 4.90%, as determined by the Agent. Interest on the Notes will be payable in cash quarterly in arrears on each interest payment date. The Company will
make each interest payment to the holders of record on each interest payment date. The interest rate on the Note Issuance Facility is fully hedged by two interest rate swaps contracted with Jefferies Financial Services, Inc. with effective date
March 31, 2017 and maturity date December 31, 2022, resulting in the Company paying a net fixed interest rate of 5.5% on the Note Issuance Facility. Changes in fair value of these interest rate swaps have been recorded in the consolidated income
statement. The Note Issuance Facility is a € denominated liability for which the Company applies net investment hedge accounting. When converted to US$ at US$/€ closing exchange rate, it contributes to reduce the impact in translation difference
reserves generated in the equity of these consolidated financial statements by the conversion of the net assets of the Spanish solar assets into US$.
On July 20, 2017, the Company signed a credit facility (the “Credit Facility 2017”) for up to €10 million, approximately $11.7 million, which is available
in euros or US dollars. Amounts drawn accrue interest at a rate per year equal to EURIBOR plus 2.25% or LIBOR plus 2.25%, depending on the currency. As of December 31, 2017, the Company drew down the credit facility in full and used the entire
proceeds to prepay a part of the Tranche A of the Credit Facility. The credit facility had an original maturity date of July 20, 2018 and therefore the amounts drawn down were classified as Current as of June 30, 2018. It has been renewed during
the month of July 2018 and the new maturity date is July 20, 2019.
On May 10, 2018, the Company entered into a $215 million revolving credit facility (the “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. The Company has the option to increase the amount of the Revolving Credit Facility by up to $85 million to $300 million, subject
to certain conditions being met. 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 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 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. The maturity of the Revolving Credit Facility is December 31, 2021. As of June 30, 2018, the Company had drawn down an amount of $58 million (net of debt issuance costs).
Current corporate debt corresponds mainly to the accrued interest on the Notes and to the amount of the 2017 Credit Facility.
Note 15. - Project debt
The main purpose of the Company is the long-term ownership and management of contracted concessional assets, such as renewable energy, efficient natural
gas, electric transmission line and water assets, which are financed through project debt. This note shows the project debt linked to the contracted concessional assets included in Note 6 of these consolidated condensed interim financial
statements.
Project debt is generally used to finance contracted assets, exclusively using as guarantee the assets and cash flows of the company or group of companies
carrying out the activities financed. In most of the cases, the assets and/or contracts are set up as guarantee to ensure the repayment of the related financing.
Compared with corporate debt, project debt has certain key advantages, including a greater leverage and a clearly defined risk profile.
The detail of Project debt of both non-current and current liabilities as of June 30, 2018 and December 31, 2017 is as follows:
|
Balance as of
June 30,
|
|
|
Balance as of
December 31,
|
|
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Non-current
|
|
|
4,956,811
|
|
|
|
5,228,917
|
|
Current
|
|
|
262,009
|
|
|
|
246,291
|
|
Total Project debt
|
|
|
5,218,820
|
|
|
|
5,475,208
|
|
The decrease in total project debt is primarily due to contractual payments of debt for the period, the partial repayment of Solana debt using the
indemnity received from Abengoa in March 2018 for $52.5 million (see Note 11), the lower value of debts denominated in foreign currencies since their exchange rate has decreased against the U.S. dollars since December 31, 2017 and to the impact of
the application of IFRS 9, ´Financial instruments´ from January 1, 2018 (see Note 2).
Additionally, during the second quarter of 2018, the Company refinanced debts of Helios 1/2 and Helioenergy 1/2 on May 18, 2018 and June 26, 2018
respectively. The terms of the new debts are not substantially different from the original debts refinanced and therefore the exchange of debts instruments does not qualify for an extinguishment of the original debts under IFRS 9, ´Financial
instruments´. When there is a refinancing with a non-substantial modification of the original debt, there is a gain or loss recorded in the income statement. This gain or loss is equal to the difference between the present value of the cash flows
under the original terms of the former financing and the present value of the cash flows under the new financing, discounted both at the original effective interest rate. In this respect, the Company recorded a $36.6 million financial income in the
profit and loss statement of the consolidated condensed financial statements (see Note 19).
The repayment schedule for Project debt in accordance with the financing arrangements, as of June 30, 2018 is as follows and is consistent with the
projected cash flows of the related projects:
Remainder of 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of
interests
accrued as of
June 30, 2018
|
|
Nominal
repayment
|
|
Between
January and
June 2019
|
|
Between
July and
December 2019
|
|
2020
|
|
2021
|
|
2022
|
|
Subsequent
Years
|
|
Total
|
|
($ in thousands)
|
|
|
21,010
|
|
|
|
140,526
|
|
|
|
100,473
|
|
|
|
147,033
|
|
|
|
259,552
|
|
|
|
271,441
|
|
|
|
301,052
|
|
|
|
3,977,633
|
|
|
|
5,218,820
|
|
Note 16. - Grants and other liabilities
|
Balance as of
June 30,
|
|
|
Balance as of
December 31,
|
|
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Grants
|
|
|
1,182,650
|
|
|
|
1,225,877
|
|
Other Liabilities
|
|
|
479,729
|
|
|
|
410,183
|
|
Grant and other non-current liabilities
|
|
|
1,662,379
|
|
|
|
1,636,060
|
|
As of June 30, 2018, 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 $755 million ($771 million as of December 31, 2017), 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 $426
million ($452 million as of December 31, 2017). 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 $29.6 million and $29.8 million for the six-month periods ended June 30, 2018 and 2017, respectively.
Other liabilities mainly relate to the investment from Liberty Interactive Corporation (‘Liberty’) made on October 2, 2013 for an amount of $300 million.
The investment was made in class A shares of Arizona Solar Holding, the holding of Solana Solar plant in the United States. Such investment was made in a tax equity partnership which permits the partners to have certain tax benefits such as
accelerated depreciation and ITC. The investment is recorded as a liability for a total amount of $363 million as of June 30, 2018 ($352 million as of December 31, 2017). Additionally, other liabilities include $57 million of finance lease
liabilities, further to the application of IFRS 16, Leases from January 1, 2018 (see Note 2).
Note 17. - Trade payables and other current liabilities
Trade payable and other current liabilities as of June 30, 2018 and December 31, 2017 are as follows:
|
Balance as
June 30,
|
|
|
Balance as
December 31,
|
|
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Trade accounts payable
|
|
|
97,970
|
|
|
|
107,662
|
|
Down payments from clients
|
|
|
6,483
|
|
|
|
6,466
|
|
Other accounts payable
|
|
|
49,464
|
|
|
|
41,016
|
|
Total
|
|
|
153,917
|
|
|
|
155,144
|
|
Trade accounts payables mainly relate to the operating and maintenance of the plants.
Nominal values of Trade payables and other current liabilities are considered to approximately equal to fair values and the effect of discounting them is
not significant.
Other account payable primarily include subordinated debt of Mojave with Abener Teyma Mojave General Partnership (Abener), a related party, with maturity
date on October 2018. The repayment will occur if certain technical conditions are fulfilled.
Note 18. - Income Tax
The effective tax rate for the periods presented has been established based on Management’s best estimates.
In the six-month period ended June 30, 2018, Income tax amounted to a $31,019 thousand expense with respect to a profit before income tax of $104,194
thousand. In the six-month period ended June 30, 2017, Income tax amounted to a $12,848 thousand expense with respect to a profit before income tax of $27,025 thousand. The effective tax rate differs from the nominal tax rate mainly due to
permanent differences and treatment of tax credits in some jurisdictions.
Note 19. - Financial income and expenses
Financial income and expenses
The following table sets forth our financial income and expenses for the six-month period ended June 30, 2018 and 2017:
|
For the six-month period ended June 30,
|
|
Financial income
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Interest income from loans and credits
|
|
|
36,871
|
|
|
|
258
|
|
Interest rates benefits derivatives: cash flow hedges
|
|
|
-
|
|
|
|
230
|
|
Total
|
|
|
36,871
|
|
|
|
488
|
|
|
|
For the six-month period ended June 30,
|
|
Financial expenses
|
|
2018
|
|
|
2017
|
|
Expenses due to interest:
|
($ in thousands)
|
|
- Loans from credit entities
|
|
|
(128,838
|
)
|
|
|
(124,556
|
)
|
- Other debts
|
|
|
(42,951
|
)
|
|
|
(43,218
|
)
|
Interest rates losses derivatives: cash flow hedges
|
|
|
(34,317
|
)
|
|
|
(34,922
|
)
|
Total
|
|
|
(206,106
|
)
|
|
|
(202,696
|
)
|
Financial income from loans and credits primarily includes a non-monetary financial income of $36.6 million resulting from the refinancing of the debts of
Helios 1&2 and Helioenergy 1&2 in the second quarter of 2018 (see Note 15).
Interests from other debts are primarily interests on the notes issued by ATS, ATN, ATN2, Atlantica Yield and Solaben Luxembourg and interests related to
the investment from Liberty (see Note 16). Losses from interest rate derivatives designated as cash flow hedges correspond primarily to transfers from equity to financial expense when the hedged item is impacting the consolidated condensed income
statement.
Other net financial income and expenses
The following table sets out ‘Other net financial income and expenses” for the six-month period ended June 30, 2018, and 2017:
|
For the six-month period ended
June 30,
|
|
Other financial income / (expenses)
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Dividend from ACBH (Brazil)
|
|
|
-
|
|
|
|
10,383
|
|
Other financial income
|
|
|
5,514
|
|
|
|
6,774
|
|
Other financial losses
|
|
|
(15,201
|
)
|
|
|
(10,669
|
)
|
Total
|
|
|
(9,687
|
)
|
|
|
6,487
|
|
According to the agreement reached with Abengoa in the third quarter of 2016, Abengoa acknowledged that Atlantica Yield was the legal owner of the
dividends declared on February 24, 2017 and retained from Abengoa amounting to $10.4 million. As a result, the Company recorded $10.4 million as Other financial income in accordance with the accounting treatment previously given to the ACBH
dividend.
Note 20. - Other operating income and expenses
The table below shows the detail of Other operating income and expenses for the six-month periods ended June 30, 2018, and 2017:
Other Operating income
|
For the six-month period ended June 30,
|
|
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Grants (see Note 16)
|
|
|
29,719
|
|
|
|
29,882
|
|
Income from various services and insurance proceeds
|
|
|
16,384
|
|
|
|
10,431
|
|
Income from the purchase of the long-term operation and maintenance payable to Abengoa (see Note 11)
|
|
|
38,955
|
|
|
|
-
|
|
Total
|
|
|
85,058
|
|
|
|
40,313
|
|
Other Operating expenses
|
|
For the six-month period ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
($ in thousands)
|
|
Leases and fees
|
|
|
(1,033
|
)
|
|
|
(3,298
|
)
|
Operation and maintenance
|
|
|
(71,367
|
)
|
|
|
(57,191
|
)
|
Independent professional services
|
|
|
(15,714
|
)
|
|
|
(10,540
|
)
|
Supplies
|
|
|
(13,152
|
)
|
|
|
(12,571
|
)
|
Insurance
|
|
|
(12,606
|
)
|
|
|
(11,573
|
)
|
Levies and duties
|
|
|
(21,957
|
)
|
|
|
(31,476
|
)
|
Other expenses
|
|
|
(5,397
|
)
|
|
|
(2,136
|
)
|
Total
|
|
|
(141,226
|
)
|
|
|
(128,785
|
)
|
Note 21. - Earnings per share
Basic earnings per share has been calculated by dividing the loss attributable to equity holders by the average number of shares outstanding. Diluted
earnings per share equals basic earnings per share for the periods presented.
Item
|
For the six-month period ended June 30,
|
|
|
2018
|
|
|
2017
|
|
|
($ in thousands)
|
|
Profit/ (loss) from continuing operations attributable to Atlantica Yield Plc.
|
|
|
67,350
|
|
|
|
12,613
|
|
Average number of ordinary shares outstanding (thousands) - basic and diluted
|
|
|
100,217
|
|
|
|
100,217
|
|
Earnings per share from continuing operations (US dollar per share) - basic and diluted
|
|
|
0.67
|
|
|
|
0.13
|
|
Earnings per share from profit/(loss) for the period (US dollar per share) - basic and
diluted
|
|
|
0.67
|
|
|
|
0.13
|
|
Note 22. - Subsequent events
On July 31, the Board of Directors of the Company approved a dividend of $0.34 per share, which is expected to be paid on or about September 15, 2018 to
shareholders of record as of August 31, 2018.
|
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) contained in this quarterly 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 total return company that owns, manages, and acquires renewable energy, efficient natural gas power, electric transmission
lines and water assets, focused on North America (the United States and Mexico), South America (Peru, Chile and Uruguay) and EMEA (Spain, Algeria and South Africa). We intend to expand, maintaining North America, South America and Europe as our
core geographies.
As of the date of this quarterly report, we own or have interests in 22 assets, comprising 1,446 MW of renewable energy generation, 300
MW of efficient natural gas power generation, 10.5 M ft
3
per day of water desalination and 1,099 miles of electric transmission lines. Most of the assets
we own have a non-recourse project-finance agreement in place. All of our assets have contracted revenues (regulated revenues in the case of our Spanish assets) with low-risk off-takers and collectively have a weighted average remaining contract
life of approximately 19 years as of December 31, 2017.
We intend to take advantage of favorable trends in the power generation and electric transmission sectors globally, including energy
scarcity and a focus on the reduction of carbon emissions. To that end, we believe that our cash flow profile, coupled with our scale, diversity and low-cost business model, offers us a lower cost of capital than that of a traditional engineering
and construction company or independent power producer and provides us with a significant competitive advantage with which to execute our growth strategy.
We are focused on high-quality, newly-constructed and long-life facilities that have contracts with creditworthy counterparties that we
expect will produce stable, long-term cash flows. We will seek to grow our cash available for distribution and our dividends to shareholders through organic growth and by acquiring new contracted assets from AAGES, Abengoa, third parties and
potential new future partners.
We have in place exclusive agreements with AAGES and Abengoa, which we refer to as the AAGES ROFO Agreement and the Abengoa ROFO
Agreement.
The AAGES ROFO Agreement, which provides us with a right of first offer on any proposed sale, transfer or other disposition of AAGES’
ROFO Assets, became effective on March 9, 2018, upon the completion of the 25.0% Share Sale. AAGES is the joint venture formed by Algonquin and Abengoa to develop and invest renewable energy and water assets.
The Abengoa ROFO Agreement, in place since our IPO, provides us with a right of first offer on any proposed sale, transfer or other
disposition of any of Abengoa’s contracted renewable energy, efficient natural gas power, electric transmission or water assets in operation and located in the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European
Union, as well as four assets in selected countries in Africa, the Middle East and Asia.
Additionally, we plan to sign similar agreements or enter into partnerships with other developers or asset owners to acquire assets in
operation. We may also invest directly or through investment vehicles with partners in assets under development or construction, ensuring that such investments are always a small part of our total investments. Finally, we also expect to acquire
assets from third parties leveraging the local presence and network we have in the geographies and sectors in which we operate.
With this business model, our objective is to pay a consistent and growing cash dividend to shareholders that is sustainable on a
long-term basis. We expect to distribute 80% of our cash available for distribution as cash dividends and will seek to increase such cash dividends over time through organic growth and as we acquire assets with characteristics similar to those in
our current portfolio.
When we closed our initial public offering, Abengoa had a 64.28% interest in us. Following several divestitures, as
of December 31, 2017, Abengoa beneficially owned a 41.5% stake in us, and its shares were pledged under the secured New Money 1 Tradable Notes. On March 9, 2018, Algonquin completed an acquisition of a 25.0% stake in us from Abengoa with the option
to acquire the remaining 16.5% stake. On April 17, 2018, Algonquin exercised its option and announced that it reached an agreement with Abengoa to acquire the remaining 16.5% stake. According to the information publicly disclosed by Algonquin, the
acquisition of the 16.5% stake is expected to close in the third quarter of 2018, subject to the approval of the DOE and certain other closing conditions.
Agreements with Algonquin
In connection with the acquisition by Algonquin of a 25.0% stake in us, we signed the Shareholders Agreement with Algonquin, effective
March 9, 2018, which limits Algonquin’s ownership in us to a maximum of 41.47% of our outstanding shares (subject to a certain exception where such ownership may be temporarily increased up to 46.0%) and limits the number of directors it can
appoint to a maximum of 50% less one (if the resulting number is not a whole number, it shall be rounded up to the next whole number). In addition, Algonquin has agreed to provide, subject to board approval, an incremental equity investment of up
to $100 million through the subscription of our ordinary shares for the acquisition of new assets during 2018 and 2019 and has been granted certain preferred rights when participating in further equity issuances. Additionally, we have agreed to
maintain a target payout ratio of 80%.
We have also signed a ROFO agreement with AAGES, the joint venture created between Algonquin and Abengoa, to invest in the development
and construction of clean energy and water infrastructure contracted assets. The AAGES ROFO Agreement, which became effective on March 9, 2018, provides us with a right of first offer on any proposed sale, transfer or other disposition of AAGES
ROFO Assets. Some of the assets currently under construction by Abengoa may be transferred to AAGES and the AAGES ROFO Agreement will include such assets within its scope.
Potential implications of Abengoa developments
In 2015, Abengoa filed a communication pursuant to article 5 bis of the Spanish Insolvency Law 22/2003 with the Mercantile Court of
Seville nº 2. On November 8, 2016, the Judge of the Mercantile Court of Seville declared judicial approval of Abengoa’s restructuring agreement, extending the terms of the agreement to those creditors who had not approved the restructuring
agreement. On March 31, 2017, Abengoa announced the completion of its financial restructuring.
As of December 31, 2017, the financing arrangements of Solana and Mojave contained a change of ownership clause that would be triggered
if Abengoa ceased to own at least 30% of Atlantica’s shares and which would put us in breach of covenants. A forbearance agreement signed with the DOE in 2016 with respect to these assets allows reductions of Abengoa’s ownership of our shares if
it results from (i) a sale or other disposition at any time pursuant to and in connection with a subsequent insolvency proceeding by Abengoa, or (ii) capital increases by us. In other events of reduction of ownership by Abengoa below the minimum
ownership threshold, such as sales of shares by Abengoa, the available DOE remedies will not include debt acceleration, but could include limitations on distributions to us from Solana and Mojave. In November 2017, in the context of the agreement
reached between Abengoa and Algonquin for the acquisition by Algonquin of 25.0% of our shares and based on the obligations of Abengoa under an EPC contract, we signed a consent with the DOE in relation to the Solana and Mojave projects which
reduces the minimum ownership stake required to be held by Abengoa in us from 30.0% to 16.0%, which became effective on March 9, 2018 upon closing of the 25.0% Share Sale. The EPC guarantee period for the Solana project expired without it reaching
the expected production levels and Abengoa, as the EPC supplier, agreed to provide certain compensation to the Solana project. As a result, and in the context of the DOE consent, Solana received an aggregate amount of $120 million in payments from
Abengoa consisting of $42.5 million received in December 2017 and $77.5 million received in March 2018. Of the received sums, $95 million was used to repay project debt and $25 million was set aside to cover other Abengoa obligations.
Based on the most recent public information, Abengoa currently owns 16.47% of our shares, all of which are pledged as collateral under
their New Money 1 Tradable Notes and loans. Upon completion of the 16.5% Share Sale, Abengoa will no longer own any of our shares. If Abengoa ceased to maintain its 16.0% ownership of our shares prior to obtaining necessary approvals by the DOE, we
would potentially be in breach of covenants under the Solana and Mojave project financing arrangements.
In March 2017, we obtained a waiver in our Kaxu project financing arrangement which waives any potential cross-defaults with Abengoa up
to that date, but it does not cover potential future cross-default events.
We have not identified any PPAs or any contracts with off-takers that include any cross-default provision relating to Abengoa or any
minimum ownership provision.
We expect Abengoa to continue to maintain its contractual obligations under material contracts with us including the operation and
maintenance agreements, the Financial Support Agreement and limited support service agreements in South Africa.
If Abengoa failed to comply with its obligations or terminated operation and maintenance agreements, we would need to find alternative
suppliers or alternative ways to perform those services. In assets with “cost plus” pricing arrangements such as Solana and Mojave, the risk is limited, while in assets with “all in” pricing arrangements, we cannot guarantee that the cost or the
service level would be the same.
In addition, under the Financial Support Agreement, Abengoa continues to have a commitment to maintain guarantees and letters of credit
currently outstanding in our affiliates’ favor until June 2019. If Abengoa fails to comply with the Financial Support Agreement or terminates it, we would need to replace the financial guarantees currently provided by Abengoa with guarantees
provided by the assets or by us, which amount to approximately $31 million.
Additionally, Abengoa has a number of obligations in several of our assets as an EPC supplier irrespective of its ownership in us. In
Kaxu and Solana, the respective EPC guarantee periods expired without the projects reaching the guaranteed levels of production. As the EPC supplier, Abengoa offered to extend the guarantee periods and to provide certain compensations. In Kaxu, we
reached an agreement with Abengoa and the lenders under the project financing agreement to extend the production guarantee until October 2018. The agreement includes an extension of the existing ZAR 570 million (approximately $42 million) letter of
credit until the expiration of the new production guarantee period. In Solana, the guarantee period also expired without reaching the guaranteed levels of production (see above).
Furthermore, the Abengoa ROFO Agreement applies to assets which are in operation. Abengoa could decide to sell assets while they are
still under construction without offering those assets to us first. Once Abengoa offers an asset for acquisition, we need to reach an agreement on price with them to close the acquisition. In the case of Xina, the asset is no longer subject to the
Abengoa ROFO Agreement.
Moreover, the sale by Abengoa of its stake in us or other changes in our shareholder base may cause a change of ownership under Section
382 of the U.S. Internal Revenue Code, as a result of which our ability to use U.S. NOLs may be limited. See “Item 3D.–Risk Factors–Risks Related to Taxation–Our ability to use U.S. NOLs to offset future income may be limited” in our Annual
Report).
Key Metrics
We regularly review a number 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 Further Adjusted EBITDA. Our management believes Further Adjusted EBITDA is useful to investors and other users of our financial
statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. This measure is widely used by investors to measure a company’s operating
performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method
by which assets were acquired. This measure is widely used by other companies in the same industry.
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 Consolidated Financial Statements, and dividends received from our preferred equity investment in ACBH. Further Adjusted EBITDA for 2016 and for first quarter of 2017 includes compensation received from Abengoa in lieu of ACBH
dividends. See “Presentation of Financial Information—Non-GAAP Financial Measures.”
Our revenue and Further Adjusted EBITDA by geography and business sector for the six-month periods ended June 30, 2018 and 2017 are set
forth in the following tables:
|
|
Six-month period ended June 30,
|
|
Revenue by geography
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
North America
|
|
$
|
172.3
|
|
|
|
33.6
|
%
|
|
$
|
170.4
|
|
|
|
35.3
|
%
|
South America
|
|
|
59.9
|
|
|
|
11.7
|
%
|
|
|
58.7
|
|
|
|
12.1
|
%
|
EMEA
|
|
|
280.9
|
|
|
|
54.7
|
%
|
|
|
254.1
|
|
|
|
52.6
|
%
|
Total revenue
|
|
$
|
513.1
|
|
|
|
100.0
|
%
|
|
$
|
483.2
|
|
|
|
100.0
|
%
|
|
|
Six-month period ended June 30,
|
|
Revenue by business sector
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Renewable energy
|
|
$
|
392.2
|
|
|
|
76.4
|
%
|
|
$
|
363.6
|
|
|
|
75.2
|
%
|
Efficient natural gas
|
|
|
61.4
|
|
|
|
12.0
|
%
|
|
|
59.4
|
|
|
|
12.3
|
%
|
Electric transmission lines
|
|
|
47.9
|
|
|
|
9.3
|
%
|
|
|
47.6
|
|
|
|
9.9
|
%
|
Water
|
|
|
11.6
|
|
|
|
2.3
|
%
|
|
|
12.6
|
|
|
|
2.6
|
%
|
Total revenue
|
|
$
|
513.1
|
|
|
|
100
|
%
|
|
$
|
483.2
|
|
|
|
100.0
|
%
|
|
|
Six-month period ended June 30,
|
|
Further Adjusted EBITDA by geography
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
North America
|
|
$
|
154.7
|
|
|
|
89.8
|
%
|
|
$
|
151.8
|
|
|
|
89.1
|
%
|
South America
|
|
|
49.2
|
|
|
|
82.2
|
%
|
|
|
58.6
|
|
|
|
99.8
|
%
|
EMEA
|
|
|
235.5
|
|
|
|
83.8
|
%
|
|
|
179.3
|
|
|
|
70.6
|
%
|
Total Further Adjusted EBITDA
|
|
$
|
439.4
|
|
|
|
85.6
|
%
|
|
$
|
389.7
|
|
|
|
80.6
|
%
|
|
|
Six-month period ended June 30,
|
|
Further Adjusted EBITDA by business sector
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Renewable energy
|
|
$
|
345.4
|
|
|
|
88.1
|
%
|
|
$
|
279.3
|
|
|
|
76.8
|
%
|
Efficient natural gas
|
|
|
47.0
|
|
|
|
76.5
|
%
|
|
|
52.8
|
|
|
|
88.9
|
%
|
Electric transmission lines
|
|
|
40.3
|
|
|
|
84.1
|
%
|
|
|
49.8
|
|
|
|
104.6
|
%
|
Water
|
|
|
6.7
|
|
|
|
57.9
|
%
|
|
|
7.8
|
|
|
|
61.9
|
%
|
Total Further Adjusted EBITDA
|
|
$
|
439.4
|
|
|
|
85.6
|
%
|
|
$
|
389.7
|
|
|
|
80.6
|
%
|
Note:—
|
(1)
|
Further Adjusted EBITDA is calculated as profit for the period attributable to Atlantica, 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 Consolidated Condensed Interim
Financial Statements, and dividends received from our preferred equity investment in ACBH. Further Adjusted EBITDA for the first quarter of 2017 includes compensation received from Abengoa in lieu of ACBH dividends. Further Adjusted
EBITDA is not a measure of performance under IFRS as issued by the IASB and you should not consider Further Adjusted EBITDA as an alternative to operating income or profits or as a measure of our operating performance, cash flows from
operating, investing and financing activities or as a measure of our ability to meet our cash needs or any other measures of performance under generally accepted accounting principles. We believe that Further Adjusted EBITDA is a useful
indicator of our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to evaluate us. Further Adjusted EBITDA and similar measures are used by different companies for different
purposes and are often calculated in ways that reflect the circumstances of those companies. Further Adjusted EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of potential future
results. See Note 4 to the Consolidated Condensed Interim Financial Statements.
|
Recent Developments
On July 31, 2018, our board of directors approved a dividend of $0.34 per share, which represents an increase of 31% with respect to the
second quarter of 2017. The dividend is expected to be paid on or about September 15, 2018, to shareholders of record as of August 31, 2018.
The government of Spain which is in office since June 2018 is currently analyzing a potential tax reform which could have negative
effect in the expected cash flows from Spanish solar assets. There has been no formal proposal yet and the details of the new regulation are currently unknown.
Our solar assets in Spain receive revenues under a regulation based on a reasonable of return which is subject to review
every 6 years, with the first regulatory period ending at the end of 2019. On July 27, 2018, CNMC (the regulator for the electric system in Spain) issued a proposal for the calculation of the reasonable of return for the regulatory period
2020-2025. The reasonable rate of return proposed by CNMC is 7.04%. This report is subject to changes and is non-binding for the government and the government is expected to decide and approve changes for the new regulatory period in 2019.
Currency Presentation and Definitions
In this quarterly report, all references to “U.S. Dollar” and “$” are to the lawful currency of the United States.
Factors Affecting the Comparability of Our Results of Operations
Agreement with Abengoa on ACBH preferred equity investment
In the third quarter of 2016, we entered into an agreement with Abengoa relating to the ACBH preferred equity investment among other
things with the following main consequences:
|
·
|
We were recognized as the legal owner of the dividends that we retained from Abengoa and these amounts were recorded as Further Adjusted EBITDA in 2017 ($10.4 million) and
in 2016 ($28.0 million).
|
|
·
|
Abengoa recognized a non-contingent credit corresponding to the guarantee it provided regarding the preferred equity investment in ACBH, subject to restructuring. On
October 25, 2016, we signed Abengoa’s restructuring agreement and agreed, subject to implementation of the restructuring, to receive 30% of the amount owed to us in the form of tradable notes to be issued by Abengoa (the “Restructured
Debt”). The remaining 70% owed to us was agreed to be received in the form of equity in Abengoa
|
As a result, we waived, as agreed, all our rights under the ACBH agreements, including our right to further retain dividends payable
to Abengoa. As a result, in March 2017, we wrote off the accounting value of the ACBH instrument, which amounted to $30.5 million as of December 31, 2016. We no longer own any shares in ACBH and we sold entirely all the debt and equity instruments
we received from Abengoa.
Agreement to repurchase long-term operation and maintenance variable services
The operation and maintenance services received in some of our Spanish solar assets include a variable portion payable in the long-term.
On April 26, 2018, Atlantica Yield purchased from Abengoa the long-term operation and maintenance payable accrued until December 31, 2017, which amounted to $57.3 million. We paid $18.3 million for this payable and as a result, in the second
quarter of 2018, we recorded a one-time gain for the difference, amounting to $39.0 million.
Project debt refinancing
In the second quarter of 2018, we refinanced Helios 1/2 and Helioenergy 1/2. Under the new IFRS 9, when there is a refinancing with a
non-substantial modification of the original debt, there is a gain or loss recorded in the income statement. This gain or loss is equal to the difference between the present value of the cash flows under the original terms of the former financing
and the present value of the cash flows under the new financing, each discounted at the original effective interest rate. As a result, we recorded non-cash financial income of $36.6 million in the second quarter of 2018.
Factors Affecting Our Results of Operations
Regulation
We operate in a significant number of regulated markets. The degree of regulation to which our activities are subject varies by country.
In a number of the countries in which we operate, regulation is carried out by national regulatory authorities. In some countries, such as the United States and, to a certain degree, Spain, there are various additional layers of regulation at the
state, regional and/or local levels. In such countries, the scope, nature, and extent of regulation may differ among the various states, regions and/or localities.
While we believe the requisite authorizations, permits, and approvals for our existing activities have been obtained and that our
activities are operated in substantial compliance with applicable laws and regulations, we remain subject to a varied and complex body of laws and regulations that both public officials and private parties may seek to enforce. See “Item
4.B–Business–Regulation” in our Annual Report for a description of the primary industry-related regulations applicable to our activities in the United States and Spain, and currently in force in certain of the principal markets in which we operate.
Power purchase agreements and other contracted revenue agreements
The assets in our portfolio sell substantially all of their output under long-term, fixed price offtake agreements.
As of December 31, 2017, the average remaining life of our PPAs, concessions and contracted revenue agreements was approximately 19 years. Contracted assets and concessions consist of
long-term projects awarded to and undertaken by us (in conjunction with other companies or on an exclusive basis) typically over a term of 20 to 30 years. Upon expiration of our PPAs and contracted revenue agreements and in order to maintain and
grow our business, we must obtain extensions to these agreements or secure new agreements to replace them as they expire. Under most of our PPAs and concessions, there is an established price structure that provides us with price adjustment
mechanisms that partially protect us against inflation.
We believe long-term agreements with creditworthy customers substantially mitigates volatility in our cash flows.
See
“Item 4.B—Business Overview—Our Operations” in our Annual Report.
Project debt
We finance our contracted assets primarily through project debt issued by financial institutions. Consequently, a significant part of our
business is capital-intensive, and our assets are highly leveraged.
See “Item 5.B—Liquidity—Liquidity and Capital Resources—Financing Arrangements” in our Annual Report.
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, 2017, approximately 93% 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 93% of our total interest risk exposure was fixed or hedged as of December 31, 2017. Nevertheless, our results of operations can be affected by changes in interest
rates with respect to the unhedged portion of our indebtedness that bears interest at floating rates, which typically bears a spread over EURIBOR or LIBOR.
Exchange rates
Our functional currency is the U.S. dollar, as most of our revenues and expenses are denominated or linked to U.S. dollars. All our
companies located in North America, South America and Algeria have their PPAs, or concessional agreements, and financing contracts signed in, or indexed to, U.S. dollars. Our solar power plants in Spain have their revenues and expenses denominated
in euros. Revenues and expenses of Kaxu, our solar plant in South Africa, are denominated in ZAR. While fluctuations in the value of the euro and the ZAR may affect our operating results, we hedge cash distributions from our Spanish assets. Our
strategy is to hedge the exchange rate for the distributions from our Spanish assets after deducting euro-denominated interest payments and euro-denominated general and administrative expenses. Through currency options, our strategy is to hedge
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.
Impacts associated with fluctuations in foreign currency are discussed in
more detail under “Item 11—Quantitative and Qualitative Disclosure about Market Risk—Foreign Exchange Rate 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 foreign currencies (the euro and the South African rand) in relation to the
United States dollar may affect our operating results.
The following table illustrates the average rates of exchange used in the case of euros and ZAR:
|
|
U.S. dollar
average per Euro
|
|
|
U.S. dollar
average per ZAR
|
|
Six-month period ended June 30, 2018
|
|
|
1.2105
|
|
|
|
0.0814
|
|
Six-month period ended June 30, 2017
|
|
|
1.0829
|
|
|
|
0.0757
|
|
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, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of
operations. We calculate constant currency amounts by converting our current period local currency revenue using the prior period foreign currency average exchange rates and comparing these adjusted amounts to our prior period reported results.
This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to substitute for recorded amounts presented in conformity with IFRS as issued by the IASB nor should such
amounts be considered in isolation.
Key Performance Indicators
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.
|
|
As of and for the six-month
period ended June 30,
|
|
Key performance indicator
|
|
2018
|
|
|
2017
|
|
Renewable energy
|
|
|
|
|
|
|
MW in operation
1
|
|
|
1,446
|
|
|
|
1,442
|
|
GWh produced
2
|
|
|
1,446
|
|
|
|
1,560
|
|
Efficient natural gas
|
|
|
|
|
|
|
|
|
MW in operation
1
|
|
|
300
|
|
|
|
300
|
|
GWh produced
|
|
|
1,101
|
|
|
|
1,171
|
|
Availability (%)
3
|
|
|
98.6
|
%
|
|
|
99.8
|
%
|
Electric transmission lines
|
|
|
|
|
|
|
|
|
Miles in operation
|
|
|
1,099
|
|
|
|
1,099
|
|
Availability (%)
4
|
|
|
99.9
|
%
|
|
|
96.6
|
%
|
Water
|
|
|
|
|
|
|
|
|
Mft
3
in operation
1
|
|
|
10.5
|
|
|
|
10.5
|
|
Availability (%)
4
|
|
|
100.9
|
%
|
|
|
102.1
|
%
|
Notes:—
|
(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 production in wind assets for which we receive compensation.
|
|
(3)
|
Electric availability refers to operational MW over contracted MW with Pemex
|
|
(4)
|
Availability refers to actual availability divided by contracted availability
|
Production in the Renewable business sector decreased during the six-month period ended June 30, 2018 compared to the six-month period
ended June 30, 2017. The decrease was mainly due to lower production in our solar assets in Spain, resulting mainly from lower radiation in the period; however, impact on revenues was limited, since in Spain most of the revenues are based on
availability, in accordance with the regulation in place. Production remained stable in the United States. In Solana, Abengoa and the supplier of the heat exchangers presented a proposal to improve the performance and reliability of this equipment,
which has been implemented in one of the heat exchangers and is planned to be implemented in the rest of the exchangers during this year. On the other hand, production increased in Kaxu, which was affected by a technical problem in the water pumps
in the first quarter of 2017. Repairs were carried out during 2017 and the insurance proceeds for these repairs and loss of production were collected in the second quarter of 2017. Finally, production in our wind assets during the first half was
higher than in the same period of the previous year due to solid performance and good wind levels.
Our efficient natural gas power asset, ACT, continues to deliver high levels of availability. Lower production, which was attributable
to the offtaker, does not affect revenues since our contract is based on availability. In
transmission lines, availability was higher mainly due to the impact of torrential rains in
Peru which occurred during the first quarter of 2017. Our water segment assets have also comfortably achieved forecasted availability levels.
Results of Operations
The table below illustrates our results of operations the six-month periods ended June 30, 2018 and 2017.
|
|
Six-month period ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
% Variation
|
|
|
|
($ in millions)
|
|
|
|
|
Revenue
|
|
$
|
513.1
|
|
|
$
|
483.2
|
|
|
|
6.2
|
%
|
Other operating income
|
|
|
85.1
|
|
|
|
40.3
|
|
|
|
111.0
|
%
|
Raw materials and consumables used
|
|
|
(7.3
|
)
|
|
|
(7.1
|
)
|
|
|
1.9
|
%
|
Employee benefit expenses
|
|
|
(10.3
|
)
|
|
|
(8.3
|
)
|
|
|
24.9
|
%
|
Depreciation, amortization, and impairment charges
|
|
|
(160.3
|
)
|
|
|
(155.7
|
)
|
|
|
2.9
|
%
|
Other operating expenses
|
|
|
(141.2
|
)
|
|
|
(128.8
|
)
|
|
|
9.7
|
%
|
Operating profit
|
|
$
|
279.1
|
|
|
$
|
223.6
|
|
|
|
24.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
|
|
|
36.9
|
|
|
|
0.5
|
|
|
|
7,455.5
|
%
|
Financial expense
|
|
|
(206.1
|
)
|
|
|
(202.7
|
)
|
|
|
1.7
|
%
|
Net exchange differences
|
|
|
1.1
|
|
|
|
(2.9
|
)
|
|
|
(138.7
|
%)
|
Other financial income/(expense), net
|
|
|
(9.7
|
)
|
|
|
6.5
|
|
|
|
(249.3
|
%)
|
Financial expense, net
|
|
$
|
(177.8
|
)
|
|
$
|
(198.6
|
)
|
|
|
(10.5
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of profit of associates carried under the equity method
|
|
|
2.9
|
|
|
|
2.0
|
|
|
|
40.1
|
%
|
Profit before income tax
|
|
$
|
104.2
|
|
|
$
|
27.0
|
|
|
|
285.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
(31.0
|
)
|
|
|
(12.8
|
)
|
|
|
141.4
|
%
|
Profit for the period
|
|
$
|
73.2
|
|
|
$
|
14.2
|
|
|
|
416.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to non-controlling interest
|
|
|
(5.8
|
)
|
|
|
(1.6
|
)
|
|
|
272.4
|
%
|
Profit for the period attributable to the parent company
|
|
$
|
67.4
|
|
|
$
|
12.6
|
|
|
|
434.0
|
%
|
Comparison of the Six-Month Periods Ended June 30, 2018 and 2017
The significant variances or variances of the significant components of the results of operations are discussed in the following section.
Revenue
Revenue increased by 6.2% to $513.1 million for the six-month period ended June 30, 2018, compared with $483.2 million for the six-month
period ended June 30, 2017. The increase was due in part to higher production at Kaxu and to the appreciation of the euro against the U.S. dollar. On a constant currency basis, revenues for the six-month period ended June 30, 2018 would have been
$486.8 million, representing an increase of 0.7% compared to the same period in 2017. At Kaxu, production was significantly higher for the six-month period ended June 30, 2018 because production in the first half of 2017 was affected by a technical
problem in water pumps which was solved during 2017. The insurance proceeds for the repairs and loss of production were collected in the second quarter of 2017.
Other operating income
The following table sets forth our other operating income for the six-month periods ended June 30, 2018 and 2017:
|
|
Six-month period ended June 30,
|
|
Other operating income
|
|
2018
|
|
|
2017
|
|
|
($ in millions)
|
|
|
|
|
|
|
Grants
|
|
$
|
29.7
|
|
|
$
|
29.9
|
|
Income from various services
|
|
|
16.4
|
|
|
|
10.4
|
|
Income from purchase of long-term O&M payable
|
|
|
39.0
|
|
|
|
-
|
|
Total
|
|
$
|
85.1
|
|
|
$
|
40.3
|
|
Other operating income increased by 111.0% to $85.1 million for the six-month period ended June 30, 2018, compared with $40.3 million
for the six-month period ended June 30, 2017. The increase was due in part to the one-off payments to Solana from Abengoa in connection with the consent with the DOE. In the context of this agreement, Solana received an aggregate of $120 million of
payments in December 2017 and March 2018. From an accounting perspective, as the payment resulted from Abengoa’s obligations under the EPC contract, most of the amounts received was recorded as reducing the asset value of Solana. The remainder has
been recorded in the income statement in 2018 (approximately $8 million) or as deferred income. In addition, the operation and maintenance services received by some of our Spanish solar assets include a variable portion payable in the long-term. On
April 26, 2018, Atlantica Yield purchased from Abengoa the long-term operation and maintenance payable accrued until December 31, 2017, which amounted to $57.3 million. We paid $18.3 million for this and as a result in the second quarter of 2018 we
have recorded a one-time gain for the difference, amounting to $39.0 million.
Grants represent the financial support provided by the U.S. government to Solana and Mojave and consist of ITC Cash Grants and an
implicit grant related to the below market interest rates of the project loans with the Federal Financing Bank.
Raw materials and consumables used
Raw materials and consumables remained stable at $7.3 million for the six-month period ended June 30, 2018, compared with $7.1 million
for the six-month period ended June 30, 2017.
Employee benefit expenses
Employee benefit expenses increased by 24.9% to $10.3 million for the for the six-month period ended June 30, 2018, compared with $8.3
million for the six-month period ended June 30, 2017 mainly due to the appreciation of the euro against the U.S. dollar in the first six months of 2018 compared to the same period of 2017, since a large part of our personnel costs are denominated
in euros.
Depreciation, amortization and impairment charges
Depreciation, amortization and impairment charges increased by 2.9% to $160.3 million for the six-month period ended June 30, 2018,
compared with $155.7 million for the six-month period ended June 30, 2017 mainly due to the appreciation of the euro against the U.S. dollar in the first six months of 2018 compared to the same period of 2017, which caused an increase in the
depreciation and amortization of our Spanish assets while converted to U.S. dollars and to the application of the new accounting standard IFRS 9 since January 2018. These effects were partially offset by a decrease in the amortization of Solana
arising from the reduction in the asset value resulting from the amount received from Abengoa as part of DOE’s consent. In the context of this agreement, Solana received $120 million of payments in December 2017 and March 2018. From an accounting
perspective, as the payment results from Abengoa’s obligations under the EPC contract, most of the amount received was recorded as reducing the asset value and depreciation was adjusted accordingly.
Other operating expenses
The following table sets forth our other operating expenses for the six-month periods ended June 30, 2018 and 2017:
|
|
Six-month period ended June 30,
|
|
Other operating expenses
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Leases and fees
|
|
$
|
1.0
|
|
|
|
0.2
|
%
|
|
$
|
3.3
|
|
|
|
0.7
|
%
|
Operation and maintenance
|
|
|
71.4
|
|
|
|
13.9
|
%
|
|
|
57.2
|
|
|
|
11.8
|
%
|
Independent professional services
|
|
|
15.7
|
|
|
|
3.1
|
%
|
|
|
10.5
|
|
|
|
2.2
|
%
|
Supplies
|
|
|
13.2
|
|
|
|
2.6
|
%
|
|
|
12.6
|
|
|
|
2.6
|
%
|
Insurance
|
|
|
12.6
|
|
|
|
2.5
|
%
|
|
|
11.6
|
|
|
|
2.4
|
%
|
Levies and duties
|
|
|
21.9
|
|
|
|
4.3
|
%
|
|
|
31.5
|
|
|
|
6.5
|
%
|
Other expenses
|
|
|
5.4
|
|
|
|
1.1
|
%
|
|
|
2.1
|
|
|
|
0.4
|
%
|
Total
|
|
$
|
141.2
|
|
|
|
27.5
|
%
|
|
$
|
128.8
|
|
|
|
26.7
|
%
|
Other operating expenses increased by 9.7% to $141.2 million for the six-month period ended June 30, 2018, compared with $128.8 million
for the six-month period ended June 30, 2017. The increase was mainly due to the higher operation and maintenance costs at ACT incurred in connection with the major maintenance scheduled for the beginning of 2019. At ACT, the operation and
maintenance costs increase in the quarters prior to a major maintenance. Operation and maintenance expenses also increased due to the appreciation of the euro against the US dollar in our solar assets in Spain, whose expenses are denominated in
euros and converted to U.S. dollars at an average currency exchange rate for the first six months of the year. Levies and duties decreased due to a one-time provision for property taxes recorded at some plants in Spain in the second quarter of 2017
with no corresponding amount in the first half of 2018.
Financial income
Financial income amounted to $36.9 million for the six-month period ended June 30, 2018, compared with $0.5 million for the six-month
period ended June 30, 2017. The increase is due to a non-cash financial income of $36.6 million resulting from the refinancing of Helios 1/2 and Helioenergy 1/2 in the second quarter of 2018. Under the new IFRS 9, when there is a refinancing with a
non-substantial modification of the original debt, there is a gain or loss recorded in the income statement. This gain or loss is equal to the difference between the present value of the cash flows under the original terms of the former financing
and the present value of the cash flows under the new financing, discounted both at the original effective interest rate.
Financial expense
The following table sets forth our financial expense for six-month periods ended June 30, 2018 and 2017:
|
|
Six-month period ended June 30,
|
|
Financial expense
|
|
2018
|
|
|
2017
|
|
|
($ in millions)
|
|
Loans from credit entities
|
|
$
|
(128.8
|
)
|
|
$
|
(124.6
|
)
|
Other debts
|
|
|
(43.0
|
)
|
|
|
(43.2
|
)
|
Interest rates losses derivatives: cash flow hedges
|
|
|
(34.3
|
)
|
|
|
(34.9
|
)
|
Total
|
|
$
|
(206.1
|
)
|
|
$
|
(202.7
|
)
|
Financial expense remained stable, increasing by 1.7% to $206.1 million for the six-month period ended June 30, 2018, compared with
$202.7 million for the six-month period ended June 30, 2017.
The interest on other debts consists of interest on the notes issued by ATS, ATN, ATN2 and Solaben 1/6 and on the 2019 Notes.
Other financial income/(expense), net
The following table sets forth our other net financial income/(expense):
|
|
Six-month period ended June 30,
|
|
Other financial income /(expense), net
|
|
2018
|
|
|
2017
|
|
|
($ in millions)
|
|
Dividend from ACBH
|
|
$
|
-
|
|
|
$
|
10.4
|
|
Other financial income
|
|
$
|
5.5
|
|
|
$
|
6.8
|
|
Other financial losses
|
|
|
(15.2
|
)
|
|
|
(10.7
|
)
|
Total
|
|
$
|
(9.7
|
)
|
|
$
|
6.5
|
|
“Other financial income/(expense), net” was a net expense of $9.7 million for the six-month period ended June 30, 2018 compared to a net
income of $6.5 million for the six-month period ended June 30, 2017. The change resulted in part from the $10.4 million ACBH retained dividend compensation recorded in the first quarter of 2017 with no corresponding amount in the first half of
2018. We no longer own any shares in ACBH and will not retain any additional dividends. See “Factors Affecting the Comparability of Our Results of Operations” above.
Other financial losses include expenses from guarantees, letters of credit, wire transfers, other bank fees and other minor financial
expenses.
Share of profit of associates carried under the equity method
Share of profit of associates carried under the equity method increased by 40.1% to $2.9 million in the six-month period ended June 30,
2018 compared to $2.0 million in the six-month period ended June 30, 2017 mainly due to higher income from Honaine, which we account for by the equity method.
Income tax
The effective tax rate for the periods presented has been established based on management’s best estimates. In the six-month period
ended June 30, 2018, income tax amounted to an expense of $31.0 million, with a profit before income tax of $104.2 million. In the six-month period ended June 30, 2017, income tax amounted to a $12.8 million of expense, with a profit before income
tax of $27.0 million. The effective tax rate differs from the nominal tax rate mainly due to permanent differences and tax losses for which we do not record a tax credit in some jurisdictions.
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests was $5.8 million in the six-month period ended June 30, 2018 compared to $1.6 million
in the six-month period ended June 30, 2017 mainly due to higher profit at Kaxu, a project in which our partners hold a 49% stake. This increase in Kaxu earnings was driven by higher production, since the plant had technical problems in 2017.
Segment Reporting
We organize our business into the following three geographies where the contracted 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 Power, which includes our activities related to the production of electricity and steam from natural gas;
|
•
|
Electric Transmission, which includes our activities related to the operation of electric transmission lines; and
|
•
|
Water, which includes our activities related to desalination plants.
|
As a result, we report our results in accordance with both criteria.
Revenue and Further Adjusted EBITDA by geography and business sector
The following table sets forth our revenue, Further Adjusted EBITDA and volumes for the six-month periods ended June 30, 2018 and 2017, by
geographic region:
|
|
Six-month period ended June 30,
|
|
Revenue by geography
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
North America
|
|
$
|
172.3
|
|
|
|
33.6
|
%
|
|
$
|
170.4
|
|
|
|
35.3
|
%
|
South America
|
|
|
59.9
|
|
|
|
11.7
|
%
|
|
|
58.7
|
|
|
|
12.1
|
%
|
EMEA
|
|
|
280.9
|
|
|
|
54.7
|
%
|
|
|
254.1
|
|
|
|
52.6
|
%
|
Total revenue
|
|
$
|
513.1
|
|
|
|
100.0
|
%
|
|
$
|
483.2
|
|
|
|
100.0
|
%
|
|
|
Six-month period ended June 30,
|
|
Further Adjusted EBITDA by geography
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
North America
|
|
$
|
154.7
|
|
|
|
89.8
|
%
|
|
$
|
151.8
|
|
|
|
89.1
|
%
|
South America
|
|
|
49.2
|
|
|
|
82.2
|
%
|
|
|
58.6
|
|
|
|
99.8
|
%
|
EMEA
|
|
|
235.5
|
|
|
|
83.8
|
%
|
|
|
179.3
|
|
|
|
70.6
|
%
|
Total Further Adjusted EBITDA
|
|
$
|
439.4
|
|
|
|
85.6
|
%
|
|
$
|
389.7
|
|
|
|
80.6
|
%
|
|
|
Six-month period ended June 30,
|
|
Geography
|
|
2018
|
|
|
2017
|
|
North America (GWh, volume sold)
|
|
|
1,817
|
|
|
|
1,903
|
|
South America (miles in operation)
|
|
|
1,099
|
|
|
|
1,099
|
|
South America (GWh, volume sold)
1
|
|
|
151
|
|
|
|
139
|
|
EMEA (GWh)
|
|
|
579
|
|
|
|
689
|
|
EMEA (capacity in Mft
3
per
day)
2
|
|
|
10.5
|
|
|
|
10.5
|
|
Notes:—
|
(1)
|
Includes curtailment production in wind assets for which we receive compensation
|
|
(2)
|
Represents total installed capacity in assets owned at the end of the period, regardless of our percentage of ownership in each of the assets
|
North America.
Revenues
increased by 1.1% to $172.3 million for the six-month period ended June 30, 2018, compared with $170.4 million for the six-month period ended June 30, 2017. The increase was primarily due to higher revenues at ACT in the portion of the tariff
related to the operation and maintenance services, driven by the higher operation and maintenance costs in the six-month period ended June 30, 2018. Revenues remained stable during the period in the United States. Further Adjusted EBITDA margin
remained stable in the six-month period ended June 30, 2018 when compared to the same period of the previous year.
South America.
Revenue
increased by 2.0% to $59.9 million for the six-month period ended June 30, 2018, compared with $58.7 million for the six-month period ended June 30, 2017, with production and availabilities in line with the same period of last year. Further
Adjusted EBITDA decreased from $58.6 million for the six-month period ended June 30, 2017 to $49.2 million for the six-month period ended June 30, 2018. Further Adjusted EBITDA margin decreased from 99.8% for the six-month period ended June 30,
2017 to 82.2% for the six-month period ended June 30, 2018. Pursuant to the agreement reached with Abengoa in the third quarter of 2016, we were acknowledged as the legal owner of the dividends retained from Abengoa prior to the ACBH agreement
settlement. As a result, we recorded $10.4 million income in the first quarter of 2017 in our financial statements, in accordance with the accounting treatment given previously to the ACBH dividend. We no longer own any shares in ACBH and will not
retain any additional dividends.
EMEA.
Revenue increased by
10.6% to $280.9 million in the six-month period ended June 30, 2018 from $254.1 million in the six-month period ended June 30, 2017. The increase was mainly due to a more favorable foreign exchange rate. On a constant currency basis, revenues for
the six-month period ended June 30, 2018 would have been $254.6 million, representing an increase of 0.2% compared to the same period of 2017. Revenues also increased due to higher production levels at Kaxu. Kaxu, our solar plant in South Africa
which experienced technical problems during 2017, performed significantly better in the six-month period ended June 30, 2018 following the repairs completed during 2017. Further Adjusted EBITDA margin increased to 82.8% for the six-month period
ended June 30, 2018 compared to 70.6% for the respective period of 2017. The increase is mainly attributable to the one-time $39.0 million gain we recognized related to the long-term operation and maintenance payables accrued in Spain (see
“Results of Operations- Other operating income” above).
The following table sets forth our revenue, Further Adjusted EBITDA and volumes for the six-month period ended June 30, 2018 and 2017 by
business sector:
|
|
Six-month period ended June 30,
|
|
Revenue by business sector
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Renewable energy
|
|
$
|
392.2
|
|
|
|
76.4
|
%
|
|
$
|
363.6
|
|
|
|
75.2
|
%
|
Efficient natural gas
|
|
|
61.4
|
|
|
|
12.0
|
%
|
|
|
59.4
|
|
|
|
12.3
|
%
|
Electric transmission lines
|
|
|
47.9
|
|
|
|
9.3
|
%
|
|
|
47.6
|
|
|
|
9.9
|
%
|
Water
|
|
|
11.6
|
|
|
|
2.3
|
%
|
|
|
12.6
|
|
|
|
2.6
|
%
|
Total revenue
|
|
$
|
513.1
|
|
|
|
100
|
%
|
|
$
|
483.2
|
|
|
|
100.0
|
%
|
|
|
Six-month period ended June 30,
|
|
Further Adjusted EBITDA by business sector
|
|
2018
|
|
|
2017
|
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
|
$ in
millions
|
|
|
% of
revenue
|
|
Renewable energy
|
|
$
|
345.4
|
|
|
|
88.1
|
%
|
|
$
|
279.3
|
|
|
|
76.8
|
%
|
Efficient natural gas
|
|
|
47.0
|
|
|
|
76.5
|
%
|
|
|
52.8
|
|
|
|
88.9
|
%
|
Electric transmission lines
|
|
|
40.3
|
|
|
|
84.1
|
%
|
|
|
49.8
|
|
|
|
104.6
|
%
|
Water
|
|
|
6.7
|
|
|
|
57.9
|
%
|
|
|
7.8
|
|
|
|
61.9
|
%
|
Total Further Adjusted EBITDA
|
|
$
|
439.4
|
|
|
|
85.6
|
%
|
|
$
|
389.7
|
|
|
|
80.6
|
%
|
|
|
Volume sold
|
|
|
|
Six-month period ended June 30,
|
|
Business Sectors
|
|
2018
|
|
2017
|
|
Renewable Energy (GWh)
1
|
|
|
|
1,446
|
|
|
|
1,560
|
|
Efficient natural gas (GWh)
|
|
|
|
1,101
|
|
|
|
1,171
|
|
Electric transmission (miles in operation)
|
|
|
|
1,099
|
|
|
|
1,099
|
|
Water (capacity in Mft
3
per
day)
2
|
|
|
|
10.5
|
|
|
|
10.5
|
|
Notes:—
|
(1)
|
Includes curtailment production in wind assets for which we receive compensation
|
|
(2)
|
Represents total installed capacity in assets owned at the end of the period, regardless of our percentage of ownership in each of the assets
|
Renewable energy.
Revenue increased by 7.9% to $392.2 million for the six-month period ended June 30, 2018, compared with $363.6 million for the six-month period ended June 30,
2017. The increase was due in part to a more favorable foreign exchange rate. On a constant currency basis, revenues for the six-month period ended June 30, 2018 would have been $365.6 million, representing an increase of 0.6% compared to the same
period of 2017. The increase is also due to the higher production at Kaxu. Further Adjusted EBITDA margin increased to 88.1% for the six-month period ended June 30, 2018 from 76.8% for the six-month period ended June 30, 2017 principally due to
the one-time $39.0 million gain on the long-term operation and maintenance agreement (see “Results of Operations- Other operating income” above).
Efficient natural gas power.
Revenue increased by 3.4% to $61.4 million for the six-month period ended June 30, 2018, compared with $59.4 million for the six-month period ended June 30, 2017. The increase was due to the higher revenues in the portion of the tariff related to
the operation and maintenance services, driven by the higher operation and maintenance costs in the six-month period ended June 30, 2018. Operation and maintenance costs are typically higher in the quarters prior to a major maintenance, which is
scheduled to take place at the beginning of 2019. As a result, Further Adjusted EBITDA margin decreased from 88.9% in the six-month period ended June 30, 2017, compared to 76.5% in the six-month period ended June 30, 2018.
Electric transmission lines.
Revenue remained stable at $47.9 million for the six-month period ended June 30, 2018, compared with $47.6 million for the six-month period ended June 30, 2017. Further Adjusted EBITDA decreased to $40.3 million in the six-month period ended June
30, 2018 from $49.8 million in the six-month period ended June 30, 2017, primarily due to the ACBH dividend recorded in the first quarter of 2017. Pursuant to the agreement reached with Abengoa in the third quarter of 2016, we were acknowledged as
the legal owner of the dividends retained from Abengoa prior to the ACBH agreement settlement. As a result, we recorded $10.4 million income in the first quarter of 2017 in our financial statements, in accordance with the accounting treatment given
previously to the ACBH dividend. We no longer own any shares in ACBH and will not retain any additional dividends.
Water.
Revenue and Further
Adjusted EBITDA in the six-month period ended June 30, 2018 decreased to $11.6 million and $6.7 million from $12.6 million and $7.8 million, respectively, mainly due to a one-off gain recorded in the first half of 2017.
Liquidity and Capital Resources
The liquidity and capital resources discussion which follows 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. 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 in this quarterly report of these estimates 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.
Our principal liquidity and capital requirements consist of the following:
|
·
|
debt service requirements on our existing and future debt;
|
|
·
|
cash dividends to investors; and
|
|
·
|
acquisitions of new companies and operations (see “Item 4.B—Business Overview—Our Growth 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 June 30, 2018, our cash and cash equivalents at the project company level were $504.9 million compared with $520.9 million as of
December 31, 2017. In addition, our cash and cash equivalents at the Atlantica Yield plc level were $152.3 million as of June 30, 2018 compared with $148.5 million as of December 31, 2017. Additionally, we had $155.0 million available under our
Revolving Credit Facility and total corporate liquidity $307.3 million as of June 30, 2018. As of December 31, 2017, we had $71.0 million available under our Former Credit Facility and our total corporate liquidity $219.5 million as of December
31, 2017.
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, the 2019 Notes, the Revolving Credit
Facility, the Note Issuance Facility and a line of credit with a local bank.
Revolving Credit Facility
On May 10, 2018, we, entered into a $215 million revolving credit facility with a syndicate of banks (the “Revolving Credit Facility”)
which matures in December 2021. The Revolving Credit Facility may be increased by $85 million to $300 million, subject to certain conditions. As of June 30, 2018, we had $60 million outstanding under the Revolving Credit Facility. Thus, the
available liquidity was $155 million as of June 30, 2018.The Revolving Credit Facility replaced Tranche A of the Former Revolving Credit Facility, which was repaid and cancelled ahead of its maturity.
Loans under the Revolving Credit 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 U.S. prime rate 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%. Letters of credit are subject to a sublimit under the Revolving Credit Facility of $70 million.
Our payment obligations under the Revolving Credit Facility are guaranteed by our subsidiaries ABY Concessions Infrastructures, S.L.U.,
ABY Concessions Peru S.A., ACT Holding, S.A. de C.V., ASHUSA Inc., ASUSHI Inc. and Atlantica Yield South Africa Ltd. The Revolving Credit Facility permits the release of the guaranty of ABY South Africa (Pty) LTD, subject to certain conditions set
forth therein. The Revolving Credit Facility is also secured by a high percentage of our assets and the assets of the guarantors, subject to customary exceptions.
The Revolving Credit Facility contains covenants that limit certain of our and the guarantors’ activities, including those relating to:
mergers; customary change of control provisions; consolidations; the ability to incur additional indebtedness; sales, transfers and other dispositions of property and assets; providing new guarantees; investments; granting additional security
interests, transactions with affiliates and our ability to pay cash dividends and is also subject to certain standard restrictions. Additionally, we are required to comply with (i) a maintenance leverage ratio of our indebtedness at the holding
level to our cash available for distribution of 5.0x and (ii) an interest coverage ratio of cash available for distribution to debt service payments of 2.0x. The Revolving Credit Facility also contains customary events of default, upon the
occurrence of which the lenders have the ability to declare the unpaid principal amount of all outstanding loans, and interest accrued thereon, to be immediately due and payable. In addition, the Revolving Credit Facility includes a material
subsidiary default provision related to a default by our project subsidiaries in their financing arrangements, such that a payment default by one or more of our non-recourse subsidiaries representing more than 25% of the cash available for
distribution distributed in the previous four fiscal quarters could trigger a default under our Revolving Credit Facility.
Note Issuance Facility
On February 10, 2017, we entered into a Note Issuance Facility, a senior secured note facility with a group of funds managed by
Westbourne Capital as purchasers of the notes issued thereunder for a total amount of €275 million (approximately $321 million), with three series of notes. €92 million of Series 1 notes mature in 2022; €91.5 million of series 2 notes mature in
2023; and €91.5 million of series 3 notes mature in 2024. Interest on all three series is variable and we fully hedged the Note Issuance Facility with a swap to fix the interest rate for a total interest of 5.5%. The proceeds of the Note Issuance
Facility were used for the repayment and cancellation of Tranche B under the Former Revolving Credit Facility.
Local Credit Line
In July 2017, we signed a line of credit with a local bank for up to €10.0 million (approximately $11.7 million) which is available in
euros or U.S. dollars. Amounts drawn accrue interest at a rate per annum equal to EURIBOR plus 2.25% or LIBOR plus 2.25%, depending on the currency. This credit facility had a maturity date of July 20, 2018 which was extended to July 2019 in the
third quarter of 2018. The line was fully drawn in 2017 and was used to prepay a portion of Tranche A under the Former Revolving Credit Facility.
2019 Notes
On November 17, 2014, we issued the 2019 Notes in an aggregate principal amount of $255 million. The 2019 Notes accrue annual interest
of 7.000% payable semi-annually beginning on May 15, 2015 until their maturity date of November 15, 2019. As required by the indenture governing the 2019 Notes, we have obtained a public credit rating for the 2019 Notes from S&P and Moody’s.
Former Revolving Credit Facility
On December 3, 2014, we entered into the Former Revolving Credit Facility in the total amount of up to $125 million, which was fully
prepaid and canceled on May 16, 2018. On December 22, 2014, we drew down $125 million under Tranche A of the Former Revolving Credit Facility. On June 26, 2015, we amended and restated our Former Revolving Credit Facility to include a new tranche,
Tranche B, in the total principal amount of $290 million, which was fully prepaid and canceled in March 2017.
See “Item 5.B—Liquidity and Capital Resources—Financing Arrangements” of our Annual Report.
Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, as well as
acquisitions, will depend on our future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control.
We believe that our existing liquidity position and cash flows from operations will be sufficient to meet our requirements and
commitments for the next 12 months and to distribute dividends to our investors. Based on our current level of operations, we believe our cash flow from operations and available cash will be adequate to meet our future liquidity needs for at least
the next twelve months. Please see “Risk Factors—Risks Related to Our Indebtedness—Potential future defaults by our subsidiaries, Abengoa or other persons could adversely affect us.”
Project debt refinancing
Helios 1/2
On May 18, 2018 we refinanced Helios 1/2 as expected in our financial plan. Under the previous financing, Helios 1/2 projects had a
“cash-sweep” mechanism in the financing agreements in virtue of which all the cash generated by the projects, from 2020 onwards had to be used to prepay the outstanding loan amounts. The new loan agreements have eliminated this requirement.
The new project finances are two mini-perm loan agreements for a total amount of €292 million for both projects with a syndicate of
eight banks formed by Santander S.A., Caixabank S.A., Bankia S.A., ICO, Credit Agricole Corporate, ING Bank N.V., Abanca S.A. and Bankinter S.A. The increase in notional with respect to the previous financing was used to partially cancel the swap
in place and pay refinancing costs. The mini-perm structure consists of sculpting semiannual debt service payments using an underlying tenor of 15 years but with a contractual legal maturity in 2027. We expect to refinance Helios 1/2 before 2028.
The interest rate for the loans is a floating rate based on EURIBOR (six months) plus a margin of: (i) 2.25% until December 2020; (ii) 2.50% from January 2021 until December 2024; (iii) 2.75% from January 2025 until maturity.
The loans are currently 70% hedged with swaps with some of the same banks providing the financing. We have maintained part of the swaps
which were previously in place. As a result, 64% of the swap hedged portion is structured through a swap set at approximately 3.85% and 36% through a new swap contracted in 2018 set at approximately 0.89%. Furthermore, in 2017, we contracted
additional caps with a 1% strike covering 11% of the principal of both loan agreements through 2025.
The financing agreements of both plants permit cash distributions to shareholders twice per year from 2019 onwards if the debt service
coverage ratio is at least 1.15x.
Helioenergy 1/2
On June 26, 2018 we refinanced Helioenergy 1/2 as part of our financial plan, for the same amount that was outstanding as of the date of
the refinancing.
Helioenergy 1 entered into a 15-year loan agreement of €108.9 million and Helioenergy 2 entered into a 15-year loan agreement of €109.6
million with a syndicate of banks consisting, in both agreements, of Banco Santander, S.A., CaixaBank, S.A., Bankia, S.A., Credit Agricole Corporate and Investment Bank, S.A., Bankinter, S.A., Unicaja Banco, S.A. and ING Bank, N.V., Spanish Branch
and the investment firm Rivage Investment. The interest rate for the loans is a floating rate based on EURIBOR plus a margin of 2.25% until December 2025 and 2.50% until maturity (compared to a grid of margins starting at 3.25% in the previous
financing). Debt service is sculpted according to the specific characteristics of the project.
In addition, each of the two projects entered into a 17-year, fully amortizing loan agreement with an institutional investor for a €22.5
million (€45 million in total) with a fixed interest rate of 4.37%.
We have maintained the original swap which hedged the previous financing. As a result, the banking tranche is 97% hedged through a swap
set at approximately 3.8205% strike. In addition, in 2017, we contracted additional caps with a 1% strike covering 12.5% of the principal of both Helioenergy 1 and Helioenergy 2 through 2025.
The financing arrangements permit cash distributions to shareholders semi-annually year based on audited annual financials for the prior
year indicating a debt service coverage ratio of at least 1.15x.
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 expense
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). Our
target payout ratio is 80% of our cash available for distribution, 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 24, 2017, our board of directors approved a dividend of $0.25 per share which was paid on March 15, 2017 to the shareholders
of record March 6, 2017. From that amount, we retained $10.4 million of the dividend attributable to Abengoa. In the third quarter of 2016, Abengoa acknowledged that it failed to fulfill its obligations under the agreements related to the preferred
equity investment in ACBH and recognized Atlantica as the legal owner of $28.0 million of dividends retained from Abengoa in previous years and $10.4 million retained in the first quarter of 2017. Upon completion of Abengoa’s restructuring, we
received corporate tradable bonds and equity of Abengoa and we waived, as agreed, our rights under the ACBH agreements, including our right to further retain the dividends payable to Abengoa.
On May 12, 2017, our board of directors approved a dividend of $0.25 per share which was paid on June 15, 2017 to the shareholders of
record May 31, 2017.
On July 28, 2017, our board of directors approved a dividend of $0.26 per share which was paid on September 15, 2017 to shareholders of
record August 31, 2017.
On November 10, 2017, our board of directors approved a dividend of $0.29 per share, which represented an increase of 12% from the prior
quarter and an increase of 78% from the third quarter of 2016. The dividend was paid on December 15, 2017 to shareholders of record November 30, 2017.
On February 27, 2018, our board of directors approved a dividend of $0.31 per share, which represented an increase of 7% from the prior
quarter and an increase of 24% from the fourth quarter of 2016. The dividend was paid on March 27, 2018, to shareholders of record March 19, 2018.
On May 11, 2018, our board of directors approved a dividend of $0.32 per share, which represents an increase of 28% from the first
quarter of 2017. The dividend was paid on June 15, 2018 to shareholders of record May 31, 2018.
On July 31, 2018, our board of directors approved a dividend of $0.34 per share, which represents an increase of 31% from the second
quarter of 2017. The dividend is expected to be paid on or about September 15, 2018, to shareholders of record August 31, 2018.
Acquisitions
|
•
|
On February 28, 2017, we completed the acquisition of a 12.5% interest in a 114-mile transmission line in the United States from Abengoa at cost. We expect our total
investment to be up to $10 million in the coming three years, including the initial amount invested at cost.
|
|
•
|
On February 28, 2018, we completed the acquisition of a 4 MW mini-hydroelectric power plant in Peru for $9 million. We financed the acquisition with available cash on hand.
|
Cash Flow
The following table sets forth consolidated cash flow data for the six-month periods ended June 30, 2018 and 2017:
|
|
Six-month period ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
($ in millions)
|
|
Gross cash flows from operating activities
|
|
|
|
|
|
|
Profit/(loss) for the period
|
|
$
|
73.2
|
|
|
$
|
14.2
|
|
Financial expense and non-monetary adjustments
|
|
|
297.8
|
|
|
|
339.7
|
|
Profit for the period adjusted by financial expense and non-monetary adjustments
|
|
$
|
371.0
|
|
|
$
|
353.9
|
|
Variations in working capital
|
|
|
(47.2
|
)
|
|
|
(80.0
|
)
|
Net interest and income tax paid
|
|
|
(160.6
|
)
|
|
$
|
(169.6
|
)
|
|
|
|
|
|
|
|
|
|
Total net cash provided by operating activities
|
|
$
|
163.2
|
|
|
$
|
104.3
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
1
|
|
$
|
44.5
|
|
|
$
|
19.4
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
$
|
(207.6
|
)
|
|
$
|
(123.7
|
)
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
0.1
|
|
|
|
-
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
669.4
|
|
|
|
594.8
|
|
Translation differences in cash or cash equivalents
|
|
|
(12.3
|
)
|
|
|
19.5
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
657.2
|
|
|
$
|
614.3
|
|
Note:—
|
(1)
|
Includes proceeds of $60.8 million received at Solana from Abengoa in relation to the consent with the DOE. See note 6 to the quarterly
Consolidated Financial Statements.
|
Net cash from operating activities
Net cash provided by operating activities in the six-month period ended June 30, 2018 was $163.2 million compared with $104.3 million
for the six-month period ended June 30, 2017. The increase was mainly driven by a lower negative impact of variations in working capital. Variations in working capital in the six-month period ended June 30, 2018 had a negative impact of $47.2
million compared to $80.0 million negative impact in the same period of 2017. Profit for the period adjusted by financial expense and non-monetary adjustments increased due in part to the impact of the collections received by Solana from Abengoa.
Net interest and income taxes paid also remained stable in the six-month period ended June 30, 2018 when compared to the six-month period ended June 30, 2017.
Net cash provided by investing activities
For the six-month period ended June 30, 2018, net cash provided by investing activities was $44.5 million and corresponded mainly to the
$60.8 million related to the $120 million received by Solana from Abengoa . From an accounting perspective, since the payment resulted from Abengoa’s obligations under the EPC contract, most of the amount received in 2018 was recorded as reducing
the asset value and was therefore classified as cash provided by investing activities. In addition, we paid $9.3 million for the acquisition of mini-hydroelectric plant in Peru. For the six-month period ended June 30, 2017, net cash used in
investing activities amounted to $19.4 million and corresponded mainly to the $24.7 million of proceeds obtained from the sale of the financial instruments received from Abengoa as part of the ACBH agreement settlement.
Net cash used in financing activities
Net cash used in financing activities in the six-month period ended June 30, 2018 was $207.6 million and corresponded principally to
$195.2 million of the repayments of principal of our financing agreements, of which $52.5 million were prepayments by Solana using the proceeds of the payment received from Abengoa in connection with the DOE consent and $54 million corresponded to
the prepayment and cancelation of our Former Revolving Facility. Additionally, we drew down $57.5 million of the new Revolving Credit Facility which was signed in May 2018 and we paid $69.9 million of dividends to shareholders and non-controlling
interest. Net cash used in financing activities in the six-month period ended June 30, 2017 was $123.7 million and corresponded principally to net proceeds of $76.1 million of scheduled repayments of principal of our project financing agreements
and $42.3 million in dividends paid to shareholders and non-controlling interest.
|
Quantitative and Qualitative Disclosures 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 Department 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 currency. None of the derivative contracts signed has an unlimited
loss exposure.
Foreign exchange rate risk
The main cash flows from our subsidiaries are cash collections arising from long-term contracts with clients 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
United States
dollar, as most of our revenues and expenses are denominated or linked to
United States
dollars. All our companies
located in North America, South America and Algeria have their PPAs, or concessional agreements, and financing contracts signed in, or indexed to,
United States
dollars. Our
solar power plants in Spain
have their revenues and expenses denominated in euros. Revenues and expenses of Kaxu, our solar plant in South Africa, are denominated in the South
African rand. While fluctuations in the value of the euro and the South African rand may affect our operating results, we hedge cash distributions from our Spanish assets. Our strategy is to hedge the exchange rate for the distributions from our
Spanish assets after deducting euro-denominated interest payments and euro-denominated general and administrative expenses. Through currency options, we hedge 100% of our euro-denominated net exposure for the next 12 months and 75% of our
euro-denominated net exposure for the following 12 months, on a rolling basis.
Since we hedge cash flows, fluctuations in the value of foreign
currencies (the euro and the South African rand) in relation to the
United States
dollar may affect our operating 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 considering hedges). We use interest rate swaps and interest rate options (caps) to mitigate interest rate risk.
As a result, the notional amounts hedged as of December 31, 2017, 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 U.S. dollars: between 75% and 100% of the notional amount, maturities until 2032 and average guaranteed interest rates of between 2.32% and 5.27%
|
•
|
project debt in euro: between 87% and 100% of the notional amount, maturities until 2030 and average guaranteed interest rates of between 3.20% and 4.87%
|
In connection with our interest rate derivative positions, the most significant impact on our 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 June 30, 2018, with the rest of the variables remaining constant,
the effect in the consolidated income statement would have been a loss of $2.9 million and an increase in hedging reserves of $32.1 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
We believe that we have limited credit risk with clients as revenues are derived from PPAs and other revenue contracted agreements with
electric utilities and state-owned entities.
During the recent months the credit rating of Pacific Gas & Electric Company (“PG&E”), the offtaker of our Mojave solar plant
has weakened to BBB from S&P, A3 from Moody’s and BBB from Fitch as of the date of this report. In addition, the credit rating of Eskom has also weakened and is currently CCC+ from S&P, B2 from Moody’s and BB- from Fitch. Eskom is the
offtaker of our Kaxu solar plant, a state-owned, limited liability company, wholly owned by the government of the Republic of South Africa. Eskom’s payment guarantees to our solar plant Kaxu are underwritten by the South African Department of
Energy, under the terms of an implementation agreement. The credit rating of the Republic of South Africa as of the date of this report is BB/Baa3/BB+ by S&P, Moody’s and Fitch, respectively.
The following table shows the maturity detail of trade receivables as of December 31, 2017 and 2016:
|
|
Balance as of
December 31,
|
|
|
|
|
|
|
|
|
Maturity
|
|
|
|
|
|
|
Up to 3 months
|
|
|
186.7
|
|
|
|
151.2
|
|
Between 3 and 6 months
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
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 non-recourse 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 significantly.
Not applicable.
PART II. OTHER INFORMATION
On October 17, 2016, ACT received a request for arbitration from the International Court of Arbitration of the International Chamber of
Commerce presented by Pemex. Pemex is requesting compensation for damages caused by a fire that occurred in their facilities during the construction of the ACT cogeneration plant in December 2012, for a total amount of approximately $20 million.
On July 5, 2017, Seguros Inbursa, the insurer of Pemex, joined as a second claimant in the process. In the event that the arbitration results in a negative outcome, we expect these damages to be covered by the existing insurance policy.
A number of Abengoa’s subcontractors and insurance companies that issued bonds covering Abengoa’s obligations under such contracts in
the United States have included some of our non-recourse subsidiaries in the United States as co-defendants in claims against Abengoa. Generally, our subsidiaries have been dismissed as defendants at early stages of the processes but there remain
pending cases including Arb Inc. with a potential total claim of approximately $33 million and a group of insurance companies that have addressed to a number of Abengoa’s subsidiaries and to Solana (Arizona Solar One) a potential claim for Abengoa
related losses of approximately $20 million that could increase, according to the insurance companies, up to a maximum of up to approximately $200 million if all their exposure resulted in losses.
We are not a party to any other significant legal proceeding other than legal proceedings arising in the ordinary course of our
business. We are party to various administrative and regulatory proceedings that have arisen in the ordinary course of business. While we do not expect these proceedings, either individually or in the aggregate, to have a material adverse effect on
our financial position or results of operations, because of the nature of these proceedings we are not able to predict their ultimate outcomes, some of which may be unfavorable to us.
There have been no material changes to the risk factors included in our Annual Report.
Items 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.
None.
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 YIELD PLC
|
|
|
Date: August 6, 2018
|
By:
|
/s/
Santiago Seage
|
|
|
Name:
|
Santiago Seage
|
|
|
Title:
|
Chief Executive Officer
|
70