Atlantica Sustainable Infrastructure Stock

Atlantica Sustainable Infrastructure plc (Atlantica) operates as a sustainable infrastructure company. The company’s majority of its business is in renewable energy assets. The company complements its renewable assets portfolio with storage, efficient natural gas and transmission infrastructure assets, as enablers of the transition towards a clean energy mix. The company also holds water assets, a relevant sector for sustainable development.

As of December 31, 2022, the company owned or had an interest in a portfolio of assets and new projects under development diversified in terms of business sector and geographic footprint. The company’s portfolio consists of 44 assets with 2,161 MW of aggregate renewable energy installed generation capacity (of which approximately 73% is solar), 343 MW of efficient natural gas-fired power generation capacity, 55 MWt of district heating capacity, 1,229 miles of electric transmission lines and 17.5 M ft3 per day of water desalination.

The company owns and manages operating facilities and projects under development in North America (United States, Canada and Mexico), South America (Peru, Chile, Colombia and Uruguay) and EMEA (Spain, Italy, Algeria and South Africa). The company’s assets generally have contracted or regulated revenue. As of December 31, 2022, the company estimated that its assets had a weighted average remaining contract life of approximately 14 years3.

Operations

The company’s assets are organized into the following four business sectors: Renewable Energy, Efficient Natural Gas and Heat, Transmission Lines and Water.

Business Strategy

The company’s strategy focuses on climate change solutions in the power and water sectors. The company intends to provide clean electricity, transmission capacity and desalinated water in a safe, reliable and environmentally responsible way.

The company intends to take advantage of, and leverage its growth strategy on, favorable trends in clean power generation, energy scarcity and the global focus on the reduction of carbon emissions. The company intends to grow its business maintaining renewable energy as its main segment with a primary focus on North America and Europe.

Additionally, the company expects to continue investing in the development and construction of new assets, in some cases on its own and in other cases with partners. The company has entered into and intend to continue to enter into agreements or partnerships with developers.

The company’s plan for executing this strategy includes the following key components: focus on stable assets in the power and water sectors, including renewable energy, storage, efficient natural gas and heat, transmission assets as well as water assets, generally contracted or regulated; maintain diversification across its business sectors and geographies; grow its business through the optimization of the existing portfolio and through investments in the expansion of its current assets; and grow its business by developing new projects and investing in new assets in the business sectors where it is present.

Operations

Renewable energy

Solana

Solana is a 250 MW net (280 MW gross) solar plant, wholly owned by the company, located in Maricopa County, Arizona, approximately 70 miles southwest of Phoenix. Solana uses a conventional parabolic trough solar power system to generate electricity, including a 22-mile 230kV transmission line and a molten salt thermal energy storage system. Solana reached COD in October 2013.

Power Purchase Agreements (PPA): Solana has a 30-year, fixed-price PPA with Arizona Public Service Company, or APS, for at least 110% of the output of the project. The PPA provides for the sale of electricity at a fixed base price approved by the Arizona Corporation Commission (ACC) with annual increases of 1.84% per year. The PPA includes on-going performance obligations. The PPA expires in October 2043.

Mojave

Mojave is a 250 MW net (280 MW gross) solar plant wholly-owned by the company located in San Bernardino County, California, approximately 100 miles northeast of Los Angeles. Mojave relies on a conventional parabolic trough solar power system to generate electricity. Mojave reached COD in December 2014.

PPA: Mojave has a 25-year, fixed-price PPA with Pacific Gas & Electric Company, for 100% of the output of Mojave which began on COD. The PPA provides for the sale of electricity with seasonal adjustments and adjustments for time of delivery. Mojave can deliver and receive payment for at least 110% of contracted capacity under the PPA. The PPA expires in 2039.

Coso

Coso is a platform of nine geothermal units with a total net capacity of approximately 135 MW (megawatts) located in Inyo County, California. This asset provides baseload renewable generation to CAISO.

PPAs: The company has three PPAs with fixed prices:

Vento II

Vento II is a portfolio of four wind assets located in the states of Illinois, Texas, Oregon and Minnesota in the United States in which Atlantica has a 49% equity interest. Operation and maintenance services are provided by EDP Renewables North America (“EDPR”) for the four assets.

Elkhorn Valley

Elkhorn Valley is a 101 MW wind asset in Union County, Oregon, which entered into operation in November 2007.

PPA: Elkhorn Valley has a PPA with Idaho Power Company at a fixed price, expiring in December 2027.

Prairie Star

Prairie Star is a 101 MW wind asset in Filmore County, Minnesota, which entered into operation in December 2007.

PPA:Prairie Star has a PPA with Great River Energy. The PPA expires in December 2027 with the option to extend it until 2036.

Twin Groves II

Twin Groves II is a 198 MW wind asset in McLean County, Illinois, which entered into operation in March 2008.

PPA: Twin Groves II has a PPA with Exelon Generation Co LLC at a fixed price, expiring in March 2026.

Lone Star II

Lone Star II is a 196 MW wind asset in Albany, Texas, which entered into operation in May 2008.

PPA: Lone Star II had a PPA with EDPR North America, LLC at a fixed price that expired in January 2023. Together with the company’s partner EDPR it has decided to sell electricity at market prices in the short-term and re-evaluate in the future the option to repower the asset.

Chile PV 1, Chile PV 2 and Chile PV 3

In April 2020, the company made an investment in the creation of a renewable energy platform in Chile, together with financial partners, where it owns approximately a 35% stake and has a strategic investor role. The platform intends to make further investments in renewable energy in Chile and sign PPAs with credit-worthy off-takers.

Chile PV 1, Chile PV 2 and Chile PV 3 are three solar plants with 55 MW, 40 MW, and 73 MW, respectively. Chile PV 1 reached COD in May 2016, Chile PV 2 reached COD in August 2017 and Chile PV 3 reached COD in December 2014.

PPA: Chile PV 1 and Chile PV 3 sell their production to the Chilean power market. Chile PV 2 has PPAs signed for part of its production.

La Sierpe

La Sierpe is a 20 MW solar PV plant in Colombia, wholly owned by the company, which reached COD in October 2021.

PPA: La Sierpe has a 15-year, fixed-price PPA in local currency with Coenersa, the largest independent electricity wholesaler in Colombia. The PPA provides for the sale of electricity at a fixed base price indexed to local Consumer Price Index.

La Tolua

La Tolua is a 20 MW solar PV (photovoltaic power) asset in Colombia, wholly owned by the company.

PPA: The asset has a 10-year PPA (commencing on COD) in local currency with Coenersa, the largest independent electricity wholesaler in Colombia.

Tierra Linda

Tierra Linda is a 10 MW solar PV asset in Colombia, wholly owned by the company.

PPA: The asset has a 10-year PPA (commencing on COD) in local currency with Coenersa, the largest independent electricity wholesaler in Colombia.

Albisu

Albisu is a 10 MW solar PV asset near the city of Salto, in Uruguay, wholly owned by the company, which reached COD in January 2023.

PPA: The asset has a 15-year PPA, for approximately 60% of the plant’s capacity, starting in July 2023, with Montevideo Refrescos, S.R.L, a subsidiary of Coca-Cola FEMSA, S.A.B. de C.V.

Palmatir

Palmatir is an onshore, 50 MW wind farm facility wholly owned by the company, located in Tacuarembo, 170 miles north of the city of Montevideo, Uruguay. Palmatir has 25 wind turbines supplied by Siemens, and each turbine has a capacity of 2 MW. The plant reached COD in May 2014.

PPA: Palmatir signed a PPA with UTE in September 2011 for 100% of the electricity produced. UTE pays a fixed tariff under the PPA, which is denominated in U.S. dollars and is partially adjusted annually based on a formula referring to U.S. PPI, Uruguay’s PPI and the applicable UYU/U.S. dollar exchange rate.

Cadonal

Cadonal is an onshore, 50 MW wind farm facility wholly owned by the company, located in Flores, 105 miles north of the city of Montevideo, Uruguay. Cadonal has 25 wind turbines of 2 MW each which were supplied by Siemens. The plant reached COD in December 2014.

PPA: Cadonal signed a PPA with UTE on December 28, 2012, for 100% of the electricity produced. UTE pays a fixed tariff under the PPA, which is denominated in U.S. dollars and is partially adjusted annually based on a formula referring to U.S. PPI, Uruguay’s PPI and the applicable UYU/U.S. dollar exchange rate.

Melowind

Melowind is an onshore, 50 MW wind farm facility wholly owned by the company, located in Cerro Largo, 200 miles north of the city of Montevideo, Uruguay. Melowind has 20 wind turbines supplied by Nordex, each with a capacity of 2.5 MW. The asset reached COD in November 2015.

PPA: Melowind signed a PPA with UTE in August 2012, for 100% of the electricity produced. UTE pays a fixed tariff under the PPA, which is denominated in U.S. dollars and is partially adjusted every year based on a formula referring to U.S. PPI, Uruguay’s PPI and the applicable UYU/U.S. dollar exchange rate.

Mini-hydro Peru

Mini-hydro Peru is a 4 MW mini-hydroelectric power plant located approximately 99 miles from Lima. The plant reached COD in April 2012.

Solar Assets in Spain

The company owns a portfolio of solar assets in Spain which are all subject to the same regulation. Renewable assets in Spain sell the power they produce into the wholesale electricity market and receive additional payments from the CNMC, the Spanish state-owned regulator. Solar power plants receive, in addition to the revenue from the sale of electricity in the market, two monthly payments. These payments consist of a fixed monthly payment based on installed capacity, and a variable payment based on net electricity produced.

The portfolio of solar assets in Spain consists of solar platforms generally of two 50 MW solar plants, with the exception of Solnova 1, 3 & 4, (which has three 50 MW solar plants) and PS 10 & 20 (which is a 31 MW solar power complex). Except for PS 10 & PS 20 and Seville PV, all the assets rely on a conventional parabolic trough solar power system to generate electricity, which is similar to the technology used in other solar power plants that the company owns in the U.S.

Solaben 2 & 3

Solaben 2 and Solaben 3 are two 50 MW solar plants located in Extremadura, Spain. Atlantica owns 70% of each asset and Itochu, a Japanese trading company, owns the remaining 30%. The assets reached COD in June and October 2012, respectively.

Solacor 1 & 2

Solacor 1 & 2 are two 50 MW solar plants located in Andalusia, Spain. Atlantica owns 87% and JGC Corporation, a Japanese engineering company, holds the remaining 13%. The assets reached COD in February and March 2012, respectively.

PS 10 & 20

PS 10 & 20 is a 31 MW solar complex wholly owned by the company located in Andalusia, Spain. PS 10 reached COD in 2007 and PS 20 reached COD in 2009.

Helios 1 & 2

Overview. Helios 1 and Helios 2 are two 50 MW solar plants wholly owned by the company located in Castilla-La Mancha, Spain. The assets reached COD in March and June 2012.

Helioenergy 1 & 2

Helioenergy 1 and Helioenergy 2 are two 50 MW solar plants wholly owned by the company located in Andalusia, Spain. They reached COD in April and August 2011, respectively.

Solnova 1, 3 & 4

Solnova 1, Solnova 3 and Solnova 4 are three 50 MW solar plants wholly owned by the company located in Andalusia, Spain, in the same complex as PS-10 and PS-20. Solnova 1, 3 & 4 projects reached COD in February, June, and July 2010, respectively.

Solaben 1 & 6

Solaben 1 and Solaben 6 are two 50 MW solar plants wholly owned by the company located in Extremadura, Spain, in the same complex as Solaben 2 & 3. Solaben 1 & 6 reached COD in September and October 2013, respectively.

Seville PV

Seville PV is a 1 MW photovoltaic farm located alongside PS 10 & 20 and Solnova 1, 3 & 4, in Andalusia, Spain. Seville PV reached COD in 2006.

Italy PV 1, 2, 3 & 4

The company owns 7 PV assets in Italy which have a combined capacity of 9.8 MW. Italy PV 1 is a 1.6 MW solar PV plant, which reached COD in December 2010. Italy PV 2 is a 2.1 MW solar PV plant which reached COD in April 2011. Italy PV 3 is a portfolio of 4 PV assets with a total capacity of 2.5 MW which reached COD between March and May 2012. Italy PV 4 is a 3.6 MW solar PV plant which reached COD in July 2011.

PPA: The assets have contracted revenues through a regulated feed in premium in addition to merchant revenues for the energy sold to the wholesale market.

Kaxu

Kaxu is a 100 MW solar plant located in Pofadder, Northern Cape Province, South Africa. The project company is currently 51% owned by Atlantica South Africa (Pty) Ltd, which the company fully owns, while the remaining is owned by Industrial Development Corporation of South Africa (29%) and Kaxu Community Trust (20%). Kaxu relies on a conventional parabolic trough solar power system to generate electricity. This technology is similar to the technology used in solar power plants that the company owns in the U.S. and Spain. In addition, Kaxu has a molten salt thermal energy storage system. The asset reached COD in January 2015.

PPA: Kaxu has a 20-year PPA with Eskom, under a take-or-pay contract for the purchase of electricity up to the contracted capacity of the facility, which expires in February 2035. Eskom purchases all the output of the Kaxu plant under a fixed-price formula in South African Rand subject to indexation to local inflation.

Eskom is a state-owned, limited liability company, wholly owned by the Republic of South Africa. Eskom’s payment guarantees are underwritten by the South African Department of Mineral Resources and Energy, under the terms of an implementation agreement. Eskom’s credit ratings are CCC+ from S&P, Caa1 from Moody’s and BB- from Fitch. The Republic of South Africa’s credit ratings are BB- from S&P, Ba2 from Moody’s and BB- from Fitch.

In addition, in 2019, the company entered into a political risk insurance agreement with the Multinational Investment Guarantee Agency for Kaxu. The insurance provides protection for breach of contract up to $58 million in the event of the South African Department of Mineral Resources and Energy not complying with its obligations as guarantor. This insurance policy does not cover credit risk.

Efficient Natural Gas and Heat

Calgary District Heating

Overview. Calgary is a 55MWt district heating facility located in the city of Calgary in Alberta, Canada which reached COD in 2010. Calgary District Heating is a wholly owned subsidiary of Atlantica.

Thermal Off-take Agreements: The asset has capacity-based thermal heat revenue with inflation indexation, investment grade off-takers and an 18-year average contract life remaining. Contracted capacity and pass-through volume payments represent approximately 80% of the total revenue. Calgary District Heating is well-positioned to provide a pathway to reduced GHG heat.

ACT

ACT is a gas-fired cogeneration facility 99.99% owned by the company through ACT Energy Mexico, S. de R.L. de C.V., or ACT Energy Mexico. The asset is 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. ACT reached COD in 2013.

Conversion Services Agreement: On September 18, 2009, ACT entered into the Pemex Conversion Services Agreement, with Pemex (Pemex CSA), under which ACT is required to sell all of the plant’s thermal and electrical output to Pemex. The Pemex CSA has an initial term of 20 years from the in-service date and will expire on March 31, 2033. The Pemex CSA requires Pemex to supply the facility, free of charge, with the fuel and water necessary to operate ACT, 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.

Monterrey

Monterrey is a 142 MW gas-fired engine facility, including 130 MW installed capacity and 12 MW battery capacity. The company owns 30% of Monterrey through Pemcorp S.A.P.I. de C.V., while Arroyo Energy owns the remaining 70%. The asset is located in Mexico and reached COD in the third quarter of 2018. The power plant is configured with seven Wärtsilä natural gas internal combustion engines.

PPA. It is a U.S. dollar-denominated PPA with two international large corporations engaged in the car manufacturing industry. The PPA had originally a 20-year term starting at COD. In May 2022, together with the company’s partner, it entered into a 7.5-year PPA extension with the same off-takers, such that the PPA ends in 2046. The extension will involve an investment to achieve improvements in the asset to provide, among other things, additional battery capacity and additional redundancy of electric power supply.

Transmission Lines

ATN

ATN is a 365 miles transmission line located in Peru wholly owned by the company, which is part of the Guaranteed Transmission System and comprises several sections of transmission lines and substations. ATN reached COD in 2011. On December 28, 2018, ATN S.A. completed the acquisition of a power substation and two small transmission lines to connect the company’s line to the Shahuindo (ATN expansion 1) mine located nearby. In October 2019, the company also closed the acquisition of ATN Expansion 2.

Concession Agreement: Pursuant to the initial concession agreement, the Peruvian Ministry of Energy and Mines, on behalf of the Peruvian Government, granted ATN a concession to construct, develop, own, operate and maintain the transmission line and substations. ATN owns all assets that it has acquired to construct and operate ATN for the duration of the concession. The ownership of these assets will revert to the Peruvian Ministry of Energy and Mines upon termination of the initial concession agreement.

ATN has a 30-year fixed-price tariff base denominated in U.S. dollars that is adjusted annually in accordance with the U.S. Finished Goods Less Foods and Energy Index as published by the U.S. Department of Labor. The company’s receipt of the tariff base is independent from the effective utilization of the transmission lines and substations. In addition, ATN Expansion 1 has a 15-year Transmission Service Agreement (TSA) and ATN Expansion 2 has two 20-year TSAs and one 30-year TSA denominated in U.S. dollars.

ATS

ATS is a 569 miles transmission line located in Peru wholly owned by us. ATS is part of the Guaranteed Transmission System and comprises several sections of transmission lines and substations. ATS reached COD in 2014.

Concession Agreement: The initial concession agreement became effective on July 22, 2010 and will expire 30 years after achieving COD. Pursuant to the initial concession agreement, ATS will own all assets it has acquired to construct and operate the ATS Project for the duration of the concession. These assets will revert to the Peruvian Ministry of Energy and Mines upon termination of the initial concession agreement.

The concession agreement has a fixed-price tariff base denominated in U.S. dollars and is adjusted annually in accordance with the U.S. Finished Goods Less Foods and Energy Index as published by the U.S. Department of Labor. The company’s receipt of the tariff base is independent from the effective utilization of the transmission lines and substations related to the ATS Project.

ATN 2

ATN 2, is an 81 miles transmission line located in Peru wholly owned by the company, which is part of the Complementary Transmission System. ATN 2 reached COD in June 2015.

ATN 2 has an 18-year, fixed-price tariff base contract denominated in U.S. dollars with Minera Las Bambas. The tariff is partially adjusted annually in accordance with the U.S. Finished Goods Less Foods and Energy Index as published by the U.S. Department of Labor. The company’receipt of the tariff base is independent from the effective utilization of the transmission lines and substations related to ATN 2.

Minera Las Bambas is owned by a partnership consisting of a China Minmetals Corporation subsidiary (62.5%), a wholly owned subsidiary of Guoxin International Investment Co. Ltd (22.5%) and CITIC Metal Co. Ltd (15.0%).

Quadra 1 & Quadra 2

Overview. Quadra 1 is a 49-mile transmission line in Chile. 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. Quadra 2 is a 32-mile transmission asset that provides electricity to the seawater pump stations owned by the Sierra Gorda SCM in Chile. Quadra 1 and Quadra 2 reached COD in December 2013 and January 2014, respectively.

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 grants in favor of Sierra Gorda a call option over the transmission lines, exercisable at any time during the life of the contract.

Palmucho

Palmucho is a transmission line in Chile of approximately 6 miles. Palmucho has a 14-year concession contract with Enel Generacion Chile, whereby 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. O&M services are provided by Energysur.

Chile TL 3

Chile TL 3 is a 50-mile transmission line in operation in Chile which reached COD in 1993. It generates revenue under the current regulation in Chile. The asset has a fixed-price tariff determined by the regulator and is partially adjusted annually in accordance with the U.S. and Chilean Consumer Price Indexes and currency exchange rates.

Chile TL 4

Chile TL 4 is a 63-mile transmission line in operation in Chile which reached COD in 2016. The asset has fully contracted revenues in U.S. dollars, with inflation escalation and 50-year contract life. The off-takers are several mini-hydro plants that receive contracted or regulated payments from third parties.

Water

Honaine

Honaine is a water desalination plant of 7 M ft3 per day capacity located in Taffsout, Algeria. The company indirectly owns 25.5% through Myah Bahr Honaine Spa (MBH), Algerian Energy Company, or AEC, owns 49% and Sacyr owns the remaining 25.5% of Honaine.

Honaine reached COD in July 2012. AEC is the Algerian agency in charge of delivering Algeria’s large-scale desalination program. The technology used in the Honaine plant is currently the most commonly used in this kind of asset. It consists of desalination using membranes by reverse osmosis.

Honaine had a corporate income tax exemption until 2021. After that period, the tariff was adjusted accordingly.

Concession Agreement. The water purchase agreement is a 25-year take-or-pay contract with Sonatrach/Algerienne des Eaux, or ADE, from COD. The tariff structure is based upon plant capacity. Tariffs are adjusted monthly based on the indexation mechanisms that include local inflation, U.S. inflation and the exchange rate between the U.S. dollar and local currency.

Skikda

The Skikda project is a 3.5 M ft3 per day capacity water desalination plant located in Skikda, Algeria. Skikda is located 510 km east of Algiers. The company indirectly owns 34.2% of Skikda through Aguas de Skikda, or ADS, AEC owns 49% and Sacyr owns the remaining 16.8%. The company owns a 67% of the holding company which in turns has a 51% equity stake in Skikda, as a result it fully consolidates the asset.

Skikda reached COD in 2009 and uses the same technology as Honaine.

Skikda had a corporate income tax exemption until 2019. After that period, and the tariff was adjusted accordingly.

Concession Agreement: The water purchase agreement is a 25-year take-or-pay contract with Sonatrach/ADE from COD. The tariff structure is based upon plant capacity. Tariffs are adjusted monthly based on the indexation mechanisms that include local inflation, U.S. inflation and the exchange rate between the U.S. dollar and local currency.

Tenes

Tenes is a 7 M ft3 per day capacity water desalination plant located 208 km west of Algiers, in Algeria. Tenes uses the same technology as Honaine and Skikda.

Since January 2019, the company has an investment in Befesa Agua Tenes, the owner of 51.0% stake in Tenes, through a secured loan to be reimbursed by Befesa Agua Tenes, together with 12% per annum interest, through a full cash-sweep of all the dividends to be received from the asset.

Concession Agreement: The water purchase agreement is a 25-year take-or-pay contract with Sonatrach/ADE from COD.

Development Pipeline

The company is developing new projects in most of its core geographies. By focusing its development activities on locations where the company already has assets in operation and by working in many cases with partners, it has been able to maintain its development cost.

The company has a pipeline of assets under development, including both repowering or expansion opportunities of existing assets and greenfield development, of approximately 2.0 GW7 of renewable energy and 5.6 GWh7 of storage. Approximately 40% of the projects are PV, 40% storage and 19% wind, while 18% of the projects are expected to reach ready to build (Rtb) in 2023 or 2024, 17% are in an advanced development stage and 65% are in early stage. 27% correspond to expansion or repower opportunities of existing assets and 73% to greenfield developments.

Customers

The company derives its revenue from selling electricity, electric transmission capacity, water desalination capacity and heat. The company’s customers are mainly comprised of electrical utilities and corporations, with which it typically has entered into PPAs. The company also employs concession contracts, typically ranging from 20 to 30 years. The company also has regulated assets in Spain, Chile (Chile TL 3) and Italy. Chile PV 1, Chile PV 3 and Lone Star II. The company’s main contracts in its business also include the project finance contracts with banks or financial institutions and the operation and maintenance contracts of each of its assets.

Seasonality

The company expects to derive a majority of its annual revenue in the months of May through September, when solar generation is the highest in the majority of its markets and when some of its off-take arrangements provide for higher payments to it.

History

The company was founded in 2013. It was incorporated in England and Wales as a private limited company in 2013 under the name Abengoa Yield Limited. In 2014, the company was re-registered as a public limited company under the name Abengoa Yield plc. The company was formerly known as Abengoa Yield plc and changed its name to Atlantica Yield plc in 2016 to Atlantica Sustainable Infrastructure plc in 2020.