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As confidentially submitted to the Securities and Exchange Commission on February 28, 2014

pursuant to the Jumpstart Our Business Startups Act

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Abengoa Yield Limited

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

 

 

England and Wales		4911		Not applicable
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

1 Park Row

Leeds, United Kingdom LS1 5AB

Tel.: +34 954 937 111

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Abengoa Solar LLC

1250 Simms St., #101

Lakewood, CO 80401

Tel.: (303) 928 8500

Attn.: Christopher B. Hansmeyer

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Jeffrey C. Cohen Linklaters LLP 1345 Avenue of the Americas New York, New York 10105 Phone: (212) 903-9000		Michael J. Willisch Davis Polk & Wardwell LLP Paseo de la Castellana, 41 28046 Madrid Phone: + 34 91 768 9610

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

Calculation of Registration Fee

 

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price(1)(2)		Amount of Registration Fee
Ordinary Shares, nominal value $             per share		$		$

(1)	Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)	Includes the aggregate offering price of additional shares that may be purchased by the underwriters.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

 

 

 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated February 28, 2014.

Preliminary Prospectus

             Ordinary Shares

 

(Incorporated in England and Wales)

Ordinary Shares

$             per share

 

 

This is the initial public offering of the ordinary shares of Abengoa Yield Limited, or Abengoa Yield. We were recently formed by Abengoa, S.A., or Abengoa. We refer to this offering of ordinary shares, or the “shares,” as the “offering.”

We currently expect that the initial public offering price per share will be between $             and $            .

Immediately following this offering, Abengoa will indirectly hold         % of the voting power in Abengoa Yield. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NASDAQ Global Select Market.

We intend to apply to have our shares listed on the NASDAQ Global Select Market under the symbol “        ”.

We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, and, as such, are allowed to provide in this prospectus more limited disclosures than an issuer that would not so qualify. In addition, for as long as we remain an emerging growth company, we will qualify for certain limited exceptions from the Sarbanes-Oxley Act of 2002. Please see “Risk Factors—Risks Related to Ownership of our Shares—We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements, which could make our shares less attractive to investors” and “Summary—JOBS Act.”

 

 

Investing in our shares involves risks. See “Risk Factors” beginning on page 35 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

		Per Share				Total
Public Offering Price		$				$
Underwriting Discounts(1)		$				$
Proceeds to Abengoa Yield, before expenses		$				$

 

(1)	Abengoa is paying certain expenses of the underwriters. See “Expenses of the Offering” and “Underwriting.”

The underwriters expect to deliver the shares to purchasers on or about                     , 2014 through the book-entry facilities of The Depository Trust Company.

To the extent that the underwriters sell more than              shares, the underwriters have the option to purchase up to an additional              shares from an Abengoa subsidiary at the public offering price less the underwriting discount. We will not receive any proceeds from the exercise of the underwriters’ over-allotment option.

Citigroup

The date of this prospectus is                     , 2014.

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TABLE OF CONTENTS

 

		Page
Enforcement of Civil Liabilities			1
Definitions			1
Presentation of Financial Information			3
Presentation of Industry and Market Data			4
Cautionary Statements Regarding Forward-Looking Statements			6
Summary			8
The Offering			28
Summary Combined Financial Information			30
Risk Factors			35
Use of Proceeds			61
Cash Dividend Policy			62
Capitalization			74
Dilution			75
Unaudited Pro Forma Combined Financial Information			77
Selected Financial Information			81
Management’s Discussion and Analysis of Financial Condition and Results of Operations			85
Industry and Market Opportunity			109
Business			118
Regulation			143
Management			168
Related Party Transactions			174
Principal and Selling Shareholder			181
Description of Share Capital			182
Shares Eligible for Future Sale			197
Taxation			199
Underwriting			205
Expenses of the Offering			210
Legal Matters			211
Experts			212
Where You Can Find More Information			213
Combined Financial Statements			F-1

We are responsible for the information contained in this prospectus and in any free-writing prospectus we prepare or authorize. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

 

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ENFORCEMENT OF CIVIL LIABILITIES

We will be a public limited company organized under the laws of England and Wales. A majority of our directors and officers and certain other persons named in this prospectus reside outside the United States and all or a significant portion of the assets of the directors and officers and certain other persons named in this prospectus and a significant portion of our assets is located outside the United States.

As a result, it may not be possible for U.S. investors to effect service of process within the United States upon these persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in the United Kingdom and in Spain, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the U.S. federal securities laws.

DEFINITIONS

Unless otherwise specified or the context requires otherwise in this prospectus:

 

•

references to “we,” “us,” the “Issuer” and “our” refer to Abengoa Yield Limited (or following our re-registration as a public limited company that will take place prior to the consummation of this offering, Abengoa Yield plc), including the assets and liabilities to be contributed to us by Abengoa immediately prior to the consummation of the offering, unless the context otherwise requires;

 

•

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

 

•

references to “Abengoa ROFO Assets” refer to all of the future contracted assets in renewable energy, conventional power, electric transmission and water of Abengoa in the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European Union, and four additional assets in other selected regions, including a pipeline of specified assets that we except to evaluate for acquisition in 2015, 2016 and beyond, for which Abengoa will provide us a right of first offer to purchase if offered for sale by Abengoa;

 

•

references to “ACBH” refer to Abengoa Concessoes Brasil Holding, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines;

 

•

references to “Adjusted EBITDA” have the meaning set forth in “Presentation of Financial Information”;

 

•

references to “Annual Combined Financial Statements” refer to the audited Combined Financial Statements as of and for the years ended December 31, 2013 and 2012 (which include a statement of financial position as of January 1, 2012), including the related notes thereto, prepared in accordance with IFRS as issued by the IASB (as such terms are defined herein), included in this prospectus;

 

•

references to “BOOT” refer to build-own-operate-transfer arrangements;

 

•

references to “cash available for distribution” have the meaning set forth in “Cash Dividend Policy”;

 

•

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

 

•

references to “Combined EBITDA” have the meaning set forth in “Presentation of Financial Information;

 

•

references to “CSP” refer to Concentrating Solar Power;

 

•

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

 

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•

references to “EBITDA” have the meaning set forth in “Presentation of Financial Information”;

 

•

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

 

•

references to “euro” or “€” are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time;

 

•

references to “Executive Services Agreement” refer to the agreement we will enter into with Abengoa pursuant to which Abengoa will arrange for a team of executives to provide executive management services to Abengoa Yield in the year following the consummation of this offering;

 

•

references to “FPA” refer to the U.S. Federal Power Act;

 

•

references to “gross capacity” or “gross MW” refer to the maximum, or rated, power generation capacity, in MW, of a facility or group of facilities, without adjusting by our percentage of ownership interest in such facility as of the date of this prospectus;

 

•

references to “GW” refer to gigawatts;

 

•

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

 

•

references to “IPP” refer to independent power producers;

 

•

references to “ITC” refer to investment tax credits;

 

•

references to “membership interest” refer to ownership interest in the applicable entity, including such economic interest and right, if any, to participate in the management of the business and affairs of the entity, including the right, if any, to vote on, consent to or otherwise participate in any decision or action of or by the members of the entity and the right to receive information concerning the business and affairs of the entity, in each case to the extent expressly provided in the relevant operating agreement;

 

•

references to “MW” refer to megawatts;

 

•

references to “MWh” refer to megawatt hours;

 

•

references to “O&M” refer to operations and maintenance services provided at our various facilities;

 

•

references to “operation” refer to the status of projects that have reached COD (as defined above);

 

•

references to “pre-construction” refer to the status of projects for which a PPA is in place and for which financing arrangements are in the process of being implemented;

 

•

references to “PV” refer to photovoltaic;

 

•

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

 

•

references to “ROFO Agreement” refer to our agreement with Abengoa that will provide us a right of first offer to purchase any of the Abengoa ROFO Assets offered for sale by Abengoa;

 

•

references to “RPS” refer to renewable portfolio standards adopted by 29 states and the District of Columbia that require a regulated retail electric utility to procure a specific percentage of its total electricity delivered to retail customers in the state from eligible renewable generation resources, such as solar or wind generation facilities, by a specific date;

 

•

references to “Support Services Agreement” refer to the agreement we have entered into with Abengoa pursuant to which Abengoa will provide certain administrative and support services to us and some of our subsidiaries;

 

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•

references to “total net fixed assets” refer to the sum of intangible assets and property, plant and equipment, and fixed assets and projects, net of depreciation, amortization and provisions for impairment charges; and

 

•

references to “TWh” refer to terawatt hours.

PRESENTATION OF FINANCIAL INFORMATION

The selected financial information as of and for the years ended December 31, 2013 and 2012 and as of January 1, 2012 is derived from, and qualified in its entirety by reference to, our Annual Combined Financial Statements, which are included elsewhere in this prospectus, which are prepared in accordance with IFRS as issued by the IASB.

Our Annual Combined Financial Statements reflect the combination of the assets and associated liabilities that Abengoa will contribute to us immediately prior to the consummation of the offering.

Certain numerical figures set out in this prospectus, including financial data presented in millions or thousands and percentages describing market shares, have been subject to rounding adjustments, and, as a result, the totals of the data in this prospectus may vary slightly from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other data set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are calculated using the numerical data in our Annual Combined Financial Statements or the tabular presentation of other data (subject to rounding) contained in this prospectus, as applicable, and not using the numerical data in the narrative description thereof.

Non-GAAP Financial Measures

This prospectus contains non-GAAP financial measures including Combined EBITDA, or EBITDA, Adjusted EBITDA and cash available for distribution.

Combined EBITDA, also referred to as EBITDA, is calculated as profit for the year from continuing operations, after adding back income tax expense/(benefit), share of (loss)/profit of associates, finance expense net and depreciation, amortization and impairment charges of entities included in the Annual Combined Financial Statements.

Adjusted EBITDA is calculated as profit for the year from continuing operations, after adding back income tax expense/(benefit), share of (loss)/profit of associates, finance expense net (excluding the net income from our convertible preferred equity investment in ACBH) and depreciation, amortization and impairment charges of entities included in the Annual Combined Financial Statements.

Cash available for distribution is calculated as set forth in “Cash Dividend Policy—General—Estimate of Future Cash Available for Distribution.”

We present non-GAAP financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. The non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS as issued by the IASB. Non-GAAP financial measures and ratios are not measurements of our performance or liquidity under IFRS as issued by the IASB and should not be considered as alternatives to operating profit or profit for the year or any other performance measures derived in accordance with IFRS as issued by the IASB or any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities.

 

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Some of the limitations of these non-GAAP measures are:

 

•

they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

 

•

they do not reflect changes in, or cash requirements for, our working capital needs;

 

•

they may not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments, on our debts;

 

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and Combined EBITDA, Adjusted EBITDA and cash available for distribution do not reflect any cash requirements that would be required for such replacements;

 

•

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

 

•

the fact that other companies in our industry may calculate Combined EBITDA, Adjusted EBITDA and cash available for distribution differently than we do, which limits their usefulness as comparative measures.

In our discussion of operating results, we have included foreign exchange impacts in our revenue by providing constant currency revenue growth. The constant currency presentation is a non-GAAP financial measure, 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.

Pro Forma Financial Information

We present in this prospectus unaudited pro forma combined financial information consisting of the unaudited pro forma combined income statement of Abengoa Yield for the year ended December 31, 2013 as well as the unaudited pro forma combined statement of financial position of Abengoa Yield as of December 31, 2013 to give effect to the consolidation of Mojave, the transfer to us of a preferred equity investment in ACBH, a Brazilian company that owns 14 electric transmission lines, the contribution of certain related party loans and repayment of debt to third parties and reduction of equity that we expect to occur prior to consummation of this offering.

Unaudited pro forma combined financial information has been derived from, and should be read in conjunction with, the Annual Combined Financial Statements as of and for the year ended December 31, 2013 prepared in accordance with IFRS as issued by the IASB, included elsewhere in this prospectus.

PRESENTATION OF INDUSTRY AND MARKET DATA

In this prospectus, we rely on, and refer to, information regarding our business and the markets in which we operate and compete. The market data and certain economic and industry data and forecasts used in this prospectus were obtained from internal surveys, market research, governmental and other publicly available information, independent industry publications and reports prepared by industry consultants. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable but we have not independently verified them, and there can be no assurance as to the accuracy or completeness of the included information.

 

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Certain market information and other statements presented herein regarding our position relative to our competitors are not based on published statistical data or information obtained from independent third parties, but reflect our best estimates. We have based these estimates upon information obtained from our customers, trade and business organizations and associations and other contacts in the industries in which we operate.

Elsewhere in this prospectus, statements regarding our contracted concessions activities, our position in the industries and geographies in which we operate are based solely on our experience, our internal studies and estimates and our own investigation of market conditions.

All of the information set forth in this prospectus relating to the operations, financial results or market share of our competitors has been obtained from information made available to the public in such companies’ publicly available reports and independent research, as well as from our experience, internal studies, estimates and investigation of market conditions. We have not funded, nor are we affiliated with, any of the sources cited in this prospectus.

All third-party information, as outlined above, has to our knowledge been accurately reproduced and, as far as we are aware and are able to ascertain, no facts have been omitted which would render the reproduced information inaccurate or misleading, but there can be no assurance as to the accuracy or completeness of the included information.

 

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this prospectus, including, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we operate or are seeking to operate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,’ “forecast,” “guidance,” “intend,” “is likely to,” “may,” “plan,” “potential,” “predict,” “projected,” “should” or “will” or the negative of such terms or other similar expressions or terminology.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements speak only as of the date of this prospectus and are not guarantees of future performance and are based on numerous assumptions. Our actual results of operations, financial condition and the development of events may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements. Investors should read the section entitled “Risk Factors” and the description of our segments and business sectors in the section entitled “Business” for a more complete discussion of the factors that could affect us. Important risks, uncertainties and other factors that could cause these differences include, but are not limited to:

 

•

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

 

•

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

 

•

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

 

•

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

 

•

Decline in public acceptance or support of energy from renewable sources;

 

•

Inability to identify and/or consummate future acquisitions, whether the Abengoa ROFO Assets or otherwise, on favorable terms or at all;

 

•

Legal challenges to regulations, subsidies and incentives that support renewable energy sources;

 

•

Extensive governmental regulation in a number of different jurisdictions, including stringent environmental regulation;

 

•

Changes in prices, including increases in the cost of energy, natural gas, oil and other operating costs;

 

•

Counterparty credit risk and failures of counterparties to our offtake agreements to fulfill their obligations;

 

•

Inability to replace expiring or terminated offtake agreements with similar agreements;

 

•

Changes in interest rates and foreign currency exchange rates;

 

•

New technology or changes in industry standards;

 

•

Inability to manage exposure to credit, interest rate, exchange rate, supply and commodity price risks;

 

•

Reliance on third-party contractors and suppliers;

 

•

Deviations from our investment criteria for future acquisitions and investments;

 

•

Failure to maintain safe work environments;

 

•

Effects of catastrophes, natural disasters, adverse weather conditions, climate change, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of our plants;

 

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•

Insufficient insurance coverage and increases in insurance cost;

 

•

Revocation or termination of our concession agreements;

 

•

Litigation and other legal proceedings;

 

•

Reputational risk, including damage to the reputation of Abengoa;

 

•

Inability to adjust regulated tariffs or fixed-rate arrangements as a result of fluctuations in prices of raw materials, exchange rates, labor and subcontractor costs;

 

•

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

 

•

Variations in market electricity prices;

 

•

Loss of senior management and key personnel and our reliance on Abengoa to supply administrative, financial, executive and other support services to us;

 

•

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

 

•

Disruption of the fuel supplies necessary to generate power at our conventional generation facilities;

 

•

Failure of our newly-constructed assets or assets under construction to perform as expected;

 

•

Variations in meteorological conditions;

 

•

Changes in our tax position and greater than expected future tax liability;

 

•

Changes to our relationship with Abengoa; and

 

•

Various other factors, including those factors discussed under “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” herein.

We caution that the important factors referenced above may not be all of the factors that are important to investors. Unless required by law, we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or developments or otherwise.

 

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RISK FACTORS

Investing in our shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information contained in this prospectus, before making any investment decision. Any of the following risks and uncertainties could have a material adverse effect on our business, prospects, results of operations and financial condition. The market price of our shares could decline due to any of these risks and uncertainties, and you could lose all or part of your investment.

Risks Related to Our Business and the Markets in Which We Operate

Difficult conditions in the global economy and in the global capital markets have caused, and may continue to cause, a sharp reduction in worldwide demand for our products and services and negatively affect our access to the levels of financing necessary for the successful refinancing of our project level indebtedness

Our results of operations have been, and continue to be, materially affected by conditions in the global economy and in the global capital markets. Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, sovereign debt and the instability of the euro have contributed to increased volatility and diminished expectations for the economy and global capital markets going forward. These factors, combined with volatile oil and gas prices, declining global business and consumer confidence and rising unemployment, have precipitated an economic slowdown and have led to a recession and weak economic growth. Adverse events and continuing disruptions in the global economy and in the global capital markets may have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility with certain factors, including consumer spending, business investment, government spending, inflation affecting the business and economic environment that could affect the economic and financial situation of our concession contracts counterparties and, ultimately, the profitability and growth of our business.

Generalized or localized downturns or inflationary or deflationary pressures in our key geographical areas could also have a material adverse effect on the performance of our business. A significant portion of our business activity is concentrated in the United States, Mexico, Peru and Spain, and we have significant investments in Brazil. Consequently, we are significantly affected by the general economic conditions in these countries. Spain, for instance, has recently experienced negative economic conditions, including high unemployment and significant government debt which we believe could adversely affect our operations in the future. The effects on the European and global economy of any exit of one or more member states (each a “Member State”) from the Eurozone, the dissolution of the euro and the possible redenomination of our financial instruments or other contractual obligations from euro into a different currency, or the perception that any of these events are imminent, are inherently difficult to predict and could give rise to operational disruptions or other risks of contagion to our business and have a material, adverse effect on our business, financial condition and results of operation. In addition, to the extent uncertainty regarding the European economic recovery continues to negatively affect government or regional budgets, our business, results of operations and cash flows could be materially adversely affected.

The global capital and credit markets have experienced periods of extreme volatility and disruption since the last half of 2008. Continued disruptions, uncertainty or volatility in the global capital and credit markets may limit our access to additional capital required to operate or grow our business, including our access to new equity capital to make further acquisitions or access to non-recourse project finance which we may use to fund or refinance many of our projects, even in cases where such capital has already been committed. Such market conditions may limit our ability to replace, in a timely manner, maturing liabilities and access the capital necessary to grow our business, or replace financing previously committed for a project that ceases to be available to it. As a result, we may be forced to delay raising capital, issue shorter-term securities than we prefer, or bear a higher cost of capital which could decrease our profitability and significantly reduce our financial flexibility or even require us to modify our dividend policy. In the event that we are required to replace previously committed financing to certain projects that subsequently becomes unavailable, we may have to postpone or cancel planned capital expenditures.

 

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We have international operations and investments, including in emerging markets that could be subject to economic, social and political uncertainties

We operate our activities in a range of international locations, including Mexico, Peru, Uruguay, Chile and Spain and have significant investments in Brazil, and we expect to expand our operations into new locations in the future. Accordingly, we face a number of risks associated with operating and investing in different countries that may have a material adverse effect on our business, financial condition, results of operations and cash flows. These risks include, but are not limited to, adapting to the regulatory requirements of such countries, compliance with changes in laws and regulations applicable to foreign corporations, the uncertainty of judicial processes, and the absence, loss or non-renewal of favorable treaties, or similar agreements, with local authorities or political, social and economic instability, all of which can place disproportionate demands on our management, as well as significant demands on our operational and financial personnel and business. As a result, we can provide no assurance that our future international operations and investments will remain successful.

A significant portion of our current and our potential future operations and investments are conducted in various emerging countries worldwide. Our activities and investments in these countries involve a number of risks that are more prevalent than in developed markets, such as economic and governmental instability, the possibility of significant amendments to, or changes in, the application of governmental regulations, the nationalization and expropriation of private property, payment collection difficulties, social problems, substantial fluctuations in interest and exchange rates, changes in the tax framework or the unpredictability of enforcement of contractual provisions, currency control measures, repatriation of funds and other unfavorable interventions or restrictions imposed by public authorities. Our dollar-denominated contracts in Peru and Mexico are payable in local currency at the exchange rate of the payment date. In the event of a rapid devaluation or implementation of exchange or currency controls, we may not be able to exchange the local currency for the agreed dollar amount, which could affect our cash available for distribution. Governments in Latin America frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations. Governmental actions in certain Latin American countries to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports.

Decreases in government budgets, reductions in government subsidies and adverse changes in law may adversely affect our business and growth plan

Poor economic conditions have affected, and continue to affect, government budgets and threaten the continuation of government subsidies such as regulated revenues, cash grants, U.S. federal income tax benefits and other similar subsidies that benefit our business, particularly with respect to renewable energy. Such conditions may also lead to adverse changes in laws. For example, in the United States, due to the failure of the U.S. Congress to enact a plan by February 28, 2013 to reduce the federal budget deficit by $1.2 trillion, $85 billion of automatic budget cuts went into effect on March 1, 2013 reducing discretionary spending by all agencies of the federal government for the remainder of the federal fiscal year ending September 30, 2013. These cuts affected, among others, the U.S. Department of the Treasury’s, or the U.S. Treasury, program providing for cash grants in lieu of investment tax credits, or ITCs. See “Regulation—Regulation in the United States—U.S. Tax Incentives and Other Federal Considerations for Renewable Energy Generation Facilities—Section 1603 U.S. Treasury Grant Program.” In addition, a number of states and municipal authorities are experiencing severe fiscal pressures as they seek to address mounting budget deficits. The reduction or elimination of tariffs or subsidies or adverse changes in law could have a material adverse effect on the profitability of our existing projects, and the lack of availability of new projects undertaken in reliance on the continuation of such subsidies could adversely affect our growth plan.

Pursuant to our cash dividend policy, we intend to distribute all or substantially all of our cash available for distribution through regular quarterly distributions and dividends, and our ability to grow and make acquisitions through cash on hand could be limited

As discussed in “Cash Dividend Policy,” our dividend policy is to distribute all or substantially all of our cash available for distribution each quarter and to rely primarily upon external financing sources, including the

 

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issuance of debt and equity securities and, if applicable, borrowings under our revolving credit line with Abengoa, to fund our acquisitions and potential growth capital expenditures. We may be precluded from pursuing otherwise attractive acquisitions if the projected short-term cash flow from the acquisition or investment is not adequate to service the capital raised to fund the acquisition or investment, after giving effect to our available cash reserves. See “Cash Dividend Policy—General—Our Ability to Grow our Business and Dividend.”

We intend to make regular quarterly cash distributions to our shareholders in an amount equal to the cash available for distribution generated during a given quarter, less reserves for the prudent conduct of our business, and subject to the stated payout ratio during that given period. As such, our growth may not be as fast as that of businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional equity securities in connection with any acquisitions or growth capital expenditures, the payment of dividends on these additional equity securities may increase the risk that we will be unable to maintain or increase our per share dividend. There will be no limitations in our articles of association on our ability to issue equity securities, including securities ranking senior to our shares. The incurrence of any bank borrowings or other debt by intermediate subsidiary or by our project-level subsidiaries to finance our growth strategy will result in increased interest expense and the imposition of additional or more restrictive covenants, which, in turn, may impact the cash distributions we receive to distribute to holders of our shares.

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

Our business strategy includes growth through the acquisitions of additional generation assets primarily from Abengoa, pursuant to the ROFO Agreement, and from third parties. This strategy depends on Abengoa’s ability to identify and develop assets and desire to sell those assets to us, as well as our ability to successfully identify and evaluate acquisition opportunities and consummate acquisitions on favorable terms. However, the number of acquisition opportunities may be limited.

Our ability to acquire future renewable facilities depends on the viability of renewable assets generally. These assets currently are largely contingent on public policy mechanisms including, among others, ITCs, cash grants, loan guarantees, accelerated depreciation, carbon trading plans, environmental tax credits and R&D incentives, as discussed in “Regulation—EU Directives—Incentives for renewable energy” and “Regulation—Regulation in the United States—U.S. Tax Incentives and other Federal Considerations for Renewable Energy Generation Facilities.” These mechanisms have been implemented at the U.S. federal and state levels and in other jurisdictions where our assets are located to support the development of renewable generation and other clean infrastructure technologies. The availability and continuation of public policy support mechanisms will drive a significant part of the economics and viability of our growth strategy and expansion into clean energy investments. For example, an ITC is crucial for the development of Concentrating Solar Power plants in the United States and the benefits of ITC for new projects might be lower beginning in 2017. See “Industry and Market Opportunity—Solar—Concentrating Solar Power Technology in the United States.”

Our ability to effectively consummate future acquisitions will also depend on our ability to arrange the required or desired financing for acquisitions. We may not have access to the capital markets to issue new equity securities or sufficient availability under our credit facilities or have access to project-level financing on commercially reasonably terms when acquisition opportunities arise. An inability to obtain the required or desired financing could significantly limit our ability to consummate future acquisitions and effectuate our growth strategy. If financing is available, utilization of our credit facilities or project-level financing for all or a portion of the purchase price of an acquisition, as applicable, could significantly increase our interest expense, impose additional or more restrictive covenants and reduce cash available for distribution. Similarly, the issuance of additional equity securities as consideration for acquisitions could cause significant shareholder dilution and reduce our per share cash available for distribution if the acquisitions are not sufficiently accretive. Our ability to consummate future acquisitions may also depend on our ability to obtain any required government or regulatory approvals for such acquisitions, including, but not limited to, the Federal Energy Regulatory Commission, or FERC, approval under Section 203 of the Federal Power Act, or FPA, in respect of acquisitions in the United

 

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States; the National Electric Energy Agency, Agência Nacional de Energia Elétrica, or ANEEL, approval for the acquisition of transmission lines in Brazil; or any other approvals in the countries in which we may purchase assets in the future pursuant to the ROFO Agreement or otherwise. We may also be required to seek authorizations, waivers or notifications from debt and/or equity financing providers at the project or holding company level; local or regional agencies or bodies; and/or development agencies or institutions that may have a contractual right to authorize a proposed acquisition.

In addition, changes in our shareholder base as a result of future equity issuances to fund acquisitions or other equity-based capital markets transactions may trigger the requirement to seek waivers, authorizations or approvals from agencies, governments, financing providers, concession contract counterparties or any other relevant contract counterparty. Failure to secure any required waivers, authorizations or approvals may adversely affect our business.

Additionally, the acquisition of companies and assets are subject to substantial risks, including the failure to identify material problems during due diligence (for which we may not be indemnified post-closing), the risk of over-paying for assets (or not making acquisitions on an accretive basis) and the ability to retain customers. Further, the integration and consolidation of acquisitions requires substantial human, financial and other resources and, ultimately, our acquisitions may divert management’s attention from our existing business concerns, disrupt our ongoing business or not be successfully integrated. There can be no assurances that any future acquisitions will perform as expected or that the returns from such acquisitions will support the financing utilized to acquire them or maintain them. As a result, the consummation of acquisitions may have a material adverse effect on our business, financial condition, results of operations and cash flows and ability to pay dividends to holders of our shares.

Finally, while we benefit from a right of first offer with respect to the Abengoa ROFO Assets, we will compete with other companies for limited acquisition opportunities from third parties, which may increase our cost of making acquisitions or cause us to refrain from making acquisitions from third parties. Some of our competitors for acquisitions are much larger than us with substantially greater resources. These companies may be able to pay more for acquisitions due to cost of capital advantages, synergy potential, or other drivers, and may be able to identify, evaluate, bid for and purchase a greater number of assets than our financial or human resources permit. If we are unable to identify and consummate future acquisitions, it will impede our ability to execute our growth strategy and limit our ability to increase the amount of dividends paid to holders of our shares.

We rely on certain regulations, subsidies and tax incentives that may be changed or legally challenged

We rely in a significant part on environmental and other regulation of industrial and local government activities, including regulations mandating, among other things, reductions in carbon or other greenhouse gas emissions and minimum biofuel content in fuel or use of energy from renewable sources. If the businesses to which such regulations relate were deregulated or if such regulations were materially changed or weakened, the profitability of our current and future projects could suffer, which could in turn have a material adverse effect on our business, financial condition and results of operations. In addition, uncertainty regarding possible changes to any such regulations has adversely affected in the past, and may adversely affect in the future, our ability to refinance a project or to satisfy other financing needs.

Subsidy regimes for renewable energy generation have been challenged in the past on constitutional and other grounds (including that such regimes constitute impermissible European Union state aid) in certain jurisdictions. In addition, certain loan guarantee programs in the United States, including those which have enabled the DOE to provide loan guarantees to support our Solana and Mojave projects, have been challenged on grounds of failure by the appropriate authorities to comply with applicable U.S. federal administrative and energy law. If all or part of the subsidy and incentive regimes for renewable energy generation in any jurisdiction in which we operate were found to be unlawful and, therefore, reduced or discontinued, we may be unable to compete effectively with conventional and other renewable forms of energy.

 

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The production from our renewable energy facilities is the subject of various tax relief measures or tax incentives in the jurisdictions in which they operate. These tax relief and tax incentive measures play an important role in the profitability of our projects. In the future, it is possible that some or all of these tax incentives will be suspended, curtailed, not renewed or revoked. For example, our Solana and Mojave projects are reliant on the ITC Cash Grant program to repay a significant portion of their respective external debt financing and the failure to receive anticipated funds, or any funds at all, pursuant to the ITC Cash Grant would have an adverse effect on our ability to receive distributions from our Solana and Mojave projects. The occurrence of any of the above could adversely affect the profitability of our current plants and our ability to refinance projects, which could in turn have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to extensive governmental regulation in a number of different jurisdictions, and our inability to comply with existing regulations or requirements or changes in applicable regulations or requirements may have a negative impact on our business, results of operations or financial condition

We are subject to extensive regulation of our business in the United States, Mexico, Spain, Peru and Brazil and in each of the other countries in which we operate. Such laws and regulations require licenses, permits and other approvals to be obtained in connection with the operations of our activities. This regulatory framework imposes significant actual, day-to-day compliance burdens, costs and risks on us. In particular, the power plants and transmission lines that we own are subject to strict international, national, state and local regulations relating to their operation and expansion (including, among other things, leasing and use of land, and corresponding building permits, landscape conservation, noise regulation, environmental protection and environmental permits and electric transmission and distribution network congestion regulations). Non-compliance with such regulations could result in the revocation of permits, sanctions, fines or even criminal penalties. Compliance with regulatory requirements, which may in the future include increased exposure to capital markets regulations, may result in substantial costs to our operations that may not be recovered. In addition, we cannot predict the timing or form of any future regulatory or law enforcement initiatives. Changes in existing energy, environmental and administrative laws and regulations may materially and adversely affect our business, margins and investments. Our business may also be affected by additional taxes imposed on our activities, reduction of regulated tariffs and other cuts or measures.

Further, similar changes in laws and regulations could increase the size and number of claims and damages asserted against us or subject us to enforcement actions, fines and even criminal penalties. In addition, changes in laws and regulations may, in certain cases, have retroactive effect and may cause the result of operations to be lower than expected. In particular, our activities in the energy sector are subject to regulations applicable to the economic regime of generation of electricity from renewable sources and to subsidies or public support in the benefit of the production of biofuels from renewable energy sources, which vary by jurisdiction, and are subject to modifications that may be more restrictive or unfavorable to us.

Our business is subject to stringent environmental regulation

We are subject to significant environmental regulation, which, among other things, requires us to obtain and maintain regulatory licenses, permits and other approvals and comply with the requirements of such licenses, permits and other approvals and perform environmental impact studies on changes to projects. There can be no assurance that:

 

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public opposition will not result in delays, modifications to or cancellation of any project or license;

 

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laws or regulations will not change or be interpreted in a manner that increases our costs of compliance or materially or adversely affects our operations or plants; or

 

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governmental authorities will approve our environmental impact studies where required to implement proposed changes to operational projects.

 

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We believe that we are currently in material compliance with all applicable regulations, including those governing the environment. While we employ robust policies with regard to environmental regulation compliance, there are occasions where regulations are breached. On occasion, we have been found not to be in compliance with certain environmental regulations, and have incurred fines and penalties associated with such violations which, to date, have not been material in amount. We can give no assurance, however, that we will continue to be in compliance or avoid material fines, penalties, sanctions and expenses associated with compliance issues in the future. Violation of such regulations may give rise to significant liability, including fines, damages, fees and expenses, and site closures. Generally, relevant governmental authorities are empowered to clean up and remediate releases of environmental damage and to charge the costs of such remediation and cleanup to the owners or occupiers of the property, the persons responsible for the release and environmental damage, the producer of the contaminant and other parties, or to direct the responsible parties to take such action. These governmental authorities may also impose a tax or other liens on the responsible parties to secure the parties’ reimbursement obligations.

Environmental regulation has changed rapidly in recent years, and it is possible that we will be subject to even more stringent environmental standards in the future. For example, our activities are likely to be covered by increasingly strict national and international standards relating to climate change and related costs, and may be subject to potential risks associated with climate change, which may have a material adverse effect on our business, financial condition or results of operations. We cannot predict the amounts of any increased capital expenditures or any increases in operating costs or other expenses that we may incur to comply with applicable environmental, or other regulatory, requirements, or whether these costs can be passed on to our concession contract counterparties through price increases.

Increases in the cost of energy and gas could significantly increase our operating costs in some of our assets

Some of our activities (in particular, our Concentrating Solar Power plants in Spain that produce a portion of their power from natural gas) require some consumption of energy and gas, and we are vulnerable to material fluctuations in their prices. Although our energy and gas purchase contracts generally include indexing mechanisms, we cannot guarantee that these mechanisms will cover all of the additional costs generated by an increase in energy and gas prices, particularly for long-term contracts, and some of the contracts entered into by us do not include any indexing provisions. Significant increases in the cost of energy or gas, or shortages of the supply of energy and/or gas, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Counterparties to our offtake agreements may not fulfill their obligations and, as our contracts expire, we may not be able to replace them with agreements on similar terms in light of increasing competition in the markets in which we operate

A significant portion of the electric power we generate and the transmission capacity we have is sold under long-term offtake agreements with public utilities, industrial or commercial end-users or governmental entities, with a weighted average remaining duration (weighted using the relevant technical indicator by each type of asset) of approximately 26 years.

If, for any reason, any of the purchasers of power or transmission capacity under these agreements are unable or unwilling to fulfill their related contractual obligations or if they refuse to accept delivery of power delivered thereunder or if they otherwise terminate such agreements prior to the expiration thereof, our assets, liabilities, business, financial condition, results of operations and cash flow could be materially and adversely affected. Furthermore, to the extent any of our power or transmission capacity purchasers are, or are controlled by, governmental entities, our facilities may be subject to legislative or other political action that may impair their contractual performance.

The power generation industry is characterized by intense competition and our electric generation assets encounter competition from utilities, industrial companies and other independent power producers, in particular

 

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with respect to uncontracted output. In recent years, there has been increasing competition among generators for offtake agreements and this has contributed to a reduction in electricity prices in certain markets characterized by excess supply above designated reserve margins. In light of these market conditions, we may not be able to replace an expiring or terminated agreement with an agreement on equivalent terms and conditions, including at prices that permit operation of the related facility on a profitable basis. In addition, we believe many of our competitors have well-established relationships with our current and potential suppliers, lenders, customers and have extensive knowledge of our target markets. As a result, these competitors may be able to respond more quickly to evolving industry standards and changing customer requirements than we will be able to. Adoption of technology more advanced than ours could reduce our competitors’ power production costs resulting in their having a lower cost structure than is achievable with the technologies we currently employ and adversely affect our ability to compete for offtake agreement renewals. If we are unable to replace an expiring or terminated offtake agreement, the affected facility may temporarily or permanently cease operations. External events, such as a severe economic downturn, could also impair the ability of some counterparties to our offtake agreements and other customer agreements to pay for energy and/or other products and services received.

Our inability to enter into new or replacement offtake agreements or to compete successfully against current and future competitors in the markets in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Transactions with counterparties expose us to credit risk which we must effectively manage to mitigate the effect of counterparty default

We are exposed to the credit risk profile of the counterparties to our long-term concession contracts, our suppliers and our financing providers, which could impact our business, financial condition and results of operations. Although we actively manage this credit risk through diversification, the use of non-recourse factoring contracts, credit insurance and other measures, our risk management strategy may not be successful in limiting our exposure to credit risk. This could adversely affect our business, financial condition, results of operations and cash flow.

We may be subject to increased finance expenses if we do not effectively manage our exposure to interest rate and foreign currency exchange rate risks

We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and foreign currency exchange rate fluctuations. Some of our indebtedness (including project-level indebtedness) bears interest at variable rates, generally linked to market benchmarks such as EURIBOR and LIBOR. Any increase in interest rates would increase our finance expenses relating to our variable rate indebtedness and increase the costs of refinancing our existing indebtedness and issuing new debt (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Interest Rates”). Although most of our long-term contracts are denominated in or indexed to U.S. dollars, we conduct our business and incur certain costs in the local currency of the countries in which we operate. As we continue expanding our business into existing markets such as South America and Europe, and into other new markets, we expect that an increasing percentage of our revenue and cost of sales will be denominated in currencies other than our reporting currency, the U.S. dollar. As a result, we will become subject to increasing currency translation risk, whereby changes in exchange rates between the U.S. dollar and the other currencies in which we do business could result in foreign exchange losses.

We seek to actively manage these risks by entering into interest rate options and swaps, which according to our policies, generally cover at least 75% of the outstanding project debt, to hedge against interest rate risk. In addition, we plan to use future currency sale and purchase contracts and foreign exchange rate swaps or caps to hedge against foreign exchange rate risk when our exposure to non-U.S. dollar denominated cash flows is significantly below our 90% target. If our risk management strategies are not successful in limiting our exposure to changes in interest rates and foreign currency exchange rates, our business, financial condition and results of operations could be materially and adversely affected.

 

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Our competitive position could be adversely affected by changes in technology, prices, industry standards and other factors

The markets in which our assets or projects operate change rapidly because of technological innovations and changes in prices, industry standards, product instructions, customer requirements and the economic environment. New technology or changes in industry and customer requirements may put pressure on the profitability of our existing projects by increasing the incentives of counterparties to our long-term contracts to seek new alternative projects or request higher service standards.

Our performance under our concession contracts may be adversely affected by problems related to our reliance on third-party contractors and suppliers

Our projects rely on the supply of services, equipment or software which we subcontract to Abengoa or other third-party suppliers in order to meet our contractual obligations under our contracted concessions. The delivery of products or services which are not in compliance with the requirements of the subcontract, or the late supply of products and services, can cause us to be in default under our contracts with our concession counterparties. To the extent we are not able to transfer all of the risk or be fully indemnified by Abengoa or other third-party contractors and suppliers, we may be subject to a claim by our customers as a result of a problem caused by a third-party that could have a material adverse effect on our reputation, business, results of operations, financial condition and cash flows.

Supplier concentration may expose us to significant financial credit or performance risk

We often rely on a single contracted supplier or a small number of suppliers for the provision of fuel, transportation of fuel, equipment, technology and/or other services required for the operation of certain of our facilities. In addition, certain of our suppliers provide long-term warranties with respect to the performance of their products or services. If any of these suppliers cannot perform under their agreements with us, or satisfy their related warranty obligations, we will need to utilize the marketplace to provide or repair these products and services. There can be no assurance that the marketplace can provide these products and services as, when and where required. We may not be able to enter into replacement agreements on favorable terms or at all. If we are unable to enter into replacement agreements to provide for fuel, equipment, technology and other required services, we would seek to purchase the related goods or services at market prices, exposing us to market price volatility and the risk that fuel and transportation may not be available during certain periods at any price. We may also be required to make significant capital contributions to remove, replace or redesign equipment that cannot be supported or maintained by replacement suppliers, which could have a material adverse effect on our business, financial condition, results of operations, credit support terms and cash flows.

The failure of any supplier or customer to fulfill its contractual obligations to us could have a material adverse effect on our financial results. Consequently, the financial performance of our facilities is dependent on the credit quality of, and continued performance by, our suppliers and vendors.

We may be adversely affected by risks associated with acquisitions or investments

As a part of our growth strategy, we intend to make certain acquisitions and/or financial investments, and we may take on additional equity and debt to pay for such acquisitions. Moreover, we cannot guarantee that we will be able to complete all, or any, such transactions that we might contemplate in the future. To the extent we do, such transactions expose us to risks inherent in integrating acquired businesses and personnel, such as the inability to achieve projected cash flows; recognition of unexpected liabilities or costs; and regulatory complications arising from such transactions. Furthermore, the terms and conditions of financing for such acquisitions or financial investments could restrict the manner in which we conduct our business, particularly if we were to use debt financing. These risks could have a material adverse effect on our business, financial condition and results of operations.

 

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In addition, we have made and may continue to make equity investments in certain strategic assets managed by or together with third parties, including governmental entities and private entities. In certain cases, we may only have partial or joint control over a particular asset. For example, we currently hold only economic rights in respect of our Brazilian investment through ACBH, which economic rights provide us with the right to receive a preferred dividend of $18 million annually for a five-year period commencing on July 1, 2014, but we do not have control over ACBH. Investments in assets over which we have no, partial or joint control are subject to the risk that the other shareholders of the assets, who may have different business or investment strategies than us or with whom we may have a disagreement or dispute, may have the ability to independently make or block business, financial or management decisions, such as the decision to distribute dividends or appoint members of management, which may be crucial to the success of the project or our investment in the project, or otherwise implement initiatives which may be contrary to our interests. Additionally, the approval of other shareholders or partners may be required to sell, pledge, transfer, assign or otherwise convey our interest in such assets, or for us to acquire Abengoa’s interests in such assets as an initial matter. Alternatively, other shareholders may have rights of first refusal or rights of first offer in the event of a proposed sale or transfer of our interests in such assets or in the event of our acquisition of an interest in new assets pursuant to the ROFO Agreement or with third parties. These restrictions may limit the price or interest level for our interests in such assets, in the event we want to sell such interests.

Finally, our partners in existing or future projects may be unable, or unwilling, to fulfill their obligations under the relevant shareholder agreements or may experience financial or other difficulties that may adversely affect our investment in a particular joint venture. In certain of our joint ventures, we may also be reliant on the particular expertise of our partners and, as a result, any failure to perform our obligations in a diligent manner could also adversely affect the joint venture. If any of the foregoing were to occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

There are risks relating to future acquisitions and investments

Our board of directors might approve acquisitions and investments in the future. This could result in our making acquisitions or investments in assets that are different from, and possibly riskier than, those described in this prospectus. These changes could adversely affect the market price of our shares or our ability to make distributions to shareholders.

The facilities we operate are, in some cases, dangerous workplaces at which hazardous materials are handled. If we fail to maintain safe work environments, we can be exposed to significant financial losses, as well as civil and criminal liabilities

The facilities we operate often put our employees and others in close proximity with large pieces of mechanized equipment, moving vehicles, manufacturing or industrial processes, heat or liquids stored under pressure and highly regulated materials. On most projects and at most facilities, we are responsible for safety and, accordingly, must implement safe practices and safety procedures, which are also applicable to on-site subcontractors such as our O&M services providers. If we fail to design and implement such practices and procedures or if the practices and procedures we implement are ineffective or if our O&M service providers or other suppliers do not follow them, our employees and others may become injured and our and others property may become damaged. Unsafe work sites also have the potential to increase employee turnover, increase the cost of a project to our customers or the operation of a facility, and raise our operating costs. Any of the foregoing could result in financial losses, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, our projects and the operation of our facilities can involve the handling of hazardous and other highly regulated materials, which, if improperly handled or disposed of, could subject us to civil and criminal liabilities. We are also subject to regulations dealing with occupational health and safety. Although we maintain functional groups whose primary purpose is to ensure we implement effective health, safety, and environmental

 

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work procedures throughout our organization, including construction sites and maintenance sites, the failure to comply with such regulations could subject us to liability. In addition, we may incur liability based on allegations of illness or disease resulting from exposure of employees or other persons to hazardous materials that we handle or are present in our workplaces.

Our business may be adversely affected by catastrophes, natural disasters, adverse weather conditions, climate change, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of our plants, facilities and electric transmission lines

If one or more of our plants, facilities or electric transmission lines were to be subject in the future to fire, flood or a natural disaster, adverse weather conditions, drought, terrorism, power loss or other catastrophe, or if unexpected geological or other adverse physical conditions were to develop at any of our plants, facilities or electric transmission lines we may not be able to carry out our business activities at that location or such operations could be significantly reduced. For example, drought may affect the cooling capacity of our thermosolar projects. Any of these circumstances could result in lost revenue at these sites during the period of disruption and costly remediation, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, despite security measures taken by us, it is possible that our sites and assets could be affected by criminal or terrorist acts. Any such acts could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our insurance may be insufficient to cover relevant risks and the cost of our insurance may increase

Our business is exposed to the inherent risks in the markets in which we operate. Although we seek to obtain appropriate insurance coverage in relation to the principal risks associated with our business, we cannot guarantee that such insurance coverage is, or will be, sufficient to cover all of the possible losses we may face in the future. If we were to incur a serious uninsured loss or a loss that significantly exceeded the coverage limits established in our insurance policies, the resulting costs could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, our insurance policies are subject to review by our insurers. If premiums were to increase in the future, or certain types of insurance coverage were to become unavailable, we might not be able to maintain insurance coverage comparable to those that are currently in effect at comparable cost, or at all. If we were unable to pass any increase in insurance premiums on to our customers, such additional costs could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be subject to litigation and other legal proceedings

We are subject to the risk of legal claims and proceedings and regulatory enforcement actions in the ordinary course of our business and otherwise. The results of legal and regulatory proceedings cannot be predicted with certainty. We cannot guarantee that the results of current or future legal or regulatory proceedings or actions will not materially harm our business, financial condition, results of operations or operations, nor can we guarantee that we will not incur losses in connection with current or future legal or regulatory proceedings or actions that exceed any provisions we may have set aside in respect of such proceedings or actions or that exceed any available insurance coverage, which may have a material adverse effect on our business, financial condition, results of operations and cash flows. See “Business—Legal Proceedings.”

Our business will suffer if we or Abengoa, as supplier of services through our Executive Services Agreement and our Support Services Agreement, do not retain our senior management and key employees or if we do not attract and retain other highly skilled employees

Our future success depends significantly on the involvement of our senior management, provided by Abengoa for an interim period, and key employees, who have valuable expertise in all areas of our business.

 

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Abengoa’s and our ability to retain and motivate our senior management and key employees and attract highly skilled employees will significantly affect our ability to run our business successfully and to implement our growth plan. If we were to lose one or more of our senior management or, for example, valuable local managers with significant experience in the markets in which we operate, we might encounter difficulty in appointing replacements. This could have an adverse impact on our business, financial condition and results of operations.

We are subject to reputational risk, and our reputation is closely related to that of Abengoa

We rely on our reputation to do business, obtain financing, hire and retain employees and attract investors, one or more of which could be adversely affected if our reputation were damaged. Harm to our reputation could arise from real or perceived faulty or obsolete technology, failure to comply with legal and regulatory requirements, difficulties in meeting contractual obligations or standards of quality and service, ethical issues, money laundering and insolvency, among others. In addition, our reputation is closely related to that of Abengoa. If the public image or reputation of Abengoa were to be damaged as a result of adverse publicity or otherwise, we could be adversely affected due to our relationship with Abengoa. Any such perceived or real difficulties experienced by Abengoa would harm our reputation, which could have an adverse effect on our business, financial condition and results of operations.

Risks Related to Our Assets

The concession agreements under which we conduct some of our operations are subject to revocation or termination

Certain of our operations are conducted pursuant to contracted concessions granted by various governmental bodies. Generally, these contracted concessions give us rights to provide services for a limited period of time, subject to various governmental regulations. The governmental bodies or private clients responsible for regulating and monitoring these services often have broad powers to monitor our compliance with the applicable concession contracts and can require us to supply them with technical, administrative and financial information. Among other obligations, we may be required to comply with investment commitments and efficiency and safety standards established in the concession. Such commitments and standards may be amended in certain cases by the governmental bodies. Our failure to comply with the concession agreements or other regulatory requirements may result in contracted concessions not being granted, upheld or renewed in our favor, or, if granted, upheld or renewed, may not be done on as favorable terms as currently applicable. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In some of the markets in which we are present, or in which we may own assets in the future, political instability, economic crisis or social unrest may give rise to a change in policies regarding long-term contracted assets with private companies, like us, in strategic sectors such as power generation or electric transmission. Any such changes could lead to modifications of the economic terms of our concession contracts or, in extreme scenarios, the nationalization of our assets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Revenue from our contracted assets and concessions is significantly dependent on regulated tariffs or other long-term fixed rate arrangements that restrict our ability to increase revenue from these operations

The revenue that we generate from our contracted concessions is significantly dependent on regulated tariffs or other long-term fixed rate arrangements. Under most of our concession agreements, a tariff structure is established in such agreements, and we have limited or no possibility to independently raise tariffs beyond the established rates and indexation or adjustment mechanisms. Similarly, under a long-term power purchase agreement, we are required to deliver power at a fixed rate for the contract period, with limited escalation rights. In addition, we may be unable to adjust our tariffs or rates as a result of fluctuations in prices of raw materials, exchange rates, labor and subcontractor costs during the operating phase of these projects, or any other variations

 

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in the conditions of specific jurisdictions in which our concession-type infrastructure projects are located, which may reduce our revenue. Moreover, in some cases, if we fail to comply with certain pre-established conditions, the government or customer (as applicable) may reduce the tariffs or rates payable to us. In addition, during the life of a concession, the relevant government authority may unilaterally impose additional restrictions on our tariff rates, subject to the regulatory frameworks applicable in each jurisdiction. Governments may also postpone annual tariff increases until a new tariff structure is approved without compensating us for lost revenue. Furthermore, changes in laws and regulations may, in certain cases, have retroactive effect and expose us to additional compliance costs or interfere with our existing financial and business planning. For example, the Spanish government modified regulations applicable to renewable energy assets, including Concentrated Solar Power, in 2012 and 2013 which as a result, lowered yearly revenues of such assets. In the case that any one or more of these events occur, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Revenue from our renewable energy and conventional power facilities is partially exposed to market electricity prices

In addition to regulated incentives, revenue and operating costs from certain of our projects depend to a limited extent on market prices for sales of electricity. Market prices may be volatile and are affected by various factors, including the cost of raw materials, user demand, and if applicable, the price of greenhouse gas emission rights. In several of the jurisdictions in which we operate, we are exposed to remuneration schemes which contain both regulated incentive and market price components. In such jurisdictions, the regulated incentive component may not compensate for fluctuations in the market price component, and, consequently, total remuneration may be volatile. There can be no assurance that market prices will remain at levels which enable us to maintain profit margins and desired rates of return on investment. A decline in market prices below anticipated levels could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our solar and wind projects will be negatively affected if there are adverse changes to national and international laws and policies that support renewable energy sources

Recently, certain countries, such as the United States, a market that is one of our principal markets, have enacted policies of active support for renewable energy. These policies have included feed-in tariffs and renewable energy purchase obligations, mandatory quotas and/or portfolio standards imposed on utilities and certain tax incentives (such as the Investment Tax Credit in the United States). See “Regulation—Regulation in the United States—U.S. Tax Incentives and other Federal Considerations for Renewable Energy Generation Facilities—Section 1603 U.S. Treasury Grant Program.”

Although support for renewable energy sources by governments and regulatory authorities in the jurisdictions in which we operate has historically been strong, and European authorities, along with the United States government, have reaffirmed their intention to continue such support, certain policies currently in place may expire, be suspended or be phased out over time, cease upon exhaustion of the allocated funding or be subject to cancellation or non-renewal. Accordingly, we cannot guarantee that such government support will be maintained in full, in part or at all.

If the governments and regulatory authorities in the jurisdictions in which we operate or plan to operate were to further decrease or abandon their support for development of solar and wind energy due to, for example, competing funding priorities, political considerations or a desire to favor other energy sources, renewable or otherwise, the assets we plan to acquire in the future could become less profitable or cease to be economically viable. Such an outcome could have a material adverse effect on our ability to execute our growth strategy.

 

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Lack of electric transmission capacity availability, potential upgrade costs to the electric transmission grid, and other systems constraints could significantly impact our ability to generate solar electricity power sales

We depend on electric interconnection and transmission facilities owned and operated by others to deliver the wholesale power we will sell from our electric generation assets to our customers. A failure or delay in the operation or development of these interconnection or transmission facilities or a significant increase in the cost of the development of such facilities could result in the loss of revenues. Such failures or delays could limit the amount of power our operating facilities deliver or delay the completion of our construction projects, as the case may be. Additionally, such failures, delays or increased costs could have a material adverse effect on our business, financial condition, results of operations and cash flows. If a region’s electric transmission infrastructure is inadequate, our recovery of wholesale costs and profits may be limited. If restrictive transmission price regulation is imposed, the transmission companies may not have a sufficient incentive to invest in expansion of transmission infrastructure. Additionally, we cannot predict whether interconnection and transmission facilities will be expanded in specific markets to accommodate competitive access to those markets. In addition, certain of our operating facilities’ generation of electricity may be curtailed without compensation due to transmission limitations or limitations on the electricity grid’s ability to accommodate intermittent electricity generating sources, reducing our revenues and impairing our ability to capitalize fully on a particular facility’s generating potential. Such curtailments could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We do not own all of the land on which our renewable energy, conventional power or electric transmission assets are located, which could result in disruption to our operations

We do not own all of the land on which our power generation or electric transmission assets are located and we are, therefore, subject to the possibility of less desirable terms and increased costs to retain necessary land use if we do not have valid leases or rights-of-way or if such rights-of-way lapse or terminate. Although we have obtained rights to construct and operate these assets pursuant to related lease arrangements, our rights to conduct those activities are subject to certain exceptions, including the term of the lease arrangement. Our loss of these rights, through our inability to renew right-of-way contracts or otherwise, may adversely affect our ability to operate our power generation and electric transmission assets.

Certain of our facilities are newly constructed or in the late stages of construction, and may not perform as expected

We completed the construction of Solana, ACT, Quadra 1, Quadra 2 and ATS during 2013 or the first half of 2014. Mojave has substantially finished construction and is in the startup and production testing stage as of the date hereof and expected to reach COD by October 2014. Additionally, Palmatir has substantially completed construction and is expected to be fully operational by June 2014. Therefore, our expectations regarding the operating performance of Mojave, Palmatir and newly finished assets are based on assumptions, estimates and past experience with similar assets that Abengoa has developed and built, and without the benefit of a substantial operating history. Projections contained in this prospectus regarding our ability to pay dividends to holders of our shares assume newly constructed facilities perform to our expectation. However, the ability of these facilities to meet our performance expectations is subject to the risks inherent in newly constructed power generation facilities and the construction of such facilities, including, but not limited to, degradation of equipment in excess of our expectations, system failures, and outages. The failure of these facilities to perform as we expect, could have a material adverse effect on our business, financial condition, results of operations and cash flows and our ability to pay dividends to holders of our shares.

Some of our facilities will not have reached COD as of the date of this offering. Delays or a failure to achieve COD at all may reduce anticipated revenues from these assets, generate unexpected costs or, in extreme cases, trigger defaults in our concession or financing agreements

Mojave has substantially completed construction and COD is expected by October 2014. Unexpected technical difficulties, or the occurrence of unpredictable events, such as natural disasters or catastrophes, may

 

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delay COD or otherwise prevent us from meeting the contractual deadlines established in the Mojave PPA and/or our related financing contracts. Palmatir’s construction is substantially finished, with COD expected in June 2014. Although many of the potential causes for delay are covered under the applicable engineering, procurement and construction contract we have with Abengoa subsidiaries, any delays or failure to achieve COD could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends to holders of our shares.

The generation of electric energy from renewable energy sources depends heavily on suitable meteorological conditions, and if solar or wind conditions are unfavorable, our electricity generation, and therefore revenue from our renewable energy generation facilities using our systems, may be substantially below our expectations

The electricity produced and revenues generated by a renewable energy generation facility are highly dependent on suitable solar or wind conditions, as applicable, and associated weather conditions, which are beyond our control. Furthermore, components of our system, such as mirrors, absorber tubes or blades, could be damaged by severe weather. In addition, replacement and spare parts for key components may be difficult or costly to acquire or may be unavailable. Unfavorable weather and atmospheric conditions could impair the effectiveness of our assets or reduce their output beneath their rated capacity or require shutdown of key equipment, impeding operation of our renewable assets and our ability to achieve forecasted revenues and cash flows.

We base our investment decisions with respect to each renewable generation facility on the findings of related wind and solar studies conducted on-site prior to construction or based on historical conditions at existing facilities. However, actual climatic conditions at a facility site, particularly wind conditions, may not conform to the findings of these studies and therefore, our solar and wind energy facilities may not meet anticipated production levels or the rated capacity of our generation assets, which could adversely affect our business, financial condition and results of operations and cash flows.

Our costs, results of operations, financial condition and cash flows could be adversely affected by the disruption of the fuel supplies necessary to generate power at our conventional generation facilities

Delivery of fossil fuels to fuel our conventional and some Concentrated Solar Power generation facilities is dependent upon the infrastructure, including natural gas pipelines, available to serve each such generation facility, as well as upon the continuing financial viability of contractual counterparties. As a result, we are subject to the risks of disruptions or curtailments in the production of power at these generation facilities if a counterparty fails to perform or if there is a disruption in the relevant fuel delivery infrastructure.

Risks Related to Our Indebtedness

Our indebtedness could adversely affect our ability to raise additional capital to fund our operations or pay dividends. It could also expose us to the risk of increased interest rates and limit our ability to react to changes in the economy or our industry as well as impact our cash available for distribution.

As of December 31, 2013, we had approximately $2,895 million of total indebtedness under various project-level financing arrangements. Our indebtedness will increase as a result of the consolidation of Mojave. Concurrently with the completion of this offering, we will enter into a new $50 million revolving credit line with Abengoa. We do not intend to make borrowings under our new revolving facility in connection with this offering. All of our existing indebtedness is incurred at the project level, except certain debt facilities with Abengoa and third parties that will be cancelled with the proceeds of this offering. Our substantial debt could have important negative consequences on our financial condition, including:

 

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increasing our vulnerability to general economic and industry conditions;

 

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•

requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to pay dividends to holders of our shares or to use our cash flow to fund our operations, capital expenditures and future business opportunities;

 

•

limiting our ability to enter into long-term power sales or fuel purchases which require credit support;

 

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limiting our ability to fund operations or future acquisitions;

 

•

restricting our ability to make certain distributions with respect to our shares and the ability of our subsidiaries to make certain distributions to us, in light of restricted payment and other financial covenants in our credit facilities and other financing agreements;

 

•

exposing us to the risk of increased interest rates because a portion of some of our borrowings (below 10% as of the date hereof), are at variable rates of interest;

 

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limiting our ability to obtain additional financing for working capital including collateral postings, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and

 

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limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have less debt.

The agreements governing our project-level financing contain financial and other restrictive covenants that limit our project subsidiaries’ ability to make distributions to us or otherwise engage in activities that may be in our long-term best interests. The project-level financing agreements generally prohibit distributions from the project entities to us unless certain specific conditions are met, including the satisfaction of certain financial ratios. In addition, the project-level financing for Mojave prohibits distributions until such facility reaches COD and the first principal repayment is made. Our inability to satisfy certain financial covenants may prevent cash distributions by the particular project(s) to us and, our failure to comply with those and other covenants could result in an event of default which, if not cured or waived may entitle the related lenders to demand repayment or enforce their security interests, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, failure to comply with such covenants may entitle the related lenders to demand repayment and accelerate all such indebtedness. If our project-level subsidiaries are unable to make distributions, it would likely have a material adverse effect on our ability to pay dividends to holders of our shares.

Letter of credit facilities or personal guarantees to support project-level contractual obligations generally need to be renewed, at which time we will need to satisfy applicable financial ratios and covenants. If we are unable to renew our letters of credit as expected or replace them with letters of credit under different facilities on favorable terms or at all, we may experience a material adverse effect on our business, financial condition, results of operations and cash flows. Furthermore, such inability may constitute a default under certain project-level financing arrangements, restrict the ability of the project-level subsidiary to make distributions to us and/or reduce the amount of cash available at such subsidiary to make distributions to us.

In addition, our ability to arrange financing, either at the corporate level or at a non-recourse project-level subsidiary, and the costs of such capital, are dependent on numerous factors, including:

 

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general economic and capital market conditions;

 

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credit availability from banks and other financial institutions;

 

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investor confidence in us, our partners and Abengoa, as our main shareholder;

 

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our financial performance and the financial performance of our subsidiaries;

 

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our level of indebtedness and compliance with covenants in debt agreements;

 

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maintenance of acceptable project credit ratings or credit quality;

 

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•

cash flow; and

 

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provisions of tax and securities laws that may impact raising capital.

We may not be successful in obtaining additional capital for these or other reasons. Furthermore, we may be unable to refinance or replace project-level financing arrangements or other credit facilities on favorable terms or at all upon the expiration or termination thereof. Our failure, or the failure of any of our projects, to obtain additional capital or enter into new or replacement financing arrangements when due may constitute a default under such existing indebtedness and may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Potential future defaults by our subsidiaries or by Abengoa could adversely affect us

All of our subsidiaries finance project assets and significant investments, including capital expenditures typically relating to contracted assets and concessions, primarily under loan agreements and related documents which, except as noted below, require the loans to be repaid solely from the revenue of the project being financed thereby, and provide that the repayment of the loans (and interest thereon) is secured solely by the shares, physical assets, contracts and cash flow of that project company. This type of financing is usually referred to herein as “non-recourse debt” or “project financing.” As of December 31, 2013, we had $2,895 million outstanding indebtedness on a combined basis.

While the lenders under our non-recourse project financings do not have direct recourse to us or our subsidiaries (other than the project borrowers under those financing), defaults by the project borrowers under such financings can still have important consequences for us and our subsidiaries, including, without limitation:

 

•

reducing our receipt of dividends, fees, interest payments, loans and other sources of cash, since the project company will typically be prohibited from distributing cash to us and our subsidiaries during the pendency of any default;

 

•

causing us to record a loss in the event the lender forecloses on the assets of the project company; and

 

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the loss or impairment of investors’ and project finance lenders’ confidence in us.

If we were to fail to satisfy any of our debt service obligations or to breach any related financial or operating covenants, the applicable lender could declare the full amount of the relevant indebtedness to be immediately due and payable and could foreclose on any assets pledged as collateral. Further, certain of our financing arrangements contain cross default provisions such that a default under one particular financing arrangement in Abengoa could automatically trigger defaults under some of our financing arrangements while certain technical obligations related to the construction of our assets are still outstanding (i.e. performance guarantees). As a result, a default under any indebtedness above certain thresholds in Abengoa could result in a substantial loss to us or could otherwise have a material adverse effect on our and our subsidiaries’ ability to perform our and their respective obligations in respect of any of our debt obligations.

Any of these events could have a material adverse effect on our financial condition, results of operations or cash flows.

Maintenance, expansion and refurbishment of electric generation facilities involve significant risks that could result in unplanned power outages or reduced output

Although the facilities in our portfolio are relatively new, they may require periodic upgrading and improvement in the future. Any unexpected operational or mechanical failure, including failure associated with breakdowns and forced outages, could reduce our facilities’ generating capacity below expected levels, reducing our revenues and jeopardizing our ability to pay dividends to shareholders at forecasted levels or at all. Degradation of the performance of our solar facilities above levels provided for in the related offtake agreements may also reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may also reduce profitability.

 

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If we make any major modifications to our conventional or renewable power generation facilities or electric transmission lines, we may be required to comply with more stringent environmental regulations, which would likely result in substantial additional capital expenditures. We may also choose to repower, refurbish or upgrade our facilities based on our assessment that such activity will provide adequate financial returns. Such facilities require time for development and capital expenditures before commencement of commercial operations, and key assumptions underpinning a decision to make such an investment may prove incorrect, including assumptions regarding construction costs, timing, available financing and future fuel and power prices. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Related to Our Relationship with Abengoa

Abengoa will be our main shareholder and will exercise substantial influence over Abengoa Yield and we are highly dependent on Abengoa

Abengoa will beneficially own and be entitled to vote a majority of our outstanding shares upon completion of this offering. As a result of this ownership, Abengoa will continue to have a substantial influence on our affairs and its ownership interest and voting power will constitute a majority of any quorum of our shareholders voting on any matter requiring the approval of our shareholders. Such matters include the election of directors, the adoption of amendments to our articles of associations and approval of mergers or sale of all or substantially all of our assets. This concentration of ownership may also have the effect of delaying or preventing a change in control of Abengoa Yield or discouraging others from making tender offers for our shares, which could prevent shareholders from receiving a premium for their shares. In addition, Abengoa will have the ability to appoint a majority of our directors. Abengoa may cause corporate actions to be taken even if its interests conflict with the interests of our other shareholders. See “Related Party Transactions—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest.” There can be no assurance that the interests of Abengoa will coincide with the interests of purchasers of our shares or that Abengoa will act in a manner that is in our best interests.

Furthermore, we will depend on the executive services and management support provided by or under the direction of Abengoa under the Executive Services Agreement and the Support Services Agreement. We will depend on Abengoa to provide us with our revolving credit line and maintain existing guarantees and letters of credit in our favor, under the Financial Support Agreement. If Abengoa were to fail to provide the requisite financial support, we may be unable to obtain financing from a third party on comparable terms, without undue delay or at all. Any failure to effectively support our operations, implement our strategy or provide financial support could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Abengoa or Abengoa subsidiaries currently provide support and administration services as well as operating and maintenance services at most of our facilities. Any failure by Abengoa to perform its requirements under the services arrangements, or any failure by us to identify and contract with replacement service providers, if required, could adversely affect our business or the operation of our facilities and have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be able to consummate future acquisitions from Abengoa

Our ability to grow through acquisitions depends, in part, on Abengoa’s ability to identify and present us with acquisition opportunities. Abengoa established us to own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue generating assets. Although Abengoa has agreed to grant us a right of first offer with respect to certain contracted revenue assets that Abengoa may elect to sell in the future (as described in “Related Party Transactions—Right of First Offer”), Abengoa will be under no obligation to sell or propose for consideration for acquisition any assets to us or to accept any related offer from us, and may identify other opportunities for itself and its other subsidiaries and

 

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pursue such opportunities for its or their respective accounts. Furthermore, Abengoa has no obligation to source acquisition opportunities specifically for us. There are a number of factors which could materially and adversely impact the extent to which suitable acquisition opportunities are made available from Abengoa, including:

 

•

the same professionals within Abengoa’s organization that are involved in acquisitions that are suitable for us have responsibilities within Abengoa’s broader business. Limits on the availability of such individuals will likewise result in a limitation on the availability of acquisition opportunities for us; and

 

•

in addition to structural limitations, the question of whether a particular asset is suitable is highly subjective and is dependent on a number of factors including an assessment by Abengoa relating to our liquidity position at the time, the risk profile of the asset, the consistency of the asset with our investment criteria, and whether such asset is an appropriate fit given our then current operations and other factors.

If Abengoa determines that an opportunity is not suitable for us, it may still pursue such opportunity on its own behalf, or on behalf of another Abengoa affiliate. In making these determinations, Abengoa may be influenced by factors that result in a misalignment or conflict of interest. See “—Risks Related to Our Business and the Markets in Which We Operate—We may not be able to identify or consummate any future acquisitions on favorable terms, or at all” for a description of risks associated with the identifying, evaluating and consummating acquisitions generally, including acquisitions of Abengoa ROFO Assets.

The departure of some or all of Abengoa’s employees could prevent us from achieving our objectives

We will depend on the diligence, skill and business contacts of Abengoa’s executives and personnel and the information and opportunities they generate during the normal course of their activities. Under the Executive Services Agreement, senior Abengoa managers will provide executive management services to us for up to one year following the consummation of this offering; thereafter, we expect that these executives will be directly employed by us. Our future success will depend on the continued service of these individuals, who are not obligated to remain employed with Abengoa and who are not obliged to accept direct employment with us. Abengoa has experienced departures of key professionals and personnel in the past and may do so in the future, and we cannot predict the impact that any such departures will have on our ability to achieve our objectives. The departure of a significant number of Abengoa’s professionals or a material portion of the Abengoa employees who work at any of our facilities for any reason, or the failure to appoint qualified or effective successors in the event of such departures, could have a material adverse effect on our ability to achieve our objectives.

Our organizational and ownership structure may create significant conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of holders of our minority shareholders and that may have a material adverse effect on our business, financial condition, results of operations and cash flows

Our organizational and ownership structure involves a number of relationships that may give rise to certain conflicts of interest between us and our minority shareholders, on the one hand, and Abengoa, on the other hand. Five of our initial directors, including our chairman who will have a tie-breaking vote, will be affiliated with Abengoa. Prior to the completion of this offering, we will enter into an Executive Services Agreement and a Support Services Agreement with Abengoa. Ten of our senior managers will be Abengoa senior managers who devote their time to both our company and Abengoa as needed to conduct the respective businesses pursuant to the Executive Services Agreement. Although our directors and executive officers owe fiduciary duties to our shareholders, these shared Abengoa executives will have fiduciary and other duties to Abengoa during the period before we directly employ them, which duties may be inconsistent with the best interests of us and our minority shareholders. In addition, Abengoa and its representatives, agents and affiliates will have access to our confidential information. Although some of these persons will be subject to confidentiality obligations pursuant to confidentiality agreements or implied duties of confidence, neither the Executive Services Agreement nor the Support Services Agreement contains general confidentiality provisions.

 

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Following the completion of this offering, Abengoa will be a related party under the applicable securities laws governing related party transactions and may have interests which differ from our interests or those of our other minority shareholders, including with respect to the types of acquisitions made, the timing and amount of dividends made by Abengoa Yield, the reinvestment of returns generated by our operations, the use of leverage when making acquisitions and the appointment of outside advisors and service providers. Any material transaction between us and Abengoa (including the proposed acquisition of any Abengoa ROFO Asset) will be subject to our related party transaction policy, which will require prior approval of such transaction by a majority of the independent members of our board of directors (as discussed in “Related Party Transactions—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest”). The creation of our related party transaction approval policy may not insulate us from derivative claims related to related party transactions and the conflicts of interest described in this risk factor. Regardless of the merits of such claims, we may be required to spend significant management time and financial resources in the defense thereof. Additionally, to the extent we fail to appropriately deal with any such conflicts, it could negatively impact our reputation and ability to raise additional funds and the willingness of counterparties to do business with us, all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If Abengoa terminates the Executive Services Agreement or the Support Services Agreement, or defaults in the performance of its obligations under the agreement, we may be unable to contract with a substitute service provider on similar terms, or at all

We will rely on Abengoa to provide us with executive management for up to one year following the consummation of this offering under the Executive Services Agreement and support services on an ongoing basis under the Support Services Agreement, and we will not have independent executive management for that interim period or support personnel. Our future success depends significantly on the involvement of certain of Abengoa’s senior managers and employees, who have valuable expertise in all areas of our business. Abengoa’s ability to retain and motivate the senior managers and employees involved in the management of our business, as well as attract highly skilled employees, will significantly affect our ability to run our business successfully and to execute our growth strategy. If we were to lose access to one or more of the ten senior managers provided for under the Executive Services Agreement or, for example, valuable local managers with significant experience in the markets in which we operate, it might be difficult to appoint replacements. This could have an adverse impact on our business, financial condition, results of operations and cash flows.

The Executive Services Agreement will provide that Abengoa cannot terminate the agreement unilaterally; however, the Support Services Agreement will provide that Abengoa may terminate the agreement upon 180 days prior written notice of termination to us if we default in the performance or observance of any material term, condition or covenant contained in the agreement in a manner that results in material harm and the default continues unremedied for a period of 60 days after written notice of the breach is given to us. If Abengoa terminates the Support Services Agreement or defaults in the performance of its obligations under the Executive Services Agreement or Support Services Agreement, we may be unable to contract with a substitute service provider on similar terms or at all, and the costs of substituting service providers may be substantial. In addition, in light of Abengoa’s familiarity with our assets, a substitute service provider may not be able to provide the same level of service due to lack of pre-existing synergies. If we cannot locate a service provider that is able to provide us with substantially similar services as Abengoa does under the Executive Services Agreement or Support Services Agreement on similar terms, it would likely have a material adverse effect on our business, financial condition, results of operation and cash flows.

 

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Risks Related to Ownership of our Shares

We may not be able to pay a specific level or growing cash dividends to holders of our shares in the future

The amount of our cash available for distribution principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

 

•

the level and timing of capital expenditures we make;

 

•

the level of our operating and general and administrative expenses, including reimbursements to Abengoa for services provided to us in accordance with the Support Services Agreement;

 

•

seasonal variations in revenues generated by the business;

 

•

our debt service requirements and other liabilities;

 

•

fluctuations in our working capital needs;

 

•

our ability to borrow funds;

 

•

restrictions contained in our debt agreements (including our project-level financing); and

 

•

other business risks affecting our cash levels.

As a result of all these factors, we cannot guarantee that we will have sufficient cash generated from operations to pay a specific level of cash dividends to holders of our shares. Furthermore, holders of our shares should be aware that the amount of cash available for distribution depends primarily on our cash flow, and is not solely a function of profitability, which is affected by non-cash items. We may incur other expenses or liabilities during a period that could significantly reduce or eliminate our cash available for distribution and, in turn, impair our ability to pay dividends to shareholders during the period. Because we are a holding company, our ability to pay dividends on our shares is limited by restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us, including restrictions under the terms of the agreements governing project-level financing or restrictions applicable in the various jurisdictions in which we operate, such as exchange controls or similar matters. Our project-level financing agreements generally prohibit distributions to us unless certain specific conditions are met, including the satisfaction of financial ratios.

Our cash available for distribution will likely fluctuate from quarter to quarter, in some cases significantly, due to seasonality. See “Business—Seasonality.” As result, we may reduce the amount of cash we distribute in a particular quarter to establish reserves to fund distributions to shareholders in future periods for which the cash distributions we would otherwise receive from our subsidiary project companies would otherwise be insufficient to fund our quarterly dividend. If we fail to establish sufficient reserves, we may not be able to maintain our quarterly dividend with a respect to a quarter adversely affected by seasonality.

Dividends to holders of our shares will be paid at the discretion of our board of directors. Our board of directors may decrease the level of or entirely discontinue payment of dividends. For a description of additional restrictions and factors that may affect our ability to pay cash dividends, please see “Cash Dividend Policy.”

The assumptions underlying the forecasts presented elsewhere in this prospectus are inherently uncertain and subject to significant business, economic, financial, regulatory and competitive risks that could cause our actual cash available for distribution to differ materially from our forecasts

The forecasts presented elsewhere in this prospectus are based on our current portfolio of assets and were prepared using assumptions that our management believes are reasonable. See “Cash Dividend Policy—Assumptions and Considerations.” These include assumptions regarding the future operating costs of our facilities, our facilities’ future level of power generation, interest rates, administrative expenses, tax treatment of income, future capital expenditure requirements if any, the COD of Mojave and Palmatir on schedule and to budget and the absence of material adverse changes in economic conditions or government regulations. They also

 

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include assumptions based on wind and solar resource studies that take into account meteorological conditions and on the availability of our facilities and transmission lines. The forecasts assume that no unexpected risks materialize during the forecast periods. Any one or more than one of these assumptions may prove to be incorrect, in which case our actual results of operations will be different from, and possibly materially worse than, those contemplated by the forecasts. There can be no assurance that the assumptions underlying the forecasts presented elsewhere in this prospectus will prove to be accurate. Actual results for the forecast periods will likely vary from the forecast results and those variations may be material. We make no representation that actual results achieved in the forecast periods will be the same, in whole or in part, as those forecasted herein.

We are a holding company and our only material assets after completion of this offering will be our interest in our subsidiaries, upon whom we are dependent for distributions to pay dividends, taxes and other expenses

We are a holding company whose sole material assets are the ones contributed to it by Abengoa in the Asset Transfer. We do not have any independent means of generating revenue. We intend to cause our operating subsidiaries to make distributions to us in an amount sufficient to cover all applicable taxes payable and dividends, if any, declared by us. To the extent that we need funds for a quarterly cash dividend to holders of our shares or otherwise, and one or more of our operating subsidiaries is restricted from making such distributions under the terms of its financing or other agreements or applicable law and regulations or is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition and limit our ability to pay dividends to shareholders.

We have a limited operating history and as a result there is no assurance we can operate on a profitable basis

We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of operation. We cannot assure you that we will be successful in addressing the risks we may encounter, and our failure to do so could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Market interest rates may have an effect on the value of our shares

One of the factors that will influence the price of our shares will be the effective dividend yield of our shares (i.e., the yield as a percentage of the then-market price of our shares) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our shares to expect a higher dividend yield. Our inability to increase our dividend as a result of an increase in borrowing costs, insufficient cash available for distribution or otherwise could result in selling pressure on, and a decrease in, the market price of our shares as investors seek alternative investments with higher yield.

If you purchase shares sold in this offering, you will incur immediate and substantial dilution

If you purchase shares in this offering, you will incur immediate and substantial dilution, because the assumed initial public offering price of $             per share is substantially higher than the as adjusted net tangible book value per share on an as adjusted basis to give effect to the Asset Transfer. The as adjusted net tangible book value of our shares is $             per share. For additional information, see “Dilution.”

Market volatility may affect the price of our shares and the value of your investment

Following the completion of this offering, the market price for our shares is likely to be volatile, in part because our shares have not been previously publicly traded. We cannot predict the extent to which a trading market will develop or how liquid that market may become. If you purchase shares in this offering, you will pay a price that was not established in the public trading markets. The initial public offering price will be determined

 

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by negotiations between the underwriters and us. You may not be able to resell your shares above the initial public offering price and may suffer a loss on your investment. In addition, the market price of our shares may fluctuate due to the termination of the ROFO Agreement, the Executive Services Agreement, the Support Services Agreement or additions or departures of Abengoa’s key personnel, changes in market valuations of similar companies, and/or speculation in the press or investment community regarding us or Abengoa. Securities markets in general may experience extreme volatility that is unrelated to the operating performance of particular companies. Any broad market fluctuations may adversely affect the trading price of our shares.

You may experience dilution of your ownership interest due to the future issuance of additional shares

We are in a capital intensive business, and may not have sufficient funds to finance the growth of our business through future acquisitions. As a result, we may require additional funds from further equity or debt financings, including tax equity financing transactions or sales of preferred shares or convertible debt to complete future acquisitions, expansions and capital expenditures and pay the general and administrative costs of our business. In the future, we may issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of purchasers of our shares offered hereby. The potential issuance of additional shares or preferred stock or convertible debt may create downward pressure on the trading price of our shares. We may also issue additional shares or other securities that are convertible into or exercisable for our shares in future public offerings or private placements for capital raising purposes or for other business purposes, potentially at an offering price, conversion price or exercise price that is below the offering price for our shares in this offering.

If securities or industry analysts do not publish or cease to publish research or reports about us, our business or our market, or if they change their recommendations regarding our shares adversely, the price and trading volume of our shares could decline

The trading market for our shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our shares adversely, or provide more favorable relative recommendations about our competitors, the price of our shares would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our shares to decline.

Future sales of our shares by Abengoa may cause the price of our shares to fall

The market price of our shares could decline as a result of sales by Abengoa of such shares in the market, or the perception that these sales could occur. Abengoa has agreed to certain limitations on the ability to dispose of or hedge any of our shares, or any securities convertible into or exchangeable for our shares, for a period of time commencing on the date of this prospectus. Future sales of substantial amounts of the shares and/or equity-related securities in the public market or the perception that such sales could occur, could adversely affect prevailing trading prices of the shares and could impair our ability to raise capital through future offerings of equity or equity-related securities. The price of the shares could be depressed by investors’ anticipation of the potential sale in the market of substantial additional amounts of shares. Disposals of shares could increase their offer in the market and depress their price.

There may not be a public market for our shares

There is currently subject to official notice of issuance, no public market for our shares. While we intend to apply to list our shares on the NASDAQ Global Select Market, an active or liquid public market for our shares may not develop or be sustained. If an active trading market does not develop and is not maintained, the liquidity and market price of our shares could be negatively affected.

 

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The trading market for our shares may be volatile and may be adversely affected by many events

The market for securities issued by issuers such as us is influenced by economic and market conditions and, to varying degrees, market conditions, interest rates, currency exchange rates and inflation rates in other countries. There can be no assurance that events in the United States, Latin America, Europe or elsewhere will not cause market volatility or that such volatility will not adversely affect the price of the shares or that economic and market conditions will not have any other adverse effect. Fluctuations in interest rates may give rise to arbitrage opportunities based upon changes in the relative value of the shares. Any trading by arbitrageurs could, in turn, affect the trading prices of the shares.

As a “foreign private issuer” in the United States, we are exempt from certain rules under the U.S. securities laws and are permitted to file less information with the SEC than U.S. companies

As a “foreign private issuer,” we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.

Judgments of U.S. courts may not be enforceable against us

Judgment of U.S. courts, including those predicated on the civil liability provisions of the federal securities laws of the United States may not be enforceable in courts in the United Kingdom or other countries in which we operate. As a result, our shareholders who obtain a judgment against us in the United States may not be able to require us to pay the amount of the judgment.

There are limitations on enforceability of civil liabilities under U.S. federal securities laws

We are incorporated under the laws of England and Wales. Most of our officers and directors reside outside of the United States. In addition, a portion of our assets and the majority of the assets of our directors and officers are located outside the United States. As a result it may be difficult or impossible to serve legal process on persons located outside the United States and to force them to appear in a U.S. court. It may also be difficult or impossible to enforce a judgment of a U.S. court against persons outside the United States, or to enforce a judgment of a foreign court against such persons in the United States. We believe that there may be doubt as to the enforceability against persons in England and Wales and in Spain, whether in original actions or in actions for the enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the laws of the United States, including its federal securities laws. Because we are a foreign private issuer, our directors and officers will not be subject to rules under the Exchange Act that under certain circumstances would require directors and officers to forfeit to us any “short-swing” profits realized from purchases and sales, as determined under the Exchange Act and the rules thereunder, of our equity securities. In addition, punitive damages in actions brought in the United States or elsewhere may be unenforceable in England and Wales and in Spain.

We will incur increased costs as a result of being a publicly traded company

As a public company, we will incur additional legal, accounting and other expenses that we did not incur as a private company. In addition, SEC and NASDAQ rules impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial

 

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compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements, which could make our shares less attractive to investors

We are an “emerging growth company,” as defined by the JOBS Act. For as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various public company reporting requirements. These exemptions include, but are not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and (ii) reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements. We could be an emerging growth company for up to five years after the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which such fifth anniversary will occur in 2019. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company prior to the end of such five-year period. The information that we provide to holders of our shares may be different than you might receive from other public reporting companies in which you hold equity interests. We cannot predict if investors will find our shares less attractive as a result of our reliance on these exemptions. If some investors find our shares less attractive as a result of any choice we make to reduce disclosure, there may be a less active trading market for our shares and the price for our shares may be more volatile.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Shareholders in certain jurisdictions may not be able to exercise their pre-emptive rights if we increase our share capital

Under our articles of association, holders of our shares generally have the right to subscribe and pay for a sufficient number of our shares to maintain their relative ownership percentages prior to the issuance of any new shares in exchange for cash consideration. Holders of shares in certain jurisdictions may not be able to exercise their pre-emptive rights unless securities laws in such jurisdictions have been complied with respect to such rights and the related shares, or an exemption from the requirements of the securities laws of these jurisdictions is available. We currently do not intend to register the shares under the laws of any jurisdiction other than the United States, and no assurance can be given that an exemption from the securities laws requirements of other jurisdictions will be available to shareholders in these jurisdictions. To the extent that such shareholders are not able to exercise their pre-emptive rights, the pre-emptive rights would lapse and the proportional interests of such holders would be reduced.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation organized in Delaware

We are incorporated under English law. The rights of holders of our shares are governed by English law, including the provisions of the U.K. Companies Act 2006, and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations organized in Delaware. The principal differences are set forth in “Description of Share Capital—Differences in Corporate Law.”

 

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Provisions in the U.K. City Code on Takeovers and Mergers may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders

The U.K. City Code on Takeovers and Mergers, or the Takeover Code, applies, among other things, to an offer for a public company whose registered office is in the United Kingdom and whose securities are not admitted to trading on a regulated market in the United Kingdom if the company is considered by the Panel on Takeovers and Mergers, or the Takeover Panel, to have its place of central management and control in the United Kingdom. This is known as the “residency test.” The test for central management and control under the Takeover Code is different from that used by the U.K. tax authorities. Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the United Kingdom by looking at various factors, including the structure of our Board of Directors, the functions of the directors and where they are resident.

If at the time of a takeover offer the Takeover Panel determines that we have our place of central management and control in the United Kingdom, we would be subject to a number of rules and restrictions, including but not limited to the following: (1) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (2) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (3) we would be obliged to provide equality of information to all bona fide competing bidders

Risks Related to Taxation

Changes in our tax position can significantly affect our reported earnings and cash flows

Changes in corporate tax rates and/or other relevant tax laws in the United Kingdom, the United States or the other countries in which our assets are located could have a material impact on our future tax rate and/or our required tax payments. Although we consider our tax provision to be adequate, the final determination of our tax liability could be different from the forecasted amount, which could have potential adverse effects on our financial condition and cash flows. In relation to the United Kingdom Controlled Foreign Company regime, or the U.K. CFC rules, we have good arguments to consider that the foreign entities held under Abengoa Yield would not be subject to the U.K. CFC rules. Changes to the U.K. CFC rules or adverse interpretations of them, could have effects on future tax rate and/or required tax payments in Abengoa Yield. With respect to some of our projects, we must meet defined requirements to apply favorable tax treatment, such as lower tax rates or exemptions. We intend to seek to meet these requirements in order to benefit from the favorable tax treatment; however, there can be no assurance that we will be able to comply with all of the necessary requirements in the future, or the requirements could change or be interpreted in another manner, which could give rise to a greater tax liability and which could have an adverse effect on our results of operations and cash flows.

Our future tax liability may be greater than expected if we do not utilize Net Operating Losses, or NOLs, sufficient to offset our taxable income

We expect to generate NOLs and NOL carryforwards that we can use to offset future taxable income. Based on our current portfolio of assets, which include renewable assets that benefit from an accelerated tax depreciation schedule, and subject to potential tax audits, which may result in income, sales, use or other tax obligations, we do not expect to pay significant taxes for a period of approximately ten years, with the exception of ACT in Mexico, where we expect to use existing NOLs in five to seven years.

While we expect these losses will be available to us as a future benefit, in the event that they are not generated as expected, or are successfully challenged by the local tax authorities, such as the U.S. Internal Revenue Service, or the IRS, or Her Majesty’s Revenue and Customs among others, by way of a tax audit or otherwise, or subject to future limitations as discussed below, our ability to realize these benefits may be limited. A reduction in our expected NOLs, a limitation on our ability to use such losses or the occurrence of future tax audits may result in a material increase in our estimated future income tax liability and may negatively impact our results of operations and liquidity.

 

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Our ability to use U.S. NOLs to offset future income may be limited

Our ability to use U.S. NOLs generated in the future could be limited if we were to experience an “ownership change” as defined under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the IRC, and similar state rules. In general, an “ownership change” would occur if our “5-percent shareholders,” as defined under Section 382 of the IRC, collectively increased their ownership in us by more than 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change U.S. NOLs equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurs. The long-term tax-exempt rate for March 2014 is 3.56%. Future sales of our shares by Abengoa, as well as future issuances by us or Abengoa could contribute to a potential ownership change.

Distributions to U.S. Holders of our shares may be taxable as dividends

It is difficult to predict whether we will generate earnings or profits as computed for U.S. federal income tax purposes in any given tax year. If we make distributions on the shares from current or accumulated earnings and profits as computed for U.S. federal income tax purposes, such distributions generally will be taxable to U.S. Holders of our shares as ordinary dividend income for U.S. federal income tax purposes. Under current law, if certain requirements are met, such dividends would be eligible for the lower tax rates applicable to qualified dividend income of certain non-corporate U.S. Holders. While we expect that a portion of our distributions to U.S. Holders of our shares may exceed our current and accumulated earnings and profits as computed for U.S. federal income tax purposes, and therefore may constitute a non-taxable return of capital to the extent of a U.S. Holders basis in our shares, no assurance can be given that this will occur. We intend to calculate our earnings and profits annually in accordance with U.S. federal income tax principles. See “Taxation—Material U.S. Federal Income Tax Considerations.”

If we are a passive foreign investment company for U.S. federal income tax purposes for any taxable year, U.S. Holders in our shares could be subject to adverse U.S. federal income tax consequences

The rules relating to passive foreign investment companies, or PFICs, can have adverse effects on U.S. Holders for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of certain kinds of income.

If Abengoa Yield were a PFIC for any taxable year during which a U.S. Holder held shares, certain adverse U.S. federal income tax consequences may apply to the U.S. Holder. Abengoa Yield does not believe it was a PFIC for its most recent taxable year and does not expect to be a PFIC for U.S. federal income tax purposes for its current taxable year or in the foreseeable future. However, PFIC status depends on the composition of a company’s income and assets and the fair market value of its assets (including, among others, less than 25% owned equity investments) from time to time, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. Accordingly, there can be no assurance that Abengoa Yield will not be considered a PFIC for any taxable year.

If we were a PFIC, U.S. Holders of our shares may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements. See “Taxation—Material U.S. Federal Income Tax Considerations—Passive foreign investment company rules.”

 

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USE OF PROCEEDS

We estimate the net proceeds to us from this offering will be approximately $            million, based on an assumed public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus and after deducting underwriting commissions payable by us.

We intend to distribute all of the net proceeds from this offering, less $10 million to strengthen our liquidity position, to Abengoa, as part of the consideration paid to Abengoa in connection with the Asset Transfer.

Each $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds to us by approximately $            million, after deducting underwriting commissions payable by us, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Any increase or decrease in net proceeds would result in a corresponding increase or decrease in the amount paid to Abengoa.

The underwriters may also purchase up to an additional              shares from the selling shareholder at the public offering price, less the underwriting commissions, from the closing date of this offering to cover over-allotments, if any. We estimate that the net proceeds to the selling shareholder will be approximately $            million, after deducting underwriting commissions and assuming the exercise in full of the underwriters’ over-allotment option. We will not receive any proceeds from the exercise of the underwriters’ over-allotment option.

 

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CASH DIVIDEND POLICY

You should read the following discussion of our cash dividend policy in conjunction with “—Assumptions and Considerations” below, which includes the factors and assumptions upon which we base our cash dividend policy. In addition, you should read “Cautionary Statements Regarding Forward-Looking Statements” and “Risk Factors” for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our business.

This forecast of future operating results and cash available for distribution in future periods is based on the assumptions described below and other assumptions believed by us to be reasonable as of the date of this prospectus. However, we cannot assure you that any or all of these assumptions will be realized. These forward-looking statements are based upon estimates and assumptions about circumstances and events that have not yet occurred and are subject to all of the uncertainties inherent in making projections. This forecast should not be relied upon as fact or as an accurate representation of future results. Future results will be different from this forecast and the differences may be materially less favorable.

For additional information regarding our historical combined results of operations, you should refer to our Annual Combined Financial Statements included elsewhere in this prospectus.

General

Our Cash Dividend Policy

We intend to pay a regular quarterly dividend in U.S. dollars to our shareholders starting in the third quarter of 2014. Our quarterly dividend will initially be set at $0.2592 per share, or $1.04 per share on an annualized basis, and the amount may be changed in the future without advance notice.

We expect to pay a quarterly dividend on or about the 75th day following the expiration of each fiscal quarter to our shareholders of record on or about the 60th day following the last day of such fiscal quarter. With respect to our first dividend payable on December 15th to holders of record on December 1st, assuming a closing date of                     , 2014, we intend to pay a full initial dividend of $0.2592 per share.

We have established our initial quarterly dividend level based on a targeted cash available for distribution payout ratio of 90%, after considering the cash available for distribution that we expect our projects will be able to generate, less reserves for the prudent conduct of our business (including for, among other things, unplanned capital expenditures and dividend shortfalls as a result of fluctuations in our cash flows). We intend to grow our business via improvements in our existing projects, the start of production of Mojave and through the acquisition of operational projects, which, we believe, will facilitate the growth of our cash available for distribution and enable us to increase our dividend per share over time. However, the determination of the amount of 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 dividend policy reflects a basic judgment that our shareholders will be better served by distributing most of the cash distributions we receive from our project companies each quarter in the form of a quarterly dividend rather than retaining it. In addition, by providing for the provision of reserves each quarter after calculating cash available for distribution, and thereby enabling us to retain a portion of cash generated from operations, we believe we will also provide better value to our shareholders by maintaining the operating capacity of our assets and, in turn, dividend paying capacity.

Our cash available for distribution is likely to fluctuate from quarter to quarter, in some cases significantly, as a result of the seasonality of our assets, 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

 

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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, such as net cash provided by financing activities, receipts from cash grant proceeds, or, if applicable, borrowings under our new revolving credit line or future credit facilities, to pay dividends to our shareholders. Our estimation of cash available for distribution does not include non-recurring cash generation events nor the starting cash position.

Estimate of Future Cash Available for Distribution

We primarily considered forecasted cash available for distribution in assessing the amount of cash that we expect our assets will be able to generate for the purposes of the dividends we will distribute during the forecast period. Cash available for distribution is a non-GAAP financial measure that is not required by, or presented in accordance with, IFRS as issued by IASB.

We believe that an understanding of cash available for distribution is useful to investors in evaluating our ability to pay dividends pursuant to our stated cash dividend policy. We have forecasted cash available for distribution through monthly cash projections of cash that can actually reach the holding company per project. Nevertheless, in general we expect that “cash available for distribution” will be similar to Adjusted EBITDA generated during the period,

less:

 

•

changes in other assets and liabilities;

 

•

non-cash revenue linked to U.S. cash grants;

 

•

minorities dividend;

 

•

cash interest paid;

 

•

principal amortization of indebtedness; and

 

•

cash taxes;

plus:

 

•

temporary financial investment interests.

We have approved a policy to distribute 90% of our cash available for distribution and our main shareholder has communicated to us that it supports and plans to continue supporting such policy.

Risks Regarding Our Cash Dividend Policy

We do not have any operating history as an independent company upon which to rely in evaluating whether we will have sufficient cash available for distribution and other sources of liquidity to allow us to pay dividends on our shares at our initial quarterly dividend level on an annualized basis or at all. There is no guarantee that we will pay quarterly cash dividends to our shareholders. We do not have a legal obligation to pay our initial quarterly dividend or any other dividend. While we currently intend to maintain our initial dividend following the completion of this offering and to grow our business and increase our dividend per share over time, our cash dividend policy is subject to all the risks inherent in our business and may be changed at any time as a result of certain restrictions and uncertainties, including the following:

 

•

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

 

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subsidiaries comply with certain financial tests and covenants in order to make such cash distributions. When forecasting cash available for distribution and dividend payments we have aimed to take these restrictions into consideration, but we cannot guarantee future dividends. Additionally, we may incur debt in the future to acquire new projects, the terms of which will likely require commencement of commercial operations prior to our ability to receive cash distributions from such acquired projects. These agreements likely will contain financial tests and covenants that our subsidiaries must satisfy prior to making distributions. Should we or any of our project-level subsidiaries be unable to satisfy these covenants or if any of us are otherwise in default under such facilities, we may be unable to receive sufficient cash distributions to pay our stated quarterly cash dividends notwithstanding our stated cash dividend policy. See the “Project-Level Financing” descriptions contained in the “Business—Our Operations” for a description of such restrictions.

 

•

We and our board of directors will have the authority to establish cash reserves for the prudent conduct of our business and for future cash dividends to our shareholders, and the establishment of or increase in those reserves could result in a reduction in cash dividends from levels we currently anticipate pursuant to our stated cash dividend policy. These reserves may account for the fact that our project-level cash flows may vary from year to year based on, among other things, changes in prices under offtake agreements, operational costs and other project contracts, compliance with the terms of non-recourse project-level financing including debt repayment schedules, the transition to market or recontracted pricing following the expiration of offtake agreements, working capital requirements and the operating performance of the assets. Furthermore, our board of directors may increase reserves to account for the seasonality that has historically existed in our assets’ cash flows and the variances in the pattern and frequency of distributions to us from our assets during the year.

 

•

We may lack sufficient cash to pay dividends to our shareholders due to cash flow shortfalls attributable to a number of operational, commercial or other factors, including low availability, unexpected operating interruptions, legal liabilities, costs associated with governmental regulation, changes in governmental subsidies, changes in regulation, as well as increases in our operating and/or general and administrative expenses, including existing contracts with Abengoa and its subsidiaries, principal and interest payments on our and our subsidiaries’ outstanding debt, income tax expenses, working capital requirements or anticipated cash needs at our project-level subsidiaries. See “Risk Factors” for more information on the risks to which our business is subject.

 

•

We may pay cash to our shareholders via capital reduction and not dividends in some years.

 

•

Our project companies’ cash distributions to us and, as a result, our ability to pay or grow our dividends is dependent upon the performance of our subsidiaries and their ability to distribute cash to us. The ability of our project-level subsidiaries to make cash distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness, applicable corporation laws and other laws and regulations.

Our Ability to Grow our Business and Dividend

We intend to grow our business primarily through the improvement of existing assets, the COD of Mojave and the acquisition of contracted power generation assets, electric transmission lines and other infrastructure assets, which, we believe, will facilitate the growth of our cash available for distribution and enable us to increase our dividend per share over time. Our approved policy is to maximize cash distributions to shareholders and specifically to distribute 90% of our cash available for distribution. However, the final determination of the amount of cash dividends to be paid to our shareholders will be made by our board of directors and will depend upon our financial condition, results of operations, cash flow, long-term prospects and any other matters that our board of directors deem relevant.

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

Estimated Cash Available for Distribution for the Twelve Months Ending June 30, 2015 and June 30, 2016

Based upon the material assumptions described below and other assumptions that we believe to be reasonable as of the date of this prospectus, we forecast that our cash available for distribution during the twelve months ending June 30, 2015 and 2016 will be approximately $92 million and $150 million, respectively. This amount would be sufficient to pay our initial quarterly dividend of $0.2592 per share on all outstanding shares immediately after consummation of this offering for each quarter in the twelve months ending June 30, 2015 and the twelve months ending June 30, 2016. If our board were to decide to maintain the 90% payout ratio in the twelve month period ending June 30, 2016, based on the foregoing, our quarterly dividend would increase to approximately $0.42 per share or $1.69 on an annualized basis.

We are providing this forecast to supplement our financial statements in support of our belief that we will have sufficient cash available for distribution to make distributions in amounts sufficient to allow us to pay a regular quarterly dividend on all of our outstanding shares immediately after consummation of this offering for each quarter in the twelve months ended June 30, 2015, at our initial quarterly dividend of $0.2592 per share (or $1.04 per share on an annualized basis). Please read “—Assumptions and Considerations” for further information as to the assumptions we have made for the forecast. Please see Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” for information regarding the accounting policies we have followed for the forecast.

Our forecast is a forward-looking statement and reflects our judgment as of the date of this prospectus of the conditions we expect to exist and the course of action we expect to take during the twelve months ending June 30, 2015 and the twelve months ending June 30, 2016. It should be read together with the financial statements and the accompanying notes thereto included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We believe that we have a reasonable basis for these assumptions and that our actual results of operations will approximate those reflected in our forecast, but we can give no assurance that our forecasted results will be achieved. The assumptions and estimates underlying the forecast, as described below under “—Assumptions and Considerations,” are inherently uncertain and, although we consider them reasonable as of the date of this prospectus, they are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from forecasted results, including, among others, the risks and uncertainties described in “Risk Factors.” Any of the risks discussed in this prospectus, to the extent they occur, could cause actual results of operations to vary significantly from those that would enable us to generate sufficient cash available for distribution to allow us to pay the aggregate annualized regular quarterly dividend on all outstanding shares for the twelve months ending June 30, 2015 and 2016, calculated at the initial quarterly dividend rate of $0.2592 per share per quarter (or $1.04 per share on an annualized basis). Accordingly, there can be no assurance that the forecast will be indicative of our future performance or that actual results will not differ materially from those presented in the forecast. If our forecasted results are not achieved, we may not be able to pay a regular quarterly dividend to our shareholders at our initial quarterly dividend level or at all. Inclusion of the forecast in this prospectus should not be regarded as a representation by us, the underwriters or any other person that the results contained in the forecast will be achieved.

 

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Forecasted Financial Information

We do not as a matter of course make public projections as to future sales, earnings or other results. However, our management has prepared the prospective financial information set forth below to present the cash available for distribution during the twelve months ending June 30, 2015 and 2016. The accompanying prospective financial information was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, our expected course of action and future financial performance. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information. Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the prospective financial information. The assumptions and estimates underlying the forecasted financial information are inherently uncertain and, though considered reasonable by our management as of the date of its preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective financial information, including, among others, risks and uncertainties. See “Risk Factors.” Accordingly, there can be no assurance that the prospective results are indicative of our future performance or that actual results will not differ materially from those presented in the forecasted financial information. Inclusion of the forecasted financial information in this prospectus should not be regarded as a representation by any person that the results contained in the forecasted financial information will be achieved. We do not generally publish our business plans and strategies or make external disclosures of our anticipated financial position or results of operations. Accordingly, we do not intend to update or otherwise revise the forecasted financial information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, we do not intend to update or revise the forecasted financial information to reflect changes in general economic or industry conditions. Additional information relating to the principal assumptions used in preparing the projections is set forth below. See “Risk Factors” for a discussion of various factors that could materially affect our financial condition, results of operations, business, prospects and securities.

The statement that we believe that we will have sufficient cash available for distribution to allow us to pay the full regular quarterly dividend on all of our outstanding shares immediately after the consummation of this offering for each quarter in the twelve months ending June 30, 2015 and 2016 (based on our initial quarterly dividend rate of $0.2592 per share per quarter (or $1.04 per share on an annualized basis)) should not be regarded as a representation by us, the underwriters or any other person that we will pay such dividends. Therefore, you are cautioned not to place undue reliance on this information.

 

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The below sets forth our forecasted cash available for distribution for the twelve months ending June 30, 2015 and 2016:

 

		Twelve months ending
(in millions of U.S. dollars)		June 30, 2015				June 30, 2016
Operating revenues
Total operating revenues		$	492			$	576
Operating costs and expenses
Costs of operations			(119	)			(132	)
Depreciations and amortization			(166	)			(177	)
General and administration			(5	)			(5	)
Total operating costs and expenses		$	(290	)		$	(313	)
Operating income		$	203			$	263
Other income/(expense)
Interest income			2				2
Interest expense			(175	)			(177	)
Total other income/(expense)		$	(173	)		$	(175	)
Cash distribution from unconsolidated affiliates			18				18
Income before income taxes			48				106
Income tax expense			(3	)			(5	)
Net income		$	44			$	101
Less:
Interest income			2				2
Add:
Depreciation and amortization			166				177
Interest expense			175				177
Income tax expense			3				5
Adjusted EBITDA		$	387			$	458
Changes in other assets and liabilities			(32	)			1
Non-cash revenue linked to U.S. cash grants			(25	)			(31	)
Less:
Minorities dividend			20				24
Cash interest paid			166				165
Principal amortization of indebtedness			51				87
Cash taxes			1				2
Add:
Temporary financial investment interests			1				1
Estimated cash available for distribution to shareholders after investing and funding activities		$	92			$	150
Annual dividend per ordinary share			1.04				1.68
Ordinary shares (in millions)			80				80
Aggregate annual dividend			83				135
Excess/(Shortfall) of cash available for distribution over aggregated annualized quarterly distributions		$	9			$	15

 

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The following table provides a reconciliation of net income to Adjusted EBITDA by geography for the twelve months ending June 30, 2015 and 2016:

 

(in millions of U.S. dollars)		Twelve months ending June 30, 2015
		North America				South America(1)				Europe				Corporate				Total
Net income		$	44			$	2			$	2			$	(5	)		$	44
Less:
Interest income			0				1				0				0				2
Add:
Depreciation and amortization			103				39				24				0				166
Interest expense			96				57				22				0				175
Income tax expense			0				2				1				0				3
Adjusted EBITDA		$	243			$	99			$	49			$	(5	)		$	387

 

(1)	South America includes cash distributions from unconsolidated affiliates of $18 million.

 

(in millions of U.S. dollars)		Twelve months ending June 30, 2016
		North America				South America(1)				Europe				Corporate				Total
Net income		$	101			$	3			$	2			$	(5	)		$	101
Less:
Interest income			0				1				1				0				2
Add:
Depreciation and amortization			114				39				24				0				177
Interest expense			100				55				22				0				177
Income tax expense			0				4				1				0				5
Adjusted EBITDA		$	314			$	100			$	49			$	(5	)		$	458

 

(1)	South America includes cash distributions from unconsolidated affiliates of $18 million.

The following tables provide a reconciliation of net income to Adjusted EBITDA by business sector for the twelve months ending June 30, 2015 and 2016:

 

(in millions of U.S. dollars)		Twelve months ending June 30, 2015
		Renewable Energy				Conventional Power				Electric Transmission(1)				Corporate				Total
Net income		$	(16	)		$	67			$	(1	)		$	(5	)		$	44
Less:
Interest income			1				0				1				0				2
Add:
Depreciation and amortization			134				0				32				0				166
Interest expense			82				41				52				0				175
Income tax expense			1				0				2				0				3
Adjusted EBITDA		$	200			$	108			$	83			$	(5	)		$	387

 

(1)	Electric Transmission includes cash distributions from unconsolidated affiliates of $18 million.

 

 

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(in millions of U.S. dollars)		Twelve months ending June 30, 2016
		Renewable Energy				Conventional Power				Electric Transmission(1)				Corporate				Total
Net income		$	38			$	69			$	0			$	(5	)		$	101
Less:
Interest income			1				0				1				0				2
Add:
Depreciation and amortization			145				0				32				0				177
Interest expense			86				40				50				0				177
Income tax expense			1				0				4				0				5
Adjusted EBITDA		$	269			$	109			$	85			$	(5	)		$	458

 

(1)	Electric Transmission includes cash distributions from unconsolidated affiliates of $18 million.

Assumptions and Considerations

Set forth below are the material assumptions that we have made to demonstrate our ability to generate our estimated Adjusted EBITDA and estimated cash available for distribution for the twelve months ending June 30, 2015 and June 30, 2016. The forecast has been prepared by and is the responsibility of our management. Our forecast reflects our judgment of the conditions we expect to exist and the course of action we expect to take during the forecast period. While the assumptions disclosed in this prospectus are not all inclusive, such assumptions are those that we believe are material to our forecasted results of operations. We believe we have a reasonable basis for these assumptions. We believe that our historical results of operations will approximate those reflected in our forecast. However, we can give no assurance that our forecasted results will be achieved. There will likely be differences between our forecasted and our historical results, and those differences may be material. While we believe that the assumptions underlying the forecast are reasonable in light of management’s current expectations concerning future events, we can give no assurance that our assumptions will be realized or that we will generate cash available for distribution during the forecast periods at the levels forecasted, in which event we may not be able to pay cash dividends on our shares at our initial dividend level or at all.

Assumptions and estimates underlying the forecast are inherently uncertain and our future operating results are subject to a wide variety of risks and uncertainties, including significant business, economic, and competitive risks and uncertainties described under the headings “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements” elsewhere in this prospectus.

 

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The following table presents the forecasted Adjusted EBITDA and cash available for distribution by geography and business sector for the twelve months ending June 30, 2015 and June 30, 2016 (in millions):

 

(in millions of U.S. dollars)		Twelve months ending
		June 30, 2015								June 30, 2016
		Adjusted EBITDA				Estimated Cash Available for Distribution				Adjusted EBITDA				Estimated Cash Available for Distribution
Split by Geography
North America		$	243			$	28			$	314			$	95
South America(1)			99				46				100				50
Europe			49				23				49				10
Corporate			(5	)			(5	)			(5	)			(5	)
Total		$	386			$	92			$	458			$	150
Split by Business sector
Conventional Power		$	108			$	19			$	109			$	19
Renewable Energy			200				31				269				95
Electric Transmission(1)			83				46				85				41
Corporate			(5	)			(5	)			(5	)			(5	)
Total		$	386			$	92			$	458			$	150

 

(1)	Includes cash distributions from unconsolidated affiliates of $18 million.

Potential Risks

Our business is exposed to numerous risks that could have a material adverse effect on our business, financial condition, results of operations or cash available for distribution. However, we have assumed that no such risks will materialize for the purposes of preparing the forecast. Nevertheless, when we have estimated dividends to be paid, we have used a 90% payout ratio for the twelve months ending June 30, 2015 and June 30, 2016. For a discussion of the important factors that could cause actual results to differ materially from our forecast, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this prospectus.

Initial Public Offering

The forecast assumes that the proceeds of this offering will be used as described in “Use of Proceeds” elsewhere in this prospectus and that in connection with the completion of this offering, the other transactions contemplated upon under the heading “Summary—Asset Transfer” will have been consummated (other than the exercise by the underwriters of their option to purchase additional shares).

Our Projects and Investment

The forecast assumes that our projects and investment will be comprised, during the relevant periods, of the projects set forth in the table under “Business—Our Operations” and our preferred equity investment in ACBH. All projects are currently in operation, with the exception of Palmatir and Mojave, which have both substantially completed construction. We expect to reach COD of Palmatir by June 2014 and COD of Mojave by October 2014. Although making acquisitions is part of our strategy, we have assumed we will not make any further acquisitions during the forecasted period.

 

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Asset assumptions:

Renewable Energy Assets:

Revenues and expenses reflect the terms specified in the fixed-priced offtake agreements for 100% of energy production or in the case of our Spanish assets (Solaben 2 and Solaben 3) a regulated revenue for 100% of energy production (see “Business—Our Operations—Renewable Energy—Solaben 2 and Solaben 3” for additional information). Our forecast assumes production based on solar and wind resource assessments of a 1-year P-50 output probability for each asset adjusted by our experience in typical ramp-up periods. Production based on a 1-year P-50 output probability is defined as the output level that has a more than 50% probability of being exceeded in any given year. Our forecast for the solar facilities assumes an EBITDA margin of approximately $139 per MWh for the twelve months ending June 30, 2015 and an EBITDA margin of approximately $156 per MWh for the twelve months ending June 30, 2016 and an average capacity factor of approximately 24.0% for the twelve months ending June 30, 2015 and an average capacity factor of approximately 30.2% for the twelve months ending June 30, 2016. Our forecast for our wind facility assumes an EBITDA margin of approximately $90 per MWh for the twelve months ending June 30, 2015 and an EBITDA margin of approximately $89 per MWh for the twelve months ending June 30, 2016 and an average capacity factor of 39.8% for the twelve months ending June 30, 2015 and 2016.

Conventional Power Asset:

Revenues and expenses reflect the terms specified in the Pemex Conversion Services Agreement under which ACT is required to deliver all of the plant’s thermal and electrical output to the Nuevo Pemex Gas Processing Facility. Our forecast assumes an average EBITDA margin of approximately 80%. The Conversion Services Agreement requires Pemex to supply, free of charge, the facility with the fuel and water necessary to operate the Cogeneration Plant and produce electrical energy and steam requested by the Pemex Purchasers based on the expected levels of efficiency. See “Business—Our Operations—Conventional Power—Abengoa Cogeneración Tabasco” for additional information.

Transmission Lines Assets:

Revenues and expenses for electric transmission assets reflect fixed price concession agreements with negotiated and/or regulated rates independent from the effective utilization of the transmission lines and substations related to the projects. Our forecast assumes an EBITDA margin of approximately 85%.

Total Operating Revenue

We estimate that we will generate total operating revenue of $492 million for the twelve months ending June 30, 2015 and $576 million for the twelve months ending June 30, 2016, compared to $210.9 million for the twelve months ended December 31, 2013. This increase in our forecasted period from the historical period is primarily attributed the contributions from several assets that started or are expecting to start operations in the late 2013 or 2014, including Solana, Mojave, ATS, Quadra 1, Quadra 2 and Palmatir. The increase in the forecast period for the twelve months ending June 30, 2016 over the twelve months ending June 30, 2015 is primarily attributed to a full twelve months of generation from Mojave.

Cost of Operations

We estimate that we will incur a cost of operations expense of $119 million for the twelve months ending June 30, 2015 and $132 million for the twelve months ending June 30, 2016, compared to $52 million for the twelve months ended December 31, 2013. This increase in our forecasted period ending June 30, 2015 from the historical period is primarily attributed to the contributions from projects that started operations in late 2013 or early 2014. The increase in the forecast period for the twelve months ending June 30, 2016 over the twelve months ending June 30, 2015 is primarily attributed to a full twelve months of generation from Mojave.

 

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Depreciation and Amortization

We estimate that we will incur depreciation and amortization expense of $166 million for the twelve months ending June 30, 2015 and $177 million for the twelve months ending June 30, 2016 compared to $47 million for the twelve months ended December 31, 2013. This increase in our forecasted periods from the historical period is primarily attributed to the contributions from projects that started operations in late 2013 or early 2014 and the commencement of operations at Mojave. Forecasted depreciation and amortization expense reflects management’s estimates, which are based on consistent average depreciable asset lives and depreciation methodologies under IFRS.

General and Administrative Expenses

We estimate that we will incur general and administrative expenses, or G&A expenses, of $4.5 million for the twelve months ending June 30, 2015 and $4.6 million for the twelve months ending June 30, 2016. G&A expenses include certain shared services and administrative expenses including our services payments to Abengoa under the Executive Services Agreement and the Support Services Agreement and specifically for the forecasts, together with the aforementioned expenses, and certain costs associated with being a public company.

Capital Expenditures

We expect our maintenance capital and operating expenditures to be minimal since they are generally limited by O&M agreements.

Financing and Other

We estimate that interest expense will be $175 million for the twelve months ending June 30, 2015 and $177 million for the twelve months ending June 30, 2016, compared to $123.8 million for the twelve months ended December 31, 2013. The increase is primarily attributed to additional indebtedness incurred to fund the construction of Mojave. Forecasted interest expense is based on the following assumptions:

 

•

We estimate that our net debt level will be approximately $3.4 billion as of June 30, 2015 and $3.3 billion as of June 30, 2016; and

 

•

We estimate that our borrowing costs will average 5.2% and 5.4% for the twelve months ending June 30, 2015 and June 30, 2016, respectively.

We estimate that principal amortization of indebtedness will be $51 million for the twelve months ending June 30, 2015 and $87 million for the twelve months ending June 30, 2016. The increase is primarily attributed to Mojave.

On November 14, 2013, Abengoa finalized its application for cash grant proceeds on behalf of Solana under the American Recovery and Reinvestment Act of 2009 Section 1603 (Cash Grant Program), or the 1603 Cash Grant Program, which provides a cash payment from the federal government in lieu of ITCs for eligible renewable generation sources, and will finalize its application under the same 1603 Cash Grant Program on behalf of Mojave by December 2014 or earlier. Based on recent estimates announced by the U.S. Office of Management and Budget, or OMB, for fiscal year 2014, we estimate a 7.2% reduction for awards. Assuming receipt of proceeds under the 1603 Cash Grant Program, or 1603 Cash Grant Proceeds, after giving effect to sequestration, we estimate that a portion of such proceeds will be used to pay down the amount outstanding under the cash grant bridge loan. Any remaining amount of the 1603 Cash Grant Proceeds, after giving effect to the sequestration, will be received by us.

As we classify 1603 Cash Grant Proceeds as one-time items, we have excluded the excess proceeds distributable to us from our forecasted cash available for distribution. We intend to retain such excess proceeds for general corporate purposes and to potentially fund future acquisitions of assets (whether Abengoa ROFO Assets or otherwise).

 

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Exchange Rates

The forecast assumes that the average exchange rate between the U.S. dollar and the Euro will be approximately €1: U.S.$1.35 and €1: U.S.$1.36 for the twelve months ending June 30, 2015 and June 30, 2016, respectively. The assumed average exchange rates were determined by reference to actual exchange rates and forward exchange rates as reported by Bloomberg as of February 1, 2014 for the balance of 2014, 2015 and 2016.

Significant Accounting Policies

In preparing the forecast, we have applied the accounting policies used in the preparation of our financial statements shown elsewhere in this prospectus. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the notes to our financial statements included elsewhere in this prospectus.

Regulatory, Industry and Economic Factors

Our estimated results of operations for the forecasted period are based on the following assumptions related to regulatory, industry and economic factors:

 

•

no material nonperformance or credit-related defaults by customers, suppliers, Abengoa Concessions, S.L. or any of our commercial customers;

 

•

no new or material amendments to United States (federal, state or local), U.K., Mexican, Peruvian, Chilean, Brazilian, Uruguayan, Spanish or any other laws or regulations, or interpretation or application of existing laws or regulation, that in either case will be materially adverse to our business or to the business of our suppliers, Abengoa Concessions, S.L. or any of our commercial customers;

 

•

no material adverse effects to our business, industry or the business of our suppliers, Abengoa Concessions or any of our commercial customers on account of natural disasters;

 

•

no material adverse change resulting from supply disruptions or reduced demand for electricity; and

 

•

no material adverse changes in market, regulatory and overall economic conditions.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and combined capitalization as of December 31, 2013:

 

•

on a historical basis;

 

•

as adjusted to give effect to (i) the transfer of the preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines, (see “Summary—Asset Transfer”) which is not included in the historical financial information, and (ii) the contribution of certain related party loans and repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of the offering. See “Unaudited Pro Forma Combined Financial Information”; and

 

•

as further adjusted to give effect to the offering and the use of proceeds set forth under the heading “Use of Proceeds.”

You should read the following table in conjunction with the sections entitled “Use of Proceeds,” “Selected Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Information” and our Annual Combined Financial Statements included elsewhere in this prospectus.

 

		As of December 31, 2013(1)
(in millions of U.S. dollars)		Historical				As Adjusted(2)				As Further Adjusted(3)
Cash and cash equivalents		$	357.7			$	172.7			$	182.7
Short-term financial investments			266.4				284.8				284.8
Total cash and cash equivalents and short-term financial investments			624.1				457.5				467.5
Borrowings			2,786.1				2,690.1				2,690.1
Notes and bonds			108.6				108.6				108.6
Non-recourse project financing (long and short term)			2,894.7				2,799.0				2,799.0
Total equity			1,287.2				1,900.3				1,910.3
Total capitalization		$	4,181.9			$	4,699.2			$	4,709.3

Notes:

(1)

We have prepared the information presented in the “as adjusted” and “as further adjusted” columns for illustrative purposes only. The information presented in the “as adjusted” and “as further adjusted” columns addresses pro forma situations and, therefore, does not represent our actual financial position or results. Consequently, such information may not be indicative of our total capitalization as of the date of this prospectus. Investors are cautioned not to place undue reliance on this pro forma information.

(2)

As adjusted to give effect to the transfer of a preferred instrument in ACBH and to the repayment of debt held by General Electric of $96 million and reduction of equity by $89 million that we expect to occur prior to the consummation of the offering. We estimate the fair value of the preferred equity investment in ACBH to be $263 million, of which $18.4 million has been classified as a short-term financial investment, as that amount is expected to be collected in the next twelve months. In addition, prior to the consummation of this offering, we expect to capitalize debt with related parties of $439.4 million.

(3)	As further adjusted to give effect to $10 million of proceeds from the offering added to cash and cash equivalents.

 

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DILUTION

Dilution is the amount by which the offering price per share paid by the purchasers of shares sold in this offering will exceed the pro forma net tangible book value per share. Pro forma net tangible book value per share as of a particular date represents the amount of our total tangible assets (which excludes intangible assets from pro forma combined assets) less pro forma combined liabilities divided by the number of shares outstanding as of that date. See “Unaudited Pro forma Combined Financial Information.”

Dilution Information

As of December 31, 2013, our pro forma combined net tangible value was $(3,253.7) million or $             per share. After deducting underwriting fees and commissions, purchasers of our shares in this offering will experience an immediate dilution in net tangible book value per share of $             per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares sold in the offering and the pro forma combined net tangible book value per share immediately after the offering of the shares. The following table illustrates this per share dilution:

 

Initial public offering price		$
Pro forma combined net tangible book value per share as of December 31, 2013
Increase in net tangible book value per share attributable to existing investors
Dilution per share to new investors		$

If the underwriters exercise their option to purchase additional shares in full, the net tangible book value per share after giving effect to the offering would be $             per share. This represents an increase in net tangible book value of $             per share to our existing shareholder, Abengoa, and dilution in net tangible book value of $             per share to purchasers in this offering.

The following table sets forth the number of shares (as applicable) purchased, the total consideration paid, or to be paid to us, and the average price per share paid, or to be paid, by our existing shareholder immediately and by the new investors, at the initial public offering price of $ per share, before deducting underwriting fees and commissions.

 

		Shares Purchased				Total Consideration
		Number		Percent		Amount		Percent		Average Price per Share
						(in $)				(in $)
Existing shareholder (Abengoa)(1)
New investors in this offering
Total

(1)	The assets contributed by Abengoa in the Asset Transfer will be recorded at historical cost. The book value of the consideration to be provided by Abengoa in the Asset Transfer as of December 31, 2013 was approximately $             million.

If the initial public offering price were to increase or decrease by $1.00 per of share, then dilution in net tangible book value per share would equal $             and $            , respectively.

Supplemental Dilution Information

For the reasons set forth below, we believe that it is useful for investors that we present supplemental dilution information that does not exclude intangible service concession agreements from the calculation of pro forma combined net tangible book value and pro forma combined net tangible book value per share. We refer to these measures that have been calculated to include intangible service concession agreements as supplemental pro forma combined net tangible book value and supplemental pro forma combined net tangible book value per share.

 

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Some of our service concession agreements are accounted for as intangible assets in accordance with IFRIC 12, representing the right to future cash flows under existing concession arrangements, for a net amount of $3,695.1 million as of December 31, 2013 (see Notes 1, 2, 5, 10 and 18 and Appendix III to our Annual Combined Financial Statements) and $5,154.0 million on a pro forma basis as of December 31, 2013. Contracted concessional assets should be contemplated in the same way for calculations of “net tangible book value,” irrespective of whether they are recorded as financial assets or intangible assets for accounting purposes. Contracted concessional assets are our productive assets, which constitute the value of our company and the recovery of the book value of these assets is not subject to significant uncertainty or illiquidity. As a result, management believes that it is appropriate to include intangible service concession agreements in the calculation of pro forma combined net tangible book value and pro forma combined net tangible book value per share.

Had combined pro forma net tangible book value and pro forma combined net tangible book value per share been calculated so as to include intangible service concession agreements in these calculations, supplemental pro forma combined net tangible book value as of December 31, 2013 would have been $1,900.3 million, or $             per share. Furthermore, following the sale by us of shares in the offering at the initial public offering price of $             per share and the receipt of the net proceeds of $             million after deducting the underwriting discounts and commissions, supplemental pro forma combined net tangible book value as of December 31, 2013 as adjusted, would have been $             per share. This would have represented an immediate increase in supplemental pro forma combined net tangible book value to existing stockholders of $             per share and an immediate dilution to new investors of $             per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares sold in the offering and supplemental combined net tangible book value per share, as adjusted for the offering of the shares. The following table illustrates this per share dilution:

 

Initial public offering price		$
Pro forma combined net tangible book value per share as of December 31, 2013
Increase in net tangible book value per share attributable to existing investors
Supplemental pro forma combined net tangible book value per share, as adjusted for this offering
Dilution per share to new investors		$

 

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information sets forth the unaudited pro forma combined income statement of Abengoa Yield for the year ended December 31, 2013 as well as the unaudited pro forma combined statement of financial position of Abengoa Yield as of December 31, 2013 to give effect to the consolidation of Mojave, to the transfer of a preferred equity investment in ACBH, to the contribution of certain related party loans and to the repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of this offering.

Unaudited pro forma combined financial information has been derived from, and should be read in conjunction with the Annual Combined Financial Statements of our accounting predecessor as of and for the year ended December 31, 2013 prepared in accordance with IFRS as issued by the IASB, included elsewhere in this prospectus.

We have included the unaudited pro forma combined financial information to illustrate, on a pro forma basis:

 

(a)

The consolidation of Mojave Solar, LLC, once we assume control over Mojave Solar, LLC, which is expected to occur when Mojave achieves COD. Mojave is currently recorded as an associate under the equity method in our Annual Combined Financial Statements.

 

(b)

The transfer of a preferred equity investment in ACBH, a Brazilian company that owns 14 electric transmission lines in Brazil (as described in “Business—Our Operations—Convertible Preferred Equity Investment in Abengoa Concessoes Brasil Holding”) which is not included in the historical combined financial statements as part of the Asset Transfer given such preferred equity investment was not made during the period covered for such financial statements.

 

(c)

The contribution of certain related party loans and to the repayment of debt to third parties and reduction of equity that we expect to occur prior to the consummation of this offering.

The events described above are described in more detail in notes 1 to 3 to this “Unaudited Pro Forma Combined Financial Information.”

We have assumed that the above transactions have been completed on:

 

•

January 1, 2013 for the purpose of presenting the Unaudited Pro Forma Combined Income Statement for the year ended December 31, 2013.

 

•

December 31, 2013 for the purpose of presenting the Unaudited Pro Forma Combined Statement of Financial Position as of December 31, 2013.

The unaudited pro forma combined financial information is presented for illustrative purposes only and reflects estimates and certain assumptions made by our management that are considered reasonable under the circumstances as of the date of this prospectus and which are based on the information available at the time of the preparation of the unaudited pro forma combined financial information. Actual adjustments may differ materially from the information presented herein. The unaudited pro forma combined financial information does not purport to represent what our combined income statement and combined statement of financial position would have been if the relevant transactions had occurred on the dates indicated and is not intended to project our consolidated results of operations or consolidated financial position for any future period or date.

We have calculated earnings per share assuming a total of 80,000,000 shares, outstanding after the consummation of this offering. Since our predecessor is a combination of entities under common control of Abengoa and did not have any share capital as of December 31, 2013, we have not calculated earnings per share on an historical basis.

 

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Unaudited Pro Forma Combined Income Statement for the year ended December 31, 2013

 

		Historical combined information				Pro Forma adjustment for Mojave consolidation(1)				Pro Forma adjustment for the preferred shares of ACBH(2)				Pro Forma adjustments for repayments(3)				Pro Forma Abengoa Yield
		(in millions of U.S. dollars)
Revenue			210.9				—				—				—				210.9
Other operating income			379.6				—				—				—				379.6
Raw materials and consumables used			(8.7	)			—				—				—				(8.7	)
Employee benefit expenses			(2.4	)			—				—				—				(2.4	)
Depreciation, amortization, and impairment charges			(46.9	)			—				—				—				(46.9	)
Other operating expenses			(420.9	)			(0.1	)			—				—				(421.0	)
Operating Profit/(loss)		$	111.6			$	(0.1	)			—				—			$	111.5
Financial income			1.2				—				18.4								19.6
Financial expenses			(123.8	)			(0.1	)			—				37.6				(86.3	)
Net exchange differences			(0.9	)			—				—				—				(0.9	)
Other financial income/expenses, net			(1.7	)			0.3				—				—				(1.4	)
Financial expense, net		$	(125.2	)		$	0.1			$	18.4			$	37.6			$	(69.1	)
Share of (Loss)/Profit of Associates carried under the equity method		$	0.0				—				—				—			$	—
Profit/(Loss) before Income Tax		$	(13.6	)		$	—			$	18.4			$	37.6			$	42.4
Income tax			11.8				—				—				—				11.8
Profit/(Loss) for the year		$	(1.9	)		$	0.1			$	18.4			$	37.6			$	54.2
Profit attributable to non-controlling interests			(1.6	)			—				—				—				(1.6	)
Profit/(Loss) for the Year attributable to the combined group		$	(3.4	)		$	0.1			$	18.4			$	37.6			$	52.6
Number of ordinary shares outstanding (millions)																			80.0
Earnings per Share (U.S.$ per share)																		$	0.657

 

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Unaudited Pro Forma Combined Statement of Financial Position as of December 31, 2013

 

		Historical Combined Information				Pro Forma adjustments for Mojave consolidation(1)				Pro Forma adjustments for the preferred shares of ACBH(2)				Pro Forma adjustments for repayments(3)				Abengoa Yield Pro Forma
		(U.S.$ in millions)
Non-current assets
Contracted concessional assets			4,418.1				1,458.9				—				—				5,877.0
Investments carried under the equity method			387.3				(381.2	)			—				—				6.1
Financial investments			28.9				11.1				244.6				—				284.5
Deferred tax assets			52.8				—				—				—				52.8
Total Non-Current Assets		$	4,887.1			$	1,088.8			$	244.6				—			$	6,220.5
Current assets
Inventories			5.2				—				—				—				5.2
Clients and Other Receivables			97.6				1.6				—				—				99.2
Financial Investments			266.4				20.3				18.4				—				305.0
Cash and Cash Equivalents			357.7				0.5				—				(185.0	)			173.2
Total Current Assets			726.9				22.4				18.4				(185.0	)			582.7
Total Assets		$	5,614.0			$	1,111.2			$	263.0				(185.0	)			6,803.2
Equity and Liabilities
Total Equity		$	1,287.2			$	—			$	263.0			$	350.1				1,900.3
Non-Current Liabilities
Long-term Non-Recourse (Project Financing)			2842.4				791.0				—				(95.7	)			3,537.7
Grants and other liabilities			650.9				262.7				—				—				913.6
Related parties			492.5				—				—				(439.4	)			53.1
Derivative liabilities			44.2				—				—				—				44.2
Deferred tax liabilities			21.8				—				—				—				21.8
Total Non-Current Liabilities		$	4,051.8			$	1,053.7			$	—			$	(535.1	)		$	4,570.4
Current Liabilities
Short-term Non-Recourse (Project Financing)			52.4				1.2				—				—				53.6
Trade Payables and Other Current Liabilities			204.0				56.3				—				—				260.3
Income and other tax payables			18.6				—				—				—				18.6
Total Current Liabilities		$	275.0			$	57.5			$	—			$	—			$	332.5
Total Equity and Liabilities		$	5,614.0			$	1,111.2			$	263.0			$	(185.0	)			6,803.2

 

Notes:—

(1)

Reflects the impact of consolidating Mojave Solar LLC, the company that holds our Mojave project, which is recorded under the equity method during its construction period. We have derived the pro forma adjustments in the pro forma combined income statement for Mojave’s consolidation from Mojave’s income statement for the year ended December 31, 2013; we have not made any adjustments to reflect the construction in progress performed by related parties in 2013 because Mojave will be operational when it is consolidated. Mojave is expected to enter into operation during 2014 and will be fully consolidated once we obtain control over Mojave Solar LLC.

We reassess whether or not we control an investee when facts and circumstances indicate that there are changes to the elements that determine control (power over the investee, exposition to variable returns of the investee and ability to use its power to affect its returns). We concluded that during the construction phase of Mojave all the relevant decisions were subject to the control and approval of a third party. As a result, we did not have control over Mojave during the construction period. IFRS 10 (B80) provides that control requires a

 

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continuous assessment and that we shall reassess if it controls on investee if facts and circumstances indicate that there are changes to the elements of control. Once Mojave enters into operation, the decision-making process will change, the investee will be controlled and it will be fully consolidated. As during the construction period the assets were included under the scope of IFRIC 12, we estimate that the book value of consolidated assets and liabilities will be similar to its fair value.

(2)

Reflects a preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines. This investment is not reflected in our historical combined financial statements; as a result it has been included as an adjustment in the unaudited pro forma combined financial statements. We estimate the expected annual dividend to be $ 18.4 million, and we estimate the expected fair value of this instrument to be $263 million.

(3)

Reflects the contribution of certain loans with related parties of $439.4 million as of December 31, 2013 and the purchase of the 15% interest in ACT held by General Electric, and a preferred interest in ACT also held by General Electric which is considered debt from an accounting perspective given the characteristics of the investment. This debt amounted to $96.0 million as of December 31, 2013 and reduction of equity for an amount of $89.3 million. Both the capitalization of debt and purchase of 15% from General Electric are expected to occur prior to the consummation of this offering.

 

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SELECTED FINANCIAL INFORMATION

The selected combined financial information as of and for the years ended December 31, 2013 and 2012, and as of January 1, 2012, is not intended to be an indicator of our financial condition or results of operations in the future. You should review such selected combined financial information together with our Annual Combined Financial Statements and notes thereto, included elsewhere in this prospectus.

The following tables should be read in conjunction with “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Annual Combined Financial Statements and related notes included elsewhere in this prospectus.

Combined Income Statement

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
Operating revenues and costs
Revenue		$	210.9			$	107.2
Other operating income			379.6				560.4
Raw materials and consumables used			(8.7	)			(4.3	)
Employee benefit expense			(2.4	)			(1.8	)
Depreciation, amortization and impairment charges			(46.9	)			(20.2	)
Other operating expenses			(420.9	)			(573.6	)
Operating profit		$	111.6			$	67.7
Finance income			1.2				0.7
Finance expense			(123.8	)			(64.1	)
Net exchange differences			(0.9	)			0.4
Other financial income/(expense), net			(1.7	)			(0.2	)
Finance expense net		$	(125.2	)		$	(63.2	)
Share of (loss)/profit of associates carried under the equity method			—				(0.4	)
Profit before income tax		$	(13.6	)		$	4.1
Income tax benefit/(expense)			11.8				(4.0	)
Profit/(loss) for the year		$	(1.8	)		$	0.1
Profit/(loss) attributable to non-controlling interest			(1.6	)			1.2
Profit/(loss) for the year attributable to the combined group		$	(3.4	)		$	1.3

 

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Combined Statement of Financial Position

 

(in millions of U.S. dollars)		As of December 31,								As of January 1,
		2013				2012				2012
Non-current assets:
Contracted concessional assets		$	4,418.1			$	2,058.9			$	1,546.8
Investments in associates carried under the equity method			387.3				734.1				180.2
Financial investments and other			28.9				13.7				9.4
Deferred tax assets			52.8				60.2				44.1
Total non-current assets		$	4,887.1			$	2,866.9			$	1,780.5
Current assets:
Inventories		$	5.1			$	—			$	—
Clients and other receivables			97.6				106.1				124.8
Financial investments			266.4				127.6				101.7
Cash and cash equivalents			357.7				97.5				40.2
Total current assets		$	726.8			$	331.2			$	266.7
Total assets		$	5,613.9			$	3,198.1			$	2,047.2
Total equity			1,287.2				1,139.8				583.9
Non-current liabilities:
Long-term non-recourse project financing			2,842.3				1,320.0				1,003.2
Other liabilities			1,209.5				502.2				214.6
Total non-current liabilities		$	4,051.8			$	1,822.2			$	1,217.8
Current liabilities:
Short-term non-recourse project financing			52.3				48.9				78.7
Other liabilities			222.6				187.2				166.8
Total current liabilities			274.9				236.1				245.5
Equity and Total liabilities		$	5,613.9			$	3,198.1			$	2,047.2

Combined Cash Flow Statement

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
Gross cash flows from operating activities
Profit for the year		$	(1.8	)		$	0.1
Adjustments to reconcile after-tax profit to net cash generated by operating activities			92.4				22.8
Net interest/taxes paid			(62.4	)			(41.6	)
Variations in working capital			9.2				66.6
Total net cash flow generated by (used in) operating activities		$	37.4			$	47.9
Net cash flows from investment activities
Investments			(694.6	)			(1,098.7	)
Disposals			—				—
Total net cash flows used in investment activities		$	(694.6	)		$	(1,098.7	)
Net cash flows generated by finance activities		$	914.9			$	1,107.3
Net increase/(decrease) in cash and cash equivalents			257.7				56.5
Cash and cash equivalents at the beginning of the year			97.5				40.2
Currency translation difference on cash and cash equivalents			2.5				0.8
Cash and cash equivalents at the end of the year		$	357.7			$	97.5

 

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Geography and business sector data

Revenue by geography

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
North America		$	114.0			$	62.3
South America			25.4				17.0
Europe			71.5				27.9
Total revenue		$	210.9			$	107.2

Revenue by business sectors

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
Renewable Energy		$	82.7			$	27.9
Conventional Power			102.8				62.3
Electric Transmission			25.4				17.0
Total revenue		$	210.9			$	107.2

Non-GAAP Financial Data

EBITDA by geography

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
North America		$	96.7			$	61.1
South America			19.0				10.2
Europe			42.8				16.7
Combined EBITDA(1)		$	158.5			$	88.0

EBITDA by business sectors

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
Renewable Energy		$	55.8			$	16.1
Conventional Power			83.3				61.1
Electric Transmission			19.4				10.8
Combined EBITDA(1)		$	158.5			$	88.0

 

Notes:—

(1)

EBITDA is calculated as profit for the year from continuing operations, after adding back income tax expense, share of (loss)/profit of associates, finance expense net and depreciation, amortization and impairment charges of the combined entities. EBITDA is not a measurement of performance under IFRS as issued by the IASB, and you should not consider 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 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. 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. EBITDA may not be indicative of our historical operating results, nor are meant to be predictive of potential future results. See “Presentation of Financial Information—Non-GAAP Financial Measures.”

 

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The following table sets forth a reconciliation of EBITDA to our profit for the year from continuing operations:

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
Reconciliation of profit for the year to EBITDA
Profit/(loss) for the year attributable to the combined group		$	(3.4	)		$	1.3
Profit attributable to non-controlling interest from continued operations			1.6				(1.2)
Income tax expenses/(benefits)			(11.8)				4.0
Share of loss/(profit) of associated companies			—				0.4
Financial expenses, net			125.2				63.2
Operating profit		$	111.6			$	67.7
Depreciation, amortization and impairment charges			46.9				20.2
Combined EBITDA (unaudited)		$	158.5			$	88.0

The following table sets forth a reconciliation of EBITDA to our net cash generated by operating activities:

 

(in millions of U.S. dollars)		Year ended December 31,
		2013				2012
Reconciliation of EBITDA to net cash generated or used from operating activities
Combined EBITDA (unaudited)		$	158.5			$	88.0
Other cash finance costs and other			(67.9)				(65.0)
Variations in working capital			9.2				66.6
Income tax (paid)/received			(0.1)				(0.3)
Interests (paid)/received			(62.3)				(41.4)
Net cash generated or used from operating activities		$	37.4			$	47.9

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Annual Combined Financial Statements appearing elsewhere in this prospectus were prepared on a “carve-out” basis from Abengoa and are intended to represent the financial results during those periods of a portfolio of renewable energy, conventional power, and electric transmission line assets in North America (the United States and Mexico), South America (Peru, Chile, and Uruguay) and Europe (Spain) that will be contributed to us as part of the Asset Transfer.

The following discussion should be read together with, and is qualified in its entirety by reference to, our Annual Combined Financial Statements, that are included elsewhere in this prospectus, which have been prepared in accordance with IFRS as issued by the IASB. 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. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Overview

We are a dividend growth-oriented company formed to serve as the primary vehicle through which Abengoa will own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue-generating assets, initially focused on North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as Europe (Spain).

We believe we are well positioned to be a premier company for investors seeking a total return based on stable and growing dividend income from a diversified portfolio of low-risk, high-quality assets, and for investors with a key objective of accretive dividend growth.

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, will offer us a lower cost of capital than that of a traditional engineering or construction company and independent power producer and provide us with a significant competitive advantage with which to execute our growth strategy.

With this business model, our objective is to pay a consistent and growing cash dividend to holders of our shares that is sustainable on a long-term basis. We expect to target a payout ratio of 90% of our cash available for distribution 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. We will focus on high-quality, newly-constructed and long-life facilities with creditworthy counterparties that we expect will produce stable, long-term cash flows.

Upon consummation of this offering, we will own eleven assets, comprising 710 MW of renewable energy generation, 300 MW of conventional power generation and 1,018 miles of electric transmission lines.

We have signed an exclusive agreement with Abengoa, which we refer to as the ROFO Agreement, which provides us with a right of first offer on any proposed sale, transfer or other disposition of any of Abenoga’s contracted renewable energy, conventional power, electric transmission lines or water assets located in North America, Chile, Peru, Uruguay, Brazil, Colombia and the European Union, as well as four assets in a selected number of other regions. We refer to the contracted assets subject to the ROFO Agreement as the “Abengoa ROFO Assets.” See “Related Party Transactions—Right of First Offer.” Based on the acquisition opportunities available to us, which include the Abengoa ROFO Assets as well as any third-party acquisitions we

 

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pursue, we believe that we will have the opportunity to grow our cash available for distribution in a manner that would allow us to further increase our cash dividends per share over time. Prospective investors should read “Cash Dividend Policy,” including our financial forecast and related assumptions, and “Risk Factors,” including the risks and uncertainties related to our forecasted results, acquisition opportunities and growth plan, in their entirety.

We own a diversified portfolio of renewable energy, conventional power and electric transmission line contracted assets in North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as in Spain. Our portfolio consists of five renewable energy assets, a cogeneration facility and several electric transmission lines, all of which are fully operational, with the exception of Palmatir and Mojave, where the construction of each asset is substantially complete and which are expected to be fully operational by June 2014 and October 2014, respectively. In addition, we own a convertible preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, consisting mostly of transmission lines. All of our assets have contracted revenues (regulated revenues in the case of the Spanish assets) with low-risk offtakers and collectively have an average remaining contract life of approximately 26 years as of December 31, 2013. Over 90% of cash available for distribution from these assets in each of the next four years will be in U.S. dollars or indexed to the U.S. dollar and our policy is to use currency coverage contracts if required to maintain that ratio. Over 90% of our project-level debt is hedged against changes in interest rates through an underlying fixed rate on the debt instrument or through interest rate swaps, caps or similar hedging instruments.

Our revenue and EBITDA by geography and business sector for the years ended December 31, 2013 and 2012 are set forth in the following tables:

 

		Year ended December 31,
Revenue by geography		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
North America			114.0				54.1	%			62.3				58.1	%
South America			25.4				12.0	%			17.0				15.9	%
Europe			71.5				33.9	%			27.9				26.0	%
Total revenue		$	210.9				100.0	%		$	107.2				100.0	%

 

		Year ended December 31,
Revenue by business sector		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
Renewable energy			82.7				39.2	%			27.9				26.0	%
Conventional power			102.8				48.7	%			62.3				58.1	%
Electric transmission lines			25.4				12.1	%			17.0				15.9	%
Total revenue		$	210.9				100.0	%		$	107.2				100.0	%

 

		Year ended December 31,
EBITDA by geography		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
North America			96.7				84.8	%			61.1				98.1	%
South America			19.0				74.8	%			10.2				60.0	%
Europe			42.8				59.9	%			16.7				59.9	%
Combined EBITDA		$	158.5				75.2	%		$	88.0				82.1	%

 

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		Year ended December 31,
EBITDA by business sector		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
Renewable energy			55.8				67.5	%			16.1				57.7	%
Conventional power			83.3				81.0	%			61.1				98.1	%
Electric transmission lines			19.4				76.4	%			10.8				63.5	%
Combined EBITDA		$	158.5				75.2	%		$	88.0				82.1	%

Factors Affecting our Results of Operations

Commencement of operations of projects

The comparability of our results of operations is significantly influenced by the volume of projects that become operational during a particular year. The number of projects becoming operational and the length of lead times for projects under construction significantly affect our revenue and operating profit, which makes the comparison of periods difficult.

The following table sets forth the principal projects that commenced operations during each of the years ended December 31, 2013 and 2012, and expected in 2014, including the quarter in which operations began or are expected to begin:

 

Geography Segment		Business Sector		Project		Capacity		Status		Commercial Operation Date
North America		Renewable energy		Solana		280 MW		Operation		4Q 2013
		Renewable energy		Mojave		280 MW		Startup and Production Testing		4Q 2014(*)
		Conventional power		ACT		300 MW		Operation		2Q 2013
South America		Electric transmission line		ATN		362 miles		Operation		1Q 2011
		Electric transmission line		ATS		569 miles		Operation		1Q 2014
		Electric transmission line		Quadra 1		49 miles		Operation		1Q 2014
		Electric transmission line		Quadra 2		32 miles		Operation		1Q 2014
		Electric transmission line		Palmucho		6 miles		Operation		4Q 2007
		Renewable energy		Palmatir		50 MW		Startup and Production Testing		2Q 2014(*)
Europe		Renewable energy		Solaben 2 and 3		2x50 MW		Operation		2Q 2012 & 4Q 2012

 

(*)	Expected commercial operation date

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

 

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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 “Regulation” for a description of the primary industry-related regulations applicable to our activities in 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

As of December 31, 2013, the average remaining life of our PPAs, concessions and contracted revenue agreements was approximately 26 years. We believe that the average life of our PPAs and contracted revenue agreements is a significant indicator of our forecasted revenue streams and the growth of our business. 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 price adjustment mechanisms that partially protect us against inflation.

Tax Incentives in the United States for renewable energy assets

U.S. federal, state, and local governments have established several incentives and financial mechanisms to reduce the cost of renewable energy and spur the development of energy from renewable, non-carbon based, sources. Some of the major tax incentives applied in our projects are, among others, Investment Tax Credit, Cash Grant in Lieu of ITC, Modified Accelerated Cost Recovery System, or MACRS, and Loan Guarantee Program.

We do not expect Solana or Mojave to pay U.S. federal income tax for the foreseeable future due to the relevant NOLs and NOL carryfowards generated by the application of the aforementioned tax incentives established in the United States, in particular MACRS accelerated depreciation.

Tax accelerated depreciation for Spanish new assets

For investments in new material assets and investment properties used for economic activities acquired in the tax periods commencing in 2009 up to March 31, 2012, tax free depreciation is allowed.

Due to this special regime, Solaben 2 and Solaben 3 do not expect to pay taxes in the following 10 years.

Specific corporate income tax rules in Mexico

Our project in Mexico, ACT, must pay Mexican corporate income tax on its business income and capital gains. The general taxable income is calculated in a similar way to the other jurisdictions in which our assets are located; however, the Mexican corporate income tax provides for specific inflationary adjustments on monetary assets and liabilities.

Notwithstanding the above, the project is not expected to pay relevant corporate taxes for the next five to seven years due to the NOL carryforwards generated during the construction phase.

Capital expenditures

We finance our contracted assets primarily through non-recourse debt issued by a financial institution. Consequently, a significant part of our business is capital-intensive and our new assets are highly leveraged. See “Liquidity and capital resources—Capital expenditures.”

 

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Interest rates

We incur significant indebtedness in our assets. The interest rate risk arises mainly from indebtedness with variable interest rates. To mitigate the interest rate risk, we primarily use long-term interest rate swaps and interest rate options which, in exchange for a fee, offer protection against a rise in interest rates. We estimate that currently over 90% of our interest cost exposure is covered. 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 and most of those located in South America have their PPAs, or concessional agreements, and financing contracts signed in, or indexed to, U.S. dollars, and report their individual financial statements in U.S. dollars. There are some companies with revenue and expenses denominated in the local currency of the jurisdictions in which we operate, in particular, our Concentrating Solar Power plants in Spain, Solaben 2 and Solaben 3 (2x50 MW), and the Palmucho electric transmission line in Chile (6 miles), where the principal revenues and expenses are denominated in euros and Chilean pesos, respectively.

Fluctuations in the value of foreign currencies, mainly the euro, in relation to the U.S. dollar may affect our operating results. Impacts associated with fluctuations in foreign currency are discussed in more detail under “Quantitative and qualitative disclosure about market risk—Foreign exchange rate risk.” 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. The following tables illustrate the average rates of exchange used in the case of euros:

 

		U.S. dollar average per euro
Year ended December 31, 2013			1.3277
Year ended December 31, 2012			1.2857

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

In our discussion of operating results, we have included foreign exchange impacts in our revenue by providing constant currency revenue growth. The constant currency presentation is a non-IFRS financial measure, 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 nor should such amounts be considered in isolation.

 

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Key Performance Indicators

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

 

		Year ended December 31,
Key performance indicator		2013				2012
Renewable energy
MW in operation			380				100
GWh produced			280				75
Conventional power
MW in operation			300				—
GWh produced			1,849				—
Availability (%)			97.0	%			—
Electric transmission lines
Miles in operation			368				368
Availability (%)			99.6	%			99.2	%

Results of operations

The tables below illustrate our results of operations for the years ended December 31, 2013 and 2012.

 

		Year ended December 31,
Results of operations		2013				2012
		($ in millions)
Revenue			210.9				107.2
Other operating income			379.6				560.4
Raw materials and consumables used			(8.7	)			(4.3	)
Employee benefit expense			(2.4	)			(1.8	)
Depreciation, amortization and impairment charges			(46.9	)			(20.2	)
Other operating expenses			(420.9	)			(573.6	)
Operating profit		$	111.6			$	67.7
Financial income			1.2				0.7
Financial expense			(123.8	)			(64.1	)
Net exchange differences			(0.9	)			0.4
Other net financial income/(expense)			(1.7	)			(0.2	)
Financial expense, net		$	(125.2	)		$	(63.2	)
Share of profit/(loss) of associates			0.0				(0.4	)
Profit/(loss) before income tax		$	(13.6	)		$	4.1
Income tax benefit/(expense)			11.8				(4.0	)
Profit/(loss) for the year		$	(1.8	)		$	0.1
Profit attributable to non-controlling interest			(1.6	)			1.2
Profit/(loss) attributable to the combined group		$	(3.4	)		$	1.3

 

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Explanation of Combined Income Statement Items

Comparison of Years ended December 31, 2013 and 2012

Revenues

Revenues increased by 96.8% to $210.9 million for the year ended December 31, 2013, compared with $107.2 million for the year ended December 31, 2012. On a constant currency basis, revenue for the year ended December 31, 2013 would have been $208.2 million, representing an increase of $101.0 million, or 94.2%, compared to the year ended December 31, 2012. The increase is largely attributable to the commencement of operations of ACT and Solana in the first quarter and the last quarter of 2013 respectively, and a full year of operations of Solaben 2 and Solaben 3, as they commenced operations during 2012. This resulted in net electricity production of 2,129 GWh for the year ended December 31, 2013 compared to 75 GWh produced during the year ended December 31, 2012.

Other operating income

The following table sets forth our other operating income for the years ended December 31, 2013 and 2012:

 

		Year ended December 31,
Other operating income		2013				2012
		($ in millions)
Grants			10.1				—
Income from various services			4.8				1.8
Income from subcontracted construction services for our assets and concessions			364.7				558.6
Total		$	379.6			$	560.4

Other operating income decreased by 32.3% to $379.6 million for the year ended December 31, 2013, compared with $560.4 million for the year ended December 31, 2012. As certain assets owned by us were under construction and subcontracted to related parties during 2012 and 2013, we were required to account for income from construction services as “Other income” in accordance with IFRIC 12. The corresponding costs of construction were recorded within “Other operating expenses.” This income decreased by 34.7% to $364.7 for the year ended December 31, 2013 compared with $558.6 million for the year ended December 31, 2012. These amounts reflect the construction progress of the assets and concessions during 2013 and 2012. The decrease was primarily due to the completion of construction of ACT. We do not expect to have significant other operating income from construction activities in future periods. The increase in grants is related to the financial support provided by the U.S. Administration to Solana.

Raw materials and consumables used

Raw materials and consumables used increased by 102.3% to $8.7 million for the year ended December 31, 2013, compared with $4.3 million for the year ended December 31, 2012. This was primarily due to the commencement of operations of ACT and Solana in the first and last quarter of 2013 respectively and a full year of operation of Solaben 2 and Solaben 3, as they commenced operations during 2012.

Employee benefits expenses

Employee benefit expenses increased by 33.3% to $2.4 million for the year ended December 31, 2013, compared with $1.8 million for the year ended December 31, 2012. This was attributable in full to an increase in the number of employees at ATN. In 2014, all ATN employees will be transferred to an entity excluded from the perimeter of Abengoa Yield.

 

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Depreciation, amortization and impairment charges

Depreciation, amortization and impairment charges increased by 132.2% to $46.9 million for the year ended December 31, 2013, compared with $20.2 million for the year ended December 31, 2012. The net change was due to the increase in depreciation and amortization, due to the commencement of operations of Solana and a full year of operation of Solaben 2 and Solaben 3, given that depreciation and amortization are recorded from the commencement of operations of the contracted assets.

Other operating expenses

The following table sets forth our other operating expenses for the years ended December 31, 2013, and 2012.

 

		Year ended December 31,
Other operating expenses		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
Leases and fees			1.8				0.9	%			0.4				0.4	%
Repairs and maintenance			12.8				6.0	%			0.9				0.8	%
Independent professional services(*)			22.6				10.7	%			9.6				9.0	%
Transportation			0.4				0.2	%			0.3				0.3	%
Supplies			3.3				1.6	%			0.7				0.6	%
Other external services			5.5				2.6	%			1.8				1.6	%
Levies and duties			6.6				3.1	%			0.4				0.4	%
Other expenses			3.2				1.5	%			0.9				0.9	%
Cost from subcontracted construction costs for our assets and concessions			364.7				172.9	%			558.6				521.2	%
Total		$	420.9				199.6	%		$	573.6				535.1	%

 

(*)	Includes approximately $3.5 million in 2012 and $2.0 million in 2013 of allocated costs and expenses for general and administrative services provided by Abengoa.

Other operating expenses decreased by 26.6% to $420.9 million for the year ended December 31, 2013, compared with $573.5 million for the year ended December 31, 2012. This was primarily due to the decrease of construction costs by 34.7% to $364.7 million for the year ended December 31, 2013 compared with $558.6 million for the year ended December 31, 2012 This decrease, due to the completion of construction of ACT, was partially offset by increases in repairs and maintenance and independent professional services related to the commencement of operations of ACT and Solana in the first quarter and the last quarter of 2013 respectively, a full year of operation of Solaben 2 and Solaben 3, as well as an increase in levies and duties in the Spanish plants due primarily to the existing levy on revenues from power generation.

Operating profit

As a result of the above factors, operating profit increased by 64.7% to $111.6 million for the year ended December 31, 2013, compared with $67.7 million for the year ended December 31, 2012. This increase was primarily attributable to the commencement of operations of several projects (ACT and Solana in the first quarter and the last quarter of 2013 respectively) and a full year of operation of Solaben 2 and Solaben 3.

 

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Financial expense

The following table sets forth our financial expense for the years ended December 31, 2013 and 2012:

 

		Year ended December 31,
Financial expense		2013				2012
		($ in millions)
Expenses due to interest:
- Loans from credit entities			78.6				53.6
- Other debts			17.2				4.5
Interest rates losses derivatives: cash flow hedges			28.0				6.0
Total		$	123.8			$	64.1

Financial expenses increased by 93.2% to $123.8 million for the year ended December 31, 2013, compared with $64.1 million for the year ended December 31, 2012. This increase was primarily attributable to interest expenses from loans and credits associated with Solana, which entered into operation during the last quarter of 2013 and Solaben 2 and Solaben 3, which entered into operation during the fourth and second quarters of 2012, respectively. Interest is capitalized for our intangible concession assets during the construction period and begins to be expensed upon commercial operation. Losses from interest-rate derivatives designated as cash flow hedges of $28 million in 2013 were due to transfers from equity to financial expense in accordance with our cash flow hedge accounting policy and to a one-time loss of $9 million resulting from the transfer to the income statement of all of the accumulated amount in equity as the hedged financing agreement of ACT was cancelled and replaced.

Financial expense, net

Net financial expense increased by 98.1% to $125.2 million for the year ended December 31, 2013, compared with $63.2 million for the year ended December 31, 2012. This increase was primarily attributable to the aforementioned change in financial expense, financial income, net exchange differences and other net finance income/expenses.

Profit/(loss) before income tax

As a result of the above factors, loss before income taxes amounted to $13.6 million for the year ended December 31, 2013, compared to a profit of $4.1 million for the year ended December 31, 2012.

Income tax benefit/(expense)

Income tax benefit increased to $11.8 million for the year ended December 31, 2013, compared with an income tax expense of $4.0 million for the year ended December 31, 2012. Our effective tax rate differs from the average nominal tax rate mainly due to tax incentives in some jurisdictions and to permanent differences in Mexico, resulting from the application of local tax regulation in Mexico.

Profit/(loss) attributable to non-controlling interests

Profit attributable to non-controlling interests amounted to $1.6 million for the year ended December 31, 2013, compared with a loss of $1.2 million for the year ended December 31, 2012. This change was primarily attributable to our minority shareholders in Solaben 2 and Solaben 3.

Profit/(loss) attributable to the combined group

As a result of the above factors, loss attributable to the parent company amounted to $3.4 million for the year ended December 31, 2013, compared with a profit attributable to the parent company of $1.3 million for the year ended December 31, 2012.

 

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Total comprehensive income

Total comprehensive income attributable to the combined group increased to $69.8 million for the year ended December 31, 2013, compared with a negative amount of $17.7 million for the year ended December 31, 2012, mainly due to the change in fair value of cash flow hedges, corresponding to interest rate derivatives.

Segment Reporting

We organize our business into the following three geographies where the contracted assets and concessions are located:

 

•

North America;

 

•

South America; and

 

•

Europe.

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

 

•

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

 

•

Conventional power, which includes our activities related to the production of electricity and steam from natural gas; and

 

•

Electric transmission lines, which include our activities related to the operation of electric transmission lines.

As a result we report our results in accordance with both criteria.

Comparison of Years ended December 31, 2013 and 2012

Revenue and EBITDA by geography and business sector

The following table sets forth our revenue, EBITDA and volumes for the years ended December 31, 2013 and 2012, by geographic region:

 

		Year ended December 31,
Revenue by geography		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
North America			114.0				54.1	%			62.3				58.1	%
South America			25.4				12.0	%			17.0				15.9	%
Europe			71.5				33.9	%			27.9				26.0	%
Total revenue		$	210.9				100.0	%		$	107.2				100.0	%

 

		Year ended December 31,
EBITDA by geography		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
North America			96.7				84.8	%			61.1				98.1	%
South America			19.0				74.8	%			10.2				60.0	%
Europe			42.8				59.9	%			16.7				59.9	%
Combined EBITDA		$	158.5				75.2	%		$	88.0				82.1	%

 

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		Volume sold
Geography		2013				2012
North America (GWh)			1,938				—
South America (miles in operation)			368				368
Europe (GWh)			191				75

North America. Revenues increased to $114.0 million for the year ended December 31, 2013, compared with $62.3 million for the year ended December 31, 2012. The increase was due to the commencement of operations of ACT and Solana in the first quarter of 2013 and in the last quarter of 2013 respectively. As a result, EBITDA increased to $96.7 million for the year ended December 31, 2013, compared with $61.1 million for the year ended December 31, 2012.

South America. Revenue increased by 49.4% to $25.4 million for the year ended December 31, 2013, compared with $17.0 million for the year ended December 31, 2012. On a constant currency basis, revenue for the year ended December 31, 2013 would have been $25.5 million, representing an increase of $8.5 million, or 50.0%, compared with the same period of the previous year. The increase is mostly attributable to the higher level of availability of ATN in 2013 compared with 2012 and to revenues from Quadra 1 and Quadra 2 electric transmission lines. Thus, EBITDA amounted to $19.0 million for the year ended December 31, 2013, which represents an increase of $8.8 million with respect to the year ended December 31, 2012.

Europe. Revenue increased by 156.3% to $71.5 million for the year ended December 31, 2013, compared with $27.9 million for the year ended December 31, 2012. On a constant currency basis, revenue for the year ended December 31, 2013 would have been $68.7 million, representing an increase of $40.8 million, or 146%, compared with the same period of the previous year. The increase is mainly attributable to Solaben 2 and Solaben 3, which entered into operation during 2012. As a result, EBITDA increased to $42.8 million for the year ended December 31, 2013, compared with $16.7 million for the same period in 2012.

The following table sets forth our revenue, EBITDA and volumes for the years ended December 31, 2013 and 2012 by type of business sector:

 

		Year ended December 31,
Revenue by business sector		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
Renewable energy			82.7				39.2	%			27.9				26.0	%
Conventional power			102.8				48.7	%			62.3				58.1	%
Electric transmission lines			25.4				12.1	%			17.0				15.9	%
Total revenue		$	210.9				100.0	%		$	107.2				100.0	%

 

		Year ended December 31,
EBITDA by business sector		2013								2012
		$ in millions				% of revenue				$ in millions				% of revenue
Renewable energy			55.8				67.5	%			16.1				57.7	%
Conventional power			83.3				81.0	%			61.1				98.1	%
Electric transmission lines			19.4				76.4	%			10.8				63.5	%
Combined EBITDA			158.5				75.2	%			88.0				82.1	%

 

		Volume sold
Business Sectors		2013				2012
Renewable energy (GWh)			280				75
Conventional power (GWh)			1,849				—
Electric transmission lines (miles in operation)			368				368

 

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Renewable energy. Revenue increased by 196% to $82.7 million for the year ended December 31, 2013, compared with $27.9 million for the year ended December 31, 2012. On a constant currency basis, revenue for the year ended December 31, 2013, would have been $79.9 million, representing an increase of $52.0 million, or 186%, compared with the same period of the previous year. The increase was mainly attributable to the larger contribution from Solaben 2 and Solaben 3 that entered in operation during 2012 and the commencement of operations in the last quarter of 2013 of Solana. As a consequence, the average capacity in terms of installed MW available throughout the period increased by 280 MW. This resulted in a net electricity production of 280 GWh for the year ended December 31, 2013, compared to 75 GWh produced during the year ended December 31, 2012. Thus, EBITDA reached $55.8 million for the year ended December 31, 2013, which represented an increase of $39.7 million with respect to the year ended December 31, 2012.

Conventional power. Revenue increased to $102.8 million for the year ended December 31, 2013, compared with $62.3 million for the year ended December 31, 2012. The increase was due to the commencement of operations of ACT in the first quarter of 2013. This resulted in net electricity production of 1,849 GWh for the year ended December 31, 2013. As a consequence, EBITDA increased to $83.3 million for the year ended December 31, 2013, from $61.1 million for the year ended December 31, 2012.

Electric transmission lines. Revenue increased to $25.4 million for the year ended December 31, 2013, compared with $17.0 million for the year ended December 31, 2012. On a constant currency basis, revenue for the year ended December 31, 2013 would have been $25.5 million, representing an increase of $8.5 million, or 50.0%, compared with the same period of the previous year. The increase was mostly attributable to the higher level of availability of ATN in 2013 compared to 2012 and to revenues from Quadra 1 and Quadra 2 electric transmission lines. Thus, EBITDA amounted to $19.4 million for the year ended December 31, 2013, an increase of $8.6 million compared to the year ended December 31, 2012.

Liquidity and Capital Resources

The liquidity and capital resources discussion which follows contains certain estimates as of the date of this prospectus of our estimated future 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 prospectus. 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. Without disclaiming responsibility to have a reasonable basis for the prospective financial information included in this prospectus, none of us, the board, the underwriters, or any of our or their respective advisors or representatives or any of our or their respective affiliates, assumes any responsibility for the validity, accuracy or completeness of such information. None of us, the board, the underwriters, or our or their respective

 

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affiliates, 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 prospectus of these estimates should not be deemed an admission or representation by us, the board, the underwriters, or our or their respective affiliates that such information is viewed by us, the board, the underwriters, or our or their respective affiliates as material information of ours. Such information should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding Abengoa Yield contained in this prospectus. None of us, the board, the underwriters, or our or their respective affiliates, 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 “Risk Factors.”

Our principal liquidity requirements are to service our debt, pay cash dividends to investors and acquire new companies and operations. Historically, our predecessor operations were largely financed by internally generated cash flows as well as corporate and/or project-level borrowings to satisfy its capital expenditure requirements. 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 “Risk Factors” in this prospectus may also significantly impact our liquidity.

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 “Business—Our Growth Strategy”).

Liquidity position

As of December 31, 2013, our cash and cash equivalents were $357.7 million as compared to $97.5 million as of December 30, 2012.

Sources of liquidity

Following the consummation of this offering, we expect our ongoing sources of liquidity to include cash on hand, cash generated from our operations, non-recourse project financing arrangements, corporate debt and the issuance of additional equity securities, as appropriate, given market conditions. As described in Note 13 of our Annual Combined Financial Statements, our financing agreements consist mainly of the project-level financings for our various assets.

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.

 

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Concurrently with the consummation of this offering, we plan to enter into a new $50 million revolving credit line with Abengoa, subject to the terms of the Financial Support Agreement. See “Related Party Transactions term—Financial Support Agreement.”

We believe that our existing liquidity position and cash flows from operations will be sufficient to meet our requirements and commitments for the foreseeable future, to finance growth and to distribute dividends to our investors. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our financing agreements will be adequate to meet our future liquidity needs for at least twelve months.

Debt service

Principal payments on debt as of December 31, 2013 are due in the following periods:

 

Repayment schedule by geography		Total				Up to one year				Between one and three years				Between three and five years				Subsequent years
North America			1,842.9				18.5				174.3				88.9				1,561.2
South America			605.3				18.2				44.6				303.6				238.9
Europe			446.4				15.6				34.6				40.2				356.0
Total		$	2,894.6			$	52.3			$	253.5			$	432.7			$	2,156.1

 

Repayment schedule by business sectors		Total				Up to one year				Between one and three years				Between three and five years				Subsequent years
(in millions of U.S. dollars)
Renewable energy			1,667.2				18.3				60.1				72.9				1,515.9
Conventional power			729.3				18.5				156.6				64.1				490.1
Electric transmission lines			498.1				15.5				36.8				295.7				150.1
Total		$	2,894.6			$	52.3			$	253.5			$	432.7			$	2,156.1

The debt maturities relate to non-recourse financing that will be repaid with cash flows generated from the projects in respect of which that financing was incurred.

Capital expenditures

Our capital spending program is focused on completing the construction of assets where construction is in process. As of December 31, 2013, to finance our capital expenditures plan, we have secured commitments for the provision of $124 million of non-recourse debt, and the remaining $48 million will be contributed to us as part of the Asset Transfer. As of the date of this offering, the funds to be provided as equity in relation to the Mojave project are held in cash in a subsidiary of us.

As of December 31, 2013, our estimated capital expenditures for the next year are as follows:

 

Committed contracted assets		2014				Future years				Total
		(unaudited and estimated) ($ in millions)
Mojave			158.9				—				158.9
Palmatir			13.1				—				13.1
Total capex plan		$	172.0				—			$	172.0

 

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Acquisitions

We intend to analyze the acquisition of certain operational assets in the future that meet our defined investment criteria. See “Business—Our Growth Strategy.” Abengoa has a pipeline of projects in various phases of development that are expected to become operational over the course of the next two years. Upon consummation of this offering, we will enter into the ROFO Agreement with Abengoa. The ROFO Agreement will provide us with a right of first offer to acquire all of the future contracted assets of Abengoa in our primary geographies (North America, Chile, Peru, Uruguay, Brazil, Colombia, and the European Union) and four assets to be mutually agreed in other selected regions. The following table presents the projects that we expect Abengoa to propose to us for evaluation for acquisition in 2015 and 2016:

 

Future Pipeline

Type

Ownership

Location

Currency

Capacity

Status

Offtaker

Counterparty Credit Ratings(1)

COD/ Expected COD

Contract Years Left

2015

Cadonal

Renewable (wind)

100%

Uruguay

USD

30 MW

Construction

Uruguay

BBB-/Baa3/BBB-

4Q 2014

20

Solacor 1 & 2

Renewable (CSP)

74%

Spain

Euro

2x50 MW

Operation

Spain

BBB-/Baa2/BBB

2012

23

Shams

Renewable (CSP)

20%

U.A.E.

USD

100 MW

Operation

Abu Dhabi

AA/Aa2/AA

3Q 2013

25

Honaine

Water

25.5%

Algeria

USD

7M ft3/day

Operation

Sonatrach

N/A

2012

23

2016

3T

Conventional Power

100%

Mexico

USD

220 MW

Construction

Several

N/A

4Q 2016

20-25

ATN3

Transmission Line

100%

Peru

USD

220 Miles

Construction

Peru

BBB+/Baa2/BBB+

3Q 2016

30

Helioenergy 1 & 2

Renewable (CSP)

50%

Spain

Euro

2x50 MW

Operation

Spain

BBB-/Baa2/BBB

2011

23

SPP1

Conventional Power

51%

Algeria

Euro

150 MW

Operation

Sonatrach

N/A

3Q 2011

22

 

(1)	Reflects the counterparty’s credit ratings issued by S&P, Moody’s and Fitch as of the date of the prospectus

Cash dividends to investors

We intend to distribute to holders of our shares in the form of a quarterly distribution all of the cash available for distribution that is generated each quarter, less reserves for the prudent conduct of our business. The cash available for distribution is likely to fluctuate, and in some cases significantly, from quarter to quarter as a result of seasonality, maintenance and outage schedules and other factors. See “Cash Dividend Policy—Assumptions and Considerations.”

 

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Cash Flow

The following table sets forth combined cash flow data for each of the two years ended December 31, 2013 and 2012:

 

		Year ended December 31,
		2013				2012
		$ in millions
Gross cash flows from operating activities
Profit for the year			(1.8	)			0.1
Adjustments to reconcile combined after-tax profit to net cash generated by operating activities			92.4				22.8
Net interest / taxes paid			(62.4	)			(41.6	)
Variations in working capital			9.2				66.6
Total net cash flow generated by (used in) operating activities		$	37.4			$	47.9
Total net cash flows used in investment activities		$	(694.6	)		$	(1,098.7	)
Net cash flows generated by finance activities		$	914.9			$	1,107.3
Net increase/(decrease) in cash and cash equivalents			257.7				56.5
Cash and cash equivalents at the beginning of the year			97.5				40.2
Currency translation difference on cash and cash equivalents			2.5				0.8
Cash and cash equivalents at the end of the year		$	357.7			$	97.5

Net cash flows from operating activities

For the year ended December 31, 2013, we generated net cash from our operating activities of $37.4 million, compared to net cash generated from operating activities of $48.0 million for the year ended December 31, 2012. In 2013, profit for the period adjusted by non-monetary items was $ 90.6 million compared to $ 22.9 million. The increase is mainly due to the commencement of operations of ACT and Solana in the first and last quarters of 2013, respectively, and to a full year of operations of Solaben 2 and Solaben 3, as they commenced operations during the fourth and second quarters of 2012, respectively. This increase was mostly offset by reductions in variations in working capital due primarily to the reductions of other current liabilities related to the end of the construction phase of the projects. The variation in working capital amounted to $9.2 million in 2013 compared to $66.6 million in 2012. In addition, the increase of profit for the period adjusted by non-monetary items was offset by larger net interest and taxes paid in 2013 of $62.3 million compared to $41.6 million 2012.

Net cash generated from investing activities

For the year ended December 31, 2013, net cash used in investing activities declined to $694.6 million compared to $1,098.7 million for the year ended December 31, 2012 due to finalization of construction of some of our larger projects. For the year ended December 31, 2013, our net investments in Solana and Mojave amounted to $240.6 million compared to $554.3 million in 2012, as Solana entered into operation in October 2013 and Mojave had substantially completed construction in 2013. The net investment in Solaben 2 and Solaben 3 was nil in 2013 as each project commenced operations in mid-2012, compared to $142.0 million in 2012. Finally, the net cash used in investments of ATS amounted to $158.3 million in 2013 compared to. $215.4 million in 2012 as the project reached COD in January 2014.

 

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Net cash generated from financing activities

For the year ended December 31, 2013, net cash flow from financing activities was $914.9 million, compared to $1,107.3 million for the year ended December 31, 2012. The net cash generated from financing activities during 2013 comprises proceeds from non-recourse financing of $1,139.7 million, repayment of non-recourse financing of $667.7 million, proceeds from related parties and other of $443.0 million. The net cash generated from financing activities in 2013 related primarily to drawdowns of non-recourse loans for the construction of electric transmission lines in Peru and ACT in Mexico and the investment by Liberty in Solana. The net cash generated from financing activities during 2012 related to proceeds from non-recourse financing of $339.5 million, repayment of non-recourse financing of $61.6 million, proceeds from related parties and other of $829.3 million. The net cash generated from financing activities in 2012 relate mostly to proceeds for the construction of Solana, Mojave, electric transmission lines in Peru, ACT in Mexico and Solaben 2 and Solaben 3.

Off-Balance Sheet Arrangements

As of December 31, 2013, our only off-balance sheet arrangements consisted of bank bond and surety insurance in an aggregate amount of $7.1 million attributed to operations of a technical nature.

Tabular Disclosure of Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2013.

 

(in millions of U.S. dollars)		Total				Up to one year				Between one and three years				Between three and five years				Subsequent years
Loans with credit institutions		$	2,786.0			$	49.5			$	247.6			$	426.3			$	2,062.6
Notes and bonds			108.6				2.8				5.9				6.4				93.5
Purchase commitments			1,132.1				48.6				109.7				116.0				858.0
Derivative financial instruments			44.2				4.5				8.2				6.9				24.6
Accrued interest estimate during the useful life of loans			1,318.1				97.4				193.2				189.3				838.2

We have contractual obligations to make future payments in connection with bank debt and notes and bonds. In addition, during the normal course of business, we enter into agreements where we commit to future purchases of goods and services from third parties.

For more detailed information on Project Financing (loans with credit institutions) refer to Note 13 in our Annual Combined Financial Statements.

Notes and bonds refer to the carrying value of issuances made during 2013, which are described in detail in Note 13 in our Annual Combined Financial Statements.

Purchase obligations include agreements for the purchase of goods or services that are enforceable and legally binding on the combined group and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the appropriate timing of the transactions.

Accrued interest estimate during the useful life of loans represents the estimation for the total amount of interest to be paid or accumulated over the useful life of the loans, notes and bonds.

Critical Accounting Policies and Estimates

The preparation of our combined financial statements in conformity with IFRS requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base

 

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our estimates on historical experience and on various other assumptions we believe to be reasonable under the specific circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

An understanding of the accounting policies for these items is important to understand the combined financial statements. The following discussion provides more information regarding the estimates and assumptions used for these items in accordance with IFRS and should be considered in conjunction with the combined financial statements.

The most critical accounting policies, which reflect significant management estimates and judgment to determine amounts in our combined financial statements, are as follows:

 

•

Contracted concessional agreements;

 

•

Impairment of intangible assets;

 

•

Assessment of control;

 

•

Derivative financial instruments and fair value estimates; and

 

•

Income taxes and recoverable amount of deferred tax assets.

Some of these accounting policies require the application of significant judgment by management to select the appropriate assumptions to determine these estimates. These assumptions and estimates are based on our historical experience, forecasts and other circumstances and expectations as of the close of the financial period. The assessment is considered in relation to the global economic situation of the industries and regions where we operate, taking into account future development of our businesses. By their nature, these judgments are subject to an inherent degree of uncertainty; therefore, actual results could materially differ from the estimates and assumptions used. In such cases, the carrying values of assets and liabilities are adjusted.

As of the date of preparation of our Annual Combined Financial Statements, no relevant changes in the estimates made are anticipated and, therefore, no significant changes in the value of the assets and liabilities recognized at December 31, 2013, are expected.

Although these estimates and assumptions are being made using all available facts and circumstances, it is possible that future events may require management to amend such estimates and assumptions in future periods. Changes in accounting estimates are recognized prospectively, in accordance with IAS 8, in the combined income statement of the year in which the change occurs. Our significant accounting policies are more fully described in note 2 to the Annual Combined Financial Statements as of and for the years ended December 31, 2013 and 2012, presented elsewhere in this prospectus.

Contracted concessional agreements

Contracted concessional assets include fixed assets financed through non-recourse loans, related to service concession arrangements recorded in accordance with IFRIC 12. The infrastructures accounted for as concessions are related to the activities concerning electric transmission lines, solar electricity generation plants, cogeneration plants and a wind farm. The infrastructure used in a concession can be classified as an intangible asset or a financial asset, depending on the nature of the payment entitlements established in the agreement.

The application of IFRIC 12 requires extensive judgment in relation with, among other factors, (i) the identification of certain infrastructures and contractual agreements in the scope of IFRIC 12, (ii) the understanding of the nature of the payments in order to determine the classification of the infrastructure as a financial asset or as an intangible asset and (iii) the timing and recognition of the revenue from construction and concessionary activity.

 

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

Consequently, even though construction is subcontracted to Abengoa, in accordance with the provisions of IFRIC 12, we recognize and measure revenue and costs for providing construction services during the period of construction of the infrastructure in accordance with IAS 11 “Construction Contracts.” Construction revenue is recorded within “Other operating income” and Construction cost, which is fully contracted with related parties, is recorded within “Other operating expense.” This applies in the same way to the two models.

 

a)

Intangible assets

We recognize an intangible asset to the extent that we receive a right to charge final customers for the use of the infrastructure. This intangible asset is subject to the provisions of IAS 38 and is amortized linearly, taking into account the estimated period of commercial operation of infrastructure which generally coincides with the concession period.

We recognize and measure revenue, costs and margin for providing construction services during the period of construction of the infrastructure in accordance with IAS 11 “Construction contracts” and revenue for other services in accordance with IAS 18 “Revenue.” The interest costs derived from financing the project incurred during construction are capitalized during the period of time required to complete and prepare the asset for its predetermined used.

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

 

•

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

 

•

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

 

•

Financing costs are expensed as incurred.

 

b)

Financial assets

We recognize a financial asset when demand risk is assumed by the grantor, to the extent that the contracted concession holder has an unconditional right to receive payments for the asset. This asset is recognized at the fair value of the construction services provided, considering improvements.

The financial asset is subsequently recorded at amortized cost calculated according to the effective interest method. Revenue from operations and maintenance services is recognized in each period according to IAS 18 “Ordinary income.” The remuneration of managing and operating the asset resulting from the valuation at amortized cost is also recorded in revenue.

Financing costs are expensed as incurred.

Impairment of intangible assets

We review our contracted revenue assets to identify any indicators of impairment annually.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use, defined as the present value of the estimated future cash flows to be generated by the asset. In the event that the asset does not generate cash flows independently of other assets, we calculate the recoverable amount of the cash generating unit (CGU) to which the asset belongs.

 

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When the carrying amount of the CGU to which these assets belong is lower than its recoverable amount assets are impaired.

Assumptions used to calculate value in use include a discount rate and projections considering real data based in the contracts terms and projected changes in both selling prices and costs. The discount rate is estimated by management, to reflect both changes in the value of money over time and the risks associated with the specific CGU.

For contracted or concession revenue assets with a defined useful life and with a specific financial structure, cash flow projections until the end of the project are considered and no terminal value is assumed. Contracted revenue assets have a contractual structure that permits to estimate quite accurately the costs of the project (both in the construction and in the operations periods) and revenue during the life of the project.

Projections take into account real data based in the contract terms and fundamental assumptions based in specific reports prepared by experts, assumptions on demand and assumptions on production. Additionally, assumptions on macroeconomic conditions are also taken into account, such as inflation rates, future interest rates, etc. and sensitivity analysis are performed over all major assumptions which can have a significant impact in the value of the asset.

Cash flow projections of CGUs are calculated in the functional currency of those CGUs and are discounted using rates that take into consideration the risk corresponding to each specific country and currency.

Taking into account that in most CGUs its specific financial structure is linked to the financial structure of the projects that are part of those CGUs, the discount rate used to calculate the present value of cash flow projections is based in the weighted average cost of capital (WACC) for the type of asset, adjusted, if necessary, in accordance with the business of the specific activity and with the risk associated with the country where the project is performed. In any case, sensitivity analyses are performed, especially in relation with the discount rate used and fair value changes in the main business variables, in order to ensure that possible changes in the estimates of these items do not impact the possible recovery of recognized assets. See Note 2 to our combined financial statements for further information on WACCs.

In the event that the recoverable amount of an asset is lower than its carrying amount, an impairment charge for the difference would be recorded in the combined income statement under the item “depreciation, amortization and impairment charges.”

Assessment of control

Control over an investee is achieved when we have power over the investee, we are exposed, or have rights, to variable returns from our involvement with the investee; and have the ability to use its power to affect its returns.

We reassess whether or not we control an investee when facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. In order to evaluate the existence of control, we need to distinguish two independent stages in these projects in terms of decision making process: the construction phase and the operation phase. In some of these projects, such as Solana and Mojave, we have concluded that all the relevant decisions during the construction phase are subject to the approval of a third party. As a result, we do not have control over these assets during this period and we record these companies as associates under the equity method. Once the project is in operation, we gain control over these companies which are then fully consolidated.

We use the acquisition method to account for business combinations. According to this method, identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Any contingent consideration is recognized at fair value at the

 

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acquisition date and subsequent changes in its fair value are recognized in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Acquisition—related costs are expensed as incurred. We recognize any non-controlling interest in the acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquirer’s net assets on an acquisition-by-acquisition basis.

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

Derivative financial instruments and fair value estimates

Derivatives are recorded at fair value. We apply hedge accounting to all hedging derivatives that qualify to be accounted for as hedges under IFRS.

When hedge accounting is applied, hedging strategy and risk management objectives are documented at inception, as well as the relationship between hedging instruments and hedged items. Effectiveness of the hedging relationship needs to be assessed on an ongoing basis. Effectiveness tests are performed prospectively and retrospectively at inception and at each reporting date, following the dollar offset method.

We apply cash flow hedge accounting. Under this method, the effective portion of changes in fair value of derivatives designated as cash flow hedges are recorded temporarily in equity and are subsequently reclassified from equity to profit or loss in the same period or periods during which the hedged item affects profit or loss. Any ineffective portion of the hedged transaction is recorded in the combined income statement as it occurs.

When interest rate options are designated as hedging instruments, the intrinsic value and time value of the financial hedge instrument are separated. Changes in intrinsic value which are highly effective are recorded in equity and subsequently reclassified from equity to profit or loss in the same period or periods during which the hedged item affects profit or loss. Changes in time value are recorded as financial income or expenses, together with any ineffectiveness.

When the hedging instrument matures or is sold, or when it no longer meets the requirements to apply hedge accounting, accumulated gains and losses recorded in equity remain as such until the forecast transaction is ultimately recognized in the income statement. However, if it becomes unlikely that the forecast transaction will actually take place, the accumulated gains and losses in equity are recognized immediately in the income statement.

The inputs used to calculate fair value of our derivatives are based on inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices), thorough the application of valuation models (Level 2). The valuation techniques used to calculate fair value of our derivatives include discounting estimated future cash flows, using assumptions based on market conditions at the date of valuation or using market prices of similar comparable instruments, amongst others. The valuation of derivatives requires the use of considerable professional judgment. These determinations were based on available market information and appropriate valuation methodologies. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts

Income taxes and recoverable amount of deferred tax assets

The current income tax provision is calculated on the basis of relevant tax laws in force at the date of the statement of financial position in the countries in which the subsidiaries and associates operate and generate taxable income.

Determining income tax payable requires judgment in assessing the timing and the amount of deductible and taxable items, as well as the interpretation and application of tax laws in different jurisdictions. Due to this fact, contingencies or additional tax expenses could arise as a result of tax inspections or different interpretations of certain tax laws by the corresponding tax authorities.

 

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We recognize deferred tax assets for all deductible temporary differences and all unused tax losses and tax credits to the extent that it is probable that future taxable profit will be available against which they can be utilized.

We consider it probable that we will have sufficient taxable profit available in the future to enable a deferred tax asset to be recovered when:

 

•

There are sufficient taxable temporary differences relating to the same tax authority, and the same taxable entity is expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward.

 

•

It is probable that the taxable entity will have sufficient taxable profit, relating to the same tax authority and the same taxable entity, in the same period as the reversal of the deductible temporary difference (or in the periods into which a tax loss arising from the deferred tax asset can be carried back or forward).

 

•

Tax planning opportunities are available to the entity that will create taxable profit in appropriate periods.

Our management assesses the recoverability of deferred tax assets on the basis of estimates of future taxable profit. These estimates are derived from the projections of each of our assets. Based on our current estimates we expect to generate sufficient future taxable income to achieve the realization of our current tax credits and tax loss carryforwards, supported by our historical trend of business performance.

In assessing the recoverability of our deferred tax assets, our management also considers the foreseen reversal of deferred tax liabilities and tax planning strategies. To the extent management relies on deferred tax liabilities for the readability of our deferred tax assets, such deferred tax liabilities are expected to reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets. We consider that the recovery of our current deferred tax assets is probable without counting on potential tax planning strategies that we could use in the future.

Quantitative and Qualitative Disclosure about Market Risk

Our activities are undertaken through our segments and are exposed to market risk, credit risk and liquidity risk. Risk is managed by our Risk Management and Finance 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. None of the derivative contracts signed has an unlimited lose exposure.

Foreign exchange rate risk

The main cash flows in the entities included in these combined financial statements 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 client is signed, a natural hedge exists for our main operations. Consequently, there are no forward sale contracts signed as of December 31, 2013.

 

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Interest rate risk

Interest rate risks arise mainly from our financial liabilities at variable interest rate (less than 10% of our total project debt financing). We use interest rate swaps and interest rate options (caps) to mitigate interest rate risk.

As a result, the notional amounts hedged, strikes contracted and maturities, depending on the characteristics of the debt on which the interest rate risk is being hedged, are very diverse, including the following:

 

1)

Non-recourse debt in U.S. dollars: between 75% and 100% of the notional amount, maturities until 2028 and average guaranteed interest rates of between 2.515% and 3.787%.

 

2)

Non-recourse debt in euro: between 80% and 100% of the notional amount, maturities until 2030 and average guaranteed interest rates of between 0.75% and 3.75%.

In connection with our interest rate derivative positions, the most significant impact on our combined 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 combined 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 resulting in a likely 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 December 31, 2013, with the rest of the variables remaining constant, the effect in the combined income statement would have been a loss of $195,000 (a profit of $296,000 in 2012) and an increase in hedging reserves of $16.3 million ($24.0 million in 2012). 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 consider that we have a limited credit risk with clients as revenues derive from power purchase agreements and other revenue contracted agreements with electric utilities and state-owned entities.

The following table shows the maturity detail of trade receivables as of December 31, 2013 and 2012:

 

		Balance as of December 31,
		2013				2012
		(in $ millions)
Maturity
Up to 3 months			26.6				11.2
Between 3 and 6 months			—				—
Total		$	26.6			$	11.2

 

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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.

 

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INDUSTRY AND MARKET OPPORTUNITY

Overview

Over the last decade, global investment in the renewable energy and environmental sectors has witnessed significant growth. Moreover, energy scarcity, the focus on reduction of carbon emissions, and the potential increased costs of building and operating conventional and nuclear plants are expected to continue to drive renewable technology. We expect this to continue both in the short- and long-term and expect that this will support demand for the type of contracted assets that we own. Overall energy demand is expected to increase by 1.2% per year from 2010 through 2035, while fossil-based energy sources are expected to become scarcer. The World Energy Outlook forecasts that, for example, global installed capacity of solar power will grow at 12% per year from 2010 to reach capacity of 674 GW by 2035. In addition, according to the International Energy Association, total investment of $1.8 trillion is expected in the electric transmission sector worldwide between 2012 and 2035 and approximately 61% of such investment is projected in regions where we focus our electric transmission activity. Bloomberg’s Global Renewable Energy Market Outlook expects generation from renewable sources to increase significantly from 2012 to 2030.

In addition, increasing environmental consciousness, reducing carbon and greenhouse gas emissions, increasing focus on security of energy supply in many developed countries, and the related tightening of environmental regulation are important factors that we expect to bolster global demand and provide an impetus to our sustainable development focus.

Solar

Solar energy is one of the largest sources of renewable energy and the market for solar energy has become increasingly prominent in recent years. According to the BP Statistical Review of World Energy 2013, the global consumption of solar electricity has grown from 1.6 TWh in 2002 to more than 90 TWh in 2012. The principal factors that have contributed to the development of this industry are the following:

 

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political will and awareness of environmental problems associated with non-renewable energy sources;

 

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the need for countries with limited fossil fuel resources to reduce dependence on non-renewable energy sources; and

 

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the increased cost and price volatility of fossil fuels.

Among the different types of renewable energy, solar energy has become a technologically proven option. The two technologies that rely on solar power as a primary source of electricity generation are Concentrating Solar Power and photovoltaics, or PV.

Overview of Concentrating Solar Power Technology

Concentrating Solar Power technology uses direct sunlight to heat a fluid (heat transfer fluid) that produces steam to feed a steam cycle and produce electricity. This technology has experienced significant international development in the last decade. Concentrating Solar Power technology requires a high level of direct solar irradiation to be feasible. The best geographical areas for Concentrating Solar Power plants are located between 35º North and 35º South from the Equator an area that we refer to as the “sunbelt.” This area includes the southwestern United States and Spain, where we have Concentrating Solar Power facilities.

The most important factor that distinguishes Concentrating Solar Power technology from other forms of renewable energy generation, such as PV, is its “dispatchability,” or the ability to adapt production to demand, which is essential for electrical grids. During the course of a day, demand for electricity fluctuates according to human activity with three different phases: base, middle, and peak, which are covered with different loads by the utilities. Not all renewable energy sources are able to meet demand in the same way as Concentrating Solar

 

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Power for daily power generation. PV and wind are intermittent sources of renewable power and battery storage for those sources is relatively expensive and cumbersome. PV and wind cannot generate power at all times and therefore require back-up capacity and can unbalance the electrical grid. However, in contrast to PV and wind, Concentrating Solar Power plants achieve dispatchability through thermal inertia inherent in the heat transfer fluid used, the addition of thermal energy storage and/or hybridization with conventional fuels, like gas or biomass. Accordingly, Concentrating Solar Power is more versatile than PV because it can meet base, middle and peak load demands.

There are four technologies in the Concentrating Solar Power market:

 

•

parabolic trough;

 

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tower;

 

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Fresnel; and

 

•

dish Stirling,

among which parabolic trough and tower are the more mature and commercially available technologies.

Our four Concentrating Solar Power projects use parabolic trough technology. Parabolic trough systems consist of parallel rows of mirrors (reflectors) curved in one dimension to focus the sun’s rays. The mirror arrays can be more than 100 meters long with the curved surface that is five to six meters across. Stainless steel pipes (absorber tubes) with a selective coating serve as the heat collectors. The coating is designed to allow pipes to absorb high levels of solar radiation while emitting very little infrared radiation. The pipes are insulated in an evacuated glass envelope. The reflectors and the absorber tubes move in tandem with the sun as it crosses the sky. Synthetic oil is the fluid used to transfer heat from collector pipes to heat exchangers, where water is preheated, evaporated and then superheated into steam. The superheated steam runs a turbine, which drives a generator to produce electricity. After being cooled and condensed, the water returns to the heat exchangers. Some of the Concentrating Solar Power plants have seven or more hours of storage capacity by using molten salts storage technology, other plants have around three hours of capacity and some plants have no storage capacity other than the plant’s thermal inertia.

Concentrating Solar Power Technology in the United States

Concentrating Solar Power development in the United States began in the late 1970s with the creation by the DOE of renewable energy incentives, and the development of energy R&D programs. These developments occurred following the oil crisis in the 1970s and the recognition of the need for the United States to become energy independent. California, which has among the best direct solar insolation in the United States, was the first state to support solar development. State tax incentives in California combined with federal tax incentives enabled the construction of the first Concentrating Solar Power plants in California in the late 1980s.

California’s policies enabled the building of nine SEGS plants with a total capacity of 354 MW, in the Mojave Desert from 1985 through 1992. The SEGS plants sold electricity to Southern California Edison with 30-year PPAs for each plant and each SEGS plant belonged to an independent investor group. The construction and operation of the SEGS plants was a landmark for Concentrating Solar Power in the United States and demonstrated the financial viability of parabolic trough Concentrating Solar Power plants. The SEGS plants continued to operate and their operation and maintenance was eventually taken over by the Kramer Junction Company and two other companies. The SEGS plants continue to produce electricity under their existing contracts.

A further wave of Concentrating Solar Power development in the United States began ten years ago with the re-establishment of federal renewable energy policies and the enactment of state renewable portfolio standards.

The Energy Policy Act of 2005 established the 1603 Loan Guarantee Program by the DOE to help renewable energy projects obtain financing at lower interest rates and longer terms by providing the financial

 

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support of the U.S. federal government. This program has expanded since 2005 through federal legislation and renewable energy received additional support following the election of President Obama in 2008. The Emergency Economic Stabilization Act of 2008, or EESA, included tax credits for investments in wind and solar power generation facilities. The EESA included an investment tax credit, or ITC, which provides a tax credit of 30% for qualified expenditures for solar power facilities that are placed in service on or before December 31, 2016. This credit is currently scheduled to be reduced to 10% effective January 1, 2017. The ITC is crucial for the development of large-scale Concentrating Solar Power plants in the United States. The benefits of ITC may also be reduced in any future tax reform.

The American Recovery and Reinvestment Act of 2009 provided further support for the Concentrating Solar Power industry by earmarking billions of dollars for renewable energy projects. In addition, the DOE’s Concentrating Solar Power budget for R&D programs increased ten-fold from 2004 to 2011.

Some states also have enacted renewable portfolio standards, or RPS, to help develop renewable energy projects. RPSs require regulated retail electric utilities to procure a specified percentage of total electricity delivered to retail customers in the state from eligible renewable generation sources, such as Concentrating Solar Power facilities, by a specified date. Since 2004, 29 states have enacted RPSs. California has a 33% renewable energy mandate by 2020, Nevada has a renewable energy target of 25% by 2025 and Arizona has 15% renewable energy mandate by 2025.

According to SEIA, from 2006 to 2010, 17 new Concentrating Solar Power projects were developed in the southwestern United States with cumulative capacity of 507 MW. Since 2010, five new Concentrating Solar Power plants, including Solana and Mojave, have been built with a total capacity of 1,300 MW.

The future development of the Concentrating Solar Power industry in the United States will be tied to federal and state incentives and state RPS targets. California continues to be an ardent supporter of solar power in general and Concentrating Solar Power in particular. Arizona, Nevada, New Mexico and Texas may increase their respective RPSs, but any such increase would require legislative action.

At the federal level, the ITC is available for solar projects that are placed in service by December 31, 2016. Concentrating Solar Power plants require multiyear development timelines and for the ITC to be of further practical use, Congress would need to replace the “placed in service” requirement with a “commence construction” requirement. The “placed in service” requirement means that any solar project needs to be complete and capable of generating power substantially equal to its capacity by December 31, 2016 in order to be eligible for the ITC. A “commence construction” requirement would allow projects that start construction prior to the December 31, 2016 deadline to take advantage of the ITC when such projects were placed into service, even if they were placed in service after the December 31, 2016 deadline. The benefits of ITC may also be reduced in any future tax reform.

Accelerated depreciation for projects is available pursuant to the Modified Accelerated Cost Recovery System, or MACRS, for Concentrating Solar Power projects, but the benefits of MACRS could be reduced in any future tax reform. There is also legislative discussion regarding the inclusion of renewable energy projects as qualified assets for Real Estate Investment Trusts and Master Limited Partnerships, which may offer a new financing approach and capital leverage.

Additionally, through Presidential action, the Environmental Protection Agency, or EPA, is tightening its regulations on new coal power plants, and as result, fewer coal plants may be built and many existing coal power plants may close, which may increase the demand for renewable energy. Finally, there is also the possibility that the United States will enact a federal carbon pricing legislation or a carbon tax, which could increase the cost of carbon-based energy resources.

 

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Concentrating Solar Power in Spain

Since the late twentieth century, various governments of Spain have strongly promoted renewable energies. The Development Plan for Renewable Energy (2000-2010) aimed to generate 30% of electricity from renewable energy sources in 2010. The objective was achieved for electricity in 2010 as 35% of the total electricity demand was generated from renewable energy sources and renewable energy sources became the main source of electricity generation in the country.

The regulation of renewable energies based on a feed-in-tariff system facilitated the penetration of renewable energies in Spain. Currently, energy projects receive a fixed and variable monthly payment in addition to the market price of electricity produced, that guarantees a return linked to the long-term Spanish Government bond yield applied to a standardized asset base, plus a complement to cover standardized O&M expenses. See “Regulation—Regulation in Spain.”

Spain has a historical record of accomplishment in the Concentrating Solar Power development. In 1981, the “Plataforma Solar Almería” started its operations, an R&D center jointly sponsored by the German and Spanish governments in order to develop and improve Concentrating Solar Power technologies.

The evolution of the Concentrating Solar Power in Spain represented a breakthrough in the development of this technology. Since 2007, when Abengoa opened Europe’s first commercial Concentrating Solar Power tower plant, with capacity of 11 MW in Seville, the Concentrating Solar Power market has expanded rapidly; there are now 50 plants with a total capacity of 2,300 MW, according to Protermosolar. Abengoa is the leader in this market with an aggregate installed capacity of 681 MW.

Concentrating Solar Power in other markets

As of the date hereof, our business in Concentrating Solar Power is concentrated in the United States and Spain. Going forward, as we acquire new assets (whether Abengoa ROFO Assets or otherwise), we expect to expand our operations in other “Sunbelt” areas such as Chile, the Middle East and South Africa, where new Concentrating Solar Power projects are being developed at a significant scale.

Wind Power

Wind power harnesses the kinetic energy of moving air. Electricity is generated from the energy of wind flows exerted on the blades of a wind turbine, which activates an electric generator. Wind turbines are equipped with a control system that optimizes electricity generation output. In addition, wind power projects can be monitored and operated remotely to respond to changing weather conditions, including shutting down during heavy lightning storms and rotating to adjust to shifts in wind direction.

The amount of energy that the wind transfers to the turbine depends on the blades’ surface area and the wind speed. The amount of energy captured by a wind turbine increases as a square-function of an increase in blade size. For example, doubling the surface area of the blades quadruples the wind energy captured. The speed of the wind has an even greater effect. As wind speed doubles, the available energy increases by a factor of eight. Stronger winds are also able to drive larger turbine blades. In order to maximize the efficiency of the transfer of energy from wind to electricity, blade size must be designed to capture the most wind energy the highest proportion of the time.

Wind is a source of energy that is naturally variable; wind generally does not blow at a constant speed throughout a given day nor month-to-month. As a result, the amount of electricity generated on a daily or monthly basis is also variable or intermittent. However, long-term historical site-specific measurements for wind power allow for an annual average or “mean” wind speed, enabling the use of statistical analyses to estimate electricity generation.

 

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Wind Power in Uruguay

A number of Latin American governments are looking to wind power to support their emerging economies, to alleviate variations in hydropower and other seasonal electricity sources, and to reduce the threat posed by insecure imported power sources.

Latin America has abundant wind resources, both onshore and offshore, much of which remains untapped in many countries. According to the Global Wind Energy Council, in 2012 the Latin American market installed over 2 GW of new wind capacity reaching a total installed capacity of just over 4.3 GW. MAKE Consulting forecasts a 20% compounded annual growth rate in Latin America. MAKE Consulting also predicts that, for the first time, the majority of new wind capacity brought online in the Americas will occur outside of the U.S. market. Wind Power estimates that by 2025, wind power production in all of Latin America, including Mexico, will reach a capacity of 37.7 GW, including capacity of 1.5 GW in Uruguay.

In Uruguay, the traditional main source of energy has been hydroelectric power. However, due to growing demand, the exploitation of large-scale hydropower has reached its economic limit. This has resulted in the installation of additional base load thermal plants and the incorporation of other alternative energy sources.

However, due to thermal generation’s environmental costs and oil price volatility, there is an opportunity for the development of renewable energies. It is therefore expected that UTE, the state-owned company in Uruguay that has a monopoly over the transmission and distribution of energy and controls 58% of all generation capacity, will continue to award PPAs to private generators for renewable energy purchases, particularly in wind and biomass.

Conventional Power

Cogeneration, which is the simultaneous production of electricity and heat using a single fuel source such as natural gas, harnesses heat that would otherwise be wasted in the generation of power.

The cogeneration process increases thermal efficiency and reduces emissions of carbon dioxide that are a normal part of the power generation process. Cogeneration can therefore make a meaningful contribution towards the achievement of emissions stabilization necessary to reduce the risk of major climate disruption.

Power Generation in Mexico

According to the Secretaría de Energía de México, power generation in Mexico amounted to more than 300,000 GWh in 2012. The power generation market in Mexico is comprised of:

 

•

state-owned power generation plants, which contributed 60.4% of energy generated;

 

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independent power producers, or IPPs, which produced 28.1% of the energy generated; and

 

•

self-generation, which accounted for 11.6% of the energy generated.

According to the Secretaría de Energía de México, conventional sources, which include thermal, dual and coal, accounted for 73% of generation capacity in the country as of 2013.

The energy sector in Mexico is administered by the Secretaría de Energía, and by several commissions and institutions at both the federal level and state level. Two state-owned companies, the Comisión Federal de Electricidad, or CFE and Pemex, are both particularly important to this sector and our operations in Mexico.

CFE is a company created and owned by the Mexican government. According to CFE, it generates, distributes and markets electric power for almost 35.3 million customers and almost 100 million people. It produces electric power using various technologies and various primary energy sources, mainly thermoelectric and hydroelectric, and all IPPs in Mexico are required to sell their energy production to CFE. CFE also serves as the power planning body of the country.

 

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Pemex is a state-owned petroleum company which until recently had a monopoly of exploration, refining and distribution of hydrocarbons in Mexico.

We believe future growth of the Mexican conventional power industry will be driven by economic growth in Mexico and the effect of the energy reform that is currently under way.

Energy Reform in Mexico

Mexican energy reform has three main pillars:

 

•

to facilitate and increase the role of private sector investment in the power sector and in areas of the hydrocarbons value chain (such as refining);

 

•

to strengthen independence and transparency in the energy regulatory bodies; and

 

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to focus to a greater extent on environmental protection by fostering cleaner energies and fuels (such as natural gas and co-generation schemes).

We believe that the effect of this reform, coupled with economic growth in the country, may foster new capacity additions in the private sector for projects such as combined cycles and cogeneration plants.

We own one co-generation plant in Mexico that produces both steam and power for the consumption of a Pemex refinery and we believe there are significant additional co-generation opportunities in Mexico.

According to Bloomberg New Energy Finance, co-generation potential in Mexico is estimated to be between 6 and 10 GW in total, comprising 1 GW for the sugar production sector, between 2 and 6 GW for the general industrial sector and 3 GW for Pemex.

Electric Transmission

Overview

The potential for growth and development in the electric transmission sector comes from several factors: (i) increasing global demand for electricity, (ii) inadequate and insufficient electrical grid capacity, (iii) construction of new power plants and demand-response facilities and (iv) the need to connect new renewable energy generation plants, which are typically built in remote areas, to consumption centers. Due to the unique need to locate renewable power plants in remote areas, new renewable power plants will require additional electric transmission infrastructure to bring electrical power to consumption centers.

Electric Transmission in Brazil

In Brazil, the National Interconnected System, or Sistema Interligado Nacional, SIN, provides electricity to consumers. According to Operador Nacional do Sistema Elétrico, only 1.7% of energy required is managed outside the SIN in isolated systems in the Amazonia region.

The SIN is divided into south, southeast, center-west, northeast, and north regions. According to Agência Nacional de Energia Elétrica, the electric transmission system in Brazil is very large due to the long distance from hydropower plants, which are the key energy source for the country, to consumption centers.

Although the Brazilian electric power industry is deregulated, most major companies involved in electric transmission are state-owned. According to Eletrobras, which is partially state-owned, it is responsible for 38,235 miles of transmission lines and 257 substations, representing nearly 55% of the total of electric transmission lines in Brazil. Eletrobras directly owns 36,187 miles of transmission lines and the remaining transmission were won in auctions through special purpose entities. According to Cemig, which is controlled by the State of Minas Gerais, it operates a 4,664-mile transmission network through its controlled and associated electric energy transmission companies.

 

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Key participants in the regulation, expansion and management of the transmission sector in Brazil are:

 

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the National System Operator, or Operador Nacional do Sistema Elétrico, which is responsible for the operation, coordination and control of the generation and transmission activities within the SIN;

 

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the Brazil Electricity Regulatory Agency, or Agência Nacional de Energia Elétrica, the Brazilian electricity regulatory agency, which seeks to provide favorable conditions for the electric power market and to develop a balance between market participants and the benefit of society;

 

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the Electric Power Commercialization Chamber, or Câmara de Comercialização de Energia Elétrica, which is responsible for the commercialization of electric power in the Brazilian power market;

 

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the Power Research Company, or Empresa de Pesquisa Energética, which carries out studies and research services in the planning of the energy sector; and

 

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the Ministry of Energy and Mines, or Ministerio de Minas e Energia, which has the overall responsibility for policy setting in the electricity sector.

The energy needs of an expanding middle class in Brazil is driving rising consumption and has resulted in strong growth in demand for transport fuels and a doubling of electricity consumption. Meeting this demand requires substantial and timely investment throughout the energy system of $90 billion per year on average. According to World Energy Outlook 2013, the system of auctions for new electricity generation and transmission capacity will continue to be vital in bringing new capital to the power sector and in reducing pressure on end-user prices.

Electric Transmission in Peru

In Peru, the National Interconnected Electric System, or Sistema Eléctrico Interconectado Nacional, SEIN, provides electricity to most consumers and stand-alone systems cover the rest of the country.

The SEIN is divided in fifteen different operative areas that are consolidated into the north, center and south regions. Power lines in these regions belong to three categories:

 

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National Transmission System, or Sistema de Transmisión Troncal Nacional, with 500kV electric transmission lines or electric transmission lines connecting two operative areas;

 

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Regional Transmission System, or Sistema de Transmisión Troncal Regional, with electric transmission lines with voltages between 138–220kV inside an operative area; and

 

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the Local Transmission System, or Sistema de Transmisión Local, with electric transmission lines connecting power plants or loads to the SEIN.

Transmission activities are carried out by ten main private companies including ATN and ATS, according to COES SINAC—Comité de Operación Económica del Sistema Interconectado Nacional.

The most important entities in the regulation, expansion and management of the transmission sector in the country are:

 

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the National Interconnected System Economic Operation Committee, or COES SINAC Comité de Operación Económica del Sistema Interconectado Nacional, composed of all of the agents of the SEIN to coordinate the operation of the transmission system;

 

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the Energy and Mining Ministry, or Ministerio de Energía y Minas, MEM, with the Electricity General Direction (Dirección General de Electricidad, DGE, in charge of developing policies and analysis, evaluating and awarding electricity rights (including electric transmission and distribution concessions); and

 

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•

the Investment Supervisor Entity for Energy and Mining, or Organismo Supervisor de la Inversión en Energía y Minería, which is responsible for regulating and supervising the electric, mining and hydrocarbons companies.

Peru recently approved a transmission plan to improve the SEIN between 2013 and 2022. The plan includes both new electric transmission lines and re-powering of already-built electric transmission lines. MEM estimates that total investment is $1,240 million. We believe this transmission plan will continue to generate opportunities for growth.

Electric Transmission in Chile

The existing transmission system in Chile consists of two interconnected electrical systems or markets: the Central Interconnected System, or SIC, and the Northern Interconnected System, or SING. Historical development in both systems has been conditioned by their distinctive geographic, economic and commercial traits.

The majority of the SIC transmission facilities have been linked to the development of public generation and distribution services that serve most of the population in the country. A significant portion of the SING transmission facilities have been developed by larger customers in the Chilean mining industry, which own 32% of operating power lines when measured in kilometers. The longitudinal geographic orientation of Chile and distance of the hydroelectric generation facilities from the consumption centers have differentiated transmission in both systems. The SIC has facilities with transmission capacity intended to carry the hydroelectric energy from South-central Chile through a 500kV system.

The ownership of the transmission systems is distributed through agents that operate in all segments, including mining and industrial clients. The main participant in the electricity transmission sector in Chile is Transelec.

In Chile, the transmission sector is considered to be a natural monopoly, which means that the revenues and access conditions are subject to regulation. Although a concession model with long-term contracted revenue is not mandatory, contracted concessions have become the most used modality in the transmission business, since its implementation is necessary either to use public national assets or to enforce easements upon private property.

The most important entities in the regulation, expansion and management of the transmission sector in Chile are:

 

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the Department of Economy, or Ministerio de Economía, MINECOM, which grants permanent transmission concessions, formalizes the administrative acts of regulation and sets prices and transmission toll fees;

 

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Superintendent’s Office of Electricity and Fuels, or Superintendencia de Electricidad y Combustibles, the sector’s monitoring entity that oversees quality and service safety compliance;

 

•

National Board of Energy, or Comisión Nacional de Energía, which develops the technical reports that support administrative acts carried out by MINECOM; and

 

•

Economic Load Dispatch Center, or Centro de Despacho Económico de Cargas, the entity in charge of coordinating short term operation, determining payments coming from energy and power transfers in the spot market between companies.

We believe that growth in transmission lines in Chile will continue to be driven by: (i) the need to transport power from the hydropower resources in southern Chile to the consumption centers; (ii) the interconnection of both SIC and SINC systems; and (iii) the growth of energy demand by mining projects in northern Chile.

 

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Water

Although we do not own any assets in the water sector as of the date of this prospectus, we intend to evaluate and potentially purchase water assets in the future, particularly in the field of desalination and water transportation.

We expect the water sector to experience significant growth globally driven by the following long-term trends:

 

•

Growing water demand and water scarcity: As demand for water grows in areas with limited resources, driven by increasing world population, the need to develop new assets to produce water (i.e. desalination and potabilization) and to transport water will grow as well. In fact, the increase in demand for water has surpassed population growth by a factor of two as a result of the increased income per person and growth in water use for agricultural purposes and industrial development.

 

•

Regulation of water management and enforcement of those regulations will continue to intensify: As public awareness and concerns about water grow, we expect a corresponding increase in governmental attention, legislation, regulatory controls and overview and enforcement.

 

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Pressure to deliver better performance: Water utility companies are under pressure to maximize operating efficiencies and performance, and we believe that infrastructure and technologies that will allow them to do so will be in high demand.

 

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BUSINESS

About Abengoa Yield

We are a dividend growth-oriented company formed to serve as the primary vehicle through which Abengoa will own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue-generating assets, initially focused on North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as Europe (Spain).

We believe we are well positioned to be a premier company for investors seeking a total return based on stable and growing dividend income from a diversified portfolio of low-risk, high-quality assets, and for investors with a key objective of accretive dividend growth.

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, will offer us a lower cost of capital than that of a traditional engineering and construction company or independent power producer and provide us with a significant competitive advantage with which to execute our growth strategy.

With this business model, our objective is to pay a consistent and growing cash dividend to holders of our shares that is sustainable on a long-term basis. We expect to target a payout ratio of 90% of our cash available for distribution 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. We will focus on high-quality, newly-constructed and long-life facilities with creditworthy counterparties that we expect will produce stable, long-term cash flows.

Upon consummation of this offering, we will own eleven assets, comprising 710 MW of renewable energy generation, 300 MW of conventional power generation and 1,018 miles of electric transmission lines and a convertible preferred equity investment in ACBH. When we refer to these assets as our assets or being owned by us throughout this prospectus, we mean that they will be transferred to us by Abengoa and owned by us immediately prior to the consummation of the offering.

We have signed an exclusive agreement with Abengoa, which we refer to as the ROFO Agreement, which provides us with a right of first offer on any proposed sale, transfer or other disposition of any of Abengoa’s contracted renewable energy, conventional power, electric transmission or water assets in operation located in the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European Union, as well as four assets in a selected number of other regions. We refer to the contracted assets subject to the ROFO Agreement as the “Abengoa ROFO Assets.” See “Related Party Transactions—Right of First Offer.” Based on the acquisition opportunities available to us, which include the Abengoa ROFO Assets as well as any third-party acquisitions we pursue, we believe that we will have the opportunity to grow our cash available for distribution in a manner that would allow us to further increase our cash dividends per share over time. Prospective investors should read “Cash Dividend Policy,” including our financial forecast and related assumptions, and “Risk Factors,” including the risks and uncertainties related to our forecasted results, acquisition opportunities and growth plan, in their entirety.

Pursuant to our cash dividend policy, we intend to pay a cash dividend each quarter to holders of our shares. Our initial quarterly dividend will be set at $0.2592 per share, or $1.04 per share on an annualized basis. See “Cash Dividend Policy.”

Upon consummation of this offering (assuming no exercise of the underwriters’ over-allotment option), Abengoa will own indirectly         % of our shares.

 

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Purpose of Abengoa Yield

Through this offering, Abengoa and Abengoa Yield intend to create enhanced value for holders of our shares by seeking to achieve the following objectives:

 

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offer an investment vehicle with predictable, recurrent and growing dividends to investors valuing long-term contracted assets;

 

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create a vehicle with a competitive source of equity capital to benefit from the acquisition of long-term contracted assets developed by Abengoa and other third-party assets;

 

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align strategie interests, with Abengoa maintaining a majority shareholding in Abengoa Yield; and

 

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provide enhanced visibility to the value inherent in Abengoa’s long-term contracted concessions portfolio in the renewable energy, conventional power and electric transmission sectors.

Current Operations

We own a diversified portfolio of renewable energy, conventional power and electric transmission line contracted assets in North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as in Spain. Our portfolio consists of five renewable energy assets, a cogeneration facility and several electric transmission lines, all of which are fully operational, with the exception of Palmatir and Mojave, where the construction of each asset is substantially complete and which are expected to be fully operational by June 2014 and October 2014, respectively. In addition, we own a convertible preferred equity investment in Abengoa Concessoes Brasil Holding, or ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, consisting mostly of transmission lines. All of our assets have contracted revenues (regulated revenues in the case of the Spanish assets) with low-risk offtakers, and collectively have an average remaining contract life of approximately 26 years as of December 31, 2013. Over 90% of cash generated each year and available for distribution from these assets in the next five years will be in U.S. dollars or indexed to the U.S. dollar, and our policy is to use currency coverage contracts if required to maintain that ratio. Over 90% of our project-level debt is hedged against changes in interest rates through an underlying fixed rate on the debt instrument or through interest rate swaps, caps or similar hedging instruments.

Our renewable energy assets consist of (i) two Concentrating Solar Power plants in the United States, Solana and Mojave, each with a gross capacity of 280 MW; (ii) one on-shore wind farm in Uruguay, Palmatir, with a gross capacity of 50 MW; and (iii) two Concentrating Solar Power plants in Spain, Solaben 2 and Solaben 3, each with a gross capacity of 50 MW.

Our conventional power asset consists of Abengoa Cogeneración Tabasco, or ACT, a 300 MW cogeneration plant in Mexico.

Our electric transmission assets consist of (i) two lines in Peru, ATN and ATS, spanning a total of 931 miles; (ii) three lines in Chile, Quadra 1, Quadra 2 and Palmucho, spanning a total of 87 miles; and (iii) a convertible preferred equity investment in ACBH.

 

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Our forecasted cash available for distribution for the twelve months ending June 30, 2016, which reflects the first full twelve-month period when all of our eleven current assets, including Mojave, which are expected to distribute cash on a recurrent basis, is as set forth below by sector and region after deducting general and administrative expenses allocated proportionally across segments and business sectors:

 

Our annual forecasted cash available for distribution for the twelve months ending June 30, 2015 and the twelve months ending June 30, 2016 based on our current assets and without any acquisitions are as set forth below:

 

 

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The following table provides an overview of our current assets (excluding our convertible preferred equity investment in ACBH):

 

Our Assets

Type

Ownership

Location

Currency

Capacity (Gross)

Status

Offtaker

Counterparty Credit Ratings(3)

COD/ Expected COD

Contract Years Left

Solana

Renewable (CSP)

100% Class B(1)

Arizona (USA)

USD

280 MW

Operation

APS

A-/A3/BBB+

4Q 2013

29

Mojave

Renewable (CSP)

100%

California (USA)

USD

280 MW

Startup and Production Testing

PG&E

BBB/A3/BBB+

4Q 2014

25

ACT

Conventional Power

100%

Mexico

USD

300 MW

Operation

Pemex

BBB+/Baa1/BBB+

2Q 2013

19

ATN

Transmission Line

100%

Peru

USD

362 Miles

Operation

Peru

BBB+/Baa2/BBB+

1Q 2011

27

ATS

Transmission Line

100%

Peru

USD

569 Miles

Operation

Peru

BBB+/Baa2/BBB+

1Q 2014

30

Quadra 1 & Quadra 2

Transmission Line

100%

Chile

USD

81 Miles

Operation

Sierra Gorda

N/A

1Q 2014

21

Palmucho

Transmission Line

100%

Chile

CLP

6 Miles

Operation

Endesa

BBB/NA/BBB+

4Q 2007

23

Palmatir

Renewable (Wind)

100%

Uruguay

USD

50 MW

Startup and Production Testing

Uruguay

BBB-/Baa3/BBB-

2Q 2014

20

Solaben 2 & Solaben 3

Renewable (CSP)

70%(2)

Spain

Euro

2x50 MW

Operation

Spain

BBB-/Baa2/BBB

2Q 2012 & 4Q 2012

24

 

(1)	On September 30, 2013, Liberty Interactive Corporation agreed to invest $300 million in Class A membership interests in exchange for a share of the dividends and the taxable loss generated by Solana.

(2)	Itochu Corporation holds 30% of the economic rights to each of Solaben 2 and Solaben 3.

(3)	Reflects the counterparty’s issuer credit ratings issued by S&P, Moody’s and Fitch, as of the date of this prospectus.

Our assets and operations are organized into the following three business sectors:

Renewable Energy: Our renewable energy assets include two Concentrating Solar Power plants in the United States, Solana and Mojave, each with a gross capacity of 280 MW and located in Arizona, and California, respectively. Solana is a party to a long-term power purchase agreement, or PPAs, with Arizona Public Service Company and Mojave is a party to a PPA with Pacific Gas & Electric Company. Solana reached its Commercial Operations Date, or COD, on October 9, 2013 and Mojave has substantially completed construction and we expect to enter the startup and production testing stage by May 2014, with expected COD by October 2014.

Additionally, we own an onshore wind farm in Uruguay, Palmatir, with a gross capacity of 50 MW. The wind farm is subject to a 20-year U.S. dollar-denominated PPA with a state-owned utility company in Uruguay. The construction of Palmatir is substantially complete and COD is expected in June 2014.

Finally, Solaben 2 and Solaben 3 are two Concentrating Solar Power plants each with a gross capacity of 50 MW and located in Spain. Both projects have been in operation since mid-2012 and receive regulated revenues under the framework for renewable energy projects in Spain.

Conventional Power: Our conventional power asset consists of ACT, a 300 MW cogeneration plant in Mexico. ACT is a party to a 20-year take-or-pay contract with Petróleos Mexicanos S.A. de C.V., or Pemex, for the supply of electric power and steam to a refinery located in the state of Tabasco. Pemex also supplies the natural gas required for the plant at no cost to ACT, which insulates the project from natural gas price variations.

Electric Transmission: Our electric transmission assets consist of (i) two lines in Peru, ATN and ATS, spanning a total of 931 miles; (ii) three lines in Chile, Quadra 1, Quadra 2 and Palmucho, spanning a total of 87 miles and (iii) a convertible preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines.

 

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Peru. ATN and ATS are core lines in the Peruvian electric transmission system. Each line is subject to a U.S. dollar-denominated 30-year contract with the Ministry of Energy of the Government of Peru that is indexed to the U.S. Finished Goods Less Food and Energy Index. ATN reached COD in 2011 and ATS reached COD on January 17, 2014.

Chile. Quadra 1 and Quadra 2 are two electric transmission lines that are subject to a concession contract with Sierra Gorda SCM, a mining company owned by Sumitomo Corporation, Sumitomo Metal Mining and KGHM Polska Mietz. Quadra 1 and Quadra 2 have been in operation since December 2013 and January 2014, respectively. Both projects are expected to reach COD by March 2014. The concession contract is denominated in U.S. dollars and has a remaining term of 21 years. Palmucho is a 6-mile electric transmission line and substation subject to a private concession agreement with a utility, Endesa, with a remaining term of 23 years. Palmucho reached COD in October 2007.

Brazil. In addition to the assets listed above, we own a preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, consisting mostly of transmission lines (see “—Our Operations—Electric Transmission—Convertible Preferred Equity Investment in Abengoa Concessoes Brasil Holding” for details on the transmission assets held by ACBH).

This preferred equity investment grants us the following rights:

 

•

During the five-year period commencing on July 1, 2014, we will receive, in four quarterly installments, a preferred dividend of $18 million per year.

 

•

Following the initial five-year period, we will have the option to (i) remain as preferred equity holder receiving the first $18 million in dividends per year that ACBH is able to distribute, or (ii) convert the preferred equity into ordinary shares of specific project companies owned by ACBH.

Our Growth Strategy

We intend to grow our cash available for distribution and, in turn, dividend per share, by optimizing the operations of our existing assets, achieving COD of our Mojave facility by October 2014 and by acquiring new contracted revenue-generating assets from Abengoa under the ROFO Agreement, and from parties other than Abengoa. Abengoa has informed us of its intention, which is reflected in the ROFO Agreement, for Abengoa Yield to serve as its primary vehicle for owning, managing and acquiring contracted assets in our primary geographies (North America, Chile, Peru, Uruguay, Brazil, Colombia and the European Union) and four assets to be mutually agreed in other selected regions. Abengoa will assist us in pursuing such acquisitions by presenting acquisition opportunities to us. In general, we expect to acquire only assets that are developed and operational, and we expect Abengoa to continue to pursue construction and development opportunities for its own account.

We will leverage the ability of Abengoa to develop, build and operate assets in our target sectors and secure contracted concessions that we expect to generate accretive growth for our shareholders once purchased by Abengoa Yield. We intend to use the following investment guidelines in evaluating prospective acquisitions in order to successfully execute our accretive growth strategy:

 

•

high quality offtakers, with long-term contracted revenue, ideally longer than 20 years;

 

•

project financing in place at each project;

 

•

operations and maintenance contract in place at each project;

 

•

management and operational systems and processes at the Abengoa Yield level, while leveraging Abengoa’s support and capabilities;

 

•

focus on regions and countries that provide growth opportunities while balancing security and risk considerations, which regions and countries include the United States, Canada, Mexico, Chile, Peru, Uruguay, Brazil, Colombia and the European Union; and

 

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•

preference for U.S. dollar-denominated revenues, in the absence of which, we will implement a cost-effective, ad-hoc hedging policy that will support stability of cash flows.

Abengoa has contracted assets with an equity book value of approximately $4.5 billion in its concession-type infrastructure activity, including the assets described in “—Our Current Operations.” A significant portion of these assets are currently in operation and Abengoa may elect to offer such assets for sale to us in the future. In addition, Abengoa has announced its intention to invest approximately $440 million in additional concession-type infrastructure assets per year from 2014. If these investments are made, they will further add to the pool of assets that Abengoa may elect to offer to sell to us in the future.

The ROFO Agreement will provide us with a right of first offer to acquire Abengoa’s contracted renewable energy, conventional power, electric transmission or water assets operating in our primary geographies (North America, Chile, Peru, Uruguay, Brazil, Colombia, and the European Union) and four assets to be mutually agreed in other selected regions. The following table presents the projects that we expect Abengoa to propose to us for evaluation for acquisition in 2015 and 2016:

 

Future Pipeline

Type

Ownership

Location

Currency

Capacity

Status

Offtaker

Counterparty Credit Ratings(1)

COD/ Expected COD

Contract Years Left

2015

Cadonal

Renewable (wind)

100%

Uruguay

USD

30 MW

Construction

Uruguay

BBB-/Baa3/BBB-

4Q 2014

20

Solacor 1 & 2

Renewable (CSP)

74%

Spain

Euro

2x50 MW

Operation

Spain

BBB-/Baa2/BBB

2012

23

Shams

Renewable (CSP)

20%

U.A.E.

USD

100 MW

Operation

Abu Dhabi

AA/Aa2/AA

3Q 2013

25

Honaine

Water

25.5%

Algeria

USD

7M ft3/day

Operation

Sonatrach

N/A

2012

23

2016

3T

Conventional Power

100%

Mexico

USD

220 MW

Construction

Several

N/A

4Q2016

20-25

ATN3

Transmission Line

100%

Peru

USD

220 Miles

Construction

Peru

BBB+/Baa2/BBB+

3Q 2016

30

Helioenergy 1 & 2

Renewable (CSP)

50%

Spain

Euro

2x50 MW

Operation

Spain

BBB-/Baa2/BBB

2011

23

SPP1

Conventional Power

51%

Algeria

Euro

150 MW

Operation

Sonatrach

N/A

3Q 2011

22

 

(1)	Reflects the counterparty’s issuer credit ratings issued by S&P, Moody’s and Fitch, as of the date of this prospectus.

We expect that, pursuant to the ROFO Agreement, Abengoa will from time to time present us with acquisition opportunities that are expected to fulfill our investment guidelines. If Abengoa offers an Abengoa ROFO Asset to us, we will have 60 days to complete due diligence and negotiate the acquisition of the asset. If we do not agree to purchase the applicable asset after such period, Abengoa will be free to pursue the sale with other potential buyers. Under the ROFO Agreement, Abengoa will not be obligated to sell any of the Abengoa ROFO Assets to us by any date or at all. As a result, we do not know when, if ever, Abengoa will offer any Abengoa ROFO Assets. In addition, in the event that Abengoa elects to sell such assets, Abengoa will not be required to accept any offer we make for the Abengoa ROFO Asset. Abengoa also may, following the completion of good-faith negotiations with us during the 60-day period mentioned above, choose to sell such assets to a third party or not to sell the assets at all. However, if we do not reach an agreement, any sale to a third party within 18 months following such 60-day period must be on terms and conditions generally no less favorable to Abengoa than those offered to us. After such 18-month period, the asset will cease to be an Abengoa ROFO Asset. We will pay Abengoa a fee of 1% of the equity purchase price of any Abengoa ROFO Asset that we acquire as consideration for Abengoa granting us the right of first offer.

 

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In addition to the potential acquisition targets for 2015 and 2016 listed above, the following table presents some of the longer term opportunities that Abengoa may present to us for acquisition in the future:

 

Future Pipeline		Type		Location		Capacity		Status
Palen		Renewable (CSP)		United States		500 MW		Development
Parump		Renewable (PV)		United States		90 MW		Development
Water SA		Water		United States		50 million gallons/day		Development
Zapotillo		Water		Mexico		112 Miles		Pre-Construction
Chile Solar Tower		Renewable (CSP)		Chile		110 MW		Development
Leasing		Renewable (Wind)		Uruguay		70 MW		Pre-Construction
Manaus		Transmission Line		Brazil		364 Miles		Operation
Norte		Transmission Line		Brazil		1,476 Miles		Construction
ATE IV-VIII		Transmission Line		Brazil		354 Miles		Operation
ATE XVI-XXII		Transmission Line		Brazil		3,593 Miles		Pre-Construction
Ashalim		Renewable (CSP)		Israel		110 MW		Pre-Construction
Kaxu		Renewable (CSP)		South Africa		100 MW		Construction
Khi		Renewable (CSP)		South Africa		50 MW		Construction
Tenes		Water		Algeria		7M ft3/day		Construction
Skikda		Water		Algeria		3.5M ft3/day		Operation

Our agreements with Abengoa will not prohibit Abengoa from acquiring or operating contracted assets that fulfill our principles. See “Risk Factors” and “Related Party Transactions—Project-Level Management and Administration Agreements” for further information.

Our Business Strategy

Our primary business strategy is to increase the cash dividends that we intend to pay to holders of our shares over time while ensuring the ongoing stability of our business. Our plan for executing this strategy includes the following key components:

Focus on contracted renewable energy, conventional power generation and electric transmission lines. We intend to focus on owning and operating these types of assets, for which we possess deep know-how, extensive experience and proven systems and management processes, as well as the critical mass to benefit from operating efficiencies and scale. We expect that this will allow us to maximize value and cash flow generation going forward. We intend to maintain a diversified portfolio in the future, as we believe these technologies will undergo significant growth in our targeted geographies.

Increase cash available for distribution and dividends by optimizing our existing assets. Some of our assets are newly operational and we believe that we can increase the cash flow generation of these assets through further management and optimization initiatives and, in some cases, through repowering. Additionally, once Mojave achieves COD, which is expected to occur by October 2014, we will have a new revenue-generating asset that we expect will result in a significant increase to our cash flow generation. Finally, our Palmatir facility has substantially completed construction with COD expected in June 2014 and also is expected to generate increased cash flows. See “Risk Factors—Risks Related To Our Assets—Certain of our facilities are newly constructed and may not perform as expected.”

Increase cash available to grow our dividend per share through the acquisition of new assets in renewable energy, conventional power and electric transmission. We expect the ROFO Agreement with Abengoa will provide us with access to a large number of acquisition opportunities that will allow us to achieve accretive growth over the next few years. Abengoa expects to have over thirty contracted assets in our target sectors under construction or operation immediately following this offering and is developing many others. This, together with the fact that Abegnoa acts as a greenfield developer, should allow us to access a large pipeline of contracted assets going forward. Additionally, we intend to analyze other potential acquisitions from third

 

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parties. We believe that our know-how and operating expertise in our key markets together with a critical mass of assets in several geographic areas and the access to capital that this offering provides will permit us to successfully realize our growth plans.

Increase available cash by expanding into water assets. We believe that contracted water assets, which include desalination plants, water treatment facilities and transportation facilities, constitute a high-growth market. Moreover, the water market offers attractive acquisition opportunities and is one in which Abengoa enjoys a strong market position. Accordingly, our target list of near-term opportunities that we expect to be under the ROFO Agreement includes four water assets, two of which are in operation. We expect these assets to help us achieve growth and potentially achieve a critical mass if we acquire any of them from Abengoa pursuant to the ROFO Agreement.

Maintain geographic diversification across two principal geographic areas. Our focus on two main markets, North America and South America, helps to ensure exposure to markets in which we believe the renewable energy, conventional power and electric transmission sectors will continue growing significantly. We believe that a strategic exposure to international markets will allow us to pursue greater growth opportunities and achieve higher returns than if we only focus on assets located in the United States.

Enjoy a shareholder-oriented financial strategy. We intend to focus on maximizing the cash generation potential of the assets currently held in our portfolio. With cash received from our contracted concessions, we intend to distribute quarterly dividends of substantially all cash available following the deduction of a provision to allow for the prudent management of our business. Additionally, as our main shareholder, Abengoa has a strategic interest to create a vehicle that focuses exclusively on cash flow generation from contracted assets and this offering is a key component of this strategy. Accordingly, Abengoa, as our main shareholder, will seek to actively support our strategy to maximize dividend distribution, subject to the boundaries of prudent management.

Foster a low-risk approach. We intend to maintain, over time, a portfolio of contracted assets with a low-risk profile due to creditworthy offtake counterparties, long-term contracted revenues, over 90% of cash available for distribution in or indexed to the U.S. dollar and proven technologies in which we have deep expertise and significant experience, located in countries where we believe conditions to be stable and safe.

Additionally, our policies and management systems include thorough risk analysis and risk management processes that we apply whenever we acquire an asset, and which we review monthly throughout the life of the asset. Our policy is to insure all of our assets whenever economically feasible.

Maintain financial strength and flexibility. We intend to maintain a solid financial position through a combination of cash on hand and credit facilities. This prudent strategy provides the required flexibility to maintain our dividend throughout the year in spite of the inherent seasonality of our business. Additionally, conservative cash management may help us to mitigate any unexpected downturns that reduce our cash flow generation.

Our Competitive Strengths

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

Stable and predictable long-term U.S. and international cash flows with attractive tax profiles. We believe that our young asset portfolio has a highly stable, predictable cash flow profile consisting of predominantly long-life electric power generation and electric transmission assets that generate revenues under long-term fixed priced contracts or pursuant to regulated rates with creditworthy counterparties and with long-term O&M contracts in place. Additionally, our facilities have minimal to no fuel risk. The offtake agreements for our assets have a weighted average remaining duration of approximately 26 years (based on the relevant technical indicator by type of asset), providing long-term cash flow stability. Additionally, our business strategy and hedging policy is intended to ensure a minimum of 90% of cash available for distribution in or indexed to the U.S. dollar. Based on our current portfolio of assets and current tax regulations in the jurisdictions in which we operate, we do not

 

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expect to pay significant income tax for a period of at least ten years, except for ACT in Mexico, where we expect to pay income taxes in five to seven years once we use existing NOLs. Furthermore, based on our current portfolio of assets, we believe that there is minimal repatriation risk in all of the jurisdictions in which we operate. See “Risk Factors—Risks Related to Our Business and the Markets in Which We Operate—We have international operations and investments, including in emerging markets that could be subject to economic, social and political uncertainties.”

Experienced and incentivized management team. Abengoa Yield’s management team has significant and valuable expertise in developing, financing, operating and managing renewable energy, conventional power and electric transmission assets. Their financial and tax management skills will help us achieve our financial targets and continue to grow on a cash accretive basis over the medium- to long-term. Additionally, we intend to encourage our executives to ensure that they focus on cash generation and long-term value creation for our shareholders.

Our relationship and our agreements with Abengoa. We believe our relationship with Abengoa, including Abengoa’s expressed intention to maintain a controlling stake in us, provides us with significant benefits, including managerial and operational expertise and a sustainable source of future growth opportunities based on Abengoa’s greenfield development capabilities and construction expertise. Moreover, Abengoa provides a significant pipeline of opportunities in our targeted sectors and geographies. Abengoa usually targets an internal rate of return for its projects that is higher than the expected of cost of equity of Abengoa Yield, thus both parties could benefit from a contribution of assets from Abengoa to us.

Specifically, the various agreements we have in place with Abengoa allow us to access:

 

•

Abengoa Management and Operational Expertise. We will monitor and oversee operations in each asset and will continue implementing Abengoa standards required in key areas like reporting, management, quality, health and safety and compliance.

 

•

Abengoa Asset Development Track Record. Over the last ten years, Abengoa has successfully developed approximately 2,000 MW of renewable power assets, dozens of conventional power plants and over 7,700 miles of electric transmission lines.

 

•

Abengoa Financing Experience. Over the last ten years, Abengoa has financed through non-recourse project financing more than $15 billion worth of projects, mostly in North America and South America as well as in Europe, Africa and the Middle East. We expect that we will realize significant benefits from Abengoa’s financing and structuring expertise as well as its relationships with financial institutions and other lenders.

 

•

Abengoa Construction Expertise. Abengoa has built approximately 4,000 MW of power generation facilities, over 21,800 miles of electric transmission lines and water desalination plants with capacity in excess of 32.5 million cubic feet/day, as well as many infrastructure assets in other markets. Many of these projects have been built for third parties pursuant to the standards of these third parties. Abengoa was recently ranked by Engineering News Record as the largest international power facility contractor (previously ranked among the top three during the preceding five years), and the largest electric transmission contractor for the seventh consecutive year.

 

•

Abengoa Operation and Maintenance Expertise. Abengoa currently provides operation and maintenance services to renewable energy plants with an aggregate capacity of approximately 1,000 MW, conventional power plants with an aggregate capacity of approximately 1,000 MW, approximately 7,700 miles of electric transmission lines and water treatment facilities with an aggregate capacity of 21.7 million of cubic feet per day.

 

•

Abengoa Technical Expertise in Our Key Technologies and Presence in our Key Geographies. Abengoa currently has deep know-how and expertise in the technologies that we use in our assets and has an important presence and experience in our key geographies.

 

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Multi-technology portfolio of assets that is strategically positioned. Our portfolio of assets uses technologies that we expect to benefit from long-term trends in the electricity sector. Our renewable energy generation assets generate low or no emissions and serve markets where we expect growth in demand in the future. Additionally, our electric transmission lines connect electricity systems to key areas in their respective markets and we expect significant electric transmission investment in our geographies. As a result, we believe that we may be able to benefit from opportunities to repower some of our assets during the lives of our existing PPAs and to extend the terms of those contracts after current PPAs expire. We expect our well-diversified portfolio of assets by technology and geography to maintain cash flow stability.

Our Operations

Revenues

Our revenues for the years ended December 31, 2013 and 2012 amounted to $211 million and $107 million, respectively.

Our total revenue in North America for the years ended December 31, 2013 and 2012 amounted to $114 million and $20 million, respectively. Our total revenues in South America for the years ended December 31, 2013 and 2012 amounted to $25 million and $17 million, respectively. Our total revenue in Europe for the years ended December 31, 2013 and 2012 amounted to $72 million and $28 million, respectively.

Our total revenue from renewable energy for the years ended December 31, 2013 and 2012 amounted to $83 million and $28 million, respectively. Our total revenues from conventional power for the years ended December 31, 2013 and 2012 amounted to $103 million and $20 million, respectively. Our total revenue from electric transmission lines for the years ended December 31, 2013 and 2012 amounted to $25 million and $17 million, respectively.

Renewable energy

The following table presents our renewable energy assets:

 

Asset

Type

Location

Capacity

Status

Offtaker

Currency

Counterparty Credit Ratings(1)

COD/ Expected COD

Contract Years Remaining

Solana

Solar

Arizona

280 MW

Operational

APS

USD

A-/A3/BBB+

4Q 2013

29

Mojave

Solar

California

280 MW

Startup and Production Testing

PG&E

USD

BBB/A3/BBB+

4Q 2014

25

Palmatir

Wind

Uruguay

50 MW

Test Operation

Uruguay

USD

BBB-/Baa3/BBB-

2Q 2014

20

Solaben 2 & Solaben 3

Solar

Spain

2 X 50 MW

Operational

Spain

Euro

BBB-/Baa2/BBB

2Q 2012 & 4Q 2012

24

 

(1)	Reflects counterparty’s issuer credit ratings issued by S&P, Moody’s and Fitch as of the date of this prospectus.

Solana

Overview. The Solana Solar Project, or Solana, is a 250 MW net (280 MW gross) solar electric generation facility located in Maricopa County, Arizona, approximately 70 miles southwest of Phoenix. Arizona Solar One LLC, or Arizona Solar, owns the Solana project. Solana includes a 22-mile 230kV transmission line and a molten salt thermal energy storage system. The construction of Solana commenced in December 2010 and Solana reached COD on October 9, 2013.

Solana relies on a conventional parabolic trough Concentrating Solar Power system to generate electricity. The parabolic trough technology has been utilized for over 25 years at the Solar Electric Generating Systems, SEGS, facilities located in the Mojave Desert in Southern California. Abengoa’s thirteen 50 MW parabolic trough facilities in Spain, including Solaben 2 and Solaben 3, have also used this technology since 2010. Solana produces electricity by means of an integrated process using solar energy to heat a synthetic petroleum-based

 

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fluid in a closed-loop system that, in turn, heats water to create steam to drive a conventional steam turbine. Solana employs a two-tank molten salt thermal energy storage system that provides an additional six hours of solar dispatchability to increase its efficiency. This type of storage system has been in operation in several commercial plants in Spain since March 2009 and is also similar to the Abengoa’s demonstration plant at its Solúcar Platform in Seville that has been in operation since February 2009.

Abengoa Solar One Holdings, Inc., the entity through which we indirectly invest in Solana, is not expected to pay U.S. federal income taxes for the foreseeable future due to the relevant NOLs and NOL carryforwards generated by the application of tax incentives established in the United States, in particular MACRS accelerated depreciation.

Power Purchase Agreement. Solana has a 30-year, fixed-price PPA with Arizona Public Service Company, or APS, for up to 110% of the output of the project. The PPA provides for the sale of electricity at a fixed base price with annual increases of 1.84% per year. The PPA includes on-going performance obligations and is intended to provide Arizona Solar with consistent and predictable monthly revenues that are sufficient to cover operating costs and debt service and to earn an equity return.

APS is a load serving utility based in Phoenix, Arizona. APS has senior unsecured credit ratings of A3 from Moody’s, A- from S&P and BBB+ from Fitch.

The PPA was initially executed in February 2008 and received final approval from the Arizona Corporation Commission in December 2008. The PPA was subsequently amended and restated in December 2010. The PPA expires on October 9, 2043.

Engineering, Procurement and Construction Agreements. The construction of Solana was carried out by subsidiaries of Abengoa under an arm’s-length, fixed-price and date-certain engineering, procurement and construction contract, or EPC Contract, that was executed on December 20, 2010. Abengoa completed construction of Solana on October 9, 2013. The EPC Contract contains warranties that protect Arizona Solar against defects in design, materials and workmanship for one year after completion and provides a three-year performance guarantee for the benefit of financing parties. Abengoa constructed Solana using equipment from leading suppliers, including two 140 MW (gross) steam turbines supplied by Siemens.

Transmission and Interconnection. Solana interconnects to the existing 230kV APS panda substation via a newly constructed 230kV transmission line between the facility switchyard and the APS panda substation. A large generator interconnection agreement, or LGIA, was executed with APS to govern the interconnection. The Federal Energy Regulatory Commission, or FERC, approved the LGIA on August 31, 2010.

Operations & Maintenance. ASI Operations Inc., or ASI Operations, a wholly-owned subsidiary of Abengoa, provides operations and maintenance, or O&M, services for Solana. The senior staff of ASI Operations has experience managing and operating SEGS plants. Solana also benefits from Abengoa’s overall experience operating 781 MW of solar projects worldwide as of December 31, 2013. ASI Operations has agreed to operate the facility in accordance with prudent utility practices, to ensure compliance with all applicable government and agency permits, licenses, approvals and PPA terms, and to assist Arizona Solar in connection with the procurement of all necessary support and ancillary services. The Operations and Maintenance Agreement, or O&M Agreement, between ASI Operations and Arizona Solar is a cost-reimbursable contract with a fixed fee of $480,000 per year, which is indexed to U.S. CPI, and a variable fee that Arizona Solar will pay in periods when the project’s annual net operating profits exceed the target annual net operating profit. We expect that the variable fee will provide ASI Operations with a significant long-term interest in the success of the project, which we expect will align its interests with those of Arizona Solar.

Project Level Financing. Arizona Solar executed a loan guarantee agreement with the DOE on December 20, 2010 to provide a loan guarantee in connection with a two-tranche loan of approximately $1.445 billion from the Federal Financing Bank, or FFB. The FFB loan has a short-term tranche that Arizona Solar expects to repay with the proceeds from the Investment Tax Credit Cash Grant, or ITC Cash Grant, that the project expects to receive from the U.S. Treasury. The principal balance of this tranche was $450 million as of

 

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December 31, 2013. The FFB loan has a long-term tranche payable over a 29-year term with the cash generated by the project. The principal balance of this tranche was $968 million as of December 31, 2013. Each tranche is denominated in U.S. dollars. The FFB loan has a fixed average interest rate of 3.56%.

The financing arrangement permits dividend distributions on a semi-annual basis after the first principal repayment of the long-term tranche, as long as the debt service coverage ratio for the previous four fiscal quarters is at least 1.2x and the projected debt service coverage ratio for the next four fiscal quarters is at least 1.2x.

Partnerships. On September 30, 2013, Abengoa entered into an agreement with Liberty Interactive Corporation, or Liberty, pursuant to which Liberty agreed to invest $300 million in Class A membership interests of ASO Holdings Company LLC, the parent of Arizona Solar, in exchange for a share of the dividends and the taxable loss generated by the project. All figures in this prospectus take into account Liberty’s share of dividends. Abengoa Yield indirectly owns 100% of the Class B membership interests in ASO Holdings Company LLC.

Mojave

Overview. The Mojave Solar Project, or Mojave, is a 250 MW net (280 MW gross) solar electric generation facility located in San Bernardino County, California, approximately 100 miles northeast of Los Angeles. Abengoa commenced construction of Mojave in September 2011. Mojave has substantially finished construction and we expect it to enter the start-up and production testing stage by May 2014. We expect that the project will reach COD by October 2014. Mojave Solar LLC, or Mojave Solar, owns the Mojave project.

Mojave relies on a conventional parabolic trough Concentrating Solar Power system to generate electricity and is similar to Solana with respect to technology and general design. The main difference between Solana and Mojave is that Mojave does not have a molten salt storage system, as the offtaker did not require one.

Mojave’s total project investment is expected to be approximately $1,540 million, of which approximately $159 million was pending as of December 31, 2013.

Mojave is not expected to pay federal income tax for the foreseeable future due to the relevant NOLs and NOL carryforwards generated by the application of tax incentives established in the United States, in particular MACRS accelerated depreciation.

Power Purchase Agreement. Mojave has a 25-year, fixed-price PPA with Pacific Gas & Electric Company, or PG&E, for 100% of the output of Mojave. The PPA will begin on COD. The PPA provides for the sale of electricity at a fixed base price with seasonal adjustments and adjustments for time of delivery. Mojave Solar can deliver and receive payment for up to 110% of contracted capacity under the PPA. The PPA includes on-going performance obligations of 140% of annual contract quantity (approximately 617 GWh) in any 24-month period. The PPA is intended to provide Mojave Solar with consistent and predictable monthly revenues sufficient to cover operating costs and debt service and to earn an equity return.

PG&E, a utility based in San Francisco, is one of the largest integrated natural gas and electric utilities in the United States. PG&E has senior unsecured credit ratings of A3 from Moody’s, BBB from S&P and BBB+ from Fitch.

Engineering, Procurement and Construction Agreements. The construction of Mojave is being carried out by subsidiaries of Abengoa under an arm’s-length, fixed-price EPC Contract that was executed on September 12, 2010. Mojave issued a “full notice to proceed” on March 7, 2012. We expect Mojave to achieve COD by October 2014.

The EPC Contract includes a one-year warranty by the EPC Contractor for defects among other typical equipment guarantees. Additionally, the EPC Contractor provides a three-year performance guarantee linked to energy production. Mojave’s key equipment has been supplied by leading companies including two twin turbines from General Electric.

 

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Transmission and Interconnection. Mojave interconnects to the existing transmission system through Southern California Edison, or SCE, transmission lines. The interconnection to SCE’s existing 220kV Kramer-Coolwater transmission line at Kramer substation is essentially complete and the existing transmission line will allow the project to begin to deliver output to PG&E. However, additional upgrades to the network are required to achieve the full contractual requirements in the PPA and resource adequacy. The additional upgrades, which are under the responsibility of SCE, require the construction of a new 59-mile transmission line between Coolwater and Lugo, which is scheduled to be completed in 2018. Failure to meet the schedule for such upgrades may temporarily block dividend distributions and may cause the project to suffer penalties for failure to achieve resource adequacy.

Operations & Maintenance. ASI Operations provides O&M services for Mojave. Under the terms of the O&M Agreement between ASI Operations and Mojave Solar, ASI Operations has agreed to operate the facility in accordance with prudent utility practices, to ensure compliance with all applicable government and agency permits, licenses, approvals and PPA terms, and to assist Mojave Solar in connection with the procurement of all necessary support and ancillary services. The O&M Agreement is a cost-reimbursable contract with a combination of fixed and variable fees. The fixed fee is $500,000 per year starting in the second year of full operations and will increase by 2.5% per year. The fixed fee will be $1.0 million during the start-up year and will be $750,000 during the first year of full operations. Mojave Solar will pay the variable fee in periods when the project’s annual net operating profits exceed the target annual net operating profit. We expect that the variable fee will provide ASI Operations with a significant long-term interest in the success of the project, which we expect will align its interests with those of Mojave Solar.

Project Level Financing. Mojave Solar executed a Loan Guarantee Agreement with the DOE on September 12, 2011 to provide a loan guarantee in connection with a two-tranche FFB loan of approximately $1.202 billion. The FFB loan has a short-term tranche that Mojave Solar expects to repay with the proceeds from the ITC Cash Grant that the project expects to receive from the U.S. Treasury. The principal balance of this tranche was $229 million as of December 31, 2013. The FFB loan has a long-term tranche payable over a 25-year term with the cash generated by the project. The principal balance of this tranche was $819 million as of December 31, 2013. Each tranche is denominated in U.S. dollars. The FFB loan has an average fixed interest rate of 2.75% and each disbursement is linked to the Treasury bond with the maturity of that disbursement.

The financing arrangement permits dividend distributions on a semi-annual basis after the first principal repayment of the long-term tranche, as long as the debt service coverage ratio for the previous four fiscal quarters is at least 1.2x and the projected debt service coverage ratio for the next four fiscal quarters is at least 1.2x.

Partnerships. We own 100% of the equity interests in the Mojave project.

Palmatir

Overview. Palmatir is an on-shore wind farm facility in Uruguay with nominal installed capacity of 50 MW. Palmatir has 25 wind turbines and each turbine has a nominal capacity of 2 MW. UTE, Uruguay’s state-owned electricity company, has agreed to purchase all energy produced by Palmatir pursuant to a 20-year PPA. Construction is substantially complete and we expect to reach COD by June 2014.

The wind farm is located in Tacuarembó, 170 miles north of the city of Montevideo. Gamesa, a global leader in the manufacture and maintenance of wind turbines, supplied the turbines from its U.S. subsidiary.

Palmatir is not expected to pay significant corporate taxes in the foreseeable future due to the specific tax exemptions established by the Uruguayan government for renewable assets.

Power Purchase Agreement. On September 14, 2011, Palmatir signed a PPA with UTE for 100% of the electricity produced. The PPA requires us to connect Palmatir to UTE’s electrical grid by September 2014. After Palmatir is connected to the electrical grid, UTE will purchase all electricity produced during the 20-year term of the PPA. UTE will pay a fixed tariff under the PPA, which is denominated in U.S. dollars and will be partially

 

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adjusted in January of each year based on a formula referring to U.S. CPI and the Uruguay’s Indice de Precios al Productor de Productos Nacionales and the applicable UYU/USD exchange rate.

Uruguay has senior unsecured credit ratings of Baa3 from Moody’s, BBB- from S&P and BBB- from Fitch.

Engineering, Procurement and Construction Agreements. The construction of Palmatir was carried out by subsidiaries of Abengoa under a fixed price EPC Contract that includes customary guarantees, such as a one year warranty by the EPC Contractor for defects plus a two-year performance guarantee for the wind turbines from Gamesa.

Transmission and Interconnection. Palmatir will connect to UTE’s grid at the Bonete substation via a newly built 21-mile overhead line.

Operations & Maintenance. Palmatir signed an agreement with Epartir, a subsidiary of Omega that is in turn a wholly-owned Abengoa subsidiary, for the provision of O&M services for a 20 year-term. The O&M Agreement covers scheduled and unscheduled turbine maintenance, a supply of spare parts, wind farm monitoring and reporting services. Epartir subcontracted with the wind turbine manufacturer, Gamesa, for the wind turbine O&M services. According to Gamesa, it has more than 20,800 MW of installed wind turbines and operates and maintains over 13,600 MW of wind turbines.

Project Level Financing. Palmatir signed a financing agreement for a 20-year loan in two tranches in connection with the project. Each tranche is denominated in U.S. dollars. The first tranche is a $73 million loan from the U.S. Export Import Bank with a fixed interest rate of 3.11%. The second tranche is a $40 million loan from the Inter-American Development Bank with a floating interest rate of LIBOR plus 4.125%. The project hedged 80% of the floating rate loan with a swap at a rate of 2.22% with the financing bank. The total principal balance of both tranches as of December 31, 2013 was $107 million.

Cash distributions are permissible every six months subject to a historical debt service coverage ratio for the previous twelve-month period and a projected debt service coverage ratio for the following twelve-month period of at least 1.25x.

Solaben 2 and Solaben 3

Overview. The Solaben 2 and Solaben 3 projects are two 50 MW Concentrating Solar Power facilities and are part of Abengoa’s Extremadura Solar Complex. The Extremadura Solar Complex consists of four Concentrating Solar Power plants, Solaben 1, Solaben 2, Solaben 3 and Solaben 6, and is located in the municipality of Logrosán, Spain. Abengoa commenced construction of Solaben 2 and Solaben 3 in August 2010. Solaben 2 reached COD in June 2012 and Solaben 3 reached COD in October 2012. Solaben Electricidad Dos, S.A., or SE2, owns Solaben 2 and Solaben Electricidad Tres, S.A., or SE3, owns Solaben 3.

Solaben 2 and Solaben 3 each rely on a conventional parabolic trough Concentrating Solar Power system to generate electricity. The technology is similar to the technology used at Solana, Mojave and the eleven other 50 MW Concentrating Solar Power plants that Abengoa owns in Spain.

According to the tax accelerated depreciation regime established by the Spanish Corporate Income Tax Act, Solaben 2 and Solaben 3 are not expected to pay significant income taxes in the next ten years.

Regulation. Renewable energy projects in Spain sell the power they produce into the wholesale electricity market and receive additional payments from the Comisión Nacional de los Mercados y de la Competencia, or CNMC, the Spanish state-owned regulator. According to the Electricity Sector Law, the addition of expected revenues from the wholesale market and from regulated payments should allow all renewable energy installations to obtain a project internal rate of return of 7.5%. This return can be reviewed by the regulator and government every six years, based on the cost of Spanish long-term sovereign bonds and a 300 basis points spread.

 

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Concentrating Solar Power plants receive, in addition to the revenues from the sale of electricity in the market, two monthly payments in order to achieve the specific rate of return. These payments are comprised of (i) a fixed monthly payment based on installed capacity and (ii) a variable payment based on net electricity produced. There is a maximum number of production hours per year beyond which no variable payment is received. The regulation also includes a minimum number of yearly hours of generation, under which the plant would receive no regulated payments and another higher threshold below which regulated payments would be reduced for a certain year. Those numbers are 35% and 60% of the maximum yearly hours respectively. We expect that a plant would fail to achieve these thresholds only in cases of major breakdowns.

Engineering, Procurement and Construction Agreements. The construction of Solaben 2 and Solaben 3 was carried out by subsidiaries of Abengoa under an arm’s-length, fixed-price and date-certain EPC Contract executed on December 6, 2010. The EPC Contract provides a three-year performance guarantee by the EPC Contractor for the benefit of financing parties starting six months after the applicable COD.

Transmission and Interconnection. Solaben 2 and Solaben 3, together with two other Abengoa Solaben projects and three plants owned by other companies, are connected to the electrical grid via common interconnection facilities that were jointly developed and are jointly owned. The interconnection facilities connect Solaben 2 and Solaben 3 from the SET Mesa de la Copa substation, which is located next to the Solaben projects, to the Valdecaballeros substation. The installation consists of a nodal transformer substation 220/400kV with a capacity of 600 MVA at SET Mesa de la Copa and a transmission line at 400kV of about 12 miles, which connect the nodal substation with a post of 400kV in the Valdecaballeros substation.

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

Operations & Maintenance. Abengoa Solar España, S.A., or ASE, is the contractor for O&M services at Solaben 2 and Solaben 3. ASE has operated Concentrating Solar Power plants since 2007 and currently operates 681 MW of installed capacity, including Solaben 2 and Solaben 3, in four solar complexes across the south of Spain. ASE has agreed to operate the facility in accordance with prudent utility practices, ensure compliance with all applicable government and agency permits, licenses and approvals, and feed-in tariff terms, and to assist Solaben 2 and Solaben 3 in connection with the procurement of all necessary support and ancillary services.

Each O&M Agreement is a 20-year, all-in contract that expires on the 20^th anniversary of the COD. Each contract provides for the payment of a fixed fee of €3.5 million for the equivalent of 75% of the annual targeted output in the O&M Agreement and a variable fee thereafter equivalent to approximately €39 per MWh until 100% of the target output is reached and €90 per MWh for any production above 100%. All amounts are indexed annually to Spanish CPI.

Project Level Financing. SE2 and SE3 each entered into a 20-year loan agreement with a syndicate of banks formed by the Bank of Tokyo-Mitsubishi, Mizuho, HSBC and Sumitomo Mitsui Banking Corporation on December 16, 2010. Each loan is denominated in euro. The loan for Solaben 2 was for €169.3 million and the loan for Solaben 3 was for €171.5 million. The banks providing these loans obtained commercial and political risk insurance from Nippon Export and Investment Insurance, which allowed for lower financing costs. The interest rate for each loan is a floating rate based on EURIBOR plus a margin of 1.5%. Each loan was initially 80% hedged with the same banks providing the financing. The hedge was structured 50% through a swap set at approximately 3.7% and 50% through a cap with a 3.75% strike. In November 2013, SE2 and SE3 hedged through 2017 the remaining 20% exposure through a cap with a 0.75% strike.

The outstanding amount of these loans as of December 31, 2013 was €164 million for Solaben 2 and €167 million for Solaben 3.

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

 

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Partnerships. Itochu Corporation, a Japanese trading company, purchased a 30% stake in the economic rights of each of Solaben 2 and Solaben 3 in December 2010.

Conventional Power

The following table provides an overview of our sole conventional power asset:

 

Asset

Location

Capacity

Status

Currency

Offtaker

Offtaker Credit Rating

COD

Contract Years Remaining

ACT

Mexico

300 MW

Operational

USD

Pemex

BBB+/Baa1/BBB+

2Q 2013

19

Abengoa Cogeneración Tabasco

Overview. Abengoa Cogeneración Tabasco, or the ACT Plant, is a gas-fired cogeneration facility located inside the Nuevo Pemex Gas Processing Facility near the city of Villahermosa in the State of Tabasco, Mexico. It has a rated capacity of approximately 300 MW and between 550 and 800 metric tons per hour of steam. The plant includes a substation and an approximately 52 mile and 115 kilowatt transmission line. Abengoa commenced construction of the ACT Plant in October 2009 and it reached COD on April 1, 2013. Abengoa Cogeneración Tabasco, S. de R.L. de C.V., or Abengoa Cogeneración Tabasco, owns the ACT Plant.

The ACT Plant utilizes mature and proven gas combustion turbines and heat recovery technology. Specifically, the ACT Plant utilizes two GE Power & Water “F” technology natural gas-fired combustion turbines and two Cerrey, S.A. de C.V., or Cerrey, heat recovery steam generators. According to GE, as of May 2013, GE Power & Water has supplied or received orders for more than 10,000 gas turbines, representing over 600,000 MW of installed capacity. As of May 2013, GE’s “F” technology gas turbines have accumulated over 47 million combined operating hours worldwide. Cerrey designs, manufactures, installs and maintains steam generating systems.

ACT is not expected to pay corporate income taxes in the next five to seven years due to the NOLs generated during the construction phase.

Conversion Services Agreement. On September 18, 2009, Abengoa Cogeneración Tabasco entered into the Pemex Conversion Services Agreement, or the Pemex CSA, with Petróleos Mexicanos, or Pemex, under which Abengoa Cogeneración Tabasco is required to deliver all of the plant’s thermal and electrical output to the Nuevo Pemex Gas Processing Facility. The Pemex CSA has an initial term of 20 years from the in-service date and will expire on March 31, 2033. The parties may mutually extend the Pemex CSA for an additional 20-year period. The Pemex CSA requires Pemex to supply the facility, free of charge, with the fuel and water necessary to operate the ACT Plant and the latter has to produce electrical energy and steam requested by Pemex based on the expected levels of efficiency. The Pemex CSA is denominated in U.S. dollars.

Pemex has a corporate credit rating of BBB+ by S&P, Baa1 by Moody’s and BBB+ by Fitch.

Engineering, Procurement and Construction Agreements. The construction of the ACT Plant was carried out by subsidiaries of Abengoa, which were responsible for the design, engineering, equipment procurement and construction under a turnkey EPC Contract. CFE, Mexico’s Federal Electricity Commission and Pemex supervised the engineering, procurement and construction work. Under the applicable EPC Contract guaranty, an affiliate of Abengoa will continue to perform works for the project for warranty repairs during the applicable warranty period.

Transmission and Interconnection. The Transferred Transmission Line that connects the ACT Plant to the CFE transmission grid system includes seven outgoing lines connected to the Cactus Switcheo substation. On April 1, 2013, pursuant to the terms of the Pemex CSA and as required by Mexican laws and regulations, Abengoa Cogeneración Tabasco transferred ownership of the Transferred Transmission Line and the Cactus Switcheo substation to the CFE for no consideration.

 

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Operations & Maintenance. GE International provides services for the maintenance, service and repair of the gas turbines as well as certain equipment, parts, materials, supplies, components, engineering support test services and inspection and repair services. GE International, an indirect subsidiary of GE, is one of the world’s largest third-party providers of operation and maintenance services to simple and combined-cycle combustion turbine facilities with over 25 years of experience. According to GE International, it had maintenance agreements covering almost 2,200 units on approximately 750 customer sites in seventy-seven countries with capacity over 250,000 MW as of April 2013.

In addition, NAES Mexico, S. de R.L. de C.V., or NAES, is responsible for the O&M of the ACT Plant. NAES has experience operating 173 power-generating facilities in North America and eighteen facilities in Central and South America, including four facilities utilizing GE “F” turbine technology in Mexico as of May 2013, according to NAES. The O&M Agreement with NAES expires 20 years after COD, although we may cancel it after five years with no penalty. Abengoa Cogeneración Tabasco pays NAES for its reimbursable costs, operating costs and a $230,000 annual management fee.

Project Level Financing. On December 2013, Abengoa Cogeneración Tabasco signed a $680 million senior loan agreement with a syndicate of banks led by Banco Santander, Banobras and Crédit Agricole Corporate & Investment Bank. Each tranche of the loan is denominated in U.S. dollars. The financing consists of a $333 million tranche and a $327 million tranche plus an additional $20 million for the issuance of a letter of credit. No repayment of principal has occurred as of the date of this prospectus.

The first tranche has a 10-year maturity, the second tranche has an 18-year maturity and the letter of credit may be convertible into additional principal that will be added to the first tranche. The interest rate on each tranche is a floating rate based on the three-month LIBOR plus a margin of 3.0% until December 2018, 3.5% from January 2019 to December 2023 and 3.75% from January 2024 to December 2031. The senior loan agreement requires Abengoa Cogeneración Tabasco to hedge the interest rate for a minimum amount of 75% of the outstanding debt amount during at least 75% of the debt maturity. In January 2014, ACT closed a swap for a notional amount of $322.5 million. We expect to close the remaining $172 million by March 13, 2014.

The senior loan agreement permits cash distributions to shareholders after four quarters with a debt service coverage ratio of at least 1.2x.

Partnerships. We currently indirectly own 85% of the equity interests in Abengoa Cogeneración Tabasco and a subsidiary of GE Financial Services owns 15% through a special class of share. Abengoa Mexico and Abener Energia, two subsidiaries of Abengoa, own two ordinary shares. We expect to purchase GE’s stake before the consummation of this offering.

Electric Transmission

The following table provides an overview of our electric transmission assets:

 

Asset

Location

Length

Status

Currency

Offtaker

Counterparty Credit Ratings(1)

COD/ Expected COD

Contract Years Remaining

ATN

Peru

362 miles

Operational

USD

Peru

BBB+/Baa2/BBB+

1Q 2011

27

ATS

Peru

569 miles

Operational

USD

Peru

BBB+/Baa2/BBB+

1Q 2014

30

Quadra 1&2

Chile

81 miles

Operational

USD

Private Companies

N/A

1Q 2014

21

Palmucho

Chile

6 miles

Operational

USD

Endesa

BBB/NA/BBB+

4Q 2007

23

 

(1)	Reflects counterparty’s issuer credit ratings issued by S&P, Moody’s and Fitch.

In addition to the assets listed above, we own a convertible preferred equity investment in ACBH, which is a subsidiary of Abengoa that holds entities involved in the development and construction of contracted assets, which are substantially all electric transmission lines, in Brazil. This investment is described further below.

 

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Abengoa Transmisión Norte

Overview. Abengoa Transmisión Norte, or the ATN Project, in Peru is part of the Guaranteed Transmission System, or Sistema Garantizado de Transmisión, SGT, and is comprised of the following facilities:

 

(i)

the approximately 356 mile, 220kV line from Carhuamayo—Paragsha—Conococha—Kiman—Ayllu—Cajamarca Norte;

 

(ii)

the 4.3 mile, 138kV link between the existing Huallanca substation and Kiman Ayllu substations;

 

(iii)

the 1.9 mile, 138kV link between the 138kV Carhuamayo substation and the 220kV Carhuamayo substation;

 

(iv)

the new Conococha and Kiman Ayllu substations; and

 

(v)

the expansion of the Cajamarca Norte, 220kV Carhuamayo, 138kV Carhuamayo and 220kV Paragsha substations.

Abengoa started construction of the ATN Project in May 2008 and reached COD for each line as set forth below:

 

Line		kV		Beginning		End		COD
1		220		Carhuamayo		Paragsha		January 11, 2011
2		220		Paragsha		Conococha		February 24, 2011
3		220		Conococha		Kiman Ayllu		December 28, 2011
4		220		Kiman Ayllu		Cajamarca Norte		June 26, 2011

Creditítulos Sociedad Titulizadora S.A., or Creditítulos, acting as trustee for the senior bond holders of the project, owns the ATN Project.

Concession Agreement. Pursuant to the initial concession agreement, the Ministry of Energy, on behalf of the Peruvian Government, granted ATN a concession to construct, develop, own, operate and maintain the ATN Project. The initial concession agreement became effective on May 22, 2008 and will expire 30 years after the COD of Line 1, which was achieved on January 11, 2011.

Pursuant to the initial concession agreement, we own all assets that we acquired to construct and operate the ATN Project for the duration of the concession. The ownership of these assets will revert to the Ministry of Energy upon termination of the initial concession agreement.

The ATN Project has a 30-year, fixed-price tariff base denominated in U.S. dollars that is adjusted annually after the COD for each line in accordance with the U.S. Finished Goods Less Food and Energy Index as published by the U.S. Department of Labor. Our receipt of the tariff base is independent from the effective utilization of the transmission lines and substations related to the ATN Project. The tariff base is intended to provide the ATN Project with consistent and predictable monthly revenues sufficient to cover the ATN Project’s operating costs and debt service and to earn an equity return.

Peruvian law requires the existence of a definitive concession agreement to perform electricity transmission activities where the transmission facilities cross public land or land owned by third parties. On February 20, 2010, the Ministry of Energy granted the project a definitive concession agreement to transmit electricity using the transmission lines of the ATN Project. The Ministry of Energy also approved the execution of the concession agreement between the Ministry of Energy and ATN, which was executed on February 23, 2010 and formalized by Public Deed dated March 9, 2010.

ATN has generated and will generate relevant NOL carryforwards that we expect to use to offset future taxable income. According to our estimates, ATN is not expected to pay income tax for a period of more than ten years.

Peru has a long-term credit rating of BBB+ from S&P, BBB+ from Fitch and Baa2 from Moody’s.

 

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Engineering, Procurement and Construction Agreements. The construction of the ATN Project was carried out by subsidiaries of Abengoa under arm’s-length, fixed-price and date-certain EPC Contracts. The Procurement Contract and Construction Contract was executed on June 1, 2008 and all lines were completed by December 28, 2011. The guarantee period of the EPC Contracts has expired.

Operations & Maintenance. Creditítulos, as trustee, has an O&M Agreement in the process of being assigned to Omega Peru, a subsidiary of Abengoa, specialized in O&M services for electric transmission lines across South American countries. The O&M Agreement has a five-year term that renews automatically for an additional five-year period until the termination of the Concession Agreement, unless either party exercises its right not to renew the O&M Agreement. The O&M Agreement provides for a fixed price of $3.35 million per year and is adjusted yearly with the variation of the U.S. Finished Goods Less Food and Energy Index.

Project Level Financing. On September 26, 2013, ATN completed the issue of a project bond in three tranches. To implement the bond issuance, ATN created a trust holding all of the assets and economic rights arising out of the definitive concession agreement. Each tranche is denominated in U.S. dollars. The first tranche has a principal amount of $15 million with a five-year term with quarterly amortization and bears interest at a rate of 3.84375% per year. The second tranche has a principal amount of $50 million with a fifteen-year term with quarterly amortization and bears interest at a rate of 6.15% per year. The second tranche also has a five-year grace period for principal repayment. The third tranche has a principal amount of $45 million with a 26-year term and bears interest at a rate of 7.53% per year. The third tranche has a fifteen-year grace period for principal repayments. As of December 31, 2013, $108 million in aggregate was outstanding.

Cash distributions are subject to a historical debt service coverage ratio for the last six months of at least 1.10x.

Abengoa Transmisión Sur

Overview. The Abengoa Transmisión Sur, or ATS Project, in Peru is part of the SGT, and consists of:

 

(i)

one 500kV electric transmission line and two short 220kV electric transmission lines, which are linked to existing substations;

 

(ii)

three new 500kV substations; and

 

(iii)

the expansion of three existing substations (two existing 220kV substations and one existing 550/220kV substation), through the development of new transformers, line reactors, series reactive compensation, and shunt reactions in some substations.

The transmission lines span approximately 569 miles and cross over the Lima, Ica, Arequipa and Moquegua districts. The new substations are located in the district of Poroma (Marcona), Ocoña and Moquegua. Abengoa Transmisión Sur, S.A., or ATS, owns the ATS Project.

Construction of the transmission lines and related substations required for operation of the ATS Project is complete. Pursuant to the concession agreements, the Ministry of Energy granted ATS the right to operate the ATS Project for 30 years from COD, which we achieved on January 17, 2014. As part of the initial concession agreement, we agreed to construct the Montalvo substation second bus bar, which was not required for operation of the ATS Project. A bus bar is a strip or bar of copper, brass or aluminum that conducts electricity within an electrical system. We anticipate the procurement, engineering, construction, testing and commissioning of the Montalvo substation second bus bar will cost approximately $700,000. We have funding in place for the costs associated with the second bus bar.

ATS has generated and will generate relevant NOL carryforwards that we expect to use to offset future taxable income. According to our estimates, ATS is not expected to pay income tax for a period of more than ten years.

 

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Concession Agreement. Pursuant to the initial concession agreement, the Ministry of Energy, on behalf of the Peruvian Government granted ATS a concession to construct, develop, own, operate and maintain the ATS Project. The initial concession agreement became effective on July 22, 2010 and will expire 30 years after the COD.

Pursuant to the initial concession agreement, we will own all assets we acquired to construct and operate the ATS Project for the duration of the concession. These assets will revert to the Ministry of Energy upon termination of the initial concession agreement.

The ATS Project has a 30-year, fixed-price tariff base denominated in U.S. dollars and is adjusted annually after the COD in accordance with the U.S. Finished Goods Less Food and Energy Index as published by the U.S. Department of Labor. Our receipt of the tariff base will be independent from the effective utilization of the transmission lines and substations related to the ATS Project. The tariff base is intended to provide the ATS Project with consistent and predictable monthly revenues sufficient to cover the ATS Project’s operating costs and debt service and to earn an equity return.

Peruvian law requires market participants to enter into a definitive concession agreement to perform electricity transmission activities where the transmission facilities cross public land or land owned by third parties. On June 6, 2012, the Ministry of Energy granted ATS a definitive concession agreement to transmit electricity using the transmission lines of the ATS Project. The Ministry of Energy approved the execution of the concession agreement between the Ministry of Energy and ATS, which was executed on June 7, 2012 and formalized by Public Deed dated August 1, 2012.

Peru has a long-term credit rating of BBB+ from S&P, BBB+ from Fitch and Baa2 from Moody’s.

Engineering, Procurement and Construction Agreements. The construction of the ATS Project was carried out by subsidiaries of Abengoa under arm’s-length, fixed-price and date-certain EPC Contracts. Procurement Contract and Construction Contracts were executed on July 22, 2010 and August 24, 2010, respectively, and COD was reached on January 17, 2014, except for the equipment related to the Montalvo substation second bus bar. The EPC Contracts provide warranties that protect ATS against defects in design, materials and workmanship for one year after the COD. The project also benefits from a full guarantee from Abengoa in favor of the financing parties of all of the EPC Contractor’s obligations under the EPC Contracts.

Operations & Maintenance. Omega Perú, a wholly owned subsidiary of Abengoa, is in the process of being assigned a contract to provide O&M services for the ATS Project. The senior staff of Omega Perú has experience managing and operating transmission lines in Peru and additionally the project benefits from Abengoa’s overall experience in operating transmission lines projects worldwide and South America in particular. Omega Perú has agreed to operate the facility in accordance with prudent utility practices, ensure compliance with all applicable government and agency permits, licenses, approvals and Concession Agreement terms. The O&M Agreement provides for a fixed fee of $2.0 million per year and is adjusted annually on the anniversary of the execution of the O&M Agreement to reflect the variation in the U.S. Finished Goods Less Food and Energy Index. The O&M Agreement has a five-year term that renews automatically for an additional five-year period until the termination of the initial concession agreement, unless either party exercises its right not to renew the O&M Agreement.

Project Level Financing. On December 29, 2011 ATS signed a project financing (miniperm) with a syndicate of nine international and national banks for approximately $341 million with a seven-year tenor, with a 50% cash-sweep activating after the first 42 months and a 100% cash-sweep activating after the first 54 months. The facility is denominated in U.S. dollars. The pricing of the financing facility is LIBOR plus 3.25% with a 25 basis points step up every two years. As of December 31, 2013, $323 million in aggregate was outstanding. We are currently undertaking a refinancing of this facility, which we expect to conclude prior to the consummation of this offering.

Cash distributions may be made every six months subject to a trailing historical debt service coverage ratio for the last twelve months of at least 1.20x.

 

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Partnerships. On December 5, 2012, Abengoa reached an agreement with Fondo para Inversiones en el Exterior represented by Compañía Española de Financiación del Desarrollo, Cofides, S.A., or Cofides, pursuant to which Cofides invested €25 million of shares of ATS in exchange for a share of the dividends and the taxable loss generated by the ATS Project. Prior to the consummation of the offering, we will purchase Cofides’ stake in ATS and will indirectly own 100% of ATS.

Quadra 1 & Quadra 2

Overview. Transmisora Mejillones, or Quadra 1, is a transmission line project consisting of a 220kV double circuit transmission line that begins at the Encuentro electrical substation that is owned by Transelec and is located in the commune of María Elena. Quadra 1 connects to the Sierra Gorda substation owned by Sierra Gorda SCM, a mining company and is located in the commune of Sierra Gorda. The project covers approximately 49 miles. It is comprised of 232 metallic galvanized structures and 293 miles of installed conductors.

Transmisora Baquedano, or Quadra 2, is a transmission line project that provides electricity to the seawater pump stations owned by the Sierra Gorda SCM. It consists of a simple circuit 220kV electric transmission line that begins at the Angamos electrical substation owned by EE Cochrane, an electrical company, and is located in the commune of Mejillones. Quadra 2 connects to the PS1 transformer substation. This section of Quadra 2 covers approximately 7 miles. This section is comprised of 29 metallic galvanized structures and has 21 miles of installed conductors. The existing pumps, which are owned by Sierra Gorda, feed from the PS1 substation and the energy is converted by a transformer from 220/110/13.2kV to 110kV to continue through a simple circuit 110kV transmission line up to the PS2 substation. This section of Quadra 2 covers approximately 25 miles. This section is comprised of 165 metallic galvanized structures and has 75 miles of installed conductors.

Abengoa Chile S.A., or Abengoa Chile, began constructing Quadra I and Quadra II in September 2012 and started operations in December 2013 and January 2014, respectively. Both projects are expected to reach COD in March 2014.

Concession Agreement. Both projects have concession agreements with the Sierra Gorda SCM mining company, which is owned by Sumitomo Corporation, Sumitomo Metal Mining and KGHM Polska Mietz. The concession agreement is denominated in U.S. dollars and has a 21-year term that began on the COD. The contract price is indexed to the U.S. CPI.

Sierra Gorda SCM requested additional work on Quadra 2 not initially foreseen, which required an additional capital expenditure of approximately $22 million. Construction of the additional work is substantially finished and has resulted in an increased tariff under the concession agreement with Sierra Gorda SCM.

Engineering, Procurement and Construction Agreements. The construction of both projects has been carried out by Abengoa Chile S.A. under arm’s-length, fixed-price and date-certain EPC Contracts. Following the standard Abengoa model, the EPC Contracts provide warranties that protect the project against defects in design, materials and workmanship for one year after COD. The project also benefits from a full guarantee from Abengoa in favor of the financing parties of all of the EPC Contractor’s obligations under the EPC Contracts.

Operations and Maintenance. Quadra 1 and Abengoa Chile S.A. executed an agreement for O&M services at Quadra 1. Abengoa Chile, in turn, subcontracted the O&M of the two land strips at the Encuentro substation to Transelec. This also includes the use of its communication channels down to the CDEC-SING.

Quadra 2 and Abengoa Chile executed an agreement for the provision of O&M services at Quadra 2, subject to certain exceptions. First, the O&M for the land strip that is within the EE Cochrane property will be undertaken by EE Cochrane under an agreement with Abengoa Chile S.A. Second, Gasatacama will undertake the operational representation against the CDEC-SING under an agreement with Abengoa Chile S.A.

Each O&M Agreement with Abengoa Chile has a 252-month maturity and is denominated in U.S. dollars and indexed to Chilean CPI and to the average exchange rate.

 

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Project Level Financing. On July 6, 2012, Quadra 1 signed a financing contract for $40.2 million with Crédit Agricole Corporate and Investment Bank, or CA-CIB, Corpbanca, Banco BICE and the Inter-American Investment Corporation. The loan is denominated in U.S. dollars. The term of the loan is sixteen years and the loan matures on July 30, 2028. The loan has a semi-annual amortization schedule. As of December 31, 2013, Quadra 1 has not made any principal payments. The interest rate is a variable rate based on the six-month LIBOR plus 3.80%. Quadra 1 signed an interest rate cap hedging contract with CA-CIB that covers 75% of the debt and fixed the six-month LIBOR to a maximum rate of 2.5% per year until maturity.

On November 20, 2012, Quadra 2 signed an initial financing contract for $34.4 million with CA-CIB and Corpbanca. The term of the loan is sixteen years and the loan matures on August 31, 2028 and has a semi-annual amortization schedule. As of December 31, 2013, Quadra 2 has not made any principal payments. The interest rate is a variable rate based on the six-month LIBOR plus 3.80%. Quadra 2 signed an interest rate swap hedging contract with Corpbanca that covers 75% of the debt and fixed the six-month LIBOR to 2.5175% until maturity. Due to the additional work required by Sierra Gorda SCM, an additional debt tranche for a total of $17 million is pending. An additional hedging contract will also be required in connection with the additional $17 million credit. As of December 31, 2013, $67.4 million in aggregate was outstanding in respect of Quadra 1 and Quadra 2.

With respect to Quadra 1 and Quadra 2, the financing arrangements restrict cash distribution to shareholders unless a distribution test of 1.20x historical debt service coverage ratio for the previous six months is met.

Palmucho

Palmucho is a short transmission line in Chile that is approximately 6 miles. It delivers energy generated by the Palmucho Plant, which is owned by Endesa, to the SIC. The Palmucho Plant connects to the n° 2 circuit of the 220kV Ralco—Charrua transmission line at the 66/220kV Zona de Caída substation. The Palmucho project has been in operation since October 2007. Palmucho has a fourteen-year concession contract with Endesa. Both parties are obliged to enter into a four-year valid toll contract at the end of the term of the concession contract and the valid toll contract will be renewed for three periods of four years each until one of the parties decides not to renew. Endesa operates the Palmucho project and Abengoa Chile maintains the project. On October 24, 2008, Palmucho signed a long-term debt facility with Corpbanca for $7 million. The loan is denominated in U.S. dollars. The term of the loan is thirteen years and the loan matures on October 25, 2021. The loan has a quarterly amortization schedule and the outstanding balance as of December 31, 2013 was $6.5 million. Endesa has a senior unsecured credit rating of BBB from S&P and BBB+ from Fitch.

Convertible Preferred Equity Investment in Abengoa Concessoes Brasil Holding

In addition to the assets listed above, we hold a convertible preferred equity investment in ACBH, a subsidiary holding company of Abengoa that is engaged in the development, construction, investment and management of contracted concessions in Brazil, comprised mostly of transmission lines in various stages of development.

We have the following rights pursuant to a shareholders agreement to be entered into among us, ACBH and the ordinary shareholders of ACBH:

 

•

During the five-year period commencing on July 1, 2014, we have the right to receive, in four quarterly installments, a preferred dividend of $18 million per year. The board of directors and shareholders of ACBH will approve the distribution of the preferred dividend for the five-year period prior to the consummation of the offering. The cash required to pay the preferred dividends during the five-year period will be held in an escrow account in Brazil in U.S. dollars in the amount of $92 million.

 

•

Following the initial five-year period, we will have the option to (i) remain as a preferred equity holder with the right to receive, in U.S. dollars or Brazilian reais, the first $18 million that ACBH is able to distribute, if any, or (ii) convert the preferred equity interest into ordinary shares of one or several project companies currently owned by ACBH that, in aggregate, have a valuation at least equal to the valuation, based on the then-prevailing conditions, of an instrument yielding $18 million to perpetuity, verified by an external

 

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advisor selected by our independent board members. Abengoa will propose specified projects that fulfill the above-described criteria, and which may include minority and/or majority stakes in various completed projects. Our independent board members will then approve or reject the proposal based on the external advisor input. Any conversion of shares would be subject to relevant approvals, including from regulatory bodies, financing banks or equity partners at the project level. If ACBH cannot secure such approvals following Abengoa’s best efforts, the preferred equity interest will not be converted and we will retain the right to receive the first $18 million dividend that ACBH approves for distribution, if any. We cannot guarantee, after the initial five-year period, that the $18 million distribution will be made, as any distribution will depend, among others, on the actual performance of ACBH or of the project companies into which the preferred equity interest has converted, as the case may be. Furthermore, any such future payments will not be backed by any escrow arrangements.

In accordance with the deed described under “Description of Share Capital—Rights Attached to our Shares—Brazil Dividend Policy”, until the aggregate of dividends of the projects owned by ACBH reaches a minimum of $36 million per year for three consecutive years, in the event there is a shortfall in the preferred dividend of $18 million, such shortfall will be deducted from the dividends to be distributed by us to the Abengoa subsidiary holding our shares in its capacity as our shareholder; provided however, that such deduction will be made only if and to the extent that the Abengoa subsidiary holding our shares continues to be a shareholder of ours as of the relevant date.

The following table summarizes the electric transmission lines owned by the ACBH project companies:

 

		Brazil
Project		Miles				Abengoa Ownership				Concession- Type Contract				Concessionaire				Status (Historical or Expected Operational Start Date)
ATE IV (São Mateus)			53				75	%			BOOT				ANEEL			Operating (Sept 10)
ATE V (Londrina)			82				100	%			BOOT				ANEEL			Operating (Oct 10)
ATE VI (Campos Novos)			81				100	%			BOOT				ANEEL			Operating (Jan 10)
ATE VII (Foz do Iguaçu)			71				100	%			BOOT				ANEEL			Operating (Aug 09)
Manaus			364				50.5	%			BOOT				ANEEL			Operating (Mar 13)
ATE VIII			67				50	%			BOOT				ANEEL			Operating (Jan 14)
Norte Brasil			1,476				51	%			BOOT				ANEEL			Construction (Q3 2014)
Linha Verde			613				51	%			BOOT				ANEEL			Construction (Q4 2014)
ATE XVI			1,128				100	%			BOOT				ANEEL			Pre-Construction (Q3 2016)(1)
ATE XVII			178				100	%			BOOT				ANEEL			Pre-Construction (Q2 2016)(1)
ATE XVIII			238				100	%			BOOT				ANEEL			Pre-Construction (Q1 2016)(1)
ATE XIX			391				100	%			BOOT				ANEEL			Pre-Construction (Q3 2016)(1)
ATE XX			336				100	%			BOOT				ANEEL			Pre-Construction (Q3 2016)(1)
ATE XXI			1,094				100	%			BOOT				ANEEL			Pre-Construction (Q3 2016)(1)
ATE XXII			228				100	%			BOOT				ANEEL			Pre-Construction (Q1 2017)(1)
Total			6,401

 

(1)

The pre-construction projects will require ACBH to secure all permits required by Brazilian law. See “Risk Factors—Risks Related to Our Business and the Markets in which We Operate—We are subject to extensive governmental regulation in a number of different jurisdictions, and our inability to comply with existing regulations or requirements or changes in applicable regulations or requirements may have a negative impact on our business, results of operations or financial condition.”

 

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Each project has a 30-year concession agreement, and each concession agreement provides for indemnification and compensation at replacement value of non-depreciated assets at the end of the concession. ANEEL granted the concession agreements to the different project companies through an auction process. The revenues paid by ANEEL are denominated in Brazilian Reais and indexed to the IPCA, which is the Brazilian consumer price index.

Projects ATE IV, ATE V, ATE VI, ATE VII, Manaus and Norte each received project financing from the National Bank for Economic and Social Development, or Banco Nacional de Desenvolvimento Econômico e Social, and Norte and Manaus received project financing from Superintendencia do Desenvolvimento da Amazonia, a development institution for projects in certain regions of Brazil.

Manaus, Norte Brasil and Linha Verde are partnerships with different subsidiaries of Electrobras, the Brazilian utility.

ACBH also holds an ownership interest in a hospital facility.

Customers and Contracts

We derive our revenue from selling electricity and electric transmission capacity. Our customers are comprised of governments and electrical utilities, the latter with which we typically have entered into power purchase agreements. We also employ concession contracts, typically ranging from 20 to 30 years.

See the description of each asset under “—Our Operations” for more detail on each concession contract.

Our main contracts in our business also include the non-recourse project finance contracts with banks or financial institutions and the operation and maintenance contracts of each of our assets. See description of financing and operation and maintenance contracts under “—Our Operations.”

Additionally, we have entered into a ROFO Agreement, an Executive Services Agreement, a Support Services Agreement, a Financial Support Agreement and a Trademark License Agreement with Abengoa. See “Related Party Transactions” for more detail on these contracts.

Competition

Renewable energy, conventional power and electric transmission are all capital-intensive and significantly commodity-driven businesses with numerous industry participants. We compete based on the location of our assets and ownership of portfolios of assets in various countries and regions; however, because our assets typically have 20- to 30-year contracts, competition with other asset operations is limited until the expiration of the PPAs. Power generation and transmission are highly regulated businesses in each country in which we operate and are currently highly fragmented and have a diverse industry structure. Our competitors have a wide variety of capabilities and resources. Our competitors include, among others, regulated utilities and transmission companies, other independent power producers and power marketers or trading companies and state-owned monopolies.

Intellectual Property

We will enter into a licensing agreement with Abengoa pursuant to which Abengoa will grant us a non-exclusive, royalty-free license to use the name “Abengoa” and the Abengoa logo. Other than under this limited license, we will not have a legal right to use the “Abengoa” name or the Abengoa logo. Abengoa will commit to transfer, sell or assign three web domains to us, including www.abengoayield.com and www.abengoayield.co.uk. Abengoa will be entitled to terminate the licensing agreement in the circumstances described under “Related Party Transactions—Trademark License Agreement.”

 

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Regulatory and Environmental Matters

See “Regulation.”

Insurance

We maintain the types and amounts of insurance coverage that we believe are consistent with customary industry practices in the jurisdictions in which we operate. Our insurance policies cover employee-related accidents and injuries, property damage, machinery breakdowns, fixed assets, facilities and liability deriving from our activities, including environmental liability. We maintain business interruption insurance for interruptions resulting from incidents covered by insurance policies. Our insurance policies also cover directors’ and officers’ liability and third-party insurance. We have not had any material claims under our insurance policies that would either invalidate our insurance policies or cause a material increase to our insurance premiums. We cannot assure you, however, that our insurance coverage will adequately protect us from all risks that may arise or in amounts sufficient to prevent any material loss. See “Risk Factors—Risks Related to Our Business and the Markets in which We Operate—Our insurance may be insufficient to cover relevant risks and the cost of our insurance may increase.”

Seasonality

Our operating results and cash flows can be significantly affected by weather in some of our most relevant projects, such as the Concentrating Solar Power plants. We expect to derive a majority of our annual revenues in the months of May through September, when demand for electricity is generally at its highest in the majority of our markets and when some of our offtake arrangements provide for higher payments to us.

Employees

Most of our project companies and intermediate holdings have no employees. Only Palmatir and ATN had employees as of December 31, 2013. In 2014, all ATN employees have been transferred to other Abengoa subsidiaries as they are related to activities to be performed by them. As a result, as of the date of this prospectus, we have four employees at Palmatir. Additionally, all members of our management team are currently employees of Abengoa and expect to remain so after the consummation of this offering. Within one year following the consummation of this offering, we expect to employ directly ten senior managers currently employed by Abengoa who we expect will be transferred to Abengoa Yield from Abengoa. For a discussion of the individuals from Abengoa’s management team that are expected to be involved in our business, see “Management.”

Properties

See “—Our Operations.”

Legal Proceedings

We are not a party to any 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.

 

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REGULATION

Overview

We operate in a significant number of highly 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 mainly by national regulatory authorities. In others, 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 level. In countries with these additional layers of regulatory agencies, 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 assets 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. The following is a description of the primary industry-related regulations applicable to our assets that are currently in force in the principal markets in which we operate.

Regulation in the United States

In the United States, our electricity generation project companies are subject to extensive federal, state and local laws and regulations that govern the development, ownership, business organization and operation of power generation facilities. The federal government regulates wholesale sales, operation, and interstate transmission of electric power through FERC and through other federal agencies, certain environmental, health, and safety matters. State and local governments regulate the siting, permitting, construction, and operation of power generation facilities, the retail sale of electricity, and certain other environmental, health, safety, and permitting matters.

United States Federal Regulation of the Power Generation Facilities and Electric Transmission

The United States federal government regulates the wholesale sale of electric power and the transmission of electricity in interstate commerce through FERC, which draws its jurisdiction from the FPA and from other federal legislation such as the Public Utility Regulatory Policies Act of 1978, or PURPA, the Energy Policy Act of 1992, and the Energy Policy Act of 2005, or EPACT 2005. EPACT 2005 repealed the Public Utility Holding Company Act of 1935 and replaced it with the Public Utility Holding Company Act of 2005, or PUHCA.

Federal Regulation of Electricity Generators

The FPA provides FERC with exclusive ratemaking jurisdiction over all public utilities that engage in wholesale sales of electricity and/or the transmission of electricity in interstate commerce. The owners of renewable energy facilities selling at wholesale are therefore generally subject to FERC’s ratemaking jurisdiction. FERC may authorize a public utility to make wholesale sales of electric energy and related products at negotiated or market-based rates if the public utility can demonstrate that it does not have, or that it has adequately mitigated horizontal and vertical market power and that it cannot otherwise erect barriers to market entry. Entities granted market-based rate approval face ongoing filing and compliance requirements. Failure to comply with such requirements may result in a revocation of market-based rate authority, disgorgement of profits, civil penalties or other remedies that FERC finds appropriate based on the specific facts and circumstances. In granting market-based rate approval to a wholesale generator, FERC also typically grants blanket authorizations under Section 204 of the FPA and FERC’s regulations for the issuance of securities and the assumption of debt liabilities.

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rate authority altogether and require sales to be made based on cost-of-service rates, which could in either case result in a reduction in rates. FERC also has the authority to assess substantial civil penalties (up to $1 million per day per violation) for failure to comply with tariff provisions or the requirements of the FPA.

FERC approval under the FPA may be required prior to a change in ownership or control of a 10% or greater voting interest, directly or through one or more subsidiaries, in any public utility (including one of our U.S. project companies) or any public utility assets. FERC approval may also be required for individuals to serve as common officers or directors of public utilities or of a public utility and certain other companies that provide financing or equipment to public utilities.

FERC also implements the requirements of PUHCA applicable to ‘‘holding companies’’ having direct or indirect voting interests of 10% or more in companies that (among other activities) own or operate facilities used for the generation of electricity for sale, which includes renewable energy facilities. PUHCA imposes certain record-keeping, reporting and accounting obligations on such holding companies and certain of their affiliates. However, holding companies that own only exempt wholesale generators, or EWGs, foreign utility companies, and certain qualifying facilities under PURPA are exempt from the federal access to books and records provisions of PUHCA. EWGs are owners or operators of electric generation facilities (including producers of renewable energy, such as solar projects) that are engaged exclusively in the business of owning and/or operating generation facilities and selling electricity at wholesale. An EWG cannot make retail sales of electricity, may only own or operate the limited interconnection facilities necessary to connect its generation facility to the grid, and faces restrictions in transacting business with affiliated regulated utilities. Both Solana and Mojave have been granted EWG status and market-based rate authority by FERC.

Regulation of Electricity Sales

Electricity transactions in the United States may be bilateral in nature, whereby two parties contract for the sale and purchase of electricity subject to various governmental approval processes or guidelines that may apply to the contract, or they may take place within a single, centralized clearing market for purchases and sales of energy, electric generation capacity and ancillary services. Given the limited interconnections between electric transmission systems in the United States and differences among market rules, regional markets have formed as part of the electric transmission systems operated by regional transmission organizations, or RTOs, or independent system operators, or ISOs, in places such as California, the Midwest, New York, Texas, the Mid-Atlantic region and New England.

Federal Reliability Standards

EPACT 2005 amended the FPA to grant FERC jurisdiction over all users, owners, and operators of the bulk power system for the purpose of enforcing compliance with certain standards for the reliable operation of the bulk power system. Pursuant to its authority under the FPA, FERC certified the North American Electric Reliability Corporation, or NERC, as the entity responsible for developing reliability standards, submitting them to FERC for approval, and overseeing and enforcing compliance with them, in each case subject in each case to FERC review. NERC, in turn, has delegated certain monitoring and enforcement powers to regional reliability organizations. Users, owners, and operators of the bulk power system meeting certain materiality thresholds are required to register with the NERC compliance registry and comply with FERC-approved reliability standards.

EPACT 2005 amended the FPA to grant FERC jurisdiction over all users, owners, and operators of the bulk power system for the purpose of enforcing compliance with certain standards for the reliable operation of the bulk power system. Pursuant to its authority under the FPA, FERC certified the North American Electric Reliability Corporation, or NERC, as the entity responsible for developing reliability standards, submitting them to FERC for approval, and overseeing and enforcing compliance with them, subject in each case to FERC review. NERC, in turn, has delegated certain monitoring and enforcement powers to regional reliability organizations. Users, owners, and operators of the bulk power system meeting certain materiality thresholds are required to register with the NERC compliance registry and comply with FERC-approved reliability standards.

 

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In the western United States, NERC has a delegation agreement with the Western Electricity Coordinating Council, or WECC, whose service territory extends from Canada to Mexico and includes the provinces of Alberta and British Columbia, the northern portion of Baja California, Mexico, and all or portions of the 14 western states in between. WECC is the regional entity responsible for coordinating, promoting, and enforcing bulk power system reliability in its service territory. Any entity that owns, operates, or uses any portion of the bulk power system must comply with NERC or WECC’s mandatory reliability standards. Failure to comply with these mandatory reliability standards may subject a user, owner, or operator to sanctions, including substantial monetary penalties, which range from $1,000 to $1 million per day per violation for the most severe cases, where companies show negligence and lack evidence of adequate compliance.

Federal Environmental Regulation, Permitting and Compliance

Construction and operation of power generation facilities, including solar power plants, and the generation and electric transmission of renewable energy from such facilities are subject to environmental regulation at the federal, state and local level. State and local regulatory processes are discussed separately in a subsequent section. At the federal level, environmental laws and regulations typically require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a generation project or electric transmission facilities. Prior to development, permitting authorities may require that project developers consider and address, among other things, the impact on water resources and water quality, endangered species and other biological resources, compatibility with existing land uses and zoning, agricultural resources, archaeological, paleontological, recreational and cultural considerations, environmental justice and cumulative and visual impacts. In an effort to identify and minimize the potential impacts to these resources, power generation facilities may be required to comply with a myriad of federal regulatory programs and applicable federal permits under the National Environmental Policy Act, or NEPA, the Endangered Species Act, the Clean Water Act, the National Historic Preservation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Environmental Protection and Community Right-to-Know Act, and the National Wilderness Preservation Act, among other federal laws.

Solana and Mojave successfully completed all of their permitting requirements with regard to federal laws and regulations. The NEPA designation of a finding of no significant impact, or FONSI, was granted by the DOE (acting as lead federal agency for both projects) to Solana and Mojave on May 6, 2010 and July 8, 2011, respectively. Because a FONSI designation under NEPA is a declaration of environmental compatibility rather than an operating permit, the designation carries no conditions or stipulations that could present an operational risk to Solana or Mojave.

In addition, various federal environmental, health and safety regulations applicable during the construction phase are also applicable to the operational phase of power generation facilities. During the operational phase, obtaining certain federal permits or federal approval of certain operating documents (e.g., O&M plans, the spill prevention, control and countermeasure plan, and an emergency and preparedness response plan), as well as maintaining strict compliance with such permits or operating documents, is mandatory. Failure to maintain compliance may result in the revocation of any applicable permit or authorization, civil and criminal charges and fines, or potentially the closure of the plant.

U.S. Federal Income Tax Incentives and Other Federal Considerations for Renewable Energy Generation Facilities

The United States provides various federal, state and local tax incentives to stimulate investment in renewable energy generation capacity, including solar power. These tax incentives are subject to change and, possibly, elimination in the future. Certain U.S. federal income tax incentives are described below.

Section 1603 U.S. Treasury Grant Program

In lieu of claiming certain U.S. federal income tax credits, in particular, the ITC, owners of eligible solar energy property may be eligible to receive a cash grant from U.S. Treasury equal to 30% of the tax basis of the

 

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eligible property. Among other requirements, to be eligible for a 1603 Cash Grant, the eligible property must have been placed in service in 2009, 2010 or 2011 or, for property not placed in service during that period, the construction of the specified energy property must have begun after December 31, 2008 and before January 1, 2012. In addition, in order to qualify, eligible solar energy property must be placed in service by January 1, 2017. Applicants who began construction after December 31, 2008 and before January 1, 2012, but who did not place the eligible solar energy property in service prior to October 1, 2012, were required to file a preliminary 1603 Cash Grant application prior to October 1, 2012. These applicants are further required to file a final or “converted” 1603 Cash Grant application no later than 180 days after the eligible solar energy property is placed in service. The preliminary 1603 Cash Grant application for Solana was filed in September 2012, and the final 1603 Cash Grant application for Solana was filed on November 14, 2013 with additional information being provided to the U.S. Treasury on an ongoing basis. The preliminary 1603 Cash Grant application for Mojave was filed on September 14, 2012. Because Mojave has not yet been placed in service, no final 1603 Cash Grant application has been filed or currently is due.

The risks associated with the 1603 Cash Grant program are as follows:

 

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Disqualified Persons: Certain persons, “disqualified persons,” are ineligible to receive the 1603 Cash Grant and are prohibited from owning a direct or indirect interest in otherwise 1603 Cash Grant-eligible solar energy property, unless the indirect interest is held through an entity taxable as a C corporation for U.S. federal income tax purposes. 1603 Cash Grants are subject to recapture during the five-year period beginning on the date the eligible solar energy property is placed in service. The amount of the 1603 Cash Grant subject to recapture decreases ratably over the five-year recapture period. Among other events, failure of the eligible property to be used for its intended purpose or the direct or indirect transfer to a disqualified person (as described above) will cause recapture of the 1603 Cash Grant.

 

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Sequestration of Cash Grant Funds: Certain legislation required a mandatory sequestration of discretionary spending if the U.S. Congress failed to reach an agreement on a deficit-reducing budget by March 1, 2013. Because the U.S. Congress did not approve the requisite budget by that deadline, President Obama signed a sequestration order. Under the current sequestration rules, every final decision by U.S. Treasury in respect of a 1603 Cash Grant, evidenced by an award letter that is delivered to a 1603 Cash Grant applicant on or after October 1, 2013 through September 30, 2014, will reflect a 7.2% reduction in the 1603 Cash Grant award amount. This reduction applies regardless of the date on which the application for a 1603 Cash Grant was received by U.S. Treasury. For fiscal year 2015, which starts on October 1, 2014, certain legislation requires the White House’s Office of Management and Budget to recalculate the sequestration percentage for 1603 Cash Grants awarded in Fiscal Year 2015.

Federal Loan Guarantee Program

The DOE, in an effort to promote the rapid deployment of renewable energy and electric transmission projects, is currently authorized to grant guarantees with respect to certain loans to renewable energy projects and related manufacturing facilities and electric transmission projects under Section 1703 of EPACT 2005. Previously, the DOE also granted guarantees with respect to certain loans made under Section 1705 of EPACT 2005. In order to have qualified for the Section 1705 program, physical construction must have commenced at the primary site of the project on or before September 30, 2011. NEPA review must have been completed prior to the issuance of a loan guarantee. In May 2011, the Section 1705 program expired by statute, and the DOE announced that it would no longer accept new applications under that program. On September 30, 2011, the Section 1705 loan guarantee program closed with no further loan guarantees to be issued.

Solana was issued a loan guarantee under section 1705 of EPACT 2005 on December 20, 2010. Mojave was issued a loan guarantee under section 1705 of EPACT 2005 on September 12, 2011. Because of their respective loan guarantees, both projects must pay prevailing wages under the Davis-Bacon Act of 1931.

 

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Accelerated Depreciation under Federal Regulation

Owners of eligible solar energy property also benefit from accelerated depreciation of the property over a five-year period under the MACRS under the IRC. Most of the equipment used in Concentrating Solar Power projects such as Solana and Mojave qualifies for five-year depreciation under MACRS. In addition, some equipment used in Concentrating Solar Power projects may qualify for bonus depreciation for equipment placed in service.

State and Local Regulation of the Electricity Industry in the United States

State regulatory agencies in the United States have jurisdiction over the rates and terms of electricity service to retail customers. Regulated investor-owned utilities often must obtain state approval for the contracts through which they purchase electricity, including renewable energy, if they seek to pass along the costs of these contracts to their retail ratepayers. Municipal utilities and electric cooperatives are typically governed on these matters by their city councils or elected boards of directors. Different states apply different standards for determining acceptable prices for utility procurement contracts, including PPAs. Our electricity generation project companies operate or are near operation in Arizona and California. Information about the regulatory frameworks in Arizona and California is provided below.

State and Local Incentives

In addition to federal legislation, many states have enacted legislation, principally in the form of RPS, which generally require electric utilities to generate or purchase a certain percentage of their electricity supplied to consumers from renewable resources. Depending upon the state, various certifications, permits, contracts and approvals may be required in order for a project to qualify for particular RPS programs. Although there is currently no federal RPS program, there have been proposals to create a federal RPS standard for renewable energy.

Renewable Energy Certificates, or RECs, are typically used in conjunction with RPS programs as tradable certificates demonstrating that a certain number of kWh have been generated from renewable resources. Under many RPS programs, a utility may generally demonstrate, through its ownership of RECs, that it has supported an amount of renewable energy generation equal to its state-mandated RPS percentage. The sale of RECs can represent a significant additional revenue stream for renewable energy generators.

Effective December 10, 2011, California enacted legislation that increases its existing RPS to 25% by 2016 and 33% by 2020, and expands the program to cover publicly-owned utilities, in addition to investor-owned utilities. In addition, the California Solar Initiative, or CSI, sets a goal of 1,940 MW of solar capacity by the end of 2016. Arizona set an RPS of 15% by 2025, with 30% of the RPS to be met from distributed generation.

Other incentives that states and localities have adopted to encourage the development of renewable resources include property and state tax exemptions and abatements, state grants, and rebate programs. California offers a property tax incentive for certain solar energy systems installed between January 1, 1999 and December 31, 2016. The Arizona Department of Revenue provides a corporate tax credit based on production for solar, wind, or biomass systems that are 5 MW or larger and are installed on or after December 31, 2010 and before January 1, 2021.

Solar generation may also be incentivized by state greenhouse gas, or GHG, emission reduction measures, such as California’s cap and trade scheme, which caps and reduces GHG emissions. The California cap and trade program went into effect with respect to the electricity and other sectors starting in 2013.

 

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Arizona

Regulation of Retail Electricity Service in Arizona

The Arizona Corporation Commission, or ACC, has complete and exclusive jurisdiction over the rates and terms under which regulated utilities may provide electricity service to retail customers in Arizona. Under the Arizona Constitution, the ACC has unilateral authority over all utility regulation, including electric and natural gas utilities. The ACC also oversees all rate cases for its jurisdictional utilities, and as such has oversight of renewable energy procurement contracts by regulated electric utilities. Under Arizona’s Renewable Energy Standard & Tariff, or REST, regulated electric utilities must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including solar, wind, biomass, biogas and geothermal technologies. The renewable energy requirement is 4.5% of retail electric sales in 2014 and increases annually until it reaches 15% in 2025.

Unlike many other state regulatory commissions, the ACC does not approve PPAs executed by regulated utilities, nor does it issue rulings of “prudency” regarding PPAs. This practice leaves a utility somewhat at risk of recovering its costs until a successful rate case finding is rendered by the ACC. Rate recovery requests may not be filed until the utility begins to make actual expenditures for power procurement. In the case of Solana, however, the power purchaser, Arizona Public Service Company, or APS, voluntarily sought a hearing before the ACC to request its informal opinion of the prudency of the Solana PPA. After ACC staff conducted an analysis of the costs and benefits of Solana to Arizona ratepayers, it recommended to the ACC commissioners that the PPA should be deemed “a reasonable means” by which APS could meet its requirements under the REST. The ACC affirmed the staff’s recommendation on September 30, 2008, thereby providing greater assurance of APS’s successful rate recovery request. APS is expected to file its full rate recovery request in 2016.

Performance and Operational Provisions of Solana’s PPA

The PPA executed between APS and Solana’s project company, Arizona Solar, contains provisions related to guarantees of performance (e.g., provision of minimum annual renewable energy certificates’, or REC, eligible energy quantities to APS). The provisions are largely intended to protect APS’ ability to meet its mandatory requirements under the REST, and to prevent APS from having to procure REC eligible power elsewhere at an unknown, and presumably higher cost than the PPA price.

Siting and Construction of New Power Generation Facilities in Arizona

The Arizona Power Plant & Transmission Line Siting Committee, or Siting Committee, oversees utility and private developer applications to build power plants (of 100 MW or more) or transmission projects (of 115,000 volts or more) within Arizona. The Siting Committee holds public meetings and evidentiary hearings to determine whether a proposed generation or transmission project is compatible with preservation of the state’s environmental protection interests, and if the finding is affirmative, makes a recommendation to the ACC to grant a Certificate of Environmental Compatibility, or CEC, to the applicant. The ACC then has authority to approve, decline, or modify the Siting Committee’s recommendation.

The ACC granted CECs to Solana on December 11, 2008, for both the 280 MW solar generation project and its associated 20.8-mile, 230 kilovolt transmission line. Both the generation facility and transmission line CECs contain obligatory conditions and stipulations, none of which could present a risk to Solana during the operational phase.

Other Arizona Permitting and Compliance Frameworks

Various state and county regulations, mostly related to the environment, public health and safety, are applicable during the operational phase of a solar power plant located in Maricopa County, Arizona. Such regulations include the Arizona Aquifer Water Quality Standards and Aquifer Protection Permit Rules, the

 

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Maricopa County Special Use Permit Stipulations, the Maricopa County Air Pollution Control Regulations, and the Maricopa County Zoning Ordinances and Regulations. Obtaining a permit or requesting the approval of certain operating plans, as well as strict compliance to such permits and plans, is mandatory. Failure to comply may result in the revocation of the permit or authorization, civil and criminal charges and fines, or potentially the closure of Solana.

In addition, in accordance with the NEPA designation of a FONSI issued by the DOE, Solana must comply with certain water requirements due to the reduction in tail water runoff being contributed to a wash located near the site. In coordination with Arizona Game & Fish Department and the U.S. Fish and Wildlife Service, Solana must provide 447 acre-feet of water annually as a direct off-set to the reduction in tail water runoff from the site. This requirement is for the duration of Solana, and failure to comply would trigger an administrative procedure that could cause temporary closure of the plant until the non-compliance condition is cured.

Regulations Affecting Operating Generation Facilities in Arizona

Many of the permits obtained for Solana carry specific conditions that must be complied with during the operational phase of the facility and which are continuously monitored, measured, and documented by the Solana plant operators. The primary obligations that commenced during commissioning and/or commercial operation are those related to reliability, emergency response, potential hazards of waste disposal, and human health and safety. These requirements originate with federal laws, and in many cases are enforced via delegated authority from the appropriate federal agency to a state or county agency. These include:

 

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NERC Reliability Standards and Critical Infrastructure Plans, delegated to WECC as the regional authority;

 

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Emergency Planning and Community Right-to-Know Act, delegated to the Arizona Division of Emergency Management;

 

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Resource Conservation and Recovery Act, delegated to EPA Region 9 in San Francisco, California; and

 

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Occupational Safety and Health Administration federal requirements.

California

Regulation of Retail Electricity Service in California

The California Public Utilities Commission, or CPUC, governs, among other entities, California’s three large investor-owned utilities, including Pacific Gas & Electric, or PG&E. PG&E is required to file an RPS procurement plan annually with the CPUC. Once the CPUC approves the plan, PG&E issues a request for offers, or RFO, for renewable energy. It then evaluates all of the bids using a “least-cost, best-fit” evaluation process approved by the CPUC and develops a short list of acceptable bids. In August 2008, Mojave was submitted as a renewable solar thermal project in response to PG&E’s 2008 RFO solicitation and placed on their short list. After two years of negotiations, PG&E and Mojave Solar executed a final PPA, for which PG&E filed with the CPUC an advice letter requesting approval of the PPA in July 2011. The CPUC reviewed the PPA and approved the contract by issuing a formal decision in November 2011. The terms of the PPA will govern Mojave during its development, construction and operating period. The CPUC historically does not retroactively apply new regulations or rulings to previously approved PPAs that would result in any economic impact.

Performance and Operational Provisions of Mojave’s PPA

The PPA executed between PG&E and Mojave’s project company, Mojave Solar, contains provisions related to guarantees of performance (e.g., provision of minimum annual REC eligible energy quantities to PG&E). The provisions are largely intended to protect PG&E’s ability to meet its mandatory requirements established by the CPUC, and to prevent PG&E from having to procure REC eligible power elsewhere at an unknown, and presumably higher cost than the PPA price.

 

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Siting and Construction of New Power Generation Facilities in California

The California Energy Commission, or CAEC, is the lead agency for licensing thermal power plants 50 MW and larger under the California Environmental Quality Act and has a certified regulatory program under such Act. The EC is comprised of five commissioners, two of which oversee all hearings, workshops and related proceedings on a specific project. The CAEC’s siting process evaluates Applications for Certification, or AFCs, to assure that only power plants which are actually needed will be built, provides review by independent staff with technical expertise in public health and safety, environmental sciences, engineering and reliability, ensures simultaneous review and full participation by all state and local agencies, as well as coordination with federal agencies resulting in issuance of one regulatory permit within a specific time frame, with full opportunity for participation by public and interest groups.

On August 10, 2009, Mojave’s AFC for its nominal 250 MW project was filed with the CAEC. The CAEC approved Mojave’s AFC with the CAEC decision issued on September 8, 2010. The CAEC monitors the power plant’s construction, operational phase and eventual decommissioning through a compliance proceeding.

Regulations Affecting Operating Generation Facilities in California

Mojave must maintain compliance with the CAEC decision conditions of certification. These concern, among others, biological resources, health and safety, cultural resources, fire safety, and water. The conditions require Mojave to provide plans, notifications, and other reports on an ongoing basis. As noted above, such compliance is monitored by CAEC staff. Per the CAEC decision, “Failure to comply with any of the Conditions of Certification or the compliance conditions may result in reopening of the case and revocation of Energy Commission certification; an administrative fine; or other action as appropriate.” Additional regulations are administered by the California Independent System Operators and under the terms of the federally administered Large Generator Interconnection Agreement.

Regulation in Mexico

Overview

The following is a description of the regulation of the Mexican power industry applicable to the conventional generation of electricity. Such regulation remains subject to all future reforms, which may be promulgated pursuant to the amendments to articles 25, 26, and 28 of the Mexican Constitution, Constitución Política de los Estados Unidos Mexicanos.

Pursuant to the Mexican Constitution, the electricity industry in Mexico is controlled by the federal government, acting through the Federal Electricity Commission, Comisión Federal de Electricidad, or CFE, an entity wholly-owned and controlled by the Mexican government, and legally independent from the Ministry of Energy, Secretaría de Energía. CFE is the only entity authorized to provide electricity directly to the public and to supply services to the Mexican wholesale market. CFE is also responsible for the construction and maintenance of infrastructure necessary for the delivery of electricity, such as the national electric grid.

As a result of Mexico’s Energy Reform Bill enacted on December 21^st, 2013, articles 25, 27 and 28 of the Mexican Constitution were amended in order to end the long-standing state monopoly in the oil, petrochemical and power sectors, and allow private investment in these areas for their development in an open market. Hence, the power generation sector will be open to full private participation and investment, creating a competitive spot market in power generation, although electric transmission and distribution will remain public services to be provided exclusively by the CFE. Once secondary legislation is enacted to implement the constitutional reform (expected by April 2014), generation, transmission and distribution of power in Mexico will be governed by a new legal framework which will likely improve the development of the sector.

Notwithstanding the anticipated legal changes, we do not expect any negative consequences for Abengoa Cogeneración Tabasco, or ACT, or for the power generated and delivered to Pemex Gas y Petroqímica Básica.

 

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Until the recent constitutional reform on December 21, 2013, the laws and regulations governing the generation, transmission and distribution of power for public use were considered areas of national strategic importance. As a result, such activities were carried out exclusively by CFE. The national electric grid is also controlled by CFE through the Centro Nacional de Control Eléctrico, or the CENACE, which operates the national electric grid and controls delivery of all electricity generated by the CFE and private generators connected to the grid. The CFE is a vertically-integrated state monopoly that serves the whole country, and CENACE is a semi-independent agency that is part of the CFE. As a result of the energy reform passed in December 2013 in Mexico, CENACE will become a decentralized public agency, which will continue to be responsible for the operation and control of the national electric grid with the aim of having an impartial third party (not the CFE) operate the wholesale electricity market, guaranteeing open access to the national electric grid for both transmission and distribution of electricity.

The generation, transmission and distribution of electricity is currently regulated by the Ley del Servicio Público de Energía Eléctrica, or Electricity Law enacted in 1975 and amended in 1992. Since the implementation of the 1992 amendment to the Electricity Law, private entities have been allowed to participate in the following activities not considered public utility services:

 

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Cogeneration—The electricity produced is used to supply power to the establishments associated with the cogeneration process and/or the shareholders of the cogeneration company;

 

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Self-supply generation—The electricity produced is used for the self-supply purposes of the holder of the relevant self-supply power generation permit and/or its shareholders;

 

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Independent power production—All the electricity produced is delivered to the CFE;

 

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Small-scale production—The electricity produced does not exceed 30 MW and is used for export purposes or the supply of all power output is sold to the CFE;

 

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Exports—The electricity produced is exported in its entirety; and

 

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Imports for independent consumption—The import of power for self-supply purposes.

Conventional Electricity Generation in Mexico

The current legal framework for conventional electricity generation in Mexico includes the regulation of fossil fuels, such as carbon, diesel, fuel oil, and natural gas, as well as nuclear fission regulation, which includes nuclear power plants and all related activities.

Accordingly, power generation under independent power production or self-supply schemes is not considered a public utility service and, therefore, may be performed by private companies and individuals pursuant to permits issued by the Energy Regulatory Commission, Comisión Reguladora de Energía, or CRE. The CRE is a federal agency created in 1995 in order to enforce the laws and regulations relating to natural gas and electricity, and has the authority to issue permits, set tariffs, supervise, ensure adequate supply and, in the case of gas, promote competition.

As previously indicated, the Mexican federal government, acting through the CFE, controls the entire chain of activities related to electric power, including generation, sale, distribution and transmission. The energy reform allows the private sector to openly participate in two portions of the production chain: the generation and the sale of electricity.

Pursuant to the reform, the private energy sector will be able to invest in electricity generation with the requisite permits. While the sale of electricity by private parties has not yet begun in Mexico, it is anticipated that privately sold electricity will be produced and transmitted by the CFE.

The reforms are expected to have positive effects on the electricity industry in Mexico, where the private sector will be able to play an active role where a government monopoly once existed, generating greater investment and better technology.

 

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Permits and Authorizations

Permits are granted for indefinite periods of time, except for independent power producer permits, which are granted for 30 year renewable terms. In addition to the legal and technical requirements established by law to obtain such permits, the CFE’s approval is required as part of the CRE’s permit approval process.

Consequently, the Mexican power industry has been divided into two main areas: (a) the electric power public utility service under the CFE’s control, and (b) the activities where private parties may be involved (such as where the CFE actively promoted private investment in the construction and operation of power plants for supplying the CFE and private parties under self-supply and cogeneration schemes).

While power generated in Mexico is still predominantly generated by the CFE, there is a large amount of electricity generated by private energy producers, which generally fall under the categories of independent power production and self-supply generation, although cogeneration has started to become a relevant source of power as a result of amendments enacted in 2006 which allowed Pemex to develop new cogeneration projects independently and in collaboration with the CFE. These amendments allowed Pemex to enter into the Pemex conversion services agreement and to receive the power generated by ACT.

As a result of the reforms, the issuance of a new class of permit available to those interested in generating electricity is anticipated. This permit would expand the ways in which entities are allowed to participate as energy producers under the Electricity Law and is within the scope of the CRE’s regulatory control.

Transmission and Distribution of Electricity in Mexico

Regarding conventional energy generation, there are no regulatory limitations that would interfere with a private generator engaging in transmission activities. Distribution, however, may only be performed by the CFE. Although the recent reform contemplates the participation of private investors in electricity transmission and distribution activities, these activities will remain under the purview of the Mexican federal government through the CFE.

Under the existing system, the CFE transmits and distributes electricity generated under any of the methods allowed under the Electricity Law. Once the reform is fully implemented, the intention is for the private sector to be involved in transmission and distribution activities, jointly with the CFE, through contractual arrangements.

The CFE is required by law to provide its wheeling (the transfer of electrical power through transmission and distribution lines to another utility), dispatch and backup services to all permit holders whenever the requested service is technically feasible under the principle of first come, first served. The CFE’s wheeling services are provided pursuant to an interconnection agreement and a transmission services agreement entered into between the CFE and the relevant permit holder (in ACT’s case, these were executed by Pemex). Those agreements follow model contracts approved by the CRE, which also approves the methodology used to calculate the applicable tariffs. The permit holders must build their own transmission lines for self-use in order to connect to the power grid. In addition, permit holders are required to enter into a back-up services agreement with the CFE, which also follow a model agreement approved by the CRE.

Regulatory Framework

The following includes constitutional, legal, and administrative provisions applying to the development of cogeneration projects in Mexico:

 

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The Mexican Constitution. Pursuant to articles 25, 27, and 28 of the Mexican Constitution, the supply of electricity, a public service in Mexico, including its generation, transmission, transformation, distribution and sale are activities expressly reserved to the Mexican federal government.

 

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Electricity Law. Along with its regulations, this law provides the main legal framework through which the Mexican federal government, acting through CFE, provides the public its electricity supply, as well as the regulations applicable to power generation, sale, and purchase for the private sector.

 

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Law of the Energy Regulatory Commission, Ley de la Comisión Reguladora de Energía. This regulates the manner in which CRE operates.

 

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Resolution number RES/146/2001, issued by the CRE: Fee Calculation Methodology for Electricity Transmission Services, Metodologia para la determinacion de los cargos por servicios de transmisión de energía eléctrica. This regulation provides the mechanism pursuant to which CFE will calculate the appropriate charges for the requests of transmission services.

 

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Interconnection Agreement, Contrato de Interconexión issued by the CRE.

 

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Transmission Agreement, Convenio de Transmisión issued by the CRE.

 

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Methodology and criteria for high-efficiency cogeneration, Metodología y criterios de cogeneración eficiente.

 

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Guidelines for the validation as high-efficiency cogeneration systems, Disposiciones para acreditar sistemas de cogeneración eficiente).

Regulation in Peru

Below is a general overview of certain Peruvian electricity sector regulations. This overview should not be considered a full description of all regulations.

The Electric Transmission Sector

The Peruvian electric system serves energy to a large area of the country through the SEIN that has transmission lines and substations operating at 500, 220, 138, 69 and 33-kV levels that are located mainly in the coastal area, from the border of Ecuador to the border of Chile and eastward near the border of Bolivia.

Pursuant to Law 28832, which is applicable to any transmission project commissioned after July 2006, the transmission facilities integrating the transmission grid are classified as those belonging to: either (i) the SGT for transmission facilities that are included in the transmission plan and developed pursuant to a concession agreement granted by the Peruvian government to the winner of a public tender, or (ii) the Complementary Transmission System, or Sistema Complementario de Transmisión, or SCT, for transmission facilities that are either (a) included in the transmission plan and developed by the private entity that was awarded a concession as a result of the successful review of a private initiative proposal, or (b) not included in the transmission plan.

The projected expansions of the transmission system identified in the Peruvian transmission plan are now part of the SGT. The government also introduced tender procedures to call private investors interested in building the projected lines of the SGT. Under SGT concession agreements, the concessionaire shall build the lines and be responsible for their operation and maintenance. Recovery of the investment during the term of the contract (30 years) is guaranteed thereunder. The concessionaire owns the transmission assets during the term of the contract. Upon expiry of the contract the assets return to the State who shall call a new tender if the lines are required at such time for the operation of the system.

Transmission lines of interest to generation plants, distribution networks or large consumers are part of the SCT. The lines of the SCT included in the Transmission Plan and certain projects that exclusively serve the demand, as defined by the government, may be subject to tenders for the granting of SCT concession agreements for 30 years. The rest of the SCT projects are subject to the general regime in which the owners of the SCT lines (for example, the generation companies building them to connect their plants to the system) are the holders of the respective definitive transmission concession and own the transmission assets through the term of the concession.

 

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Open Access Regime

The electricity transmission is a public service according to Peruvian law; such service is subject to open access regulations, which imply that the owner of the infrastructure where the connection to the SEIN will take place is obliged to allow the third parties to connect to the SEIN through its transmission facilities. However, third parties requesting access to a transmission system have the obligation to assume the costs of any additional investment required to increase the connection capacity, if required to make the interconnection feasible. The terms and conditions of the required new investments shall be negotiated in the interconnection agreement.

If a private interconnection agreement is not reached through private negotiation, a request for an interconnection mandate can be filed before the Organismo Supervisor de la Inversión en Energía y Minería, or OSINERGMIN, who will determine the conditions applicable to the connection, if it is technically feasible. To that end an assessment of the different connection possibilities shall be submitted to OSINERGMIN by the applicant to determine the most efficient technical solution.

The participation of OSINERGMIN shall guarantee and enforce compliance with the legal principle of open access to transmission and distribution networks. An interconnection mandate establishes the conditions under which the interconnection shall take place. The parties usually prefer to reach an agreement establishing those conditions. However, in cases where an agreement is not feasible due to the pre-existence of previous interconnection commitments with other companies, OSINERGMIN has been willing to grant new interconnection mandates as long as there is available capacity.

Tariff Regime

The SGT is compensated through the tariff base, which is the authorized annual remuneration for facilities belonging to the SGT. The tariff base is established in annual amounts and includes the following: (i) remuneration of investments (including adjustments), which is calculated based on a 30-year recovery period applying a 12% rate of return, (ii) efficient operating and maintenance costs, and (iii) the liquidation of imbalances between the authorized tariff base for the previous year and the proceeds obtained during that year.

The tariff base will be paid through the (i) Tariff Income and (ii) the Transmission Toll. The Tariff Income is paid monthly by the electricity generation companies in proportion to their respective capacity income. The Transmission Toll is paid by the electricity generation companies based on their collection of the transmission toll paid by their respective customers pursuant to Article 26 of Law 28832 and Article 27 of the Transmission Rules, or Reglamento de Transmisión, approved by the Supreme Decree No. 027-2007-EM.

The electricity generation companies are paid by customers via capacity charges and energy charges established in their respective supply contracts. These capacity charges include a transmission toll per unit of peak demand ($ per kW-month). Customers pay a monthly demand charge determined by multiplying this capacity charge by the peak demand. This demand charge includes the amount needed to cover the costs to be paid for the SGT.

The monthly payments to be made by electricity generation companies to the transmission companies are calculated by the COES, taking into account the actual demand of their customers. A portion of the amount collected by the electricity generation companies from customers is allocated to the transmission companies that own facilities in the SGT. As such, electricity generation companies collect the money required to pay the SGT facilities from customers.

Non-regulated customers and distribution companies that supply electricity to non-regulated customers pay these demand charges when they buy energy in the short-term market. Non-regulated customers include large electricity consumers with a power demand of over 2,500 kW and customers with power demands between 200 kW and 2500 kW that may choose to be regulated customers or not. Non-regulated customers may freely negotiate their energy prices with suppliers.

 

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The SCT (and the lines of the old STS) are remunerated on the basis of the annual average cost approved by OSINERGMIN. The applicable tariffs and their respective actualization formulas are approved by OSINERGMIN every four years.

Penalties

The concessionaires must maintain certain quality, safety and maintenance standards of the facilities. The failure to meet the quality standards established by applicable industry regulations, such as the technical rules for power services approved by Supreme Decree No. 020-97-EM and the National Power Code, may result in the imposition of penalties, fines and restrictions. In addition to these penalties, fines and restrictions, if our concession is terminated due to the breach of obligations under the Concession Agreements, the Ministry of Energy may appoint an intervenor to supervise the operations related to the concession to ensure the continuity in the provision of the service, and the compliance with applicable laws and regulations

If the concessionaire suspends or interrupts the service for reasons other than regular maintenance, repairs, force majeure events or breaches by customers under their contracts, the concessionaire may be required to indemnify our customers for the damages caused by any such service interruption, in accordance with applicable regulations. In addition, the OSINERGMIN could impose penalties, including, among others, (a) admonishment, (b) successive fines, depending on the nature and effect of the interruption and its frequency, (c) temporary suspension of activities, and (d) definitive suspension of activities and the provisional administration of operations by an intervenor, if a termination event occurs and the Ministry of Energy notifies of its desire to terminate the SGT concession agreement.

Electricity Legal Framework

The principal laws and regulations governing the Peruvian power sector, or the Power Legal Framework, are: (i) the Power Concessions Law, or Ley de Concesiones Eléctricas, PCL), approved by Law No. 25844, and its rules (Supreme Decree No. 09-93-EM); (ii) the Law to Ensure the Efficient Development of Electricity Generation, or Ley para Asegurar el Desarrollo Eficiente de la Generación Eléctrica, approved by Law No. 28832, or Law No. 28832; (iii) the Transmission Rules, or Reglamento de Transmisión, approved by the Supreme Decree No. 027-2007-EM, or the Transmission Rules; (iv) the General Environmental Law (Law No. 28611); (v) the Rules for the Environmental Protection in Power Activities (Supreme Decree No. 029-94-EM); (vi) the Power Sector Antitrust Law (Law No. 26876) and its regulations (Supreme Decree No. 017-98-ITINCI); (vii) the Laws creating the Supervisory Agency of Investment in Energy and Mining (Law No. 26734 and Law No. 28964); (viii) the Supervisory Agency of Investment in Energy and Mining Rules (Supreme Decree No. 054-2001-PCM); (ix) the Regulatory Agencies of Private Investment in Public Services Framework Law (Law No. 27332); and (x) the Legislative Decree that promotes investment in the generation of power through renewable resources (Legislative Decree No. 1002) and its regulations (Supreme Decree No. 012-2011-EM).

These laws regulate how to enter the electricity sector (applicable permits and licenses); the main obligations of the different participants of the electricity market (generators, transmission companies and distribution companies); remuneration systems for the different market participants; rights of electricity consumers and the attributions of the competent authorities.

Other relevant laws are: (i) the Public Consultation Law and its regulations (Law No. 29758 and Supreme Decree No. 001-2012-MC) for projects that may affect rights of indigenous and native communities and (ii) Law of National Patrimony (Law 28296) and relevant regulations (Supreme Resolution No. 004-2000-ED) for obtaining the CIRA which is a issued by the Ministry of Culture certifying there are no archaeological remains in an area. Prior to performance of any activity or construction works, titleholders shall obtain the corresponding CIRA

Some of the main aspects of Peru’s regulatory framework concerning its power sector are: (i) the separation between the power generation, transmission and distribution activities; (ii) unregulated prices for the generation

 

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of power supplied to unregulated customers; (iii) regulated prices for the generation of power supplied to regulated customers; (iv) regulated prices applicable to transmission and distribution of power for both regulated and unregulated customers; and (v) the private administration of the SEIN, according to the principles of efficiency, cost reduction, guaranty of quality and reliability in the provision of services.

All entities that generate, transmit or distribute power to third parties in Peru, including self-generators and co-generators that sell their excess capacity and energy in the SEIN, are regulated by the Power Legal Framework.

Although significant private investments have been made in the Peruvian power sector and independent entities have been created to regulate and coordinate its oversight, the Peruvian government still retains ultimate oversight and regulatory control. In addition, the Peruvian government owns and controls various generation and distribution companies in Peru.

The Guaranteed Transmission System—SGT Concession Agreement

ATN and ATS, as concessionaires, have SGT concession agreements granted by the Peruvian government as a result of a public tender.

Under SGT concession agreement, the Ministry of Energy grants the concession necessary to construct, develop, own, operate, and maintain the transmission lines and substations comprising a project to provide electricity transmission services.

The SGT concessionaires are not obliged to pay the grantor any consideration for the SGT concession agreement or for the utilization of the contracted concessions.

The grantor is required to impose easements required for the execution of the project upon accordance with applicable laws, but it does not assume the costs associated with such easements.

Upon request, the grantor is also required to use its best efforts to assist in obtaining licenses, permits, authorizations, concessions and other rights when the owner of the project comply with the legal requirements to obtain them and they are not granted on a timely basis by the competent authorities.

In this case, the concessionaire shall build the lines and be responsible for their operation and maintenance. The recovery of the investment during the term of the contract (30 years) is guaranteed thereunder. The concessionaire owns the transmission assets during the term of the contract. Upon expiry of the contract the assets return to the state, which shall call a new tender if the lines are required at such time for the operation of the system.

Revenues

The revenues of the project are established under the terms of the SGT concession agreement. In addition, the revenues of the project are funded by the entire Peruvian electric transmission system.

In effect, the compensation for facilities that are part of the SGT is allocated to customers by OSINERGMIN according to the amounts of investment, operational and maintenance costs set forth in the SGT concession agreement. The SGT will receive monthly compensation from the generation companies that collect the tariff base from their customers. Their compensation will be paid on a monthly basis and these monthly payments are determined by the COES, following the compensation established annually by OSINERGMIN.

As of the commercial operation date, the owner of a project receives the revenue from payments of the tariff base pursuant to the SGT concession agreement. The calculation of the tariff base is based on: (i) an amount

 

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which represents a return on investment, including operation and maintenance costs and (ii) the amount determined on May 1 of each year by OSINERGMIN, in order to compensate for any intra-year difference between the compensation we should have received in the immediately preceding tariff year in U.S. dollars and the amount actually paid in Peruvian nuevos soles, determined at the exchange rate published in the Official Gazette “El Peruano” on the last working day prior to the fifteenth day of the month following the relevant month for which the services were charged to the electricity generation companies.

Pursuant to the SGT concession agreement, the receipt of the tariff base will be (i) fixed for the entire life of the concession and (ii) indexed annually on May 1 to the U.S. Finished Goods Less Food and Energy Index, published by the U.S. Department of Labor (utilizing the last definitive index available on the last day of December of the previous year as the relevant base date for the first such adjustment). See “—Tariff Regime.”

Regulation in Spain

On November 26, 1997, the European Union published a report, or White Paper, which outlined a strategy and a community-wide action plan aimed at doubling energy production from renewable energy sources in the European Union from 6% in 1996 to 12% by 2010. The White Paper proposed a number of measures to promote the use of renewable energy sources, including measures designed to provide renewable energy sources better access to the electricity market. The Kyoto Protocol, ratified by the EU and its Member States on May 31, 2002, imposed a target of reducing EU emissions of greenhouse gases by 8%.

Directive 2009/28/EC on the Promotion of the Use of Energy from Renewable Sources of the European Parliament and of the Council of the European Union, or the 2009 Renewable Energy Directive, set mandatory national overall targets for each Member State consistent with at least 20% of EU total energy consumption coming from renewable energy sources by 2020. In order to comply with these mandatory renewable energy targets, all EU Member States, including Spain, were required to develop a national action plan, called a National Renewable Energy Action Plan, or NREAP. Spain’s NREAP was issued on June 30, 2010 and sent to the European Commission.

In its NREAP, Spain set a target of 22.7% for primary energy consumption to be supplied by renewable energy sources and a target of 42.3% of total electricity consumption to be supplied by renewable energy sources by 2020.

In 2011, a new Renewable Energies Plan, referred to as REP 2011-2020, was developed by the European Parliament and the Council of the European Union under the 2009 Renewable Energy Directive that added a new target to the 2009 Renewable Energy Directive, a minimum of 10% of transportation energy consumption to be supplied from renewable energy sources in each Member State by 2020.

In Spain, these targets mean that energy from renewable sources should represent at least 20% of total energy consumption by 2020, consistent with the EU target, with a minimum of 10% of transportation consumption to be derived from renewable sources by that same year.

Article 3.3.(a) of the 2009 Renewable Energy Directive states that in order to reach the targets set for 2020, Member States may apply support schemes and incentives for renewable energy. These support systems or incentives are different in each country, but the most common are:

 

(i)

Green certificates. Producers of renewable energy receive a ‘‘green certificate’’ for each MWh they generate and suppliers of energy have an obligation to purchase part of the energy that they supply from renewable sources.

 

(ii)

Investment grants and direct subsidies. These help defray the costs of installing renewable energy generation plants.

 

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(iii)

Tax exemptions or relief. These include ITCs, cash grants in lieu of tax credits and accelerated depreciation, among others.

 

(iv)

System of direct support of prices. These include regulated tariffs and premiums and involve a regulatory guarantee to purchase energy generated by a renewable energy plant for an allotted period of time at a fixed tariff per kWh, for a maximum annual number of hours, so that the producer is ensured of a reasonable return on its investment.

Solar Regulatory Framework Applicable to Concentrating Solar Power Plants Currently in Operation

The applicable legal framework for Concentrating Solar Power plants already in operation is set out in three primary legal instruments:

 

(i)

Law 24/2013, of December 26, 2013 the Electricity Sector Act, referred to as the Electricity Act;

 

(ii)

New Royal Decree, currently under approval process and expected to be approved in March 2014, regulating electricity production from renewable energy sources, combined heat and power and waste, referred to as Proposed Royal Decree 2014; and

 

(iii)

New Ministerial Order, currently under approval process and expected to be approved in March 2014 establishing the compensation criteria applicable to certain electricity generation plants using renewable energy sources, combined heat and power and waste, referred to as the Revenue Order.

Primary Rights and Obligations under the Electricity Sector Act

The Electricity Act eliminates a previously existing distinction between ordinary electricity producers and those using renewable energy sources in their production of electricity, though it continues to recognize the following rights for producers with facilities that use renewable energy sources:

 

(i)

Priority off-take. Producers of electricity from renewable sources will have priority over conventional generators in transmitting to off-takers the energy they produce over conventional generators under equal market conditions, subject to the secure operation of the national electricity system and based on transparent and non-discriminatory criteria.

 

(ii)

Priority of access and connection to transmission and distribution networks. Producers of electricity from renewable energy sources will have priority in obtaining access and connecting to the grid, subject the terms set forth in the regulations, on the basis of objective, transparent and non-discriminatory criteria.

 

(iii)

Entitlement to a specific payment scheme. Producers of electricity from renewable sources will receive specific reimbursement that shall not exceed the minimum amount necessary to cover their costs. This enables them to compete on a level playing field with the other, non-renewable technologies on the market while achieving a reasonable return on investment.

The significant obligations of the renewable energy electricity producers under the Electricity Act include:

 

(i)

Offer to sell the energy they produce through the market operator even when they have not entered into a contract and so are excluded from the bidding system managed by the market operator.

 

(ii)

Maintain the plant’s planned production capacity. Power lines, which include connections with the transmission or distribution network and transformers, are considered part of the production facility.

 

(iii)

Contract and pay the corresponding fees, whether directly or through their representatives, to the transmission or distribution companies to which the renewable energy facilities are connected in order for their power to be fed into the grid.

 

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Registration on Public Registers

The Electricity Act and Proposed Royal Decree 2014 require electricity generation facilities to be entered on the official register of electricity production plants maintained by the Ministry of Industry, Energy and Tourism.

The autonomous regions may keep their own registers of electricity generation plants they have authorized if such plants have a capacity of 50 MW or less. The registration details of these plants must be provided to the Ministry of Industry, Energy and Tourism electronically.

Solaben 2 and Solaben 3 are on the register of the autonomous region Extremadura and the Ministry of Industry, Energy and Tourism register.

To receive their facility-specific reimbursement, renewable energy facilities are required under the Electricity Act and Proposed Royal Decree 2014 to be listed on a new register entitled the Specific Payment System Register (Registro de Régimen Retributivo Específico). Unregistered plants will only receive the pool price.

The first transitional provision of Proposed Royal Decree 2014 states that power plants based on renewable sources recognized under the previous economic regime, as in the case of Solaben 2 and Solaben 3, will be automatically included in the Specific Payment System Register.

Change of Compensation System Applicable to Concentrating Solar Power Plants

Royal Decree 9/2013 introduced a change in the payment system applicable to existing electricity production facilities using renewable energy sources to guarantee the financial stability of the electric system. The purpose of Royal Decree 9/2013, which entered into force on July 14, 2013, was to adopt a series of measures to ensure the sustainability of the electric system and to combat the shortfalls between electricity system revenues and costs, referred to as the tariff deficit.

The measures adopted were focused primarily on the following areas: (i) the legal and financial regime for existing electricity production facilities using renewable energy sources, co-generation and residual waste; (ii) the remuneration regime for transport and distribution activities; (iii) Spain’s guarantee of the Securitization Fund to cover the tariff deficit; and (iv) certain aspects related to capacity payments, assumption of the cost of the subsidized tariff and a review of access charges.

Royal Decree 9/2013 established an entirely new remuneration system, abolishing the remuneration system based on a regulated tariff applicable to electricity production facilities using renewable energy sources (including facilities in operation at the time that Royal Decree 9/2013 entered into force).

Prior to the adoption of Royal Decree 9/2013, electricity production facilities using renewable energy sources received revenues tied to their electricity produced according to their power output. This involved receiving feed-in tariffs, in €/kWh, that were split into two components: (i) the pool price of electricity and (ii) an equivalent premium, consisting of the difference between the pool price and the set feed-in tariff for each type of plant (feed in tariff = pool price + equivalent premium). This revenue was received for a maximum annual number of hours and for a pre-determined number of years, depending on the technology used in each case. For any additional hours produced, producers received the pool price

The repealed economic scheme was applied on a transitional basis until new provisions were approved to fully implement the new remuneration system. Settlements made after July 14, 2013 were made in accordance with the previous regime until the new implementing regulations have been adopted. However, following the implementation of these new regulations, payments made during this interim period will be recalculated in accordance with the new regulations. The difference between the amounts received under the prior regime and those calculated under the new regime will be deducted from the first six settlements that follow the approval of the new implementing regulations.

 

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New System

Under the third final provision of the Electricity Act, at the proposal of Ministry for Industry, Energy and Tourism, or the Ministry, the Spanish Government will approve a new royal decree regulating the legal and economic framework for currently operating renewable energy power plants with Proposed Royal Decree 2014. This new remuneration model, based on the third final provision of the Electricity Act, is adjusted to the criteria set out in article 30.4 of the Electricity Act 1997, under Royal Decree 9/2013

According to these criteria, producers will now receive (i) the pool price for the power they produce and (ii) a payment based on the standard investment cost for each kind of plant (without any relation whatsoever to the amount of power they generate). This payment based on investment (in €/MW of installed capacity) will be supplemented (in cases of technologies with running costs in excess of the pool price) with an “operating payment” (in €/MWh produced).

The principle driving the new economic regime is that the incentives that an electricity producer receives should be equivalent to the costs that they are unable recover on the electricity market where they compete with non-renewable technologies. The new economic regime seeks to allow a “well-run and efficient enterprise” to recover the costs of building and running a plant, plus a reasonable return on investment (project internal rate of return). For plants eligible for a premium when Royal Decree 9/2013 entered into force, the reasonable return will be 7.503% pre-tax, and will apply until December 31, 2019.

According to Proposed Royal Decree 2014, the remuneration for investment in respect of plants that were already in operation during the first statutory period (from July 14, 2013 to December 31, 2019) is calculated as follows:

 

(i)

The “standard per-MW investment value” is added to the “standard per-MW operating cost” (both updated from July 2013 with a 7.503% rate of return); i.e., what it would have cost a well-run and efficient enterprise to build, maintain and run the facility from its start-up until the time Royal Decree 9/2013 came into force.

 

(ii)

From the resulting total, the “standard per-MW total revenue valued at the electricity pool price,” earned by each type of plant from its start-up through entry into force of Royal Decree 9/2013, also updated applying the 7.503% rate of return is subtracted.

 

(iii)

The result (the standard per-MW investment value plus standard per-MW operating cost minus standard per-MW total revenue) is the “net investment value,” i.e., the costs unrecovered by the plant owner as of July 14, 2013.

Accordingly, under Proposed Royal Decree 2014, the returns received by the owners of plants in excess of 7.503%, from start-up until Royal Decree 9/2013 took effect, would serve to reduce the unrecovered net investment value as of July 14, 2013.

Operating payments will only be available for those facilities whose costs exceed the estimated average pool price. However, the Ministry of Industry, Energy and Tourism can cap operating payments at a maximum number of hours.

Payment Factors for Concentrating Solar Power Plants

The payment system applicable for each plant is based on various criteria considered by the Ministry of Industry, Energy and Tourism and includes the specific technology used, amount of power produced relative to operating costs, age of the facility and any other differentiating factor deemed necessary to consider in applications of the payment system.

The regulations recognize six types of solar thermal plants: (i) parabolic trough collectors without a storage system, (ii) parabolic trough collectors with a storage system, (iii) central or tower receivers without a storage system, (iv) central or tower receivers with a storage system, (v) fresnel linear collectors and (vi) solar-biomass hybrids.

 

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To determine the payment system applicable to each plant, the following factors are considered:

 

(i)

Net investment value. This consists of a standard amount per MW for each type of plant, calculated by the method set out in Proposed Royal Decree 2014, which is the amount invested in the plant and not depreciated as of July 14, 2013.

 

(ii)

Useful life of the plant. For solar thermal plants this is 25 years.

 

(iii)

Return on investment. Considering the net asset value determined on the basis of a standard cost per MW built, an amount is set per unit of power, which enables investment costs that cannot be recovered through the pool price to be recouped over the useful life of the plant.

 

(iv)

Operating remuneration. An amount is set per unit of power and hour that, added to the pool price, enables the producer to recoup all the plant’s operating and maintenance costs. Operating expenses include the cost of land, electricity, gas and water bills, management, security, corrective and preventive maintenance, representation costs, the Spanish tax on special immovable properties, insurance, applicable generation charges and a generation tax which is equal to 7% of total revenue.

 

(v)

Maximum number of operating hours. A maximum number of hours is set for which each plant type can receive the operating subsidy.

 

(vi)

Operating threshold. Plants must operate for more than a set number of hours per year to receive the return on investment and operating subsidy.

 

(vii)

Minimum operating hours. Plants that cross the operating threshold but operate for fewer hours than the annual minimum hours receive a lower subsidy.

The payment criteria established in respect of Solaben 2 and Solaben 3 are set forth below:

 

		Useful Life				Return on Investment 2014 (euros/MW)				Operating Remuneration 2014 (euros/GWh)				Maximum Hours				Minimum Hours				Operating Threshold
Solaben 2			25 years				403,216				37,491				2,040				1,224				714
Solaben 3			25 years				403,216				37,491				2,040				1.224				714

Regulatory Periods

Payment criteria are based on prevailing economic conditions in Spain, demand for electricity and reasonable profits for electricity generation activities and can be revised every six years. The first regulatory period commenced on July 14, 2013, the date on which Royal Decree 9/2013 came into force, and will end on December 31, 2019.

The definitions and values of all payment criteria can be changed at the end of each regulatory period, except for a plants’ useful lives and the value of a plant’s initial investment that is recouped through the specific return on investment.

Unless reviewed, payment criteria will be considered to be extended for the subsequent regulatory period.

Reasonable Rate of Return

Article 14 of the Electricity Act provides that a reasonable return on investment is calculated on the basis of the average pre-tax yield of Spanish government 10-year bonds on the secondary market.

For plants that are already in operation, the reasonable return over the regulatory life of the plants is based on the average pre-tax yield on Spanish government 10-year bonds on the secondary market for the preceding 10 years, plus 300 basis points. The reasonable rate of return has been set at 7.503% during the first regulatory period from July 14, 2013 through December 31, 2019.

 

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Under no circumstances will amounts received by producers for electricity generated before July 14, 2013, be required to be returned or reimbursed under the new system

Before the start of a new regulatory period, a revised reasonable return can be established for each plant type, calculated as the average yield on Spanish government 10-year bonds on the secondary market in the 24 months through the month of May preceding the new regulatory period, plus a spread.

This spread is based on the following criteria:

 

(i)

Appropriate profit for this specific type of renewable electricity generation and electricity generation as a whole, considering the financial condition of the Spanish electricity system and Spanish prevailing economic conditions; and

 

(ii)

Borrowing costs for electricity generation companies using renewable energy sources with regulated payment systems, which are efficient and well run, within Europe.

The next regulatory period will begin on January 1, 2020.

Funding the Tariff Deficit

The new Electricity Act also states that from January 1, 2014, tariff deficit amounts would no longer be paid for, as they had been previously, by the five major Spanish utilities. Instead, they will be paid by the companies that receive “regulated payments,” including distributors, transportation companies, producers of electricity from renewable plants, companies receiving capacity payments and others. Each of these entities will contribute to paying down the tariff deficit in proportion to the costs that they represent for the electricity system, and can recover these contributions in the following five years, plus interest at a market rate.

Access Fee

Royal Decree 14/2010 was passed in order to eliminate the shortfalls between electricity system revenues and costs, referred to as the tariff deficit in the electricity sector.

The First Transitional Provision of Royal Decree 14/2010 provided that the owners of electricity production facilities pay a fee for access to the grid to the transmission and distribution companies (this access previously having been provided at no cost) from January 1, 2011. During the interim period, the access fee payable is (i) calculated at €0.5 per MWh delivered to the network; or (ii) any other amount that the Ministry of Industry, Energy and Tourism establishes.

Royal Decree 1544/2011 implemented the First Transitional Provision of Royal Decree 14/2010 and confirmed the interim access fee imposed on electricity producers (€0.5 per MWh), subject to the adoption of a final method for calculating the access fee.

Electricity Sales Tax

On December 27, 2012, the Spanish Parliament approved Law 15/2012, which became effective on January 1, 2013, or Law 15/2012. The aim of Law 15/2012 is to try to combat the problem of the so-called tariff deficit, which reached approximately €28 billion as of December 2013.

Law 15/2012 provides for an electricity sales tax which is levied on activities related to electricity production. The tax is triggered by the sale of electricity and affects ordinary energy producers and those generating power from renewable sources. The tax, a flat rate of 7%, is levied on the total income received from the power produced at each of the installations, which means that every calendar year, Concentrating Solar Power plants will be required to pay 7% of the total amount which they are entitled to receive for production and incorporation into the electricity system of electric power, measured as the net output generated.

 

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Tax Incentive of Accelerated Depreciation of New Assets

Under provisions of the Spanish Corporate Income Tax Act, tax-free depreciation is permitted on investments in new material assets and investment properties used for economic activities acquired between January 1, 2009 and March 31, 2012.

Taxpayers who made or will make investments from March 31, 2012 through March 31, 2015 in new material assets and investment properties used for economic activities are permitted to take accelerated depreciation for those assets subject to certain limitations. The accelerated depreciation is permitted if:

 

•

40% of the tax base before the amortization or depreciation and before the offset of tax loss carryforwards for taxpayers (subject to requirements to keep up employment levels); or

 

•

20% of the tax base before the amortization or depreciation and before the offset of tax loss carryforwards for taxpayers (without employment requirements).

Most of the investment in Solaben 2 and 3 was undertaken within the regime that applied between January 1, 2009 and March 31, 2012.

These limitations do not apply in respect of companies that meet the requirements set forth in article 108.1 of the Spanish Corporate Income Tax Act related to the special rules for enterprises of a reduced size.

Regulation in Brazil

Electric transmission operations are subject to significant regulation in Brazil.

The Governmental Policy and Legislative Framework for the Electricity Sector

The electricity sector in Brazil has undergone two major institutional reforms in the last decades which results in its current form: the first in the 1990s and another in 2003, which aimed at modifying the rules applying to the SIN. The first change in the sector occurred after the enactment of Law No. 8,987 of 1995, as amended, which established the system for the concessions and permissions for rendering public services, or the Concessions’ General Act, and with the enactment of Law No. 9,074 of 1995 as amended, which sets forth specific rules for the concession of electricity public services. This law, inter alia:

 

•

established the granting, duration and extension of concessions and permissions;

 

•

set forth the free access principle for the electric transmission and distribution systems;

 

•

released free consumers (as defined below) from the commercial monopoly of distribution concessionaires, allowing them to choose their supplier; and

 

•

introduced the independent power producer and the cell producer agents.

Law No. 9,074 of 1995 is regulated by Decree No. 1,717 of 1995, which establishes the procedures for extending the concessions granted before the enactment of the Concessions’ General Act for a period up to twenty years, and by Decree No. 2,003 of 1996, governing the independent producers’ and self-producers’ system. In addition, Decree No. 7,805 of 2012, which regulates the Provisional Measure, or Medida Provisória, No. 579 of 2012, later converted into Law No. 12,783 of 2013 sets forth the rules for further extending the concession contracts up to 30 years, for one period only.

Law No. 9,427 of 1996, as amended, inter alia, created ANEEL, the regulatory agency concerned with supervising the production, electric transmission, distribution and trading of electricity, and it is regulated by Decree No. 2,335 of 1997. Such law granted ANEEL the authority, inter alia, to run public tenders for concessions and permissions, as well as to execute and manage the agreements for delivering public services and to grant certain authorizations. Law No. 9,478 of 1997, as amended, created the National Committee on Energy Policy, or Conselho Nacional de Política Energética, chaired by the Minister of Mining and Energy with the duty of advising the President of the Republic on the national policies in this domain.

 

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The first phase of the reform was concluded with the enactment in May 1998 of Law No. 9,648, later amended, which regulates competition in the electricity sector. Among many other provisions, it sets forth rules for:

 

(i)

the trading, import and export of power;

 

(ii)

the division, into separate agreements, of the purchase and sale of energy, and the free access to the electric transmission and distribution systems;

 

(iii)

the creation of the Electric System National Operator, Operador Nacional do Sistema Elétrico, or ONS, a legal entity organized under the private law, in charge of the coordination and operational control of the facilities for the electric and power transmission of interconnected electric systems in Brazil; and

 

(iv)

the free negotiation of energy, within the scope of the Wholesale Market of Electricity, Mercado Atacadista de Energia Electrica, or MAE, to be created by a market agreement.

The second phase of the reform redefined the sector’s institutional model, mainly concerning the energy market, by setting forth as chief goals the need for the system’s expansion while keeping tariffs low and competition present in power generation.

The new institutional framework was established by Law No. 10,848 and Law No. 10,847 of 2004 in an effort to restructure the electricity industry to better provide consumers with a secure electricity supply combined with low tariffs by expanding electricity generation and services.

Law No. 10,848 created two co-existing energy markets: a regulated market, for the protection of customers, and a free market to encourage consumers which are able to buy directly from producers on a competitive basis, or free consumers. Law No. 10,848 authorized the creation of the Chamber of Electric Energy Trading, or Câmara de Comercialização de Energia Elétrica, a non-profit private entity, functioning under the supervision of ANEEL to manage the agreements for the purchase and sale of energy in the regulated contracting environment and the ascertainment and settlement of contractual differences in the free contracting environment. This law further authorized the creation of the Committee on the Monitoring of the Electricity Sector, or Comitê de Monitoramento de Setor Energético, under the aegis of the government, to monitor the supply conditions of the electricity market and the advising of preventive actions for guaranteeing this supply.

On May 28, 2009, Provisional Measure No. 450 of 2008 became Law No. 11,943, as amended, which authorizes the federal government to participate in the Guarantee Fund for Electric Energy Enterprises, or Fundo de Garantia a Empreendimentos de Energia Elétrica. Such fund aims to provide financial guarantees proportional to the participation, direct or indirect, of federal or state companies of the electric industry in special purpose companies, created for the development of electric-related projects in connection with the Growth Acceleration Program, or Programa de Aceleração do Crescimento and other strategic programs appointed by an act of the Executive Branch.

More recently, the government passed Provisional Measure No. 577 of 2012, later converted into Law No. 12.767 of 2012, which establishes specific rules for the termination of concessions in the event of bankruptcy or forfeiture and for intervention by the granting authority, acting through ANEEL, in the management of concessionaires in order to ensure the adequate rendering of services and compliance with contractual, regulatory and legal provisions. The goal of this law is to ensure the continuation of the service and its rules on administrative intervention are stricter than the ones of the Concessions’ General Act.

The Governmental or Administrative Authorizations Required for the Construction and Operation of Electric Transmission Networks

Before the auction for the concession of electric transmission lines, the environmental impact assessment and environmental impact reports shall be conducted and must be approved by the proper environmental agency.

 

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After the auction, the concession is granted by a presidential decree, followed by the execution of the concession agreement, which is signed by and registered and filed with ANEEL. Next, the concessionaire should apply for ANEEL’s approval of the Basic Project for Power Transmission Facilities relating to the concession. The previous license (licença prévia), which is the first environmental permit that allows the development of the environmental studies, and the installation license (licença de instalação), which is the permit that authorizes the construction of the project, should be obtained at different stages from the environmental agencies. The Declaration of Public Interest from ANEEL, the tree cutting authorization and the operation license (licença de operação) issued by the environmental agency, as well as the release certificate issued by the ONS are also required.

The Requirements that must be Met to Obtain Access to such Public Service

The regulation in force sets forth that the rendering of transmission services shall be preceded by the execution of a Transmission Agreement and of an Agreement for the Rendering of Supplementary Services, or Contrato de Serviços Anciliares. There are three different types of Transmission Agreements: (i) Agreement for the Rendering of Transmission Services, or CPST; (ii) Agreement for the Use of the Transmission Networks, or CUST; and (iii) Connection Agreement. The CPST is executed between the ONS and the concessionaire. The CUST is executed among the ONS, the concessionaire, represented by the ONS, and the user of the transmission network. These users may be: (i) agents holding a concession or a permission for the distribution of electricity; (ii) power generation agents directly connected to the basic grid or not connected to the basic grid but operating centrally, whether concessionaires or authorized companies; (iii) consumers connected to the basic grid; and (iv) importers and exporters of electricity directly connected to the basic grid.

There are three types of Connection Agreements: (i) Agreement for the Connection to the Transmission Network, or Contrato de Conexão do Sistema de Transmissão; (ii) Agreement for Facilities’ Sharing, or Contrato de Compartilhamento de Instalações; and (iii) Agreement for the Connection to the Transmission Network—Adjustment Term, or Contrato de Conexão ao Sistema de Transmissão—Termo de Ajuste. These agreements are executed between the transmission concessionaires and the connecting agents, while the ONS is an interested third party to such agreements.

There is also the Financial Guarantee Contract, or Contrato de Constituição de Garantia, which is an agreement between the ONS, acting on its own behalf and on behalf of the transmission concessionaire, and the custodian bank which provides ONS with access to funds available in user-designated bank accounts in the event the latter fails to satisfy payments owed to the transmission concessionaires and to ONS under the corresponding CUST.

Governmental Incentives to Encourage Expansion of the Electric Transmission Grid

There are special credit lines available to entrepreneurs from the National Bank for Economic and Social Development, or Banco Nacional de Desenvolvimento Econômico e Social. Also, Law No. 11,488 of 2007, as amended, created the Special Incentive Regimen for the Development of Infrastructure, or Regime Especial de Incentivos para o Desenvolvimento da Infraestrutura, or REIDI, a general tax incentive to infrastructure projects, which directly applies to the expansion of the electric transmission grids.

A recent innovation regarding the granting of the REIDI was established after the edition of Mines and Energy Ministerial Ordinance No. 274/2013, which stipulates all the data that is required in order to apply for this incentive, which includes, among other, the description of the project, technical and legal information, and the perspective of investment in equipment, materials and machines. All information required must be compiled in a specific petition and filed with ANEEL.

 

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The Rates for the Provision of Electric Transmission Services

Electric transmission companies are remunerated through the Annual Authorized Revenue, or Receita Anual Permitida, or RAP, for the availability of their facilities to the ONS and for the rendering of transmission services to the users.

Charges and Tariffs Owed by Electric Transmission Concessionaires

The Electricity Services Inspection Fee, Taxa de Fiscalização de Serviços de Energia Elétrica, or TFSEE, was created by Law No. 9,427 of 1996, as amended, and regulated by Decree No. 2,410 of 1997. TFSEE is an annual fee payable directly to ANEEL in twelve monthly payments, and is calculated based on the type of service rendered by the concessionaire and in proportion to the size of the concession. It is equivalent to 0.4% of the annual economic benefit earned by the concessionaire. Electricity transmission concessionaires also must invest each year a minimum of 1% of their net operating revenues in electricity research and development.

Penalties

The regulation issued by ANEEL governs the imposition of sanctions against the participants of the energy sector and classifies the appropriate penalties based on the nature and importance of the breach (including warnings, fines, temporary suspension from the right to participate in public auctions for new concessions, licenses or authorizations and forfeiture). For each breach, the fine may be up to 2% of the concessionaire revenues (net of value-added tax and services tax) in the 12 months period preceding any assessment notice. In addition, electricity generation, distribution and electric transmission concessionaires are strictly liable for any direct or consequential damages caused to third parties as a result of inappropriate provision of electricity services at their facilities. In case ONS is incapable of determining liability for the damages to a particular concessionaire, permissionaire or authorized agent, or if the damages are caused by ONS, liability is proportionately allocated to the electric transmission, distribution and generation agents in accordance with the voting rights of each category under the ONS bylaws.

Reinforcements and Improvements

The granting authority may unilaterally amend the concession agreements, including in the event of alterations to the project or previously unforeseen specifications (such as a requirement to strengthen or to improve the current electric transmission facilities). A concessionaire is entitled to the economic and financial balance of the concession agreement and, therefore, receives additional revenues by way of amortization of its investments in the implementation of these reinforcements or improvements.

Until May 2005, a concessionaire’s obligation to implement strengthening actions, or Reinforcement, was subject to specific prior authorization from ANEEL, which would then set the corresponding additional revenues. Any improvement action, or Improvement, would not require prior authorization or additional revenues. The then existing regulation, however, failed to clearly define Reinforcement and Improvement. Thus, on May 23, 2005, ANEEL issued Resolution No. 158, distinguishing the projects and installations that would be considered as reinforcements and those deemed to be classified as Improvements. In July 2011, Resolution No. 158 was replaced by Resolution No. 443.

Improvement is defined as any installation, replacement or remodeling of equipment in order to ensure regular, continued, safe and updated electricity transmission services, pursuant to the relevant concession agreement and network procedures. The costs incurred from improvements will not be taken into account in any subsequent revision of the RAP. Nonetheless, the concessionaire can claim for the reestablishment of economic and financial balance of the concession agreement.

Reinforcement is defined as the implementation of new electricity transmission facilities, or replacement or adjustment of existing facilities, as recommended in previously approved plans for the expansion of the power

 

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transmission network. It is subject to prior authorization by ANEEL and is intended to increase the electric transmission capacity or the reliability of the SIN, or to implement a physical alteration of the configuration of the electric grid or of a given facility. Through ANEEL Resolution No. 443, certain types of reinforcements may be implemented by transmission concessionaires directly, without prior authorization by ANEEL, provided that they are the result of a request by ONS aiming at expanding electric transmission capacity or the reliability of the SIN. In this case, however, ANEEL will not have previously established the additional revenues to which the concessionaire would be entitled for the implementation of such reinforcement. These revenues, therefore, are included in the annual revision of the RAP. In addition, Resolution No. 443 does not assure that all costs incurred by the concessionaire for the investments in reinforcements will be taken into account for establishing the relevant RAP.

Finally, concessionaires that are not subject to periodic revision of the RAP could be compelled to make investments within the scope of expansion plans or at the request of ONS, which would not require prior approval by ANEEL and, consequently, are not included in RAP. In such event, pursuant to Resolution No. 443, concessionaires will be entitled to apply for acknowledgement of the investments by means of a special revision of the RAP pursuant to a procedure and parameters not clearly defined by ANEEL, including time periods. The lack of a clear definition could result in mismatched investment disbursements and RAP payments. However, additional fixed revenues from revisions will be retroacted until the reinforcement operations begin.

 

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MANAGEMENT

Executive Officers and Directors

Below is a list of names and a brief account of the business experience of the persons appointed, or to be appointed, to serve as our executive officers and directors prior to the consummation of this offering.

 

Name		Position
Manuel Sanchez Ortega		Director and Chairman of the Board
Santiago Seage		Chief Executive Officer and Director
Eduard Soler		Executive Vice President and Chief Financial Officer
Manuel Silvan		Vice President Taxes, Risk Management and Compliance
Emiliano Garcia		Vice President North America
Antonio Merino		Vice President South America
William B. Richardson		Director
Christopher Standlee		Director
		Director
Eduardo Kausel		Director, independent
Daniel Villalba		Director, independent
Jack Robinson		Director, independent
Enrique Alarcon		Director, independent
Juan del Hoyo		Director, independent

Manuel Sanchez Ortega, Director and Chairman of the Board

Mr. Sanchez has served as our Chairman since our formation in December 2013. Mr. Sanchez joined Abengoa in 1989 as a software engineer. In 1995, he was named Executive Vice President in Mexico, where he was based for five years. In 2001, Mr. Sánchez was named general manager of Abengoa’s Information Technologies business, of which he was appointed the Chief Executive Officer in 2002 and Chairman in 2004, serving in that capacity until he was appointed Chief Executive Officer of Abengoa in October 2010, in which capacity he continues to serve. He holds a degree in Industrial Electrical Engineering from the ICAI in Madrid and has a master’s degree in Business Administration from the Instituto Panamericano de Alta Dirección de Empresas (IPADE) in Mexico.

Santiago Seage, Chief Executive Officer and Director

Mr. Seage has served as our CEO since our formation. Prior to this appointment, he served as Abengoa Solar’s CEO beginning in 2006. Previously, Mr. Seage was Abengoa’s Vice President of Strategy and Corporate Development. Before joining Abengoa, he was a partner with McKinsey & Company. Mr. Seage holds a degree in Business Management from ICADE University in Madrid. Mr. Seage will remain an officer of Abengoa after this offering.

Eduard Soler, Executive Vice President and Chief Financial Officer

Mr. Soler has served as our Executive Vice President and CFO since our formation. Prior to that, he served as the corporate head of Abengoa’s concessions business and previously as Abengoa Solar’s head of strategy and business development. Prior to this, he was an engagement manager with McKinsey & Company in its corporate finance practice. Mr. Soler holds a Business Administration degree from Esade University in Barcelona and an MBA from Harvard University. Mr. Soler will remain an officer of Abengoa after this offering.

Manuel Silvan, Vice President Taxes, Risk Management and Compliance

Mr. Silvan has served as Vice President Taxes, Risk Management and Compliance since our formation. Prior to that, he served as Abengoa’s Vice President of Taxation beginning in 2007. Before joining Abengoa in

 

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1998, he worked for the legal and tax advisory firm of Garrigues. Mr. Silvan holds a degree in Economics and Business Science from Huelva University, a master’s degree in Tax Consultancy from Cajasol Business Institute and an MBA from San Telmo International Institute. Mr. Silvan will remain an officer of Abengoa after this offering.

Emiliano Garcia, Vice President North America

Mr. Garcia currently serves as Vice President of our North American business. Based in Phoenix, Arizona, he is responsible for managing two of our key assets, Solana and Mojave. Mr. Garcia was previously the General Manager of Abengoa Solar in the United States and of the Solana Power Plant. Before that, he held a number of managerial positions in various Abengoa companies over two decades. Mr. Garcia holds a Bachelor’s degree in Engineering from Madrid Technical University.

Antonio Merino, Vice President South America

Mr. Merino currently serves as Vice President of our South American business. Previously, he was the Vice President of Abengoa’s Brazilian business, as well as the head of Abengoa’s commercial activities and partnerships in South America. Mr. Merino holds an MBA from San Telmo University.

William B. Richardson, Director

Mr. Richardson was the 30th Governor of the State of New Mexico, from 2003 to 2011. He was U.S. Ambassador to the United Nations and Energy Secretary and has also served as a U.S. Congressman, chairman of the 2004 Democratic National Convention and chairman of the Democratic Governor’s Association. He is chairman of APCO Worldwide’s executive advisory service, Global Political Strategies and Special Envoy of the Organization of American States, Chairman of the International Council for Science and the Environment as well as an advisor to Abengoa and member of Abengoa’s international advisory board.

Christopher Standlee, Director

Mr. Standlee currently serves as Executive Vice President of Global Affairs at Abengoa Bioenergy U.S. He also serves as co-chairman of the Biotechnology Industry Organization’s Industrial and Environmental Section Working Group. Mr. Standlee previously served as Vice President and General Counsel of Abengoa Bioenergy U.S., where he held operational responsibilities, until 2010. Before that, Mr. Standlee served as Vice President and General Counsel of the NASDAQ-listed company High Plains Corporation until its acquisition by Abengoa in 2002. He is a past chairman of the board of directors of the Renewable Fuels Association. Mr. Standlee received his undergraduate degree from Yale University in Political Science, and his Juris Doctorate from the University of Kansas.

                    , Director

Eduardo Kausel, Director

Dr. Kausel is a Professor of Civil and Environmental Engineering at Massachusetts Institute of Technology, or MIT. Dr. Kausel is a senior member of various professional organizations and has extensive experience as consulting engineer. He is the author of more than a hundred technical papers and has a Doctorate and a Masters of Science from MIT, a post-graduate degree from Darmstadt University in Germany and a civil engineering degree from the University of Chile.

Daniel Villalba, Director

Daniel Villalba was previously a Professor of Business Economics at the Universidad Autónoma de Madrid. He also previously served as the CEO of Inverban, a broker and investment bank, and independent board member

 

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of Vueling, an airline currently part of International Airlines Group, Abengoa and the Madrid Stock Exchange, as well as a board member of several private companies. He also has written more than fifty academic papers and books. Mr. Villalba holds a Master of Science in Operations Research from Stanford University, a Master of Science in Business Administration from the University of Massachusetts and a PhD in Economics from the Universidad Autónoma de Madrid.

Jack Robinson, Director

Mr. Robinson is a partner at Brown Advisory, an environmentally-focused investment service firm. He also serves on the advisory board of several institutions including ACORE, Greener Capital Partners and Practically Green. He holds a Bachelor’s degree from Brown University.

Enrique Alarcon, Director

Dr. Alarcon has been a Professor of Engineering at several universities, as well as Chairman of the Spanish Royal Academy of Engineering and member of the Science and Engineering Sector of the “European Academy.” Dr. Alarcon holds a PhD in Engineering and a civil engineering degree from the Madrid Technical University and has written a dozen books and more than 100 articles and received many prizes in recognition of his work in the field of engineering.

Juan del Hoyo, Director

Dr. del Hoyo is a Professor of Economics at Madrid University. He has published several books and many articles on economy and finance. He holds a PhD in Economics, a Masters in Econometrics from the University of Southampton and is a telecommunications Engineer.

Board Practices

For purpose of the following disclosure, Mr. Sanchez, Mr. Seage, Mr. Richardson, Mr. Standlee and                      are considered Abengoa representatives.

Upon completion of this offering our board of directors will consist of ten directors, five of them independent. Under our articles of association, our board may consist of seven to thirteen members, and Abengoa will be entitled to nominate up to a majority of our directors for so long as Abengoa beneficially owns more than 50% of our outstanding shares

We believe that this corporate governance structure of five independent directors out of a total of ten directors will help to avoid any potential conflicts of interest and will allow us to have stronger decision-making processes. Abengoa representatives will not vote on matters that represent or could represent a conflict of interests, including the evaluation of assets offered to us under the ROFO Agreement.

Our board of directors will be responsible for, among other things, overseeing the conduct of our business; reviewing and, where appropriate, approving, our long-term strategic, financial and organizational goals and plans; and reviewing the performance of our chief executive officer and other members of senior management.

Under English law, the board of directors of an English corporation is responsible for the management, administration and representation of all matters concerning the relevant business, subject to the provisions of the relevant constitution, statutes and resolutions adopted at general shareholder’s meetings by a majority vote of the shareholders. Under English law, the board of directors may delegate its powers to an executive committee or other delegated committee or to one or more persons, unless the shareholders, through a meeting, have specifically delegated certain powers to the board and have not approved the board’s delegation to others.

 

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Appointments and Remuneration Committee

The duties and functions of our Appointments and Remuneration Committee include, among others, the duty to inform our board of directors of appointments, re-elections, terminations and remuneration of the board and its members, as well as upon general remuneration and incentives policy for the board and senior management. The Appointments and Remuneration Committee meets as often as necessary in order to perform its functions and at least once every six months. The committee will inform and make proposals to the board.

Immediately following the consummation of this offering, our Appointments and Remuneration Committee will consist of Mr. Sánchez and two independent directors.

Audit Committee

The Audit Committee will be responsible for monitoring and informing the board on the work of external and internal auditors, control systems, key processes and procedures, security and risks.

The committee will consist initially of six members. Initially, it will be chaired by Mr. Villalba and will include Mr. Seage, Mr. Alarcon, Mr. Kausel, Mr. Robinson and Mr. del Hoyo. We believe that Mr. Villalba qualifies as our “audit committee financial expert,” as such term is defined in Item 407(d)(5)(i) of Regulation S-K. We expect Mr. Seage to resign from the committee prior to the first anniversary of the offering, whereupon the committee will consist of five independent directors.

The committee will meet as many times as required and a minimum of two times per year.

The Audit Committee is directly responsible for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services, including the resolution of disagreements between the external auditor and management. The external auditor will report directly to the Audit Committee. The Audit Committee is also responsible for reviewing and approving our hiring policies regarding former employees of the external auditor. In addition, the Audit Committee pre-approves all non-audit services undertaken by the external auditor.

The Audit Committee is responsible for reviewing the adequacy and security of procedures for the confidential, anonymous submission by our employees or contractors regarding any possible wrongdoing in financial reporting or other matters. The Audit Committee is accountable to the board and will provide a report to the board after each regularly scheduled Audit Committee meeting outlining the results of the Audit Committee’s activities and proceedings.

Lead Independent Director

Our corporate governance guidelines will provide that one of our independent directors shall serve as a lead independent director at any time when an independent director is not serving as the chairman of the board of directors. Immediately prior to the consummation of this offering, our board of directors will appoint Mr. Villalba to serve as our lead independent director.

Management Team

We will have a senior management team with extensive experience in developing, financing, managing and operating contracted assets. This senior management team is being provided to us by Abengoa pursuant to the Executive Services Agreement. We intend to employ directly these individuals beginning prior to the first anniversary of the offering.

Once directly employed by us, the senior management team will provide management services to Abengoa. We expect that we will charge Abengoa approximately 40% of all personnel-related expenses in 2015, potentially decreasing in 2016 if we execute the acquisitions we expect to under the ROFO Agreement.

 

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Family Relationships

There are no family relationships among any of our executive officers or directors.

Benefits upon Termination of Employment

Neither we nor our subsidiaries maintain any director’s service contracts providing for benefits upon termination of service.

Controlled Company

For purposes of the NASDAQ rules, we expect to be a “controlled company.” Controlled companies under those rules are companies of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. We expect that Abengoa will continue to control more than 50% of the combined voting power of our shares upon completion of this offering and will continue to have the right to designate a majority of the members of our board of directors for nomination for election and the voting power to elect such directors following this offering. Accordingly, we expect to be eligible to, and we may, take advantage of certain exemptions from corporate governance requirements provided in the NASDAQ rules. Specifically, as a controlled company, we would not be required to have (i) a majority of independent directors, (ii) a nominating/corporate governance committee composed entirely of independent directors, (iii) a compensation committee composed entirely of independent directors or (iv) an annual performance evaluation of the nominating/corporate governance and compensation committees. Therefore, following this offering if we are able to rely on the “controlled company” exemption, we will not be required to have a majority of independent directors, our Appointments and Remuneration Committee will not need to consist entirely of independent directors and such committees will not be required to be subject to annual performance evaluations; accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the applicable NASDAQ rules. The controlled company exemption does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley Act and the NASDAQ rules, which require that our audit committee be composed of at least three members, one of whom will be independent upon the listing of our shares on the NASDAQ Global Select Market, a majority of whom will be independent within 90 days of the date of this prospectus, and each of whom will be independent within one year of the date of this prospectus.

Compensation of Our Executive Officers

We are a newly-formed subsidiary of Abengoa consisting of portions of various parts of Abengoa’s business that are being contributed to us in connection with this offering. We have not incurred any cost or liability with respect to compensation of our executive officers prior to our formation. We do not currently directly employ any of the executives responsible for managing our business, but we plan to employ our executive management team, including Mr. Seage, Mr. Soler, Mr. Silvan, Mr. Garcia and Mr. Merino over the course of the next year.

Our officers will manage the day-to-day affairs of our business and will be employed and compensated by us, including under long-term incentive plans, once they become our employees, although some of our executives may continue to participate in long-term incentive plans with Abengoa, provided that from January 1, 2015 these incentives can only be based on Abengoa Yield’s business objectives and Abengoa’s stock price. We expect that future compensation for our executive officers will be determined and structured in a manner similar to that then currently used by Abengoa to compensate its executive officers. Our officers, as well as the employees of Abengoa who provide services to us, may participate in employee benefit plans and arrangements sponsored by Abengoa, including plans that may be established in the future but their objectives can only be based on Abengoa Yield’s business objectives and approved by us.

Compensation of Our Directors

Our independent directors will receive compensation as “non-employee directors” as set by our board of directors.

 

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Effective as of the consummation of this offering, each independent director will receive a total annual compensation of $100,000. As lead independent director and Chair of our Audit Committee, Mr. Villalba will receive an additional $35,000 per year. Directors representing Abengoa will not receive any compensation from us.

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

 

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RELATED PARTY TRANSACTIONS

Each of our assets typically has two contracts in place with Abengoa entities from the time of construction, including an operation and maintenance agreement and a services agreement that covers local administrative support.

Additionally, we have entered into a number of agreements with our main shareholder, Abengoa, that we believe will allow us to (i) secure cost-effective administrative and financial support, (ii) ensure a smooth transition following completion of the offering, and (iii) access through the ROFO Agreement a pipeline of potential acquisitions that we believe will help us to grow in the future. In addition to the deed described under “Description of Share Capital—Brazil Dividend Policy” and the shareholders agreement described under Business—Our Operations—Convertible Preferred Equity Investment in Abengoa Concessoes Brasil Holding, we will enter into five agreements with Abengoa:

 

•

ROFO Agreement;

 

•

Trademark License Agreement;

 

•

Financial Support Agreement;

 

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Support Services Agreement; and

 

•

Executive Services Agreement.

Each of these agreements has been reviewed with external advisors and we believe that they comply with transfer pricing regulations. Each agreement is described below.

Project-Level Management and Administration Agreements

When our projects reach COD, we typically have in place two contracts for each project:

 

•

an operations and maintenance contact, in most cases with an Abengoa subsidiary; and

 

•

a services contract that typically covers areas like accounting, administration, payments management, local legal and tax support, local institutional relations, communications and other services. This contract is entered into with local Abengoa subsidiaries that have the required staff in the countries or states in which our assets are located.

Operation and Maintenance Contracts

Each of the assets in our portfolio have entered into an operation and maintenance agreement with an Abengoa subsidiary, with the exception of ACT, where the contract is with third-party providers.

 

•

Term. Contract terms range from 20 to 30 years, typically mirroring the duration of financing contracts. The only exceptions are ATN and ATS, which are subject to shorter terms but have renewal clauses.

 

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Services. Contracts typically cover all day-to-day operation and maintenance services, including procurement of equipment, scheduling and performance of maintenance, operation of the facility, training and supervision of personnel, as well as compliance with laws and regulations, safety and security programs, environmental services and technical reporting.

 

•

Termination. Typically, either party may terminate the agreement upon default by the counterparty. The relevant project-level company that owns the asset can typically terminate due to payment default, winding-up of the operator, failure of the operator to perform material obligations, termination of the PPA and, in some cases, for failure to reach certain performance ratios, the imposition of fines or penalties in excess of certain threshold amounts or force majeure. The operator can typically terminate in the event of payment default, winding-up of the project-level company, failure of the project-level company to perform material obligations and, in some cases, force majeure.

 

•

Compensation. Operation and maintenance contracts in Solana and Mojave provide for a fixed fee of approximately $500,000 per plant per year, which is indexed to U.S. CPI and a variable fee paid in periods

 

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in which net operating profit exceeds the target. In addition, the operator is entitled to reimbursement of certain costs. In other projects, including ATN, ATS, Solaben 2 and Solaben 3, the operation and maintenance contract provides for an all-in fee by which the operator must bear substantially all costs for the operation and maintenance of the plant.

Services Agreement

Each of our project-level companies have entered into a services agreement with a local Abengoa subsidiary, which agreement typically provides for accounting, administration, payments management, local legal and tax support, local institutional, communications services and general support services.

 

•

Term. The agreements relating to ATN and ATS expire after a year but include tacit renewal clauses, while Solana, Mojave, Solaben 2 and Solaben 3 are contracts with 20- to 30-year terms.

 

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Termination. The agreements can typically be terminated due to breach of obligations, insolvency, suspension of payments or winding-up of the counterparty, or mutual consent.

 

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Compensation. The compensation paid is typically approximately 1% of revenues, with the exception of Solaben 2 and 3, which provide for a fee of 2.5% of revenues.

Right of First Offer

We and Abengoa will enter into the ROFO Agreement, pursuant to which Abengoa and its affiliates will grant us and our affiliates a right of first offer on any proposed sale, transfer or other disposition of any of their contracted renewable energy, conventional power, electric transmission or water assets that are located in our primary geographies: (i) North America (the United States, Canada and Mexico); (ii) the following countries in South America: Chile, Peru, Uruguay, Brazil and Colombia; and (iii) the European Union. In addition, with respect to certain countries in Africa, the Middle East and Asia and Australia, which we refer to as our secondary geographies, we will agree with Abengoa within the first month following the consummation of this offering, on a list of four assets that will be thereafter considered Abengoa ROFO Assets. Whenever we acquire an asset from Abengoa in the secondary geographies, or, if after 60 days of negotiations we and Abengoa are unable to reach an agreement on an asset offered for sale to us, we will update the list to include a replacement asset. If we and Abengoa are unable to agree on the replacement asset, Abengoa will propose three additional assets in the secondary geographies and we will select one to replace the asset removed from the list. Thereafter, the selected asset will also be considered an Abengoa ROFO Asset. This right of first offer will not apply to a merger with or into, or sale of substantially all of Abengoa’s assets to, an unaffiliated third party, or to an internal restructuring.

The ROFO Agreement will have an initial term of five years from the completion of this offering. We will be able to unilaterally extend the term of the ROFO Agreement as many times as desired for an additional three-year period; provided that we have executed at least one acquisition in the previous two years after having been offered at least four projects.

Prior to engaging in any negotiation regarding any disposition, sale or other transfer of any Abengoa ROFO Asset, Abengoa will deliver a written notice to us thereof, including all information that is relevant for us to make a determination regarding the Abengoa ROFO Asset including the price at which Abengoa proposes to sell it to us. Once that information is received and if we do not notify Abengoa within ten days that the information is insufficient, a 60-day negotiation period will start. If an agreement is not reached, Abengoa may, during the following 18 months, only sell, transfer, dispose or recontract such Abengoa ROFO Asset to a third party (or to agree in writing to undertake such transaction with a third party) on terms and conditions generally no less favorable to Abengoa than those offered by Abengoa to us. If an asset that was already the subject of negotiations is presented again, we will have a 15-day period to negotiate. After such 18 month period, the asset will cease to be an Abengoa ROFO Asset.

We will pay to Abengoa a fee of 1% of the equity purchase price of any Abengoa ROFO Asset that we acquire as consideration for Abengoa granting us the right of first offer.

 

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Under the ROFO Agreement, Abengoa will not be obligated to sell any Abengoa ROFO Asset and, therefore, we do not know when, if ever, these assets will be offered to us. In addition, in some of the assets offered to us under the ROFO Agreement, Abengoa may have equity partners with rights regulating divestitures by Abengoa of its stake such as drag-along and tag-along clauses, and rights of first refusal, among others. We will consider and take into account all these clauses when deciding whether to present an offer.

Even though we do not have a ROFO right over them as described in this section, Abengoa may offer to sell to us contracted assets in business sectors or geographic regions not covered by the ROFO Agreement. We will evaluate these opportunities on a case-by-case basis.

Any offer by Abengoa to sell an Abengoa ROFO Asset under the ROFO Agreement will be subject to an inherent conflict of interest because some of the same professionals within Abengoa’s organization who are involved in acquisitions that are suitable for us have responsibilities to Abengoa within Abengoa’s broader asset management business. Notwithstanding the significance of the services to be rendered by Abengoa or its designated affiliates on our behalf or of the assets which we may elect to acquire from Abengoa in accordance with the terms of the ROFO Agreement or otherwise, Abengoa will not owe fiduciary duties to us or our shareholders.

Any material transaction between Abengoa and us (including the proposed acquisition of any Abengoa ROFO Asset) will be subject to our related party transaction policy, which will require prior approval of such transaction by a majority of the independent members of our board of directors. See “—Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest.” See “Risk Factors—Risks Related to Our Relationship with Abengoa—We may not be able to consummate future acquisitions from Abengoa” and “—Our organizational and ownership structure may create significant conflicts of interest that may be resolved in a manner that is not in the best interests of Abengoa Yield or the best interests of holders of our shares and that may have a material adverse effect on our business, financial condition, results of operations and cash flows.”

Trademark License Agreement

We and Abengoa will enter into a Trademark License Agreement pursuant to which Abengoa will grant us a non-exclusive, royalty-free license to use the name “Abengoa” and the Abengoa logo, among other trademarks owned by Abengoa. Other than under this limited license, we will not have a legal right to the “Abengoa” name or the Abengoa logo. Abengoa will also grant an exclusive license to use the “Abengoa Yield” name and logo.

Abengoa will sell, transfer or assign to us the domain names www.abengoayield.com, www.abengoayield.co.uk and www.abengoayield.es against payment of costs incurred by Abengoa in registering such domain names. It will commit to cooperate to deliver to us any similar domain names at our request and it shall defend us against any infringements. We will assign the domain names to Abengoa within two years of any termination of the Trademark License Agreement.

Abengoa will be entitled to terminate the Trademark License Agreement with respect to us upon 90 days’ prior written notice of termination if any of the following occurs:

 

•

we default in the performance of any material term, condition or agreement contained in the Trademark License Agreement and the default continues uncured for a period of 90 days after written notice of termination of the breach is given to us;

 

•

we assign, sublicense, pledge, mortgage or otherwise encumber the intellectual property rights granted to us pursuant to the Trademark License Agreement without Abengoa’s prior written consent and do not provide satisfactory remedy within 90 days; or

 

•

in the event of our bankruptcy, insolvency or similar events.

 

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If Abengoa ceases to own directly or indirectly at least 20% of our outstanding shares, Abengoa will be entitled to terminate the Trademark License Agreement two years thereafter upon written notice.

In the event of any dispute under the Trademark License Agreement, a dispute notice will be required to be delivered, after which our CEO and the CEO of Abengoa will have an obligation to discuss and attempt to resolve the dispute for 15 days prior to submitting the matter to a court.

Financial Support Agreement

We and Abengoa will enter into a Financial Support Agreement in connection with the consummation of this offering, for a period of five years, pursuant to which:

 

(1)

Abengoa will provide us with a revolving credit line from its central treasury for a period of five years up to a maximum amount of $50,000,000. If we have any funding needs in excess of this amount, Abengoa will make a good faith effort to accommodate any requests from us for additional funding taking into positive consideration the achievement of our business objectives.

 

(2)

If we generate excess cash while the revolving credit line is outstanding, we will deposit such cash in Abengoa’s central treasury, up to a maximum amount of $20,000,000.

 

(3)

Abengoa will maintain any guarantees (whether parent company guarantees, bank guarantees, technical guarantees or otherwise) or letters of credit currently outstanding in our or any of our affiliates’ favor for a period of up to five years from the offering. We have undertaken to periodically review the relevance and possible substitution of such guarantees with a view to operating independently from Abengoa.

If Abengoa ceases to own directly or indirectly at least 20% of our outstanding shares, Abengoa shall be entitled to terminate the Financial Support Agreement not earlier than three years from the date thereof, upon 180 days prior written notice.

Procedures for Review, Approval and Ratification of Related Party Transactions; Conflicts of Interest

Our board of directors has adopted a code of business conduct and ethics to take effect upon the consummation of this offering that will provide that our board of directors or its authorized committee will periodically review all related party transactions and, when appropriate, initially authorize or ratify all such transactions. In the event that our board of directors or its authorized committee considers ratification of a related party transaction and determines not to so ratify, the code of business conduct will provide that our management will make all reasonable efforts to cancel or annul the transaction.

Support Services Agreement

In connection with the consummation of this offering, we will enter into a Support Services Agreement pursuant to which Abengoa will agree to provide or arrange for other service providers to provide management and administration services to us. This agreement does not include executive or senior management services

Services Rendered

Under the Support Services Agreement, Abengoa or certain of its affiliates will provide or arrange for the provision by an appropriate service provider of the following services:

 

•

causing or supervising the carrying out of all day-to-day, secretarial, accounting, banking, treasury, administrative, liaison, representative, regulatory and reporting functions and obligations;

 

•

establishing and maintaining or supervising the establishment and maintenance of books and records;

 

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•

monitoring and/or oversight of our accountants, legal counsel and other accounting, financial or legal advisors and technical, commercial, marketing and other independent experts, and managing litigation in which we or one of our subsidiaries is sued or commencing litigation after consulting with, and subject to the approval of, the board of directors or its equivalent of us or our relevant subsidiary;

 

•

attending to all matters necessary for any reorganization, bankruptcy proceedings, dissolution or winding up of us or one of our subsidiaries, subject to approval by the relevant board of directors or its equivalent;

 

•

supervising the timely calculation and payment of taxes, and the filing of all tax returns;

 

•

causing or supervising the preparation of our annual financial statements and quarterly interim financial statements to be: (i) prepared in accordance with IFRS and audited at least to such extent and with such frequency as may be required by law, regulation or in order to comply with any debt covenants; and (ii) submitted to the relevant board of directors or its equivalent for its prior approval;

 

•

preparing filings for submission to, or required by, relevant regulators;

 

•

making recommendations in relation to and effecting the entry into insurance policies covering our assets, together with other insurances against other risks, including directors’ and officers’ insurance, as the relevant service provider and the relevant board of directors or its equivalent may from time to time agree;

 

•

providing us with authorizations and licenses necessary to use Abengoa’s corporate systems for management of risks (NOC) and for compliance processes (POC);

 

•

providing IT services, human resources support and office and space and support to our employees;

 

•

advising us regarding the maintenance of compliance with applicable laws and other obligations; and

 

•

providing all such other services as may from time to time be agreed with us that are reasonably related to our day-to-day operations.

These activities will be subject to the supervision of our executive management.

Support Services Fee

Pursuant to the Support Services Agreement, we will pay a support services fee of approximately $625,000 per quarter. The support services fee shall be adjusted for inflation annually beginning on January 1, 2015 at an inflation factor based on year-over-year CPI. The support services fee shall also be increased if the total services agreements fees paid by the assets in a given year are lower than 1% of our revenue. The increase would be equivalent to the difference between a 1% of our revenues and the total fees paid under the service agreements by our assets. We do not expect this adjustment to occur based on the current level of fees, unless a significant project stopped paying its fees under its relevant project-level services agreement. Additionally, it will also be increased in connection with our completion of future acquisitions (including any Abengoa ROFO Assets) by an amount estimated to be equal to 0.05% of the enterprise value of the acquired assets as of the acquisition closing date.

We may amend the scope of the services to be provided by Abengoa under the Support Services Agreement, including reducing the number of our subsidiaries that receive services or otherwise, by providing 180 days’ prior written notice to Abengoa; provided that the services to be provided by Abengoa under the Support Services Agreement cannot be increased without Abengoa’s prior written consent. Furthermore, we and Abengoa must consent to any related change in the support services fee resulting from a change in the scope of services. If the parties are unable to agree on a revised support services fee, we may terminate the agreement after the end of such 180-day period by providing 60 days prior written notice to Abengoa; provided, that any decision by us to terminate the Support Services Agreement must be approved by a majority of our independent directors.

 

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Term and Termination

The Support Services Agreement will not have a fixed term. However, we will be able to terminate the Support Services Agreement upon 180 days’ prior written notice of termination from us to Abengoa: provided that any decision by us to terminate the Support Services Agreement may be approved by a majority of our independent directors. We may not terminate the Support Services Agreement solely due to the poor performance of us or any of our subsidiaries or investments.

Abengoa will be able to terminate the Support Services Agreement upon 180 days’ prior written notice of termination to us if we default in the performance or observance of any material term, condition or agreement contained in the Support Services Agreement in a manner that results in material harm to Abengoa and the default continues unremedied for a period of 60 days after written notice of the breach is given to us. Abengoa will also be able to terminate the Support Services Agreement upon the occurrence of certain events relating to our bankruptcy or insolvency.

Indemnification and Limitations on Liability

Under the Support Services Agreement, Abengoa will not assume any responsibility other than to provide or arrange for the provision of the services called for thereunder in good faith and will not be responsible for any action that we take in following or declining to follow the advice or recommendations of Abengoa. The maximum amount of the aggregate liability of Abengoa or any of its affiliates, or of any director, officer, employee, member, shareholder, agent or other representative of Abengoa or any of its affiliates, will be equal to the support services fee previously paid by us in the two most recent calendar years pursuant to the Support Services Agreement. We have also agreed to indemnify each of Abengoa and its affiliates, directors, officers, agents, members, partners, shareholders and employees to the fullest extent permitted by law from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) incurred by an indemnified person or threatened in connection with our respective businesses, investments and activities or in respect of or arising from the Support Services Agreement or the services provided by Abengoa, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined by a final and non-appealable judgment entered by a court or by a settlement agreement to have resulted from the indemnified person’s bad faith, fraud, willful misconduct, gross negligence, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under the Support Services Agreement, the indemnified persons will not be liable to us except to the extent that there is a determination by a final and non-appealable judgment entered by a court that the conduct involved bad faith, fraud, willful misconduct, gross negligence or in the case of a criminal matter, action that the indemnified person knew to have been unlawful.

Continuity Arrangements

Abengoa and/or its affiliates, as the case may be, will take all actions necessary (including obtaining consents) to transfer, and will transfer, and provide all necessary documentation in connection with such transfer, to us and/or our designee(s) any and all licenses currently held by Abengoa or any of its affiliates (unless the terms of a licenses does not allow for its transfer) and (i) used solely by us and/or our affiliates or (ii) which are necessary for us and our affiliates to operate our business as it was operated immediately prior to this offering. All such licenses, if any, will be transferred to us and/or our designee(s) as promptly as practicable but in no event later than October 31, 2014; provided, however, that any such transfer or effort related thereto will in no event materially interrupt any parties’ ordinary course business.

Executive Services Agreement

We intend to employ our executive and senior managers within one year following the consummation of this offering. Nevertheless, until that time, we will enter into an Executive Services Agreement with Abengoa under which approximately ten key executives, currently employed by Abengoa, will provide their services to us while remaining employees of and continuing to provide services to Abengoa. We estimate that in 2014 and 2015 such persons will devote approximately 60% of their time to our business.

 

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Services Rendered

Under the Executive Services Agreement, Abengoa will arrange for senior managers to provide, among others, the following services:

 

•

providing the senior managers to act for us as agreed from time to time, subject to the approval of the relevant board of directors or its equivalent;

 

•

identifying, evaluating and recommending to us acquisitions or dispositions from time-to-time and, where requested to do so, assisting in negotiating the terms of such acquisitions or dispositions;

 

•

recommending to us suitable candidates to serve on the boards of directors or their equivalents of our subsidiaries;

 

•

making recommendations with respect to the exercise of any voting rights to which we are entitled in respect of our subsidiaries;

 

•

making recommendations regarding the issuance of any security, equity or debt;

 

•

making recommendations with respect to the payment of dividends by us or any other distributions by us, including distributions to our shareholders; and

 

•

carrying out the functions of principal executive, accounting, legal and financial officers for purposes of applicable securities laws.

Executive Services Fee

We will pay an executive services fee of approximately $500,000 per quarter.

Termination

We will be able to terminate this agreement immediately upon notice on or after the date that is one year following the consummation of this offering without cause, or at any time upon 30 days notice with cause. Both parties can agree to terminate it earlier once the ten senior managers, or a majority of them, have transferred to us.

Abengoa will not be able to terminate this agreement unilaterally.

Once the ten senior managers, or a majority of them, have transferred to us, we will charge a percentage of the compensation and related costs of these managers back to Abengoa, as they will dedicate part of their time to manage assets that are owned by Abengoa at that time.

Indemnification and Limitations on Liability

Under the Executive Services Agreement, Abengoa will not assume any responsibility other than to provide or arrange for the provision of the services called for thereunder in good faith and will not be responsible for any action that we take in following or declining to follow the advice or recommendations of Abengoa. The maximum amount of the aggregate liability of Abengoa or any of its affiliates, or of any director, officer, employee, contractor, agent, advisor or other representative of Abengoa or any of its affiliates, will be equal to the executive management services fee previously paid by us in the previous calendar years pursuant to the Executive Services Agreement. We have also agreed to indemnify each of Abengoa and its affiliates, directors, officers, agents, members, partners, stockholders and employees to the fullest extent permitted by law from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) incurred by an indemnified person or threatened in connection with our respective businesses, investments and activities or in respect of or arising from the Executive Services Agreement or the services provided by Abengoa, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined by a final non-appealable judgment entered by a court to have resulted from the indemnified person’s bad faith, fraud or willful misconduct, or in the case of a criminal matter, action that the indemnified person knew to have been unlawful. In addition, under the Executive Services Agreement, the indemnified persons will not be liable to us to the fullest extent permitted by law, except for conduct that involved bad faith, fraud, willful misconduct, gross negligence or in the case of a criminal matter, action that the indemnified person knew to have been unlawful.

 

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PRINCIPAL AND SELLING SHAREHOLDER

Major Shareholders

Prior to the offering, all of our shares are held by Abengoa Concessions Investments Limited. After completion of the offering, Abengoa Concessions Investments Limited will own     % of our shares, assuming no exercise of the underwriters’ option to purchase additional shares, which would be reduced to     % if the underwriters exercise in full their option to purchase additional shares.

Shareholders in the United States

Prior to this offering, we have no shareholders in the United States.

Control of Abengoa Yield

Prior to the offering, of Abengoa indirectly holds 100% of the voting power of our outstanding shares.

Arrangements for Change in Control of Abengoa Yield

We are not aware of any arrangements the operation of which may at a subsequent date result in a change of control of Abengoa Yield.

 

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DESCRIPTION OF SHARE CAPITAL

Issued capital

We were incorporated on December 17, 2013 under the name Abengoa Yield Limited, with an issued, fully paid up, share capital of 100 ordinary shares of €0.10 each. Prior to the consummation of this offering, we will re-register as a public limited company with an issued fully paid up capital of          shares, nominal value $      per share.

As of February 28, 2014, we had 100 shares outstanding.

On     , 2014, at our General Meeting it was resolved that the directors are authorized to issue equity securities after the shareholders waived their pre-emption rights on the issue of new shares. Such power shall expire on the fifth anniversary of the date of passing this resolution, namely            .

Upon completion of this offering, our capital stock will consist of 80,000,000 shares that will have been issued in two steps:

 

•

following pricing, we will issue new shares and debt to Abengoa in exchange for the assets they will contribute to us; and

 

•

immediately thereafter, we will issue new shares to the new shareholders in exchange for cash and will use cash proceeds to repay the outstanding debt.

Shares not representing capital

None.

Shares held by the Company

We are not permitted under English law to hold our own shares unless they are repurchased by us and held in treasury.

History of share capital

The following table presents the history of our share capital as of the end of each of our last three fiscal years:

 

		December 31,
		2013				2012				2011
Shares			100				N/A				N/A

Upon our incorporation (December 17, 2013), we issued 100 shares and we have not issued any securities.

Memorandum and Articles of Association

Objects and Purposes

We were incorporated in England and Wales as a private limited company on December 17, 2013 under the name Abengoa Yield Limited, registered number 8818211. On                     , 2014, we will re-register as a public limited company, under the name Abengoa Yield plc.

The description of the company’s articles of association, or the Articles, in this section is based on the form of articles of association that will be adopted by the company prior to the consummation of this offering.

The Companies Act 2006, or the Companies Act, abolishes the need for an objects clause and, as such, our objects will be unrestricted.

 

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Disclosure of Personal Interests of an Office Holder

The Companies Act requires that an office holder disclose to the company any personal interest that he or she may have, and all related material information and documents known to him or her, in connection with any existing or proposed transaction by the company. The disclosure is required to be made promptly and in any event, no later than at the board of directors meeting in which the transaction is first discussed.

Directors

Subject to the provisions of the Articles, the directors may meet for the dispatch of business and adjourn and otherwise regulate its proceedings as they think fit. Unless and until in a general meeting the shareholders of the company determine otherwise, the number of directors of the company shall not be less than 7 nor more than 13 in number.

The quorum necessary for the transaction of business of the directors may be fixed from time to time by the directors and unless so fixed at any other number shall be a number equal to at least half of the directors appointed from time to time. A meeting of the directors at which a quorum is present shall be competent to exercise all powers and discretions for the time being exercisable by the directors. A director is not counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.

The directors of the company may in accordance with the Articles, and the provisions of the Companies Act, authorise a matter proposed to the company that would, if not authorised, involve a breach by a director of his duty under section 175 of the Companies Act to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the interests of the company. A director is not required, by reason of being a director (save as otherwise agreed by such director), to account to the company for any benefit which the director (or a person connected with the director) derives from any such matter authorised by the director. Any contract, transaction or arrangement relating to such matter shall not be liable to be avoided on the grounds of any such benefit.

Sections 177 and 182 of the Companies Act requires any transaction or arrangements with the company in which a director has an interest (proposed or existing) to be declared, and not only those that are extraordinary transactions or arrangements.

A director may not vote at a meeting of the board or of a committee of the board on any resolution in respect of any contract, transaction, or arrangement, or any other proposal in which he has (either alone or together with any person connected with him, as provided in the Companies Act) an interest other than in the circumstances set out below. A director shall not be counted in the quorum at a meeting of the directors in relation to any resolution in which the director is not entitled to vote.

Subject to the provisions of the Companies Act, a director is entitled to vote and be counted in the quorum in respect of any resolution concerning any contract, transaction or arrangement, or any other proposal (inter alia):

 

•

in which he has an interest of which he is not aware or which cannot reasonably be regarded as likely to give rise to a conflict of interest;

 

•

in which he has an interest only by virtue of interests in the company’s shares, debentures or other securities or otherwise in or through the company;

 

•

which involves the giving of any security, guarantee or indemnity to the director or any other person in respect of obligations incurred by him or any other person for the benefit of the company or a debt or other obligation of the company for which the director has assumed responsibility under a guarantee or indemnity or by the giving of security;

 

•

concerning an offer of securities by the company or any of its subsidiary undertakings in which he is or may be entitled to participate as a holder of securities or as an underwriter or sub-underwriter;

 

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•

concerning any other corporate, provided that he and any connected persons do not own or have a beneficial interest in one percent or more of any class of share capital of such body corporate, or of the voting rights available to the members of such body corporate;

 

•

relating to an arrangement for the benefit of employees or former employees which does not award him any privilege or benefit not generally awarded to the employees or former employees to whom such arrangement relates;

 

•

concerning the purchase or maintenance of insurance for any liability for the benefit of directors;

 

•

concerning the giving of indemnities in favor of the directors; or

 

•

concerning the funding of expenditure by any director or directors (i) on defending criminal, civil or regulatory proceedings or actions against him or them, (ii) in connection with an application to the court for relief, (iii) on defending him or them in any regulator investigations, or (iv) incurred doing anything to enable him to avoid incurring such expenditure.

Any director (including the director that has the conflict) may propose that such conflicted director be authorized in relation to any matter which is the subject of such a conflict. The director with the conflict will not count towards the quorum at the meeting at which the conflict is considered and may not vote on any resolution authorizing the conflict. Where the board gives authority in relation to such a conflict, the board may impose such terms on the relevant director as it deems appropriate.

Each of our directors and other officers may be indemnified by us against all costs, charges, losses, expenses and liabilities incurred by such director or officer in the execution or discharge of his or her duties or in relation to those duties. The Companies Act renders void an indemnity for a director against any liability attaching to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he or she is a director, as described in “—Differences in Corporate Law – Liability of Directors and Officers”. We plan to purchase insurance for our directors regarding negligence, default, breach of trust and breach of duty under the terms allowed under the Companies Act.

Appointment of Directors

The Companies Act requires that a resolution approving provisions to appoint a director for a period of more than two years must not be passed unless a memorandum setting out the proposed contract incorporating the provision is made available to members: in the case of a resolution at a meeting, by being made available for inspection by members of the company both (i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and (ii) at the meeting itself.

Subject to certain minimum thresholds in terms of their shareholdings, each shareholder shall be entitled to appoint a number of directors in proportion to their shareholding. However, no shareholder shall be entitled to appoint more than half of the directors plus one.

Effective from October 1, 2013, quoted companies must obtain a binding vote of shareholders on remuneration policy at least once every three years and an advisory vote an implementation report on how the remuneration policy was implemented in the relevant financial year.

Ordinary remuneration shall be paid to the independent non-executive directors only and shall be determined by the directors.

Directors’ Borrowing Powers

Subject to the provisions of the Articles and the Companies Act, the directors may exercise all the powers of the company to borrow money, mortgage or charge all or any part or parts of its undertaking, property and uncalled capital, and issue debentures and other securities whether outright or as collateral security for any debt, liability or obligation of the company or of any third party.

 

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Removal of Directors

The company may by ordinary resolution of which special notice has been given, remove any director and elect another person in place of such director.

Retirement of Directors

Each director shall retire at the annual general meeting held in the third calendar year following the year in which he was elected or last re-elected by the company or such shorter period as the directors may determine. In addition, each director (other than the Chairman and any director holding an executive office) shall also be required to retire at each annual general meeting following the ninth anniversary on the date on which he was elected by the company. A director who retires at any annual general meeting shall be eligible for election or re-election unless the directors resolve otherwise not later than the date of the notice of such annual general meeting.

When a director retires at an annual general meeting in accordance with the Articles, the company may, by ordinary resolution at the meeting, fill the office being vacated by re-electing the retiring director. In the absence of such a resolution, the retiring director shall nevertheless be deemed to have been re-elected, except in the cases identified by the Articles.

Termination of office

The office of a director of the company shall be terminated if:

 

(i)

subject to the provisions of the Companies Act, the shareholder who appointed the relevant director of the company elects to terminate the office of such director;

 

(ii)

the director of the company becomes prohibited by law or (if applicable) the NASDAQ Rules from acting as a director or ceases to be a director by virtue of any provision of the Companies Act;

 

(iii)

the company has received notice of the director’s resignation or retirement from office and such resignation or retirement from office has taken effect in accordance with its terms;

 

(iv)

the director has retired at an annual general meeting in accordance with the Articles;

 

(v)

the director has a bankruptcy order made against him/her, compounds with his/her creditors generally or applies to the court for an interim order under the UK Insolvency Act 1986 in connection with a voluntary arrangement under that Act or any analogous event occurs in relation to the director in another country;

 

(vi)

an order is made by any court claiming jurisdiction in that behalf on the ground (however formulated) of mental disorder for the director’s detention or for the appointment of another person (by whatever name called) to exercise powers with respect to the director’s property or affairs;

 

(vii)

the director is absent from meetings of the directors for three months without permission and the directors have resolved that the director’s office be vacated;

 

(viii)

notice of termination is served or deemed served on the director and that notice is given by a majority of directors for the time being; or

 

(ix)

in the case of a director other than the chairman and any director holding an executive office, if the directors resolve to require the director to resign and the director fails to do so within 30 days of notification of such resolution being served or deemed served on the director.

Share Qualification of Directors

A director shall not be required to hold any shares of the company by way of qualification. A director who is not a member of the company shall nevertheless be entitled to attend and speak at general meetings.

 

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Rights Attached to our Shares

As of December 17, 2013, the shares have attached to them full voting, dividend and capital distribution (including winding up) rights. However, the shares do not confer any rights of redemption.

Without prejudice to any rights attached to any existing shares, the company may issue shares with such rights or restrictions as determined either by the company by ordinary resolution or, if the company passes a resolution to authorize them, the directors. The company may also issue shares which are, or are liable to be, redeemed at the option of the company or the holder.

Dividend Rights. Our Articles provide that the company may, by ordinary resolution, declare final dividends to be paid to its shareholders in accordance with their respective rights. However, no dividend shall be declared unless it has been recommended by the directors and does not exceed the amount recommended by the directors.

If the directors believe that the profits of the company justify such payment, they may pay fixed dividends on any class of shares where the fixed dividend is payable on fixed dates. They may also pay interim dividends on shares of any class in amounts and on dates and periods as they think fit. Provided the directors act in good faith, they shall not incur any liability to the holders of any shares for any loss they may suffer by the lawful payment of dividends on any other class of shares having rights ranking equally with or behind those shares.

Unless the share rights otherwise provide, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, and apportioned and paid pro rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid.

Any unclaimed dividends may be invested or otherwise applied for the benefit of the company until they are claimed. If any dividend is unclaimed for 12 years from the date on which it was declared or became due for payment, the person who was otherwise entitled to it shall cease to be entitled and the company may keep that sum. In addition, the company will not be considered a trustee with respect to the amount of any payment into a separate account by the directors of any unclaimed dividend or other sum payable on or in respect of a share of the company.

The company may cease to send any check or other means of payment by post for any dividend on any shares which is normally paid in that manner if in respect of at least two consecutive dividends payable on those shares, the check, warrant or order has been returned undelivered or remains uncashed but, subject to the provisions of these Articles, shall recommence sending checks, warrants or orders in respect of the dividends payable on those shares if the holder of or person entitled to them claims the arrears of dividend and does not instruct the company to pay future dividends in some other way.

The directors may, if authorized by ordinary resolution, offer to shareholders the right to elect to receive, in lieu of a dividend, an allotment of new shares credited as fully paid.

Voting Rights. Subject to the provisions in the Articles and any special rights or restrictions as to voting attached to any shares or class of shares of the company, at a general meeting, voting on each and every resolution shall be taken by way of a poll.

As such, every member present in person or by proxy has one vote for every share held by him, as per the Articles.

A proxy shall not be entitled to vote where the member appointing the proxy would not have been entitled to vote on the resolution had he been present in person.

In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names appear in the register of the company in respect of the joint holding.

 

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The actions necessary to change the rights of holders of the shares are as follows: the rights of the shareholders would need to be altered by way of a special resolution requiring 75% vote of the shareholders who are present and voting in person or by proxy. In order to change the rights of a separate class of shares, it will require such a vote by shareholders of that class of shares.

Liquidation Rights. In the event of our liquidation, subject to applicable law, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of shares in proportion to their respective holdings. This liquidation right may be affected by the grant of preferential dividends or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Redemption Provisions. We may, subject to applicable law and to our Articles, issue redeemable preference shares and redeem the same.

Capital Calls. Under our Articles and the Companies Act, the liability of our shareholders is limited to the nominal (par) value of the shares held by them.

Subject to the terms of allotment of the shares of the company, the directors of the company may make a call on our shareholders by giving them notices of such call. A shareholder must pay to the company the amount called on his shares but is not required to do so until 14 days have passed since the notice of call was sent. If a shareholder fails to pay any part of a call, the directors may serve further notice naming another day not being less than seven days from the date of the further notice requiring payment and stating that in the event of non-payment the shares on which the call has been made will be liable to be forfeited. Subsequent forfeiture requires a resolution by the directors.

Transfer of Shares. Fully paid shares are issued in registered form and may be transferred pursuant to our Articles, unless such transfer is restricted or prohibited by another instrument and subject to applicable securities laws.

Transfers of uncertificated shares may be effected by means of a relevant system (i.e. NASDAQ Global Select Market) unless the NASDAQ Regulations provide otherwise.

Preemptive Rights. In certain circumstances, our shareholders have preemptive rights under the Companies Act with respect to new issuances of equity securities. These rights are summarized in “—Differences in Corporate Law—Preemptive Rights.” We plan to convene a shareholders’ meeting prior to the effectiveness of this Form F-1 to obtain a waiver of such rights for a period of five years in accordance with the provisions of the Companies Act.

Modification of Rights

Whenever the share capital of the company is divided into different classes of shares, the special rights attached to any class may be varied or abrogated either with the written consent of the holders of three-quarters in nominal value of the issued shares of the class (excluding shares held as treasury shares) or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class (but not otherwise), and may be so varied or abrogated either while the company is a going concern or during or in contemplation of a winding-up.

The special rights attached to any class of shares will not, unless otherwise expressly provided by the terms of issue, be deemed to be varied by (a) the creation or issue of further shares ranking, as regards participation in the profits or assets of the company, in some or all respects equally with them but in no respect in priority to them, or (b) the purchase or redemption by the company of any of its own shares.

 

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Shareholders’ Meetings and Resolutions

An annual general meeting shall be held in each period of six months beginning with the day following the company’s accounting reference date, at such place or places, date and time as may be decided by the directors.

The directors may, whenever they think fit, call a general meeting. The directors are required to call a general meeting once the company has received requests from its members to do so in accordance with the Companies Act.

Notice of general meetings shall include all information required to be included by the Companies Act and shall be given to all members other than those members who are not entitled to receive such notices from the company under the provisions of the Articles. The company may determine that only those persons entered on the Register at the close of business on a day decided by the company, such day being no more than 21 days before the day that notice of the meeting is sent, shall be entitled to receive such a notice.

For the purposes of determining which persons are entitled to attend or vote at a meeting, and how many votes such persons may cast, the company must specify in the notice of the meeting a time, not more than 48 hours before the time fixed for the meeting, by which a person must be entered on the Register in order to have the right to attend or vote at the meeting. The directors may in their discretion resolve that, in calculating such period, no account shall be taken of any part of any day that is not a working day (within the meaning of Section 1173 of the Companies Act).

No business other than the appointment of a chairman shall be transacted at any general meeting unless a quorum is present at the time when the meeting proceeds to business. Two members present in person or by proxy and representing in total at least one third in nominal value of the issued shares will be a quorum.

The directors may require attendees to submit to searches or put in place such arrangements or restrictions as they think fit to ensure the safety and security of attendees at a general meeting. Any member, proxy or other person who fails to comply with such arrangements or restrictions may be refused entry to, or removed from, the general meeting.

The directors may decide that a general meeting shall be held at two or more locations to facilitate the organization and administration of such meeting. A member present in person or by proxy at the designated “satellite” meeting place may be counted in the quorum and may exercise all rights that they would have been able to exercise if they had been present at the principal meeting place. The directors may make and change from time to time such arrangements as they shall in their absolute discretion consider appropriate to:

 

•

ensure that all members and proxies for members wishing to attend the meeting can do so;

 

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ensure that all persons attending the meeting are able to participate in the business of the meeting and to see and hear anyone else addressing the meeting;

 

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ensure the safety of persons attending the meeting and the orderly conduct of the meeting; and

 

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restrict the numbers of members and proxies at any one location to such number as can safely and conveniently be accommodated there.

Limitation on Owning Securities

Our Articles do not restrict in any way the ownership or voting of our shares by non-residents. Furthermore, there is no longer an obligation of a shareholder of a U.K. company which is a non-listed (in the U.K. or EU) company to voluntarily disclose his shareholding unless, required to do so by the company. If the company serves a demand on a person under section 793 to the Companies Act, that person will be required to disclose any interest he has in the shares of the company.

 

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Change in Control

We can issue additional shares with any rights or restrictions attached to them as long as not restricted by any rights attached to existing shares. These rights or restrictions can be decided by the directors so long as there is no conflict with the Articles or any resolution passed by the shareholders. The ability of the directors to issue shares with rights or restrictions that are different than those attached to the currently outstanding shares could have the effect of delaying, deferring or preventing change of control of our company.

We may in the future be subject to the U.K. Takeover Code which is not binding on our company at the present time. Nevertheless, the U.K. Takeover Code could apply to our company under certain circumstances in the future and if that were to occur, each shareholder who is to acquire more than 29.9% of our issued and outstanding shares could, in most circumstances, be required to make an offer for all the shares in our company under the terms of the U.K. Takeover Code.

Brazil Dividend Policy

Pursuant to the terms of a deed we will enter into with Abengoa prior to the consummation of the offering, in the event the annual dividend paid to us by ACBH as holder of its preferred equity is below $18 million, or the equivalent in local currency, in any given year, Abengoa has agreed to waive its right to receive a portion of the dividend from Abengoa Yield in an amount equal to such shortfall. This waiver will cease to be in force when we have converted the preferred equity into project shares (provided we elect to convert), or when the aggregate amount of dividends from projects owned by ACBH reaches a minimum of $36 million per year for three consecutive years.

Other UK Law Considerations

Squeeze-out

Under the Companies Act, if a takeover offer (as defined in section 974 of the Companies Act) is made for the shares of a company and the offeror were to acquire, or unconditionally contract to acquire, not less than 90% in value of the shares to which the takeover offer relates the Takeover Offer Shares, and not less than 90% of the voting rights attached to the Takeover Offer Shares within three months of the last day on which its offer can be accepted, it could acquire compulsorily the remaining 10%. It would do so by sending a notice to outstanding shareholders telling them that it will acquire compulsorily their Takeover Offer Shares and then, six weeks later, it would execute a transfer of the outstanding Takeover Offer Shares in its favor and pay the consideration to the company, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose Takeover Offer Shares are acquired compulsorily under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer.

Sell-out

The Companies Act also gives minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer (as defined in Section 974 of the Companies Act). If a takeover offer related to all our shares and, at any time before the end of the period within which the offer could be accepted, the offeror held or had agreed to acquire not less than 90% of our shares to which the offer relates, any holder of our shares to which the offer related who had not accepted the offer could by a written communication to the offeror require it to acquire those shares. The offeror is required to give any shareholder notice of his right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of the minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period. If a shareholder exercises his or her rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.

 

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Disclosure of Interest in Shares

Pursuant to Part 22 of the Companies Act, the company is empowered by notice in writing to require any person whom the company knows to be, or has reasonable cause to believe to be, interested in the company’s shares or at any time during the three years immediately preceding the date on which the notice is issued to have been so interested, within a reasonable time to disclose to the company details of that person’s interest and (so far as is within such person’s knowledge) details of any other interest that subsists or subsisted in those shares. Under the Articles, if a member defaults in supplying the company with the required details in relation to the shares in question, or the Default Shares, the member shall not be entitled to vote or exercise any other right conferred by membership in relation to general meetings. Where the Default Shares represent 0.25% or more of the issued shares of the class in question, the directors may direct that (a) any dividend or other money payable in respect of the Default Shares shall be retained by the company without any liability to pay interest on it when such dividend or other money is finally paid to the member; and/or (b) no transfer by the relevant member of shares (other than transfer approved in accordance with the provisions of the Articles) may be registered (unless such member is not in default and the transfer does not relate to Default Shares).

Purchase of Own Shares

Under English law, a public limited company may purchase its own shares only out of the distributable profits of the company or the proceeds of a new issue of shares made for the purpose of financing the purchase. A public limited company may not purchase its own shares if as a result of the purchase there would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares. Subject to the foregoing, because The NASDAQ Global Market is not a “recognized investment exchange” under the Companies Act, the company may purchase its own fully paid shares only pursuant to a purchase contract authorized by ordinary resolution of the holders of its ordinary shares before the purchase takes place. Any authority will not be effective if any shareholder from whom we propose to purchase shares votes on the resolution and the resolution would not have been passed if such shareholder had not done so. The resolution authorizing the purchase must specify a date, not being later than five years after the passing of the resolution, on which the authority to purchase is to expire.

A share buy-back by the company of its ordinary shares will give rise to UK stamp duty at the rate of 0.5% of the amount or value of the consideration payable by the company, and such stamp duty will be paid by the company.

Our Articles do not have conditions governing changes in our capital which are more stringent than those required by law.

 

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Differences in Corporate Law

The applicable provisions of the Companies Act differ from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of certain differences between the provisions of the Companies Act applicable to us and the Delaware General Corporation Law relating to shareholders’ rights and protections. This summary is not intended to be a complete discussion of the respective rights and it is qualified in its entirety by reference to English law and Delaware law.

 

		England and Wales		Delaware
Number of Directors		Under the Companies Act, a public limited company must have at least two directors and the number of directors may be fixed by or in the manner provided in a company’s articles of association.		Under Delaware law, a corporation must have at least one director and the number of directors shall be fixed by or in the manner provided in the bylaws.
Removal of Directors		Under the Companies Act, shareholders may remove a director without cause by an ordinary resolution (which is passed by a simple majority of those voting in person or by proxy at a general meeting) irrespective of any provisions of any service contract the director has with the company, provided that 28 clear days’ notice of the resolution is given to the company and its shareholders and certain other procedural requirements under the Companies Act are followed (such as allowing the director to make representations against his or her removal either at the meeting or in writing).		Under Delaware law, unless otherwise provided in the certificate of incorporation, directors may be removed from office, with or without cause, by a majority stockholder vote, though in the case of a corporation whose board is classified, stockholders may effect such removal only for cause.
Vacancies on the Board of Directors		Under English law, the procedure by which directors (other than a company’s initial directors) are appointed is generally set out in a company’s articles of association, provided that where two or more persons are appointed as directors of a public limited company by resolution of the shareholders, resolutions appointing each director must be voted on individually unless a resolution of the shareholders that such resolutions do not have to be voted on individually is first agreed to by the meeting without any vote being given against it.		Under Delaware law, vacancies on a corporation’s board of directors, including those caused by an increase in the number of directors, may be filled by a majority of the remaining directors.
Annual General Meeting		Under the Companies Act, a public limited company must hold an annual general meeting in each six-month period following the company’s annual accounting reference date.		Under Delaware law, the annual meeting of stockholders shall be held at such place, on such date and at such time as may be designated from time to time by the board of directors or as provided in the certificate of incorporation or by the bylaws.

 

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		England and Wales		Delaware
General Meeting		Under the Companies Act, a general meeting of the shareholders of a public limited company may be called by the directors.   Shareholders holding at least 5% of the paid-up capital of the company carrying voting rights at general meetings can require the directors to call a general meeting.		Under Delaware law, special meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.
Notice of General Meetings		Under the Companies Act, 21 clear days’ notice must be given for an annual general meeting and any resolutions to be proposed at the meeting. Subject to a company’s articles of association providing for a longer period, at least 14 clear days’ notice is required for any other general meeting. In addition, certain matters (such as the removal of directors or auditors) require special notice, which is 28 clear days’ notice. The shareholders of a company may in all cases consent to a shorter notice period, the proportion of shareholders’ consent required being 100% of those entitled to attend and vote in the case of an annual general meeting and, in the case of any other general meeting, a majority in number of the members having a right to attend and vote at the meeting, being a majority who together hold not less than 95% in nominal value of the shares giving a right to attend and vote at the meeting. Neither of these thresholds can be changed by a company’s articles of association.		Under Delaware law, unless otherwise provided in the certificate of incorporation or bylaws, written notice of any meeting of the stockholders must be given to each stockholder entitled to vote at the meeting not less than ten nor more than 60 days before the date of the meeting and shall specify the place, date, hour, and purpose or purposes of the meeting.
Proxy		Under the Companies Act, at any meeting of shareholders, a shareholder may designate another person to attend, speak and vote at the meeting on their behalf by proxy.		Under Delaware law, at any meeting of stockholders, a stockholder may designate another person to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Preemptive Rights		Under the Companies Act, “equity securities” (being (i) shares in the company other than shares that, with respect to dividends and capital, carry a right to participate only up to a specified amount in a distribution (“ordinary shares”) or (ii) rights to subscribe for, or to		Under Delaware law, unless otherwise provided in a corporation’s certificate of incorporation, a stockholder does not, by operation of law, possess preemptive rights to subscribe to additional issuances of the corporation’s stock.

 

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		England and Wales		Delaware
		convert securities into, ordinary shares) proposed to be allotted for cash must be offered first to the existing equity shareholders in the company in proportion to the respective nominal value of their holdings, unless an exception applies or a special resolution to the contrary has been passed by shareholders in a general meeting or the articles of association provide otherwise in each case in accordance with the provisions of the Companies Act.
Liability of Directors and Officers		Under the Companies Act, any provision (whether contained in a company’s articles of association or any contract or otherwise) that purports to exempt a director of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company is void.   Any provision by which a company directly or indirectly provides an indemnity (to any extent) for a director of the company or of an associated company against any liability attaching to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he is a director is also void except as permitted by the Companies Act, which provides exceptions for the company to (a) purchase and maintain insurance against such liability; (b) provide a “qualifying third party indemnity” (being an indemnity against liability incurred by the director to a person other than the company or an associated company. Such indemnity must not cover criminal fines, penalties imposed by regulatory bodies, the defense costs of criminal proceedings where the director is found guilty, the defense costs of civil proceedings successfully brought against the director by the company or an associated company, and the costs of unsuccessful applications by the director for relief); and (c) provide a “qualifying pension scheme indemnity” (being an indemnity against liability incurred in connection with the company’s activities		Under Delaware law, a corporation’s certificate of incorporation may include a provision eliminating or limiting the personal liability of a director to the corporation and its stockholders for damages arising from a breach of fiduciary duty as a director. However, no provision can limit the liability of a director for:   •    any breach of the director’s duty of loyalty to the corporation or its stockholders;   •    acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;   •    intentional or negligent payment of unlawful dividends or stock purchases or redemptions; or   •    any transaction from which the director derives an improper personal benefit.

 

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		England and Wales		Delaware
		as trustee of an occupational pension plan). Such indemnity must not cover a fine imposed in criminal proceedings, or sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (however arising), or any liability incurred by the director in defending criminal proceedings in which he is convicted).
Voting Rights		Under English law, unless a poll is demanded by the shareholders of a company or is required by the chairman of the meeting or the company’s articles of association, shareholders shall vote on all resolutions on a show of hands. Under the Companies Act, a poll may be demanded by (a) not fewer than five shareholders having the right to vote on the resolution; (b) any shareholder(s) representing at least 10% of the total voting rights of all the shareholders having the right to vote on the resolution (excluding any voting rights attached to treasury shares); or (c) any shareholder (s) holding shares in the company conferring a right to vote on the resolution being shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all the shares conferring that right. A company’s articles of association may provide more extensive rights for shareholders to call a poll.   Under English law, an ordinary resolution is passed on a show of hands if it is approved by a simple majority (more than 50%) of the votes cast by shareholders present (in person or by proxy) and entitled to vote. If a poll is demanded, an ordinary resolution is passed if it is approved by holders representing a simple majority of the total voting rights of shareholders present (in person or by proxy) who (being entitled to vote) vote on the resolution. Special resolutions require the affirmative vote of not less than 75% of the votes cast by shareholders present (in person or by proxy) at the meeting.		Delaware law provides that, unless otherwise provided in the certificate of incorporation, each stockholder is entitled to one vote for each share of capital stock held by such stockholder.

 

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		England and Wales		Delaware
Shareholder Vote on Certain Transactions		The Companies Act provides for schemes of arrangement, which are arrangements or compromises between a company and any class of shareholders or creditors and used in certain types of reconstructions, amalgamations, capital reorganizations or takeovers. These arrangements require:   •    the approval at a shareholders’ or creditors’ meeting convened by order of the court, of a majority in number of shareholders or creditors representing 75% in value of the capital held by, or debt owed to, the class of shareholders or creditors, or class thereof present and voting, either in person or by proxy; and   •    the approval of the court.		Generally, under Delaware law, unless the certificate of incorporation provides for the vote of a larger portion of the stock, completion of a merger, consolidation, sale, lease or exchange of all or substantially all of a corporation’s assets or dissolution requires:   •    the approval of the board of directors; and   •    approval by the vote of the holders of a majority of the outstanding stock or, if the certificate of incorporation provides for more or less than one vote per share, a majority of the votes of the outstanding stock of a corporation entitled to vote on the matter.
Standard of Conduct for Directors		Under English law, a director owes various statutory and fiduciary duties to the company, including:   •    to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole;   •    to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly conflicts, with the interests of the company;   •    to act in accordance with the company’s constitution and only exercise his powers for the purposes for which they are conferred;   •    to exercise independent judgment;   •    to exercise reasonable care, skill and diligence;   •    not to accept benefits from a third party conferred by reason of his being a director or doing (or not doing) anything as a director; and   •    a duty to declare any interest that he has, whether directly or indirectly, in a proposed or existing transaction or arrangement with the company.		Delaware law does not contain specific provisions setting forth the standard of conduct of a director. The scope of the fiduciary duties of directors is generally determined by the courts of the State of Delaware. In general, directors have a duty to act without self-interest, on a well-informed basis and in a manner they reasonably believe to be in the best interest of the stockholders.

 

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		England and Wales		Delaware
Stockholder Suits		Under English law, generally, the company, rather than its shareholders, is the proper claimant in an action in respect of a wrong done to the company or where there is an irregularity in the company’s internal management. Notwithstanding this general position, the Companies Act provides that (i) a court may allow a shareholder to bring a derivative claim (that is, an action in respect of and on behalf of the company) in respect of a cause of action arising from a director’s negligence, default, breach of duty or breach of trust and (ii) a shareholder may bring a claim for a court order where the company’s affairs have been or are being conducted in a manner that is unfairly prejudicial to some of its shareholders.		Under Delaware law, a stockholder may initiate a derivative action to enforce a right of a corporation if the corporation fails to enforce the right itself. The complaint must:   •    state that the plaintiff was a stockholder at the time of the transaction of which the plaintiff complains or that the plaintiffs shares thereafter devolved on the plaintiff by operation of law; and   •    allege with particularity the efforts made by the plaintiff to obtain the action the plaintiff desires from the directors and the reasons for the plaintiff’s failure to obtain the action; or   •    state the reasons for not making the effort.   Additionally, the plaintiff must remain a stockholder through the duration of the derivative suit. The action will not be dismissed or compromised without the approval of the Delaware Court of Chancery.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of our shares in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of our shares. No prediction can be made as to the effect, if any, future sales of shares, or the availability of our shares for future sales, will have on the market price of our shares prevailing from time to time. The number of shares available for future sale in the public market is subject to legal and contractual restrictions, some of which are described below. The expiration of these restrictions will permit sales of substantial amounts of our shares in the public market, or could create the perception that these sales may occur, which could adversely affect the prevailing market price of our shares. These factors also could make it more difficult for us to raise funds through future offerings of our shares.

Upon the consummation of this offering, we will have issued and outstanding an aggregate of 80 million shares. All of the shares to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any such shares held or acquired by an “affiliate” of ours, as that term is defined in Rule 144 promulgated under the Securities Act, or Rule 144, which shares will be subject to the volume limitations and other restrictions of Rule 144 described below. The remaining shares that will be outstanding upon completion of this offering will be “restricted securities,” as that phrase is defined in Rule 144, and may be resold only after registration under the Securities Act or pursuant to an exemption from such registration, including, among others, the exemptions provided by Rule 144, which rules are summarized below. These remaining shares that will be outstanding upon completion of this offering will be available for sale in the public market after the expiration of the lock-up agreements described in “Underwriting,” taking into account the provisions of Rule 144.

Rule 144

The shares being sold in this offering will generally be freely tradable without restriction or further registration under the Securities Act, except that any shares held by an “affiliate” of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits shares that have been acquired by a person who is an affiliate of ours, or has been an affiliate of ours within the past three months, to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:

 

•

1% of the total number of our outstanding shares which will equal approximately              shares after this offering; or

 

•

the average weekly reported trading volume of our shares on the NASDAQ Global Select Market for the four calendar weeks prior to the sale.

Such sales are also subject to specific manner-of-sale provisions, a six-month holding period requirement for restricted securities, notice requirements and the availability of current public information about us. An “affiliate” is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with an issuer.

Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least six months beneficially owned shares that are restricted securities (including the holding period of any prior owner other than an affiliate), will be entitled to freely sell such shares subject only to the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least one year beneficially owned shares that are restricted securities (including the holding period of any prior owner other than an affiliate), will be entitled to freely sell such shares under Rule 144 without regard to the public information requirements of Rule 144. To the extent that any of our affiliates sell their shares, other than pursuant to Rule 144 or a registration statement, the purchaser’s holding period for the purpose of effecting a sale under Rule 144 commences on the date of the transfer from the affiliate.

 

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Lock-Up Agreements

We expect that we, the selling shareholder and our directors and executive officers will enter into lock-up agreements under which we and they will agree that we and they will not sell, directly or indirectly, any shares for a period of 180 days from the date of this prospectus (subject to certain exceptions) without the prior written consent of Citigroup Global Markets Inc. See “Underwriting.”

 

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TAXATION

Material U.K. Tax Considerations

The following is a general summary of material U.K. tax considerations relating to the ownership and disposal of our shares. The comments set out below are based on current United Kingdom tax law as applied in England and Wales and HM Revenue & Customs practice (which may not be binding on HM Revenue & Customs) as at the date of this summary, both of which are subject to change, possibly with retrospective effect. They are intended as a general guide and apply only to our shareholders resident and, in the case of an individual, domiciled for tax purposes in the United Kingdom and to whom “split year” treatment does not apply (except insofar as express reference is made to the treatment of non-United Kingdom residents), who hold our shares as an investment and who are the absolute beneficial owners thereof. (In particular, shareholders holding their shares via a depositary receipt system or clearance service should note that they may not always be the absolute beneficial owners thereof.) The discussion does not address all possible tax consequences relating to an investment in the shares. Certain categories of shareholders, including those carrying on certain financial activities, those subject to specific tax regimes or benefitting from certain reliefs or exemptions, those connected with us and those for whom the shares are employment related securities may be subject to special rules and this summary does not apply to such shareholders. This summary does not address any inheritance tax considerations

This summary is for general information only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular investor. It does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under U.K. tax law. In particular:

POTENTIAL INVESTORS SHOULD SATISFY THEMSELVES PRIOR TO INVESTING AS TO THE OVERALL TAX CONSEQUENCES, INCLUDING, SPECIFICALLY, THE CONSEQUENCES UNDER U.K. TAX LAW AND HMRC PRACTICE OF THE ACQUISITION, OWNERSHIP AND DISPOSAL OF THE SHARES IN THEIR OWN PARTICULAR CIRCUMSTANCES BY CONSULTING THEIR OWN TAX ADVISORS.

Taxation of dividends

We will not be required to withhold amounts on account of United Kingdom tax at source when paying a dividend.

A United Kingdom resident individual shareholder who receives a dividend from us will be entitled to a tax credit which may be set off against the shareholder’s total income tax liability. The tax credit will be equal to 10% of the aggregate of the dividend and the tax credit (the “gross dividend”), which is also equal to one-ninth of the cash dividend received. Such an individual shareholder who is liable to income tax at the basic rate will be subject to tax on the dividend at the rate of 10% of the gross dividend, so that the tax credit will satisfy in full such shareholder’s liability to income tax on the dividend. In the case of such an individual shareholder who is liable to income tax at the higher rate, the tax credit will be set against but not fully match the shareholder’s tax liability on the gross dividend and such shareholder will have to account for additional income tax equal to 22.5% of the gross dividend (which is also equal to 25% of the cash dividend received) to the extent that the gross dividend when treated as the top slice of the shareholder’s income falls above the threshold for higher rate income tax. In the case of such an individual shareholder who is subject to income tax at the additional rate, the tax credit will also be set against but not fully match the shareholder’s liability on the gross dividend and such shareholder will have to account for additional income tax equal to 27.5% of the gross dividend (which is also equal to approximately 30.6% of the cash dividend received) to the extent that the gross dividend when treated as the top slice of the shareholder’s income falls above the threshold for additional rate income tax.

A United Kingdom resident individual shareholder who is not liable to income tax in respect of the gross dividend and other United Kingdom resident taxpayers who are not liable to United Kingdom tax on dividends will not be entitled to claim repayment of the tax credit attaching to dividends paid by us.

 

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Shareholders who are within the charge to corporation tax will be subject to corporation tax on dividends paid by us, unless (subject to special rules for such shareholders that are small companies) the dividends fall within an exempt class and certain other conditions are met. Each shareholder’s position will depend on its own individual circumstances, although it would normally be expected that the dividends paid by us would fall within an exempt class. Such shareholders will not be able to claim repayment of tax credits attaching to dividends.

Non-United Kingdom resident shareholders will not generally be able to claim repayment from HM Revenue & Customs of any part of the tax credit attaching to dividends paid by us. A shareholder resident outside the United Kingdom may also be subject to foreign taxation on dividend income under local law. Shareholders who are not resident for tax purposes in the United Kingdom should obtain their own tax advice concerning tax liabilities on dividends received from us.

Taxation of disposals

U.K. Holders

Shareholders who are resident in the United Kingdom, or, in the case of individuals, who cease to be resident in the United Kingdom for a period of five years or less, may depending on their circumstances (including the availability of exemptions or reliefs), be liable to United Kingdom taxation on chargeable gains in respect of gains arising from a sale or other disposal of our shares.

Non-U.K. Holders

An individual holder who is not a U.K. Holder will not be liable to U.K. capital gains tax on capital gains realized on the disposal of his or her shares unless such holder carries on (whether solely or in partnership) a trade, profession or vocation in the United Kingdom through a branch or agency in the United Kingdom to which the shares are attributable. In these circumstances, such holder may, depending on his or her individual circumstances, be chargeable to U.K. capital gains tax on chargeable gains arising from a disposal of his or her shares.

A corporate holder of shares that is not a U.K. Holder will not be liable for U.K. corporation tax on chargeable gains realized on the disposal of its shares unless it carries on a trade in the United Kingdom through a permanent establishment to which the shares are attributable. In these circumstances, a disposal of shares by such holder may give rise to a chargeable gain or an allowable loss for the purposes of U.K. corporation tax.

Stamp duty and stamp duty reserve tax

General

The issue of new shares under a primary offering does not give rise to a stamp duty or stamp duty reserve tax (SDRT) liability, according to the HM Revenue & Customs practice and recent case law. Moreover, in relation to depositary receipt systems and clearance services such as DTC (to which the special rules outlined below apply), no stamp duty or SDRT will arise on the issue of our shares in registered form.

An agreement to transfer our shares will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer. SDRT is, in general, payable by the purchaser.

Transfers of our shares will generally be subject to stamp duty at the rate of 0.5% of the consideration given for the transfer (rounded up to the next £5). The purchaser normally pays the stamp duty.

If a duly stamped transfer completing an agreement to transfer is produced within six years of the date on which the agreement is made (or, if the agreement is conditional, the date on which the agreement becomes unconditional) any SDRT already paid is generally repayable, normally with interest, and any SDRT charge yet to be paid is cancelled.

 

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Depositary Receipt Systems and Clearance Services

Following the ECJ decision in C-569/07 HSBC Holdings Plc, Vidacos Nominees Limited v The Commissioners of Her Majesty’s Revenue & Customs and the First-tier Tax Tribunal decision in HSBC Holdings Plc and The Bank of New York Mellon Corporation v The Commissioners of Her Majesty’s Revenue & Customs, HM Revenue & Customs has confirmed that 1.5% SDRT is no longer payable when new shares are issued to a clearance service or depositary receipt system.

Where our shares are transferred (a) to, or to a nominee or an agent for, a person whose business is or includes the provision of clearance services or (b) to, or to a nominee or an agent for, a person whose business is or includes issuing depositary receipts, stamp duty or SDRT will generally be payable at the higher rate of 1.5% of the amount or value of the consideration given or, in certain circumstances, the value of the shares.

There is an exception from the 1.5% charge on the transfer to, or to a nominee or agent for, a clearance service where the clearance service has made and maintained an election under section 97A(1) of the Finance Act 1986, which has been approved by HM Revenue & Customs. In these circumstances, SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer will arise on any transfer of our shares into such an account and on subsequent agreements to transfer such shares within such account.

Any liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt system, or in respect of a transfer within such a service, which does arise will strictly be accountable by the clearance service or depositary receipt system operator or their nominee, as the case may be, but will, in practice, be payable by the participants in the clearance service or depositary receipt system.

The Proposed Financial Transactions Tax

The European Commission has published a proposal for a Directive for a common Financial Transactions Tax, or FTT, in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”).

The proposed FTT has very broad scope and could, if introduced in its current form, apply to certain dealings in our shares (including secondary market transactions) in certain circumstances.

Under current proposals the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in our shares where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

The FTT proposal remains subject to negotiation between the participating Member States and is the subject of legal challenge. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate. Prospective holders of our shares are advised to seek their own professional advice in relation to the FTT.

Material U.S. Federal Income Tax Considerations

The following is a summary of material U.S. federal income tax consequences of the acquisition, ownership and disposition of shares by U.S. Holders (as defined below) who are initial purchasers of the shares. This summary is based upon U.S. federal income tax laws (including the IRC, final, temporary and proposed Treasury regulations, rulings, judicial decisions and administrative pronouncements), and the income tax treaty between the United States and the United Kingdom, or the Treaty, all as of the date hereof and all of which are subject to changes in wording or administrative or judicial interpretation occurring after the date hereof, possibly with retroactive effect.

 

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As used herein, the term “U.S. Holder” means a beneficial owner of shares:

 

(a)

that is, for U.S. federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or the trust has validly elected to be treated as a domestic trust for U.S. federal income tax purposes;

 

(b)

that holds the shares as capital assets for U.S. federal income tax purposes; and

 

(c)

that owns, directly, indirectly or by attribution, less than 10% of the share capital or voting stock of Abengoa Yield.

This summary does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of shares by particular investors, and does not address state, local, foreign or other tax laws. This summary does not address all of the U.S. federal income tax considerations that may apply to U.S. Holders that are subject to special tax rules, such as certain U.S. expatriates, insurance companies, tax-exempt organizations, certain financial institutions, persons subject to the alternative minimum tax or the net investment income tax, dealers and certain traders in securities or currencies, persons holding shares as part of a straddle, hedging, conversion or other integrated transaction, persons who acquired their shares pursuant to the exercise of employee stock options or otherwise as compensation, partners in entities classified as partnerships for U.S. federal income tax purposes, persons holding shares through an individual retirement account or other tax-deferred account, or persons whose functional currency is not the U.S. dollar. Such U.S. holders may be subject to U.S. federal income tax consequences different from those set forth below.

If an entity classified as partnership for U.S. federal income tax purposes holds shares, the U.S. federal income tax treatment of a partner in such entity generally will depend upon the status of the partner and the activities of the partnership. An entity treated as a partnership for U.S. federal income tax purposes that holds shares and its partners are urged to consult their own tax advisor regarding the specific U.S. federal income tax consequences to the partnership and its partners of acquiring, owning and disposing of the shares.

This discussion assumes that Abengoa Yield is not, and will not become, a passive foreign investment company, or PFIC, for U.S. federal income tax purposes, as discussed below under “—Passive foreign investment company rules.”

Potential investors in shares should consult their own tax advisors concerning the specific U.S. federal, state and local tax consequences of the ownership and disposition of shares in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

Taxation of distributions on the shares

Distributions received by a U.S. Holder on shares generally will constitute foreign-source dividends to the extent paid out of Abengoa Yield’s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Abengoa Yield intends to annually calculate its earnings and profits in accordance with U.S. federal income tax principles. If distributions exceed Abengoa Yield’s current and accumulated earnings and profits, such excess distributions will constitute a non-taxable return of capital to the extent of the U.S. Holder’s tax basis in its shares and will result in a reduction of such tax basis. To the extent such excess exceeds a U.S. Holder’s tax basis in the shares, such excess will generally be taxed as capital gain.

Subject to certain exceptions for short-term and hedged positions, dividends received by certain non-corporate U.S. Holders of shares generally will be subject to U.S. federal income taxation at rates lower than

 

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those applicable to other ordinary income if the dividends are “qualified dividends.” Distributions received by a U.S. Holder on shares will be qualified dividends if (i) shares are readily tradable on an established securities market in the United States (such as NASDAQ Global Market on which the shares are expected to be listed) and (ii) Abengoa Yield was not, for the year prior to the year in which the dividends are paid, and is not, for the year in which the dividends are paid, a PFIC. As discussed below under “—Passive foreign investment company rules,” Abengoa Yield does not believe it was a PFIC for its most recent taxable year and does not expect to be a PFIC for its current taxable year or in the foreseeable future. Non-corporate U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at these favorable rates. Corporate U.S. Holders will not be entitled to claim the dividends-received deduction with respect to dividends paid by Abengoa Yield. Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend.

Taxation upon sale or other disposition of shares

A U.S. Holder generally will recognize U.S. source capital gain or loss on the sale or other disposition of shares, which will generally be long-term capital gain or loss if the U.S. Holder has held such shares for more than one year. The amount of the U.S. Holder’s gain or loss will be equal to the difference between such U.S. Holder’s adjusted tax basis in the shares sold or otherwise disposed of and the amount realized on the sale or other disposition. Net long-term capital gain recognized by certain non-corporate U.S. Holders will be taxed at a lower rate than the rate applicable to ordinary income. The deductibility of capital losses is subject to limitations.

Passive foreign investment company rules

If Abengoa Yield were a PFIC for any taxable year during which a U.S. Holder held shares, certain adverse U.S. federal income tax consequences may apply to the U.S. Holder. Abengoa Yield does not believe it was a PFIC for its most recent taxable year and does not expect to be a PFIC for U.S. federal income tax purposes for its current taxable year or in the foreseeable future. However, PFIC status depends on the composition of a company’s income and assets and the fair market value of its assets (including, among others, less than 25% owned equity investments) from time to time, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. Accordingly, there can be no assurance that Abengoa Yield will not be considered a PFIC for any taxable year.

A non-U.S. corporation will be a PFIC in any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable “look-through rules,” either (i) at least 75% of its gross income is “passive income” or (ii) at least 50% of the average value of its assets is attributable to assets which produce passive income or are held for the production of passive income. For purposes of the PFIC rules, “passive income” includes, among other things, certain foreign currency gains and the excess of gains over losses from certain commodities transactions. Gains from commodities transactions, however, are generally excluded from the definition of passive income if such gains are active business gains from the sale of commodities and the foreign corporation’s commodities meet specified criteria.

If Abengoa Yield were a PFIC for any taxable year during which a U.S. Holder held shares, gain recognized by a U.S. Holder on a sale or other disposition of the shares would generally be allocated ratably over the U.S. Holder’s holding period for the shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before Abengoa Yield became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to U.S. federal income tax at the highest rate in effect in that year for individuals or corporations, as appropriate, and an interest charge would be imposed on the resulting U.S. federal income tax liability. The same treatment would generally apply to any distribution in respect of shares to the extent the distribution exceeds 125% of the average of the annual distributions on shares received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter.

 

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In addition, if Abengoa Yield were a PFIC for a taxable year in which it pays a dividend or in the prior taxable year, the favorable dividend rate discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply.

Information reporting and backup withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S. financial intermediaries generally are subject to information reporting and to backup withholding unless the U.S. Holder is a corporation or other exempt recipient or, in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Certain U.S. Holders who are individuals may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock and securities of a non-U.S. person (such as Abengoa Yield), subject to exceptions (including an exception for stock and securities held through a U.S. financial institution). Other U.S. Holders may be subject to similar rules in the future. U.S. Holders should consult their tax advisors regarding their reporting obligations with respect to the shares.

 

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UNDERWRITING

Citigroup Global Markets Inc. is acting as book-running manager and representative of the underwriters named below in respect of the offering. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has severally agreed to purchase, and we have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter’s name.

 

Underwriter		Number of Shares
Citigroup Global Markets Inc.
Total

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $             per share. If all the shares are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The representative has advised us that the underwriters do not intend to make sales to discretionary accounts.

If the underwriters sell more shares than the total number set forth in the table above, the selling shareholder has granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional              shares at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment. Any over-allotment shares issued or sold under the option will be issued and sold by the selling shareholder on the same terms and conditions as the other shares that are the subject of this offering.

We, Abengoa, and our officers and directors listed in the “Management” section have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup and, subject to certain exceptions, dispose of or hedge any shares, or any securities convertible into or exchangeable for our shares. Citigroup in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice.

Prior to this offering, there has been no public market for our shares. Consequently, the initial public offering price for the shares was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our results of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our shares will develop and continue after this offering.

We have applied to have our shares listed on the NASDAQ Global Market under the symbol “            ”.

 

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The following table shows the underwriting discounts and commissions that we and the selling shareholder are to pay to the underwriters in connection with this offering.

 

Selling Shareholder

Abengoa Yield

No Exercise

Full Exercise

Per share

$

$

$

Total

$

$

$

Abengoa will pay the offering expenses, other than the underwriting discounts and commissions payable by us.

In connection with the offering, the underwriters may purchase and sell shares in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the over-allotment option, and stabilizing purchases.

Short sales involve secondary market sales by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales of shares in an amount up to the number of shares represented by the underwriters’ over-allotment option. “Naked” short sales are sales of shares in an amount in excess of the number of shares represented by the underwriters’ over-allotment option.

Covering transactions involve purchases of shares either pursuant to the underwriters’ over-allotment option or in the open market in order to cover short positions. To close a naked short position, the underwriters must purchase shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. To close a covered short position, the underwriters must purchase shares in the open market or must exercise the over-allotment option. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.

Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum.

Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares. They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the NASDAQ Global Market, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

Conflicts of Interest

The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The underwriters and their respective affiliates have in the past performed commercial banking, investment banking and advisory services for us and our affiliates, including Abengoa, from time to time for which they have received customary fees and reimbursement of expenses and may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and

 

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instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. In addition, affiliates of some of the underwriters are lenders, and in some cases agents or managers for the lenders, under certain of our credit facilities and other credit arrangements or those of our affiliates. In their capacity as lenders, such lender affiliates may, in the future, seek a reduction of a loan commitment to us or our affiliates, or impose incremental pricing or collateral requirements with respect to such facilities or credit arrangements, in the ordinary course of business. See “Risk Factors—Risks Related to Our Indebtedness.” In addition, certain of the underwriters or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. A typical such hedging strategy would include these underwriters or their affiliates hedging such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities and Abengoa has agreed to reimburse the underwriters for certain expenses relating to the offering, including expenses related to the clearance of this offering with the Financial Industry Regulatory Authority, or FINRA, in an amount not to exceed $        .

Notice to Prospective Investors in the European Economic Area

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of shares described in this prospectus may not be made to the public in that relevant member state other than:

 

•

to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

•

to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or

 

•

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For purposes of this provision, the expression an “offer of securities to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in the relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.

The sellers of the shares have not authorized and do not authorize the making of any offer of shares through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the shares as contemplated in this prospectus. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of the shares on behalf of the sellers or the underwriters.

 

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Notice to Prospective Investors in the United Kingdom

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a “relevant person”). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Notice to Prospective Investors in France

Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorite des Marches Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorite des Marches Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be:

 

•

released, issued, distributed or caused to be released, issued or distributed to the public in France; or

 

•

used in connection with any offer for subscription or sale of the shares to the public in France.

Such offers, sales and distributions will be made in France only:

 

•

to qualified investors (investisseurs qualifies) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monetaire et financier;

 

•

to investment services providers authorized to engage in portfolio management on behalf of third parties; or

 

•

in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monetaire et financier and article 211-2 of the General Regulations (Reglement General) of the Autorite des Marches Financiers, does not constitute a public offer (appel public à l’epargne).

The shares may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monetaire et financier.

Notice to Prospective Investors in Hong Kong

The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

 

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Notice to Prospective Investors in Japan

The shares offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.

Notice to Prospective Investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

•

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

•

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

 

•

to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

 

•

where no consideration is or will be given for the transfer; or

 

•

where the transfer is by operation of law.

Notice to Prospective Investors in Spain

Neither the shares nor this prospectus have been approved or registered in the administrative registries of the Spanish National Securities Exchange Commission, or Comision Nacional del Mercado de Valores, or CNMV. Accordingly, the shares may not be offered in Spain except in circumstances which do not constitute a public offer of securities in Spain within the meaning of articles 30bis of the Spanish Securities Market Law of July 28, 1988 (Ley 24/1988, de 28 Julio, del Mercado de Valores), as amended and restated, and supplemental rules enacted thereunder.

 

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EXPENSES OF THE OFFERING

We estimate that expenses in connection with the offering, other than underwriting discounts and commissions, will be as follows:

 

Expense		Amount
Securities and Exchange Commission registration fee			*
NASDAQ listing fee			*
Financial Industry Regulatory Authority filing fee			*
Printing and engraving expenses			*
Legal fees and expenses			*
Accounting fees and expenses			*
Transfer agent and registrar fees			*
Miscellaneous fees and expenses			*
Total			*

 

*	To be completed by amendment.

All of the above expenses will be paid by Abengoa.

 

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LEGAL MATTERS

The validity of the shares and certain other matters under English law will be passed upon for us by Linklaters LLP, our English counsel. We are also being advised as to certain legal matters by Linklaters LLP, New York, New York and Linklaters S.L.P., Madrid, Spain. The underwriters are being advised as to certain legal matters by Davis Polk & Wardwell LLP, Madrid, Spain.

 

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EXPERTS

The Combined Financial Statements included in this Prospectus as of and for each of the years ended December 31, 2013 and 2012 have been audited by Deloitte, S.L., an independent registered public accounting firm, as stated in their report appearing herein which report expresses an unqualified opinion on the Combined Financial Statements and includes an explanatory paragraph referring to the adoption of IFRS 10. Such Combined Financial Statements are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

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WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form F-1, including relevant exhibits and schedules, under the Securities Act for the shares being by offered by this prospectus. This prospectus is a part of the registration statement and does not contain all of the information set forth in the registration statement. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in the registration statement. This prospectus summarizes material provisions of contracts and other documents. Since this prospectus does not contain all of the information contained in the registration statement and exhibits, you should read the registration statement on Form F-1 and its exhibits and other documents.

Upon completion of this offering, we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, periodic reports and other information with the SEC.

We are allowed four months to file our annual report with the SEC, and we are not required to disclose certain detailed information regarding executive compensation that is required from U.S. domestic issuers. Also, as a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing of proxy statements to shareholders, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5. Since many of the disclosure obligations required of us as a foreign private issuer are different than those required of U.S. domestic reporting companies, our shareholders, potential shareholders and the investing public in general should not expect to receive information about us in the same amount, or at the same time, as information is received from, or provided by, other U.S. domestic reporting companies. We are only liable for violations of the rules and regulations of the SEC that apply to us as a foreign private issuer.

We plan to file our annual report on Form 20-F with the SEC no later than 90 days after the end of each fiscal year. We plan to furnish a quarterly report with the SEC on Form 6-K no later than 60 days following the end of each of the first three fiscal quarter of each year, or as soon thereafter as is reasonably practicable. The quarterly report will include substantially the same information as required by a Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations; provided that the financial statements included in such quarterly report will be prepared and presented in conformity with IFRS as issued by the IASB, rather than with U.S. GAAP.

For further information about us and our shares, you may inspect a copy of the registration statement, of the exhibits and schedules to the registration statement or of any reports, statements or other information we file with the SEC without charge at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549, United States. You may obtain copies of all or any part of the registration statement upon the payment of the duplicating fees by writing to the SEC. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at www.sec.gov that contains reports and information statements and other information regarding registrants like us that file electronically with the SEC. You also can inspect our registration statement as well as any other information we file with or furnish to the SEC on this website. This reference to the SEC’s website is an inactive textual reference only and is not a hyperlink.

We expect to make our annual reports and other information filed with or furnished to the SEC available, free of charge, through our website at www.abengoayield.com and www.abengoayield.co.uk as soon as reasonably practicable after those reports and other information are filed with or furnished to the SEC. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus.

 

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COMBINED FINANCIAL STATEMENTS

 

		Page
Report of Independent Registered Public Accounting Firm
Combined statements of financial position as of December 31, 2013 and 2012, and as of January  1, 2012			F-3
Combined income statements for the years ended December 31, 2013 and 2012			F-5
Combined statements of comprehensive income for the years ended December 31, 2013 and 2012			F-6
Combined statements of changes in equity for the years ended December 31, 2013 and 2012			F-7
Combined cash flow statements for the years ended December 31, 2013 and 2012			F-8
Notes to the combined financial statements			F-9

 

F-1

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Table of Contents

								Deloitte, S.L. Américo Vespucio, 13 Isla de la Cartuja 41092 Sevilla España   Tel: +34 954 48 93 00 Fax: +34 954 48 93 10 www.deloitte.es

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Abengoa Yield Ltd.:

We have audited the accompanying combined statements of financial position of the Abengoa Concessions Businesses (a group of businesses within Abengoa, S.A. herein after “the Company” – see Note 1) as of December 31, 2013 and 2012, and the related combined income statements, the combined statements of comprehensive income, the combined statements of changes in equity, the combined cash flow statements and related notes to the combined financial statements for each of the years in the two-year period ended December 31, 2013. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Combined Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Combined Group’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined financial statements, referred to above, present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of their operations and cash flows for each of the years in the two-year period ended December 31, 2013 in conformity with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.

As discussed in Note 2.1, the combined financial statements have been prepared as a combination of the historical accounts of the companies that compose the Company. The combined financial statements also include expense allocations for certain corporate functions historically provided by Abengoa, S.A. These allocations may not be reflective of the actual expense which would have been incurred had the Company operated as a separate entity apart from Abengoa, S.A. As described in in Note 2.1 to the combined financial statements, the Company has adopted IFRS 10 for all years presented in the combined financial statements.

/s/Deloitte, S.L.

Seville, Spain

February 28, 2014

Deloitte S.L. Inscrita en el Registro Mercantil de Madrid, tomo 13.650, sección 8ª, folio 188, hoja M-54414, inscripción 96ª. C.I.F.: B-79104469.

Domicilio social: Plaza Pablo Ruiz Picasso, 1, Torre Picasso, 28020, Madrid.

 

F-2

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Table of Contents

Combined statements of financial position as of December 31, 2013 and 2012, and as of January 1, 2012

Amounts in thousands of U.S. dollars

 

		Note (1)		As of December 31,								As of January 1,
				2013				2012				2012
Assets
Non-current assets
Contracted concessional assets		6			4,418,120				2,058,941				1,546,795
Investments carried under the equity method		7			387,324				734,083				180,210
Other receivable accounts		8			15,230				8,001				222
Derivative assets		8 & 9			13,622				5,604				9,188
Financial investments					28,852				13,605				9,410
Deferred tax assets		16			52,784				60,242				44,115
Total non-current assets					4,887,080				2,866,871				1,780,530
Current assets
Inventories					5,244				—				—
Trade receivables		11			26,649				11,194				1,215
Credits and other receivables		11			70,948				94,883				123,606
Clients and other receivables		8 & 11			97,597				106,077				124,821
Other receivable accounts					266,363				127,647				101,707
Financial investments		8			266,363				127,647				101,707
Cash and cash equivalents		8 & 12			357,664				97,499				40,171
Total current assets					726,868				331,223				266,699
Total assets					5,613,948				3,198,094				2,047,229

 

(1)	Notes 1 to 20 are an integral part of the combined financial statements

 

F-3

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Table of Contents

Combined statements of financial position as of December 31, 2013 and 2012, and as of January 1, 2012

Amounts in thousands of U.S. dollars

 

		Note (1)		As of December 31,								As of January 1,
				2013				2012				2012
Equity and liabilities
Equity attributable to the Company
Hedging reserves					(36,600	)			(103,547	)			(82,048	)
Accumulated currency translation differences					9,009				2,731				290
Other equity					1,245,510				1,182,008				617,752
Non-controlling interest					69,279				58,617				47,926
Total equity					1,287,198				1,139,809				583,920
Non-current liabilities
Borrowings					2,736,552				1,320,042				1,003,239
Notes and bonds					105,786				—				—
Long-term non-recourse project financing		8 & 13			2,842,338				1,320,042				1,003,239
Grants and other liabilities		14			650,903				129,217				—
Related parties		8 & 10			492,534				222,946				86,952
Derivative liabilities		8 & 9			44,221				134,673				122,974
Deferred tax liabilities		16			21,839				15,358				4,652
Total non-current liabilities					4,051,835				1,822,236				1,217,817
Current liabilities
Borrowings					49,540				48,867				78,674
Notes and bonds					2,772				—				—
Short-term non-recourse project financing		8 & 13			52,312				48,867				78,674
Trade payables and other current liabilities		8 & 15			204,013				186,048				166,246
Income and other tax payables		16			18,590				1,134				572
Total current liabilities					274,915				236,049				245,492
Total equity and liabilities					5,613,948				3,198,094				2,047,229

 

(1)	Notes 1 to 20 are an integral part of the combined financial statements

 

F-4

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Table of Contents

Combined income statements for the years ended December 31, 2013 and 2012

Amounts in thousands of U.S. dollars

 

		Note (1)		For the year ended December 31,
				2013				2012
Revenue		4			210,907				107,183
Other operating income		18			379,644				560,372
Raw materials and consumables used					(8,671	)			(4,289	)
Employee benefit expenses					(2,446	)			(1,789	)
Depreciation, amortization, and impairment charges		6			(46,943	)			(20,234	)
Other operating expenses		18			(420,905	)			(573,510	)
Operating profit/(loss)					111,586				67,733
Financial income		19			1,153				718
Financial expense		19			(123,784	)			(64,104	)
Net exchange differences					(895	)			392
Other financial income/(expense), net		19			(1,693	)			(173	)
Financial expense, net					(125,219	)			(63,167	)
Share of profit/(loss) of associates carried under the equity method					13				(404	)
Profit/(loss) before income tax					(13,620	)			4,162
Income tax		16			11,762				(4,021	)
Profit/(loss) for the year					(1,858	)			141
Loss/(profit) attributable to non-controlling interests					(1,559	)			1,195
Profit/(loss) for the year attributable to the Company					(3,417	)			1,336

 

(1)	Notes 1 to 20 are an integral part of the combined financial statements

The combined income statements include the following income (expense) items arising from transactions with related parties:

 

		Year ended December 31,
		2013				2012
Sales			11,925				5,089
Construction costs			(364,715	)			(558,620	)
Services rendered			2,804				3,527
Services received			(24,403	)			(8,742	)
Purchases			(2,669	)			(177	)
Financial income			468				575
Financial expenses			(11,209	)			(4,525	)

 

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Combined statements of comprehensive income for the years ended December 31, 2013 and 2012

Amounts in thousands of U.S. dollars

 

		Note (1)				For the year ended December 31,
						2013				2012
Profit/(loss) for the year							(1,858	)			141
Items that may be subject to transfer to income statement
Change in fair value of cash flow hedges							75,907				(41,320	)
Currency translation differences							8,941				3,521
Tax effect							(22,494	)			12,396
Net income/(expenses) recognized directly in equity							62,354				(25,403	)
Cash flow hedges			9				27,513				5,916
Tax effect							(8,254	)			(1,775	)
Transfers to income statement							19,259				4,141
Other comprehensive income/(loss)							81,613				(21,262	)
Total comprehensive income/(loss) for the year							79,755				(21,121	)
Total comprehensive income/(loss) attributable to non-controlling interest							(9,947	)			3,399
Total comprehensive income/(loss) attributable to the Company							69,808				(17,722	)

 

(1)	Notes 1 to 20 are an integral part of the combined financial statements

 

F-6

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Combined statements of changes in equity for the years ended December 31, 2013 and 2012

Amounts in thousands of U.S. dollars

 

		Hedging reserves				Accumulated currency translation differences				Other equity				Total equity attributable to the Company				Non-controlling interest				Total equity
Balance as of January 1, 2012			(82,048	)			290				617,752				535,994				47,926				583,920
Profit for the year after taxes			—				—				1,336				1,336				(1,195	)			141
Change in fair value of cash flow hedges			(30,713	)			—				—				(30,713	)			(4,691	)			(35,404	)
Currency translation differences			—				2,441				—				2,441				1,080				3,521
Tax effect			9,214				—				—				9,214				1,407				10,621
Other comprehensive income			(21,499	)			2,441				—				(19,058	)			(2,204	)			(21,262	)
Total comprehensive income			(21,499	)			2,441				1,336				(17,722	)			(3,399	)			(21,121	)
Capital contributions			—				—				562,920				562,920				14,090				577,010
			—				—				562,920				562,920				14,090				577,010
Balance as of December 31, 2012			(103,547	)			2,731				1,182,008				1,081,192				58,617				1,139,809
Balance as of January 1, 2013			(103,547	)			2,731				1,182,008				1,081,192				58,617				1,139,809
Profit/(loss) for the year after taxes			—				—				(3,417	)			(3,417	)			1,559				(1,858	)
Change in fair value of cash flow hedges			95,242				—				—				95,242				8,178				103,420
Currency translation differences			—				6,278				—				6,278				2,663				8,941
Tax effect			(28,295	)			—				—				(28,295	)			(2,453	)			(30,748	)
Other comprehensive income			66,947				6,278				—				73,225				8,388				81,613
Total comprehensive income			66,947				6,278				(3,417	)			69,808				9,947				79,755
Capital contributions			—				—				66,919				66,919				715				67,634
Scope variations, acquisitions and other movements			—				—				66,919				66,919				715				67,634
Balance as of December 31, 2013			(36,600	)			9,009				1,245,510				1,217,919				69,279				1,287,198

 

(1)	Notes 1 to 20 are an integral part of the combined financial statements

 

F-7

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Table of Contents

Combined cash flow statements for the years ended December 31, 2013 and 2012

Amounts in thousands of U.S. dollars

 

				For the year ended
		Note (1)		2013				2012
I. Profit/(loss) for the year					(1,858	)			141
Non-monetary adjustments
Depreciation, amortization and impairment charges		6			46,943				20,234
Finance (income)/expenses					95,117				57,440
Fair value gains on derivative financial instruments					8,272				1,007
Shares of (profits)/losses from associates					(13	)			404
Income tax		16			(11,762	)			4,021
Changes in consolidation and other non-monetary items					(46,168	)			(60,269	)
II. Profit for the year from adjusted by non monetary items					90,531				22,978
Variations in working capital
Inventories					(5,244	)			—
Clients and other receivables					10,622				23,775
Trade payables and other current liabilities					(45,110	)			16,322
Financial investments and other current assets/liabilities					48,945				26,527
III. Variations in working capital					9,213				66,624
Income tax paid					(73	)			(255	)
Interest received					640				718
Interest paid					(62,923	)			(42,083	)
A. Net cash provided by operating activities					37,388				47,982
Investments in entities under the equity method		7			(240,639	)			(554,276	)
Investment in contracted concessional assets		6			(401,678	)			(518,495	)
Other non-current assets/liabilities					(52,250	)			(25,929	)
B. Net cash used in investing activities					(694,567	)			(1,098,700	)
Proceeds from Non recourse financing		13			1,139,671				339,550
Repayment of Non-recourse financing		13			(667,784	)			(61,620	)
Proceeds from related parties and other					442,986				829,322
C. Net cash provided by financing activities					914,873				1,107,252
Net increase/(decrease) in cash and cash equivalents					257,694				56,534
Cash, cash equivalents and bank overdrafts at beginning of the year					97,499				40,171
Translation differences cash or cash equivalent					2,471				794
Cash and cash equivalents at end of the year					357,664				97,499

 

(1)	Notes 1 to 20 are an integral part of the combined financial statements

 

F-8

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Table of Contents

Contents

 

Note 1.- Nature of the business			F-10
Note 2.- Significant accounting policies			F-12
Note 3.- Financial risk management			F-21
Note 4.- Financial information by segment			F-22
Note 5.- Changes in the scope of the combined financial statements			F-27
Note 6.- Contracted concession assets			F-28
Note 7.- Investments carried under the equity method			F-29
Note 8.- Financial Instruments by category			F-30
Note 9.- Derivative financial instruments			F-30
Note 10.- Related parties			F-32
Note 11.- Clients and other receivable			F-33
Note 12.- Cash and cash equivalents			F-33
Note 13.- Non-recourse financing (project financing)			F-34
Note 14.- Grants and other liabilities			F-36
Note 15.- Trade payables and other current liabilities			F-37
Note 16.- Income Tax			F-37
Note 17.- Third-party guarantees and commitments			F-39
Note 18.- Other operating income and expenses			F-40
Note 19.- Financial income and expenses			F-41
Note 20.- Other information			F-42
Appendices			F-43

 

F-9

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Table of Contents

Note 1.- Nature of the business

Abengoa Yield Limited is a United Kingdom corporation incorporated on December 17, 2013, by Abengoa, S.A. (‘Abengoa’ or ‘the Parent’). Abengoa Yield Limited is a dividend growth-oriented company formed to serve as the primary vehicle through which Abengoa will own, manage, and acquire renewable energy, conventional power, electric transmission lines, and other contracted revenue-generating assets, initially focused on North America (United States and Mexico) and South America (Peru, Chile, and Uruguay), as well as Europe (Spain in the first instance).

Abengoa, listed on the Madrid Stock Exchange and the NASDAQ Global Select Market, is a leading engineering and clean technology company with operations in more than 70 countries worldwide that provides innovative solutions for a diverse range of customers in the energy and environmental sectors. Over the course of its 70-years history, Abengoa has developed a unique and integrated business model that applies accumulated engineering expertise to promoting sustainable development solutions, including delivering new methods for generating power from the sun, developing biofuels, producing potable water from seawater, and efficiently transporting electricity. A cornerstone of Abengoa’s business model has been the investment in proprietary technologies, particularly in areas with relatively high barriers to entry. Abengoa’s engineering and construction activities provide sophisticated turnkey engineering, procurement, and construction services from design to implementation for infrastructure projects within the energy and environmental sectors and engages in other related activities with a high technology component. Its concession-type infrastructures activities include the management, operation and maintenance of infrastructure assets, usually pursuant to long-term concession agreements. Its industrial production activities produce mostly bioethanol.

The accompanying combined financial statements of Abengoa Yield Limited (‘the Company’, ‘Abengoa Yield’ or ‘the Predecessor’) have been prepared in connection with the proposed initial public offering of common shares of Abengoa Yield, or the Offering, and represent the eleven assets described herein that Abengoa intends to transfer to Abengoa Yield prior to the Offering.

The portfolio consists of five renewable energy assets, a cogeneration facility, and several electric transmission lines, all of which are fully operational as of today, with the exception of the Mojave solar facility, which is in the test operation stage and expected to be fully operational by October 2014, and Palmatir wind farm, which is expected to achieve commercial operation day (‘COD’) by June 2014. All of our assets have contracted revenues (regulated revenues in the case of the Spanish assets) with low-risk offtakers, and have an average remaining contract life of approximately 26 years as of December 31, 2013. Over 90% of cash generated each year and available for distribution from these assets in the next five years is in U.S. dollars, or indexed to the U.S. dollar. Over 90% of our project-level debt is hedged against changes in interest rates through an underlying fixed rate on the debt instrument or through interest rate swaps, caps, or similar hedging instruments.

Our assets and operations are organized into the following three business sectors:

 

•

Renewable energy: renewable energy assets include of (i) two concentrated solar power (CSP) plants in the United States, Solana and Mojave, each with a gross capacity of 280 MW; (ii) one on-shore wind farm in Uruguay, Palmatir, with a gross capacity of 50 MW; and (iii) two CSP plants in Spain, Solaben 2 and Solaben 3, with a gross capacity of 50 MW each.

 

•

Conventional power: the conventional power asset consists of Abengoa Cogeneración Tabasco, or ACT, a 300 MW cogeneration plant in Mexico.

 

•

Electric transmission lines: the electric transmission line assets include (i) two lines in Peru, ATN and ATS, spanning a total of 931 miles; and (ii) three lines in Chile, Quadra 1, Quadra 2, and Palmucho, spanning a total of 87 miles.

 

F-10

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Table of Contents

Abengoa Yield is expected to be comprised of the following projects:

 

Our Assets

Type

Ownership

Location

Currency

Capacity (Gross)

Rating

COD/ Expected COD

Contract Years Left

Solana

Renewable energy

100% ClassB1

Arizona (USA)

USD

280 MW

A-

4Q 2013

29

Mojave

Renewable energy

100%

California (USA)

USD

280 MW

BBB+

4Q 2014

25

ACT

Conventional Power

100%3

Mexico

USD

300 MW

BBB+

2Q 2013

19

ATN

Electric transmission line

100%

Peru

USD

362 miles

BBB+

1Q 2011

27

ATS

Electric transmission line

100%

Peru

USD

569 miles

BBB+

1Q 2014

30

Quadra 1

Electric transmission line

100%

Chile

USD

49 miles

N/A

1Q 2014

21

Quadra 2

Electric transmission line

100%

Chile

USD

32 miles

N/A

1Q 2014

21

Palmucho

Electric transmission line

100%

Chile

CLP

6 miles

BBB+

4Q 2007

23

Palmatir

Renewable energy

100%

Uruguay

USD

50 MW

BBB-

2Q 2014

20

Solaben 2 & Solaben 3

Renewable energy

70%2

Spain

Euro

2x50 MW

BBB

2Q 2012

24

 

1	Liberty Interactive Corporation agreed to invest $300 million in Class A membership interests in exchange of a share of the dividends and the taxable loss generated by Solana on September 30, 2013.

2	Itochu Corporation holds 30% of the economic rights to each of Solaben 2 and Solaben 3.

3	Legally, General Electric holds a 15% interest. From an accounting perspective, this investment is considered as non-recourse debt.

Entities included in these combined financial statements have signed with the grantor of the concession contracts of construction, operation and maintenance and they subcontract the construction of the contracted assets to Abengoa. Given that these projects are included within the scope of IFRIC 12 and given that they are included in the combined financial statements during their construction phase, the Company has recorded income and cost attributable to the construction in the combined income statement. Construction revenue is recorded within “Other operating income” according to the percentage of completion method as established by IAS 11. Construction cost, which is fully contracted with related parties, is recorded within “Other operating expense”.

The combined financial statements were prepared using Abengoa’s historical basis in the assets and liabilities of the Predecessor, and include all revenues, expenses, assets, and liabilities attributed to the Predecessor. In addition, other operating expenses include an allocation of certain general and administrative services provided by Abengoa that were not included in the Company’s combined income statement. The Company believes that including the allocated costs, the combined income statement include a reasonable estimate of actual costs incurred to operate the business. However, such expenses may not be indicative of the actual level of expense that would have been incurred by the Predecessor if it had operated as an independent, publicly-traded company during the periods prior to the Offering or of the costs expected to be incurred in the future. In the opinion of management, the inter-company eliminations and adjustments necessary for a fair presentation of the combined financial statements, in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) have been made.

These combined financial statements were approved by the Chief Executive Officer on February 27, 2014.

 

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Note 2.- Significant accounting policies

2.1 Basis of preparation

The Company is not an existing legal entity. Rather, it is a combination of entities and assets currently owned by Abengoa. The management has prepared the combined financial statements for the only purpose of including them as historical financial information of the predecessor of Abengoa Yield in a public prospectus.

Abengoa is a company listed in Madrid Stock Exchange and in NASDAQ and prepares, on an annual basis, consolidated financial statements in accordance with IFRS-IASB. Since the combined financial statements of Abengoa Yield are carved out from the consolidated financial statements of Abengoa in 2012 and 2013, the combined financial statements have also been prepared in accordance with the IFRS-IASB.

As a consequence, the combined financial statements represent the operations of the contributed entities using the predecessor values, and the accounting policies are the same as those used in the historical combined financial statements of Abengoa. Accordingly, the Company has not been considered IFRS first time adopter and IFRS 1 ‘First time adoption of financial reporting standards’ does not apply.

The combined financial statements are presented in U.S. dollars, which is our functional and reporting currency. Amounts included in these combined financial statements are all expressed in thousands of U.S. dollars, unless otherwise indicated.

Application of new accounting standards

 

a)	Standards, interpretations, and amendments effective from January 1, 2013 under IFRS-IASB, applied by the Company:

 

•

IFRS 13 ‘Fair value measurement’. IFRS 13 defines fair value, sets out a framework for measuring fair value in a single IFRS and requires disclosures about fair value measurements. This standard has been applied prospectively from January 1, 2013, and has not had a significant impact in the combined financial statements.

 

•

IFRS 10, ‘Consolidated financial statements’. IFRS 10 modifies the former definition of control. The new definition of control sets out the following three elements: power over the investee; exposure, or rights, to variable returns from involvement with the investee; and the ability to use power over the investee to affect the amount of the investor’s returns.

 

•

IFRS 12 ‘Disclosures of interests in other entities’. IFRS 12 defines the required disclosures of interests in subsidiaries, associates, joint ventures, and non-controlling interests.

 

•

IFRS 10, IFRS 11, and IFRS 12 (amendments) ‘Transition guidance’.

 

•

International Accounting Standard (IAS) 1 (amendment) ‘Financial statements presentation’. The main change resulting from this amendment is a requirement to group items presented in ‘other comprehensive income’ (OCI) into two categories on the basis of whether or not they will be subsequently reclassified to profit or loss.

The main impact of the application of the new standard IFRS 10 relates to the de-consolidation of Solana and Mojave, companies that do not fulfill the conditions of effective control of the interest in terms of decision making during the construction phase and which have been recorded in the combined financial statements according to the equity method during this period. In accordance with this standard, these projects are fully consolidated once they enter into operation and control over them is gained. Solana has been fully consolidated since its entry into operation (see note 5).

According to the terms and requirements established in IAS 8 ‘Accounting policies, changes in accounting estimates and errors’, the above standards and amendments have been retrospectively applied to 2012. The above standards and amendments have already been applied in the Consolidated Financial statements as of

 

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December 31, 2012, presented in Abengoa’s Form F-1. Additionally, according to IAS 1 (40A), a third combined statement of financial position as of the beginning of the preceding period, which is January 1, 2012, has been presented applying the new accounting standards. According to IAS 1 (40c), it has not been necessary to present the notes relating to the combined statement of position as of January 1, 2012.

b) Recently Issued Accounting Pronouncements

Standards, interpretations and amendments published by the IASB that will be effective for periods beginning on or after January 1, 2014, are:

 

•

IAS 32 (amendment) ‘Compensation of financial assets for financial liabilities’. IAS 32 amendment is mandatory for periods beginning on or after January 1, 2014, and is to be applied retroactively.

 

•

IAS 36 (Amendment) ‘Recoverable amount disclosures for non-financial assets’. IAS 36 amendment is mandatory for periods beginning on or after January 1, 2014.

 

•

IAS 39 (Amendment) ‘Novation of derivatives and continuation of hedge accounting’. IAS 39 amendment is mandatory for periods beginning on or after January 1, 2014.

 

•

IFRS 9, ‘Financial instruments’. This Standard will be effective from January 1, 2015.

The company does not expect any material impact of the amendments that will be effective from January 1, 2014, and is assessing the impact of IFRS 9 (classification and measurement) which will be effective from January 1, 2015.

2.2. Principles to include and record companies in the combined financial statements

Companies included in these combined financial statements are accounted for as subsidiaries as long as Abengoa has had control over them and are accounted for as investments under the equity method as long as Abengoa has had significant influence over them, in the periods presented. The group of entities included in these combined financial statements is referred to as the “Company”.

 

a)

Controlled entities

Control is achieved when the Company:

 

•

Has power over the investee;

 

•

Is exposed, or has rights, to variable returns from its involvement with the investee; and

 

•

Has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee when facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. In order to evaluate the existence of control, we need to distinguish two independent stages in these projects in terms of decision making process: the construction phase and the operation phase. In some of these projects such as Solana and Mojave CSP plants in the United States, the Company has concluded that all the relevant decisions during the construction phase are subject to the approval of a third party. As a result, the Company does not have control over these assets during this period and records these companies as associates under the equity method. Once the project is in operation, the Company gains control over these companies which are then fully consolidated.

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

 

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

 

b)

Investments accounted for under the equity method

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

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

Profits and losses resulting from the transactions of the Company with the associate are recognized in the combined financial Statements only to the extent of interests in the associate that are not related to the combined entities.

Controlled entities and associates included in these combined financial statements as of December 31, 2013, 2012, and as of January 1, 2012, are set out in appendices.

2.3. Contracted concessional Assets and price purchase agreements

Contracted concessional assets and price purchase agreements (PPAs) include fixed assets financed through non-recourse loans, related to service concession arrangements recorded in accordance with IFRIC 12. The infrastructures accounted for by the Company as concessions are related to the activities concerning electric transmission lines, solar electricity generation plants, cogeneration plants and a wind farm. The infrastructure used in a concession can be classified as an intangible asset or a financial asset, depending on the nature of the payment entitlements established in the agreement.

The application of IFRIC 12 requires extensive judgment in relation with, among other factors, (i) the identification of certain infrastructures and contractual agreements in the scope of IFRIC 12, (ii) the understanding of the nature of the payments in order to determine the classification of the infrastructure as a financial asset or as an intangible asset and (iii) the timing and recognition of the revenue from construction and concessionary activity.

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

Consequently, even though construction is subcontracted to Abengoa, in accordance with the provisions of IFRIC 12, the Company recognizes and measures revenue and costs for providing construction services during the period of construction of the infrastructure in accordance with IAS 11 “Construction Contracts”. Construction revenue is recorded within “Other operating income” and Construction cost, which is fully contracted with related parties, is recorded within “Other operating expenses”. This applies in the same way to the two models.

 

a)

Intangible asset

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

 

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

 

•

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

 

•

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

 

•

Financing costs are expensed as incurred.

 

b)

Financial asset

The Company recognizes a financial asset when demand risk is assumed by the grantor, to the extent that the concession holder has an unconditional right to receive payments for the asset. This asset is recognized at the fair value of the construction services provided, considering upgrade services in accordance with IAS 11, if any.

The financial asset is subsequently recorded at amortized cost calculated according to the effective interest method. Revenue from operations and maintenance services is recognized in each period according to IAS 18 “Revenue”. The remuneration of managing and operating the asset resulting from the valuation at amortized cost is also recorded in revenue.

Financing costs are expensed as incurred.

2.4. Borrowing costs

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

2.5 Asset impairment

Abengoa Yield reviews its contracted concessional assets to identify any indicators of impairment annually.

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

When the carrying amount of the CGU to which these assets belong is lower than its recoverable amount assets are impaired.

Assumptions used to calculate value in use include a discount rate, growth rate and projections considering real data based in the contracts terms and projected changes in both selling prices and costs. The discount rate is estimated by Management, to reflect both changes in the value of money over time and the risks associated with the specific CGU.

For contracted concessional assets, with a defined useful life and with a specific financial structure, cash flow projections until the end of the project are considered and no terminal value is assumed.

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

 

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Projections take into account real data based on the contract terms and fundamental assumptions based on specific reports prepared by experts, assumptions on demand and assumptions on production. Additionally, assumptions on macro-economic conditions are taken into account, such as inflation rates, future interest rates, etc. and sensitivity analyses are performed over all major assumptions which can have a significant impact in the value of the asset

Cash flow projections of CGUs are calculated in the functional currency of those CGUs and are discounted using rates that take into consideration the risk corresponding to each specific country and currency.

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

In any case, sensitivity analyses are performed, especially in relation with the discount rate used and fair value changes in the main business variables, in order to ensure that possible changes in the estimates of these items do not impact the possible recovery of recognized assets.

Accordingly, the following table provides a summary of the discount rates used (WACC) and growth rates to calculate the recoverable amount for CGUs with the operating segment to which it pertains:

 

Operating segment		Discount rate		Growth Rate
Europe		5% - 6%		0%
South America		5% - 6%		0%

In the event that the recoverable amount of an asset is lower than its carrying amount, an impairment charge for the difference would be recorded in the combined income statement under the item “Depreciation, amortization and impairment charges”.

Pursuant to IAS 39, an impairment loss is recognized if the carrying amount of these assets exceeds the present value of future cash flows discounted at the initial effective interest rate.

2.6 Loans and accounts receivables

Loans and accounts receivables are non-derivative financial assets with fixed or determinable payments, not listed on an active market.

In accordance with IFRIC 12, certain assets under concessions qualify as financial assets and are recorded as it is described in note 2.3.

Other loans and accounts receivables are initially recognized at fair value plus transaction costs and are subsequently measured at amortized cost in accordance with the effective interest rate method. Interest calculated using the effective interest rate method is recognized under other financial income within financial income.

2.7. Derivative financial instruments and hedging activities

Derivatives are recorded at fair value. The Company applies hedge accounting to all hedging derivatives that qualify to be accounted for as hedges under IFRS-IASB.

When hedge accounting is applied, hedging strategy and risk management objectives are documented at inception, as well as the relationship between hedging instruments and hedged items. Effectiveness of the hedging relationship needs to be assessed on an ongoing basis. Effectiveness tests are performed prospectively and retrospectively at inception and at each reporting date, following the dollar offset method.

 

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Abengoa Yield applies cash flow hedge. Under this method, the effective portion of changes in fair value of derivatives designated as cash flow hedges are recorded temporarily in equity and are subsequently reclassified from equity to profit or loss in the same period or periods during which the hedged item affects profit or loss. Any ineffective portion of the hedged transaction is recorded in the combined income statement as it occurs.

When interest rate options are designated as hedging instruments, the intrinsic value and time value of the financial hedge instrument are separated. Changes in intrinsic value which are highly effective are recorded in equity and subsequently reclassified from equity to profit or loss in the same period or periods during which the hedged item affects profit or loss. Changes in time value are recorded as financial income or expense, together with any ineffectiveness.

When the hedging instrument matures or is sold, or when it no longer meets the requirements to apply hedge accounting, accumulated gains and losses recorded in equity remain as such until the forecast transaction is ultimately recognized in the combined income statement. However, if it becomes unlikely that the forecast transaction will actually take place, the accumulated gains and losses in equity are recognized immediately in the combined income statement.

2.8. Fair value estimates

Financial instruments measured at fair value are presented in accordance with the following level classification based on the nature of the inputs used for the calculation of fair value:

 

•

Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

 

•

Level 2: Fair value is measured based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

•

Level 3: Fair value is measured based on unobservable inputs for the asset or liability.

In the event that prices cannot be observed, the management shall make its best estimate of the price that the market would otherwise establish based on proprietary internal models which, in the majority of cases, use data based on observable market parameters as significant inputs (Level 2) but occasionally use market data that is not observed as significant inputs (Level 3). Different techniques can be used to make this estimate, including extrapolation of observable market data. The best indication of the initial fair value of a financial instrument is the price of the transaction, except when the value of the instrument can be obtained from other transactions carried out in the market with the same or similar instruments, or valued using a valuation technique in which the variables used only include observable market data, mainly interest rates. Differences between the transaction price and the fair value based on valuation techniques that use data that is not observed in the market, are not initially recognized in the income statement.

Abengoa Yield derivatives correspond mainly to the interest rate swaps designated as cash flow hedges. All derivatives are classified as level 2.

Description of the valuation method

Interest rate swap valuations are made by valuing the swap part of the contract and valuing the credit risk. The methodology used by the market and applied by Abengoa Yield to value interest rate swaps is to discount the expected future cash flows according to the parameters of the contract. Variable interest rates, which are needed to estimate future cash flows, are calculated using the curve for the corresponding currency and extracting the implicit rates for each of the reference dates in the contract. These estimated flows are discounted with the swap zero curve for the reference period of the contract.

The effect of the credit risk on the valuation of the interest rate swaps depends on the future settlement. If the settlement is favorable for the Company, the counterparty credit spread will be incorporated to quantify the probability of default at maturity. If the expected settlement is negative for the Company, its own credit risk will be applied to the final settlement.

 

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Classic models for valuing interest rate swaps use deterministic valuation of the future of variable rates, based on future outlooks. When quantifying credit risk, this model is limited by considering only the risk for the current paying party, ignoring the fact that the derivative could change sign at maturity. A payer and receiver swaption model is proposed for these cases. This enables the associated risk in each swap position to be reflected. Thus, the model shows each agent’s exposure, on each payment date, as the value of entering into the ‘tail’ of the swap, i.e. the live part of the swap.

Variables (Inputs)

Interest rate derivative valuation models use the corresponding interest rate curves for the relevant currency and underlying reference in order to estimate the future cash flows and to discount them. Market prices for deposits, futures contracts and interest rate swaps are used to construct these curves. Interest rate options (caps and floors) also use the volatility of the reference interest rate curve.

To estimate the credit risk of the counterparty, the credit default swap (CDS) spreads curve is obtained in the market for important individual issuers. For less liquid issuers, the spreads curve is estimated using comparable CDSs or based on the country curve. To estimate proprietary credit risk, prices of debt issues in the market and CDSs for the sector and geographic location are used.

The fair value of the financial instruments that results from the aforementioned internal models takes into account, among other factors, the terms and conditions of the contracts and observable market data, such as interest rates, credit risk and volatility. The valuation models do not include significant levels of subjectivity, since these methodologies can be adjusted and calibrated, as appropriate, using the internal calculation of fair value and subsequently compared to the corresponding actively traded price. However, valuation adjustments may be necessary when the listed market prices are not available for comparison purposes.

2.9. Clients and other receivables

Clients and other receivables are amounts due from customers for sales in the normal course of business. They are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less allowance for doubtful accounts. Trade receivables due in less than one year are carried at their face value at both initial recognition and subsequent measurement, provided that the effect of not discounting flows is not significant.

An allowance for doubtful accounts is recorded when there is objective evidence that the Company will not be able to recover all amounts due as per the original terms of the receivables.

2.10. Cash and cash equivalents

Cash and cash equivalents include cash in hand, cash in bank and other highly-liquid current investments with an original maturity of three months or less which are held for the purpose of meeting short-term cash commitments.

2.11. Grants

Grants are recognized at fair value when it is considered that there is a reasonable assurance that the grant will be received and that the necessary qualifying conditions, as agreed with the entity assigning the grant, will be adequately complied with.

Grants are recorded as liabilities in the combined statement of financial position and are recognized in “Other operating income” in the combined income statement based on the period necessary to match them with the costs they intend to compensate.

In addition, as described in note 2.12 below, grants correspond also to loans with interest rates below market rates, for the initial difference between the fair value of the loan and the proceeds received.

 

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2.12. Loans and borrowings

Loans and borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost and any difference between the proceeds initially received (net of transaction costs incurred in obtaining such proceeds) and the repayment value is recognized in the combined income statement over the duration of the borrowing using the effective interest rate method.

Loans with interest rates below market rates are initially recognized at fair value in liabilities and the difference between proceeds received from the loan and its fair value is initially recorded within “Grants and Other liabilities” in the combined statement of financial position, and subsequently recorded in “Other operating income” in the combined income statement when the costs financed with the loan are expensed.

2.13. Bonds and notes

The Company initially recognizes ordinary notes at fair value, net of issuance costs incurred. Subsequently, notes are measured at amortized cost until settlement upon maturity. Any other difference between the proceeds obtained (net of transaction costs) and the redemption value is recognized in the combined income statement over the term of the debt using the effective interest rate method.

2.14. Income taxes

Current income tax expense is calculated on the basis of the tax laws in force as of the date of the combined statement of financial position in the countries in which the subsidiaries and associates operate and generate taxable income.

Deferred income tax is calculated in accordance with the liability method, based upon the temporary differences arising between the carrying amount of assets and liabilities and their tax base. Deferred income tax is determined using tax rates and regulations which are expected to apply at the time when the deferred tax is realized.

Deferred tax assets are recognized only when it is probable that sufficient future taxable profit will be available to use deferred tax assets.

2.15. Trade payables and other liabilities

Trade payables are obligations arising from purchases of goods and services in the ordinary course of business and are recognized initially at fair value and are subsequently measured at their amortized cost using the effective interest method. Other liabilities are obligations not arising in the normal course of business and which are not treated as financing transactions. Advances received from customers are recognized as “Trade payables and other current liabilities”.

2.16. Foreign currency transactions

The combined financial statements are presented in U.S. dollars, which is Abengoa Yield functional and reporting currency. Financial statements of each subsidiary within the Company are measured in the currency of the principal economic environment in which the subsidiary operates, which is the subsidiary’s functional currency.

Transactions denominated in a currency different from the subsidiary’s functional currency are translated into the subsidiary’s functional currency applying the exchange rates in force at the time of the transactions. Foreign currency gains and losses that result from the settlement of these transactions and the translation of monetary assets and liabilities denominated in foreign currency at the year-end rates are recognized in the combined income statement, unless they are deferred in equity, as occurs with cash flow hedges and net investment in foreign operations hedges.

 

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Assets and liabilities of subsidiaries with a functional currency different from the Company’s reporting currency are translated to U.S. dollars at the exchange rate in force at the closing date of the financial statements. Income and expenses are translated into U.S. dollars using the average annual exchange rate, which does not differ significantly from using the exchange rates of the dates of each transaction. The difference between equity translated at the historical exchange rate and the net financial position that results from translating the assets and liabilities at the closing rate is recorded in equity under the heading “Accumulated currency translation differences”.

Results of companies carried under the equity method are translated at the average annual exchange rate.

2.17. Equity

Given that the Company is not an existing legal entity, legal share capital does not exist for these combined financial statements as of December 31, 2013 and 2012, and cannot be presented separately in Equity.

The Company has recyclable balances in its equity, corresponding mainly to hedge reserves and translation differences arising from currency conversion in the preparation of these combined financial statements. These balances have been presented separately in Equity.

Non-controlling interest represent interest from other partners in entities included in these combined financial statements which are not fully owned by Abengoa as of the dates presented.

Other Equity represents the Parent’s net investment in the entities included in these combined financial statements.

2.18. Use of estimates

Some of the accounting policies applied require the application of significant judgment by management to select the appropriate assumptions to determine these estimates. These assumptions and estimates are based on our historical experience, advice from experienced consultants, forecasts and other circumstances and expectations as of the close of the financial period. The assessment is considered in relation to the global economic situation of the industries and regions where the Company operates, taking into account future development of our businesses. By their nature, these judgments are subject to an inherent degree of uncertainty; therefore, actual results could materially differ from the estimates and assumptions used. In such cases, the carrying values of assets and liabilities are adjusted.

The most critical accounting policies, which reflect significant management estimates and judgment to determine amounts in our consolidated financial statements, are as follows:

 

•

Contracted concesional agreements.

 

•

Impairment of intangible.

 

•

Assessment of control.

 

•

Derivative financial instruments and fair value estimates.

 

•

Income taxes and recoverable amount of deferred tax assets.

As of the date of preparation of these combined financial statements, no relevant changes in the estimates made are anticipated and, therefore, no significant changes in the value of the assets and liabilities recognized at December 31, 2013, are expected.

Although these estimates and assumptions are being made using all available facts and circumstances, it is possible that future events may require management to amend such estimates and assumptions in future periods. Changes in accounting estimates are recognized prospectively, in accordance with IAS 8, in the combined income statement of the year in which the change occurs.

 

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Note 3.- Financial risk management

Abengoa Yield’s activities are exposed to various financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Risk is managed by the Company’s Risk Management and Finance Department, which are responsible for identifying and evaluating financial risks quantifying them by project, region and company, in accordance with mandatory internal management rules. Written internal policies exist for global risk management, as well as for specific areas of risk. In addition, there are official written management regulations regarding key controls and control procedures for each company and the implementation of these controls is monitored through internal audit procedures.

 

a)	Market risk

The Company is 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. None of the derivative contracts signed has an unlimited lose exposure.

 

•

Interest rate risk

Interest rate risk arises when the Company’s activities are exposed to changes in foreign interest rates, which arises from financial liabilities at variable interest rates. The main interest rate exposure for the Company relates to the variable interest rate with reference to the Libor and Euribor. To minimize the interest rate risk, the Company primarily uses interest rate swaps and interest rate options (caps), which, in exchange for a fee, offer protection against an increase in interest rates. The Company does not use derivatives for speculative purposes.

As a result, the notional amounts hedged, strikes contracted and maturities, depending on the characteristics of the debt on which the interest rate risk is being hedged, are very diverse, including the following:

 

1)

Non-recourse debt in U.S. dollars: between 75% and 100% of the notional amount, maturities until 2028 average guaranteed interest rates of between 2.515% and 3.787%.

 

2)

Non-recourse debt in euro: between 80% and 100% of the notional amount, maturities until 2030 and average guaranteed interest rates of between 0.75% and 3.75%.

In connection with our interest rate derivative positions, the most significant impacts on our combined financial statements are derived from the changes in EURIBOR or LIBOR, which represents the reference interest rate for the majority of our debt. In the event that Euribor and Libor had risen by 25 basis points as of December 31, 2013, with the rest of the variables remaining constant, the effect in the combined income statement would have been a loss of $ 195 thousand (a profit of $296 thousand in 2012) and an increase in hedging reserves of $16.328 thousand ($-24,040 thousand in 2012). The increase in hedging reserves would be mainly due to an increase in the fair value of interest rate swaps designated as hedges.

A breakdown of the interest rates derivatives as of December 31, 2013 and 2012, is provided in note 9.

 

•

Currency risk

The main cash flows in the entities included in these combined financial statements 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 closed in the same currency in which the contract with client is signed, natural hedge exists for the main operations of the Company.

 

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b)	Credit risk

The company considers that it has a limited credit risk with clients as revenues derive from power purchase agreements with electric utilities and Estate owned entities.

 

c)	Liquidity risk

Abengoa Yield’s liquidity and financing policy is intended to ensure that the Company maintains sufficient funds to meet our financial obligations as they fall due.

Project finance borrowing permits the Company to finance the project through non-recourse debt and thereby insulate the rest of its assets from such credit exposure. The Company incurs in project-finance debt on a project-by-project basis.

The repayment profile of each project is established on the basis of the projected cash flow generation of the business. This ensures that sufficient financing is available to meet deadlines and maturities, which mitigates the liquidity risk significantly.

Note 4.- Financial information by segment

Abengoa Yield’s segment structure reflects how management currently makes financial decisions and allocates resources. Its operating segments are based on the following geographies where the contracted concessional assets are located:

 

•

North America

 

•

South America

 

•

Europe

Based on the type of business, the Company has identified the following business sectors:

Renewable energy: Our renewable energy assets include two CSP plants in the United States, Solana and Mojave, each with a gross capacity of 280 MW and located in Arizona and California, respectively. Solana reached COD on October 9, 2013, and Mojave has substantially completed construction and is in operation test stage, with expected COD by October 2014. Additionally, we own a wind farm in Uruguay, Palmatir, with a gross capacity of 50 MW. The construction of Palmatir is substantially complete and COD is expected in June 2014. Finally, Solaben 2 and Solaben 3 are two CSP plants located in Spain. Both projects have been in operation since mid-2012 and receive regulated revenues under the framework for renewable projects in Spain.

Conventional power: Our conventional power asset consist of ACT, a 300 MW cogeneration plant in Mexico, which is party to a 20-year take-or-pay contract with Pemex, for the supply of electric power and steam to a refinery located in the state of Tabasco.

Electric transmission lines: Our electric transmission assets include (i) two lines in Peru, ATN, and ATS, spanning a total of 931 miles; (ii) three lines in Chile, Quadra 1, Quadra 2 and Palmucho, spanning a total of 87 miles. ATN reached COD in 2011 and ATS reached COD on January 17, 2014. Quadra 1 and Quadra 2 have been in operation since February 2014. Palmucho reached COD in October 2007.

Abengoa Yield Chief Operating Decision Maker (CODM) assesses the performance and assignment of resources according to the identified operating segments. The CODM considers the revenues as a measure of the business activity and the EBITDA (Earnings before interest, tax, depreciation and amortization) as measure of the performance of each segment. In order to assess performance of the business, the CODM receives reports of each reportable segment using revenues and EBITDA. Net interest expense evolution is assessed on a consolidated basis. Financial expense and amortization are not taken into consideration by CODM for the allocation of resources.

 

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a)

The following tables show Revenues and EBITDA by operating segments and business sectors for the years 2013 and 2012:

 

Geography		Revenue								EBITDA
		2013				2012				2013				2012
North America			113,998				62,268				96,712				61,106
South America			25,392				16,986				18,979				10,191
Europe			71,517				27,929				42,838				16,670
Total			210,907				107,183				158,529				87,967

 

Business Sectors		Revenue								EBITDA
		2013				2012				2013				2012
Renewable energy			82,714				27,929				55,797				16,121
Conventional power			102,801				62,268				83,277				61,106
Electric transmission lines			25,392				16,986				19,455				10,740
Total			210,907				107,183				158,529				87,967

The reconciliation of segment EBITDA with the profit attributable to the Company is as follows:

 

Line item		For the year ended 12.31.13				For the year ended 12.31.12
Total segment EBITDA			158,529				87,967
Depreciation, amortization, and impairment charges			(46,943	)			(20,234	)
Financial expense, net			(125,219	)			(63,167	)
Share in profits/(losses) associates			13				(404	)
Income tax			11,762				(4,021	)
Profit attributable to non-controlling interests			(1,559	)			1,195
Profit attributable to the Company			(3,417	)			1,336

 

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b)

The long term asset and liabilities by operating segments (and business sector) at the end of 2013 and 2012 are as follows:

Assets and liabilities by geography as of December 31, 2013:

 

Item		North America				South America				Europe				Balance as of 12.31.13
Assets allocated
Contracted concessional assets			2,678,436				1,034,768				704,916				4,418,120
Investments carried under the equity method			387,324				—				—				387,324
Current financial investments			230,046				36,317				—				266,363
Cash and cash equivalents			206,298				86,681				64,685				357,664
Subtotal allocated			3,502,104				1,157,766				769,601				5,429,471
Unallocated assets
Other non-current assets															81,636
Other current assets															102,841
Subtotal unallocated															184,477
Total assets															5,613,948
Item		North America				South America				Europe				Balance as of 12.31.13
Liabilities allocated
Long-term and short-term non-recourse project financing			1,842,817				605,397				446,436				2,894,650
Subtotal allocated			1,842,817				605,397				446,436				2,894,650
Unallocated liabilities
Other non-current liabilities															1,209,497
Other current liabilities															222,603
Subtotal unallocated															1,432,100
Total liabilities															4,326,750
Equity unallocated															1,287,198
Total liabilities and equity unallocated															2,719,298
Total liabilities and equity															5,613,948

Assets and liabilities by geography as of December 31, 2012:

 

Item		North America				South America				Europe				Balance as of 12.31.12
Assets allocated
Contracted concessional assets			570,198				780,939				707,804				2,058,941
Investments carried under the equity method			734,083				—				—				734,083
Current financial investments			47,607				28,432				51,608				127,647
Cash and cash equivalents			8,967				55,538				32,994				97,499
Subtotal allocated			1,360,855				864,909				779,406				3,018,170
Unallocated assets
Other non-current assets															73,847
Other current assets															106,077
Subtotal unallocated															179,924
Total assets															3,198,094

 

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Item		North America				South America				Europe				Balance as of 12.31.12
Liabilities allocated
Long-term and short-term non-recourse project financing			489,084				417,266				462,559				1,368,909
Subtotal allocated			489,084				417,266				462,559				1,368,909
Unallocated liabilities
Other non-current liabilities															502,194
Other current liabilities															187,182
Subtotal unallocated															689,376
Total liabilities															2,058,285
Equity unallocated															1,139,809
Total liabilities and equity unallocated															1,829,185
Total liabilities and equity															3,198,094

Assets and liabilities by business sectors as of December 31, 2013:

 

Item		Renewable energy				Conventional power				Electric transmission lines				Balance as of 12.31.13
Assets allocated
Contracted concessional assets			2,888,622				635,849				893,649				4,418,120
Investments carried under the equity method			387,324				—				—				387,324
Current financial investments			122,795				107,255				36,313				266,363
Cash and cash equivalents			90,395				186,078				81,191				357,664
Subtotal allocated			3,489,136				929,182				1,011,153				5,429,471
Unallocated assets
Other non-current assets															81,636
Other current assets															102,841
Subtotal unallocated															184,477
Total assets															5,613,948

 

Item		Renewable energy				Conventional power				Electric transmission lines				Balance as of 12.31.13
Liabilities allocated
Long-term and short-term non-recourse project financing			1,667,174				729,318				498,158				2,894,650
Subtotal allocated			1,667,174				729,318				498,158				2,894,650
Unallocated liabilities
Other non-current liabilities															1,209,497
Other current liabilities															222,603
Subtotal unallocated															1,432,100
Total liabilities															4,326,750
Equity unallocated															1,287,198
Total liabilities and equity unallocated															2,719,298
Total liabilities and equity															5,613,948

 

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Assets and liabilities by business sectors as of December 31, 2012:

 

Item		Renewable energy				Conventional power				Electric transmission lines				Balance as of 12.31.12
Assets allocated
Contracted concessional assets			757,626				570,198				731,117				2,058,941
Investments carried under the equity method			734,083				—				—				734,083
Current financial investments			51,608				47,607				28,432				127,647
Cash and cash equivalents			33,181				8,967				55,351				97,499
Subtotal allocated			1,576,498				626,772				814,900				3,018,170
Unallocated assets
Other non-current assets															73,847
Other current assets															106,077
Subtotal unallocated															179,924
Total assets															3,198,094

 

Item		Renewable energy				Conventional power				Electric transmission lines				Balance as of 12.31.12
Liabilities allocated
Long-term and short-term non-recourse project financing			511,077				489,085				368,747				1,368,909
Subtotal allocated			511,077				489,085				368,747				1,368,909
Unallocated liabilities
Other non-current liabilities															502,194
Other current liabilities															187,182
Subtotal unallocated															689,376
Total liabilities															2,058,285
Equity unallocated															1,139,809
Total liabilities and equity unallocated															1,829,185
Total liabilities and equity															3,198,094

 

c)

The investment in contracted concessional assets and in entities under the equity method by operating segments and business sectors for the years 2013 and 2012 are as follows:

 

Geography		Capex
		2013				2012
North America			347,397				628,011
South America			294,658				293,909
Europe			262				150,851
Total			642,317				1,072,771

 

Business sectors		Capex
		2013				2012
Renewable energy			323,251				753,878
Conventional power			106,757				73,735
Electric transmission lines			212,309				245,158
Total			642,317				1,072,771

 

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d)

The amount of depreciation and amortization expense recognized for the years ended December 31, 2013 and 2012, are as follows

 

Depreciation and amortization by geography		Year ended December 31,
		2013				2012
North America			(16,182	)			—
South America			(10,853	)			(10,871	)
Europe			(19,908	)			(9,363	)
Total			(46,943	)			(20,234	)

 

Depreciation and amortization by business sectors		Year ended December 31,
		2013				2012
Renewable energy			(36,090	)			(9,363	)
Conventional power			—				—
Electric transmission lines			(10,853	)			(10,871	)
Total			(46,943	)			(20,234	)

Note 5.- Changes in the scope of the combined financial statements

On October 13, 2013, Arizona Solar One, LLC, the Company that holds the assets in Solana, which was recorded under the equity method during its construction period, entered into operation and started to be fully consolidated once control over this company was gained.

The Company reassesses whether or not it controls an investee when facts and circumstances indicate that there are changes to the elements that determine control (power over the investee, exposition to variable returns of the investee and ability to use its power to affect its returns). The Company concluded that during the construction phase of Solana plant all the relevant decisions were subject to the control and approval of a third party . As a result, the Company did not have control over these assets during this period. IFRS 10 (B80) establishes that control requires a continuous assessment and that the Company shall reassess if it controls on investee if facts and circumstances indicate that there are changes to the elements of control. Once the project entered into operation, the decision making process changed, the investee was controlled and it started to be fully consolidated.

As during the construction period the assets were included under the scope of IFRIC 12, the book value of the combined assets and liabilities is the same as its fair value. The amount of assets and liabilities integrated is shown in the following table:

 

		As of October 13, 2013
Current assets			10,494
Contracted concessional assets (note 6)			2,027,642
Other current and non-current assets			18,931
Non-recourse project financing (note 13)			(1,035,681	)
Other current and non-current liabilities			(433,974	)
Book value of previously held interest (note 7)			(587,412	)
Total			—

The results of operations of Arizona Solar One have been included in the Company’s renewable energy activities from the date in which it started to be fully consolidated.

 

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Note 6.- Contracted concessional assets

 

a)

The following table shows the movements of contracted concessional assets included in the heading ‘Contracted Concessional assets’ for 2013:

 

Cost		Total
Total as of December 31, 2012			2,085,032
Additions			401,678
Translation differences			29,987
Change in the scope of the combined financial statements (note 5)			2,027,642
Reclassifications and other movements			(52,051	)
Total as of December 31, 2013			4,492,286
Accumulated amortization		Total
Total as of December 31, 2012			(26,091	)
Additions			(46,943	)
Translation differences			(1,132	)
Total accum. amort. as of December 31, 2013			(74,166	)
Net balance at December 31, 2013			4,418,120

During 2013 contracted concessional assets increased mainly due to the full consolidation of Arizona Solar One, company that holds the Solana plant, once control over the company was gained with the entry into operation of the plant (see note 5).

In addition, contracted concessional assets increased due to the construction of contracted concessions which were not yet in operation, mainly the cogeneration plant in Mexico ($107 million), electric transmission lines in Peru ($158 million), electric transmission lines in Chile ($54 million) and Palmatir wind farm in Uruguay ($82 million). No losses from impairment of ‘Contracted concessional assets in projects’ were recorded during 2013.

The decrease included in “reclassification and other movements” is mainly due to the reclassification from the long to the short term, of the current portion of the contracted concessional financial assets (see note 23).

As of December 31, 2013, contracted concessional financial assets amount to $722,989 thousand.

 

b)

The following table shows the movements of contracted concessional assets included in the heading ‘Contracted concessional assets’ for 2012:

 

Cost		Total
Total as of January 1, 2012			1,552,409
Additions			518,495
Translation differences			14,608
Reclassifications and other movements			(480	)
Total as of December 31, 2012			2,085,032
Accumulated amortization		Total
Total as of January 1, 2012			(5,614	)
Additions			(20,234	)
Translation differences			(243	)
Total accum. amort. as of December 31, 2012			(26,091	)
Net balance at December 31, 2012			2,058,941

 

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During 2012 contracted concessional assets increased due to the construction of contracted concessions which were not yet in operation, mainly CSP plants in Spain ($142 million), as well as the cogeneration plant in Mexico ($73 million) and electric transmission lines in Peru ($215 million).

No losses from impairment of ‘Contracted concessional assets in projects’ were recorded during 2012.

As of December 31, 2012, contracted concessional financial assets amount to $ 608,717 thousand.

 

c)

Capitalized interest cost for the year ended December 31, 2013, amounts to $101,218 thousand ($79,938 thousand in 2012).

 

d)

There are no intangible assets with indefinite useful lives. There are no intangible assets restricted for use or pledged as security for liabilities.

Note 7.- Investments carried under the equity method

The table below shows the breakdown and the movement of the investments held in associates for 2013 and 2012:

 

Investments in associates		2013				2012
Initial balance			734,083				180,210
Capital contributions			240,639				554,276
Change in the scope of the combined financial statements (note 5)			(587,412	)			—
Share of (loss)/profit			13				(404	)
Final balance			387,324				734,083

The decrease in 2013 is due to the entity Arizona Solar One, which is fully consolidated since the plant entered into operation in October 2013 (see note 5).

The increase in 2013 and 2012 was due to the equity contribution to Arizona Solar One, and Mojave Solar.

The tables below show a breakdown of assets, revenues and operating profit/(loss) as well as other information of interest for the years 2013 and 2012 of the associated companies:

 

Company		% Shares				Assets				Revenue				Operating (loss)
Mojave Solar LLC			100.00				1,430,060				—				(132	)
Evacuación Valdecaballeros, S.L.			28.56				30,319				—				(1,306	)
As of December 31, 2013							1,460,379				—				(1,438	)

 

Company		% Shares				Assets				Revenue				Operating (loss)
Arizona Solar One LLC			100.00				1,773,492				—				(75	)
Mojave Solar LLC			100.00				1,166,039				—				(354	)
Evacuación Valdecaballeros, S.L.			28.56				30,443				—				(396	)
As of December 31, 2012							2,969,974				—				(825	)

 

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Note 8.- Financial instruments by category

Financial instruments are primarily deposits, derivatives, trade and other receivables and loans. Financial instruments by category (current and non-current), reconciled with the statement of financial position, are as follows:

 

Category		Notes		Loans and receivables / payables				Hedging derivatives				Balance as of 12.31.13
Derivative assets		9			—				13,622				13,622
Financial accounts receivables					281,593				—				281,593
Clients and other receivables		11			97,597				—				97,597
Cash and cash equivalents		12			357,664				—				357,664
Total Financial assets					736,854				13,622				750,476
Non-recourse financing		13			2,894,650				—				2,894,650
Related parties		10			492,534				—				492,534
Trade payables and other current liabilities		15			204,013				—				204,013
Derivative liabilities		9			—				44,221				44,221
Total Financial liabilities					3,591,197				44,221				3,635,418

 

Category		Notes		Loans and receivables / payables				Hedging derivatives				Balance as of 12.31.12
Derivative assets		9			—				5,604				5,604
Financial accounts receivables					135,648				—				135,648
Clients and other receivables		11			106,077				—				106,077
Cash and cash equivalents		12			97,499				—				97,499
Total Financial assets					339,224				5,604				344,828
Non-recourse financing		13			1,368,909				—				1,368,909
Related parties		10			222,946				—				222,946
Trade payables and other current liabilities		15			186,048				—				186,048
Derivative liabilities		9			—				134,673				134,673
Total Financial liabilities					1,777,903				134,673				1,912,576

As of December 31, 2013 and 2012, all the financial instruments measured at fair value have been classified as Level 2.

Financial accounts receivable include the short-term portion of contracted concessional assets (see Note 6).

Note 9.- Derivative financial instruments

The breakdowns of the fair value amount of the derivative financial instruments as of December 31, 2013 and 2012 are as follows:

 

Concept

Balance as of 12.31.13

Balance as of 12.31.12

Assets

Liabilities

Assets

Liabilities

Interest rate derivatives – cash flow hedge

13,622

44,221

5,604

134,673

 

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All the derivatives are interest rate cash-flow hedges. All are classified as non-current assets or non-current liabilities, as they hedge long-term financing agreements.

As stated in note 3 to these combined financial statements, the general policy is to hedge variable interest rates of financing agreements purchasing call options (caps) in exchange of a premium to fix the maximum interest rate cost and floating to fixed interest rate swaps.

As a result, the notional amounts hedged, strikes contracted and maturities, depending on the characteristics of the debt on which the interest rate risk is being hedged, can be diverse:

 

•

Non-recourse financing in Euros: we hedge between 80% and 100% of the notional amount, maturities until 2030 and average guaranteed interest rates of between 0.75 % and 3.75%.

 

•

Non-recourse financing in U.S. dollars: we hedge between 75% and 100% of the notional amount, including maturities until 2028 and average guaranteed interest rates of between 2.515% and 3.787%.

The table below shows a breakdown of the maturities of notional amounts of interest rate derivatives designated as cash flow hedges as of December 31, 2013 and 2012.

 

Notionals		Balance as of 12.31.13								Balance as of 12.31.12
		Cap				Swap				Cap				Swap
Up to 1 year			9,178				25,303				5,006				124,987
Between 1 and 2 years			9,581				29,840				7,473				22,530
Between 2 and 3 years			10,378				36,839				7,987				24,583
Subsequent years			231,694				682,384				203,095				751,581
Total			260,831				774,366				223,561				923,681

The table below shows a breakdown of the maturity of the fair values of interest rate derivatives designated as cash flow hedges as of December 31, 2013 and 2012. The net position of the fair value of caps and swaps for each year end reconciles with the net position of derivative assets and derivative liabilities in the combined statement of financial position:

 

Fair value		Balance as of 12.31.13								Balance as of 12.31.12
		Cap				Swap				Cap				Swap
Up to 1 year			290				(4,537	)			56				(20,145	)
Between 1 and 2 years			310				(4,236	)			187				(16,137	)
Between 2 and 3 years			334				(3,940	)			200				(14,121	)
Subsequent years			10,799				(29,619	)			5,161				(84,270	)
Total			11,733				(42,332	)			5,604				(134,673	)

The net amount of the fair value of interest rate derivatives designated as cash flow hedges transferred to the combined income statement is a loss of $27,513 thousand (loss of $5,916 thousand in 2012). The amount of 2013 includes $8,785 thousand which corresponds to a one-time loss caused by the transfer to the income statement of the entire accumulated amount in equity as the hedged financing agreement was cancelled and replaced by a new financing. Additionally, the net amount of the time value component of the cash flow derivatives fair value recognized in the combined income statement for the years 2013 and 2012 has been a gain of $513 thousand and a loss of $1,007 thousand respectively.

The after-tax losses accumulated in equity in connection with derivatives designated as cash flow hedges at the years ended December 31, 2013 and 2012, amount to $36,600 thousand and $103,547 thousand respectively.

 

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Note 10.- Related parties

During the normal course of business, the Company has conducted operations with related parties (Abengoa´s companies), mainly through loan contracts and advisory services. The transactions were completed at market rates.

Services agreements

Certain combined entities have entered into one-year contractual arrangements with Abengoa from which the Company receives certain administrative services. Such services include general services related to supporting functions such as financing, human resources management, and administration. The fee incurred by the operating companies is based on anticipated annual sales.

In addition, other operating expenses include an allocation of certain general and administrative services provided by Abengoa. Allocated costs include general and administrative costs deemed allocable to the Company. Measurement of allocated costs is based principally on time devoted to the Company by employees of Abengoa. The Company believes that including the allocated costs, the combined statements of operations include a reasonable estimate of actual costs incurred to operate the business.

Furthermore, some of the entities included in these combined financial statements receive engineering, procurement, construction operation and maintenance services from related parties for those concessions which are still under construction.

Credit agreements

Abengoa maintains a pooled central treasury account in which all of its subsidiaries deposit excess funds and may borrow funds from as needed. Under this arrangement, the combined entities could borrow funds from Abengoa. Borrowings under this credit arrangement have borne interest at 10.05% and 8.96% in 2013 and 2012 respectively.The contracts are long terms as agreed between the parties.

In addition, some entities included in the Company have incurred in long-term subordinated debt with related parties.

Details of balances with related parties as of December 31, 2013 and 2012 are as follows:

 

		As of December 31,
		12.31.13				12.31.12
Trade payables (current)			25,077				55,558
Total current payables with related parties			25,077				55,558
Trade payables (non-current)			5,107				3,343
Credit payables (non-current)			487,427				219,603
Total non-current payables with related parties			492,534				222,946

The operations carried out by entities included in these combined financial statements with Abengoa and with subsidiaries of Abengoa not included in these combined group during 2013 and 2012 have been as follows:

 

		Year ended December 31,
		2013				2012
Sales			11,925				5,089
Construction costs			(364,715	)			(558,620	)
Services rendered			2,804				3,527
Services received			(24,403	)			(8,742	)
Purchases			(2,669	)			(177	)
Financial income			468				575
Financial expenses			(11,209	)			(4,525	)

 

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Services include operation and maintenance services received by some plants, the fee incurred by some operating under the services agreement with Abengoa, and the allocation of general and administrative services explained above. Sales include mainly sale of energy by Spanish CSP plants.

Construction costs include construction work subcontracted to Abengoa for the construction of the assets, which is recorded in these combined financial statements due to the fact that contracted concessional assets are included in the combined financial statements during the construction phase, according to IFRIC 12.

Note 11.- Clients and other receivable

Clients and other receivable as of December 31, 2013 and 2012, consist of the following:

 

Item		Balance as of 12.31.13				Balance as of 12.31.12
Trade receivables			26,649				11,194
Tax receivables			61,888				81,595
Other debtors			9,060				13,288
Total			97,597				106,077

As of December 31, 2013 and 2012, the fair value of clients and other receivable accounts does not differ significantly from its carrying value.

Trade receivables according to foreign currency as of December 31, 2013 and 2012, are as follows:

 

Currency		Balance as of 12.31.13				Balance as of 12.31.12
Euro			5,409				7,369
Peruvian Sol			—				3,825
Total			5,409				11,194

The following table shows the maturity of Trade receivables as of December 31, 2013 and 2012:

 

Maturity		Balance as of 12.31.13				Balance as of 12.31.12
Up to 3 months			26,649				11,162
Between 3 and 6 months			—				32
Total			26,649				11,194

Note 12.- Cash and cash equivalents

The following table shows the detail of Cash and cash equivalents as of December 31, 2013 and 2012:

 

Concept		Balance as of 12.31.13				Balance as of 12.31.12
Cash at bank and on hand			351,042				88,535
Bank deposits			6,622				8,964
Total			357,664				97,499

 

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The following breakdown shows the main currencies in which cash and cash equivalent balances are denominated:

 

Currency		Balance as of 12.31.13				Balance as of 12.31.12
U.S. dollar			289,172				61,448
Euro			64,685				32,994
Peruvian sol			291				2,301
Others			3,516				756
Total			357,664				97,499

Note 13.- Non-recourse financing (project financing)

The main purpose of the Company is the long-term ownership and management of contracted concessional assets, such as renewable energy, conventional power and electric transmission line assets, which are financed through non-recourse project finance. This note shows the non-recourse financing linked to the contracted concessional assets included in note 6 of these combined financial statements.

Non-recourse financing is generally used to finance our 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 to corporate financing, non-recourse financing has certain key advantages, including a greater leverage period permitted and a clearly defined risk profile.

The movements for 2013 and 2012 of non-recourse financing have been as follows:

 

		Non-recourse financing - long term				Non-recourse financing - short term				Total
Balance as of December 31, 2012			1,320,042				48,867				1,368,909
Increases			1,047,099				92,572				1,139,671
Decreases (reimbursement)			(589,203	)			(78,581	)			(667,784	)
Currency translation differences			17,445				728				18,173
Reclassifications			399,254				(399,254	)			—
Changes in the scope of the combined financial statements (note 5)			647,701				387,980				1,035,681
Balance as of December 31, 2013			2,842,338				52,312				2,894,650

During 2013, the increase in non-recourse financing was mainly due to drawings in connection with the construction of electric transmission lines in Peru and Chile ($220 million) and with the construction of ACT ($735 million). In addition, non-recourse financing increased due to the full consolidation of Arizona Solar One resulting from the business combination of the plant in October 2013 (see note 5).

 

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A decrease also occurred mainly due to the cancellation of previous debt by ACT, with the new financing obtained as indicated above ($501 million).

 

		Non-recourse financing - long term				Non-recourse financing - short term				Total
Balance as of January 1, 2012			1,003,239				78,674				1,081,913
Increases			338,830				720				339,550
Decreases (reimbursement)			(9,396	)			(52,224	)			(61,620	)
Currency translation differences			8,714				352				9,066
Reclassifications			(21,345	)			21,345				—
Balance as of December 31, 2012			1,320,042				48,867				1,368,909

The increase in 2012 was mainly due to drawings in connection with the construction of Solaben 2 and Solaben 3 for $110 million, to the construction of ATN and ATS for $121 million, and ACT in Mexico for $60 million.

Within cash and cash equivalent and financial receivables (current), there are debt service reserve accounts in the amount of $70 million relating to project finance as of December 31, 2013, ($15 million as of December 31, 2012).

The repayment schedule for non-recourse project financing, at the end of 2013 is as follows and is consistent with the projected cash flows of the related projects.

 

2014		2015		2016		2017		2018		Subsequent years		Total
52,312		166,821		86,710		92,190		340,518		2,156,099		2,894,650

In September 2013, ATN, Abengoa Transmisión Norte, S.A. issued a total of US $110 million of ordinary bonds. The main use of proceeds was the repayment of the debt this company had with the BCP (Banco de Crédito del Peru). The bonds bear fixed interest payable quarterly. From the total amount, $15 million mature in 2018, $50 million mature in 2028 (with a grace period of 5 years) and $45 million mature in 2039 (with a grace period of 15 years).

Non-recourse financing projects entered into in 2013 and 2012 (in millions of U.S. dollars) are as follows:

 

Project		Year				Country				Amount committed				Amount drawn
Abengoa Transmisión Norte, S.A. (ATN)			2013				Peru				110				110
Abengoa Cogeneración Tabasco, S. de R.L. de C.V. (ACT)			2013				Mexico				660				660
Total year 2013											770				770
Quadra I			2012				Chile				40				—
Quadra II			2012				Chile				34				—
Abengoa Transmisión Norte, S.A. (ATN)			2012				Peru				90				84
Total year 2012											164				84

Current and non-current loans with credit entities include amounts in foreign currencies for a total of $452,997 thousand ($468,369 thousand in 2012).

 

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The equivalent in U.S. dollars of the most significant foreign-currency-denominated debts held by the Company is as follows:

 

Currency		Balance as of 12.31.13				Balance as of 12.31.12
Euro			446,436				462,559
Chilean peso			6,561				5,810
Total			452,997				468,369

All our financing agreements have a carrying amount close to its fair value.

Note 14.- Grants and other liabilities

 

Concept		Balances as of 12.31.13				Balances as of 12.31.12
Grants			416,264				—
Long-term trade payables			234,639				129,217
Grants and other non-current liabilities			650,903				129,217

As of December 31, 2013, the amount recorded in Grants corresponds mainly to loans with interest rates below market rates. Loans with the Federal Financing Bank guaranteed by the Department of Energy related to the Solana project bear interest at a rate below market rates for these types of project and term. The difference between proceeds received from these loans and its fair value, “Grants” is subsequently recorded in “Other operating income” starting at the entry into operation of the plant.

The increase in Long-term trade payables was primarily due to the investment from Liberty Interactive Corporation (‘Liberty’) made on October 2, 2013 for an amount of USD 300 million. The investment was made in class A shares of Arizona Solar Holding, the holding of Solana CSP 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 Investment Tax Credits (ITC).

According to the stipulations of IAS 32 and in spite of the fact that the investment of Liberty is in shares, it does not qualify as equity and has been classified as a liability as of December 31, 2013, the non-current portion of the liability is recorded in Grants and other liabilities for an amount of $ 235 million and its current portion is recorded in other current liabilities for the remaining amount. This liability has been initially valued at fair value, calculated as the present value of expected cash-flows during the useful life of the concession, and will be measured at amortized cost according with the effective interest method.

The control and management of the CSP plant is a responsibility of Abengoa and the plant is fully consolidated in these combined financial statements.

As of December 31, 2013, the fair value of this financial liability is close to its carrying amount.

 

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Note 15.- Trade payables and other current liabilities

Trade payable and other current liabilities as of December 31, 2013 and 2012 are as follows:

 

Item		Balance as of 12.31.13				Balance as of 12.31.12
Trade suppliers			101,409				111,781
Credits for services			18,484				7,745
Down payments from clients			4,711				4,248
Remunerations payable			144				124
Suppliers of intangible assets current			308				51,131
Other accounts payable			78,957				11,019
Total			204,013				186,048

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.

The table above includes amounts payable of $67 million at December 31, 2013, ($51 million in 2012) being ‘Confirming without recourse’ relating to various agreements entered into with a number of financial entities in which the Company receives ‘confirming’ services in connection with cash advances from trade receivables. There are linked cash and cash equivalents for an amount of $67 million at December 31, 2013, ($51 million in 2012 classified under the financial accounts receivable) over the abovementioned cash payments. Other account payable line includes the amount of $65 million related to the short term portion of Liberty´s investment (see note 14).

Note 16.- Income Tax

All the companies included in the Company file income taxes according to the tax regulations in force in each country on an individual basis or under consolidation tax regulations.

The combined income tax has been calculated as an aggregation of income tax expenses of each individual company. In order to calculate the taxable income of the combined entities individually, the accounting profit is adjusted for temporary and permanent differences, recording the corresponding deferred tax assets and liabilities. At each combined income statement date, a current tax asset or liability is recorded, representing income taxes currently refundable or payable. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates.

Income tax payable is the result of applying the applicable tax rate in force to each tax-paying entity, in accordance with the tax laws in force in the country in which the entity is registered. Additionally, tax deductions and credits are available to certain entities, primarily relating to inter-company trades and tax treaties between various countries to prevent double taxation.

As of December 31, 2013 and 2012, the analysis of deferred tax assets and deferred tax liabilities is as follows:

 

Concept		Balance as of 12.31.13				Balance as of 12.31.12
Tax credits for tax loss carryforwards			24,999				3,720
Tax credits for deductions pending application			—				1,712
Temporary differences derivatives financial instruments			23,353				50,377
Other			4,432				4,433
Total deferred tax assets			52,784				60,242

 

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Concept		Balance as of 12.31.13				Balance as of 12.31.12
Temporary differences tax amortization			19,048				14,046
Temporary differences derivatives financial instruments			195				—
Other temporary differences			2,596				1,312
Total deferred tax liabilities			21,839				15,358

Most of the tax credits for net operating loss carryforwards correspond to Peru ($11 million) and ACT ($11 million).

In relation to tax loss carryforwards and deductions pending to be used recorded as deferred tax assets, the entities evaluate its recoverability projecting forecasted taxable income for the upcoming years and taking into account their tax planning strategy. Deferred tax liabilities reversals are also considered in these projections, as well as any limitation established by tax regulations in force in each tax jurisdiction.

The movements in deferred tax assets and liabilities during the years ended December 31, 2013 and 2012, were as follows:

 

Deferred tax assets		Amount
As of January 1, 2012			44,115
Increase/decrease through the combined income statement			6,529
Increase/decrease through other combined comprehensive income (equity)			9,214
Other movements			384
As of December 31, 2012			60,242
Increase/decrease through the combined income statement			17,474
Increase/decrease through other combined comprehensive income (equity)			(26,715	)
Other movements			1,783
As of December 31, 2013			52,784

 

Deferred tax liabilities		Amount
As of January 1, 2012			4,652
Increase/decrease through the combined income statement			10,486
Other movements			220
As of December 31, 2012			15,358
Increase/decrease through the combined income statement			5,007
Increase/decrease through other comprehensive income (equity)			1,581
Other movements			(107	)
As of December 31, 2013			21,839

Details regarding income tax for the years ended December 31, 2013 and 2012, are as follows:

 

Item		For the year ended 12.31.13				For the year ended 12.31.12
Current tax			(705	)			(64	)
Deferred tax			12,467				(3,957	)
Total income tax benefit/(expense)			11,762				(4,021	)

 

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The reconciliation between the theoretical income tax resulting from applying an average statutory tax rate to income before income tax and the actual income tax expense recognized in the combined income statements for the years ended December 31, 2013 and 2012, are as follows:

 

Concept		For the year ended 12.31.13				For the year ended 12.31.12
Combined profit before taxes			(13,620	)			4,162
Regulatory tax rate			30	%			30	%
Corporate income tax at regulatory tax rate			4,086				(1,249	)
Income tax of associates, net			4				(121	)
Differences in foreign tax rates			340				(88	)
Permanent differences			16,062				(3,882	)
Incentives, deductions, and tax losses carryforwards			339				(233	)
Other non-taxable income/(expense)			(9,069	)			1,552
Corporate income tax			11,762				(4,021	)

Permanent differences are mainly due to inflationary effects in ACT (Mexico). The heading ‘Other non-taxable income/(expense)’ corresponds mainly to US disregarded entities for tax purposes.

Note 17.- Third-party guarantees and commitments

Third-party guarantees

At the close of 2013 the overall sum of Bank Bond and Surety Insurance directly deposited by the Company as a guarantee to third parties (clients, financial entities and other third parties) amounted to $7,118 thousand attributed to operations of technical nature.

Contractual obligations

The following table shows the breakdown of the third-party commitments and contractual obligations as of December 31, 2013 and 2012:

 

2013		Total				2014				2015 and 2016				2017 and 2018				Subsequent
Loans with credit institutions			2,786,093				49,540				247,654				426,275				2,062,624
Notes and bonds			108,558				2,772				5,877				6,434				93,475
Purchase commitments			1,132,137				48,556				109,654				115,953				857,968
Accrued interest estimate during the useful life of loans			1,318,097				97,431				193,226				189,272				838,168

 

2012		Total				2013				2014 and 2015				2016 and 2017				Subsequent
Loans with credit institutions			1,368,909				48,868				134,870				106,395				1,078,776
Purchase commitments			361,982				89,026				26,413				29,687				216,856
Accrued interest estimate during the useful life of loans			925,106				58,421				169,642				189,882				507,161

 

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Note 18.- Other operating income and expenses

The table below shows the detail of Other Operating Income and Expenses for the years ended December 31, 2013 and 2012:

 

Other operating income		For the year ended 12.31.13				For the year ended 12.31.12
Grants			10,118				—
Income from various services			4,811				1,752
Income from subcontracted construction services for our assets and concessions			364,715				558,620
Total			379,644				560,372

 

Other operating expenses		For the year ended 12.31.13				For the year ended 12.31.12
Leases and fees			(1,850	)			(405	)
Repairs and maintenance			(12,753	)			(876	)
Independent professional services			(22,579	)			(9,632	)
Transportation			(437	)			(191	)
Supplies			(3,322	)			(651	)
Other external services			(5,479	)			(1,763	)
Duties			(6,605	)			(437	)
Other expenses			(3,165	)			(935	)
Constructions costs			(364,715	)			(558,620	)
Total			(420,905	)			(573,510	)

Income from subcontracted construction services for our assets and concessions corresponds to income resulting from the construction of the contracted concessional assets. Entities included in these combined financial statements have signed with the grantor of the concession contracts for the construction, operation and maintenance and they subcontract the construction of the contracted assets to Abengoa. Given that these projects are included within the scope of IFRIC 12, the Company has recorded income to the construction in the combined income statement. Construction works were more intense during the year 2012, mainly due to costs incurred in construction of ACT, which entered into operation in 2013 and the construction of ATS, which is close to entry into operation in 2012. As a result income from construction decreased in 2013 with respect to 2012.

Construction services are subcontracted to Abengoa and recorded in other operating expenses, Construction costs and their decrease has caused the decrease of other operating expenses in 2013 when compared to the previous year. This decrease has been partially offset by the increase in costs related to the entry into operation of Solana and ACT, and to a full year of operation of Solaben 2 and 3. Repairs and maintenance in 2013 mainly includes costs related to the maintenance of ACT in Mexico.

For the year ended December 31, 2013, other operating expenses have increased with respect to the same period of the previous year mainly due to the entering into operation of ACT, Solaben 2 and 3 and Solana.

 

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Note 19.- Financial income and expenses

Financial income and expenses

The following table sets forth our financial income and expenses for the years ended December 31, 2013 and 2012:

 

Financial income		For the year ended 12.31.13				For the year ended 12.31.12
Interest income from loans and credits			640				718
Interest rates benefits derivatives: cash flow hedges			513				—
Total			1,153				718
Financial expenses		For the year ended 12.31.13				For the year ended 12.31.12
Expenses due to interest:
- Loans from credit entities			(78,644	)			(53,633	)
- Other debts			(17,113	)			(4,525	)
Interest rates losses derivatives: cash flow hedges			(28,027	)			(5,946	)
Total			(123,784	)			(64,104	)

Financial expenses increased during the year 2013 primarily due to interest expense from loans and credits associated with projects that have entered into operation during the year (interest expense is capitalized during the construction period) and losses from interest rate derivatives designated as cash flow hedges.

The main non-recourse projects that entered into operation during the year 2013 was ACT in Mexico and Arizona Solar One in North America, On the other hand, losses from interest-rate derivatives designated as cash flow hedges for an amount of $28,027 thousand in 2013 are due to transfers from equity to financial expense when the hedged item is impacting the combined income statement and to a one – time loss of $8,785 thousand caused by the transfer to the income statement of all of the accumulated amount in equity as the hedged financing agreement of ACT was cancelled and replaced.

Losses from interest rates cash flow hedges in 2012 are due to transfers from equity to financial expense and to a decrease in time value of the interest rate options of Solaben 2 and Solaben 3 ($1,008 thousand).

Other net financial income and expenses

The following table sets out ‘Other net financial income and expenses’ in years ended December 31, 2013 and 2012:

 

Other financial income		For the year ended 12.31.13				For the year ended 12.31.12
Other financial income			618				1,170
Other financial losses			(2,172	)			(1,256	)
Outsourcing of payables			(139	)			(87	)
Total			(1,693	)			(173	)

‘Other finance losses’ include in previous and current years financial expenses mainly related to financial guarantees and letters of credit, to wire transfers and other bank fees and other minor financial expenses.

 

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Note 20.- Other information

20.1 Restricted Net assets

Certain of our combined entities are restricted from remitting certain funds to us in the form of cash dividends or loans by a variety of regulations, contractual or statutory requirements. These restrictions are related to standard require the maintenance of debt coverage ratios. Also for certain project finance entities that are in construction, no dividends may be distributed until activity commences or, after construction completion, or payment of the first debt service. At December 31, 2013, the accumulated amount of the restrictions for the whole restricted term of these affiliates was $1,121 million. The company expects in the future to extract cash from the entities and to pay dividends to their shareholders. Taking into account only the companies which are in operation, the accumulated amount of restrictions amounts to $97 million.

The Company performed a test on the restricted net assets of combined subsidiaries in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3) ‘General Notes to Financial Statements’ and rule 5-04 (c) ‘what schedules are to be filed’ and concluded the restricted net assets exceed 25% of the combined net assets of the Company as of December 31, 2013. Therefore the separate condensed financial statements of Abengoa Yield, Ltd. should be presented (see Appendix IV for details).

20.2 Subsequent events

After the end of the year 2013, following regulatory changes introduced in July 2013 by Royal Decree 9/2013, the Spanish Ministry of Industry, Energy and Tourism submitted to the National Competition and Markets Commission for its consideration a draft of the ministerial order establishing the parameters in which to apply a new remuneration system to electricity-generation facilities using renewable energy sources in Spain, which include Solaben 2 and Solaben 3. This draft represents additional information regarding the new remuneration system. It includes the necessary parameters to estimate the impact of the new regulation on future cash flows of the abovementioned contracted assets, so therefore, we have taken this draft ministerial order into account when preparing these financial statements.

 

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Appendices

Appendix I

Entities included in the Company as subsidiaries as of December 31, 2013

 

Company name		Project name		Registered address		% of nominal share				Business
Abengoa Cogeneración Tabasco, S.R.L. de C.V.		ACT		Santa Bárbara (MX)			100.0				(2	)
Abengoa Solar US Holding Inc.		ABSU		Colorado (US)			100.0				(3	)
Abengoa Transmisión Norte, S.A.		ATN		Lima (PE)			100.0				(1	)
Abengoa Yield Ltd		Abengoa Yield		Leeds (UK)			100.0				(3	)
Abengoa Transmisión Sur, S.A.		ATS		Lima (PE)			100.0				(1	)
Arizona Solar One Holding, LLC		ASOH		Colorado (US)			100.0				(3	)
Arizona Solar One, LLC		ASO		Colorado (US)			100.0				(3	)
Mojave Solar Holding, LLC		MSH		Delaware (US)			100.0				(3	)
Palmatir, S.A.		Palmatir		Montevideo (UY)			100.0				(3	)
Palmucho, S.A.		Palmucho		Santiago (CL)			100.0				(1	)
Solaben Electricidad Dos, S.A.		Solaben 2		Cáceres (ES)			70.0				(3	)
Solaben Electricidad Tres, S.A.		Solaben 3		Cáceres (ES)			70.0				(3	)
Transmisora Baquedano, S.A.		Quadra 1		Santiago (CL)			99.9				(1	)
Transmisora Mejillones, S.A.		Quadra 2		Santiago (CL)			99.9				(1	)

 

(1)	Operating segment activities area: Electric transmission lines

(2)	Operating segment activities area: Conventional power

(3)	Operating segment activities area: Renewable energy

 

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Appendices

Appendix I

Entities included in the Company as subsidiaries as of December 31, 2012

 

Company name		Project name		Registered address		% of nominal share				Business
Abengoa Cogeneración Tabasco, S.R.L. de C.V.		ACT		Santa Bárbara (MX)			100.0				(2	)
Abengoa Transmisión Norte, S.A.		ATN		Lima (PE)			100.0				(1	)
Abengoa Transmisión Sur, S.A.		ATS		Lima (PE)			100.0				(1	)
Arizona Solar One Holding, LLC		ASOH		Colorado (US)			100.0				(3	)
Mojave Solar Holding, LLC		MSH		Delaware (US)			100.0				(3	)
Palmatir, S.A.		Palmatir		Montevideo (UY)			100.0				(3	)
Palmucho, S.A.		Palmucho		Santiago (CL)			100.0				(1	)
Solaben Electricidad Dos, S.A.		Solaben 2		Cáceres (ES)			70.0				(3	)
Solaben Electricidad Tres, S.A.		Solaben 3		Cáceres (ES)			70.0				(3	)
Transmisora Baquedano, S.A.		Quadra 1		Santiago (CL)			99.9				(1	)
Transmisora Mejillones, S.A.		Quadra 2		Santiago (CL)			99.9				(1	)

 

(1)	Operating segment activities area: Electric transmission lines

(2)	Operating segment activities area: Conventional power

(3)	Operating segment activities area: Renewable energy

 

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Appendices

Appendix II

Investments recorded under the equity method as of December 31, 2013

 

Company name

Project name

Registered address

% of nominal share

Business

Evacuacion Valdecaballeros, S.L.

Valdecaballeros

Caceres (ES)

28.6

(3

)

Mojave Solar, LLC

Mojave

California (US)

100.0

(3

)

Investments recorded under the equity method as of December 31, 2012

 

Company name

Project name

Registered address

% of nominal share

Business

Arizona Solar One, LLC

Solana

Colorado (US)

100.0

(3

)

Evacuacion Valdecaballeros, S.L.

Valdecaballeros

Caceres (ES)

28.6

(3

)

Mojave Solar, LLC

Mojave

California (US)

100.0

(3

)

 

(1)	Operating segment activities area: Electric transmission lines

(2)	Operating segment activities area: Conventional power

(3)	Operating segment activities area: Renewable energy

 

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Appendices

Appendix III

Projects subject to the application of IFRIC 12 interpretation based on the concession of services as of December 31, 2013

 

Project name		Country		Status (*)		% of nominal share		Years of agreement				Assets/ investment				Accumulated amortization
Renewable energy:
Solaben 2		Spain		(O)		70.0			2012-2042				366,776				(13,426	)
Solaben 3		Spain		(O)		70.0			2012-2042				368,800				(17,234	)
Solana		USA		(O)		100.0			2013-2043				2,058,884				(16,297	)
Palmatir		Uruguay		(C)		100.0			2014-2034				141,119				—
Conventional power:
ACT		Mexico		(O)		100.0			2013-2033				635,849				—
Electric transmission lines:
ATS		Peru		(O)		100.0			2014-2044				513,779				—
ATN		Peru		(O)		100.0			2010-2040				319,939				(27,208	)
Quadra 1		Chile		(O)		100.0			2014-2034				38,480				—
Quadra 2		Chile		(O)		100.0			2014-2034				41,441				—
Palmucho		Chile		(O)		100.0			2005-2021				7,219				—

 

(*)	Operative (O), Construction ( C)

Projects subject to the application of IFRIC 12 interpretation based on the concession of services as of December 31, 2012

 

Project name		Country		Status (*)		% of nominal share		Years of agreement				Assets/ investment				Accumulated amortization
Renewable energy:
Solaben 2		Spain		(O)		70.0			2012-2042				358,963				(2,907	)
Solaben 3		Spain		(O)		70.0			2012-2042				358,445				(6,697	)
Palmatir		Uruguay		(C)		100.0			2014-2034				49,822				—
Conventional power:
ACT		Mexico		(C)		100.0			2013-2033				570,198				—
Electric transmission lines:
ATS		Peru		(O)		100.0			2014-2044				389,829				—
ATN		Peru		(O)		100.0			2010-2040				319,256				(16,486	)
Quadra 1		Chile		(O)		100.0			2014-2034				12,935				—
Quadra 2		Chile		(O)		100.0			2014-2034				17,909				—
Palmucho		Chile		(O)		100.0			2005-2021				7,675				—

 

(*)	Operative (O), Construction ( C)

 

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Appendix IV Financial Statements of Abengoa Yield Ltd.

Income statement and statement of comprehensive income for the period ended December 31, 2013

- Amounts in U.S. dollars -

 

		Period ended 12.31.13
Profit for the year (note 1)			—

There were no transactions that resulted in gains or losses in relation to the profit for the period.

Notes 1 to 6 are an integral part of the financial statements.

 

		Balance as of 12.17.13				Dividends				Profit for the period				Balance as of 12.31.13
Share capital			14				—				—				14
Total own funds			14				—				—				14

 

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Appendices

Appendix IV

Statement of changes in equity for the period ended December 31, 2013

There were no transactions that resulted in gains or losses in relation to the profit for the period.

Notes 1 to 6 are an integral part of the financial statements.

A statement of cash flows has not been prepared because there were no cash transactions within the period.

 

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Appendices

Appendix IV

Balance sheet as of December 31, 2013

- Amounts in U.S. dollars -

 

		Note		Balance as of 12.31.13
Non-current assets
Loans to parent undertakings		3			14
Non-current assets					14
Total assets					14
Equity
Share capital		4			14
Equity and liabilities					14

Notes 1 to 6 are an integral part of the financial statements.

The financial statements of Abengoa Yield Limited (registered number 8818211) were approved by the Board of Directors and authorised for issue on February 25, 2014. They were signed on its behalf by:

 

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Appendices

Appendix IV

Notes to the financial statements

Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04-(c) of Regulation S-X, of the US Securities and Exchange Commission (SEC) which require condensed financial information as to the financial position, change in financial position, results of operations of a parent company, other comprehensive income statement and cash flow statement as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with International Financial Reporting Standards have been condensed or omitted. The footnote disclosures contain supplemental information only and, as such, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements.

1. Significant accounting policies

The financial statements of the company for the year ended December 31, 2013, were authorised for issue in accordance with a resolution of the directors on February 25, 2014. The company is a limited company incorporated in England and Wales. The principal activities of the company are described in the directors’ report.

1.1 Basis of accounting

The financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IFRS-IASB’) and applicable law. The financial statements have been prepared on a historical cost basis. The financial statements are presented in U.S. dollars.

The company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the strategic report. The strategic report also considers the principal risks and uncertainties facing the company and its policies and processes for managing these. The directors have considered the appropriateness of the going concern basis of preparation. Having considered the current position and future plans for the company, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they have adopted the going concern basis of accounting in preparing the financial statements.

These financial statements, for the period ended December 31, 2013, are the first Abengoa Yield Limited has prepared in accordance with IFRS-IASB. Accordingly, the company has prepared financial statements which comply with IFRS-IASB applicable for periods ending on or after December 31, 2013. No comparative information has been prepared as these financial statements are the first the company prepares because of its incorporation in December 2013. In preparing these financial statements, the company has decided that the date of first application of IFRS is December 17, 2013, when it was established.

The principal accounting policies adopted are summarised below. All policies have all been applied consistently throughout the period.

1.2 Foreign currency

The financial statements are presented in U.S. dollars as it is the functional currency of the company. Foreign currency transactions are translated into functional currency using exchange rates at the date of the transaction. Foreign exchange gains and losses from settlement of these transactions, and from translation of monetary assets and liabilities at period-end exchange rates, are recognised in the income statement except when deferred in equity as qualifying hedges.

 

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Appendices

Appendix IV

1.3 Financial assets, financial liabilities and equity

Financial assets, liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

1.4 Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

1.5 Accounting standards amendments

Standards, interpretations and amendments published by the IASB that will be effective for periods beginning on or after January 1, 2014:

 

•

IAS 32 (amendment). ‘Offsetting of financial assets and financial liabilities’.

 

•

IAS 36 (amendment). ‘Recoverable Amount Disclosures for Non-Financial Assets’.

 

•

IAS 39 (amendment). ‘Novation of derivatives and Confirmation of Hedge Accounting’.

 

•

IFRS 9, ‘Financial instruments’.

The directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the company in future periods.

2. Profit for the period

The fee payable to the company’s auditors has been borne by the parent company.

3. Loans to parent undertakings

Loans to parent undertakings are financial assets and relate to uncalled shared capital. Financial assets are initially recognised at fair value, including directly attributable transaction costs, and subsequently at amortised cost, recognising accrued interest according to the effective interest rate, understood to mean the updated rate that equals the book value of the instrument with all its cash flows estimated until maturity. Notwithstanding the above, credits involved in commercial operations with maturity dates not greater than one year are valued at their nominal value, both at the time of initial recognition and subsequently, provided that the effect of not updating the cash flows is not significant.

The necessary valuation corrections based on value impairment are applied, if there is any evidence that all sums owed will not be collected.

4. Reconciliation of movements in shareholder’s funds

The amounts and movements of the equity instruments accounts as of December 31, 2013 are as follows:

 

		Balance as of 12.17.13				Dividends				Profit for the period				Balance as of 12.31.13
Share capital			14				—				—				14
Total own funds			14				—				—				14

 

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Appendices

Appendix IV

The composition of the shareholders as of December 31, 2013 is as follows:

 

Shareholders		% Stake as of 12.31.13
Abengoa Concessions Investment Limited			100	%
			100	%

As of December 31, 2013, shareholders´ equity was divided into one hundred (100) registered shares with a face value of $0.138, of one class of ordinary shares which carry no right to fixed income. The shares are issued but unpaid.

5. Related party transactions

Related party transactions in the period are limited to the issue of shares to Abengoa Concessions Investments Limited as discussed in note 3.

6. Ultimate parent company

The company’s immediate parent is Abengoa Concessions Investments Limited. The directors consider the company’s ultimate parent undertaking and controlling party to be Inversion Corporativa IC, S.A. registered in Spain.

 

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             Ordinary Shares

 

            Ordinary Shares

 

 

PRELIMINARY PROSPECTUS

                    , 2014

 

 

Citigroup

 

 

Until                     , 2014 (25 days after the date of this prospectus), all dealers that buy, sell, or trade our ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers’ obligation to deliver a prospectus when acting as underwriter and with respect to their unsold allotments or subscriptions.

 

 

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 6.

Indemnification of Directors and Officers

The registrant’s articles of association provide that, subject to the U.K. Companies Act 2006, every person who is or was at any time a director or other officer (excluding an auditor) of the registrant may be indemnified out of the assets of the registrant against all costs, charges, expenses, losses or liabilities incurred by him in performing his duties or the exercise of his powers or otherwise in relation to or in connection with his duties, powers or office.

The registrant plans to maintain insurance for its directors regarding negligence, fault, breach of trust and breach of duty under the terms allowed by the U.K. Companies Act 2006.

In the underwriting agreement, the underwriters will agree to indemnify, under certain conditions, the registrant, members of the registrant’s board of directors, members of the executive management board and persons who control the registrant within the meaning of the Securities Act, against certain liabilities. See “Item 9. Undertakings” for a description of the Commission’s position regarding such indemnification provisions.

 

Item 7.

Recent Sales of Unregistered Securities

None.

 

Item 8.

Exhibits and Financial Statement Schedules

 

(a)

The following documents are filed as part of this registration statement:

The Exhibit Index attached hereto is incorporated herein by reference.

 

(b)

Financial Statement Schedules

All schedules have been omitted because the information required to be set forth in the schedules is either not applicable or is shown in the financial statements or notes thereto.

 

Item 9.

Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless, in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question, whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

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The undersigned registrant hereby undertakes that:

 

(4)

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A, and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act, as amended, shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(5)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in                     , on this      day of                 , 2014.

 

 

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POWER OF ATTORNEY

We, the undersigned directors and officers of Abengoa Yield Limited, hereby severally constitute and appoint                    ,                    , and                    , and each of them singly, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution for him/her and in his/her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the United States Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Title		Date
[Name]		[Title] (Principal executive officer)		, 2014
[Name]		[Title] (Principal financial officer)		, 2014
[Name]		[Title] (Principal accounting officer)		, 2014
[Name]		Director		, 2014
[Name]		Director		, 2014
[Name]		Director		, 2014
[Name]		Director		, 2014
[Name]		Director		, 2014
[Name]		Director		, 2014
[Name]		Director		, 2014
[Name]		Authorized Representative in the United States		, 2014

 

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EXHIBIT INDEX

 

Exhibit Number		Exhibit
1.1*		Form of Underwriting Agreement.
3.1*		Form of Articles of Association.
5.1*		Opinion of Linklaters LLP.
8.1*		Opinion of Linklaters LLP as to certain U.S. federal income taxation matters.
8.2*		Opinion of Linklaters LLP as to certain United Kingdom taxation matters.
10.1		Form of Right of First Offer Agreement by and between Abengoa Yield plc and Abengoa, S.A.
10.2		Form of Executive Services Agreement by and between Abengoa Yield plc and Abengoa Concessions, S.L.
10.3		Form of Support Services Agreement by and between Abengoa Yield plc and Abengoa Concessions, S.L.
10.4		Form of Financial Support Agreement by and between Abengoa Yield plc and Abengoa, S.A.
10.5		Form of Trademark License Agreement by and between Abengoa Yield plc and Abengoa, S.A.
10.6*		Form of Deed between Abengoa Yield plc and Abengoa Concessions Investments Limited.
10.7*		Form of Shareholders Agreement by and among Abengoa Construçao Brasil Ltd., Sociedad Inversora Lineas de Brasil S.L., Abengoa Concessions S.L and Abengoa Conçessao Brasil Holding, S.A.
10.8		Operation and Maintenance Agreement between Abengoa Solar España, S.A. and Solaben Electricidad Dos, S.A., dated December 10, 2012.
10.9		Operation and Maintenance Agreement between Abengoa Solar Espana, S.A. and Solaben Electricidad Tres, S.A., dated December 10, 2012.
21.1		List of Subsidiaries.
23.1*		Consent of Deloitte, S.L., independent registered public accounting firm
23.2*		Consent of Linklaters LLP (included in Exhibit 5.1, Exhibit 8.1 and Exhibit 8.2).
24.1*		Powers of Attorney (included on signature page).
99.1*		Consent of Director Nominees.

 

Notes:—

*	To be filed by amendment.

 

II-5

Exhibit 10.1

Dated [—], 2014

Abengoa, S.A.

and

Abengoa Yield plc

Right of First Offer Agreement

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Contents				Page
1		Definitions			1
2		Right of First Offer on Abengoa ROFO Assets			3
3		Term; Termination Rights			5
4		Confidentiality			5
5		Miscellaneous provisions			6

 

 

i

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This Right of First Offer Agreement (this “Agreement”) is made and entered into as of [—], 2014, by and between:

 

(1)	Abengoa, S.A., a company organized under the laws of the Kingdom of Spain (“Abengoa”); and

 

(2)	Abengoa Yield plc, a public limited company incorporated and registered in England and Wales (“Yield”).

Abengoa and Yield are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

Whereas:

 

(A)

Abengoa provides innovative solutions for a diverse range of customers in the energy and environmental sectors and has the intention for Yield to serve as its primary vehicle for owning, operating and acquiring renewable energy, conventional power, electric transmission and water contracted revenue assets;

 

(B)	Yield expects to increase its cash available for distribution and dividend per share by acquiring additional assets, including assets acquired from Abengoa; and

 

(C)	Abengoa desires to grant to Yield an exclusive right of first offer to acquire the Abengoa ROFO Assets (as defined in Section 2.1) wholly or partially owned by Abengoa and certain of its Affiliates (as hereinafter defined) on the terms and conditions set forth in this Agreement.

Now, therefore, in consideration of the mutual covenants set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Abengoa and Yield hereby agree as follows:

 

1	Definitions

 

1.1	Effective Date

This Agreement shall become effective on the Effective Date.

 

1.2	Definitions

In addition to the terms defined above in the introduction and Recitals to this Agreement, the following terms when used in this Agreement shall have the meanings set forth in this Section 1.2.

“Abengoa Confidential Information” has the meaning set forth in Section 4.1;

“Abengoa Group” means Abengoa, S.A. and any of its Affiliates;

“Abengoa Indemnitees” means Abengoa and its Affiliates (other than Yield and its direct or indirect subsidiaries, excluding any Abengoa ROFO Asset prior to the acquisition thereof by Yield or any of its Affiliates in accordance with the terms and conditions of this Agreement), and each of their respective shareholders, members, partners, trustees, beneficiaries, directors, officers, employees, attorneys, accountants, consultants and agents, and the successors, assigns, legal representatives, heirs, devisees and donees of each of the foregoing;

“Abengoa ROFO Assets” has the meaning set forth in Section 2.1;

 

 

1

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“Affiliate” means, with respect to the Person in question, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such Person.

“Applicable Law” means all statutes, laws, common law, rules, regulations, ordinances, codes or other legal requirements of any Governmental Authority and quasi-governmental agencies or entities, and any judgment, injunction, order, directive, decree or other judicial or regulatory requirement of any court or Governmental Authority of competent jurisdiction affecting or relating to the Person or property in question;

“Business Day” means any day other than Saturday, Sunday or any legal holiday in New York City, Madrid or London;

“Contracted Asset” means renewable energy, conventional power, electric transmission and water contracted revenue assets, already in operation.

“Effective Date” means the closing date of Yield’s initial public offering of ordinary shares

“Governmental Authority” means any federal, state or local government or political subdivision thereof of the United States, Spain or the United Kingdom, including, without limitation, any agency or entity exercising executive, legislative, judicial, regulatory or administrative governmental powers or functions, in each case to the extent the same has jurisdiction over the Person or property in question;

“Losses” means, with respect to the Person in question, any actual liability, damage (but expressly excluding any consequential and punitive damages), loss, cost or expense, including, without limitation, reasonable attorneys’ fees and expenses and court costs, incurred by such Person, as a result of the act, omission or occurrence in question;

“Negotiation Period” has the meaning set forth in Section 2.2;

“Notice” has the meaning set forth in Section 5.1;

“Person” means any natural person, corporation, general or limited partnership, limited liability company, association, joint venture, trust, estate, Governmental Authority or other legal entity, in each case whether in its own or a representative capacity;

“Project Level Indebtedness” means any indebtedness of a project company (i.e. a special purpose vehicle that undertakes to develop and finance a project related to a Contracted Asset) under a scheme of non-recourse to Abengoa.

“Required Securities Disclosure” has the meaning set forth in Section 4.1;

“ROFO Termination Date” has the meaning set forth in Section 2.3;

“Term” has the meaning set forth in Section 3.1;

“Third Party” means any Person other than a Party or an Affiliate of a Party;

“Transaction Notice” has the meaning set forth in Section 2.2; and

“Transfer” means, other than in connection with any disposition of assets or granting of liens required under any Project Level Indebtedness of any Abengoa ROFO Asset, any assignment, sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of or any other like transfer or encumbering (whether with or without consideration);

 

 

2

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provided, that this definition shall not include any (i) merger with or into, or sale of substantially all of Abengoa’s assets to, an unaffiliated third-party or (ii) internal restructuring involving any Abengoa ROFO Asset; provided, the terms of any such restructuring will not limit, delay or hinder the ability of Yield or any of its Affiliates to acquire such Abengoa ROFO Asset from Abengoa in accordance with the terms of this Agreement if and when Abengoa elects to sell, transfer or otherwise dispose of such Abengoa ROFO Asset to a third party.

“Transfer Information” means a (i) description of the Abengoa ROFO Asset, (ii) audited financial statements for the last three years with respect to the Abengoa ROFO Asset to the extent available, (iii) a financial model covering the life of the asset including yearly yield calculation, project IRR, equity IRR, NPV, valuation and debt multiples, being the model duly audited by a Big 4 accounting firm, (iv) the financial model used for raising the non-recourse financing, (v) the most recent technical report from the independent engineer advising the senior lenders of the project validating that the asset has been built in accordance to specifications and industry standards and that can deliver the expected performance (vi) any reports from independent engineers prepared in the last 12 months on behalf of the senior lenders of the project, (vii) detailed technical and economic information as per Abengoa’s reporting systems (In.Pre.So.), (viii) the last legal report prepared for the senior lenders of the project confirming that the project has reached commercial operations date and has substantially all required permits in place, (ix) all contracts relating to the Abengoa ROFO Asset, (x) the price for sale proposed by Abengoa, (xi) any proposed conditions to the closing of the sale of the Abengoa ROFO Asset and any additional materials terms or conditions that may apply and (xii) a Share Purchase Agreement proposal for entering into a transaction with Yield. The Transfer Information shall also include a detailed description of any rights regulating divestitures of Abengoa’s stake in the Abengoa ROFO Assets, such as drag-along and tag-along clauses, rights of first refusal and similar provisions, so that Yield can duly take these into account during the Negotiation Period.

 

2	Right of First Offer on Abengoa ROFO Assets

 

2.1	Abengoa ROFO Assets

During the Term, Abengoa hereby grants to Yield and its Affiliates a right of first offer on any proposed Transfer of any interest in a Contracted Asset owned by Abengoa Group and located in: the following primary geographies: (i) the following countries in North America: United States, Canada and Mexico; (ii) the following countries in South America: Chile, Brazil, Peru, Uruguay and Colombia; and (iii) the European Union. In addition, Abengoa grants to Yield and its Affiliates a right of first offer on any proposed Transfer involving any four (4) Contracted Assets to be agreed among the Parties within a one (1) month period from the Effective Date in writing and located in (i) the following countries in Africa: Morocco, Tunisia, Algeria, South Africa, Namibia, Kenya and Ghana; (ii) the following countries in the Middle East: Israel, United Arab Emirates, Saudi Arabia, Qatar and Oman; and (iii) the following countries in Asia: Turkey, Japan, Malaysia, Thailand, India and Australia (the “Secondary Geographies”). Each asset fulfilling the conditions in this paragraph as referred to individually as an “Abengoa ROFO Asset,” and such assets are collectively referred to as, the “Abengoa ROFO Assets”).

 

 

3

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The list of four (4) Contracted Assets in secondary geographies considered as Abengoa ROFO Assets will be updated to include a replacement Contracted Asset any time Yield acquires an asset or a ROFO Termination Date occurs with respect to a Contracted Asset from that list. In case the Parties do not reach agreement of which asset should be added to the list within 20 calendar days of such acquisition or ROFO Termination Date, Abengoa will propose three Contracted Assets in Secondary Geographies and Yield will pick one out of those three to be added to the list. Thereafter, such added Contracted Asset will be an Abengoa ROFO Asset for all purposes hereunder.

Additionally, Abengoa might offer Contracted Assets in other geographies and might offer contracted assets of different nature than the Contracted Assets. For the avoidance of doubt, the ROFO right described in this Agreement does not apply to such assets.

The right of first offer granted by Abengoa to Yield in this Agreement is granted in exchange for a fee equivalent to 1% of the equity purchase price (including any shareholder loan or similar transaction) of any acquisition of an Abengoa ROFO Asset, payable simultaneously with the closing of each Transfer to a bank account designated by Abengoa.

 

2.2	Notice of Transaction Related to Abengoa ROFO Assets and Negotiation of Definitive Terms for Transaction

Abengoa must deliver a written notice to Yield prior to engaging in any negotiation regarding any proposed Transfer of any Abengoa ROFO Asset (or any portion thereof) and such notice shall include the Transfer Information (such notice, a “Transaction Notice”). If Abengoa delivers any Transaction Notice to Yield, unless Yield notifies Abengoa in writing that it considers such information to be insufficient within a maximum period of 10 Business Days from the date the Transaction Notice is delivered to Yield, then Abengoa and Yield shall enter non-binding discussions and negotiate in good faith to attempt to agree on definitive terms acceptable to both Parties, in their sole and absolute discretion, for the Transfer of the applicable Abengoa ROFO Asset to Yield or any of its Affiliates for a period of sixty (60) days starting at the end of the 10 Business Day period referred to above without any communication from Yield indicating that the information was insufficient (the “Negotiation Period”). If the Parties have not agreed in writing to definitive terms for the Transfer of such Abengoa ROFO Asset to Yield, Abengoa will be able, within the next eighteen (18) months beginning from the end of the Negotiation Period, to Transfer such Abengoa ROFO Asset to a Third Party (or agree in writing to undertake such transaction with a third party) in accordance with the terms of Section 2.3.

If an Abengoa ROFO Asset is offered, any time, to Yield for a second or subsequent time, the Negotiation Period shall be reduced to fifteen (15) calendar days.

Following the lapse of the aforementioned eighteen (18) months period, the Abengoa ROFO Asset that was subject to the negotiation will not be an Abengoa ROFO Asset.

 

2.3	Negotiations with Third Parties

Neither Abengoa nor any of its representatives, agents or Affiliates (excluding Yield and its direct or indirect subsidiaries, which subsidiaries shall not include any Abengoa ROFO Asset prior to the acquisition thereof by Yield or any of its Affiliates in accordance with the terms and conditions of this Agreement) shall solicit offers from, or negotiate or enter into any agreement with, any Third Party for the Transfer of any Abengoa ROFO Asset (or any portion thereof) until the expiration of the Negotiation Period related to such Abengoa ROFO Asset and the proposed Transfer (the “ROFO Termination Date”). Yield agrees and acknowledges that, if no agreement has been reached between Abengoa and Yield, from and after the ROFO Termination Date for any Abengoa ROFO Asset and the applicable proposed Transfer, during a period of eighteen (18) months: (a) Abengoa shall have the absolute right to solicit offers from,

 

 

4

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negotiate with, and enter into agreements with, any Third Party to Transfer such Abengoa ROFO Asset, as long as such is on terms generally no less favorable to Abengoa than those offered to Yield pursuant to the Transaction Notice, and (b) Abengoa shall have no further obligation to negotiate with Yield regarding, or offer Yield the opportunity to acquire any interest in, such Abengoa ROFO Asset; provided, that the final terms of the Transfer of any Abengoa ROFO Asset to any Third Party be on terms generally no less favorable to Abengoa than those offered to Yield pursuant to the Transaction Notice.

 

3	Term; Termination Rights

 

3.1

Term

Unless earlier terminated in accordance with this Section 3, the term of this Agreement (the “Term”) shall commence at the Effective Date and shall continue in effect until 5:00 p.m. New York City time on the fifth anniversary of the date on which the Effective Date occurs, at which time this Agreement shall terminate and the Parties shall have no further rights or obligations under this Agreement, except those that expressly survive the termination of this Agreement. Nevertheless, Yield will be able to unilaterally extend this agreement for as many periods of three years as it desires, provided that Yield has acquired at least one asset in the previous two (2) years, after having been offered at least (4) Abengoa ROFO Assets through Transaction Notices.

 

3.2	Termination Rights

Abengoa or Yield, as the case may be, shall have the right to terminate this Agreement, with written notice to the other Party, if the other Party materially breaches or defaults in the performance of its obligations under this Agreement or under any transaction agreement entered into by the Parties in connection with an Abengoa ROFO Asset, and such breach or default is continuing for 90 days after such breaching Party has been given a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder. Upon any such termination the Parties shall have no further rights or obligations under this Agreement, except those that expressly survive the termination of this Agreement.

 

3.3	Exclusive Remedy

Other than with respect to a breach or default in the performance of a Party’s indemnification obligations under Section 4, each Party’s sole and exclusive remedy for a breach or default by the other Party of its obligations under this Agreement shall be to terminate this Agreement in accordance with Section 3.2.

 

4	Confidentiality

 

4.1	Abengoa Confidential Information

Yield shall keep confidential and not make any public announcement or disclose to any Person any terms of any other documents, materials, data or other information with respect to any Abengoa ROFO Asset which is not generally known to the public (the “Abengoa Confidential Information”); provided, however, that Abengoa Confidential Information shall not include (a)

 

 

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the terms and conditions of this Agreement or (b) information that becomes available to Yield on a non-confidential basis from a source other than Abengoa, its Affiliates or their directors, officers or employees, provided, that, to Yield’s knowledge, such source was not prohibited from disclosing such information to Yield by any legal, contractual or fiduciary duty. Notwithstanding the foregoing, Yield shall be permitted to (A) disclose any Abengoa Confidential Information to the extent required by court order or under Applicable Law, (B) make a public announcement regarding such matters (1) as agreed to in writing by Abengoa or (2) as required by the provisions of any securities laws or the requirements of any exchange on which Yield securities may be listed (a “Required Securities Disclosure”), or (C) disclose any Abengoa Confidential Information to any Person on a “need-to-know” basis, such as its shareholders, partners, members, trustees, beneficiaries, directors, officers, employees, attorneys, consultants or lenders; provided, however, that, other than in connection with a Required Securities Disclosure, Yield shall (y) advise such Person of the confidential nature of such Abengoa Confidential Information, and (z) cause such Person to be bound by obligations of confidentiality that are no less stringent than the obligations set forth herein. Yield shall indemnify and hold harmless the Abengoa Indemnitees for any Losses incurred by any of the Abengoa Indemnitees for a breach or default of Yield’s obligations under this Section 4.1. This Section 4.1 shall survive the termination of this Agreement.

 

5	Miscellaneous provisions

 

5.1

Notices

 

5.1.1

Method of Delivery

All notices, requests, demands and other communications (each, a “Notice”) required to be provided to the other Party pursuant to this Agreement shall be in writing and shall be delivered (i) in person, (ii) by certified U.S. mail, with postage prepaid and return receipt requested, (iii) by overnight courier service, or (iv) by facsimile transmittal, with a verification copy sent on the same day by any of the methods set forth in clauses (i), (ii) and (iii), to the other Party to this Agreement at the following address or facsimile number (or to such other address or facsimile number as Abengoa or Yield may designate from time to time pursuant to this Section 5.1):

If to Abengoa:

Abengoa, S.A.

Campus Palmas Altas

1 Energía Solar Street

Seville, Spain

Attention: [—]

Facsimile No.: [—]

If to Yield:

[Address]

Attention: [—]

Facsimile No.: [—]

 

 

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5.1.2

Receipt of Notices

All Notices sent by Abengoa or Yield under this Agreement shall be deemed to have been received by the Party to whom such Notice is sent upon (i) delivery to the address or facsimile number of the recipient Party, provided that such delivery is made prior to 5:00 p.m. (local time for the recipient Party) on a Business Day, otherwise the following Business Day, or (ii) the attempted delivery of such Notice if (A) such recipient Party refuses delivery of such Notice, or (B) such recipient Party is no longer at such address or facsimile number, and such recipient Party failed to provide the sending Party with its current address or facsimile number pursuant to this Section 5.1).

 

5.1.3

Change of Address

Abengoa and Yield shall have the right to change their respective address and/or facsimile number for the purposes of this Section 5.1 by providing a Notice of such change in address and/or facsimile as required under this Section 5.1.

 

5.2	Time is of the Essence

Time is of the essence of this Agreement; provided, however, that notwithstanding anything to the contrary in this Agreement, if the time period for the performance of any covenant or obligation, satisfaction of any condition or delivery of any notice or item required under this Agreement shall expire on a day other than a Business Day, such time period shall be extended automatically to the next Business Day.

 

5.3	Assignment

Neither Party shall assign this Agreement or any interest therein to any Person, without the prior written consent of the other Party, which consent may be withheld in such Party’s sole discretion.

 

5.4	Successors and Assigns

This Agreement shall be binding upon and inure to the benefit of Abengoa and Yield and their respective successors and permitted assigns (which include Yield’s Affiliates).

 

5.5	Third Party Beneficiaries

This Agreement shall not confer any rights or remedies on any Person other than (i) the Parties and their respective successors and permitted assigns (including Yield’s Affiliates), and (ii) the Abengoa Indemnitees to the extent such Abengoa Indemnitees are expressly granted certain rights of indemnification in this Agreement.

 

5.6	Other Activities

No Party hereto shall be prohibited from engaging in or holding an interest in any other business ventures of any kind or description, or any responsibility to account to the other for the income or profits of any such enterprises or have this Agreement be deemed to constitute any agreement not to compete. This Agreement shall not be deemed to create a partnership, joint venture, association or any other similar relationship between the Parties.

 

 

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5.7	Limitation of Liability

NOTWITHSTANDING ANYTHINGS ELSE SET OUT IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST PROFITS) ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF SUCH PARTY IS ADVISED OF, KNOWS OF OR SHOULD KNOW OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

5.8	Governing law

THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PRINCIPLES REGARDING CONFLICT OF LAWS.

 

5.9	Rules of Construction

The following rules shall apply to the construction and interpretation of this Agreement:

 

5.9.1

Singular words shall connote the plural as well as the singular, and plural words shall connote the singular as well as the plural, and the masculine shall include the feminine and the neuter.

 

5.9.2

All references in this Agreement to particular articles, sections, subsections or clauses (whether in upper or lower case) are references to articles, sections, subsections or clauses of this Agreement. All references in this Agreement to particular exhibits or schedules (whether in upper or lower case) are references to the exhibits and schedules attached to this Agreement, unless otherwise expressly stated or clearly apparent from the context of such reference

 

5.9.3

The headings contained herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.

 

5.9.4

Each Party and its counsel have reviewed and revised (or requested revisions of) this Agreement and have participated in the preparation of this Agreement, and therefore any usual rules of construction requiring that ambiguities are to be resolved against any Party shall not be applicable in the construction and interpretation of this Agreement or any exhibits hereto.

 

5.9.5

The terms “hereby,” “hereof,” “hereto,” “herein,” “hereunder” and any similar terms shall refer to this Agreement, and not solely to the provision in which such term is used.

 

5.9.6

The terms “include,” “including” and similar terms shall be construed as if followed by the phrase “without limitation.”

 

5.9.7

The term “sole discretion” with respect to any determination to be made by a Party under this Agreement shall mean the sole and absolute discretion of such Party, without regard to any standard of reasonableness or other standard by which the determination of such Party might be challenged.

 

 

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5.10	Severability

If any term or provision of this Agreement is held to be or rendered invalid or unenforceable at any time in any jurisdiction, such term or provision shall not affect the validity or enforceability of any other terms or provisions of this Agreement, or the validity or enforceability of such affected terms or provisions at any other time or in any other jurisdiction.

 

5.11	Jurisdiction; Venue

ANY LITIGATION OR OTHER COURT PROCEEDING WITH RESPECT TO ANY MATTER ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT SHALL BE CONDUCTED IN THE COURTS OF RECORD IN THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ABENGOA AND YIELD HEREBY SUBMIT TO JURISDICTION AND CONSENT TO VENUE IN SUCH COURTS.

 

5.12	Waiver of trial by jury

ABENGOA AND YIELD HEREBY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN ANY LITIGATION OR OTHER COURT PROCEEDING BY EITHER PARTY AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT.

 

5.13	Prevailing Party

If any litigation or other court action, arbitration or similar adjudicatory proceeding is sought, taken, instituted or brought by Abengoa or Yield to enforce its rights under this Agreement, all fees, costs and expenses, including, without limitation, reasonable attorneys’ fees and court costs, of the prevailing Party in such action, suit or proceeding shall be borne by the Party against whose interest the judgment or decision is rendered.

 

5.14	Recitals, Exhibits and Schedules

The recitals to this Agreement, and all exhibits and schedules referred to in this Agreement are incorporated herein by such reference and made a part of this Agreement. Any matter disclosed in any schedule to this Agreement shall be deemed to be incorporated in all other schedules to this Agreement.

 

5.15	Entire Agreement

This Agreement sets forth the entire understanding and agreement of the Parties hereto, and shall supersede any other agreements and understandings (written or oral) between Abengoa and Yield on or prior to the date of this Agreement with respect to the matters contemplated in this Agreement.

 

5.16	Amendments to Agreement

No amendment, supplement or other modification to any terms of this Agreement shall be valid unless in writing and executed and delivered by Abengoa and Yield.

 

 

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5.17	Facsimile; Counterparts

Abengoa and Yield may deliver executed signature pages to this Agreement by facsimile transmission to the other Party, which facsimile copy shall be deemed to be an original executed signature page; provided, however, that such Party shall deliver an original signature page to the other Party promptly thereafter. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which counterparts together shall constitute one agreement with the same effect as if the Parties had signed the same signature page.

[Signature Page Follows]

 

 

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In witness whereof, the Parties have caused this Agreement to be executed by their duly authorized representatives effective as of the date first set forth above.

 

ABENGOA, S.A.
By
		Name: [—]
		Title: [—]
ABENGOA YIELD PLC
By
		Name: [—]
		Title: [—]

[Signature Page to ROFO Agreement]

 

 

Exhibit 10.2

Dated [—], 2014

Abengoa Yield plc

and

Abengoa Concessions, S.L.,

as Manager

EXECUTIVE SERVICES AGREEMENT

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Table of Contents

 

Contents				Page
1		Interpretation			1
2		Appointment of Abengoa			5
3		Services and Powers of Abengoa and Executives			5
4		Relationship between Abengoa and the Service Recipients			6
5		Management and Employees			7
6		Information			7
7		Fees and Expenses			8
8		Representations and Warranties of Abengoa and the Service Recipients			9
9		Liability and Indemnification			10
10		Term and Termination			12
11		General Provisions			14

 

 

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EXECUTIVE SERVICES AGREEMENT

This Executive Services Agreement (the “Agreement”) is made as of the [—] day of [—] 2014, by and among:

 

(1)	Abengoa Concessions, S.L. a company organized under the laws of the Kingdom of Spain ( “Abengoa”); and

 

(2)	Abengoa Yield plc, a public limited company incorporated and registered in England and Wales (“Yield”).

This Agreement shall become effective upon the closing of the initial public offering of Yield’s ordinary shares

RECITALS

 

(A)	Yield, directly and indirectly, as applicable, holds interests in the Service Recipients (as defined below).

 

(B)	Yield wishes to engage Abengoa to arrange for the Executives (as defined below) to provide the services set forth in this Agreement to the Service Recipients for a transitional period, subject to the terms and conditions of this Agreement, and Abengoa wishes to accept such engagement.

 

(C)

The parties expect that once all or a substantial part of the Executives have been transferred to Yield on a permanent basis, the Executives will continue to perform executive management services for Abengoa in consideration for payment to Yield of a percentage of the Executives’ remuneration and related costs.

Now, therefore, in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

 

1	Interpretation

 

1.1	Definitions

In this Agreement, except where the context otherwise requires, the following terms will have the following meanings:

“Abengoa” has the meaning assigned hereto in the preamble;

“Abengoa Group” means Abengoa, S.A. and any of its Affiliates;

“Abengoa Indemnified Parties” has the meaning assigned thereto in Section 9.1.1 hereof;

“Abengoa ROFO Agreement” means the agreement dated as of the date hereof between Abengoa S.A. and Yield that provides Yield a right of first offer to purchase certain assets of Abengoa S.A. that may be offered for sale from time to time;

“Acquired Assets” means any renewable energy, conventional power and transmission line contracted revenue assets acquired after the date hereof by any member of the Yield Group , including, but not limited, to any assets acquired pursuant to the Abengoa ROFO Agreement or otherwise agreed upon by Abengoa and Yield;

 

 

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“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by such Person, or is under common control of a third Person;

“Business” means the business carried on from time to time by the Yield Group;

“Business Day” means every day except a Saturday or Sunday, or a legal holiday in the City of New York, London or Madrid on which banking institutions are authorized or required by law, regulation or executive order to close;

“Claims” has the meaning assigned thereto in Section 9.1.1 hereof;

“Executive Management Fee” means an amount equal to $2.0 million per year;

“Executives” shall initially mean [—], or such individuals as may be agreed between Abengoa and Yield from time to time;

“Expenses” has the meaning assigned thereto in Section 7.2.2 hereof;

“Expense Statement” has the meaning assigned thereto in Section 1 hereof;

“Governing Body” means (i) with respect to a corporation, the board of directors of such corporation, (ii) with respect to a limited liability company, the manager(s) or managing member(s) of such limited liability company, (iii) with respect to a limited partnership, the board, committee or other body of the general partner of such partnership that serves a similar function or the general partner itself (or if any such general partner is itself a limited partnership, the board, committee or other body of such general partner’s general partner that serves a similar function or such general partner’s partner) and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

“Governing Instruments” means (i) the certificate of incorporation and bylaws in the case of a corporation, (ii) the articles of formation and operating agreement in the case of a limited liability company (iii) the partnership agreement in the case of a partnership, and (iv) any other similar governing document under which an entity was organized, formed or created and/or operates;

“Interest Rate” means, for any day, the rate of interest equal to the overnight U.S. dollar London interbank offered rate on such day;

“Laws” means any and all applicable (i) laws, constitutions, treaties, statutes, codes, ordinances, principles of common law and equity, rules, regulations and municipal bylaws whether domestic, foreign or international, (ii) judicial, arbitral, administrative, ministerial, departmental and regulatory judgments, orders, writs, injunctions, decisions, and awards of any Governmental Authority, and (iii) policies, practices and guidelines of any Governmental Authority which, although not actually having the force of law, are considered by such Governmental Authority as requiring compliance as if having the force of law, and the term “applicable,” with respect to such Laws and in the context that refers to one or more Persons,

 

 

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means such Laws that apply to such Person or Persons or its or their business, undertaking, property or securities at the relevant time and that emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;

“Liabilities” has the meaning assigned thereto in Section 9.1.1 hereof;

“Operating and Administrative Agreements” means the operations and administrative agreements in effect on the date hereof between certain members of the Yield Group and Affiliates of Abengoa for such Yield Group members’ operating and administrative needs and, with respect to any Acquired Assets, any operations and administrative agreements between any of the Acquired Assets and Affiliates of Abengoa for such asset’s operating and administrative needs in effect as of the date of acquisition of the Acquired Asset by a member of the Yield Group; for greater certainty, none of the Operating and Administrative Agreements are, or shall be, amended or terminated, or otherwise altered, by this Agreement;

“Operational and Other Services” means any services provided by any member of the Abengoa Group to any member of the Yield Group, including financial advisory, operations and maintenance, marketing, agency, development, operating management and other services, including services provided under any Operating and Administrative Agreement;

“Permit” means any consent, license, approval, registration, permit or other authorization granted by any Governmental Authority;

“Person” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or Governmental Agency, authority or entity however designated or constituted and pronouns have a similarly extended meaning;

“Quarter” means a calendar quarter ending on the last day of March, June, September or December;

“Service Recipient” means Yield and its Subsidiaries, as well as any other direct and indirect Subsidiary of Yield acquired or formed after the date hereof that receives Services from the Executives pursuant to this Agreement;

“Services” has the meaning assigned thereto in Section 3.1 hereof;

“Subsidiary” means, with respect to any Person, (i) any other Person that is directly or indirectly controlled by such Person, (ii) any trust in which such Person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such Person holds all of the interests other than the interests of any general partner, managing member or similar Person;

“Third Party Claim” has the meaning assigned thereto in Section 9.1.2 hereof;

 

 

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“Transaction Fees” means fees paid or payable by the Service Recipients, which are on market terms, with respect to financial advisory services ordinarily carried out by investment banks in the context of mergers and acquisitions transactions;

“Yield” has the meaning assigned thereto in the preamble;

“Yield Group” means Yield and its direct and indirect Subsidiaries;

 

1.2	Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

 

1.3	Interpretation

In this Agreement, unless the context otherwise requires:

 

1.3.1

words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

 

1.3.2

the words “include,” “includes,” “including,” or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

 

1.3.3

references to any Person include such Person’s successors and permitted assigns;

 

1.3.4

any reference to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all amendments made to such statute, regulation, policy, rule or instrument and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

 

1.3.5

any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

 

1.3.6

in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

 

1.3.7

except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

 

 

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2	Appointment of Abengoa

 

2.1	Appointment and Acceptance

 

2.1.1

Subject to and in accordance with the terms, conditions and limitations in this Agreement, Yield hereby appoints Abengoa to arrange for the Executives to provide the Services to the Service Recipients. This appointment will be subject to the express terms of this Agreement.

 

2.1.2

Abengoa hereby accepts the appointment provided for in Section 2.1.1 and agrees to act in such capacity and to arrange for the Executives to provide the Services to the Service Recipients upon the terms, conditions and limitations in this Agreement.

 

2.1.3

Abengoa covenants that the majority of the Executives shall be transferred to Yield, which shall hire the Executives and shall become their employer, within twelve (12) months of the initial public offering of Yield’s ordinary shares.

 

2.2	Other Service Recipients

The parties acknowledge that any Subsidiary of Yield formed or acquired in the future that is not a Service Recipient on the date hereof may become a Service Recipient under this Agreement.

 

3	Services and Powers of Abengoa and Executives

 

3.1

Services

Abengoa will arrange for the Executives to provide the following services (the “Services”) to the Service Recipients:

 

3.1.1

act as senior officers of the Service Recipients as agreed from time to time, subject to the approval of the relevant Governing Body;

 

3.1.2

identify, evaluate and recommend to the Yield Group acquisitions or dispositions from time to time and, where requested to do so, assisting in negotiating the terms of such acquisitions or dispositions;

 

3.1.3

recommend to the members of the Yield Group suitable candidates to serve on the Governing Bodies of the Yield Group;

 

3.1.4

make recommendations with respect to the exercise of any voting rights to which the Service Recipients are entitled in respect of its Subsidiaries and also with respect to payment of dividends or other distributions by the Yield Group; and

 

3.1.5

make recommendations regarding the issuance of any security, equity or debt;

 

3.1.6

carry out the functions of the principal executive, accounting, legal and financial officers for Yield only for purposes of applicable securities laws and the regulations of any stock exchange on which the Securities of Yield are listed and subject to the approval of Yield’s Governing Body.

The Executives shall at all times comply with all obligations under Spanish and other applicable securities laws and regulations and, in particular, in relation to the protection of price sensitive and other material non-public information, including the establishment of separated areas and internal barriers and controls to ensure due compliance with such regulations.

 

 

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3.2	Rendering of the Services

The Executives shall only provide or arrange for the provision of such Services as Services Recipient’s Governing Body may request from time to time. For the avoidance of doubt, this Agreement does not create any labor relations whatsoever between the Executives and the Service Recipients.

 

3.3	Restrictions on Abengoa and Executives

 

3.3.1

Abengoa shall, and shall cause the Executives to, refrain from taking any action that is not in compliance with or would violate any Laws or that otherwise would not be permitted by the Governing Instruments of the Service Recipients. If Abengoa or any Executive is instructed to take any action that is not in such compliance by a Service Recipient’s Governing Body, such person will promptly notify such Governing Body of its judgment that such action would not comply with or violate any such Laws or otherwise would not be permitted by such Governing Instrument.

 

3.3.2

In performing its duties under this Agreement, Abengoa and the Executives shall be entitled to rely in good faith on qualified experts, professionals and other agents (including on accountants, appraisers, consultants, legal counsel and other professional advisors) and shall be permitted to rely in good faith upon the direction of a Service Recipient’s Governing Body to evidence any approvals or authorizations that are required under this Agreement. All references in this Agreement to the Service Recipients or Governing Body for the purposes of instructions, approvals and requests to Abengoa will refer to the Governing Body.

 

3.4	Directors and Officers (D&O) Insurance

Abengoa shall at all times during the term of this Agreement, in respect of itself and the Executives, maintain “Directors and Officers (D&O)” insurance coverage in a maximum amount of TWENTY FIVE MILLION EUROS (€25,000,000).

 

4	Relationship between Abengoa and the Service Recipients

 

4.1	Other Activities

None of Abengoa, its Affiliates, or any of their respective directors, officers, members, partners, shareholders or employees shall be prohibited from engaging in other business activities or sponsoring, or providing services to, third parties that compete directly or indirectly with the Service Recipients; provided, however that no Executive shall be engaged in any such activities.

 

4.2	Exclusivity

Except as expressly provided for herein, Yield shall not, and shall cause the other Service Recipients not to, during the term of this Agreement, engage any other Person to provide any services comparable to the Services without the prior written consent of Abengoa, which may be withheld in the absolute discretion of Abengoa.

 

 

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4.3	Independent Contractor, No Partnership or Joint Venture

The parties acknowledge that Abengoa is providing or arranging for the provision of the Services by the Executives hereunder as an independent contractor and that the Service Recipients and Abengoa are not partners or joint venturers with or agents of each other, and nothing herein will be construed so as to make them partners, joint venturers or agents or impose any liability as such on any of them as a result of this Agreement; provided however that nothing herein will be construed so as to prohibit the Service Recipients and Abengoa from embarking upon an investment together as partners, joint venturers or in any other manner whatsoever.

 

5	Management and Employees

 

5.1	Management and Employees

 

5.1.1

Abengoa shall arrange for each of the Executives to be available to carry out the Services. The Executives shall devote such of their time to the provision of the Services to the Service Recipients as Yield reasonably deems necessary and appropriate in order to fulfill Abengoa’s obligations. The Executives need not be dedicated exclusively to the provision of the Services to the Service Recipients.

 

5.1.2

If any Executive ceases to be available to perform the Services either through termination of employment, illness, personal circumstance, death or otherwise for a period of more than 30 days, the parties hereto shall mutually agree upon a replacement or substitute Executive.

 

5.1.3

Yield shall, and shall cause each of the other Service Recipients to do all things reasonably necessary on its part as requested by Abengoa or the Executives consistent with the terms of this Agreement to enable Abengoa and the Executives to fulfill their obligations, covenants and responsibilities and to exercise their rights pursuant to this Agreement, including making available and granting access to, the employees and contractors of the Service Recipients as Abengoa or the Executives may from time to time reasonably request.

 

5.1.4

Abengoa covenants and agrees to exercise the power and discharge the duties conferred under this Agreement honestly and in good faith, and shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

 

6	Information

 

6.1	Access to Information by Abengoa and Executives

 

6.1.1

Yield shall, and shall cause the other Service Recipients to:

 

(i)

grant, or cause to be granted, to Abengoa and the Executives full access to all documentation and information reasonably necessary in order for Abengoa to perform its obligations, covenants and responsibilities pursuant to the terms hereof and to enable the Executives to provide the Services; and

 

 

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(ii)

provide, or cause to be provided, all documentation and information as may be reasonably requested by Abengoa or the Executives, and promptly notify Abengoa of any material facts or information of which the Service Recipients are aware, including any known, pending or threatened suits, actions, claims, proceedings or orders by or against any member of the Yield Group before any Governmental Authority, that may affect the performance of the obligations, covenants or responsibilities of Abengoa or the pursuant to this Agreement.

 

6.2	Additional Information

The parties acknowledge and agree that conducting the activities and providing the Services contemplated herein may have the incidental effect of providing additional information which may be utilized with respect to, or may augment the value of, business interests and related assets in which Abengoa or any of its Affiliates (other than any member of the Yield Group) has an interest and that, subject to compliance with this Agreement, none of Abengoa, any of its Affiliates or the Executives will be liable to account to the Service Recipients with respect to such activities or results; provided, however, that Abengoa and the Executives will not (and will cause Abengoa´s Affiliates to), in making any use of such additional information, do so in any manner that the relevant Service Provider or its Affiliates knows, or ought reasonably to know, would cause or result in a breach of any confidentiality provision of agreements to which any Service Recipient is a party or is bound.

 

7	Fees and Expenses

 

7.1	Executive Management Fee

 

7.1.1

Yield, on behalf of the Service Recipients, hereby agrees to pay, during the term of this Agreement, the Executive Management Fee. The Executive Management Fee shall be pro-rated and paid quarterly in arrears. For purposes of the initial payment hereunder, the Executive Management Fee will accrue commencing on the date hereof and will be pro-rated based on the actual number of days during the first Quarter in which this Agreement is in effect.

 

7.1.2

The Executive Management Fee will not be reduced by operation of this Agreement by the amount of (i) any fees for Operational and Other Services that are paid or payable by any member of the Yield Group to any member of Abengoa Group or (ii) any Transaction Fees.

 

7.2

Expenses

 

7.2.1

Abengoa acknowledges and agrees that the Service Recipients will not be required to reimburse Abengoa for the salaries and other remuneration of the Executives who provide the Services to such Service Recipients or overhead for such persons.

 

7.2.2

The Parties agree that all out-of-pocket fees, costs and expenses, including travel expenses and those of any third party (“Expenses”), incurred by Abengoa or the Executives in connection with the provision of the Services will not increase the Executive Management Fee nor be reimbursed to Abengoa by Yield.

 

 

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8	Representations and Warranties of Abengoa and the Service Recipients

 

8.1	Representations and Warranties of Abengoa

Abengoa hereby represents and warrants to the Service Recipients that:

 

8.1.1

it is validly organized and existing under the laws of the Kingdom of Spain;

 

8.1.2

it holds, and shall hold, such Permits as are necessary to perform its obligations hereunder and is not aware of, or shall inform the Service Recipients promptly upon knowledge of, any reason why such Permits might be cancelled;

 

8.1.3

it has the power, capacity and authority to enter into this Agreement and to perform its obligations hereunder;

 

8.1.4

it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

 

8.1.5

the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its Governing Instruments, or under any mortgage, lease, agreement or other legally binding instrument, Permit or applicable Law to which it is a party or by which it or any of its properties or assets may be bound, except for any such contravention, breach or default which would not have a material adverse effect on the business, assets, financial condition or results of operations of Abengoa;

 

8.1.6

no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it of this Agreement (besides compliance with all U.S. Securities and Exchange Commission and U.K. Financial Services Authority requirements);

 

8.1.7

this Agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity; and

 

8.1.8

all of the Executives are either employees of (i) Abengoa Concessions S.L. or (ii) another member of the Abengoa Group and under the direct supervision and authority of Abengoa Concessions S.L.

 

8.2	Representations and Warranties of the Service Recipients

Yield hereby represents and warrants, on its behalf and on behalf of each of the other Service Recipients, to Abengoa that:

 

8.2.1

it (and, if applicable, its managing member) is validly organized and existing under the Laws governing its formation and organization;

 

 

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8.2.2

it, or the relevant Service Recipient, holds such Permits necessary to own and operate the projects and entities that it directly or indirectly owns or operates from time to time and is not aware of any reason why such Permits might be cancelled;

 

8.2.3

it (or, as applicable, its managing member on its behalf) has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder;

 

8.2.4

it (or, as applicable, its managing member) has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

 

8.2.5

the execution and delivery of this Agreement by it (or, as applicable, its managing member on its behalf) and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its Governing Instruments (or, if applicable, the Governing Instruments of its managing member), or under any mortgage, lease, agreement or other legally binding instrument, Permit or applicable Law to which it is a party or by which any of its properties or assets may be bound, except for any such contravention, breach or default which would not have a material adverse effect on the business, assets, financial condition or results of operations of the Service Recipients as a whole;

 

8.2.6

no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it (or, as applicable, its managing member on its behalf) of this Agreement (besides compliance with all SEC and FSA requirements); and

 

8.2.7

this Agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

 

9	Liability and Indemnification

 

9.1

Indemnity

 

9.1.1

Yield agrees, to the fullest extent permitted by applicable Laws, to indemnify and hold harmless, and to cause each other Service Recipient to indemnify and hold harmless, the Executives, Abengoa, any of its Affiliates (other than any member of the Yield Group) and any directors, officers, agents, members, partners, stockholders and employees and other representatives of each of the foregoing (each, a “Abengoa Indemnified Party”) from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) (“Liabilities”) incurred by them or threatened in connection with any and all actions, suits, investigations, proceedings or claims, whether arising under statute or action of a Governmental Authority or otherwise and in connection with the business, investments and activities of the Service Recipients or in respect of or arising from this Agreement or the Services provided hereunder

 

 

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(“Claims”); provided that no Abengoa Indemnified Party shall be so indemnified with respect to any Claim to the extent that such Claim is finally determined by a final and non-appealable judgment entered by a court of competent jurisdiction, or pursuant to a settlement agreement agreed to by such Abengoa Indemnified Party, to have resulted from such Abengoa Indemnified Party’s bad faith, fraud, willful misconduct or gross negligence or, in the case of a criminal matter, conduct undertaken with knowledge that the conduct was unlawful.

 

9.1.2

If any action, suit, investigation, proceeding or claim is made or brought by any third party with respect to which a Service Recipient is obligated to provide indemnification under this Agreement (a “Third Party Claim”), Abengoa Indemnified Party will have the right to employ its own counsel in connection therewith, and the reasonable fees and expenses of such counsel, as well as the reasonable costs (excluding an amount reimbursed to such Abengoa Indemnified Party for the time spent in connection therewith) and out-of-pocket expenses incurred in connection therewith will be paid by the Service Recipient in such case, as incurred but subject to recoupment by the Service Recipient if ultimately it is not liable to pay indemnification hereunder.

 

9.1.3

The Abengoa Indemnified Party and the Service Recipients agree that, promptly after the receipt of notice of the commencement of any Third Party Claim, Abengoa Indemnified Party will notify the Service Recipient in writing of the commencement of such Third Party Claim (provided that any accidental failure to provide any such notice will not prejudice the right of any such Abengoa Indemnified Party hereunder) and, throughout the course of such Third Party Claim, such Abengoa Indemnified Party will use its reasonable best efforts to provide copies of all relevant documentation to such Service Recipient, and to keep the Service Recipient apprised of the progress thereof, and to discuss with the Service Recipient all significant actions proposed.

 

9.1.4

The parties hereto expressly acknowledge and agree that the right to indemnity provided in this Section 9.1 shall be in addition to and not in derogation of any other liability which Abengoa Indemnifying Party in any particular case may have or of any other right to indemnity or contribution which any Abengoa Indemnified Party may have by statute or otherwise at law.

 

9.1.5

The indemnity provided in this Section 9.1 shall survive the completion of Services rendered under, or any termination or purported termination of, this Agreement.

 

9.2	Limitation of Liability

 

9.2.1

Abengoa assumes no responsibility under this Agreement other than to render, or arrange for the Executives to render, the Services in good faith and will not be responsible for any action of a Service Recipient’s Governing Body in following or declining to follow any advice or recommendations of the Executives.

 

9.2.2

The Service Recipients hereby agree that no Abengoa Indemnified Party will be liable to a Service Recipient, a Service Recipient’s Governing Body (including, for greater certainty, a director or officer of a Service Recipient or another individual with similar function or capacity) or any security holder or partner of a Service Recipient for any Liabilities that may occur as a result of any acts or omissions by Abengoa Indemnified

 

 

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Party pursuant to or in accordance with this Agreement, except to the extent that such Liabilities are finally determined by a final and non-appealable judgment entered by a court of competent jurisdiction to have resulted from Abengoa Indemnified Party’s bad faith, fraud, willful misconduct or gross negligence, or in the case of a criminal matter, conduct undertaken with knowledge that the conduct was unlawful.

 

9.2.3

The maximum amount of the aggregate liability of Abengoa Indemnified Parties pursuant to this Agreement will be equal to the amounts previously paid in respect of Services pursuant to this Agreement in the preceding calendar year by the Service Recipients pursuant to Section 7.

 

9.2.4

For the avoidance of doubt, the provisions of this Section 9.2 shall survive the completion of the Services rendered under, or any termination or purported termination of, this Agreement.

 

9.3	Benefit to all Abengoa Indemnified Parties

 

9.3.1

Yield on behalf of itself and the other Service Recipients, hereby constitute Abengoa as trustee for each of Abengoa Indemnified Parties of the covenants of the Service Recipients under this Section 9 with respect to such Abengoa Indemnified Parties and Abengoa hereby accepts such trust and agrees to hold and enforce such covenants on behalf of Abengoa Indemnified Parties.

 

9.3.2

Abengoa hereby constitutes the Service Recipients as trustees for each Service Recipient’s Governing Body (including, for greater certainty, a director or officer of a Service Recipient or another individual with similar function or capacity) or any security holder or partner of a Service Recipient, of the covenants of Abengoa under this Section 9 with respect to such parties and the Service Recipients hereby accept such trust and agree to hold and enforce such covenants on behalf of such parties.

 

10	Term and Termination

 

10.1

Term

This Agreement shall continue in full force and effect until terminated in accordance with Section 10.2 or Section 10.3 hereof.

 

10.2	Termination by the Service Recipients

 

10.2.1

Yield, on behalf of the Service Recipients, may terminate this Agreement without any termination fee, immediately upon written notice to Abengoa on or after the date twelve (12) months of the initial public offering of Yield’s ordinary shares have elapsed.

 

10.2.2

Yield on behalf of the Service Recipients may, subject to Section 10.2.3, terminate this Agreement effective upon 30 days’ prior written notice of termination to Abengoa without payment of any termination fee if:

 

(i)

Abengoa defaults in the performance or observance of any material term, condition or agreement contained in this Agreement in a manner that results in material harm to the Service Recipients and such default continues for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period;

 

 

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(ii)

Abengoa or the Executives engage in any act of fraud, misappropriation of funds or embezzlement against any Service Recipient that results in material harm to the Service Recipients;

 

(iii)

Abengoa is grossly negligent in the performance of its obligations under this Agreement and such gross negligence results in material harm to the Service Recipients; or

 

(iv)

Abengoa or Yield, makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency.

 

10.2.3

This Agreement may only be terminated pursuant to Section 10.2.2 above by Yield with the prior approval of a majority of the independent members of the board of directors of Yield

 

10.2.4

Yield hereby agrees and confirms that this Agreement may not be terminated due solely to the poor performance or underperformance of any of its Subsidiaries or the Business or any investment made by any member of the Yield Group on the recommendation of the Executives.

 

10.3	Termination by Agreement

The parties hereto may terminate this Agreement immediately upon written agreement by both parties hereto; provided, that all or a majority of the Executives shall have been employed on a permanent basis by Yield. In such an event, the Parties agree that they will enter into a new Executive Services Agreement that will set forth the terms and conditions of the rendering of the services from Yield executives to Abengoa.

 

10.4	Survival Upon Termination

If this Agreement is terminated pursuant to this Section 10, such termination will be without any further liability or obligation of any party hereto, except as provided in Section 1, Section 9 and Section 10.5 hereof.

 

10.5	Fees Upon Termination

From and after the effective date of the termination of this Agreement, Abengoa shall not be entitled to receive the Executive Management Fee for further Services under this Agreement, but will be paid all compensation accruing to and including the date of termination (including such day).

 

 

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11	General Provisions

 

11.1

Waiver

 

11.1.1

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement will be binding unless the prior approval of a majority of the majority of members of the board of directors of Yield is obtained and the amendment or waiver is executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement will constitute a waiver of any other provision nor will any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. A party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of that right or the exercise of any other right.

 

11.2	Assignment

 

11.2.1

This Agreement shall not be assigned by Abengoa without the prior written consent of Yield, except (i) in the case of assignment to a Person that is Abengoa’s successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as Abengoa is bound under this Agreement, or (ii) to an Affiliate of Abengoa or a Person that is, in the reasonable and good faith determination of the majority of independent members of the board of directors of Yield, an experienced and reputable manager, in which case the Affiliate or assignee shall be bound under this Agreement and by the terms of the assignment in the same manner as Abengoa is bound under this Agreement. In addition, provided that Abengoa provides prior written notice to the Service Recipients for informational purposes only, nothing contained in this Agreement shall preclude any pledge, hypothecation or other transfer or assignment of Abengoa’ rights under this Agreement, including any amounts payable to Abengoa under this Agreement, to a bona fide lender as security.

 

11.2.2

This Agreement shall not be assigned by any of the Service Recipients without the prior written consent of Abengoa, except in the case of assignment by any such Service Recipient to a Person that is its successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as such Service Recipient is bound under this Agreement.

 

11.2.3

Any purported assignment of this Agreement in violation of this Section 11.2 shall be null and void.

 

11.3	Failure to Pay When Due

Any amount payable by any Service Recipient to Abengoa hereunder which is not remitted when so due will remain due (whether on demand or otherwise) and interest will accrue on such overdue amounts (both before and after judgment) at a rate per annum equal to the Interest Rate.

 

 

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11.4	Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

11.5	Limitation of Liability

NOTWITHSTANDING ANYTHING ELSE SET OUT HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST PROFITS) ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF SUCH PARTY IS ADVISED OF, KNOWS OF OR SHOULD KNOW OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

11.6	Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

For the avoidance of doubt, nothing in this Agreement should be construed or interpreted as an amendment, modification or termination of, or conflict with, any of the Operating and Administrative Agreements. Each such agreement, and all its terms, including payments to be made thereunder, shall survive the entry into this Agreement and shall terminate in accordance with its terms.

 

11.7	Mutual Waiver of Jury Trial

AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

 

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11.8	Consent to Jurisdiction and Service of Process

EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE CITY AND COUNTY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF THE PARTIES HERETO FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS PARAGRAPH. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND HEREBY AND THEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

11.9	Governing Law

The internal law of the State of New York will govern and be used to construe this Agreement without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

 

11.10

Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

11.11

Notices

Any notice, demand or other communication to be given under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) when delivered personally to the recipient, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; but if not, then on the next Business Day, (iii) one Business Day after it is sent to the recipient by reputable overnight courier service (charges prepaid) or (iv) three (3) Business Days after it is mailed to the recipient by first class mail, return receipt requested. Such notices, demands and other communications shall be sent to the addresses specified below, or at such address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Any party may

 

 

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change such party’s address for receipt of notice by giving prior written notice of the change to the sending party as provided herein. Notices and other communications will be addressed as follows:

If to the Service Recipients:

Abengoa Yield plc

[—]

Attn: [—]

Facsimile: [—]

With a copy to:

If to Abengoa:

Abengoa, S.A.

Campus Palmas Altas

1 Energía Solar Street

Seville, Spain

Attn: [—]

Facsimile: [—]

 

11.12

Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

11.13

Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

(Signature pages follow)

 

 

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In witness whereof, the parties have executed this Agreement as of the date first above written.

 

ABENGOA YIELD PLC
By:
		Name:
		Title:
ABENGOA CONCESSIONS, S.L., as Manager
By:
		Name:
		Title:

[Signature page to Executive Services Agreement]

 

 

18

Exhibit 10.3

Dated [—], 2014

Abengoa Yield plc

and

Abengoa Concessions, S.L.

as Support Services Supplier

SUPPORT SERVICES AGREEMENT

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Table of Contents

 

Contents				Page
1		Interpretation			1
2		Appointment of the Support Services SupplierSupport Services Supplier			5
3		Services and Powers of the Support Services SupplierSupport Services Supplier			6
4		Relationship between the Support Services SupplierSupport Services Supplierand the Service Recipients			8
5		Support Services Supplierand Employees			8
6		Information and Records			9
7		Fees and Expenses			10
8		Representations and Warranties of the Support Services SupplierSupport Services Supplierand the Service Recipients			10
9		Liability and Indemnification			12
10		Term and Termination			14
11		General Provisions			15

 

 

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SUPPORT SERVICES AGREEMENT

This Support Services Agreement (the “Agreement”) is made as of the [—] day of [—] 2014, by and among:

 

(1)	Abengoa Concessions, S.L. a company organized under the laws of the Kingdom of Spain (the “Support Services Supplier”); and

 

(2)	Abengoa Yield plc, a public limited company incorporated and registered in England and Wales (“Yield”).

This Agreement shall become effective upon the closing of the initial public offering of Yield’s ordinary shares.

RECITALS

 

(A)	Yield, directly and indirectly, as applicable, holds interests in the Service Recipients (as defined below).

 

(B)

Yield wishes to engage the Support Services Supplier to provide or arrange for other Service Providers (as defined below) to provide the services set forth in this Agreement to the Service Recipients, subject to the terms and conditions of this Agreement, and the Support Services Supplier wishes to accept such engagement.

Now, therefore, in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

 

1	Interpretation

 

1.1	Definitions

In this Agreement, except where the context otherwise requires, the following terms will have the following meanings:

“Abengoa ROFO Agreement” means the agreement dated as of the date hereof between the Abengoa, S.A. and Yield that provides Yield a right of first offer to purchase certain assets of Abengoa, S.A. that may be offered for sale from time to time;

“Acquired Assets” means any contracted revenue assets acquired after the date hereof by any member of the Yield Group, including, but not limited, to any assets acquired pursuant to the Abengoa ROFO Agreement or otherwise agreed upon by Abengoa, S.A. and Yield;

“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by such Person, or is under common control of a third Person;

“Annual Fee Amount” means an annual amount equal to $2.5 million, which amount shall be adjusted for inflation annually beginning on January 1, 2015 at the Inflation Factor;

“Business” means the business carried on from time to time by the Yield Group;

 

 

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“Business Day” means every day except a Saturday or Sunday, or a legal holiday in the City of New York, London or Madrid on which banking institutions are authorized or required by law, regulation or executive order to close;

“Claims” has the meaning assigned thereto in Section 10.1.1 hereof;

“Enterprise Value” means an Acquired Asset’s capitalization plus outstanding indebtedness, minority interest and preferred shares, minus total cash and cash equivalents calculated as of such Acquired Asset’s acquisition closing date.

“Governing Body” means (i) with respect to a corporation, the board of directors of such corporation, (ii) with respect to a limited liability company, the manager(s) or managing member(s) of such limited liability company, (iii) with respect to a limited partnership, the board, committee or other body of the general partner of such partnership that serves a similar function or the general partner itself (or if any such general partner is itself a limited partnership, the board, committee or other body of such general partner’s general partner that serves a similar function or such general partner’s partner) and (iv) with respect to any other Person, the body of such Person that serves a similar function, and in the case of each of (i) through (iv) includes any committee or other subdivision of such body and any Person to whom such body has delegated any power or authority, including any officer and managing director;

“Governing Instruments” means (i) the certificate of incorporation and bylaws in the case of a corporation, (ii) the articles of formation and operating agreement in the case of a limited liability company (iii) the partnership agreement in the case of a partnership, and (iv) any other similar governing document under which an entity was organized, formed or created and/or operates;

“Governmental Authority” means any (i) international, national, multinational, federal, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, agency or instrumentality, domestic or foreign (ii) self-regulatory organization or stock exchange, (iii) subdivision, agent, commission, board, or authority of any of the foregoing, or (iv) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;

“IFRS” means the International Financial Reporting Standards as issued by the International Accounting Standards Board.

“Inflation Factor” means, at any time, the fraction obtained where the numerator is the Consumer Price Index for the United States of America (all items) for the then current year and the denominator is the Consumer Price Index for the United States of America (all items) for the year immediately preceding the then current year, with appropriate mathematical adjustment made to ensure that both the numerator and the denominator have been prepared on the same basis;

“Interest Rate” means, for any day, the rate of interest equal to the overnight U.S. dollar London interbank offered rate on such day;

 

 

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“Laws” means any and all applicable (i) laws, constitutions, treaties, statutes, codes, ordinances, principles of common law and equity, rules, regulations and municipal bylaws whether domestic, foreign or international, (ii) judicial, arbitral, administrative, ministerial, departmental and regulatory judgments, orders, writs, injunctions, decisions, and awards of any Governmental Authority, and (iii) policies, practices and guidelines of any Governmental Authority which, although not actually having the force of law, are considered by such Governmental Authority as requiring compliance as if having the force of law, and the term “applicable,” with respect to such Laws and in the context that refers to one or more Persons, means such Laws that apply to such Person or Persons or its or their business, undertaking, property or securities at the relevant time and that emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;

“Liabilities” has the meaning assigned thereto in Section 9.1.1 hereof;

“Operating and Administrative Agreements” means the operations and administrative agreements in effect on the date hereof between certain members of the Yield Group and Affiliates of the Support Services Supplier for such Yield Group members’ operating and administrative needs and, with respect to any Acquired Assets, any operations and administrative agreements between any of the Acquired Assets and Affiliates of Abengoa, S.A. for such asset’s operating and administrative needs in effect as of the date of acquisition of the Acquired Asset by a member of the Yield Group; for greater certainty, none of the Operating and Administrative Agreements are, or shall be, amended or terminated, or otherwise altered, by this Agreement;

“Operational and Other Services” means any services provided by any member of the Support Services Supplier Group to any member of the Yield Group, including accounting, administration, advisory services, marketing, agency, development, operating management and other services, including services provided under any Operating and Administrative Agreement;

“Permit” means any consent, license, approval, registration, permit or other authorization granted by any Governmental Authority;

“Person” means any natural person, partnership, limited partnership, limited liability partnership, joint venture, syndicate, sole proprietorship, company or corporation (with or without share capital), limited liability corporation, unlimited liability company, joint stock company, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or Governmental Agency, authority or entity however designated or constituted and pronouns have a similarly extended meaning;

“Quarter” means a calendar quarter ending on the last day of March, June, September or December;

“Service Providers” means the Support Services Supplier, any member of the Support Services Supplier Group and any other entity or individual that the Support Services Supplier has arranged to provide the Services to any Service Recipient;

 

 

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“Service Recipient” means Yield and its Subsidiaries, as well as any other direct and indirect Subsidiary of Yield acquired or formed after the date hereof that receives Services from a Service Provider pursuant to this Agreement;

“Services” has the meaning assigned thereto in Section 3.1 hereof;

“Subsidiary” means, with respect to any Person, (i) any other Person that is directly or indirectly controlled by such Person, (ii) any trust in which such Person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such Person holds all of the interests other than the interests of any general partner, managing member or similar Person;

“Support Service Fee” means, as of the date of determination, an aggregate amount equal to the Annual Fee Amount, plus an amount to be agreed but in principle estimated to be equal to 0.05% of the Enterprise Value of any Acquired Assets as of the date of determination. The Support Services Fee may be increased or decreased from time to time by an agreed upon amount resulting from the amendment of the scope of the Services pursuant to Section 11.1 hereof;

“Support Services Supplier Group” means the Support Services Supplier and its Affiliates (other than any member of the Yield Group) and any other Service Providers;

“Support Services Supplier Indemnified Parties” has the meaning assigned thereto in Section 9.1.1 hereof;

“Support Services Supplier” has the meaning assigned thereto in the preamble;

“Third Party Claim” has the meaning assigned thereto in Section 9.1.2 hereof;

“Yield” has the meaning assigned thereto in the preamble;

“Yield Group” means Yield and its direct and indirect Subsidiaries;

“Yield’s Executive Management” means, with respect to Yield, the senior managers of Yield.

 

1.2	Headings and Table of Contents

The inclusion of headings and a table of contents in this Agreement are for convenience of reference only and will not affect the construction or interpretation hereof.

 

1.3	Interpretation

In this Agreement, unless the context otherwise requires:

 

1.3.1

words importing the singular shall include the plural and vice versa, words importing gender shall include all genders or the neuter, and words importing the neuter shall include all genders;

 

1.3.2

the words “include”, “includes”, “including”, or any variations thereof, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

 

 

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1.3.3

references to any Person include such Person’s successors and permitted assigns;

 

1.3.4

any reference to a statute, regulation, policy, rule or instrument shall include, and shall be deemed to be a reference also to, all amendments made to such statute, regulation, policy, rule or instrument and to any statute, regulation, policy, rule or instrument that may be passed which has the effect of supplementing or superseding the statute, regulation, policy, rule or instrument so referred to;

 

1.3.5

any reference to this Agreement or any other agreement, document or instrument shall be construed as a reference to this Agreement or, as the case may be, such other agreement, document or instrument as the same may have been, or may from time to time be, amended, varied, replaced, amended and restated, supplemented or otherwise modified;

 

1.3.6

in the event that any day on which any amount is to be determined or any action is required to be taken hereunder is not a Business Day, then such amount shall be determined or such action shall be required to be taken at or before the requisite time on the next succeeding day that is a Business Day; and

 

1.3.7

except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in U.S. currency.

 

2	Appointment of the Support Services Supplier

 

2.1	Appointment and Acceptance

 

2.1.1

Subject to and in accordance with the terms, conditions and limitations in this Agreement, Yield hereby appoints the Support Services Supplier to provide or arrange for other Service Providers to provide the Services to the Service Recipients. This appointment will be subject to the express terms of this Agreement and to each Service Recipient’s Governing Body’s supervision of the Support Services Supplier and obligation to manage and control the affairs of such Service Recipient.

 

2.1.2

The Support Services Supplier hereby accepts the appointment provided for in Section 2.1.1 and agrees to act in such capacity and to provide or arrange for other Service Providers to provide the Services to the Service Recipients upon the terms, conditions and limitations in this Agreement.

 

2.2	Other Service Recipients

The parties acknowledge that any Subsidiary of Yield formed or acquired in the future that is not a Service Recipient on the date hereof may become a Service Recipient under this Agreement. In the event that any such addition results in an amendment of the scope of the Services, such amendment shall be effectuated as provided in this Agreement.

Furthermore, the parties agree that in case a Subsidiary of Yield formed or acquired in the future does not have a contract with an Affiliate of the Support Services Supplier for the provision of consultancy as well as technical collaboration and management services locally to that Subsidiary, the Support Services Supplier will also assume the provision of those services, in addition to the scope of this Agreement described in clause 3.1. In exchange for these additional services, the Support Services Supplier will receive an additional compensation as detailed in Section 7.1.2 below

 

 

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2.3	Subcontracting and Other Arrangements

The Support Services Supplier may subcontract to any other Service Provider or any of its other Affiliates, or arrange for the provision of any or all of the Services to be provided by it under this Agreement by any other Service Provider or any other of its Affiliates, and Yield hereby consents to any such subcontracting or arrangement; provided that the Support Services Supplier shall remain responsible to the Service Recipients for any Services provided by such other Service Provider or Affiliate.

 

3	Services and Powers of the Support Services Supplier

 

3.1

Services

The Support Services Supplier will provide, or arrange for the provision by other Service Providers of, and will have the exclusive power and authority to provide or arrange for the provision by other Service Providers of, the following services (the “Services”) to the Service Recipients:

 

3.1.1

causing or supervising the carrying out of all day-to-day secretarial, accounting, banking, treasury, administrative, liaison, representative, regulatory and reporting functions and obligations;

 

3.1.2

establishing and maintaining or supervising the establishment and maintenance of books and records;

 

3.1.3

monitoring and/or oversight of the applicable Service Recipient’s accountants, legal counsel and other accounting, financial or legal advisors and technical, commercial, marketing and other independent experts and managing litigation in which a Service Recipient is sued or commencing litigation after consulting with, and subject to the approval of, the relevant Governing Body;

 

3.1.4

attending to all matters necessary for any reorganization, bankruptcy proceedings, dissolution or winding up of a Service Recipient, subject to approval by the relevant Governing Body;

 

3.1.5

supervising the timely calculation and payment of taxes payable, and the filing of all tax returns, by each Service Recipient;

 

3.1.6

causing or supervising the preparation of the Service Recipients’ annual financial statements and quarterly interim financial statements (i) to be prepared in accordance with IFRS and audited at least to such extent and with such frequency as may be required by law, regulation or in order to comply with any debt covenants; (ii) to be submitted to the Governing Body of each Service Recipient and (iii) to be used for any public disclosure;

 

3.1.7

preparing filings for submission to, or required by, relevant regulators;

 

 

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3.1.8

making recommendations in relation to and effecting the entry into insurance of each Service Recipient’s assets, together with other insurances against other risks, including directors’ and officers’ insurance, as the relevant Service Provider and the relevant Governing Body may from time to time agree;

 

3.1.9

licensing of the Support Services Supplier’s corporate systems for management of risks (NOC) and for compliance processes (POC);

 

3.1.10

Providing IT support services, human resources support, as well as providing offices space and support permanently or temporarily to Yield’s employees;

 

3.1.11

advising the Service Recipients regarding the maintenance of compliance with applicable Laws and other obligations including applicable securities laws and the regulations of any stock exchange on which the securities of Yield are listed; and

 

3.1.12

providing all such other services as may from time to time be agreed with the Service Recipients that are reasonably related to the Service Recipient’s day-to-day operations.

The Executives shall at all times comply with all obligations under Spanish and other applicable securities laws and regulations and in particular, in relation to protection of price sensitive and other material non-public information, including the establishment of separated areas and internal barriers and controls to ensure due compliance with such regulations.

 

3.2	Supervision of Support Services Supplier’s Activities

The Support Services Supplier shall, at all times, be subject to the supervision of the Yield’s Executive Management. This notwithstanding, under no event or circumstance one shall deem that any member of the staff of the Support Services Supplier can be considered as an employee of Yield. This agreement does not create any labour relations whatsoever between the Support Services Supplier’s staff and Yield.

 

3.3	Restrictions on the Support Services Supplier

 

3.3.1

The Support Services Supplier shall, and shall cause any other Service Provider to, refrain from taking any action that is not in compliance with or would violate any Laws or that otherwise would not be permitted by the Governing Instruments of the Service Recipients. If the Support Services Supplier or any Service Provider is instructed to take any action that is not in such compliance by a Service Recipient’s Governing Body, such person will promptly notify such Governing Body and Yield’s Executive Management of its judgment that such action would not comply with or violate any such Laws or otherwise would not be permitted by such Governing Instrument.

 

3.3.2

In performing its duties under this Agreement, each member of the Support Services Supplier Group shall be entitled to rely in good faith on qualified experts, professionals and other agents (including on accountants, appraisers, consultants, legal counsel and other professional advisors) and shall be permitted to rely in good faith upon the direction of Yield’s Executive Management to evidence any approvals or authorizations that are required under this Agreement. Additionally, each member of the Support Services Supplier Group shall use Yield’s policies (Nocs) and the existing decision approval system (Noc and Poc) and will follow all Abengoa and Yield corporate policies and processes All references in this Agreement to the Service Recipients or Governing Body for the purposes of instructions, approvals and requests to the Support Services Supplier will refer to the Governing Body.

 

 

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3.4	Directors & Officers (D&O) Insurance

The Support Services Supplier shall, and shall cause any other Service Provider to, at all times during the term of this Agreement maintain Directors&Officers (D&O) insurance coverage in a maximum amount of TWENTY FIVE MILLION EUROS (€25,000,000).

 

4	Relationship between the Support Services Supplier and the Service Recipients

 

4.1	Other Activities

No member of the Support Services Supplier Group (and no Affiliate, director, officer, member, partner, shareholder or employee of any member of the Support Services Supplier Group) shall be prohibited from engaging in other business activities or sponsoring, or providing services to, third parties that compete directly or indirectly with the Service Recipients.

 

4.2	Independent Contractor, No Partnership or Joint Venture

The parties acknowledge that the Support Services Supplier is providing or arranging for the provision of the Services hereunder as an independent contractor and that the Service Recipients and the Support Services Supplier are not partners or joint venturers with or agents of each other, and nothing herein will be construed so as to make them partners, joint venturers or agents or impose any liability as such on any of them as a result of this Agreement; provided however that nothing herein will be construed so as to prohibit the Service Recipients and the Support Services Supplier from embarking upon an investment together as partners, joint venturers or in any other manner whatsoever.

 

5	Support Services Supplier and Employees

 

5.1	Support Services Supplier and Employees

 

5.1.1

The Support Services Supplier shall arrange, or shall arrange for another member of the Support Services Supplier Group to arrange, for such qualified personnel and support staff to be available to carry out the Services. Such personnel and support staff shall devote such of their time to the provision of the Services to the Service Recipients as the relevant member of the Support Services Supplier Group reasonably deems necessary and appropriate in order to fulfill its obligations hereunder but always under the direction of Yield’s Executive Management. Part of the personnel and support staff will have as their primary responsibility the provision of the Services to the Service Recipients or be dedicated exclusively to the provision of the Services to the Service Recipients.

 

5.1.2

The Support Services Supplier covenants and agrees to exercise the power and discharge the duties conferred under this Agreement honestly and in good faith, and shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

 

 

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6	Information and Records

 

6.1	Books and Records

The Support Services Supplier shall, or shall cause any other member of the Support Services Supplier Group to, as applicable, maintain proper books, records and documents on behalf of each Service Recipient, in which complete, true and correct entries, in conformity in all material respects with IFRS and all requirements of applicable Laws, will be made.

 

6.2	Examination of Records by the Service Recipients

The relevant member of the Support Services Supplier Group will make available to the Service Recipients and their authorized representatives, for examination during normal business hours on any Business Day, all books, records and documents required to be maintained under Section 6.1 hereof. In addition, the Support Services Supplier Group will make available to the Service Recipients or their authorized representatives such financial and operating data in respect of the performance of the Services under this Agreement as may be in existence and as the Service Recipients or their authorized representatives will from time to time reasonably request, including for the purposes of conducting any audit in respect of expenses of the Service Recipients or other matters necessary or advisable to be audited in order to conduct an audit of the financial affairs of the Service Recipients. Any examination of records will be conducted in a manner which will not unduly interfere with the conduct of the Service Recipients’ activities or of the Support Services Supplier Group’s business in the ordinary course.

 

6.3	Access to Information by Support Services Supplier Group

 

6.3.1

Yield shall, and shall cause the other Service Recipients to:

 

(i)

grant, or cause to be granted, to the Support Services Supplier Group full access to all documentation and information reasonably necessary in order for the Support Services Supplier Group to perform its obligations, covenants and responsibilities pursuant to the terms hereof and to enable the Support Services Supplier Group to provide the Services; and

 

(ii)

provide, or cause to be provided, all documentation and information as may be reasonably requested by any member of the Support Services Supplier Group, and promptly notify the appropriate member of the Support Services Supplier Group of any material facts or information of which the Service Recipients are aware, including any known, pending or threatened suits, actions, claims, proceedings or orders by or against any member of the Yield Group before any Governmental Authority, that may affect the performance of the obligations, covenants or responsibilities of the Support Services Supplier Group pursuant to this Agreement, including maintenance of proper financial records.

 

6.4	Additional Information

The parties acknowledge and agree that conducting the activities and providing the Services contemplated herein may have the incidental effect of providing additional information which may be utilized with respect to, or may augment the value of, business interests and related

 

 

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assets in which any of the Service Providers or any of its Affiliates has an interest and that, subject to compliance with this Agreement, none of the Service Providers or any of their respective Affiliates will be liable to account to the Service Recipients with respect to such activities or results; provided, however, that the relevant Service Provider will not (and will cause its Affiliates not to), in making any use of such additional information, do so in any manner that the relevant Service Provider or its Affiliates knows, or ought reasonably to know, would cause or result in a breach of any confidentiality provision of agreements to which any Service Recipient is a party or is bound.

 

7	Fees and Expenses

 

7.1	Support Services Fee

 

7.1.1

Yield, on behalf of the Service Recipients, hereby agrees to pay, during the term of this Agreement, the Support Services Fee. The Support Services Fee shall be pro-rated and paid quarterly in arrears. For purposes of the initial payment hereunder, the Support Services Fee will accrue commencing on the date hereof and will be pro-rated based on the actual number of days during the first Quarter in which this Agreement is in effect.

 

7.1.2

The parties agree that, in the case of a Subsidiary of Yield as referred to in the second paragraph of Section 2.2 hereof, in addition to the Support Services Fee, a fee will be payable to the Support Services Supplier or any Affiliate designated by it equal to 1% of revenues of that Subsidiary.

 

7.2	Computation and Payment of Quarterly Support Services Fee Amount

 

7.2.1

The Support Services Supplier will compute the Support Services Fee for each Quarter as soon as practicable following the end of the Quarter with respect to which such payment is due, but in any event no later than five (5) Business Days following the end of such Quarter and will send the corresponding invoice. A copy of the computations made will thereafter, for informational purposes only, promptly be delivered to Yield. Yield shall remit the corresponding payment sixty (60) days after the invoice date. Payment through a bank confirming document will be acceptable provided that it complies with Abengoa’s collection policies and payment is done thirty (30) days after invoice date. Any dispute relating to the computation of the Support Service Fee for any Quarter shall be resolved in accordance with Section 11 hereof.

 

7.3

Expenses

Service Recipients will not refund any expenses to the Support Services Supplier unless previously agreed. Yield will bear directly external expenses.

 

8	Representations and Warranties of the Support Services Supplier and the Service Recipients

 

8.1	Representations and Warranties of the Support Services Supplier

The Support Services Supplier hereby represents and warrants to the Service Recipients that

 

 

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8.1.1

it is validly organized and existing under the laws of the Kingdom of Spain;

 

8.1.2

it, or any another Service Provider, as applicable, holds, and shall hold, such Permits as are necessary to perform its obligations hereunder and is not aware of, or shall inform the Service Recipients promptly upon knowledge of, any reason why such Permits might be cancelled;

 

8.1.3

it has the power, capacity and authority to enter into this Agreement and to perform its obligations hereunder;

 

8.1.4

it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

 

8.1.5

the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its Governing Instruments, or under any mortgage, lease, agreement or other legally binding instrument, Permit or applicable Law to which it is a party or by which it or any of its properties or assets may be bound, except for any such contravention, breach or default which would not have a material adverse effect on the business, assets, financial condition or results of operations of the Support Services Supplier;

 

8.1.6

no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it of this Agreement (besides compliance with U.S. Securities and Exchange Commission and U.K. Financial Services Authority requirements);

 

8.1.7

this Agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity; and

 

8.1.8

it has the technical capabilities and resources to perform the Services or otherwise will retain or subcontract to appropriate professionals to render such Services.

 

8.2	Representations and Warranties of the Service Recipients

Yield hereby represents and warrants, on its behalf and on behalf of each of the other Service Recipients, to the Support Services Supplier that:

 

8.2.1

it is validly organized and existing under the Laws of England and Wales;

 

8.2.2

it, or the relevant Service Recipient, holds such Permits necessary to own and operate the projects and entities that it directly or indirectly owns or operates from time to time and is not aware of any reason why such Permits might be cancelled;

 

8.2.3

it has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder;

 

8.2.4

it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

 

 

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8.2.5

the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its Governing Instruments, or under any mortgage, lease, agreement or other legally binding instrument, Permit or applicable Law to which it is a party or by which any of its properties or assets may be bound, except for any such contravention, breach or default which would not have a material adverse effect on the business, assets, financial condition or results of operations of the Service Recipients as a whole;

 

8.2.6

no authorization, consent or approval, or filing with or notice to any Person is required in connection with the execution, delivery or performance by it of this Agreement (besides compliance with all SEC and FSA requirements); and

 

8.2.7

this Agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

 

9	Liability and Indemnification

 

9.1

Indemnity

 

9.1.1

Yield agrees, to the fullest extent permitted by applicable Laws, to indemnify and hold harmless, and to cause each other Service Recipient to indemnify and hold harmless, each member of the Support Services Supplier Group, any of its Affiliates (other than any member of the Yield Group) and any directors, officers, agents, members, partners, stockholders and employees and other representatives of each of the foregoing (each, a “Support Services Supplier Indemnified Party”) from and against any claims, liabilities, losses, damages, costs or expenses (including legal fees) (“Liabilities”) incurred by them or threatened in connection with any and all actions, suits, investigations, proceedings or claims, whether arising under statute or action of a Governmental Authority or otherwise and in connection with the business, investments and activities of the Service Recipients or in respect of or arising from this Agreement or the Services provided hereunder (“Claims”); provided that no Support Services Supplier Indemnified Party shall be so indemnified with respect to any Claim to the extent that such Claim is finally determined by a final and non-appealable judgment entered by a court of competent jurisdiction, or pursuant to a settlement agreement agreed to by such Support Services Supplier Indemnified Party, to have resulted from such Support Services Supplier Indemnified Party’s bad faith, fraud, willful misconduct or gross negligence or, in the case of a criminal matter, conduct undertaken with knowledge that the conduct was unlawful.

 

9.1.2

If any action, suit, investigation, proceeding or claim is made or brought by any third party with respect to which a Service Recipient is obligated to provide indemnification under this Agreement (a “Third Party Claim”), the Support Services Supplier

 

 

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Indemnified Party will have the right to employ its own counsel in connection therewith, and the reasonable fees and expenses of such counsel, as well as the reasonable costs (excluding an amount reimbursed to such Support Services Supplier Indemnified Party for the time spent in connection therewith) and out-of-pocket expenses incurred in connection therewith will be paid by the Service Recipient in such case, as incurred but subject to recoupment by the Service Recipient if ultimately it is not liable to pay indemnification hereunder.

 

9.1.3

The Support Services Supplier Indemnified Party and the Service Recipients agree that, promptly after the receipt of notice of the commencement of any Third Party Claim, the Support Services Supplier Indemnified Party will notify the Service Recipient in writing of the commencement of such Third Party Claim (provided that any accidental failure to provide any such notice will not prejudice the right of any such Support Services Supplier Indemnified Party hereunder) and, throughout the course of such Third Party Claim, such Support Services Supplier Indemnified Party will use its reasonable best efforts to provide copies of all relevant documentation to such Service Recipient, and to keep the Service Recipient apprised of the progress thereof, and to discuss with the Service Recipient all significant actions proposed.

 

9.1.4

The parties hereto expressly acknowledge and agree that the right to indemnity provided in this Section 9.1 shall be in addition to and not in derogation of any other liability which the Support Services Supplier Indemnifying Party in any particular case may have or of any other right to indemnity or contribution which any Support Services Supplier Indemnified Party may have by statute or otherwise at law.

 

9.1.5

The indemnity provided in this Section 9.1 shall survive the completion of Services rendered under, or any termination or purported termination of, this Agreement.

 

9.2	Limitation of Liability

 

9.2.1

The Support Services Supplier assumes no responsibility under this Agreement other than to render the Services in good faith and will not be responsible for any action of a Service Recipient’s Governing Body in following or declining to follow any advice or recommendations of the relevant Service Provider.

 

9.2.2

The Service Recipients hereby agree that no Support Services Supplier Indemnified Party will be liable to a Service Recipient, a Service Recipient’s Governing Body (including, for greater certainty, a director or officer of a Service Recipient or another individual with similar function or capacity) or any security holder or partner of a Service Recipient for any Liabilities that may occur as a result of any acts or omissions by the Support Services Supplier Indemnified Party pursuant to or in accordance with this Agreement, except to the extent that such Liabilities are finally determined by a final and non appealable judgment entered by a court of competent jurisdiction to have resulted from the Support Services Supplier Indemnified Party’s bad faith, fraud, willful misconduct or gross negligence, or in the case of a criminal matter, conduct undertaken with knowledge that the conduct was unlawful.

 

9.2.3

The maximum amount of the aggregate liability of the Support Services Supplier Indemnified Parties pursuant to this Agreement will be equal to the amounts previously paid in respect of Services pursuant to this Agreement in the preceding calendar year by the Service Recipients pursuant to Section 7.

 

 

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9.2.4

For the avoidance of doubt, the provisions of this Section 9.2 shall survive the completion of the Services rendered under, or any termination or purported termination of, this Agreement.

 

9.3	Benefit to all Support Services Supplier Indemnified Parties

 

9.3.1

Yield on behalf of itself and the other Service Recipients, hereby constitute the Support Services Supplier as trustee for each of the Support Services Supplier Indemnified Parties of the covenants of the Service Recipients under this Section 9 with respect to such Support Services Supplier Indemnified Parties and the Support Services Supplier hereby accepts such trust and agrees to hold and enforce such covenants on behalf of the Support Services Supplier Indemnified Parties.

 

9.3.2

The Support Services Supplier hereby constitutes the Service Recipients as trustees for each Service Recipient’s Governing Body (including, for greater certainty, a director or officer of a Service Recipient or another individual with similar function or capacity) or any security holder or partner of a Service Recipient, of the covenants of the Support Services Supplier under this Section 9 with respect to such parties and the Service Recipients hereby accept such trust and agree to hold and enforce such covenants on behalf of such parties.

 

10	Term and Termination

 

10.1

Term

This Agreement shall continue in full force and effect until terminated in accordance with Section 10.2 or Section10.3.

 

10.2	Termination by the Service Recipients

 

10.2.1

Yield on behalf of the Service Recipients may, subject to Section 10.2.2, terminate this Agreement effective upon 180 days’ prior written notice of termination to the Support Services Supplier without payment of any termination fee.

 

10.2.2

This Agreement may only be terminated pursuant to Section 10.2.1 above by Yield with the prior approval of a majority of the independent members of the board of directors of Yield.

 

10.2.3

Yield hereby agrees and confirms that this Agreement may not be terminated due solely to the poor performance or underperformance of any of their Subsidiaries or the Business or any investment made by any member of the Yield Group on the recommendation of any member of the Support Services Supplier Group.

 

 

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10.3	Termination by the Support Services Supplier

 

10.3.1

The Support Services Supplier may terminate this Agreement effective upon 180 days’ prior written notice of termination to the Service Recipients without payment of any termination fee if:

 

(i)

any Service Recipient defaults in the performance or observance of any material term, condition or agreement contained in this Agreement in a manner that results in material harm to the Support Services Supplier and such default continues for a period of 60 days after written notice thereof specifying such default and requesting that the same be remedied in such 60-day period; or

 

(ii)

any Service Recipient makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency.

 

10.4	Survival Upon Termination

If this Agreement is terminated pursuant to this Section 10 or Section 11, such termination will be without any further liability or obligation of any party hereto, except as provided in Section 6.4, Section 9, Section 10.5 and Section 1 hereof.

 

10.5	Action Upon Termination

 

10.5.1

From and after the effective date of the termination of this Agreement, the Support Services Supplier shall not be entitled to receive the Support Service Fee for further Services under this Agreement, but will be paid all compensation accruing to and including the date of termination (including such day).

 

10.5.2

Upon any termination of this Agreement, the Support Services Supplier shall forthwith:

 

(i)

after deducting any accrued compensation, pay over to the Service Recipients all money collected and held for the account of the Service Recipients pursuant to this Agreement;

 

(ii)

deliver to the Yield’s Executive Management a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Governing Bodies with respect to the Service Recipients; and

 

(iii)

deliver to the Yield’s Executive Management all property and documents of the Service Recipients then in the custody of the Support Services Supplier Group.

 

11	General Provisions

 

11.1	Amendment, Waiver

Yield is entitled to amend the scope of the Services, including by reducing the number of Service Recipients or the nature or description of the Services or otherwise, by providing 180 days’ prior written notice to the Support Services Supplier; provided, however, that Yield may not increase the scope of the Services without the Support Services Supplier’s prior written

 

 

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consent; and provided further, however, that prior to such modification, Yield and the Support Services Supplier shall agree in writing to any modification of the Support Service Fee resulting from such change in scope. Subject to Section 11.1 hereof, in the event that Yield and the Support Services Supplier are unable to agree on a modified Support Service Fee, Yield may terminate this Agreement after the end of such 180-day period by providing 60 days’ prior written notice to the Support Services Supplier.

 

11.2	Assignment

 

11.2.1

This Agreement shall not be assigned by the Support Services Supplier without the prior written consent of Yield, except (i) pursuant to Section 2.3 hereof, (ii) in the case of assignment to a Person that is the Support Services Supplier’s successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as the Support Services Supplier is bound under this Agreement, or (iii) to an Affiliate of the Support Services Supplier or a Person that is, in the reasonable and good faith determination of the majority of the independent members of the board of directors of Yield, an experienced and reputable manager, in which case the Affiliate or assignee shall be bound under this Agreement and by the terms of the assignment in the same manner as the Support Services Supplier is bound under this Agreement. In addition, provided that the Support Services Supplier provides prior written notice to the Service Recipients for informational purposes only, nothing contained in this Agreement shall preclude any pledge, hypothecation or other transfer or assignment of the Support Services Supplier’ rights under this Agreement, including any amounts payable to the Support Services Supplier under this Agreement, to a bona fide lender as security.

 

11.2.2

This Agreement shall not be assigned by any of the Service Recipients without the prior written consent of the Support Services Supplier, except in the case of assignment by any such Service Recipient to a Person that is its successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as such Service Recipient is bound under this Agreement.

 

11.2.3

Any purported assignment of this Agreement in violation of this Section 11 shall be null and void.

 

11.3	Failure to Pay When Due

Any amount payable by any Service Recipient to any member of the Support Services Supplier Group hereunder which is not remitted when so due will remain due (whether on demand or otherwise) and interest will accrue on such overdue amounts (both before and after judgment) at a rate per annum equal to the Interest Rate.

 

11.4	Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any

 

 

16

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provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

11.5	Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

For the avoidance of doubt, nothing in this Agreement should be construed or interpreted as an amendment, modification or termination of, or conflict with, any of the Operating and Administrative Agreements. Each such agreement, and all its terms, including payments to be made thereunder, shall survive the entry into this Agreement and shall terminate in accordance with its terms.

 

11.6	Limitation of Liability

NOTWITHSTANDING ANYTHING ELSE SET OUT HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST PROFITS) ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF SUCH PARTY IS ADVISED OF, KNOWS OF OR SHOULD KNOW OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

11.7	Mutual Waiver of Jury Trial

AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

 

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11.8	Consent to Jurisdiction and Service of Process

EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE CITY AND COUNTY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF THE PARTIES HERETO FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS PARAGRAPH. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND HEREBY AND THEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

11.9	Governing Law

The internal law of the State of New York will govern and be used to construe this Agreement without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

 

11.10

Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

 

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11.11

Notices

Any notice, demand or other communication to be given under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) when delivered personally to the recipient, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; but if not, then on the next Business Day, (iii) one Business Day after it is sent to the recipient by reputable overnight courier service (charges prepaid) or (iv) three (3) Business Days after it is mailed to the recipient by first class mail, return receipt requested. Such notices, demands and other communications shall be sent to the addresses specified below, or at such address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Any party may change such party’s address for receipt of notice by giving prior written notice of the change to the sending party as provided herein. Notices and other communications will be addressed as follows:

If to the Service Recipients:

Abengoa Yield plc

[—]

Attn: [—]

Facsimile: [—]

If to the Support Services Supplier:

Abengoa Concessions, S.L.

Campus Palmas Altas

1 Energía Solar Street

Seville, Spain

Attn: [—]

Facsimile: [—]

 

11.12

Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

11.13

Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

(Signature pages follow)

 

 

19

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In witness whereof, the parties have executed this Agreement as of the date first above written.

 

ABENGOA YIELD PLC
By:
		Name:
		Title:
ABENGOA CONCESSIONS, S.L., as Support Services Supplier
By:
		Name:
		Title:

[Signature page to Support Services Agreement]

 

 

Exhibit 10.4

Dated [—], 2014

Abengoa, S.A.

and

Abengoa Yield plc

FINANCIAL SUPPORT AGREEMENT

---

Table of Contents

 

Contents				Page
1		Line of Credit			1
2		Guarantees and Letters of Credit			2
3		Representations and Warranties of Abengoa			2
4		Representations and Warranties of Yield			3
5		Term and Termination			4
6		Applicable Law and Forum			4
7		Communications			5
8		Assignment			6
9		Enurement			6
10		No Third Party Beneficiaries			6
11		Limitation of Liability			6
12		Entire Agreement			7
13		Invalidity of Provisions			7
14		Amendments			7
15		Further Assurances			7
16		Counterparts			8

 

 

i

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FINANCIAL SUPPORT AGREEMENT

This Financial Support Agreement (“Agreement”) is made as of the [—] day of [—], 2014 by and between:

 

(1)	Abengoa, S.A., a company organized under the laws of the Kingdom of Spain (“Abengoa”); and

 

(2)	Abengoa Yield plc, a public limited company incorporated and registered in England and Wales (“Yield”).

Whereas:

 

(A)	Yield and its Subsidiaries (as defined below) have relied upon Abengoa for financial assistance in the past, including for liquidity and the issuance of letters of credit and guarantees under agreements to which Yield and its Subsidiaries are parties.

 

(B)

in connection with the initial public offering of Yield (the “Offering”), both Abengoa and Yield propose to enter into this Agreement, whereby (i) Abengoa will agree to provide a line of credit to Yield and to maintain existing letters of credit and guarantees for the benefit of Yield and its Subsidiaries on the terms and conditions set forth herein; and (ii) Yield will agree to maintain excess cash at Abengoa’s central treasury.

 

(C)	This Agreement shall become effective on the closing date of Yield’s initial public offering of ordinary shares (the “Effective Date”).

Now, therefore, in accordance with the foregoing recitals, and as consideration for the mutual covenants, agreements and promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

1	Line of Credit

 

1.1

Abengoa agrees that it shall establish for a period extending to the fifth anniversary of the Effective Date a fully committed revolving line of credit (the “Credit Line”) for Yield in the principal amount of Fifty Million U.S. Dollars (U.S.$50,000,000.00) (the “Credit Limit”), subject to the terms set forth in this Section 1. Yield will be permitted to pay distributions to shareholders out of Available Cash so long as no default or event of default under the Credit Line has occurred and is continuing at the time of such distribution (or would result therefrom).

 

1.2

Abengoa’s commitment to provide the Credit Line is subject to: (i) the consummation of the Offering; (ii) the preparation, execution and delivery of mutually acceptable loan documentation, mutually agreed among the parties including events of default that are customary for this type of financing; and (iii) Yield’s maintenance of any available cash up to a maximum amount of Twenty Million U.S. Dollars ($20,000,000.00) at Abengoa’s central treasury, for so long as the Credit Line is in place and has not been terminated pursuant to its terms. For purposes hereof, “Available Cash” shall mean cash on the balance sheet of Yield that is not subject to any contractual restriction for its use or allocation.

 

 

1

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1.3	In the event that the Credit Line has been fully drawn, Abengoa agrees to make a good faith effort to accommodate any requests for additional funding taking into positive consideration the achievement of Yield´s business objectives.

 

2	Guarantees and Letters of Credit

 

2.1

Under this Agreement, “Guarantees” means all guarantees and letters of credit (besides guarantees and letters that have been provided in connection with any O&M and EPC Agreements) that (i) have been provided by Abengoa or any of its Affiliates (meaning with respect to the person in question, any other person that, directly or indirectly, controls, is controlled by or is under common control with, such person) on behalf of or for the benefit of Yield and/or its Subsidiaries and (ii) are outstanding on the Effective Date. Subject to the terms and conditions set forth herein, Abengoa hereby agrees that it shall ensure that each Guarantee shall remain outstanding in accordance with its terms for a period of five years from the anniversary of the date hereof (the “Term”). “Subsidiaries” means, with respect to any person, (i) any other person that is directly or indirectly controlled by such person, (ii) any trust in which such person holds all of the beneficial interests or (iii) any partnership, limited liability company or similar entity in which such person holds all of the interests other than the interests of any general partner, managing member or similar person.

 

2.2	Upon the elapse of such five years period, Abengoa will have the right to release such Guarantees and, in the event that Abengoa exercises such right, Yield shall provide each beneficiary of such Guarantees with an alternative remedy or guarantee.

 

2.3

Abengoa and Yield agree to review the outstanding Guarantees from time to time with a view to achieving the independent functioning of Yield and mutually agree any outstanding Guarantees desirable for replacement (“Strategic Guarantees”). Yield agrees that it shall use commercially reasonable efforts to replace any Strategic Guarantees with a view to operating independently from Abengoa.

 

2.4

To the extent that Abengoa is required to pay any amounts under any Guarantee, Yield hereby agrees to reimburse Abengoa promptly upon demand for the full amount of such payments, together with interest at the Default Rate from the date of Abengoa’s payment through the date of reimbursement by Yield. The “Default Rate” means, as of any date of determination, the prevailing one-month LIBOR rate as quoted on the Bloomberg BTMM screen on such date of determination, plus 250 bps per annum.

 

3	Representations and Warranties of Abengoa

Abengoa hereby represents and warrants as follows:

 

3.1	it is validly organized and existing under the laws of the Kingdom of Spain;

 

3.2	it has the power, capacity and authority to enter into this Agreement and to perform its obligations hereunder;

 

3.3	it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

 

 

2

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3.4

the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its governing instruments, or under any mortgage, lease, agreement or other legally binding instrument, permit or applicable law to which it is a party or by which it or any of its properties or assets may be bound, except for any such contravention, breach or default which would not have a material adverse effect on Abengoa’s business, assets, financial condition or results of operations;

 

3.5	no authorization, consent or approval, or filing with or notice is required in connection with the execution, delivery or performance by it of this Agreement; and

 

3.6

this Agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the enforcement of creditors’ rights and remedies generally and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity.

 

4	Representations and Warranties of Yield

Yield hereby represents and warrants as follows:

 

4.1	It is validly organized and existing under the laws of England and Wales;

 

4.2	It holds such permits necessary to own and operate the projects and entities that it directly or indirectly owns or operates from time to time and is not aware of any reason why such permits might be cancelled

 

4.3	it has the power, capacity and authority to enter into this Agreement and to perform its duties and obligations hereunder;

 

4.4	it has taken all necessary action to authorize the execution, delivery and performance of this Agreement;

 

4.5

the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder do not and will not contravene, breach or result in any default under its governing instruments, or under any mortgage, lease, agreement or other legally binding instrument, permit or applicable law to which it is a party or by which any of its properties or assets may be bound, except for any such contravention, breach or default which would not have a material adverse effect on the business, assets, financial condition or results of operations of Yield as a whole;

 

4.6	no authorization, consent or approval, or filing with or notice to any person is required in connection with the execution, delivery or performance by it of this Agreement (besides compliance with all SEC and FSA requirements);; and

 

4.7	this Agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other laws of general application limiting the

 

 

3

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enforcement of creditors’ rights and remedies generally; and (ii) general principles of equity, including standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether such principles are considered in a proceeding at law or in equity

 

5	Term and Termination

 

5.1	Term. This Agreement will remain in effect until the fifth (5th) anniversary of the Effective Date.

 

5.2	Termination. This Agreement may be terminated prior to the expiration of the Term:

 

5.2.1

by Yield, in its sole discretion, upon providing thirty (30) days’ written notice to Abengoa;

 

5.2.2

by Abengoa if after the third anniversary of the Effective Date it owns, directly or indirectly, less than 20% of the total outstanding limited partner interests of Yield, upon providing 180 days’ written notice to Yield.

 

5.2.3

by either party, if the other party materially breaches any material provision of this Agreement and either the breach cannot be cured or, if the breach can be cured, it is not cured by the breaching party within thirty (30) days after the breaching party’s receipt of written notice of such breach; or

 

5.2.4

by either party, effective immediately, if the other party files, or has filed against it, a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency law, makes or seeks to make a general assignment for the benefit of its creditors or applies for, or consents to, the appointment of a trustee, receiver or custodian for a substantial part of its property.

 

5.3

Effect of Term and Termination. Upon expiration of the Term or the earlier termination of this Agreement, (i) the obligations of Abengoa to maintain any Guarantees under this Agreement, shall cease, and Yield shall ensure, at their sole cost and expense, the termination of such Guarantees, (ii) at the option and upon the demand of Abengoa (all in accordance with the loan documentation referred to in 1.2), all amounts then due and owing by Yield hereunder shall become due and payable, and guarantees then outstanding shall be cash collateralized or otherwise collateralized in amount and nature as requested by Abengoa, and (iii), should Abengoa opt not to terminate it, the Credit Line shall continue to be governed by its terms

 

6	Applicable Law and Forum

 

6.1	Governing Law

The internal law of the State of New York will govern and be used to construe this Agreement without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

 

6.2	Mutual Waiver of Jury Trial

AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

 

4

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6.3	Consent to Jurisdiction and Service of Process

EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE CITY AND COUNTY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF THE PARTIES HERETO FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS PARAGRAPH. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND HEREBY AND THEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

7	Communications

Any notice, demand or other communication to be given under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) when delivered personally to the recipient, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; but if not, then on the next business day, (iii) one business day after it is sent to the recipient by reputable overnight courier service (charges prepaid) or (iv) three (3) business days after it is mailed to the recipient by first class mail, return receipt requested. Such notices, demands and other communications shall be sent to the addresses specified below, or at such address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Any party may change such party’s address for receipt of notice by giving prior written notice of the change to the sending party as provided herein. Notices and other communications will be addressed as follows:

If to Abengoa Yield:

Abengoa Yield plc

[—]

Attn: [—]

Facsimile: [—]

 

 

5

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If to Abengoa:

Abengoa, S.A.

Campus Palmas Altas

1 Energía Solar Street

Seville, Spain

Attn: [—]

Facsimile: [—]

 

8	Assignment

 

8.1

This Agreement shall not be assigned by Abengoa without the prior written consent of Yield, except (i) in the case of assignment to a person that is Abengoa’s successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as Abengoa is bound under this Agreement, or (ii) to an Affiliate of Abengoa or a person that is, in the reasonable and good faith determination of the majority of the independent directors of Yield, an experienced and reputable provider of financial support, in which case the Affiliate or assignee shall be bound under this Agreement and by the terms of the assignment in the same manner as Abengoa is bound under this Agreement.

 

8.2

This Agreement shall not be assigned by Yield without the prior written consent of Abengoa, except in the case of assignment by Yield to a person that is its successor by merger, consolidation or purchase of assets, in which case the successor shall be bound under this Agreement and by the terms of the assignment in the same manner as Yield is bound under this Agreement.

 

8.3	Any purported assignment of this Agreement in violation of this Section 8 shall be null and void.

 

9

Enurement

This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

10	No Third Party Beneficiaries

The agreement of Abengoa to provide the Line of Credit and provide and maintain the Guarantees hereunder for the account of Yield and its Subsidiaries on the terms and conditions set forth in this Agreement, is solely for the benefit of Yield and its Subsidiaries and no other person or entity shall have any rights hereunder against Abengoa or with respect to the extension of support contemplated hereby.

 

11	Limitation of Liability

NOTWITHSTANDING ANYTHING ELSE SET OUT HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST PROFITS) ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT WHETHER THE

 

 

6

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CLAIM FOR SUCH DAMAGES IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF SUCH PARTY IS ADVISED OF, KNOWS OF OR SHOULD KNOW OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

12	Entire Agreement

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above.

 

13	Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties will engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

 

14	Amendments

Any amendment to this Agreement may be made only by a written instrument executed by all parties to this Agreement.

 

15	Further Assurances

Each of the parties hereto will promptly do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and will use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

 

 

7

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16	Counterparts

This Agreement may be signed in counterparts and each of such counterparts will constitute an original document and such counterparts, taken together, will constitute one and the same instrument.

(Signature pages follow)

 

 

8

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In witness whereof, the parties hereto caused this Agreement to be executed by their respective duly authorized representatives as of the day and year above written.

 

ABENGOA YIELD PLC
By:
		Name:
		Title:
ABENGOA, S.A.
By:
		Name:
		Title:

[Signature Page to Financial Support Agreement]

 

 

9

Exhibit 10.5

Dated [—], 2014

Abengoa, S.A.

and

Abengoa Yield plc

TRADEMARK LICENSE AGREEMENT

---

Table of Contents

 

Contents				Page
1		Grant of License			1
2		Quality Control			3
3		Ownership of Intellectual Property			3
4		Term			4
5		Disclaimer; Limitation of Liability			5
6		Indemnification			6
7		Miscellaneous.			6

 

 

i

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This Trademark License Agreement (the “Agreement”), dated as of [—], 2014, is made by and between:

 

(1)	Abengoa, S.A., a company organized under the laws of the Kingdom of Spain (“Licensor”); and

 

(2)	Abengoa Yield plc, a public limited company incorporated and registered in England and Wales (“Licensee”).

Licensor and Licensee are each a “Party”, and collectively, the “Parties”. This Agreement shall become effective upon the closing of the initial public offering of Licensee’s ordinary shares (the “Effective Date”).

Whereas:

 

(A)	Licensor owns certain trademarks as used in connection with the operation of its business; and

 

(B)	Licensee wishes to license such trademarks of Licensor, and Licensor desires to license such trademarks to Licensee, to facilitate the operation of Licensee’s business.

Now, therefore, in consideration of the mutual covenants and undertakings herein contained and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the Parties hereby agree as follows.

 

1	Grant of License

 

1.1

License

Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts, for the Term (as defined below), the non-exclusive, royalty-free, fully paid-up, non-transferable, revocable, and worldwide right, license and authority to use any and all marks owned by Licensor (the “Non-Exclusive Licensed Marks”) in connection with the operation of Licensee’s business, including using the mark “Abengoa” in Licensee’s company name.

Additionally, and subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts, for the Term (as defined below), the exclusive, royalty-free, fully paid-up, non-transferable, revocable, and worldwide right, license and authority to use the mark “Abengoa Yield” (the “Exclusive Licensed Mark”, together with the Non-Exclusive Licensed Marks, the “Licensed Marks”).

 

1.2	Sublicensing

Licensee shall have no right to sublicense the right granted in Section 1.1 without Licensor’s prior written approval, except that Licensee may sublicense such right to a Subsidiary of Licensee. Any sublicensee shall have no right to further sublicense such right. Licensee shall (i) be responsible for ensuring that each sublicensee shall be in strict compliance with the terms and conditions of this Agreement, and (ii) assume all responsibilities for any breach of any terms or conditions of this Agreement by each sublicensee and for any acts and omissions of each sublicensee relating to the Licensed Marks. A “Subsidiary” of Licensee means any entity that is, directly or indirectly, controlled by Licensee. Any entity that ceases to be, directly

 

 

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or indirectly, controlled by Licensee during the Term of this Agreement shall no longer be deemed a Subsidiary of Licensee and, subject to the terms and conditions of this Agreement, any sublicense granted to such entity shall terminate immediately unless the Parties agree otherwise

 

1.3	Use of Licensed Marks

Licensee shall use the Licensed Marks only as expressly authorized in this Agreement and shall preserve the goodwill, prestige and reputation associated with the Licensed Marks using the level of care that is substantially equivalent to or higher than such level of care used by Licensor as of the Effective Date. Licensee shall ensure that all uses of Licensed Marks (including on marketing and advertising materials, websites, and signage) conform to all standards of style, appearance, quality and usage and other guidelines and instructions regarding the Licensed Marks provided by Licensor from time to time. Licensee shall not use any translation, adaptation, combination, transliteration, variation or derivative of, or any word, mark, name, design or logo confusingly similar to, any Licensed Mark without Licensor’s prior written approval (which approval shall be subject to Licensor’s sole discretion). Licensee shall not use any Licensed Mark in combination with any other trademark, service mark, trade name, company name, logo or slogan in any manner whatsoever without Licensor’s prior written approval (which approval shall be subject to Licensor’s sole discretion). Licensee shall comply with all applicable laws and regulations in connection with the use of the Licensed Marks. Licensee shall use appropriate notification of trademark and service mark rights or registrations on all visual displays of any of the Licensed Marks, including (i) use of the encircled “R” symbol (“^®”), the superscript TM or the superscript SM, respectively, (ii) with respect to any registered Licensed Mark, the notification that such Licensed Mark is a registered trademark or service mark of Licensor, and (iii) with respect to any unregistered Licensed Mark, the notification that such Licensed Mark is a trademark or service mark of Licensor.

 

1.4	Licensed Marks

In the event that Licensor changes or ceases the use of, or intends to change or cease the use of, any Licensed Mark in connection with the operation of Licensor’s business, Licensor may notify Licensee in writing. Upon Licensee’s receipt of such notice, Licensee shall, at its own cost and expense, promptly (in no event later than sixty (60) days after the date of such notice) change such Licensed Mark to the applicable new Licensed Mark or cease the use of such Licensed Mark, as applicable, in all instances where Licensee is using such Licensed Mark and in Licensee’s company name accordingly.

 

1.5	Website Links; Domain Names

Licensee shall maintain a website for its business and shall include a link on the homepage of such website to Licensor’s website (as identified by Licensor), which link shall be comparable in prominence to other links included on such homepage. Licensor has registered and will maintain the following domain names at the expense of Licensee: www.abengoayield.com, www.abengoayield.co.uk and www.abengoayield.es (the “Domain Names”) and will sell, transfer or assign those domains to Licensee within three (3) months from the date of this Agreement against payment of costs carried by Licensor in registering such domain names.

 

 

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Licensor will cooperate in order to enable Licensee to register any similar domain names and will defend Licensee against any infringements of existing domain names. Licensee will assign the Domain Names and any additional domain names registered by it pursuant to this Clause back to Licensor in less than two (2) years in case of termination of the Licensing Agreement.

 

1.6	Reservation of Rights; No Implied Licenses

All rights to the Licensed Marks not expressly granted by Licensor to Licensee in this Agreement are hereby expressly reserved to Licensor. Except as expressly provided in this Agreement, neither Party grants to the other Party any right, title or interest in, or a license to use, any intellectual property belonging to such Party, whether by implication, estoppel or otherwise.

 

2	Quality Control

 

2.1	Quality Control

Licensee acknowledges and agrees that all uses of the Licensed Marks and the business conducted using the Licensed Marks must be of high quality so as to protect the Licensed Marks and the goodwill associated therewith. Licensee further acknowledges and agrees that the maintenance of the high quality of the products and services in connection with which Licensee uses any of the Licensed Marks is of the essence to this Agreement. Licensee shall maintain quality standards for all such products and services to be sold, offered for sale or provided by Licensee in connection with the Licensed Marks (i) that are substantially equivalent to or stricter than those standards used by Licensor as of the Effective Date, and (ii) as may be reasonably prescribed by Licensor from time to time.

 

2.2

Samples

Upon Licensor’s request, Licensee shall promptly submit to Licensor samples of all Licensed Mark usages for approval of the style, appearance, quality and usage of such sample (which approval shall be subject to Licensor’s sole discretion). In the event that the style, appearance, quality, or usage of any Licensed Mark ceases or fails to conform to any standards, guidelines or instructions provided by Licensor or any requirement of law or regulation, then upon notice by Licensor, Licensee shall immediately cease and remedy all non-conforming uses. Licensor shall have the right, upon notice, during normal business hours and in a manner so as not to unreasonably interfere with the normal operation of Licensee’s business, to inspect the premises of Licensee, for the purpose of monitoring Licensee’s compliance with the standards, guidelines and instructions provided by Licensor and Licensee’s compliance with this Agreement.

 

3	Ownership of Intellectual Property

 

3.1	Licensor’s Ownership Acknowledged

Licensee acknowledges and agrees that: (i) all right, title and interest in and to the Licensed Marks is and shall be owned solely and exclusively by Licensor; (ii) all use of the Licensed Marks by Licensee, and all goodwill arising therefrom, shall inure to the exclusive benefit of

 

 

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Licensor; and (iii) Licensee shall not at any time acquire any rights in the Licensed Marks, or associated goodwill, by virtue of any use it may make thereof. Licensor, in turn, represents and warrants that it owns all right, title and interest in and to the Licensed Marks.

 

3.2	No Adverse Actions

Licensee shall not: (i) attack, challenge, oppose, petition to cancel, or initiate legal action or proceedings in connection with any of the Licensed Marks; (ii) apply for or seek to register any of the Licensed Marks or any trademarks, service marks, trade names, domain names, or other designations that incorporate, or are confusingly similar to, any of the Licensed Marks; (iii) use any of the Licensed Marks in any manner inconsistent with this Agreement; (iv) file any document with any governmental entity or take any other action that would reasonably be expected to adversely affect Licensor’s ownership of any of the Licensed Marks; (v) do, or allow to be done, any action or omission in derogation of any of the rights of Licensor in or to any of the Licensed Marks; or (vi) use any of the Licensed Marks in any manner, or take or allow any action, that might diminish, dilute or adversely affect the reputation of any of the Licensed Marks, the goodwill associated with any of the Licensed Marks or Licensor.

 

3.3	Filing, Prosecution and Maintenance

Licensor shall file, prosecute, and maintain applications and registrations for the Licensed Marks in good standing. Licensee shall reasonably cooperate with and assist Licensor in filing, prosecuting and maintaining applications and registrations for, and Licensor’s rights in, the Licensed Marks.

 

3.4	Enforcement

Licensee shall promptly notify Licensor in writing of any infringement, dilution, or other violation of the Licensed Marks by any Person of which Licensee is or becomes aware. Licensor shall have the exclusive right (but not the obligation), in its sole discretion, to enforce the Licensed Marks (including making any and all litigation and dispute resolution decisions), or bring any actions, suits, claims or proceedings against any actual or suspected infringement, misappropriation, or other violation occurring anywhere in the world.

 

4

Term

 

4.1

Term

The term of this Agreement (the “Term”) shall begin on the Effective Date and shall remain in effect until terminated pursuant to Sections 4.2 or 4.3.

 

4.2	Termination by Licensor

Licensor may terminate this Agreement immediately upon written notice to Licensee, in the event that: (i) Licensee materially breaches this Agreement, and Licensee fails to cure such breach within ninety (90) days of the receipt of notice of such breach, (ii) Licensee assigns, sublicenses, pledges, mortgages or otherwise encumbers the Licensed Marks granted to it pursuant to the Licensing Agreement other than as permitted by this Agreement and without Licensor’s prior written consent and Licensee fails to cure such situation within ninety (90)

 

 

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days of the receipt of the notice from the Licensor; or (iii) Licensee is involved in insolvency, bankruptcy, liquidation, winding-up or receivership proceedings or an attachment is placed on assets of the Licensee materially affecting the operation of its business.

Licensor may terminate this Agreement immediately upon written notice to the Licensee on or after the date that is two years following the date on which Licensor ceases to own, directly or indirectly, more than twenty per cent (20%) of the outstanding ordinary shares or other equity interests of Licensee on a fully diluted basis and so notifies the Licensee in writing.

 

4.3	Termination by Agreement

The Parties may terminate this Agreement immediately upon written agreement by both Parties.

 

4.4	Effect of Termination

Upon termination of this Agreement for any reason, Licensee’s license and rights under this Agreement, including those granted under Sections 1.1 and 1.2, shall immediately expire and terminate, and Licensee shall, as soon as practicable (in any event within ninety (90) days after the effective date of such termination), cease, and cause its sublicensees to cease, all use of the Licensed Marks (including removing the Licensed Marks and any translation, adaptation, combination, transliteration, variations and derivatives thereof from marketing and advertising materials, websites, and signage, and changing its company name). Notwithstanding the foregoing, Section 1.6, Section 3, Section 4.4, Section 5, Section 6, and Section 7 shall survive such expiration and termination and continue in full force and effect in accordance with their respective terms.

 

5	Disclaimer; Limitation of Liability

 

5.1	Disclaimer

EACH PARTY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, IN CONNECTION WITH THIS AGREEMENT AND THE LICENSED MARKS, INCLUDING THE WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LICENSOR DOES NOT REPRESENT OR WARRANT THAT (I) LICENSOR OWNS ANY REGISTRATION OR APPLICATION FOR ANY LICENSED MARK IN ANY JURISDICTION, OR (II) LICENSOR OR LICENSEE HAS THE RIGHT TO USE ANY LICENSED MARK IN ANY JURISDICTION.

 

5.2	Limitation of Liability

NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST PROFITS) ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT OR RESULTING FROM THE USE OF, OR INABILITY TO USE, THE LICENSED MARKS, WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF SUCH PARTY IS ADVISED OF, KNOWS OF OR SHOULD KNOW OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

 

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6	Indemnification

Licensee shall defend, indemnify and hold harmless Licensor and its affiliates and subsidiaries, and its and their officers, directors, employees, representatives, and agents, against any and all third party claims, losses, damages, expenses and liabilities arising out of or relating to: (i) use of the Licensed Marks by Licensee or any of its sublicensees, including the marketing, offering for sale, selling, provision, distribution, or other commercialization of products or services; (ii) violation of any law or regulation by Licensee or any of its sublicensees; or (iii) breach of any terms or conditions of this Agreement by Licensee or any of its sublicensees.

 

7	Miscellaneous.

 

7.1	Governing Law

This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the principles thereof governing conflicts of law.

 

7.2	Jurisdiction; Venue

IF A DISPUTE OR DIFFERENCE (A “DISPUTE”) OF ANY KIND WHATSOEVER ARISES IN CONNECTION WITH, RELATING TO, OR ARISING OUT OF THIS AGREEMENT AND IT IS NOT RESOLVED WITHIN TEN (10) DAYS AFTER ANY PARTY HAS NOTIFIED THE OTHER PARTY OF THE DISPUTE IN WRITING (A “DISPUTE NOTICE”), THE PARTIES SHALL ATTEMPT TO RESOLVE SUCH DISPUTE BY DISCUSSIONS AMONG THE CHIEF EXECUTIVE OFFICERS OF EACH OF LICENSOR AND LICENSEE. IF SUCH DISPUTE HAS NOT BEEN RESOLVED BY SUCH CHIEF EXECUTIVE OFFICERS WITHIN FIFTEEN (15) DAYS AFTER THE DELIVERY OF THE DISPUTE NOTICE, THE DISPUTE IT SHALL BE CONDUCTED IN THE COURTS OF RECORD IN THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND LICENSOR AND LICENSEE HEREBY SUBMIT TO JURISDICTION AND CONSENT TO VENUE IN SUCH COURTS.

 

7.3	Waiver of trial by jury

LICENSOR AND LICENSEE HEREBY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN ANY LITIGATION OR OTHER COURT PROCEEDING BY EITHER PARTY AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT.

 

7.4

Notices

All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally, when sent by facsimile, when sent by overnight courier service, or when mailed by certified or registered mail, return receipt requested, with postage prepaid to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice).

 

 

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If to Licensor:

Abengoa, S.A.

Campus Palmas Altas

Calle Energía Solar, 1

41014 Seville, Spain

Attention: [—]

Facsimile No.: [—]

If to Licensee:

Abengoa Yield plc

[Address]

Attention: [—]

Facsimile No[—]

 

7.5	Assignment

Licensee shall not assign, transfer or encumber this Agreement (including any of its rights or obligations under this Agreement) without the express prior written consent of Licensor (which may be granted or withheld at Licensor’s sole discretion). Licensor may freely assign, transfer or encumber this Agreement (including any of its rights or obligations under this Agreement) without consent of Licensee. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and the successors in interest and permitted assigns of each Party hereto. Any assignment, transfer or encumbrance in violation of this Section 7.5 shall be null, void and without effect.

 

7.6	Severability

If any provision of this Agreement or the application of any such provision shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and the applicable provision shall be reformed to the extent necessary to render such provision valid and enforceable and to reflect the intent of the Parties to the maximum extent possible under applicable laws and regulations.

 

7.7	Independent Contractor

Nothing in this Agreement shall be construed to establish a joint venture, partnership, agency, employment or other business relationship between the Parties. Neither Party is authorized or empowered to act for or represent the other Party. Each Party agrees not to do or authorize any act which would imply apparent authority to act for any other Party.

 

7.8	Waiver and Modification

This Agreement may be amended, modified or supplemented only by a written mutual agreement executed and delivered by the Parties. Any failure of any Party to comply with any

 

 

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obligation, covenant, agreement or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver of such obligations, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

 

7.9	Construction

The section headings to this Agreement are for convenience only and are to be of no force or effect in construing and interpreting the provisions of this Agreement. The term “including” means “including, without limitation.”

 

7.10	Remedies Cumulative

All remedies provided for in this Agreement shall be cumulative and in addition to, and not in lieu of, any other remedies available to either Party at law, in equity or otherwise.

 

7.11	Assistance; Further Assurances

Licensee shall take all further actions and provide to Licensor all such cooperation and assistance at Licensor’s request (including the execution and delivery of affidavits, declarations, oaths, samples, exhibits, specimens, assignments, powers of attorney and other documentation) to more fully and effectively effectuate the purposes of this Agreement (including to confirm Licensor’s ownership of the Licensed Marks and to assist Licensor in filing, prosecuting, maintaining, and enforcing any of the Licensed Marks) and the transactions contemplated hereby, including recording any documents necessary to effectuate the purposes of this Agreement in all U.S. and foreign jurisdictions.

 

7.12	Entire Agreement

This Agreement contains the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings.

 

7.13	Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and any one of which need not contain the signatures of more than one Party, but all of which, taken together, shall constitute one and the same agreement. Signed counterparts of this Agreement may be delivered by facsimile and by scanned .pdf image, each of which shall have the same force and effect as an original signed counterpart.

[Remainder of page intentionally left blank]

 

 

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In witness whereof, the Parties have caused this Agreement to be executed by their duly authorized representatives effective on the Effective Date first set forth above.

 

ABENGOA, S.A.
By
		Name: [—]
		Title: [—]
ABENGOA YIELD PLC
By
		Name: [—]
		Title: [—]

[Signature Page to License Agreement]

 

 

Exhibit 10.8

Operation and Maintenance Agreement

Between

Abengoa Solar España, S.A.

and

Solaben Electricidad Dos, S.A.

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Table of contents:

 

Part A. General			4
Part B. Description of Services			9
Part C. Availability Guarantee			17
Part D. Other Operator’s Obligations			19
Part E. Duration			20
Part F. Price and Form of Payment			21
Part G. Client Duties			24
Part H. Common Terms			26
Part I. Termination Events			29

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I

By and between

Mr. Eduard Solar Babot, as party of the first part, with DNI 52.461.763-M, for and on behalf of “Solaben Electricidad Dos, S.A.” (hereinafter referred to as the Client), company registered in the Trading Registry of Badajoz, volume 474, of the General Section of the Registry Book, Sheet 63, Page number BA-21,546 and Tax ID Card No. A-91/608760., and registered office in Mérida (Badajoz), Paseo de los Rosales nº 7, dully empowered by virtue of the resolutions of the Board of Directors dated on 16^th December 2010.

and

Mr. D. Pedro José Robles Sánchez, as party of the second part, for and on behalf of “Abengoa Solar España, S.A.” (hereinafter referred to as Operator), with registered office and legal address in Seville, Avda. de la Buhaira, nº 2, company registered in the Trading Registry of Seville, sheet SE-47.290, folio 207, Company Volume 3.411 and with C.I.F. number A-91/185314, by virtue of deed dated 28 July 2008, made before Mr José Ruiz Granados, Notary of Seville, with notary record number 4265, which empowers him to sign this Agreement.

Hereinafter the term “Party” will mean the Client and Operator individually, and the term “Parties” will mean the Client and Operator, jointly.

The Parties do hereby acknowledge one another’s legal capacity for the signing of this Agreement, and for such purpose

II

Declare

 

(A)

That Client is going to acquire the Facility, for its operation for an indefinite term with the purpose of generating electrical energy, by entering into the EPC Contract,

 

(B)

That the Operator is a corporation duly organised and existing under the Spanish laws and that, among other activities, carries out the operation and maintenance of Facility,

 

(C)

That the EPC Contract includes Guaranteed Average Net Energy during the Guaranteed Energy Production Period. For the purpose of this guarantee, the operation and maintenance of the Facility will be carried out under the control and responsibility of the Operator,

 

(D)

That Client is desirous of contracting operation and maintenance of the Facility to Operator until twenty (20) years from the Practical Completion pursuant to Part E hereof,

 

(E)

That the Operator has expressed its willingness and ability to execute its scope of services to the satisfaction of the Client and

 

(F)

That the Operator has declared that it has enough technical capacity and the necessary human and material resources to implement the services and obligations on terms and conditions hereinafter set forth.

 

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Therefore, in consideration of the premises stated above and having the Parties reached a full agreement about the conditions of the service performance, they make this agreement as follows:

III

Covenants

Part A. General

1. Definitions

Acceptance Tests

means those construction ending tests that certifies the proper construction of the Facility which should occur prior to Practical Completion in the presence of the Technical Advisor, the Client or its representative and the Operator. It is one of the prerequisites for the Practical Completion.

Agreement Price

means the amount that should be paid by the Client to the Operator during each annual period as consideration for all services referred to in the Operation and Maintenance Agreement

Annual Referenced Net Production of the Facility

means 91,002 MWh.

Basic Maintenance Program

means an overview of the maintenance program of the main components of the Facility.

Breakdown

means an unexpected failure or malfunction of all or part of the Facility, regardless of the reasons which cause it.

Business Day

means any day of the week excluding Sundays and public holidays specified as such in the official calendar of Madrid or in the official calendar of Seville

Client

means Solaben Electricidad Dos S.A. as the party to the Operation and Maintenance Agreement between the Solaben Electricidad Dos, S.A. and Abengoa Solar España S.A.

EPC Contract

means a turnkey type construction contract executed between the between Solaben Electricidad Dos S.A. and Counter Parties for Solaben Dos dated December 16^th, 2010 for the design, procurement of equipment and materials and construction, commissioning and performance testing of the Facility (“EPC Contract for Solaben Dos”),

EPC Contractor

means “Abener Energía S.A.y Teyma; Gestión de Contratos de Construcción e Ingeniería S.A. Solaben 2, Unión Temporal de Empresas, Ley 18/1982” formed by Abener Energía S.A. and Teyma; Gestión de Contratos de Construcción e Ingeniería S.A.,. which, pursuant to the EPC Contract, performs the design and construction of the Facility.

 

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Excess Production Programme or Excess Forecast

means the hourly estimates of net energy generation for the next day which is used to send bids to the Market.

Facility

means the 50 MW thermoelectric solar plant, located in the Site, and its own facilities necessary to connect to Service Infrastructures of third parties (collector substation “Mesa de la Copa”, water collection infrastructures, reservoirs and shared wastewater manhole).

Financial Institutions or Financing Entities

mean the financial institutions providing the Senior Loans under the Senior Loan Agreement.

Finance / Financing Agreement

means the Senior Loan Agreement.

Force Majeure Event or, Chance or Act of Nature

means any event that is reasonably outside of the control any Party or was unpredictable and the consequences thereof cannot be avoided through the exercise of due diligence by the Party in question. The definition of Force Majeure existing under Spanish law, pursuant to the provisions of Article 1105 of the Spanish Civil Code, shall apply.

Daily Market

means the main session of the Iberian electric market called “Mercado Diario” in Spanish and manage by OMEL (the Market Operator). Currently, this market closes the session at 10:00 (GMT +1:00) of the previous day.

General Consumer Price Index or CPI

means a measure estimating the average price of consumer goods and services purchased by households in Spain. This index is published in the Spanish National Statistics Institute, web page www.ine.es/en/welcome_en.htm and referred there as CPI.

General Operation Procedure

Means the general instructions handled by EPC Contractor to Client and from the latter to Operator, which describes how to operate the Facility safety, according to the Operation and Maintenance Manuals.

Guaranteed Average Net Energy

means the EPC Contractor’s guarantee of net energy to the Client under the Article 7.3 of the EPC Contract.

Guaranteed Energy Production Period

Means the three (3) years period for which the EPC Contractor guarantees net energy to the Client under the EPC Contract.

Infrastructure Lease Connection Agreement

Means the agreement that regulates the terms and conditions between the Client and Evacuación Valdecaballeros S.L., based on which the Client can make use of the Substation 220/400 kV called Mesa de la Copa and 400 kV interconnection line from the boundary point of the plants to the Valdeballeros substation.

 

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Initial Basic Spares

Spare parts, consumables and any fungible materials according to the Initial Basic Spares List.

Initial Basic Spares List

List of Spare parts, consumables and any fungible materials that have been procured by Operator prior Practical Completion,

Intra-daily Market

means the six sessions of the Iberian electric market called “Mercado Intradiario” in Spanish and manage by OMEL (the Market Operator). In these sessions the market gets adjusted by unforeseen production that was not sold in the Daily Market, or in previous sessions. The session closure times, which the Client should bid, are currently:

 

Intraday 1:		17.45 hours (GMT +1:00)
Intraday 2:		21.45 hours (GMT +1:00)
Intraday 5:		08.45 hours (GMT +1:00)
Intraday 6:		12.45 hours (GMT +1:00)

Maintenance Plan

means the schedule or sequence of the maintenance operations made by the Operator and pursuant to the operation and maintenance manuals of the equipment and the basic maintenance program included in the Appendix I to the Operation and Maintenance Agreement.

Market

means the Spanish Market of Electrical Energy Generation governed, among others, by the operation rules of the market (Reglas de Funcionamiento del Mercado) approved by the Market Operator.

Market Operator

means Operador del Mercado Ibérico de Energía Polo Español, S.A. (OMEL).

Minimum Stock

means the minimum quantity of spares that shall be located inside the warehouse of the Facility according to Initial Basic Spares List.

Net Energy

means the gross electric energy generated by the Facility less self consumptions at the on-line functioning mode in kWh. The measurement equipment/s used will be located at the Mesa de la Copa substation.

OMEL

means OPERADOR DEL MERCADO IBÉRICO DE ENERGÍA - POLO ESPAÑOL, S.A. who currently regulates the Spanish electricity market.

Operator

means Abengoa Solar España S.A. in the capacity of operator of the Facility under the Operation and Maintenance Agreement entered into by it and Solaben Electricidad Dos S.A.

 

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Operation and Maintenance Agreement or Agreement

means the agreement for the operation and maintenance of the Facility executed between Abengoa Solar España S.A. and Solaben Electricidad Dos S.A, which governs the operation and maintenance of the Facility.

Operation and Maintenance Manual

means the collection of manuals from each equipment, handle by the manufacturer to the EPC Contractor to Client, and from the latter to the Operator, which describes how to use those equipments.

Operation and Maintenance Procedures

means the procedures established by the Operator that, according to the Operation and Maintenance Manual and the General Operation Procedure, handled by the EPC Contractor to Client and from the latter to Operator, and Basic Maintenance Program, handled by Operator, which describes the procedures to operate and maintain the Facility.

Parabolic Cylinder Collector Field

means the equipment and installations, located in the solar field, used for the collection and transfer of solar energy from the outlet flange to the inlet flange for the oil piping of the steam generator via the parabolic trough collectors, including the oil circulation system among others.

Power Block

means the equipment and installations used in the steam and water cycle, and the electric generator, including the turbine, the steam generator, and cooling system among others.

Practical Completion

means the date determined pursuant to the provisions of section 6.3 of the EPC Contract and established by the subscription of the Practical Completion Certificate.

RAIPRE

means Registry of Special Regime Energy Producer (Registro de Instalaciones de Producción de Energía Eléctrica acogidas al Régimen Especial)

Representative

means the authorised entities to act directly in the electric power market as sellers of electricity, in the name of energy producers.

Risk of Loss

means loss of or damage to property due to any reasons whatsoever.

SCADA

means the Supervisory Control And Data Acquisition system which shall be installed in the Facility.

Senior Loan

means the loan granted pursuant to the Senior Loan Agreement

 

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Senior Loan Agreement

means senior loan agreement between Owner in the capacity of borrower and Financial Institutions in the capacity of lender for the Project to finance the construction, commissioning, and operation of the Facility

Service Infrastructures

means every infrastructure of other entities needed for the proper use of the Facility, consisting of, among others, the collector substation “Mesa de la Copa”, property of Evacuación Valdecaballeros, S.L.,; water collection infrastructures, reservoirs and shared wastewater manhole, property of Solaben Electricidad Uno, S.A., Solaben Electricidad Dos, S.A., Solaben Electricidad Tres, S.A., and Solaben Electricidad Seis, S.A.

Services

means every service included in Operator’s scope of services according to clause B.1 of the Operation and Maintenance Agreement

Site

means the parcel of land denominated “La Copa” and “El Rincón”, which is comprised of the registral plots numbered 10.706 and 10.798, respectively, located at Logrosán (Extremadura), on which the Facility shall be constructed.

Solar Plant

means a 50MW thermoelectric solar plant to be located in Logrosán (“Solaben Dos”), which will be designed and constructed under the EPC Contract for Solaben Dos

Spares or Spare Parts

means spare parts, consumables and any fungible materials that will be procured by Operator under the Operation and Maintenance Agreement.

Subcontractor

means a supplier or subcontractor of any tier, which may deal with and contract by the Operator, for the partial performance of the Services referred to in the Operation and Maintenance Agreement, as the case may be.

System Operator

means Red Eléctrica de España, S.A (“REE”).

Technical Advisor

means an independent technical advisor employed by the Financial Institutions for supervision of the performance of the Works including, among others, review and approval of design, construction, testing, commissioning and Acceptance Tests.

Theoretical Model

means the model developed by the EPC Contractor for calculation of theoretical energy values in relation to Part C.

Unless expressly provided otherwise or where the context otherwise requires, the terms with capitalized initials have the meanings ascribed to them above, which forms an integral part of this Agreement.

 

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1.

In this Agreement unless the context requires another meaning, a reference:

 

(a)

To any document (including this Agreement) is to that document as varied, amended, novated, ratified or replaced from time to time.

 

(b)

To Client or Operator includes its successors and permitted assigns, including any person taking by way of novation and, in the case of a trustee, includes any substituted or additional trustee.

 

(c)

To the singular possibly includes the plural and vice versa, and to a gender possibly includes all genders.

 

(d)

To a Clause is to a clause of this Agreement, to Appendix is to an appendix to this Agreement.

 

2.

The headings of paragraphs in this Agreement are for descriptive purposes only and shall not control, alter, or otherwise affect the meaning, scope or intent of any provisions of this Agreement.

 

3.

The provisions (A) to (F) of the preamble shall form an integral part of this Agreement.

The Appendices shown below shall form an integral part of this Agreement.

Appendix I: Basic Maintenance Program

If there is conflict between the body of the Agreement and the Appendices, the body of the Agreement shall prevail.

Wherever in this Agreement a provision is made for the giving of notice, consent or approval by any person, such notice, consent or approval shall be in writing and the word “notify” shall be construed accordingly.

2. Subject of the Agreement

 

1.

The Operator shall perform, provide and supply all works, services, equipment and materials set forth in this Agreement and perform all other obligations required by the terms and conditions of the Agreement and shall be responsible for doing and providing all things of whatsoever nature or description which have not been specifically included in its scope of services but could reasonably be inferred from current standard applications of the market, except for those things which the Client expressly undertakes in this Agreement to do or provide.

 

2.

Upon the Practical Completion, the control of the Facility passes from the EPC Contractor to the Client and at the same time passes from the Client to the Operator. All installations, equipments, works and means (except the Spares, which are provided by the Operator) are property of the Client except from part of the land where the Client has a right to use during 30 years and public access roads.

Part B. Description of Services

1. Scope of Services

With respect to the Facility, the following, but not limited to, are Operator’s scope of services which are more specifically described in the subsequent clauses (the “Services”). An overview of the maintenance program of the main components of the Facility is also described in Appendix I – Basic Maintenance Program.

 

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The Operator has provided to the Client, who knows and accept it, the Basic Maintenance Program, which is included in the Appendix I of the Operation and Maintenance Agreement.

 

–

Initial Basic Spares Control Services

 

–

Spares Control Services

 

–

Services prior to Practical Completion

 

–

Routine operation and maintenance

 

–

Customer report services

 

–

Production Forecast Remittance Services to the Client

 

–

Preventive Maintenance, consisting of Preventive or Planned Maintenance

 

–

Corrective Maintenance, consisting of Corrective or Non-Planned Maintenance

 

–

General Services of the Facility

 

–

DCS Supervision and Control

 

–

Management of wastes

The Services will be carried out by the Work Teams, defined after the Clauses used for the description of each of the above tasks. All the costs and expenses for the scope of the Services shall be borne by Operator, unless otherwise stipulated in this Agreement.

2. Initial Basic Spares Control Services

Operator shall elaborate an Initial Basic Spare list recommended for realization of the Services described in this Agreement. This list will be approved by the Client with the verification of the Technical Advisor of the Financing Entities and will be agreed one year prior to the scheduled Practical Completion of the Plant. Operator has the responsibility of purchasing and storing those spares, included in the Initial Basic Spare list, in the Facility prior to Practical Completion.

Six months prior to Practical Completion and without cost to the Operator, the Client shall allow the Operator to access the Site, which shall have designated a proper area for the temporary storage of the total spares mentioned in the Initial Basic Spare list.

Upon the Practical Completion, the Operator shall have stored all the Initial Basic Spares in the warehouse provided by the Client two months before Practical Completion. It is the Client responsibility to have included in the scope of the EPC Contractor the erection of a warehouse for the Spares that fulfils the specifications for the proper storage, including, among others, the dimensions, the temperature and the humidity. For the avoidance of doubt, the warehouse will be provided by Client to Operator without any cost for the latter.

The management and purchase of the spares mentioned in the Intial Basic Spares List is under the scope of the Operator.

As to the Initial Basic Spares, the Operator shall be responsible for their quality and quantity, which, for the avoidance of doubt, shall fulfil the Initial Basic Spare List specifications.

These Initial Basic Spares shall fulfil, at least, the quality specifications that the EPC Contractor installs in the Facility according to the Annex A of the EPC Contract which shall be delivered by the Client to the Operator for understanding. The Operator should acknowledge receipt and understanding.

 

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3. Spares Control Services

Without prejudice to the clause above, Operator will be in charge of preparing the specifications, managing and purchasing all Spares necessary for the realization of the Services under the Agreement.

It shall be the responsibility of the Operator to order all required materials and spare parts, manage the relationships with the vendors thereof, manage administrative matters, make payment for materials, manage all matters with shippers, make claims for damages and losses during transportation, and pay for shipping.

The Operator shall be in charge of organizing the transportation of all materials supplied, including loading and off-loading. The Operator shall receive the materials and shall confirm whether they have been damaged during transportation and shall arrange facilities for the storage and protection thereof. The Operator shall maintain all files necessary to demonstrate that the materials have been received at the Site and shall make such files available to the Client upon request.

Within the warehouse designated for the Spares it shall always be at least the Minimum Stock described in Initial Basic Spares List, in order to assure the total availability of the Spares during the Duration of the Agreement. As to the Spares, the Operator shall be responsible for their quality and quantity.

The Operator shall purchase, stock, control, deliver and use the Spares without extra cost.

4. Services prior to Practical Completion

Six months before Practical Completion, the Operator shall have the option to start receiving on-site training from the EPC Contractor. The training relates to the following at the theoretical class room training and familiarization of operation and maintenance by attending at the Site while commissioning is in progress.

 

(a)

Configuration of installed system.

 

(b)

Operations.

 

(c)

Maintenance.

 

(d)

Storage of the Initial Basic Spares.

The Client shall, upon receipt, send to the Operator Operation and Maintenance Manual and the General Operation Procedure drawn up by the EPC Contractor after receipt them from the EPC Contractor, at least two months before the expected Practical Completion. The Operator shall inspect and familiarize itself with these documents and send its written comments and recommendations before Practical Completion. The comments and recommendations made by the Operator and agreed by the Client shall be incorporated into Operation & Maintenance Procedures and the Maintenance Plan which are prepared and finalized by Operator.

5. Routine Operation and Maintenance

Routine operation and maintenance contemplated in this Clause means the follow-up and on-going surveillance of the Facility carried out by the Operator, which will be defined by the Operator in the operation and maintenance procedure pursuant to the Operation and Maintenance Manuals.

The Operator shall nominate:

 

–

Plant manager.

 

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–

Conventional and solar field operators.

 

–

Mechanic, electric and instrumentation maintainers.

 

–

Conventional and solar field assistants.

The number of these personnel and qualification, right level of experience or skills to make each of the works, will be established by the Operator under his entire liability, and it may vary depending on the experience accumulated during the operation and means to carry it out provided that the quality of the performance shall not be diminished.

Routine Operation and Maintenance services include, among others:

 

–

Maintenance of the plot of land occupied by the Facility and accesses, including grubbing weeds and maintenance of the plot, ditches, drainages and storm drain facility.

 

–

Daily inspection and repair including provision of consumables.

 

–

Measurement of emission, noise, effluent water quality, etc, required by regulations.

 

–

Cleaning of the Facility.

 

–

Management of the water supply and waste management.

 

–

Control of the Spare Parts.

 

–

HSE (Health, Safety and Environment) activities.

 

–

Analysis of oil, water, natural gas.

 

–

Facility entrance security service (protection against intruders, alarms, break-ins, etc.) during 365 days a year. For the avoidance of doubt, the contract with the external 24/7 security service company will be within the scope of the Client.

 

–

Prepare specifications, manage and buy all Operational Spares necessary for the proper operation and maintenance of the Facility.

The Operator will provide all necessary tools for the proper operation and maintenance of equipment and systems in a reliable and safe way unless otherwise provided by the Client and established in this Agreement.

6. Customer Report Services

The Operator shall keep the Client in a timely and regular manner informed about the actions and in-actions, in particular:

 

•

Monthly, before the tenth (10th) Business Days of the month following invoicing:

 

i)

The Operator informs the Client of:

 

•

The liquefied natural gas stock in the tank, expressed at kWh.

 

•

Power production (gross, net), off-line use of power.

 

•

Plant efficiency.

 

•

Availability.HSE (Health, Safety and Environment)

 

•

In case the liquefied natural gas is channelled, a control of the consumption will be measured in the regulation and measurement station.

 

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ii)

The Operator delivers to the Client:

 

•

The daily production report of the Facility.

 

•

Hourly-daily breakdown production of the last invoice.

 

•

Calculation of the hourly-daily reactive power in excel format.

 

•

Calculation of the power acquired in excel format.

 

•

Quarterly, the Operator delivers to the Client:

 

•

The cumulated energy production.

 

•

Natural gas consumption.

 

•

Relevant non corrective maintenance actions done.

 

•

Relevant corrective maintenance actions done.

 

•

HSE Record.

 

•

Production adjustment and forecasting.

 

•

Semesterly the Operator informs the Client of the HTF (Heat Transfer Fluid, the oil) quality.

 

•

Long Term Maintenance Plan.

The Operator shall submit to Client, for information purpose only, a five (5) year maintenance plan one month before the Practical Completion and every five (5) anniversary thereafter.

 

•

Yearly Maintenance Plan.

The Operator shall submit to Client, for information purpose only, a Yearly Maintenance Plan (from January 1st to December 31st) on or before 30 September of every year. On the first year of operation, a first version of the Yearly Maintenance Plan should be submitted one month before Practical Completion, provided that the Customer has delivered all the documentation required for implementation. The Operator shall keep current standard applications of the market for operation and maintenance, obligations under this Agreement and comply with applicable laws and regulations.

7. Production Forecast Remittance Services to the Client

The Operator will forecast the excess electrical power of the Facility that could be issued as bids to OMEL, pursuant to a strategy formulated by the Client and communicated to the Operator (“Excess Production Programme” or “Excess Forecast”).

The Client will be responsible for delivering all selling bids to OMEL, in accordance with the forecasts made by the Operator, following the established rules and regulations for participation in the Market. The Client will be able to deliver the selling bids by itself or through a Representative. The total economic consequences derived from such bids will be to the account of the Client. Thus the Operator shall not be

 

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liable for any damage, loss or liability arising from the participation in the Market by the Facility, except where such damage, loss or liability is caused by the untimely communication to the Client of the Excess Forecast for reasons exclusively attributable to the Operator, or to negligence or wilful misconduct of the Operator in preparing the Excess Forecast.

In order to allow the Client to deliver its bid, the Operator shall report its Excess Forecast at least one hour before the closure of the Daily or Intra-daily Market session applicable at each moment. Similarly, the Operator must communicate to the Client any expected variations related to the Excess Forecast at least one hour before the closure of the Intra-daily Market Sessions in each moment. The session closure times are currently the following ones:

 

Daily:		10.00 hours (GMT +1:00)
Intra-daily 1st:		17.45 hours (GMT +1:00)
Intra-daily 2nd:		21.45 hours (GMT +1:00)
Intra-daily 5th:		08.45 hours (GMT +1:00)
Intra-daily 6th:		12.45 hours (GMT +1:00)

8. Preventive and Corrective Maintenance

The Operator acknowledges that the continuous operation of the Facility is essential, especially during day hours therefore the work of repairs, maintenance, rebuild and tests must be planned in a such a way that interruptions to the Facility operation are kept to a minimum and as a consequence he will apply a higher standard of diligence to perform during night hours to the extent possible in order to minimize interruptions and maximize production. The Operator will provide all materials, tools, staff and labour requirements, as well as its staff expenses, etc. in order to carry out the tasks, except otherwise agreed in this Agreement.

1. Preventive or Planned Maintenance

The Preventive or Planned Maintenance of the Facility will be comprised of regular visits to all the equipment composing the Facility, replacement of fungible materials and correction of those systems whose failure or deterioration is statistically foreseeable with materials, tools, supervisor and labour, pursuant to the provisions of Operation and Maintenance Manuals and Operation and Maintenance Procedures of the equipment installed at the Facility. The following tasks, but not limited to, will be carried out:

 

•

Cleaning the mirrors in the parabolic cylinder collector field with osmotized water, including maintenance of the cleaning vehicle(s). Cleaning machines, as well as the rest of special tools or machines described in Annex A to the EPC Contract, will be provided by the EPC Contractor before the Practical Completion.

 

•

Periodic revisions of a meaningful sample of collectors by means of techniques of Photogrammetry.

 

•

Maintenance of the instrumentation and control system (Level I, II and III).

 

•

Maintenance of drive systems by visual inspection and orientation as well as the replacement and inspection of oil levels every six (6) months.

 

•

Maintenance of the mirrors and collectors.

 

•

Maintenance of mirror and collector components and others (fuses of field connection boxes, etc.).

 

•

Maintenance of the receiver tubes.

 

•

Maintenance of the steam generator and its auxiliary equipment.

 

•

Maintenance of the steam turbine and its auxiliary equipment (including those to have an appropriate subcontractor as needed to maintain the steam turbine pursuant to long term maintenance agreement to be concluded).

 

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•

Maintenance of connection facilities to third party reservoir.

 

•

Maintenance of the water treatment plant.

 

•

Maintenance of the effluent treatment and drainage system and connection facilities to shared wastewater manhole.

 

•

Maintenance and measurement required by the regulation for the Facility.

 

•

Maintenance of medium voltage facility.

 

•

Planned maintenance of substation and high voltage electrical line to the collector substation “Mesa de la Copa”.

2. Corrective or Non-Planned Maintenance

In case of failure or Breakdown in the Facility, the Operator will apply a higher standard of diligence and all what technically were possible to correct the Breakdown or change the faulty parts in the same location in order to make it work properly. Whenever this is not possible or it results extremely burdensome, the Operator will be able to fix it outside the location at the Operator’s account.

The maintenance team of the Operator will proceed to the replacement of the broken-down subset by other subset new or rebuilt with equivalent quality. All components or parts removed from the Facility and replaced will become exclusive property of the Operator.

If it is not possible to carry out the repair by said procedure, it will be required the presence of a specialized personnel. If the detected malfunction has provoked the stoppage of the Facility, the specialized personnel will come on site within forty-eight (48) hours following the notice. If the breakdown does not cause the stoppage of the Facility, it will be possible to delay, under responsibility of the Operator, the visit to the Facility of the specialized personnel until the next visit for Preventive or Planned Maintenance.

Without prejudice to Spanish civil code, the Risk of Loss shall be borne by the Client. The Operator shall however bear all costs and expenses resulting from repairs and non-planned corrective maintenance arising out of any reason, except Force Majeure and Chance of or Act of Nature, up to the limit of the deductibles of the insurance policies hired by the Client. The Operator shall properly support the Client in preparing insurance claim documentation.

9. General Services of the Facility

Operator is committed to implement those activities detailed below, with the contribution of all necessary human and material resources:

 

–

Technical coordination between the Facility and the other facilities called Solaben 1, Solaben 2 and Solaben 6.

 

–

Technical coordination between the Facility and Service Infrastructures owners.

 

–

Obtaining man-power for the Services.

 

–

Follow-up of yields and analysis of energy production data.

 

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–

Weather forecasting

 

–

Surveillance of natural gas consumptions in order to assure that they are carried out pursuant to the applicable legislation.

 

–

Analysis and control of the Client exploitation expenses.

 

–

Management of purchase orders for the Facility.

 

–

Support the Client in the processes of the insurance claim and assistance to surveyor under any insurance Client will procure under Part F.

 

–

Operation and maintenance expense supervision.

10. DCS Supervision and Control

The Operator carries out evaluation and supervision tasks of the different control hierarchies composing the system. With the daily operation and exploitation information, it proposes improvements for the Facility.

Among other things, it has the obligation of supervising the integration of subsystems grouped in the DCS:

 

–

Communications between logic levels, report of parameters, graphic display in SCADA, etc.

 

–

Evolution of the global system and improvement of the different subsystems, in order to facilitate operation tasks.

 

–

Detection and report of the software incidents to the control system supplier (or the sub-contractor in charge), with the aim of guaranteeing that the system daily works in a proper way.

At the same time it develops control strategies depending on exploitation needs, as well as the instrumentation supervision related to the solar field.

They also include the adaptation and improvement of the vision systems linked to the Facility:

 

–

Hardware (sensors, cameras and optical) and software.

 

–

Reports of results and yields for the diverse field control and instrumentation systems.

11. Management of wastes

The Client shall contract at its expense a waste treatment agent in order to realize the waste treatment services, including but not limited to, to clear the disposal area and elimination of those wastes discharged from the Facility.

The Operator shall carry out the relationship with the waste treatment agent. The Operator shall collect the waste and take it into the disposal area located in the Facility.

All costs raised from the production and elimination of wastes will be paid by the Client.

Work teams

The Services will be carried out by the following work teams:

 

1)

Commercial Management of the Facility.

The team of commercial management develops, among other things, surveillance actions of the Facility

 

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commercial management in a general way, with focus on the analysis of incomes and the operational expenses of the Client. Within this context, this team becomes a liaison with entities related to the electricity and fuel (LNG) purchase (vendor companies) It also carries out the O&M expense supervision, as well as other consumables and fungible materials purchases.

 

2)

Operation and Maintenance.

This work team will carry out specific operation and maintenance tasks described in this Agreement.

 

3)

Yield Analysis, Estimates of Generation and Operation at the Market.

This team carries out the Plant production analysis, relating the real production with the expected production pursuant to the theoretical production models. Besides, it carries out estimates of radiation based on weather forecasting data, which feed the production theoretical model in order to calculate the hourly energy to be exported the following day. This last information is used to forward bids to the electrical market (OMEL), delivered to the Client according to Clause 7.

 

4)

DCS Supervision and Control Team.

This team carries out evaluation and supervision tasks of the different control hierarchies composing the system.

Part C. Availability Guarantee

Before starting the Energy Production Guarantee Period, the contractor EPC will deliver a Theoretical Production Model which will have the following hourly input data:

 

•

Meteorological conditions: Direct normal radiation, ambient temperature, relative humidity and wind speed.

 

•

Number of collectors in service/operative.

 

•

Number of collectors in solar tracking, both total and partial.

Note that the hourly data to be entered into the model will be the average values of measurements taken at least every ten (10) minutes. The output data from this Theoretical Model will be the variables necessary to determine the availabilities of both the Field of Parabolic Cylinder Collectors and the Power Block. Both availabilities will be calculated as indicated in the following sections:

(a) The availability of the Field of Parabolic Cylinder Collectors will be calculated in accordance with the following methodology:

Whenever the hourly direct normal radiation exceeds a given threshold, the value of Collectors in service will be recorded. The average of these values weighted with the modified direct radiation will correspond to the value of availability of the Field of Collectors.

The threshold of direct normal radiation will be determined by the absolute error value of the pyrheliometer used, increased by a security factor. In general, the threshold value of direct normal radiation will be set at 50 W•h / m². In addition, days with accumulated direct normal radiation of less than 2 kWh/(m² • day) will be eliminated, as these will be considered non-operation of the plant.

 

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The Collectors that can be put into automatic mode from the control system will be considered in service. In this way, the number of Collectors in service will be identified by the control system. There will be a variable in the control system to record the number of Collectors in service.

The modified direct radiation represents the effective incident radiation on the Collectors. Therefore, the availability will be evaluated in accordance with the energy captured. The modified direct radiation will be determined by multiplying the direct normal radiation by the cosine of the angle of incidence of the sun’s rays. The cosine factor will be determined by the Theoretical Model.

Following the methodology indicated above, the availability of the Field of Collectors will be calculated by means of the following expression:

 

Where:

h: hours with direct normal radiation above the pre-established threshold.

ColSer: Number of Collectors in service for each hour.

ColTot: Total number of Collectors in the Solar Field. In this case 360.

DNIMod: Modified direct radiation for each hour.

DNITotMod: Sum of the modified direct radiation in hours with values of direct normal radiation above the pre-established threshold.

(b) The availability of the Power Block will be calculated in accordance with the following methodology:

The calculated exclusively-solar theoretical electrical energy will be determined with the number of collectors in tracking, both total and partial. Note that the value of the collectors in tracking will be determined using hourly values registered in the control system. This theoretical energy will represent the production of the plant considering the inaccessibility of the Power Block and the Field of Parabolic Cylinder Collectors, ETheoretical_BOP+CS.

The calculated, exclusively-solar theoretical electrical energy will be determined using the number of Collectors in service for each hour. This theoretical energy will represent the production of the plant considering that the Power Block has an availability of 100% and taking into account the inaccessibility of the Field of Parabolic Cylinder Collectors, ETheoretical_BOP+CS.

Using the above two energy variables, the availability of the Power Block will be calculated using the following expression:

 

Once the Energy Production Guarantee Period has ended, the Operator guarantees the following availabilities:

An annual availability of the Power Block of ninety-five (95) per cent.

 

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(1)From expiry of the Energy Production Guarantee Period, the verification of the real availability of the Power Block will be carried out immediately after the 31st of December (for the period between the end of this Energy Production Guarantee and that date), and, subsequently, each year on the 31st of December. If the availability obtained annually does not reach the guaranteed availability, the Operator will pay a penalty of one (1) per cent of the proportional part for a year of the Price of the Contract for each one (1) per cent of the guaranteed value, with a limit of ten (10) per cent of the proportional part for a year of the Price of the Contract. If the availability obtained annually is higher than the guaranteed availability, provided the annual net production of the facilities exceeds the envisaged net nominal production, the Client will pay a bonus of one per cent (1%) of the Price of the Contract for each one (1) per cent above the guaranteed value.

(2) For the Field of Parabolic Cylinder Collectors, the Operator guarantees an availability of ninety-nine per cent (99%).

From expiry of the Energy Production Guarantee Period, the verification of the real availability of the Field of Parabolic Cylinder Collectors will be carried out immediately after the 31st of December (for the period between the end of the Energy Production Guarantee and that date), and, subsequently, each year on the 31st of December. If the availability obtained annually does not reach the guaranteed availability, the Operator will pay a penalty of one (1) per cent of the proportional part for a year of the Price of the Contract for each one (1) per cent of the guaranteed value, with a limit of ten (10) per cent of the proportional part for a year of the Price of the Contract. If the availability obtained annually is higher than the guaranteed availability, provided the annual net production of the facilities exceeds the envisaged net nominal production, the Client will pay a bonus of one per cent (1%) of the proportional part for a year of the Price of the Contract for each one (1) per cent above the guaranteed value.

The parties expressly agree that the application of penalties payable by virtue of sub-sections 1) and 2), when both are combined, shall never exceed ten (10) per cent of the Contract.

Part D. Other Operator’s Obligations

1. Warranty

The Operator warrants that it carries out the Services with due care and diligence and it will maintain the Facility in proper conditions during effectiveness of the Agreement, considering its normal aging.

2. Rules and Regulations

The Operator and all the staff that is directly or indirectly at its service will strictly comply all statutes, ordinances, laws, regulations, rules, usages and provisions of all authority with jurisdiction, as well as other laws and rules (both international or national) which result applicable to the operation and maintenance of the Facility and are effective during the effectiveness period of this Agreement.

The Operator and all the staff that is directly or indirectly at its service will strictly comply with natural gas and water consumptions that respect, in quantities and qualities, all applicable law, regulations and relevant permits, licenses and authorizations. In case the Client receives a fine due to a potential use of gas above the legal limits, such fine shall be paid by the Operator. In addition, the Operator shall reimburse the Client any amounts billed in accordance with this Agreement as a direct result of the production of electricity generated with gas above the legal limits. For the avoidance of doubt, any reimbursements to the relevant authority, of the revenues generated by the sales of electricity above the legal limit of gas consumption shall be the responsibility of the Client.

 

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In case that a fine for using gas above the limits is imposed, Operator shall prepare a report detailing the reasons why too much gas was used and a plan to prevent that from happening again

3. Excluded Benefits

The Operator will neither be responsible for failures, breakdowns or stoppages that the Facility may suffer nor responsible of damages or prejudices that may derive from them pursuant to the following matters:

 

–

Negligence or improper usage of one or more elements of the Facility made by the Client unless such is caused by instruction or recommendation of the Operator.

 

–

Repairs carried out by the Client without the Operator’s approval.

 

–

Force Majeure Event or Chance or Act of Nature pursuant to Part H titled Force Majeure or Chance or Act of Nature.

 

–

Non-compliance of the Client of laws, regulations, ordinances which apply to the activity or the proper Facility.

Stoppage hours of any equipment of the Facility that are derived from these matters will not be chargeable to the availability calculation.

In addition, and without prejudice to the provisions of Clause 1 part B, in case that an unforeseen (as of the date of execution of this Agreement) future event materially changes the scope of services or the works which are required for the proper operation and maintenance of the Facility, and such services or works are not included in the scope of this Agreement, the Operator will inform the Client in writing at least fifteen (15) Business Days in advance of the need to carry them out, including a quotation for these services or work. If the Client does not accept the quotation presented by the Operator, no obligation will accrue to the Operator. Prior to acceptance of the quotation, the Client will seek the approval of the Financing Entities, and the Technical Advisor if required by the Financing Agreements

If the Client does not reach an agreement with the Operator and does not make on its own or by third parties to perform the work or repair required by the appropriate operation of the Facility, it will not be able to demand any responsibility to the Operator due to damages or lower profits that may occur.

4. Reports to governmental agencies

The Operator shall provide the Client with all the necessary information needed in order to submit all the required reports by the governmental agencies so the Facility fulfils the necessary requirements.

Part E. Duration

The Agreement becomes effective from the day of the signature (the “Effective Date”) and continues to be valid for a period of twenty (20) years (the “Term”) after the Practical Completion. It could be extended by mutual agreement by the Parties

During the period until the Practical Completion, the Operator and its employers will be at the Facility watching and receiving information from the EPC Contractor, and supporting the EPC Contractor with respect to its operation and maintenance and they will be present during the start-up activities and tests.

 

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At least nine (9) months prior to the date on which the actual attainment of the Practical Completion is expected to occur, the Client shall inform the Operator of the date, which will never be lower than six (6) months before the Practical Completion, on which the Operator has the right to storage the Initial Basic Spares in the Facility.

At least four (4) months prior to the date on which the actual attainment of the Practical Completion is expected to occur, the Client shall inform the Operator’s operation personnel of the date, which will never be lower than two (2) months before the Practical Completion, on which the said personnel must appear in the Facility.

Prior to the Practical Completion, the Operator and its employees may be under the supervision and technical control of the EPC Contractor.

From the Practical Completion, the price agreed in the Part F shall become effective and applicable.

Part F. Price and Form of Payment

In consideration of the Services performed by the Operator pursuant to this Agreement, Client shall pay in accordance with this Part F.

In accordance to the Services prior to Practical Completion, described in Clause 4 of the part B, and the purchase of the Initial Basic Spares, the Operator, one month after the signature of the Agreement is done and at the request of the Operator, will invoice the Client the Advanced Payment. This Advanced Payment stays permanent and equal to 1,0000,000 €.

In this Part F the term “Net Energy” means the gross electric energy generated by the facility less self consumptions at the on-line functioning mode. The measurement equipment/s used will be located at the Mesa de la Copa substation.

Upon the Practical Completion:

 

1)

Up to the seventy five percent (75 %) of the Annual Referenced Net Production of the Facility (91,002 MWh when up to 12% of gas utilization is permitted), that is 68,251 MWh/year, the Agreement Price stays permanent and equal to 3,500,000 € (“Floor Price”), which includes, inter alia, the annual expenses of Spare Parts and the rest of expenses of the operation and maintenance services necessary for the Facility.

Since a higher production of the Facility necessarily involves a higher number of operating hours and, as a consequence, more maintenance, the Agreement Price keeps with the same evolution.

 

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2)

Between 75% and 100% (both inclusive) of the Annual Referenced Net Production of the Facility, which is between 68,251 MWh and 91,002 MWh, the Agreement Price (P) follows the following formula (“First Layer Price”):

 

Where:

 

•

P0 = Floor Price.

 

•

EP = Net Energy annually generated.

 

•

E75 =Net Energy corresponding to 75% of the Annual Referenced Net Production of the Facility (i.e. 68,251 MWh).

 

•

C1 = Agreement Price per MWh generated above the 75% of the Annual Referenced Net Production of the Facility (39.56 €/MWh).

 

3)

Between more than 100% and 120% inclusive of the Annual Referenced Net Production of the Facility, that is between 91,002 MWh and 109,202 MWh, the Agreement Price (P) follows the following formula (“Second Layer Price”):

 

Where:

 

•

P100 = Agreement Price for an annual production of 100% of Annual Referenced Net Production of the Facility (I.e. 4,400,000 €).

 

•

EP = Net Energy annually generated.

 

•

E100 = Net Energy corresponding to 100% of the Annual Referenced Net Production of the Facility (i.e. 91,002 MWh).

 

•

C2 = Agreement Price per MWh generated above the 100% of the Annual Referenced Net Production of the Facility (90 €/MWh).

Over 120% of the Annual Referenced Net Production of the Facility shall be deemed to be 120%.

In the case that the Facility is able to use up to 15% of gas, two previous factors shall be modified:

 

(i)

The Annual Referenced Net Production of the Facility, raising it up to 94,066 MWh.

 

(ii)

The C1 to 38.271 €/MWh.

On these quantities it will be applicable the effective value added tax at the accrued date.

Agreement Price has been calculated based on the understanding that the operation of the Facility commences year 2011 and the values calculated in this Agreement correspond to that year. If the compounded average CPI between the signature of this Agreement and the Effective Date is above 3%, the Agreement Price will be corrected upwards in respect of the excess inflation for the portion over 3% for each year, with a cap of 1% of yearly excess.

From year 2013, the Agreement Price will be revised (upwards or downwards) per due years, on the 31st day of December of each year which becomes effective from the immediately following 1^st January of next year, depending on the variation of CPI experimented in the immediately preceding year according to the publication by the National Statistics Institute or the institution that temporary substitutes it. If the official CPI was not known at the date of the first invoice after January 1^st, the first invoice will consider an Agreement Price adjusted with the most recent annual official CPI available. Any necessary adjustment will be done in the first invoice after the final official annual CPI is known.

Operator will invoice to Client the amount for the Services and the Client will pay to Operator through a bank within 180 days of correct invoice being received, through a line of reverse factoring that allows to Operator to

 

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anticipate payment at their financial cost (PPB 180) if there is an agreement with financial institutions. (PPB180 without interests unless the payment is delayed more than 180 days). If Reverse Factoring (PPB180) is not available, the Client will pay within fifteen (15) Business Days, starting from the reception of the invoice. Invoices will be sent by certified mail and with return receipt requested by Operator to the Client within the first ten (10) Business Days of each month.

The amount to be invoiced every month by the Operator will be the result of dividing the First Layer Price, when E_P is equal to the Annual Referenced Net Production, by twelve (12) parts based on the Net production expected for the year.

At year end, an adjustment will be calculated based on the actual Net Energy produced and invoiced in the immediately following invoice, which will include the adjustment of the First Layer Price, and, if applicable, the adjustment of the Second Layer Price.

The Parties agree that, from the date of signature of the Infrastructure Lease Connection Agreement between the Client and Evacuación Valdecaballeros S.L., the Agreement Price will be reduced by an amount equivalent to what is paid by the Client to Evacuación Valdecaballeros S.L., under the Infrastructure Lease Connection Agreement in respect of the operation and maintenance tasks associated with the connection infrastructure between the boundary point of the plant and the Valdecaballeros substation.

The reduction of the Agreement Price, as stated in the paragraph above, will be effective from the date of signature of the Infrastructure Lease Connection Agreement.

As far as the price stated at the Infrastructure Lease Connection Agreement is payable on a monthly basis, an equivalent amount to what is paid by the Client to the Evacuación Valdecaballeros S.L. will be reduced from the monthly invoices issued from the Operator to the Client.

The parties will reconciliate those amounts due to V.A.T. tax that would be legally applicable.

The following are not included in the Agreement:

 

•

Insurances: property damages and machinery breakdowns, loss of benefits or loss of profits and civil liability. The Operator will be named as co-insured in the property damage and machinery breakdown policy. The loss payee shall be the Client for all cases including the loss of benefits or loss of profits. It is agreed that the coverage, deductible amount and loss payee will be established by the insurance advisor designated in the Financing Agreement. Subject to the foregoing sentence, the deductible must be around 150,000 Euros.

 

•

Offline parasitics invoices.

 

•

Invoices relating to liquefied natural gas.

 

•

Invoices relating to N2.

 

•

Fees accrued for independent third party audit and administration functions.

 

•

Fees, taxes, public rates and other duties that tax the Facility.

 

•

Waste spill rate, management, collection and consumption of water (if necessary).

 

•

Waste costs (dangerous, inert, solid urban, etc.).

 

•

Emissions of greenhouse effect gases.

 

•

Service fee for real time measurement of electricity dispatch.

 

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Part G. Client Duties

The Client will be responsible for obtaining in its name all applicable permits, authorizations and licenses necessary for completion of its duties under this Agreement.

The Client will be responsible for executing, with the entities that own the Service Infrastructures, the contracts that, in such case, allow him to use those Service Infrastructures, as well as to comply with his obligations as shareholder/partner of those entities.

The Client must pay the total price of Services provided by the Operator pursuant to the terms and conditions in this Agreement.

The Client will provide the Facility with a closed circuit television and video to permit the Operator to carry out the following for the Facility:

 

1)

Control of gate.

 

2)

Security control.

 

3)

Plant safety operation monitoring.

 

4)

Machine monitoring.

 

5)

Surveillance.

 

6)

Industrial protection service.

For the avoidance of doubt, the contract with the external 24/7 security service company will be within the scope of the Client.

For the realization of the Services, the Client has provided at no charge to the Operator the following installations, that the Operator has been informed of and accepted:

 

–

A closed premise inside the Facility with appropriate humidity and temperature control for the storage of Spare Parts and special tools. This premise must comply with all the regulation related to occupational risk prevention and safety against fires, and it must have all the necessary elements for the spare parts storage (shelves, ladders, etc.).

 

–

Furniture and necessary equipment in the control room, including the monitoring system of the Facility in order to be used by the Operator in its operation functions.

 

–

An area close to the Facility location, in order to allow the Operator personnel the parking of necessary vehicles.

 

–

Toilets and changing rooms equipped with enough capacity for all the Operator personnel, including hot domestic water Facility.

 

–

Building equipped with the necessary elements to install a workshop of electrical and mechanical repairs and instrumentation. This building must comply with all requirements related to occupational risk prevention and safety against fires.

 

–

Waste accumulation area (toxic, dangerous, inert, etc.) totally delimited complying with provisions of the applicable regulations.

 

–

Chemical storage area perfectly delimited complying with provisions of the applicable regulations.

 

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Within thirty (30) days starting from the Practical Completion, the EPC Contractor will give the Client the documentation of the equipment tests, as well as the test results obtained once carried out the Acceptance Tests. The Client is committed to forward to the Operator said documentation as soon as its delivery has been made by the EPC Contractor.

The Client will provide appropriate cleaning equipment for parabolic cylinder collectors in order to make possible the realization of this task with the number of people as low as possible. The Client will provide all this material on the basis of commitments entered by the EPC Contractor in the EPC Contract.

The Client will provide the Operator for Client’s account and for Operator’s use with the following, provided that the payment administration shall be Operator’s responsibility.

 

a)

Electrical energy.

 

b)

Natural Gas.

 

c)

Water: drinking and cycle replacement water.

 

d)

N2.

 

e)

Telephone, internet and fax.

The Client must maintain and make effective, in those terms established for each case, the technical warranties provided in its favour by third parties.

If a specialized personnel, who is different from the operation staff of the Operator, to perform their maintenance services at the Site suffers delays due to reasons attributable to the Client. From the date the Operator informs the Client to be causing that delay, the Client shall pay to the Operator the waiting time of said personnel from that date, according to the contractual rates effective at that moment for this type of labour services and all the other expenses received by the Operator due to such delay. In case of travelling for the realization of these maintenance works which cannot be carried out on the foreseen time, due to a reason attributable to the Client, the Client shall pay the travelling and accommodation expenses incurred by the Operator, as well as any other justified expense directly related to the non-compliance of the Client.

The Client will be responsible for having the Facility in compliance with all required authorizations, licenses and permits to be obtainable in its name and enforceable by the effective regulations and complying with their possible requirements. The Client will have the obligation of adapting said authorization to possible regulatory changes as soon as possible, in order to keep to a minimum the prejudice to the Facility.

Every modification of the ordinances, laws, regulations, rules or provisions applicable to the Service will be communicated by the Operator to the Client as soon as possible, but in any case within fifteen (15) Business Days after it has come to know, as well as its technical and economic impact. In this case and whenever the provisions of the Agreement is affected by them, Operator and Client, prior authorization of the Financial Institutions, will change by mutual agreement the price and conditions of the Agreement, incorporating the necessary modifications in operation and maintenance manual and Yearly Maintenance Plan.

Therefore, the Operator will not be responsible for the negative or lack of adaptation to the applicable legislation chargeable to the Client. Then, if modifications of the Facility and contractual conditions between Operator and Client are not carried out, it will be considered that the obligations of the Operator

 

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have been successfully complied by the realization of works object of this Agreement. In case the Client subcontracts any implication required by the modification of the ordinances, laws, regulations, rules or provisions applicable to the Service to a third party, any cost or damages caused by the third party shall not be chargeable to the Operator. In case those damages are caused to the Spares or any other property of the Operator, the Client will reimburse the Operator for all reasonable expenses.

Part H. Common Terms

1. License and Permits

The Parties will be responsible for the compliance with all proceedings which should be observed each of them as required as a consequence of any governmental administrative control exerted on the Facility activity. The Operator and the Client will provide each other the collaboration and help necessary for these purposes.

The Parties will comply with all applicable rules of safety and hygiene and environmental rules and with those defined by the Operator for the particular case of the Facility.

All modifications to this Agreement will be made in writing by duly authorized representatives of the Parties.

2. Loss of profits

Neither Party shall be liable for indirect or consequential damages including loss of profits except those arising out of fraud or gross negligence.

3. Assignment and Outsourcing

Operator will not be able to assign wholly or in part (without prejudice of its capacity for outsourcing pursuant to terms and conditions authorized in this Agreement), its contractual rights and obligations in this Agreement without prior written agreement of the Client and Financial Institutions.

Operator will not be able to outsource the entire services of this Agreement or the operation of the Facility pursuant to the terms of this Agreement.

The Operator will be able to partially outsource to those persons, institutions or companies considered as appropriate for the proper realization of works and services indicated within this Agreement in the following cases:

 

i)

It will be able to outsource without any authorization the maintenance of those supplies listed below which have available a proposal of regular maintenance from the supplier itself:

 

•

Turbine, generator and gear.

 

•

Steam generator.

 

•

Cooling System.

 

•

Pumps.

 

•

UPS (Uninterrupted Power System).

 

•

LV and HV electric installations.

 

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ii)

For those equipments where the non-intervention of the supplier results in losses of warranties, outsourcing is approved to the extent the maintenance shall be effectively maintained by said supplier.

 

iii)

The Operator will be able to outsource without any authorization those non-operating and non-technical services.

Otherwise, outsourcing must have the prior and expressed consent of the Client and Financial Institutions by the Technical Advisor, which will not oppose to, except in case of reasonable cause supported by the Subcontractor’s lack of enough technical or economic capacity.

In any subcontracted services entered into by the Operator, Operator shall check and make sure that Subcontractor comply with the regulations applied in their similar projects in the past especially in industrial safety and occupational risk prevention matters, and will obtain from manufacturers and Subcontractors those warranties provided by them and it will assign said warranties to the Client in case of this Agreement being terminated.

In any event the outsourcing:

 

(a)

Will not exempt the Operator from any obligation or responsibility derived from this Agreement.

 

(b)

Will not oblige the Client to pay any amount additional to the remuneration established in this Agreement.

 

(c)

Will not generate any contractual relationship between Subcontractor and Client.

4. Applicable Law and Arbitration

The Language of this Agreement shall be English.

This Agreement, both for its application and its interpretation, shall be governed by Spanish laws.

If a dispute arises from or in connection with this Agreement, (i) at first instance, the Parties must try to solve it by Agreement within three (3) weeks and (ii) for the purpose of (i), a Party may at any time declare by giving a written notice to the other Party that such three (3) weeks commences. During this three weeks period either Party may offer the other Party to resolve the matter by mediation led by a third party mediator appointed by a neutral private authority. If the Parties agree, the matter may be settled through the mediation. The mediation does not prevent from any disputing Party from submitting the matter to arbitration unless the Parties have agreed that the matter is finally resolved. If the dispute is not finally settled by the end of the three (3) weeks, the matter shall be resolved by arbitration as provided for here below.

The Parties expressly agree that all disputes, discrepancies or claims arising out of this Agreement shall be finally settled by arbitration conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “Rules”) by three impartial arbitrators appointed in accordance with the Rules. The place of arbitration shall be Madrid, Spain. The language of the arbitration shall be English.

The submission of conflicts between Parties to arbitration does not entitle any Party to suspend the compliance of its obligations derived from this Agreement.

 

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5. Notices

All formal notices required pursuant to this Agreement will be carried out in written and addressed to the Parties as follows:

 

a)

If to the Client:

Solaben Electricidad Dos, S.A.

Avenida de la Buhaira, nº 2

41018 Seville (Spain)

Telephone: 954.93.71.11

Telefax: 954.93.70.08

For the attention of: Mr. Eduard Solar Babot

 

b)

If to the Operator:

Abengoa Solar España, S.A.

Avenida de la Buhaira, nº 2

41018 Seville (Spain)

Telephone: 954.93.71.11

Telefax: 954.45.26.59

For the attention of: Mr. Pedro José Robles Sánchez

 

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6. Access to the Facility

Client authorizes to Operator, its members, personnel, institutions or companies contracted by Operator in order to perform works and services established herein, the access and handling of the Facility, but only and exclusively for the performance of the obligations of this Agreement.

The Client will notify Operator about the list of persons who will enter regularly into the Facility. The Client shall cause these personnel to abide by the rules and applicable laws and internal safety rules established by Operator and approved by Client (together the “Site Rules”).

For the accesses of people not listed in the aforementioned list, or accesses of people not belonging to Client, Client shall notify the arrival 24 hours in advance.

The Operator shall not be liable for any loss of or damage to Client’s property or personal injury or death if such is caused by those personnel being in breach of the Site Rules.

7. Force Majeure or Chance or Act of Nature

No error or omission by either of the Parties in the execution or observance of the terms and conditions of this Agreement shall give rise to any claim by the other Party or shall be deemed to be a breach of the Agreement if such error or omission is the result of the Force Majeure Event or Chance or Act of Nature.

If the Services or other contractual obligation is delayed or suspended as a result of any Force Majeure Event or Chance or Act of Nature, the time allowed to comply with such obligation shall be extended for as long as the circumstances of force majeure causing such delay or suspension continue.

Client and the Operator shall take the measures necessary to mitigate the effects of Force Majeure Event or Chance or Act of Nature.

In case of occurrence of Force Majeure Event or Chance or Act of Nature, the Operator will not be responsible for loss of or damage to Spares or damages to the Facility provided that the Operator shall have performed its Services with due care and diligence pursuant to the provisions of the Agreement. Where Client desires, Client and Operator, for account of the Client, will collaborate resumption of the Facility to the status prior to the occurrence of the Force Majeure Event or Chance or Act of Nature. If the Operator incurs additional expenses to safeguard the Facility or Spare Parts of the Facility during or after the Force Majeure Event or Chance or Act of Nature, the Client will reimburse the Operator for all reasonable expenses.

The Client is not obliged to pay any Agreement Price to the Operator if the affected Party is the Operator and as a result the Operator (i) does not perform its obligations or (ii) fails to provide Services required under this Agreement.

Part I. Termination Events

 

1.

Event of Default and Termination

The following are justified termination events (“Event of Default”) in addition to those applicable laws:

 

(i)

The substantial and repeated failures that amounts to a substantial failure in the proper performance of relevant obligations assumed by the Operator.

 

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(ii)

In the event that the annual availability of the Power Block is lower than the eighty five (85) percent, due to a reason attributable only and exclusively to the act or omission of the Operator in the opinion of the Technical Advisor.

 

(iii)

In the event that the annual availability of the Parabolic Cylinder Collector Filed is lower than the ninety (90) percent, due to a reason attributable only and exclusively to the act or omission of the Operator in the opinion of the Technical Advisor.

 

(iv)

In the event that the amount of penalties imposed to Operator exceeds the limit of the ten (10) percent of the Agreement Price.

 

(v)

An unjustifiable delay of more than two (2) months in payment by Client of any amount due when it matures pursuant to this Agreement. In case of invoices disputed amounts, the Client has to identify the disputed ones and pay the other.

 

(vi)

In the event of the Force Majeure Event or Chance or Act of Nature occur and it lasts for a continuous period six (6) months or more.

Upon the occurrence of any Event of Default except by reason of (vi), or at any time thereafter while such Event of Default subsists, the non-defaulting Party may require the defaulting Party, by written notice, to cure such Event of Default within thirty (30) Business Days after the notification date. If such Event of Default is not cured in that period by the defaulting party , the non-defaulting Party may terminate this Agreement thirty (30) Business Days after giving an intention to terminate written notice to the defaulting Party.

In the aforementioned events except by reason of (vi), the non-breaching Party will be entitled to demand the strict compliance of the Agreement or, at its choice, to terminate the Agreement with interests and compensation for damages. The rights of the non-breaching party under this clause shall be without prejudice to any claim that the non-breaching party may have against the breaching party for damages.

If the Agreement is terminated by reason of (vi), the Client shall pay to the Operator the amounts for the Services performed up to the date of commence of Force Majoure Event plus those safeguard costs according to Part H Clause 8 of this Agreement, less those already paid to the Operator.

If the Operator terminates this Agreement by reason of (v), the Client shall pay the amounts for the Services performed up to the date of the termination less those already paid to the Operator. For clarification, in respect of the Floor Price, it shall be settled on a pro-rata basis.

In witness whereof, parties sign in two (2) counterparts this Agreement in the place and the date stated above.

 

		By Client.		By Abengoa Solar España S.A.
		Mr. Eduard Soler Babot		Mr. Pedro José Robles Sánchez

 

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Appendix I: Basic Maintenance Program

to

Operation and Maintenance Agreement

Between

Abengoa Solar España, S.A.

and

Solaben Electricidad Dos, S.A.

 

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Table of contents

 

0. Object			33
1. Introduction			33
1.1. Preventive Maintenance			33
1.2. Corrective Maintenance			34
2. Collector Field Maintenance			35
2.1. Mirror Maintenance			35
2.2. Control System Maintenance			35
2.3. Maintenance of the Drive Systems			36
2.4. Structure Maintenance			36
2.5. Maintenance of Absorbent Tubes			36
2.6. Auxiliary Elements Maintenance			36
3 Oil System Maintenance (HTF)			37
3.1 General			37
3.2 Maintenance of the Steam Generator			37
3.3 Maintenance of the Auxiliary Boiler			37
3.4 Maintenance of the Rest of Systems			37
3.5 Thermal Oil Maintenance			37
4. Maintenance of Infrastructures			38
4.1 Maintenance of Ways			38
4.2 Maintenance of Facilities			38
5. Maintenance of the Steam Turbine and Generator			39
5.1 General			39
5.2 Inspection			39
5.3 Partial Revision			40
5.4 Full revision			40
5.5 Full revision with Steam Turbine Disassembling			41
6. Maintenance of the Substation and Power Center			42
6.1. Transformers			42
6.2 Electrical Protections and Switchgear			42
6.3 Control boxes and panels			42
6.4 Electrical circuits			43
6.5 General Maintenance for Internal Electrical Installations			43
6.6 General Maintenance for external electrical installations			44
6.7 Ground Connection Installations			45
7. Maintenance of the High Voltage Electrical Line			46
7.1 Conductors			46
7.2 Ground cables			46
7.3 Fittings			46
7.4 Insulators			46
7.5 Supports and foundation			46
7.6 Connections of ground supports and fittings			47
7.7 Security Distances			47

 

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0. Object

The object of this document is giving an overview of the maintenance program of the main components of the Solar Thermal Power Plant of parabolic trough technology Solaben 2.

1. Introduction

The overall operation and maintenance strategy of the installation must be the maximization of profits, through an increase of production and useful life of all the elements composing the plant, as well as its appropriate operation. For that purpose it is necessary an appropriate operation and maintenance plan which guarantee a right equipment operation.

The availability of a solar plant may reach very high values through an appropriate O&M plan, which includes the long term maintenance agreement with Siemens, since planned stoppages, equipments replacement, cleaning of collectors and other necessary actions may be carried out in moments with no radiation (at night) or non-operating days (cloudy). The availability of the plant only shall be reduced due to unforeseen stoppages (breakdowns...) or due to any other badly preserved element (broken mirror, tube with vacuum loss...).

Those operations involving a reduction of the electric production, which may be foreseen, should be planned during out of service hours of the plant, in such a way that this does not provoke reductions of its availability and has no economic impact.

In case of breakdowns, their repair shall be carried out when the economic impact is lower, if it cannot be delayed without a production stoppage, the actions will be carried out when the plant is not operating. If a (total or partial) stoppage is necessary in the production, actions shall be carried out as faster as possible.

The Solar Plant Solaben 2 is composed by 360 parabolic troughs, 12,960 vacuum tubes, 120,960 mirror facets, 360 hydraulic drive systems... For an appropriate control of this huge quantity of elements will be necessary the implementation of a custom software that provides to the O&M operators the facility to develop reports, the operation monitoring, the planning of the equipment replacement and registry of revisions on a data base permitting a technical-economic optimization of the O&M operations to be performed in order to maximize production.

There are two actuation steps in order to include all necessary operations during the useful life of the Plant to guarantee the operation, increase the production and extend its duration:

 

♉	Preventive Maintenance

♉	Corrective Maintenance

1.1. Preventive Maintenance

Operations of visual inspection, check of actions, field adequacy and others, which applied to installation must permit to keep under acceptable limits the operating conditions, benefits, protection and durability of the Plant.

In order to make easier and carry out these operations it is foreseen the implementation of custom software which permits the registry of incidents, planning of replacements, operation monitoring.

 

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In order to register the condition of the solar field may be necessary the use of PDA’s with direct communication with the main O&M software permitting the visual inspection operators to inform about the state of the field at the moment of the inspection.

All checks that may involve a reduction of the energetic gain should be planned during non-operating hours (at night or non-operating days).

1.2. Corrective Maintenance

That maintenance covers all necessary replacement operations to make sure that the system works properly during its useful life, even the necessary analysis of works and replacements for the installation proper operation.

The corrective maintenance operations which may be planned, as well as the equipments replacement will be planned to be performed when the loss of energetic generation is lower (when there is no operation).

The maintenance will be carried out by technical qualified staff in charge of the operator.

 

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2. Solar Field Maintenance

Due to the number of collectors (360) located at the plant, it will be followed an exhaustive maintenance program which will entail regular revisions. Each collector will have a maintenance data sheet, where the actions to be performed will be noted down by the maintenance staff in order to detect possible abnormalities existing in all its components, to correct, if possible, these abnormalities or to replace the badly preserved equipment. For this purpose it will be available an appropriate warehouse of spare parts. The goal of the maintenance program is to keep the solar field availability at 99%.

2.1. Mirror Maintenance

The most important operation of the mirror maintenance will be their cleaning, since the dirt placed on the means a loss of the mirror reflectivity and, as a consequence, a reduction of the generated thermal and electric energy.

The cleaning will be performed with osmotized water, without additives or detergents, in order to avoid remains of salts located on mirrors. The periodicity of these cleaning operations will vary depending on the season, being more frequent on summer (production is higher and the weather is drier and windier) and more sporadic in winter, due to a higher amount of rains and a lower production rate during said season. This periodicity will be enough to make the average reflectivity of the field mirrors reach a value more than 92% during all seasons.

In case of mirror breakage, a warehouse with enough spare parts will be available in order to replace them without delays due to the supply. Around 480 replacements/year are foreseen.

Both cleaning and replacement operations will be carried out during non-operating hours of the Plant.

In order to check the annual reflectivity of the solar field, the Client will prepare a reflectivity sampling protocol stating the periodicity of the data collection as well as the amount and location of the samples to be measured. Besides, reflectivity checks will be carried out before and after the cleaning process in order to analyze its yield.

2.2. Control System Maintenance

With respect to the control system maintenance, this will consist of visual inspections and operating inspections where the operation of the limit switches, encoders, contactors, PLC battery, speed variators and all the collector field instrumentation (control valves, thermocouples...).

In any case recommendations and instructions established by the equipment manufacturer will be followed.

The necessary information systems will be available, in such a way that the DCS be able to save the data which permit a proper supervision of the solar field condition, with the aim of enabling the calculation of its availability in terms herein described. Among the entry values to the DCS must be the following ones:

 

–	Radiation received in the location. There are measurements collected by the set of meteorological stations distributed throughout the solar plant.

 

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–	Parabolic Troughs Status. The DCS will receive the necessary information to supervise the collectors operation, mainly the information related to the Sun tracking and variables affecting the calculation of production.

2.3. Maintenance of the Drive Systems

The maintenance of the drive systems will basically consist of carrying out visual inspections looking for lubricating grease loss, replacing it, if necessary, and the tune-up or replacement of those systems that do not work properly. In order to guarantee the security of operation, semi-annually all systems will be greased and all their oil levels checked. In any case recommendations and instructions established by the equipment manufacturer will be followed.

2.4. Structure Maintenance

The maintenance of the collector structure will be mainly carried out by visual inspection, looking for marks, corrosions, condition of the protective paint, absence of water deposits, the control system and the measures obtained, etc. which allow the Operator to identify losses in the Solar Field. The Operator will adjust the structures and mirrors to correct loosen so to maintain the original concentration factor.

2.5. Maintenance of Heat Collector Elements

The maintenance of heat collector elements includes a visual inspection in order to detect a possible vacuum loss, the reflex protection treatment of mirrors, the replacement of badly preserved (broken or without vacuum) tubes and their cleaning to keep high the transmissivity values in tubes.

Replacement of tubes involves a great amount of labour services, since it is necessary a loop emptying in order to prevent oil losses. Therefore these replacements must be preferably planned for non-production hours. Nevertheless, if the replacement of the tube is necessary because of an important leak, the repair must be addressed as soon as possible in order to avoid oil losses and also soil contamination

The amount of spare parts in the warehouse will be enough to replace them without delays due to the supply. Around 130 replacements/year are foreseen.

2.6. Auxiliary Elements Maintenance

Apart from the aforementioned elements on field there is another type of equipments that must be kept in good working condition. Among them we can enumerate the insulation of the pipe system, the relief valves, loop isolation valves, cables and other elements of the solar field.

 

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3. Oil System Maintenance (HTF)

3.1 General

The oil system consists of all the elements comprising the system of pipes, vessels, HTF auxiliary heater, etc.

The oil system will be submitted to regular (weekly and monthly) inspections and annual maintenances following the particular manufacturer recommendations of each equipment, as well as the recommendations of the system designer.

In all cases when damages or abnormalities are detected, the repair or replacement of all affected elements shall be carried out, following the same procedures and tests as during the initial assembly.

All predictable replacement or repair operations will be planned and carried out when the plant is not operating.

3.2 Maintenance of the Steam Generator

The steam generator will be submitted to visual inspection and cleaning and benefit inspections pursuant to the recommendations of this equipment’s manufacturer, in such a way that the performance values stay guaranteed. Maintenance will include the equipment thermal insulation.

3.3 Maintenance of the HTF Auxiliary Heater

The auxiliary heater will be submitted to operations of visual inspection and cleaning and benefit inspections pursuant to the recommendations of this equipment’s manufacturer, in such a way that its performance and foreseen durability stay guaranteed. Maintenance will include the equipment thermal insulation.

The boiler maintenance, as well as the rest of equipments, will be carried out during non-operation hours of the plant. Besides, in order to plan the actions, it shall be taken into account that the HTF heater must maintain the oil temperature at all times higher than a certain value so it may work during non-insolation hours.

3.4 Maintenance of the Rest of Systems

All equipments of the HTF system must follow an appropriate O&M plan which guarantees their proper operation and durability. All the necessary actions will be indicated by the manufacturer of each equipment.

These operations must include visual inspection, search of corrosions, paint condition, as well as regular cleaning revisions and functionality and benefit tests.

The rest of systems include expansion vessels, overflow, oil regeneration, N2 system, oil recirculation pumps, valves, instrumentation and all auxiliary elements of the system.

3.5 Thermal Oil Maintenance

The thermal oil must follow a thorough inspection in order to maintain its thermal properties. For that purpose the plant includes an oil regeneration system designed to this effect. The O&M program must include the necessary inspection actions to guarantee the proper operation of this system, as well as a regular analysis of oil properties and the fluid replacement necessary for an appropriate plant operation. The operations to be carried out to the oil must be those specified by the fluid supplier.

 

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4. Maintenance of Infrastructures

The maintenance of the Solaben 2 plant must also include the adequacy of infrastructures of the plant.

4.1 Maintenance of Ways

The access ways to the plant and ways within the site area shall be properly repaired for an appropriate installation operation. Actions must include operation of weed elimination (using herbicides) to reduce the fire risk. On the other hand, it will be necessary as closely as practicable to reduce the transitory dust in ways without surfacing. For them it will be necessary the use of acrylic copolymer type products which compress the ground environmentally friendly and with competitive price.

4.2 Maintenance of Facilities

Solaben 2 Plant has a surface higher to 100 Ha. The maintenance of the plant also includes an adequacy of all infrastructures for a proper operation and assuring the durability of facilities, such as parking, buildings, water connections, gas pipelines, lighting, fences…

 

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5. Maintenance of the Steam Turbine and Generator

5.1 General

Modern surveillance procedures of equipments are detailed below, as well as regular inspections and partial and full special revisions based on the long term maintenance agreement with Siemens, with the aim of reaching the highest availability and power with the same investment.

The maintenance keeps the standard conditions of components, while full revision takes those components back to these standard conditions.

Some of these actions are susceptible to planning, especially those stoppages with several days of duration, therefore to minimize the economic expense of them and to keep in high values the availability of the plant they will be planned during winter periods with low production or lack of production.

Components are submitted to wears and breakages by physical and/or chemical reactions, these wears and breakages may occur due to normal wears, aging, breakages due to corrosions or unexpected breakages.

Assuming that there are no abnormal parameters during the turbine operation and during controls, which will be carried out regularly following operation instructions, the following inspections and revisions will be performed:

 

•

An inspection after one year operation and between each partial and full revision.

 

•

A partial revision [after earlier of the maximum operating hours of 25,000 or 700 start-ups].

 

•

A full revision [after earlier of the maximum operating hours of 50,000 or 1,400 start-ups].

 

•

A full revision [after earlier of the maximum operating hours of 100,000 or 2,800 start-ups].

Regardless of the equivalent amount of operation hours, inspections and revisions may be carried out before reaching the maximum time foreseen for them (3 years for partial revision and 6 for full revision), as necessary, in order to guarantee the operating reliability in such a way that may be detected and repaired factors that do not depend on the operation time of the turbine like corrosion due to stoppages, alignment changes due to foundation deposition, etc.

5.2 Inspection (during 2-3 days)

Inspection, after one year operation, of:

 

•

The operation of all components with respect to

 

–

Follow-up

 

–

Security

 

–	Protection

will be checked and, if necessary, adjusted.

 

•

It shall be carried out the verifying/inspection actions described in the operation instructions.

 

•

During the turbine operation will be carried out the following checks:

 

–	Measurement of the steam consumption.

 

–	Determination of the internal performance.

 

–	Comparison of pressures with previous values, features at the different load points.

 

–	Comparison of housing temperature.

 

–	Vibration measurement.

 

–	Pressures and temperatures of the bearing oil.

 

–	Leaks of oil, steam and cooling water.

 

•

Checks during the stoppage and cooling of the turbine:

 

–	Stoppage time operating from normal speed to turning gear speed and from said speed to stoppage.

 

–	Real consumption in turning gear conditions.

 

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–	Noises in axis and glands.

All values must be compared to the reference ones (initial measurement).

5.3 Partial Revision (during 3-5 days)

During partial revision ([after the earlier of the maximum operating hours of 25,000 or 700 start-ups[) the tasks to be carried out will be the following ones:

In turbine:

 

•

Check of bearings including: check of external diameters (bearing and gland plays, rotor axial displacement).

 

•

Expiry date check.

 

•

Disassembly of the device of emergency disconnection, of control and non-return valves, check of valve seats and surface guides, besides closure springs.

 

•

Check of the coupling and alignment between the turbine and the conductive machine.

 

•

Check of control and protection equipments, with special attention to those components susceptible to contamination and wear.

 

•

Boroscope test (if possible).

 

•

Check of the turbine exhaust section through the manhole (if possible).

 

•

Check of the seal steam and drainage system.

In generator:

 

•

Clean and check the air Cooling System.

 

•

Check the driver dynamo.

 

•

Check the seal ring of bearing oil.

 

•

Check stator and rotor of the generator (electric checks).

5.4 Full revision (approximate duration of 10 days)

During the full revision ([after the earlier of the maximum operating hours of 50,000 or 1,400 start-ups]) the tasks to be carried out will be the following ones:

 

•

Check of all components after their disassembly, specially joints and sliding surfaces, looking for damages, wears, dirt, scales, possible deformations, etc.

 

•

Check of valves, nozzles and blades looking for:

 

–	Damages provoked by foreign bodies.

 

–

Wears.

 

–	Friction marks.

 

–	Erosion (especially in the last rows of blades).

 

–	Scales and deposits.

 

•

Detection of cracks in:

 

–	Steam filter.

 

–

Valves.

 

–

Housings.

 

–	Rotor and guide blades.

 

–

Bearings.

 

–	Couplings.

 

–	Internal steam lines.

 

•

Check of the rotor trim.

 

•

Check of alignment and internal plays.

 

•

Check of glands and oil retaining neck looking for frictions and deformations.

 

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•

Check of threaded bolts looking for cracks and permanent expansions comparing them to the original lengths.

 

•

Check of oil pumps, coolers of oil, filters and all hydraulic components looking for wears, slots, strains, replacing all diaphragms, seals, parts susceptible to wears, etc.

 

•

Check of stress and torque on external pipes.

In generator:

 

•

Clean and check the air Cooling System.

 

•

Check the driver dynamo.

 

•

Check the seal ring of bearing oil.

 

•

Check stator and rotor of the generator (electric checks).

5.5 Full revision with Steam Turbine disassembling

Full revision [after the earlier of the maximum operating hours of 100,000 or 2,800 start-ups], paying special attention to components with hot steam. This revision will consist of:

 

–	Check of breakage, ultrasounds and hardness.

 

–	Wall thickness measurement.

 

–	Sampling of grain structure in areas strongly submitted to efforts.

 

–	Mathematical calculation of the useful life based on real operation data and wall thickness measurements.

The calculation of useful life may have any of the following results:

 

–	The continuous operation without changes.

 

–	Reduction of time slots between checks.

 

–	More careful operation, reducing pressure and/or temperature and less load changes.

 

–	Replacement or rebuild of individual components.

 

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6. Maintenance of the Substation and Power Center

It will be visually checked the regulatory conditions and security and preservation condition of all elements composing the Substation and necessary maintenance operations will be carried out for its appropriate operation.

In order to carry out measurements, it will be necessary those appropriate means pursuant to what is described in the pertinent section.

6.1. Transformers.

 

•

In general they must be in good preservation condition, without oxidations or corrosions in the oil drum and tank, deformations in cooling blades.

 

•

It will be checked that during its normal operation there is no abnormal vibrations or noises, excess temperatures, relevant leaks of coolant and oil level under the minimum at 20ºC, or very higher.

 

•

If the transformer has wheels, it will be checked that they are blocked in order to avoid its movement. The anchor must be fixed to the support or rail by threaded or welded parts, or wheels must be turned.

 

•

Preservation status of main and secondary insulators, without having cracks, breakages or excess dirt. The correct fixation to the flap will be checked.

 

•

The plate will be properly fixed to the transformer drum and, if possible, visible from the cell outside since all its technical data must be readable.

 

•

The external insulation of power cables, control and signalization must not show aging, relevant tears, damages or provoke mechanic strains in insulators and other elements.

 

•

Oil analysis will be carried out by authorized laboratories and its cleaning and replacement will be performed as necessary.

6.2 Electrical Protections and Switchgear

The following checks will be carried out:

 

•

Switches and circuit breakers.- Preservation status, position indicator <<ON>> and <<OFF>>, oil level and anchor.

 

•

Isolators.- Preservation status, insulators, blades, control, interlocks and anchor, as well as their characteristics and installation.

 

•

Fuses and relays.- Preservation status, anchors, characteristics and installation.

 

•

Protection against surges (auto-valve lightning arresters), if applicable, verify their characteristics, preservation condition, installation and grounding.

 

•

In case that they may be visible from the cell outside, it will be checked the characteristics of measurement and protection transformers and, in particular, the general preservation and cleaning status, the insulation and conduit condition of cables, ground connected to metallic housings and secondary circuits and the existence of a device permitting the replacement or verification of transformers for energy measurement (with invoicing).

6.3 Control boxes and panels

It will be visually checked the regulatory conditions of those boxes used by the control of high voltage installations, with those exceptions established by the pertinent instruction.

 

•

Identification of all devices of the box, both in the front and rear side, (removable) elements, as well as (terminal) strips, connectors, wires and cables.

 

•

Internal wiring by flexible insulated cables or printed circuits. Cables will have appropriate metallic terminals.

 

•

Appropriate connectors with regulatory characteristics.

 

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•

Appropriate mechanic stiffness of structure and box and panel boards. Absence of deformations, oxidations, corrosions and vibrations. The entrance of animals damaging for the installation and possible direct contacts with parts submitted to voltage.

 

•

Rear corridors will have a minimum width of 0.8 meters.

 

•

Both the front and rear side of control boxes and panels will be duly illuminated.

6.4 Electrical circuits

The check of bus bars and electrical conduits will be carried out inspecting visually the following points:

 

•

Separation between circuits and electrical conduits with high and low voltage, checking that there is the necessary insulation in order to prevent dangerous voltages.

 

•

Status of the electrical conductors and their connections, they must not have deformations, corrosions, elements with damages, lack of fixation, defective connections or heating signs. Also the appropriate identification of circuits and conductors will be verified.

 

•

Conduits will have to be made and located in such a way that they do not represent mechanic efforts which may damage the rest of the installation. So the fixation of conductors, trays and supports will be checked and there must not be deformations, corrosions or lack of stability.

 

•

It will be verified that conductors or conduits are not located on or covered by nonself- extinguishing fuel materials.

 

•

Manholes, trenches and galleries must be clean and without humidity. It will be verified the placement of covers and closures in order to prevent possible accidents in corridors or transitory areas.

 

•

In conduits with isolated conductors it will be checked that insulating wraps don’t have tears, breakages, degradation or defects limiting their security and not admitting excess curvatures, lack of fixation or that they be directly lying on the ground.

 

•

Auxiliary cables of measurement, control, etc., will be kept separated from high voltage cables by partitions in the inside of ground metallic conduits or tubes.

 

•

For conduits with bare conductors, on supporting insulators, it will be checked that the diameter of the copper stems is not lower than 0.8 cm, or equivalent for other type of profiles and material.

 

•

In case of stiff conductors covered with insulating material, it will be checked the security distances against contacts, being considered as bare conductors.

 

•

Insulators and terminations will be properly fixed, without cracks or broken elements and they must be clean and without humidity.

 

•

The passage of conduits and conductors through 4 elements of the construction will be checked. It must maintain the established security and isolation conditions.

 

•

At last it will be checked the minimum distance between Phase-Ground and between air Phases, which will be of 27 cm.

6.5 General Maintenance for Internal Electrical Installations

The regulatory conditions of the internal installations will be checked carrying out the following checks:

 

•

General status of the premise or building which must be clean and without humidity.

 

•

Gateways.- Characteristics, accessibility, closure, anchor, corrosions, non-protected holes, impermissible deformations, etc.

 

•

Passages and accesses.- They must be free of obstacles, non-sliding flooring, condition and characteristics of scales, trapdoors and other access elements to premises and buildings.

Width and height free of corridors, check of distances to energized elements, absence of obstacles, etc.

 

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•

Absence inside the premises of conduits not involved in the Service, such as water, heating system, steam,...Check of the type of sewage, if applicable, in order to prevent water leaks inside the premise. If there is sewage the transformer cells or devices using oils or other flammable dielectric substance with a capacity superior to 50 liters, then separation partitions will be placed between them. It will be verified their existence, characteristics and condition.

 

•

It will be verified the existence, characteristics and condition of protection screens on cells containing switches with flammable dielectric oil, locally switchable.

 

•

Check of existing, natural or forced ventilation.- Operation and internal temperature without exceeding the 40%. Besides the characteristics of spaces for ventilation and vents will be checked.- Protection against contacts, water leaks and animals, etc.

Installation of insulators for the passage of air lines to the inside of the plant.- Fixation, characteristics, breakages, dirt, water leaks, etc., as well as the passage of conduits through building walls inside premises.

 

•

Signalization.- Signs of existence of high voltage installations in gateways, cells and other points where, due to the installation characteristics or its equipment, are required.

It will be checked the existence of these signs, fixation, readability and its correspondence to the homologated types. Installation diagram, at least unifilar and general service instructions.- Fixation, readability. They must be updated and contain all necessary data to carry out maneuvers with total security.

 

•

Fire protection system.- Characteristics, condition of functionality and preservation, of fire extinguishers and fixed extinguishing systems. In this case, there must be a detailed plan of the system and its operation instructions.

 

•

Existence and characteristics of oil collector devices.

 

•

Illumination and emergency lighting.- Existence, operation, effectiveness, etc.

 

•

Material storage inside the plant.- Absence of foreign stored materials, walkway obstruction, contact risk, etc.

 

•

First aid instructions and elements.- Plaque with first aid instructions located in a visible place and easily readable. If applicable, condition of the first aid material (emergency kit, trolley, fire blankets) and instructions of use. Elements and devices for maneuver.- It will be checked their existence and preservation condition. They must not have dirt, breakages or defects which reduce the security of people and things and they must meet with homologated types. If different installations belong to the same user and they are located inside a same premises or factory, these elements may be located for all Centers in an appropriate facility and properly identified. Besides there must be a sign with the location of said premise in each center.

 

•

Check of regulatory distances to elements submitted to voltage in maneuvering and inspection corridors, as well as prescriptions of protection zones against accidental contacts.

 

•

If there are prefabricated metallic units or insulators, their regulatory conditions as well as the switchgear, dirt absence, humidity, etc., insulation defects, breakages, cracks and corrosions, etc.

Interlocks, contacts, connections, etc. will be checked, as well as the ground connection and switchgear characteristic plate.

6.6 General Maintenance for external electrical installations

Visual checks listed below will be carried out:

 

•

Cleaning of plots of land where installations are located, related to scrublands, dust emanation (cobble bed or similar), etc.

 

•

Condition of fence. There must not be spaces permitting the access, corrosions, droppings, stability, height, proximity to energized elements, etc.

 

•

Likewise the condition of gateways will be checked. They must remain padlocked or similar.

 

•

Metallic elements and structures will not have corrosions, relevant oxidations or damages putting at risk its stability and security.

 

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•

It will be checked the existence of protections against the direct impact of lightings and surges provoked by them, as well as the preservation condition of the elements, stability, fixation, ground connection, etc.

 

•

If there are power centers inside the high voltage parks, the installation conditions of low voltage conduits coming out from said centers will be verified.

 

•

Check of regulatory distances to low voltage elements in service corridors and protection areas against accidental contacts inside and outside the installation premises.

 

•

With respect to the fire protection systems, it will be checked their existence and preservation condition, as well as location, proper identification, etc.

If there are transformer collecting oil trenches, it will be checked their realization, firewall and sealing, etc.

 

•

If applicable, it will be checked the installation and effectiveness of installation lighting and emergency lighting.

 

•

Elements and devices for maneuvers must be in perfect preservation condition and meet homologated types. Broken, cracked, dirty... elements will not be admitted. Placement of these elements must be perfectly identified. The material must be designed for utilization voltages of the installation and its characteristics shall be the appropriate ones.

 

•

Facilities to carry out first aids will be properly located in well visible places and readable.

If applicable, elements to carry out first aid operations must be in perfect use condition and their location must be identified.

 

•

In installations there must be an updated unifilar diagram and the utilization and maneuver guidelines.

Its readability and location in a visible place will be checked.

6.7 Ground Connection Installations

The following checks and inspections will be visually carried out:

 

•

Space between protection and service ground installations.

Impossibility of simultaneous contact between circuits or their parts, of protection and service ground installations. Condition of the ground installation. Appropriate cable fixation, absence of corrosions, deformations, lack of section (broken wires), damaged joint parts and connections, wrong lay-outs, lack of mechanical protection, defect in conductor isolations (in case of having an insulating cover), etc.

Ground points. Existence and installation, proper characteristics and preservation condition.

It will be checked that there is no interleaved switches or fuses in ground lines, except from the ground point to measure the grounding, regardless of the installation. It will be checked the ground interconnection of all metallic masses of the center which are not regularly energized, except from defect cases.

 

•

It will be checked the service ground connection of transformer neutrals which need it, directly or by impedances, the alternator neutral and other devices or equipments which need it, low voltage circuits of measurement transformers, limiters, unloaders, auto-valve and lightning arresters to eliminate surges or atmospheric impacts and ground bypass elements of ground isolators.

 

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7. Maintenance of the High Voltage Electrical Line

The inspection and maintenance of the High Voltage electrical line will be carried out by the visual check of all its accessible elements and parts and the maintenance operations necessary for its proper operation will be performed.

For the measurement of ground connection resistance of supports and the continuity of protection conductors, it will be necessary a tellurometer. Said resistance of ground connection diffusion must not exceed 20 ohms.

7.1 Conductors

The following points will be checked:

 

•

General condition of conductors and joint and connection parts. They must not have signs of oxidations, important deformations or breakages.

 

•

In conduits with isolated conductors, check of the external wrap condition, cable installation and fixation and lack of curvatures or dangerous deformations, joints and connections.

 

•

Check as closely as practicable that connection do not support the voltage exerted by conductors.

7.2 Ground cables

The following points will be checked:

 

•

Joints and connections by appropriate parts.

 

•

Check of the general condition: oxidations, important deformations, breakages, etc.

 

•

Connection of ground cable to each metallic support.

 

•

Joint of line fittings to the ground connection cable.

7.3 Fittings

The following checks will be carried out:

 

•

General condition with respect to deformations, breakages and corrosions. They must not have damages which put people or properties at risk.

 

•

The correct fixation will be checked.

 

•

It will be checked that there is no relevant slides in the conductor clamps.

7.4 Insulators The following points will be checked regularly:

 

•

Absence of corrosions, breakages, deformations, etc., in the metallic and insulating parts.

 

•

Proper fixation of insulators and chains.

 

•

Check of the upstanding of insulators and chains.

7.5 Supports and foundation

Check of the following points:

 

•

Check of the upstanding of supports, without admitting collapses that may put at risk the stability of the line.

 

•

Preservation Status. Deformations, corrosions, lack of material, etc.

 

•

Check of the existence of all screws or rivets, check of the non-existence of undone elements.

 

•

Check of crossheads, with the same criteria aforementioned.

 

•

Check of guys or neutrals.- Absence of corrosions or deformations, separation of active conductors, fixation, isolation, protection, etc.

 

•

Verification of supports numbering through all its length.

 

•

Check of risk indicators.- Placement, readability, etc.

 

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•

Inspection of each support foundation.- Preservation, absence of cracks, spaces, ground anchor, stability, etc.

7.6 Connections of ground supports and fittings

The following points will be visually checked:

 

•

Connection of ground supports, fittings and guys.- Joint pats, oxidations, relevant corrosions, torques, condition of the PE bus bar, etc.

 

•

Mechanic protection of the conductor.

 

•

Ground connection of housings and metallic parts of switches, isolators and other switching devices.

7.7 Security Distances

Distances of conductors to the ground, supports and between conductors will be checked:

 

•

Distance of conductors to the ground or unseaworthy water surface lower than 6 m.

 

•

Distance of conductors between them and between these and supports, not lower than regulatory values.

 

•

In crosspoints with lines, roads of minimum security distances.

 

Page 47 of 47

Exhibit 10.9

Operation and Maintenance Agreement

Between

Abengoa Solar España, S.A.

and

Solaben Electricidad Tres, S.A.

---

Table of contents:

 

Part A. General			4
Part B. Description of Services			10
Part C. Availability Guarantee			17
Part D. Other Operator’s Obligations			19
Part E. Duration			20
Part F. Price and Form of Payment			21
Part G. Client Duties			24
Part H. Common Terms			26
Part I. Termination Events			29

---

I

By and between

Mr. Eduard Solar Babot, as party of the first part, with DNI 52.461.763-M, for and on behalf of “Solaben Electricidad Tres, S.A.” (hereinafter referred to as the Client), company registered in the Trading Registry of Badajoz, volume 474, of the General Section of the Registry Book, folio 78, sheet BA-21,547, first entry, with CIF A91608687, and registered office in Mérida (Badajoz), Paseo de los Rosales nº 7, dully empowered by virtue of the resolutions of the Board of Directors dated on 16^th December 2010.

and

Mr. D. Pedro José Robles Sánchez, as party of the second part, for and on behalf of “Abengoa Solar España, S.A.” (hereinafter referred to as Operator), with registered office and legal address in Seville, Avda. de la Buhaira, nº 2, company registered in the Trading Registry of Seville, sheet SE-47.290, folio 207, Company Volume 3.411 and with C.I.F. number A-91/185314, by virtue of deed dated 28 July 2008, made before Mr José Ruiz Granados, Notary of Seville, with notary record number 4265, which empowers him to sign this Agreement.

Hereinafter the term “Party” will mean the Client and Operator individually, and the term “Parties” will mean the Client and Operator, jointly.

The Parties do hereby acknowledge one another’s legal capacity for the signing of this Agreement, and for such purpose

II

Declare

 

(A)

That Client is going to acquire the Facility, for its operation for an indefinite term with the purpose of generating electrical energy, by entering into the EPC Contract,

 

(B)

That the Operator is a corporation duly organised and existing under the Spanish laws and that, among other activities, carries out the operation and maintenance of Facility,

 

(C)

That the EPC Contract includes Guaranteed Average Net Energy during the Guaranteed Energy Production Period. For the purpose of this guarantee, the operation and maintenance of the Facility will be carried out under the control and responsibility of the Operator,

 

(D)

That Client is desirous of contracting operation and maintenance of the Facility to Operator until twenty (20) years from the Practical Completion pursuant to Part E hereof,

 

(E)

That the Operator has expressed its willingness and ability to execute its scope of services to the satisfaction of the Client and

 

(F)

That the Operator has declared that it has enough technical capacity and the necessary human and material resources to implement the services and obligations on terms and conditions hereinafter set forth.

 

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Therefore, in consideration of the premises stated above and having the Parties reached a full agreement about the conditions of the service performance, they make this agreement as follows:

III

Covenants

Part A. General

1. Definitions

Acceptance Tests

means those construction ending tests that certifies the proper construction of the Facility which should occur prior to Practical Completion in the presence of the Technical Advisor, the Client or its representative and the Operator. It is one of the prerequisites for the Practical Completion.

Agreement Price

means the amount that should be paid by the Client to the Operator during each annual period as consideration for all services referred to in the Operation and Maintenance Agreement

Annual Referenced Net Production of the Facility

means 91,785 MWh.

Basic Maintenance Program

means an overview of the maintenance program of the main components of the Facility.

Breakdown

means an unexpected failure or malfunction of all or part of the Facility, regardless of the reasons which cause it.

Business Day

means any day of the week excluding Sundays and public holidays specified as such in the official calendar of Madrid or in the official calendar of Seville

Client

means Solaben Electricidad Tres S.A. as the party to the Operation and Maintenance Agreement between the Solaben Electricidad Tres, S.A. and Abengoa Solar España S.A.

EPC Contract

means a turnkey type construction contract executed between the between Solaben Electricidad Tres S.A. and Counter Parties for Solaben Tres dated December 16^th, 2010 for the design, procurement of equipment and materials and construction, commissioning and performance testing of the Facility (“EPC Contract for Solaben Tres”),

EPC Contractor

means “Abener Energía S.A.y Teyma; Gestión de Contratos de Construcción e Ingeniería S.A. Solaben 3, Unión Temporal de Empresas, Ley 18/1982” formed by Abener Energía S.A. and Teyma; Gestión de Contratos de Construcción e Ingeniería S.A.,. which, pursuant to the EPC Contract, performs the design and construction of the Facility.

 

Page 4 of 47

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Excess Production Programme or Excess Forecast

means the hourly estimates of net energy generation for the next day which is used to send bids to the Market.

Facility

means the 50 MW thermoelectric solar plant, located in the Site, and its own facilities necessary to connect to Service Infrastructures of third parties (collector substation “Mesa de la Copa”, water collection infrastructures, reservoirs and shared wastewater manhole).

Financial Institutions or Financing Entities

mean the financial institutions providing the Senior Loans under the Senior Loan Agreement.

Finance / Financing Agreement

means the Senior Loan Agreement.

Force Majeure Event or, Chance or Act of Nature

means any event that is reasonably outside of the control any Party or was unpredictable and the consequences thereof cannot be avoided through the exercise of due diligence by the Party in question. The definition of Force Majeure existing under Spanish law, pursuant to the provisions of Article 1105 of the Spanish Civil Code, shall apply.

Daily Market

means the main session of the Iberian electric market called “Mercado Diario” in Spanish and manage by OMEL (the Market Operator). Currently, this market closes the session at 10:00 (GMT +1:00) of the previous day.

General Consumer Price Index or CPI

means a measure estimating the average price of consumer goods and services purchased by households in Spain. This index is published in the Spanish National Statistics Institute, web page www.ine.es/en/welcome_en.htm and referred there as CPI.

General Operation Procedure

Means the general instructions handled by EPC Contractor to Client and from the latter to Operator, which describes how to operate the Facility safety, according to the Operation and Maintenance Manuals.

Guaranteed Average Net Energy

means the EPC Contractor’s guarantee of net energy to the Client under the Article 7.3. of the EPC Contract.

Guaranteed Energy Production Period

Means the three (3) years period for which the EPC Contractor guarantees net energy to the Client under the EPC Contract.

Infrastructure Lease Connection Agreement

Means the agreement that regulates the terms and conditions between the Client and Evacuación Valdecaballeros S.L., based on which the Client can make use of the Substation 220/400 kV called Mesa de la Copa and 400 kV interconnection line from the boundary point of the plants to the Valdeballeros substation.

 

Page 5 of 47

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Initial Basic Spares

Spare parts, consumables and any fungible materials according to the Initial Basic Spares List.

Initial Basic Spares List

List of Spare parts, consumables and any fungible materials that have been procured by Operator prior Practical Completion,

Intra-daily Market

means the six sessions of the Iberian electric market called “Mercado Intradiario” in Spanish and manage by OMEL (the Market Operator). In these sessions the market gets adjusted by unforeseen production that was not sold in the Daily Market, or in previous sessions. The session closure times, which the Client should bid, are currently:

 

Intraday 1:		17.45 hours (GMT +1:00)
Intraday 2:		21.45 hours (GMT +1:00)
Intraday 5:		08.45 hours (GMT +1:00)
Intraday 6:		12.45 hours (GMT +1:00)

Maintenance Plan

means the schedule or sequence of the maintenance operations made by the Operator and pursuant to the operation and maintenance manuals of the equipment and the basic maintenance program included in the Appendix I to the Operation and Maintenance Agreement.

Market

means the Spanish Market of Electrical Energy Generation governed, among others, by the operation rules of the market (Reglas de Funcionamiento del Mercado) approved by the Market Operator.

Market Operator

means Operador del Mercado Ibérico de Energía Polo Español, S.A. (OMEL).

Minimum Stock

means the minimum quantity of spares that shall be located inside the warehouse of the Facility according to Initial Basic Spares List.

Net Energy

means the gross electric energy generated by the Facility less self consumptions at the on-line functioning mode in kWh. The measurement equipment/s used will be located at the Mesa de la Copa substation.

OMEL

means OPERADOR DEL MERCADO IBÉRICO DE ENERGÍA - POLO ESPAÑOL, S.A. who currently regulates the Spanish electricity market.

Operator

means Abengoa Solar España S.A. in the capacity of operator of the Facility under the Operation and Maintenance Agreement entered into by it and Solaben Electricidad Tres S.A.

 

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Operation and Maintenance Agreement or Agreement

means the agreement for the operation and maintenance of the Facility executed between Abengoa Solar España S.A. and Solaben Electricidad Tres S.A, which governs the operation and maintenance of the Facility.

Operation and Maintenance Manual

means the collection of manuals from each equipment, handle by the manufacturer to the EPC Contractor to Client, and from the latter to the Operator, which describes how to use those equipments.

Operation and Maintenance Procedures

means the procedures established by the Operator that, according to the Operation and Maintenance Manual and the General Operation Procedure, handled by the EPC Contractor to Client and from the latter to Operator, and Basic Maintenance Program, handled by Operator, which describes the procedures to operate and maintain the Facility.

Parabolic Cylinder Collector Field

means the equipment and installations, located in the solar field, used for the collection and transfer of solar energy from the outlet flange to the inlet flange for the oil piping of the steam generator via the parabolic trough collectors, including the oil circulation system among others.

Power Block

means the equipment and installations used in the steam and water cycle, and the electric generator, including the turbine, the steam generator, and cooling system among others.

Practical Completion

means the date determined pursuant to the provisions of section 6.3 of the EPC Contract and established by the subscription of the Practical Completion Certificate.

RAIPRE

means Registry of Special Regime Energy Producer (Registro de Instalaciones de Producción de Energía Eléctrica acogidas al Régimen Especial)

Representative

means the authorised entities to act directly in the electric power market as sellers of electricity, in the name of energy producers.

Risk of Loss

means loss of or damage to property due to any reasons whatsoever.

SCADA

means the Supervisory Control And Data Acquisition system which shall be installed in the Facility.

 

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Senior Loan

means the loan granted pursuant to the Senior Loan Agreement

Senior Loan Agreement

means senior loan agreement between Owner in the capacity of borrower and Financial Institutions in the capacity of lender for the Project to finance the construction, commissioning, and operation of the Facility

Service Infrastructures

means every infrastructure of other entities needed for the proper use of the Facility, consisting of, among others, the collector substation “Mesa de la Copa”, property of Evacuación Valdecaballeros, S.L.,; water collection infrastructures, reservoirs and shared wastewater manhole, property of Solaben Electricidad Uno, S.A., Solaben Electricidad Dos, S.A., Solaben Electricidad Tres, S.A., and Solaben Electricidad Seis, S.A.

Services

means every service included in Operator’s scope of services according to clause B.1 of the Operation and Maintenance Agreement

Site

means the parcel of land denominated “La Copa” and “El Rincón”, which is comprised of the registral plots numbered 10.687, 10.790 and 10.787, respectively, located at Logrosán (Extremadura), on which the Facility shall be constructed.

Solar Plant

means a 50MW thermoelectric solar plant to be located in Logrosán (“Solaben Tres”), which will be designed and constructed under the EPC Contract for Solaben Tres

Spares or Spare Parts

means spare parts, consumables and any fungible materials that will be procured by Operator under the Operation and Maintenance Agreement.

Subcontractor

means a supplier or subcontractor of any tier, which may deal with and contract by the Operator, for the partial performance of the Services referred to in the Operation and Maintenance Agreement, as the case may be.

System Operator

means Red Eléctrica de España, S.A (“REE”).

Technical Advisor

means an independent technical advisor employed by the Financial Institutions for supervision of the performance of the Works including, among others, review and approval of design, construction, testing, commissioning and Acceptance Tests.

Theoretical Model

means the model developed by the EPC Contractor for calculation of theoretical energy values in relation to Part C.

 

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Unless expressly provided otherwise or where the context otherwise requires, the terms with capitalized initials have the meanings ascribed to them above, which forms an integral part of this Agreement.

 

1.

In this Agreement unless the context requires another meaning, a reference:

 

(a)

To any document (including this Agreement) is to that document as varied, amended, novated, ratified or replaced from time to time.

 

(b)

To Client or Operator includes its successors and permitted assigns, including any person taking by way of novation and, in the case of a trustee, includes any substituted or additional trustee.

 

(c)

To the singular possibly includes the plural and vice versa, and to a gender possibly includes all genders.

 

(d)

To a Clause is to a clause of this Agreement, to Appendix is to an appendix to this Agreement.

 

2.

The headings of paragraphs in this Agreement are for descriptive purposes only and shall not control, alter, or otherwise affect the meaning, scope or intent of any provisions of this Agreement.

 

3.

The provisions (A) to (F) of the preamble shall form an integral part of this Agreement.

The Appendices shown below shall form an integral part of this Agreement.

Appendix I: Basic Maintenance Program

If there is conflict between the body of the Agreement and the Appendices, the body of the Agreement shall prevail.

Wherever in this Agreement a provision is made for the giving of notice, consent or approval by any person, such notice, consent or approval shall be in writing and the word “notify” shall be construed accordingly.

2. Subject of the Agreement

 

1.

The Operator shall perform, provide and supply all works, services, equipment and materials set forth in this Agreement and perform all other obligations required by the terms and conditions of the Agreement and shall be responsible for doing and providing all things of whatsoever nature or description which have not been specifically included in its scope of services but could reasonably be inferred from current standard applications of the market, except for those things which the Client expressly undertakes in this Agreement to do or provide.

 

2.

Upon the Practical Completion, the control of the Facility passes from the EPC Contractor to the Client and at the same time passes from the Client to the Operator. All installations, equipments, works and means (except the Spares, which are provided by the Operator) are property of the Client except from part of the land where the Client has a right to use during 30 years and public access roads.

 

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Part B. Description of Services

1. Scope of Services

With respect to the Facility, the following, but not limited to, are Operator’s scope of services which are more specifically described in the subsequent clauses (the “Services”). An overview of the maintenance program of the main components of the Facility is also described in Appendix I – Basic Maintenance Program.

The Operator has provided to the Client, who knows and accept it, the Basic Maintenance Program, which is included in the Appendix I of the Operation and Maintenance Agreement.

 

-

Initial Basic Spares Control Services

 

-

Spares Control Services

 

-

Services prior to Practical Completion

 

-

Routine operation and maintenance

 

-

Customer report services

 

-

Production Forecast Remittance Services to the Client

 

-

Preventive Maintenance, consisting of Preventive or Planned Maintenance

 

-

Corrective Maintenance, consisting of Corrective or Non-Planned Maintenance

 

-

General Services of the Facility

 

-

DCS Supervision and Control

 

-

Management of wastes

The Services will be carried out by the Work Teams, defined after the Clauses used for the description of each of the above tasks. All the costs and expenses for the scope of the Services shall be borne by Operator, unless otherwise stipulated in this Agreement.

2. Initial Basic Spares Control Services

Operator shall elaborate an Initial Basic Spare list recommended for realization of the Services described in this Agreement. This list will be approved by the Client with the verification of the Technical Advisor of the Financing Entities and will be agreed one year prior to the scheduled Practical Completion of the Plant. Operator has the responsibility of purchasing and storing those spares, included in the Initial Basic Spare list, in the Facility prior to Practical Completion.

Six months prior to Practical Completion and without cost to the Operator, the Client shall allow the Operator to access the Site, which shall have designated a proper area for the temporary storage of the total spares mentioned in the Initial Basic Spare list.

Upon the Practical Completion, the Operator shall have stored all the Initial Basic Spares in the warehouse provided by the Client two months before Practical Completion. It is the Client responsibility to have included in the scope of the EPC Contractor the erection of a warehouse for the Spares that fulfils the specifications for the proper storage, including, among others, the dimensions, the temperature and the humidity. For the avoidance of doubt, the warehouse will be provided by Client to Operator without any cost for the latter.

The management and purchase of the spares mentioned in the Initial Basic Spares List is under the scope of the Operator.

As to the Initial Basic Spares, the Operator shall be responsible for their quality and quantity, which, for the avoidance of doubt, shall fulfil the Initial Basic Spares List specifications.

 

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These Initial Basic Spares shall fulfil, at least, the quality specifications that the EPC Contractor installs in the Facility according to the Annex A of the EPC Contract which shall be delivered by the Client to the Operator for understanding. The Operator should acknowledge receipt and understanding.

3. Spares Control Services

Without prejudice to the clause above, Operator will be in charge of preparing the specifications, managing and purchasing all Spares necessary for the realization of the Services under the Agreement.

It shall be the responsibility of the Operator to order all required materials and spare parts, manage the relationships with the vendors thereof, manage administrative matters, make payment for materials, manage all matters with shippers, make claims for damages and losses during transportation, and pay for shipping.

The Operator shall be in charge of organizing the transportation of all materials supplied, including loading and off-loading. The Operator shall receive the materials and shall confirm whether they have been damaged during transportation and shall arrange facilities for the storage and protection thereof. The Operator shall maintain all files necessary to demonstrate that the materials have been received at the Site and shall make such files available to the Client upon request.

Within the warehouse designated for the Spares it shall always be at least the Minimum Stock described in Initial Basic Spares List, in order to assure the total availability of the Spares during the Duration of the Agreement. As to the Spares, the Operator shall be responsible for their quality and quantity.

The Operator shall purchase, stock, control, deliver and use the Spares without extra cost.

4. Services prior to Practical Completion

Six months before Practical Completion, the Operator shall have the option to start receiving on-site training from the EPC Contractor. The training relates to the following at the theoretical class room training and familiarization of operation and maintenance by attending at the Site while commissioning is in progress.

 

(a)

Configuration of installed system.

 

(b)

Operations.

 

(c)

Maintenance.

 

(d)

Storage of the Initial Basic Spares.

The Client shall, upon receipt, send to the Operator Operation and Maintenance Manual and the General Operation Procedure drawn up by the EPC Contractor after receipt them from the EPC Contractor, at least two months before the expected Practical Completion. The Operator shall inspect and familiarize itself with these documents and send its written comments and recommendations before Practical Completion. The comments and recommendations made by the Operator and agreed by the Client shall be incorporated into Operation & Maintenance Procedures and the Maintenance Plan which are prepared and finalized by Operator.

5. Routine Operation and Maintenance

Routine operation and maintenance contemplated in this Clause means the follow-up and on-going surveillance of the Facility carried out by the Operator, which will be defined by the Operator in the operation and maintenance procedure pursuant to the Operation and Maintenance Manuals.

 

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The Operator shall nominate:

 

-

Plant manager.

 

-

Conventional and solar field operators.

 

-

Mechanic, electric and instrumentation maintainers.

 

-

Conventional and solar field assistants.

The number of these personnel and qualification, right level of experience or skills to make each of the works, will be established by the Operator under his entire liability, and it may vary depending on the experience accumulated during the operation and means to carry it out provided that the quality of the performance shall not be diminished.

Routine Operation and Maintenance services include, among others:

 

-

Maintenance of the plot of land occupied by the Facility and accesses, including grubbing weeds and maintenance of the plot, ditches, drainages and storm drain facility.

 

-

Daily inspection and repair including provision of consumables.

 

-

Measurement of emission, noise, effluent water quality, etc, required by regulations.

 

-

Cleaning of the Facility.

 

-

Management of the water supply and waste management.

 

-

Control of the Spare Parts.

 

-

HSE (Health, Safety and Environment) activities.

 

-

Analysis of oil, water, natural gas.

 

-

Facility entrance security service (protection against intruders, alarms, break-ins, etc.) during 365 days a year. For the avoidance of doubt, the contract with the external 24/7 security service company will be within the scope of the Client.

 

-

Prepare specifications, manage and buy all Operational Spares necessary for the proper operation and maintenance of the Facility.

The Operator will provide all necessary tools for the proper operation and maintenance of equipment and systems in a reliable and safe way unless otherwise provided by the Client and established in this Agreement.

6. Customer Report Services

The Operator shall keep the Client in a timely and regular manner informed about the actions and in-actions, in particular:

 

•

Monthly, before the tenth (10th) Business Days of the month following invoicing:

 

i)

The Operator informs the Client of:

 

•

The liquefied natural gas stock in the tank, expressed at kWh.

 

•

Power production (gross, net), off-line use of power.

 

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•

Plant efficiency.

 

•

Availability.HSE (Health, Safety and Environment)

 

•

In case the liquefied natural gas is channelled, a control of the consumption will be measured in the regulation and measurement station.

 

ii)

The Operator delivers to the Client:

 

•

The daily production report of the Facility.

 

•

Hourly-daily breakdown production of the last invoice.

 

•

Calculation of the hourly-daily reactive power in excel format.

 

•

Calculation of the power acquired in excel format.

 

•

Quarterly, the Operator delivers to the Client:

 

•

The cumulated energy production.

 

•

Natural gas consumption.

 

•

Relevant non corrective maintenance actions done.

 

•

Relevant corrective maintenance actions done.

 

•

HSE Record.

 

•

Production adjustment and forecasting.

 

•

Semesterly the Operator informs the Client of the HTF (Heat Transfer Fluid, the oil) quality.

 

•

Long Term Maintenance Plan.

The Operator shall submit to Client, for information purpose only, a five (5) year maintenance plan one month before the Practical Completion and every five (5) anniversary thereafter.

 

•

Yearly Maintenance Plan.

The Operator shall submit to Client, for information purpose only, a Yearly Maintenance Plan (from January 1st to December 31st) on or before 30 September of every year. On the first year of operation, a first version of the Yearly Maintenance Plan should be submitted one month before Practical Completion, provided that the Customer has delivered all the documentation required for implementation. The Operator shall keep current standard applications of the market for operation and maintenance, obligations under this Agreement and comply with applicable laws and regulations.

7. Production Forecast Remittance Services to the Client

The Operator will forecast the excess electrical power of the Facility that could be issued as bids to OMEL, pursuant to a strategy formulated by the Client and communicated to the Operator (“Excess Production Programme” or “Excess Forecast”).

 

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The Client will be responsible for delivering all selling bids to OMEL, in accordance with the forecasts made by the Operator, following the established rules and regulations for participation in the Market. The Client will be able to deliver the selling bids by itself or through a Representative. The total economic consequences derived from such bids will be to the account of the Client. Thus the Operator shall not be liable for any damage, loss or liability arising from the participation in the Market by the Facility, except where such damage, loss or liability is caused by the untimely communication to the Client of the Excess Forecast for reasons exclusively attributable to the Operator, or to negligence or wilful misconduct of the Operator in preparing the Excess Forecast.

In order to allow the Client to deliver its bid, the Operator shall report its Excess Forecast at least one hour before the closure of the Daily or Intra-daily Market session applicable at each moment. Similarly, the Operator must communicate to the Client any expected variations related to the Excess Forecast at least one hour before the closure of the Intra-daily Market Sessions in each moment. The session closure times are currently the following ones:

 

Daily:		10.00 hours (GMT +1:00)
Intra-daily 1st:		17.45 hours (GMT +1:00)
Intra-daily 2nd:		21.45 hours (GMT +1:00)
Intra-daily 5th:		08.45 hours (GMT +1:00)
Intra-daily 6th:		12.45 hours (GMT +1:00)

8. Preventive and Corrective Maintenance

The Operator acknowledges that the continuous operation of the Facility is essential, especially during day hours therefore the work of repairs, maintenance, rebuild and tests must be planned in a such a way that interruptions to the Facility operation are kept to a minimum and as a consequence he will apply a higher standard of diligence to perform during night hours to the extent possible in order to minimize interruptions and maximize production. The Operator will provide all materials, tools, staff and labour requirements, as well as its staff expenses, etc. in order to carry out the tasks, except otherwise agreed in this Agreement.

1. Preventive or Planned Maintenance

The Preventive or Planned Maintenance of the Facility will be comprised of regular visits to all the equipment composing the Facility, replacement of fungible materials and correction of those systems whose failure or deterioration is statistically foreseeable with materials, tools, supervisor and labour, pursuant to the provisions of Operation and Maintenance Manuals and Operation and Maintenance Procedures of the equipment installed at the Facility. The following tasks, but not limited to, will be carried out:

 

•

Cleaning the mirrors in the parabolic cylinder collector field with osmotized water, including maintenance of the cleaning vehicle(s). Cleaning machines, as well as the rest of special tools or machines described in Annex A to the EPC Contract, will be provided by the EPC Contractor before the Practical Completion.

 

•

Periodic revisions of a meaningful sample of collectors by means of techniques of Photogrammetry.

 

•

Maintenance of the instrumentation and control system (Level I, II and III).

 

•

Maintenance of drive systems by visual inspection and orientation as well as the replacement and inspection of oil levels every six (6) months.

 

•

Maintenance of the mirrors and collectors.

 

•

Maintenance of mirror and collector components and others (fuses of field connection boxes, etc.).

 

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•

Maintenance of the receiver tubes.

 

•

Maintenance of the steam generator and its auxiliary equipment.

 

•

Maintenance of the steam turbine and its auxiliary equipment (including those to have an appropriate subcontractor as needed to maintain the steam turbine pursuant to long term maintenance agreement to be concluded).

 

•

Maintenance of connection facilities to third party reservoir.

 

•

Maintenance of the water treatment plant.

 

•

Maintenance of the effluent treatment and drainage system and connection facilities to shared wastewater manhole.

 

•

Maintenance and measurement required by the regulation for the Facility.

 

•

Maintenance of medium voltage facility.

 

•

Planned maintenance of substation and high voltage electrical line to the collector substation “Mesa de la Copa”.

2. Corrective or Non-Planned Maintenance

In case of failure or Breakdown in the Facility, the Operator will apply a higher standard of diligence and all what technically were possible to correct the Breakdown or change the faulty parts in the same location in order to make it work properly. Whenever this is not possible or it results extremely burdensome, the Operator will be able to fix it outside the location at the Operator’s account.

The maintenance team of the Operator will proceed to the replacement of the broken-down subset by other subset new or rebuilt with equivalent quality. All components or parts removed from the Facility and replaced will become exclusive property of the Operator.

If it is not possible to carry out the repair by said procedure, it will be required the presence of a specialized personnel. If the detected malfunction has provoked the stoppage of the Facility, the specialized personnel will come on site within forty-eight (48) hours following the notice. If the breakdown does not cause the stoppage of the Facility, it will be possible to delay, under responsibility of the Operator, the visit to the Facility of the specialized personnel until the next visit for Preventive or Planned Maintenance.

Without prejudice to Spanish civil code, the Risk of Loss shall be borne by the Client. The Operator shall however bear all costs and expenses resulting from repairs and non-planned corrective maintenance arising out of any reason, except Force Majeure and Chance of or Act of Nature, up to the limit of the deductibles of the insurance policies hired by the Client. The Operator shall properly support the Client in preparing insurance claim documentation.

9. General Services of the Facility

Operator is committed to implement those activities detailed below, with the contribution of all necessary human and material resources:

 

-

Technical coordination between the Facility and the other facilities called Solaben 1, Solaben 2 and Solaben 6.

 

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-

Technical coordination between the Facility and Service Infrastructures owners.

 

-

Obtaining man-power for the Services.

 

-

Follow-up of yields and analysis of energy production data.

 

-

Weather forecasting

 

-

Surveillance of natural gas consumptions in order to assure that they are carried out pursuant to the applicable legislation.

 

-

Analysis and control of the Client exploitation expenses.

 

-

Management of purchase orders for the Facility.

 

-

Support the Client in the processes of the insurance claim and assistance to surveyor under any insurance Client will procure under Part F.

 

-

Operation and maintenance expense supervision.

10. DCS Supervision and Control

The Operator carries out evaluation and supervision tasks of the different control hierarchies composing the system. With the daily operation and exploitation information, it proposes improvements for the Facility.

Among other things, it has the obligation of supervising the integration of subsystems grouped in the DCS:

 

-

Communications between logic levels, report of parameters, graphic display in SCADA, etc.

 

-

Evolution of the global system and improvement of the different subsystems, in order to facilitate operation tasks.

 

-

Detection and report of the software incidents to the control system supplier (or the sub-contractor in charge), with the aim of guaranteeing that the system daily works in a proper way.

At the same time it develops control strategies depending on exploitation needs, as well as the instrumentation supervision related to the solar field.

They also include the adaptation and improvement of the vision systems linked to the Facility:

 

-

Hardware (sensors, cameras and optical) and software.

 

-

Reports of results and yields for the diverse field control and instrumentation systems.

11. Management of wastes

The Client shall contract at its expense a waste treatment agent in order to realize the waste treatment services, including but not limited to, to clear the disposal area and elimination of those wastes discharged from the Facility.

The Operator shall carry out the relationship with the waste treatment agent. The Operator shall collect the waste and take it into the disposal area located in the Facility.

All costs raised from the production and elimination of wastes will be paid by the Client.

 

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Work teams

The Services will be carried out by the following work teams:

 

1)

Commercial Management of the Facility.

The team of commercial management develops, among other things, surveillance actions of the Facility commercial management in a general way, with focus on the analysis of incomes and the operational expenses of the Client. Within this context, this team becomes a liaison with entities related to the electricity and fuel (LNG) purchase (vendor companies) It also carries out the O&M expense supervision, as well as other consumables and fungible materials purchases.

 

2)

Operation and Maintenance.

This work team will carry out specific operation and maintenance tasks described in this Agreement.

 

3)

Yield Analysis, Estimates of Generation and Operation at the Market.

This team carries out the Plant production analysis, relating the real production with the expected production pursuant to the theoretical production models. Besides, it carries out estimates of radiation based on weather forecasting data, which feed the production theoretical model in order to calculate the hourly energy to be exported the following day. This last information is used to forward bids to the electrical market (OMEL), delivered to the Client according to Clause 7.

 

4)

DCS Supervision and Control Team.

This team carries out evaluation and supervision tasks of the different control hierarchies composing the system.

Part C. Availability Guarantee

Before starting the Energy Production Guarantee Period, the contractor EPC will deliver a Theoretical Production Model which will have the following hourly input data:

 

•

Meteorological conditions: Direct normal radiation, ambient temperature, relative humidity and wind speed.

 

•

Number of collectors in service/operative.

 

•

Number of collectors in solar tracking, both total and partial.

Note that the hourly data to be entered into the model will be the average values of measurements taken at least every ten (10) minutes. The output data from this Theoretical Model will be the variables necessary to determine the availabilities of both the Field of Parabolic Cylinder Collectors and the Power Block. Both availabilities will be calculated as indicated in the following sections:

(a) The availability of the Field of Parabolic Cylinder Collectors will be calculated in accordance with the following methodology:

Whenever the hourly direct normal radiation exceeds a given threshold, the value of Collectors in service will be recorded. The average of these values weighted with the modified direct radiation will correspond to the value of availability of the Field of Collectors.

The threshold of direct normal radiation will be determined by the absolute error value of the pyrheliometer used, increased by a security factor. In general, the threshold value of direct normal radiation will be set at 50 W•h / m². In addition, days with accumulated direct normal radiation of less than 2 kWh/(m² • day) will be eliminated, as these will be considered non-operation of the plant.

 

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The Collectors that can be put into automatic mode from the control system will be considered in service. In this way, the number of Collectors in service will be identified by the control system. There will be a variable in the control system to record the number of Collectors in service.

The modified direct radiation represents the effective incident radiation on the Collectors. Therefore, the availability will be evaluated in accordance with the energy captured. The modified direct radiation will be determined by multiplying the direct normal radiation by the cosine of the angle of incidence of the sun’s rays. The cosine factor will be determined by the Theoretical Model.

Following the methodology indicated above, the availability of the Field of Collectors will be calculated by means of the following expression:

 

Where:

h: hours with direct normal radiation above the pre-established threshold.

ColSer: Number of Collectors in service for each hour.

ColTot: Total number of Collectors in the Solar Field. In this case 360.

DNIMod: Modified direct radiation for each hour.

DNITotMod: Sum of the modified direct radiation in hours with values of direct normal radiation above the pre-established threshold.

(b) The availability of the Power Block will be calculated in accordance with the following methodology:

The calculated exclusively-solar theoretical electrical energy will be determined with the number of collectors in tracking, both total and partial. Note that the value of the collectors in tracking will be determined using hourly values registered in the control system. This theoretical energy will represent the production of the plant considering the inaccessibility of the Power Block and the Field of Parabolic Cylinder Collectors, ETheoretical_BOP+CS.

The calculated, exclusively-solar theoretical electrical energy will be determined using the number of Collectors in service for each hour. This theoretical energy will represent the production of the plant considering that the Power Block has an availability of 100% and taking into account the inaccessibility of the Field of Parabolic Cylinder Collectors, ETheoretical_BOP+CS.

Using the above two energy variables, the availability of the Power Block will be calculated using the following expression:

 

 

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Once the Energy Production Guarantee Period has ended, the Operator guarantees the following availabilities:

An annual availability of the Power Block of ninety-five (95) per cent.

(1)From expiry of the Energy Production Guarantee Period, the verification of the real availability of the Power Block will be carried out immediately after the 31st of December (for the period between the end of this Energy Production Guarantee and that date), and, subsequently, each year on the 31st of December. If the availability obtained annually does not reach the guaranteed availability, the Operator will pay a penalty of one (1) per cent of the proportional part for a year of the Price of the Contract for each one (1) per cent of the guaranteed value, with a limit of ten (10) per cent of the proportional part for a year of the Price of the Contract. If the availability obtained annually is higher than the guaranteed availability, provided the annual net production of the facilities exceeds the envisaged net nominal production, the Client will pay a bonus of one per cent (1%) of the Price of the Contract for each one (1) per cent above the guaranteed value.

(2) For the Field of Parabolic Cylinder Collectors, the Operator guarantees an availability of ninety-nine per cent (99%).

From expiry of the Energy Production Guarantee Period, the verification of the real availability of the Field of Parabolic Cylinder Collectors will be carried out immediately after the 31st of December (for the period between the end of the Energy Production Guarantee and that date), and, subsequently, each year on the 31st of December. If the availability obtained annually does not reach the guaranteed availability, the Operator will pay a penalty of one (1) per cent of the proportional part for a year of the Price of the Contract for each one (1) per cent of the guaranteed value, with a limit of ten (10) per cent of the proportional part for a year of the Price of the Contract. If the availability obtained annually is higher than the guaranteed availability, provided the annual net production of the facilities exceeds the envisaged net nominal production, the Client will pay a bonus of one per cent (1%) of the proportional part for a year of the Price of the Contract for each one (1) per cent above the guaranteed value.

The parties expressly agree that the application of penalties payable by virtue of sub-sections 1) and 2), when both are combined, shall never exceed ten (10) per cent of the Contract.

Part D. Other Operator’s Obligations

1. Warranty

The Operator warrants that it carries out the Services with due care and diligence and it will maintain the Facility in proper conditions during effectiveness of the Agreement, considering its normal aging.

2. Rules and Regulations

The Operator and all the staff that is directly or indirectly at its service will strictly comply all statutes, ordinances, laws, regulations, rules, usages and provisions of all authority with jurisdiction, as well as other laws and rules (both international or national) which result applicable to the operation and maintenance of the Facility and are effective during the effectiveness period of this Agreement.

The Operator and all the staff that is directly or indirectly at its service will strictly comply with natural gas and water consumptions that respect, in quantities and qualities, all applicable law, regulations and relevant permits, licenses and authorizations. In case the Client receives a fine due to a potential use of gas above the legal limits, such fine shall be paid by the Operator. In addition, the Operator shall reimburse the Client any amounts billed in accordance with this Agreement as a direct result of the production of electricity generated with gas above the legal limits. For the avoidance of doubt, any reimbursements to the relevant authority, of the revenues generated by the sales of electricity above the legal limit of gas consumption shall be the responsibility of the Client.

 

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In case that a fine for using gas above the limits is imposed, Operator shall prepare a report detailing the reasons why too much gas was used and a plan to prevent that from happening again

3. Excluded Benefits

The Operator will neither be responsible for failures, breakdowns or stoppages that the Facility may suffer nor responsible of damages or prejudices that may derive from them pursuant to the following matters:

 

-

Negligence or improper usage of one or more elements of the Facility made by the Client unless such is caused by instruction or recommendation of the Operator.

 

-

Repairs carried out by the Client without the Operator’s approval.

 

-

Force Majeure Event or Chance or Act of Nature pursuant to Part H titled Force Majeure or Chance or Act of Nature.

 

-

Non-compliance of the Client of laws, regulations, ordinances which apply to the activity or the proper Facility.

Stoppage hours of any equipment of the Facility that are derived from these matters will not be chargeable to the availability calculation.

In addition, and without prejudice to the provisions of Clause 1 part B, in case that an unforeseen (as of the date of execution of this Agreement) future event materially changes the scope of services or the works which are required for the proper operation and maintenance of the Facility, and such services or works are not included in the scope of this Agreement, the Operator will inform the Client in writing at least fifteen (15) Business Days in advance of the need to carry them out, including a quotation for these services or work. If the Client does not accept the quotation presented by the Operator, no obligation will accrue to the Operator. Prior to acceptance of the quotation, the Client will seek the approval of the Financing Entities, and the Technical Advisor if required by the Financing Agreements

If the Client does not reach an agreement with the Operator and does not make on its own or by third parties to perform the work or repair required by the appropriate operation of the Facility, it will not be able to demand any responsibility to the Operator due to damages or lower profits that may occur.

4. Reports to governmental agencies

The Operator shall provide the Client with all the necessary information needed in order to submit all the required reports by the governmental agencies so the Facility fulfils the necessary requirements.

Part E. Duration

The Agreement becomes effective from the day of the signature (the “Effective Date”) and continues to be valid for a period of twenty (20) years (the “Term”) after the Practical Completion. It could be extended by mutual agreement by the Parties

 

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During the period until the Practical Completion, the Operator and its employers will be at the Facility watching and receiving information from the EPC Contractor, and supporting the EPC Contractor with respect to its operation and maintenance and they will be present during the start-up activities and tests.

At least nine (9) months prior to the date on which the actual attainment of the Practical Completion is expected to occur, the Client shall inform the Operator of the date, which will never be lower than six (6) months before the Practical Completion, on which the Operator has the right to storage the Initial Basic Spares in the Facility.

At least four (4) months prior to the date on which the actual attainment of the Practical Completion is expected to occur, the Client shall inform the Operator’s operation personnel of the date, which will never be lower than two (2) months before the Practical Completion, on which the said personnel must appear in the Facility.

Prior to the Practical Completion, the Operator and its employees may be under the supervision and technical control of the EPC Contractor.

From the Practical Completion, the price agreed in the Part F shall become effective and applicable.

Part F. Price and Form of Payment

In consideration of the Services performed by the Operator pursuant to this Agreement, Client shall pay in accordance with this Part F.

In accordance to the Services prior to Practical Completion, described in Clause 4 of the part B, and the purchase of the Initial Basic Spares, the Operator, one month after the signature of the Agreement is done and at the request of the Operator, will invoice the Client the Advanced Payment. This Advanced Payment stays permanent and equal to 1,000,000 €.

In this Part F the term “Net Energy” means the gross electric energy generated by the facility less self consumptions at the on-line functioning mode. The measurement equipment/s used will be located at the Mesa de la Copa substation.

Upon the Practical Completion:

 

1)

Up to the seventy five percent (75 %) of the Annual Referenced Net Production of the Facility (91,785 MWh when up to 12% of gas utilization is permitted), that is 68,838 MWh/year, the Agreement Price stays permanent and equal to 3,500,000 € (“Floor Price”), which includes, inter alia, the annual expenses of Spare Parts and the rest of expenses of the operation and maintenance services necessary for the Facility.

Since a higher production of the Facility necessarily involves a higher number of operating hours and, as a consequence, more maintenance, the Agreement Price keeps with the same evolution.

 

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2)

Between 75% and 100% (both inclusive) of the Annual Referenced Net Production of the Facility, which is between 68,838 MWh and 91,785 MWh, the Agreement Price (P) follows the following formula (“First Layer Price”):

 

Where:

 

•

P0 = Floor Price.

•

EP = Net Energy annually generated.

 

•

E75 =Net Energy corresponding to 75% of the Annual Referenced Net Production of the Facility (i.e. 68,838 MWh).

 

•

C1 = Agreement Price per MWh generated above the 75% of the Annual Referenced Net Production of the Facility (39.222 €/MWh).

 

3)

Between more than 100% and 120% inclusive of the Annual Referenced Net Production of the Facility, that is between 91,785 MWh and 110,142 MWh, the Agreement Price (P) follows the following formula (“Second Layer Price”):

 

Where:

 

•

P100 = Agreement Price for an annual production of 100% of Annual Referenced Net Production of the Facility (I.e. 4,400,000 €).

 

•

EP = Net Energy annually generated.

 

•

E100 = Net Energy corresponding to 100% of the Annual Referenced Net Production of the Facility (i.e. 91,785 MWh).

 

•

C2 = Agreement Price per MWh generated above the 100% of the Annual Referenced Net Production of the Facility (90 €/MWh).

Over 120% of the Annual Referenced Net Production of the Facility shall be deemed to be 120%.

In the case that the Facility is able to use up to 15% of gas, two previous factors shall be modified:

 

(i)

The Annual Referenced Net Production of the Facility, raising it up to 94,781 MWh.

 

(ii)

The C1 to 37.982 €/MWh.

On these quantities it will be applicable the effective value added tax at the accrued date.

Agreement Price has been calculated based on the understanding that the operation of the Facility commences year 2011 and the values calculated in this Agreement correspond to that year. If the compounded average CPI between the signature of this Agreement and the Effective Date is above 3%, the Agreement Price will be corrected upwards in respect of the excess inflation for the portion over 3% for each year, with a cap of 1% of yearly excess.

From year 2013, the Agreement Price will be revised (upwards or downwards) per due years, on the 31st day of December of each year which becomes effective from the immediately following 1^st January of next year, depending on the variation of CPI experimented in the immediately preceding year according to the publication by the National Statistics Institute or the institution that temporary substitutes it. If the official CPI was not known at the date of the first invoice after January 1^st, the first invoice will consider an Agreement Price adjusted with the most recent annual official CPI available. Any necessary adjustment will be done in the first invoice after the final official annual CPI is known.

 

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Operator will invoice to Client the amount for the Services and the Client will pay to Operator through a bank within 180 days of correct invoice being received, through a line of reverse factoring that allows to Operator to anticipate payment at their financial cost (PPB 180) if there is an agreement with financial institutions. (PPB180 without interests unless the payment is delayed more than 180 days). If Reverse Factoring (PPB180) is not available, the Client will pay within fifteen (15) Business Days, starting from the reception of the invoice. Invoices will be sent by certified mail and with return receipt requested by Operator to the Client within the first ten (10) Business Days of each month.

The amount to be invoiced every month by the Operator will be the result of dividing the First Layer Price, when E_P is equal to the Annual Referenced Net Production, by twelve (12) parts based on the Net production expected for the year.

At year end, an adjustment will be calculated based on the actual Net Energy produced and invoiced in the immediately following invoice, which will include the adjustment of the First Layer Price, and, if applicable, the adjustment of the Second Layer Price.

The Parties agree that, from the date of signature of the Infrastructure Lease Connection Agreement between the Client and Evacuación Valdecaballeros S.L., the Agreement Price will be reduced by an amount equivalent to what is paid by the Client to Evacuación Valdecaballeros S.L., under the Infrastructure Lease Connection Agreement in respect of the operation and maintenance tasks associated with the connection infrastructure between the boundary point of the plant and the Valdecaballeros substation.

The reduction of the Agreement Price, as stated in the paragraph above, will be effective from the date of signature of the Infrastructure Lease Connection Agreement.

As far as the price stated at the Infrastructure Lease Connection Agreement is payable on a monthly basis, an equivalent amount to what is paid by the Client to the Evacuación Valdecaballeros S.L. will be reduced from the monthly invoices issued from the Operator to the Client.

The parties will reconciliate those amounts due to V.A.T. tax that would be legally applicable.

The following are not included in the Agreement:

 

•

Insurances: property damages and machinery breakdowns, loss of benefits or loss of profits and civil liability. The Operator will be named as co-insured in the property damage and machinery breakdown policy. The loss payee shall be the Client for all cases including the loss of benefits or loss of profits. It is agreed that the coverage, deductible amount and loss payee will be established by the insurance advisor designated in the Financing Agreement. Subject to the foregoing sentence, the deductible must be around 150,000 Euros.

 

•

Offline parasitics invoices.

 

•

Invoices relating to liquefied natural gas.

 

•

Invoices relating to N2.

 

•

Fees accrued for independent third party audit and administration functions.

 

•

Fees, taxes, public rates and other duties that tax the Facility.

 

•

Waste spill rate, management, collection and consumption of water (if necessary).

 

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•

Waste costs (dangerous, inert, solid urban, etc.).

 

•

Emissions of greenhouse effect gases.

 

•

Service fee for real time measurement of electricity dispatch.

Part G. Client Duties

The Client will be responsible for obtaining in its name all applicable permits, authorizations and licenses necessary for completion of its duties under this Agreement.

The Client will be responsible for executing, with the entities that own the Service Infrastructures, the contracts that, in such case, allow him to use those Service Infrastructures, as well as to comply with his obligations as shareholder/partner of those entities.

The Client must pay the total price of Services provided by the Operator pursuant to the terms and conditions in this Agreement.

The Client will provide the Facility with a closed circuit television and video to permit the Operator to carry out the following for the Facility:

 

1)

Control of gate.

 

2)

Security control.

 

3)

Plant safety operation monitoring.

 

4)

Machine monitoring.

 

5)

Surveillance.

 

6)

Industrial protection service.

For the avoidance of doubt, the contract with the external 24/7 security service company will be within the scope of the Client.

For the realization of the Services, the Client has provided at no charge to the Operator the following installations, that the Operator has been informed of and accepted:

 

-

A closed premise inside the Facility with appropriate humidity and temperature control for the storage of Spare Parts and special tools. This premise must comply with all the regulation related to occupational risk prevention and safety against fires, and it must have all the necessary elements for the spare parts storage (shelves, ladders, etc.).

 

-

Furniture and necessary equipment in the control room, including the monitoring system of the Facility in order to be used by the Operator in its operation functions.

 

-

An area close to the Facility location, in order to allow the Operator personnel the parking of necessary vehicles.

 

-

Toilets and changing rooms equipped with enough capacity for all the Operator personnel, including hot domestic water Facility.

 

-

Building equipped with the necessary elements to install a workshop of electrical and mechanical repairs and instrumentation. This building must comply with all requirements related to occupational risk prevention and safety against fires.

 

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-

Waste accumulation area (toxic, dangerous, inert, etc.) totally delimited complying with provisions of the applicable regulations.

 

-

Chemical storage area perfectly delimited complying with provisions of the applicable regulations.

Within thirty (30) days starting from the Practical Completion, the EPC Contractor will give the Client the documentation of the equipment tests, as well as the test results obtained once carried out the Acceptance Tests. The Client is committed to forward to the Operator said documentation as soon as its delivery has been made by the EPC Contractor.

The Client will provide appropriate cleaning equipment for parabolic cylinder collectors in order to make possible the realization of this task with the number of people as low as possible. The Client will provide all this material on the basis of commitments entered by the EPC Contractor in the EPC Contract.

The Client will provide the Operator for Client’s account and for Operator’s use with the following, provided that the payment administration shall be Operator’s responsibility.

 

a)

Electrical energy.

 

b)

Natural Gas.

 

c)

Water: drinking and cycle replacement water.

 

d)

N2.

 

e)

Telephone, internet and fax.

The Client must maintain and make effective, in those terms established for each case, the technical warranties provided in its favour by third parties.

If a specialized personnel, who is different from the operation staff of the Operator, to perform their maintenance services at the Site suffers delays due to reasons attributable to the Client. From the date the Operator informs the Client to be causing that delay, the Client shall pay to the Operator the waiting time of said personnel from that date, according to the contractual rates effective at that moment for this type of labour services and all the other expenses received by the Operator due to such delay. In case of travelling for the realization of these maintenance works which cannot be carried out on the foreseen time, due to a reason attributable to the Client, the Client shall pay the travelling and accommodation expenses incurred by the Operator, as well as any other justified expense directly related to the non-compliance of the Client.

The Client will be responsible for having the Facility in compliance with all required authorizations, licenses and permits to be obtainable in its name and enforceable by the effective regulations and complying with their possible requirements. The Client will have the obligation of adapting said authorization to possible regulatory changes as soon as possible, in order to keep to a minimum the prejudice to the Facility.

Every modification of the ordinances, laws, regulations, rules or provisions applicable to the Service will be communicated by the Operator to the Client as soon as possible, but in any case within fifteen (15) Business Days after it has come to know, as well as its technical and economic impact. In this case and whenever the provisions of the Agreement is affected by them, Operator and Client, prior authorization of the Financial Institutions, will change by mutual agreement the price and conditions of the Agreement, incorporating the necessary modifications in operation and maintenance manual and Yearly Maintenance Plan.

 

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Therefore, the Operator will not be responsible for the negative or lack of adaptation to the applicable legislation chargeable to the Client. Then, if modifications of the Facility and contractual conditions between Operator and Client are not carried out, it will be considered that the obligations of the Operator have been successfully complied by the realization of works object of this Agreement. In case the Client subcontracts any implication required by the modification of the ordinances, laws, regulations, rules or provisions applicable to the Service to a third party, any cost or damages caused by the third party shall not be chargeable to the Operator. In case those damages are caused to the Spares or any other property of the Operator, the Client will reimburse the Operator for all reasonable expenses.

Part H. Common Terms

1. License and Permits

The Parties will be responsible for the compliance with all proceedings which should be observed each of them as required as a consequence of any governmental administrative control exerted on the Facility activity. The Operator and the Client will provide each other the collaboration and help necessary for these purposes.

The Parties will comply with all applicable rules of safety and hygiene and environmental rules and with those defined by the Operator for the particular case of the Facility.

All modifications to this Agreement will be made in writing by duly authorized representatives of the Parties.

2. Loss of profits

Neither Party shall be liable for indirect or consequential damages including loss of profits except those arising out of fraud or gross negligence.

3. Assignment and Outsourcing

Operator will not be able to assign wholly or in part (without prejudice of its capacity for outsourcing pursuant to terms and conditions authorized in this Agreement), its contractual rights and obligations in this Agreement without prior written agreement of the Client and Financial Institutions.

Operator will not be able to outsource the entire services of this Agreement or the operation of the Facility pursuant to the terms of this Agreement.

The Operator will be able to partially outsource to those persons, institutions or companies considered as appropriate for the proper realization of works and services indicated within this Agreement in the following cases:

 

i)

It will be able to outsource without any authorization the maintenance of those supplies listed below which have available a proposal of regular maintenance from the supplier itself:

 

•

Turbine, generator and gear.

 

•

Steam generator.

 

•

Cooling System.

 

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•

Pumps.

 

•

UPS (Uninterrupted Power System).

 

•

LV and HV electric installations.

 

ii)

For those equipments where the non-intervention of the supplier results in losses of warranties, outsourcing is approved to the extent the maintenance shall be effectively maintained by said supplier.

 

iii)

The Operator will be able to outsource without any authorization those non-operating and non-technical services.

Otherwise, outsourcing must have the prior and expressed consent of the Client and Financial Institutions by the Technical Advisor, which will not oppose to, except in case of reasonable cause supported by the Subcontractor’s lack of enough technical or economic capacity.

In any subcontracted services entered into by the Operator, Operator shall check and make sure that Subcontractor comply with the regulations applied in their similar projects in the past especially in industrial safety and occupational risk prevention matters, and will obtain from manufacturers and Subcontractors those warranties provided by them and it will assign said warranties to the Client in case of this Agreement being terminated.

In any event the outsourcing:

 

(a)

Will not exempt the Operator from any obligation or responsibility derived from this Agreement.

 

(b)

Will not oblige the Client to pay any amount additional to the remuneration established in this Agreement.

 

(c)

Will not generate any contractual relationship between Subcontractor and Client.

4. Applicable Law and Arbitration

The Language of this Agreement shall be English.

This Agreement, both for its application and its interpretation, shall be governed by Spanish laws.

If a dispute arises from or in connection with this Agreement, (i) at first instance, the Parties must try to solve it by Agreement within three (3) weeks and (ii) for the purpose of (i), a Party may at any time declare by giving a written notice to the other Party that such three (3) weeks commences. During this three weeks period either Party may offer the other Party to resolve the matter by mediation led by a third party mediator appointed by a neutral private authority. If the Parties agree, the matter may be settled through the mediation. The mediation does not prevent from any disputing Party from submitting the matter to arbitration unless the Parties have agreed that the matter is finally resolved. If the dispute is not finally settled by the end of the three (3) weeks, the matter shall be resolved by arbitration as provided for here below.

The Parties expressly agree that all disputes, discrepancies or claims arising out of this Agreement shall be finally settled by arbitration conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “Rules”) by three impartial arbitrators appointed in accordance with the Rules. The place of arbitration shall be Madrid, Spain. The language of the arbitration shall be English.

The submission of conflicts between Parties to arbitration does not entitle any Party to suspend the compliance of its obligations derived from this Agreement.

 

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5. Notices

All formal notices required pursuant to this Agreement will be carried out in written and addressed to the Parties as follows:

a) If to the Client:

Solaben Electricidad Tres, S.A.

Avenida de la Buhaira, nº 2

41018 Seville (Spain)

Telephone: 954.93.71.11

Telefax: 954.93.70.08

For the attention of: Mr. Eduard Solar Babot

b) If to the Operator:

Abengoa Solar España, S.A.

Avenida de la Buhaira, nº 2

41018 Seville (Spain)

Telephone: 954.93.71.11

Telefax: 954.45.26.59

For the attention of: Mr. Pedro José Robles Sánchez

 

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6. Access to the Facility

Client authorizes to Operator, its members, personnel, institutions or companies contracted by Operator in order to perform works and services established herein, the access and handling of the Facility, but only and exclusively for the performance of the obligations of this Agreement.

The Client will notify Operator about the list of persons who will enter regularly into the Facility. The Client shall cause these personnel to abide by the rules and applicable laws and internal safety rules established by Operator and approved by Client (together the “Site Rules”).

For the accesses of people not listed in the aforementioned list, or accesses of people not belonging to Client, Client shall notify the arrival 24 hours in advance.

The Operator shall not be liable for any loss of or damage to Client’s property or personal injury or death if such is caused by those personnel being in breach of the Site Rules.

7. Force Majeure or Chance or Act of Nature

No error or omission by either of the Parties in the execution or observance of the terms and conditions of this Agreement shall give rise to any claim by the other Party or shall be deemed to be a breach of the Agreement if such error or omission is the result of the Force Majeure Event or Chance or Act of Nature.

If the Services or other contractual obligation is delayed or suspended as a result of any Force Majeure Event or Chance or Act of Nature, the time allowed to comply with such obligation shall be extended for as long as the circumstances of force majeure causing such delay or suspension continue.

Client and the Operator shall take the measures necessary to mitigate the effects of Force Majeure Event or Chance or Act of Nature.

In case of occurrence of Force Majeure Event or Chance or Act of Nature, the Operator will not be responsible for loss of or damage to Spares or damages to the Facility provided that the Operator shall have performed its Services with due care and diligence pursuant to the provisions of the Agreement. Where Client desires, Client and Operator, for account of the Client, will collaborate resumption of the Facility to the status prior to the occurrence of the Force Majeure Event or Chance or Act of Nature. If the Operator incurs additional expenses to safeguard the Facility or Spare Parts of the Facility during or after the Force Majeure Event or Chance or Act of Nature, the Client will reimburse the Operator for all reasonable expenses.

The Client is not obliged to pay any Agreement Price to the Operator if the affected Party is the Operator and as a result the Operator (i) does not perform its obligations or (ii) fails to provide Services required under this Agreement.

Part I. Termination Events

1. Event of Default and Termination

The following are justified termination events (“Event of Default”) in addition to those applicable laws:

 

(i)

The substantial and repeated failures that amounts to a substantial failure in the proper performance of relevant obligations assumed by the Operator.

 

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(ii)

In the event that the annual availability of the Power Block is lower than the eighty five (85) percent, due to a reason attributable only and exclusively to the act or omission of the Operator in the opinion of the Technical Advisor.

 

(iii)

In the event that the annual availability of the Parabolic Cylinder Collector Filed is lower than the ninety (90) percent, due to a reason attributable only and exclusively to the act or omission of the Operator in the opinion of the Technical Advisor.

 

(iv)

In the event that the amount of penalties imposed to Operator exceeds the limit of the ten (10) percent of the Agreement Price.

 

(v)

An unjustifiable delay of more than two (2) months in payment by Client of any amount due when it matures pursuant to this Agreement. In case of invoices disputed amounts, the Client has to identify the disputed ones and pay the other.

 

(vi)

In the event of the Force Majeure Event or Chance or Act of Nature occur and it lasts for a continuous period six (6) months or more.

Upon the occurrence of any Event of Default except by reason of (vi), or at any time thereafter while such Event of Default subsists, the non-defaulting Party may require the defaulting Party, by written notice, to cure such Event of Default within thirty (30) Business Days after the notification date. If such Event of Default is not cured in that period by the defaulting party , the non-defaulting Party may terminate this Agreement thirty (30) Business Days after giving an intention to terminate written notice to the defaulting Party.

In the aforementioned events except by reason of (vi), the non-breaching Party will be entitled to demand the strict compliance of the Agreement or, at its choice, to terminate the Agreement with interests and compensation for damages. The rights of the non-breaching party under this clause shall be without prejudice to any claim that the non-breaching party may have against the breaching party for damages.

If the Agreement is terminated by reason of (vi), the Client shall pay to the Operator the amounts for the Services performed up to the date of commence of Force Majoure Event plus those safeguard costs according to Part H Clause 8 of this Agreement, less those already paid to the Operator.

If the Operator terminates this Agreement by reason of (v), the Client shall pay the amounts for the Services performed up to the date of the termination less those already paid to the Operator. For clarification, in respect of the Floor Price, it shall be settled on a pro-rata basis.

In witness whereof, parties sign in two (2) counterparts this Agreement in the place and the date stated above.

 

By Client.		By Abengoa Solar España S.A.
Mr. Eduard Soler Babot		Mr. Pedro José Robles Sánchez

 

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Appendix I: Basic Maintenance Program

to

Operation and Maintenance Agreement

Between

Abengoa Solar España, S.A.

and

Solaben Electricidad Tres, S.A.

 

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Table of contents

 

0. Object			33
1. Introduction			33
1.1. Preventive Maintenance			33
1.2. Corrective Maintenance			34
2. Collector Field Maintenance			35
2.1. Mirror Maintenance			35
2.2. Control System Maintenance			35
2.3. Maintenance of the Drive Systems			36
2.4. Structure Maintenance			36
2.5. Maintenance of Absorbent Tubes			36
2.6. Auxiliary Elements Maintenance			36
3 Oil System Maintenance (HTF)			37
3.1 General			37
3.2 Maintenance of the Steam Generator			37
3.3 Maintenance of the Auxiliary Boiler			37
3.4 Maintenance of the Rest of Systems			37
3.5 Thermal Oil Maintenance			37
4. Maintenance of Infrastructures			38
4.1 Maintenance of Ways			38
4.2 Maintenance of Facilities			38
5. Maintenance of the Steam Turbine and Generator			39
5.1 General			39
5.2 Inspection			39
5.3 Partial Revision			40
5.4 Full revision			40
5.5 Full revision with Steam Turbine Disassembling			41
6. Maintenance of the Substation and Power Center			42
6.1. Transformers			42
6.2 Electrical Protections and Switchgear			42
6.3 Control boxes and panels			42
6.4 Electrical circuits			43
6.5 General Maintenance for Internal Electrical Installations			43
6.6 General Maintenance for external electrical installations			44
6.7 Ground Connection Installations			45
7. Maintenance of the High Voltage Electrical Line			46
7.1 Conductors			46
7.2 Ground cables			46
7.3 Fittings			46
7.4 Insulators			46
7.5 Supports and foundation			46
7.6 Connections of ground supports and fittings			47
7.7 Security Distances			47

 

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0. Object

The object of this document is giving an overview of the maintenance program of the main components of the Solar Thermal Power Plant of parabolic trough technology Solaben 3.

1. Introduction

The overall operation and maintenance strategy of the installation must be the maximization of profits, through an increase of production and useful life of all the elements composing the plant, as well as its appropriate operation. For that purpose it is necessary an appropriate operation and maintenance plan which guarantee a right equipment operation.

The availability of a solar plant may reach very high values through an appropriate O&M plan, which includes the long term maintenance agreement with Siemens, since planned stoppages, equipments replacement, cleaning of collectors and other necessary actions may be carried out in moments with no radiation (at night) or non-operating days (cloudy). The availability of the plant only shall be reduced due to unforeseen stoppages (breakdowns...) or due to any other badly preserved element (broken mirror, tube with vacuum loss...).

Those operations involving a reduction of the electric production, which may be foreseen, should be planned during out of service hours of the plant, in such a way that this does not provoke reductions of its availability and has no economic impact.

In case of breakdowns, their repair shall be carried out when the economic impact is lower, if it cannot be delayed without a production stoppage, the actions will be carried out when the plant is not operating. If a (total or partial) stoppage is necessary in the production, actions shall be carried out as faster as possible.

The Solar Plant Solaben 3 is composed by 360 parabolic troughs, 12,960 vacuum tubes, 120,960 mirror facets, 360 hydraulic drive systems... For an appropriate control of this huge quantity of elements will be necessary the implementation of a custom software that provides to the O&M operators the facility to develop reports, the operation monitoring, the planning of the equipment replacement and registry of revisions on a data base permitting a technical-economic optimization of the O&M operations to be performed in order to maximize production.

There are two actuation steps in order to include all necessary operations during the useful life of the Plant to guarantee the operation, increase the production and extend its duration:

♉ Preventive Maintenance

♉ Corrective Maintenance

1.1. Preventive Maintenance

Operations of visual inspection, check of actions, field adequacy and others, which applied to installation must permit to keep under acceptable limits the operating conditions, benefits, protection and durability of the Plant.

In order to make easier and carry out these operations it is foreseen the implementation of custom software which permits the registry of incidents, planning of replacements, operation monitoring.

 

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In order to register the condition of the solar field may be necessary the use of PDA’s with direct communication with the main O&M software permitting the visual inspection operators to inform about the state of the field at the moment of the inspection.

All checks that may involve a reduction of the energetic gain should be planned during non-operating hours (at night or non-operating days).

1.2. Corrective Maintenance

That maintenance covers all necessary replacement operations to make sure that the system works properly during its useful life, even the necessary analysis of works and replacements for the installation proper operation.

The corrective maintenance operations which may be planned, as well as the equipments replacement will be planned to be performed when the loss of energetic generation is lower (when there is no operation).

The maintenance will be carried out by technical qualified staff in charge of the operator.

 

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2. Solar Field Maintenance

Due to the number of collectors (360) located at the plant, it will be followed an exhaustive maintenance program which will entail regular revisions. Each collector will have a maintenance data sheet, where the actions to be performed will be noted down by the maintenance staff in order to detect possible abnormalities existing in all its components, to correct, if possible, these abnormalities or to replace the badly preserved equipment. For this purpose it will be available an appropriate warehouse of spare parts. The goal of the maintenance program is to keep the solar field availability at 99%.

2.1. Mirror Maintenance

The most important operation of the mirror maintenance will be their cleaning, since the dirt placed on the means a loss of the mirror reflectivity and, as a consequence, a reduction of the generated thermal and electric energy.

The cleaning will be performed with osmotized water, without additives or detergents, in order to avoid remains of salts located on mirrors. The periodicity of these cleaning operations will vary depending on the season, being more frequent on summer (production is higher and the weather is drier and windier) and more sporadic in winter, due to a higher amount of rains and a lower production rate during said season. This periodicity will be enough to make the average reflectivity of the field mirrors reach a value more than 92% during all seasons.

In case of mirror breakage, a warehouse with enough spare parts will be available in order to replace them without delays due to the supply. Around 480 replacements/year are foreseen.

Both cleaning and replacement operations will be carried out during non-operating hours of the Plant.

In order to check the annual reflectivity of the solar field, the Client will prepare a reflectivity sampling protocol stating the periodicity of the data collection as well as the amount and location of the samples to be measured. Besides, reflectivity checks will be carried out before and after the cleaning process in order to analyze its yield.

2.2. Control System Maintenance

With respect to the control system maintenance, this will consist of visual inspections and operating inspections where the operation of the limit switches, encoders, contactors, PLC battery, speed variators and all the collector field instrumentation (control valves, thermocouples...).

In any case recommendations and instructions established by the equipment manufacturer will be followed.

The necessary information systems will be available, in such a way that the DCS be able to save the data which permit a proper supervision of the solar field condition, with the aim of enabling the calculation of its availability in terms herein described. Among the entry values to the DCS must be the following ones:

 

-	Radiation received in the location. There are measurements collected by the set of meteorological stations distributed throughout the solar plant.

 

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-	Parabolic Troughs Status. The DCS will receive the necessary information to supervise the collectors operation, mainly the information related to the Sun tracking and variables affecting the calculation of production.

2.3. Maintenance of the Drive Systems

The maintenance of the drive systems will basically consist of carrying out visual inspections looking for lubricating grease loss, replacing it, if necessary, and the tune-up or replacement of those systems that do not work properly. In order to guarantee the security of operation, semi-annually all systems will be greased and all their oil levels checked. In any case recommendations and instructions established by the equipment manufacturer will be followed.

2.4. Structure Maintenance

The maintenance of the collector structure will be mainly carried out by visual inspection, looking for marks, corrosions, condition of the protective paint, absence of water deposits, the control system and the measures obtained, etc. which allow the Operator to identify losses in the Solar Field. The Operator will adjust the structures and mirrors to correct loosen so to maintain the original concentration factor.

2.5. Maintenance of Heat Collector Elements

The maintenance of heat collector elements includes a visual inspection in order to detect a possible vacuum loss, the reflex protection treatment of mirrors, the replacement of badly preserved (broken or without vacuum) tubes and their cleaning to keep high the transmissivity values in tubes.

Replacement of tubes involves a great amount of labour services, since it is necessary a loop emptying in order to prevent oil losses. Therefore these replacements must be preferably planned for non-production hours. Nevertheless, if the replacement of the tube is necessary because of an important leak, the repair must be addressed as soon as possible in order to avoid oil losses and also soil contamination

The amount of spare parts in the warehouse will be enough to replace them without delays due to the supply. Around 130 replacements/year are foreseen.

2.6. Auxiliary Elements Maintenance

Apart from the aforementioned elements on field there is another type of equipments that must be kept in good working condition. Among them we can enumerate the insulation of the pipe system, the relief valves, loop isolation valves, cables and other elements of the solar field.

 

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3. Oil System Maintenance (HTF)

3.1 General

The oil system consists of all the elements comprising the system of pipes, vessels, HTF auxiliary heater, etc.

The oil system will be submitted to regular (weekly and monthly) inspections and annual maintenances following the particular manufacturer recommendations of each equipment, as well as the recommendations of the system designer.

In all cases when damages or abnormalities are detected, the repair or replacement of all affected elements shall be carried out, following the same procedures and tests as during the initial assembly.

All predictable replacement or repair operations will be planned and carried out when the plant is not operating.

3.2 Maintenance of the Steam Generator

The steam generator will be submitted to visual inspection and cleaning and benefit inspections pursuant to the recommendations of this equipment’s manufacturer, in such a way that the performance values stay guaranteed. Maintenance will include the equipment thermal insulation.

3.3 Maintenance of the HTF Auxiliary Heater

The auxiliary heater will be submitted to operations of visual inspection and cleaning and benefit inspections pursuant to the recommendations of this equipment’s manufacturer, in such a way that its performance and foreseen durability stay guaranteed. Maintenance will include the equipment thermal insulation.

The boiler maintenance, as well as the rest of equipments, will be carried out during non-operation hours of the plant. Besides, in order to plan the actions, it shall be taken into account that the HTF heater must maintain the oil temperature at all times higher than a certain value so it may work during non-insolation hours.

3.4 Maintenance of the Rest of Systems

All equipments of the HTF system must follow an appropriate O&M plan which guarantees their proper operation and durability. All the necessary actions will be indicated by the manufacturer of each equipment.

These operations must include visual inspection, search of corrosions, paint condition, as well as regular cleaning revisions and functionality and benefit tests.

The rest of systems include expansion vessels, overflow, oil regeneration, N2 system, oil recirculation pumps, valves, instrumentation and all auxiliary elements of the system.

3.5 Thermal Oil Maintenance

The thermal oil must follow a thorough inspection in order to maintain its thermal properties. For that purpose the plant includes an oil regeneration system designed to this effect. The O&M program must include the necessary inspection actions to guarantee the proper operation of this system, as well as a regular analysis of oil properties and the fluid replacement necessary for an appropriate plant operation. The operations to be carried out to the oil must be those specified by the fluid supplier.

 

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4. Maintenance of Infrastructures

The maintenance of the Solaben 3 plant must also include the adequacy of infrastructures of the plant.

4.1 Maintenance of Ways

The access ways to the plant and ways within the site area shall be properly repaired for an appropriate installation operation. Actions must include operation of weed elimination (using herbicides) to reduce the fire risk. On the other hand, it will be necessary as closely as practicable to reduce the transitory dust in ways without surfacing. For them it will be necessary the use of acrylic copolymer type products which compress the ground environmentally friendly and with competitive price.

4.2 Maintenance of Facilities

Solaben 3 Plant has a surface higher to 100 Ha. The maintenance of the plant also includes an adequacy of all infrastructures for a proper operation and assuring the durability of facilities, such as parking, buildings, water connections, gas pipelines, lighting, fences…

 

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5. Maintenance of the Steam Turbine and Generator

5.1 General

Modern surveillance procedures of equipments are detailed below, as well as regular inspections and partial and full special revisions based on the long term maintenance agreement with Siemens, with the aim of reaching the highest availability and power with the same investment.

The maintenance keeps the standard conditions of components, while full revision takes those components back to these standard conditions.

Some of these actions are susceptible to planning, especially those stoppages with several days of duration, therefore to minimize the economic expense of them and to keep in high values the availability of the plant they will be planned during winter periods with low production or lack of production.

Components are submitted to wears and breakages by physical and/or chemical reactions, these wears and breakages may occur due to normal wears, aging, breakages due to corrosions or unexpected breakages.

Assuming that there are no abnormal parameters during the turbine operation and during controls, which will be carried out regularly following operation instructions, the following inspections and revisions will be performed:

 

•

An inspection after one year operation and between each partial and full revision.

 

•

A partial revision [after earlier of the maximum operating hours of 25,000 or 700 start-ups].

 

•

A full revision [after earlier of the maximum operating hours of 50,000 or 1,400 start-ups].

 

•

A full revision [after earlier of the maximum operating hours of 100,000 or 2,800 start-ups].

Regardless of the equivalent amount of operation hours, inspections and revisions may be carried out before reaching the maximum time foreseen for them (3 years for partial revision and 6 for full revision), as necessary, in order to guarantee the operating reliability in such a way that may be detected and repaired factors that do not depend on the operation time of the turbine like corrosion due to stoppages, alignment changes due to foundation deposition, etc.

5.2 Inspection (during 2-3 days)

Inspection, after one year operation, of:

 

•

The operation of all components with respect to

 

-

Follow-up

 

-

Security

 

-	Protection

will be checked and, if necessary, adjusted.

 

•

It shall be carried out the verifying/inspection actions described in the operation instructions.

 

•

During the turbine operation will be carried out the following checks:

 

-	Measurement of the steam consumption.

 

-	Determination of the internal performance.

 

-	Comparison of pressures with previous values, features at the different load points.

 

-	Comparison of housing temperature.

 

-	Vibration measurement.

 

-	Pressures and temperatures of the bearing oil.

 

-	Leaks of oil, steam and cooling water.

 

•

Checks during the stoppage and cooling of the turbine:

 

-	Stoppage time operating from normal speed to turning gear speed and from said speed to stoppage.

 

-	Real consumption in turning gear conditions.

 

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-	Noises in axis and glands.

All values must be compared to the reference ones (initial measurement).

5.3 Partial Revision (during 3-5 days)

During partial revision ([after the earlier of the maximum operating hours of 25,000 or 700 start-ups[) the tasks to be carried out will be the following ones:

In turbine:

 

•

Check of bearings including: check of external diameters (bearing and gland plays, rotor axial displacement).

 

•

Expiry date check.

 

•

Disassembly of the device of emergency disconnection, of control and non-return valves, check of valve seats and surface guides, besides closure springs.

 

•

Check of the coupling and alignment between the turbine and the conductive machine.

 

•

Check of control and protection equipments, with special attention to those components susceptible to contamination and wear.

 

•

Boroscope test (if possible).

 

•

Check of the turbine exhaust section through the manhole (if possible).

 

•

Check of the seal steam and drainage system.

In generator:

 

•

Clean and check the air Cooling System.

 

•

Check the driver dynamo.

 

•

Check the seal ring of bearing oil.

 

•

Check stator and rotor of the generator (electric checks).

5.4 Full revision (approximate duration of 10 days)

During the full revision ([after the earlier of the maximum operating hours of 50,000 or 1,400 start-ups]) the tasks to be carried out will be the following ones:

 

•

Check of all components after their disassembly, specially joints and sliding surfaces, looking for damages, wears, dirt, scales, possible deformations, etc.

 

•

Check of valves, nozzles and blades looking for:

 

-	Damages provoked by foreign bodies.

 

-

Wears.

 

-	Friction marks.

 

-	Erosion (especially in the last rows of blades).

 

-	Scales and deposits.

 

•

Detection of cracks in:

 

-	Steam filter.

 

-

Valves.

 

-

Housings.

 

-	Rotor and guide blades.

 

-

Bearings.

 

-	Couplings.

 

-	Internal steam lines.

 

•

Check of the rotor trim.

 

•

Check of alignment and internal plays.

 

•

Check of glands and oil retaining neck looking for frictions and deformations.

 

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•

Check of threaded bolts looking for cracks and permanent expansions comparing them to the original lengths.

 

•

Check of oil pumps, coolers of oil, filters and all hydraulic components looking for wears, slots, strains, replacing all diaphragms, seals, parts susceptible to wears, etc.

 

•

Check of stress and torque on external pipes.

In generator:

 

•

Clean and check the air Cooling System.

 

•

Check the driver dynamo.

 

•

Check the seal ring of bearing oil.

 

•

Check stator and rotor of the generator (electric checks).

5.5 Full revision with Steam Turbine disassembling

Full revision [after the earlier of the maximum operating hours of 100,000 or 2,800 start-ups], paying special attention to components with hot steam. This revision will consist of:

 

-	Check of breakage, ultrasounds and hardness.

 

-	Wall thickness measurement.

 

-	Sampling of grain structure in areas strongly submitted to efforts.

 

-	Mathematical calculation of the useful life based on real operation data and wall thickness measurements.

The calculation of useful life may have any of the following results:

 

-	The continuous operation without changes.

 

-	Reduction of time slots between checks.

 

-	More careful operation, reducing pressure and/or temperature and less load changes.

 

-	Replacement or rebuild of individual components.

 

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6. Maintenance of the Substation and Power Center

It will be visually checked the regulatory conditions and security and preservation condition of all elements composing the Substation and necessary maintenance operations will be carried out for its appropriate operation.

In order to carry out measurements, it will be necessary those appropriate means pursuant to what is described in the pertinent section.

6.1. Transformers.

 

•

In general they must be in good preservation condition, without oxidations or corrosions in the oil drum and tank, deformations in cooling blades.

 

•

It will be checked that during its normal operation there is no abnormal vibrations or noises, excess temperatures, relevant leaks of coolant and oil level under the minimum at 20ºC, or very higher.

 

•

If the transformer has wheels, it will be checked that they are blocked in order to avoid its movement. The anchor must be fixed to the support or rail by threaded or welded parts, or wheels must be turned.

 

•

Preservation status of main and secondary insulators, without having cracks, breakages or excess dirt. The correct fixation to the flap will be checked.

 

•

The plate will be properly fixed to the transformer drum and, if possible, visible from the cell outside since all its technical data must be readable.

 

•

The external insulation of power cables, control and signalization must not show aging, relevant tears, damages or provoke mechanic strains in insulators and other elements.

 

•

Oil analysis will be carried out by authorized laboratories and its cleaning and replacement will be performed as necessary.

6.2 Electrical Protections and Switchgear

The following checks will be carried out:

 

•

Switches and circuit breakers.- Preservation status, position indicator <<ON>> and <<OFF>>, oil level and anchor.

 

•

Isolators.- Preservation status, insulators, blades, control, interlocks and anchor, as well as their characteristics and installation.

 

•

Fuses and relays.- Preservation status, anchors, characteristics and installation.

 

•

Protection against surges (auto-valve lightning arresters), if applicable, verify their characteristics, preservation condition, installation and grounding.

 

•

In case that they may be visible from the cell outside, it will be checked the characteristics of measurement and protection transformers and, in particular, the general preservation and cleaning status, the insulation and conduit condition of cables, ground connected to metallic housings and secondary circuits and the existence of a device permitting the replacement or verification of transformers for energy measurement (with invoicing).

6.3 Control boxes and panels

It will be visually checked the regulatory conditions of those boxes used by the control of high voltage installations, with those exceptions established by the pertinent instruction.

 

•

Identification of all devices of the box, both in the front and rear side, (removable) elements, as well as (terminal) strips, connectors, wires and cables.

 

•

Internal wiring by flexible insulated cables or printed circuits. Cables will have appropriate metallic terminals.

 

•

Appropriate connectors with regulatory characteristics.

 

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•

Appropriate mechanic stiffness of structure and box and panel boards. Absence of deformations, oxidations, corrosions and vibrations. The entrance of animals damaging for the installation and possible direct contacts with parts submitted to voltage.

 

•

Rear corridors will have a minimum width of 0.8 meters.

 

•

Both the front and rear side of control boxes and panels will be duly illuminated.

6.4 Electrical circuits

The check of bus bars and electrical conduits will be carried out inspecting visually the following points:

 

•

Separation between circuits and electrical conduits with high and low voltage, checking that there is the necessary insulation in order to prevent dangerous voltages.

 

•

Status of the electrical conductors and their connections, they must not have deformations, corrosions, elements with damages, lack of fixation, defective connections or heating signs. Also the appropriate identification of circuits and conductors will be verified.

 

•

Conduits will have to be made and located in such a way that they do not represent mechanic efforts which may damage the rest of the installation. So the fixation of conductors, trays and supports will be checked and there must not be deformations, corrosions or lack of stability.

 

•

It will be verified that conductors or conduits are not located on or covered by nonself- extinguishing fuel materials.

 

•

Manholes, trenches and galleries must be clean and without humidity. It will be verified the placement of covers and closures in order to prevent possible accidents in corridors or transitory areas.

 

•

In conduits with isolated conductors it will be checked that insulating wraps don’t have tears, breakages, degradation or defects limiting their security and not admitting excess curvatures, lack of fixation or that they be directly lying on the ground.

 

•

Auxiliary cables of measurement, control, etc., will be kept separated from high voltage cables by partitions in the inside of ground metallic conduits or tubes.

 

•

For conduits with bare conductors, on supporting insulators, it will be checked that the diameter of the copper stems is not lower than 0.8 cm, or equivalent for other type of profiles and material.

 

•

In case of stiff conductors covered with insulating material, it will be checked the security distances against contacts, being considered as bare conductors.

 

•

Insulators and terminations will be properly fixed, without cracks or broken elements and they must be clean and without humidity.

 

•

The passage of conduits and conductors through 4 elements of the construction will be checked. It must maintain the established security and isolation conditions.

 

•

At last it will be checked the minimum distance between Phase-Ground and between air Phases, which will be of 27 cm.

6.5 General Maintenance for Internal Electrical Installations

The regulatory conditions of the internal installations will be checked carrying out the following checks:

 

•

General status of the premise or building which must be clean and without humidity.

 

•

Gateways.- Characteristics, accessibility, closure, anchor, corrosions, non-protected holes, impermissible deformations, etc.

 

•

Passages and accesses.- They must be free of obstacles, non-sliding flooring, condition and characteristics of scales, trapdoors and other access elements to premises and buildings. Width and height free of corridors, check of distances to energized elements, absence of obstacles, etc.

 

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•

Absence inside the premises of conduits not involved in the Service, such as water, heating system, steam,...Check of the type of sewage, if applicable, in order to prevent water leaks inside the premise. If there is sewage the transformer cells or devices using oils or other flammable dielectric substance with a capacity superior to 50 liters, then separation partitions will be placed between them. It will be verified their existence, characteristics and condition.

 

•

It will be verified the existence, characteristics and condition of protection screens on cells containing switches with flammable dielectric oil, locally switchable.

 

•

Check of existing, natural or forced ventilation.- Operation and internal temperature without exceeding the 40%. Besides the characteristics of spaces for ventilation and vents will be checked.- Protection against contacts, water leaks and animals, etc.

Installation of insulators for the passage of air lines to the inside of the plant.- Fixation, characteristics, breakages, dirt, water leaks, etc., as well as the passage of conduits through building walls inside premises.

 

•

Signalization.- Signs of existence of high voltage installations in gateways, cells and other points where, due to the installation characteristics or its equipment, are required.

It will be checked the existence of these signs, fixation, readability and its correspondence to the homologated types. Installation diagram, at least unifilar and general service instructions.- Fixation, readability. They must be updated and contain all necessary data to carry out maneuvers with total security.

 

•

Fire protection system.- Characteristics, condition of functionality and preservation, of fire extinguishers and fixed extinguishing systems. In this case, there must be a detailed plan of the system and its operation instructions.

 

•

Existence and characteristics of oil collector devices.

 

•

Illumination and emergency lighting.- Existence, operation, effectiveness, etc.

 

•

Material storage inside the plant.- Absence of foreign stored materials, walkway obstruction, contact risk, etc.

 

•

First aid instructions and elements.- Plaque with first aid instructions located in a visible

place and easily readable. If applicable, condition of the first aid material (emergency kit, trolley, fire blankets) and instructions of use. Elements and devices for maneuver.- It will be checked their existence and preservation condition. They must not have dirt, breakages or defects which reduce the security of people and things and they must meet with homologated types. If different installations belong to the same user and they are located inside a same premises or factory, these elements may be located for all Centers in an appropriate facility and properly identified. Besides there must be a sign with the location of said premise in each center.

 

•

Check of regulatory distances to elements submitted to voltage in maneuvering and inspection corridors, as well as prescriptions of protection zones against accidental contacts.

 

•

If there are prefabricated metallic units or insulators, their regulatory conditions as well as the switchgear, dirt absence, humidity, etc., insulation defects, breakages, cracks and corrosions, etc.

Interlocks, contacts, connections, etc. will be checked, as well as the ground connection and switchgear characteristic plate.

6.6 General Maintenance for external electrical installations

Visual checks listed below will be carried out:

 

•

Cleaning of plots of land where installations are located, related to scrublands, dust emanation (cobble bed or similar), etc.

 

•

Condition of fence. There must not be spaces permitting the access, corrosions, droppings, stability, height, proximity to energized elements, etc.

 

•

Likewise the condition of gateways will be checked. They must remain padlocked or similar.

 

•

Metallic elements and structures will not have corrosions, relevant oxidations or damages putting at risk its stability and security.

 

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•

It will be checked the existence of protections against the direct impact of lightings and surges provoked by them, as well as the preservation condition of the elements, stability, fixation, ground connection, etc.

 

•

If there are power centers inside the high voltage parks, the installation conditions of low voltage conduits coming out from said centers will be verified.

 

•

Check of regulatory distances to low voltage elements in service corridors and protection areas against accidental contacts inside and outside the installation premises.

 

•

With respect to the fire protection systems, it will be checked their existence and preservation condition, as well as location, proper identification, etc.

If there are transformer collecting oil trenches, it will be checked their realization, firewall and sealing, etc.

 

•

If applicable, it will be checked the installation and effectiveness of installation lighting and emergency lighting.

 

•

Elements and devices for maneuvers must be in perfect preservation condition and meet homologated types. Broken, cracked, dirty... elements will not be admitted. Placement of these elements must be perfectly identified. The material must be designed for utilization voltages of the installation and its characteristics shall be the appropriate ones.

 

•

Facilities to carry out first aids will be properly located in well visible places and readable.

If applicable, elements to carry out first aid operations must be in perfect use condition and their location must be identified.

 

•

In installations there must be an updated unifilar diagram and the utilization and maneuver guidelines.

Its readability and location in a visible place will be checked.

6.7 Ground Connection Installations

The following checks and inspections will be visually carried out:

 

•

Space between protection and service ground installations.

Impossibility of simultaneous contact between circuits or their parts, of protection and service ground installations. Condition of the ground installation. Appropriate cable fixation, absence of corrosions, deformations, lack of section (broken wires), damaged joint parts and connections, wrong lay-outs, lack of mechanical protection, defect in conductor isolations (in case of having an insulating cover), etc.

Ground points. Existence and installation, proper characteristics and preservation condition.

It will be checked that there is no interleaved switches or fuses in ground lines, except from the ground point to measure the grounding, regardless of the installation. It will be checked the ground interconnection of all metallic masses of the center which are not regularly energized, except from defect cases.

 

•

It will be checked the service ground connection of transformer neutrals which need it, directly or by impedances, the alternator neutral and other devices or equipments which need it, low voltage circuits of measurement transformers, limiters, unloaders, auto-valve and lightning arresters to eliminate surges or atmospheric impacts and ground bypass elements of ground isolators.

 

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7. Maintenance of the High Voltage Electrical Line

The inspection and maintenance of the High Voltage electrical line will be carried out by the visual check of all its accessible elements and parts and the maintenance operations necessary for its proper operation will be performed.

For the measurement of ground connection resistance of supports and the continuity of protection conductors, it will be necessary a tellurometer. Said resistance of ground connection diffusion must not exceed 20 ohms.

7.1 Conductors

The following points will be checked:

 

•

General condition of conductors and joint and connection parts. They must not have signs of oxidations, important deformations or breakages.

 

•

In conduits with isolated conductors, check of the external wrap condition, cable installation and fixation and lack of curvatures or dangerous deformations, joints and connections.

 

•

Check as closely as practicable that connection do not support the voltage exerted by conductors.

7.2 Ground cables

The following points will be checked:

 

•

Joints and connections by appropriate parts.

 

•

Check of the general condition: oxidations, important deformations, breakages, etc.

 

•

Connection of ground cable to each metallic support.

 

•

Joint of line fittings to the ground connection cable.

7.3 Fittings

The following checks will be carried out:

 

•

General condition with respect to deformations, breakages and corrosions. They must not have damages which put people or properties at risk.

 

•

The correct fixation will be checked.

 

•

It will be checked that there is no relevant slides in the conductor clamps.

7.4 Insulators

The following points will be checked regularly:

 

•

Absence of corrosions, breakages, deformations, etc., in the metallic and insulating parts.

 

•

Proper fixation of insulators and chains.

 

•

Check of the upstanding of insulators and chains.

7.5 Supports and foundation

Check of the following points:

 

•

Check of the upstanding of supports, without admitting collapses that may put at risk the stability of the line.

 

•

Preservation Status. Deformations, corrosions, lack of material, etc.

 

•

Check of the existence of all screws or rivets, check of the non-existence of undone elements.

 

•

Check of crossheads, with the same criteria aforementioned.

 

•

Check of guys or neutrals.- Absence of corrosions or deformations, separation of active conductors, fixation, isolation, protection, etc.

 

•

Verification of supports numbering through all its length.

 

•

Check of risk indicators.- Placement, readability, etc.

 

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•

Inspection of each support foundation.- Preservation, absence of cracks, spaces, ground anchor, stability, etc.

7.6 Connections of ground supports and fittings

The following points will be visually checked:

 

•

Connection of ground supports, fittings and guys.- Joint pats, oxidations, relevant corrosions, torques, condition of the PE bus bar, etc.

 

•

Mechanic protection of the conductor.

 

•

Ground connection of housings and metallic parts of switches, isolators and other switching devices.

7.7 Security Distances

Distances of conductors to the ground, supports and between conductors will be checked:

 

•

Distance of conductors to the ground or unseaworthy water surface lower than 6 m.

 

•

Distance of conductors between them and between these and supports, not lower than regulatory values.

 

•

In crosspoints with lines, roads of minimum security distances.

 

Page 47 of 47

Exhibit 21.1

List of Subsidiaries of Abengoa Yield plc

Effective as of the date of the Asset Transfer

 

Subsidiary		Jurisdiction of Incorporation or Organization
Abengoa Cogeneración Tabasco, S. de R.L. de C.V.		Mexico
Abengoa Concessions Infraestructures, S.L.		Spain
Abengoa Concessions Perú, S.A.		Peru
Abengoa Solar US Holdings Inc.		Delaware
Abengoa Solar Holdings USA Inc.		Delaware
Abengoa Transmisión Norte, S.A.		Peru
Abengoa Transmisión Sur, S.A.		Peru
ACT Holding S.A. de C.V.		Mexico
ASO Holdings Company LLC		Delaware
Arizona Solar One LLC		Delaware
Mojave Solar Holdings LLC		Delaware
Mojave Solar LLC		Delaware
Palmatir, S.A.		Uruguay
Palmucho, S.A.		Chile
Solaben Electricidad Dos, S.A.		Spain
Solaben Electricidad Tres, S.A.		Spain
Transmisora Mejillones, S.A.		Chile
Transmisora Baquedano, S.A.		Chile