Santiago Seage - CEO Francisco Martinez-Davis - CFO.

Julien Dumoulin-Smith - UBS Sophie Karp - Guggenheim Securities Michael Morosi - Avondale Partners Jeff Friedman - GMO Angie Storozynski - Macquarie.

Welcome to the Atlantica Yield Full Year 2016 Financial Results Conference Call. Atlantica Yield is a total return Company that owns a diversified portfolio of contracted renewable energy, power generation, electric transmission, and water assets in North and South America and certain markets in EMEA.

Just a reminder, that this call is being webcasted live on the Internet and the replay of this call will be available at the Atlantica Yield Corporate website. Joining us for today's conference call is Atlantica Yield CEO, Santiago Seage; and CFO, Francisco Martinez-Davis.

As usual, at the end of the conference call, we will open the lines for the Q&A session. [Operator Instructions] I will now pass you over to Mr. Seage. Please sir, go ahead..

Thank you, very much. Thank you everyone for joining us today for our full 2016 earnings conference call. Please proceed to Slide 3 where we will start the presentation with some key messages. We are pleased to announce today a very strong financial result for the year, meeting the guidance we shared with you a year ago.

Our revenues have increased by 23% reaching $972 million, while further adjusted EBITDA including unconsolidated affiliates grew by a 21% reaching $772 million. In terms of cash available for distribution, the fourth quarter was excellent with more than $59 million generated. With this our CAFD for the year reached $171 million.

In second place we would like to announce that in February we have closed the refinancing of a significant part of our corporate debt with much longer maturities than before. With this milestone behind us and with a net debt reduction our amortizing project finance allows we now have a much stronger financial structure than a year ago.

In fact, we believe that on top of our stronger financial structure, we have a stronger Atlantica as we have also been able to achieve our key priorities in terms of autonomy systems and team set for 2016.

In addition, we are announcing our quarterly dividend of $0.25 per share representing an increase of more than 50% over the last quarter reflecting the waivers and forbearances obtained in the last few months. Finally, we will end up our call sharing with you our strategic priorities for 2017.

Moving on to Slide 6, we will now review the main financial figures of the year. Revenues reached $971.8 a 23% increase over the previous year. Further adjusted EBITDA including unconsolidated affiliates reached $772.1 million, 21% increase.

Finally CAFD, consolidated affiliate distribution reached more than $171 million after an excellent fourth quarter. As you can see we have met our guidance both in terms of EBITDA and CAFD. Looking at the next slide, you can see our breakdown of the results by geography and business sector.

In North America, the increase in revenues was mainly driven by higher production in Mohave, our solar plant in California which have an excellent year in 2016. In South America growth was mainly due to the acquisition of our last transmission line in Peru.

In EMEA, revenues and EBITDA have increased by almost 50%, thanks to the successful integration of acquisitions made last year. Operational performance of the assets in Spain has been excellent again in the year and in the last quarter.

Looking at our results by business sector we can see that in renewables which is clearly our largest sector representing three quarters, our total revenues have increased by 33% thanks to the acquired assets and to the excellent production levels at Mohave. In conventional power, our asset in Mexico continues demonstrating our very good performance.

In transmission lines, we positive impacts from the last acquisitions and from the compensation of resilient preferred equity investment. Finally, our water assets have performed in line with expectations. In general, all segments and geographies have delivered strong numbers in the year.

Moving to Slide 8, operational performance of our assets has been solid overall. Nevertheless we do have two out of the 21 assets where we need to improve. Within renewable, production has increased to over 3000 gigawatt hours in 2016 compared to more or less 2500 gigawatt hours last year.

Mohave has concluded an excellent second year of operation exceeding our expectations. In Spain, radiation was slightly below normal levels due in the first half of the year but these was offset during the second half of the year and our portfolio of solar assets in the region continued to show an excellent operational performance.

As we have shared with you in previous quarters, Solana has not reached our expectations yet, as we continue to perform the scheduled improvements required at the plant.

Kaxu after an excellent year experienced technical difficulties in certain equipment specifically two conventional water pumps during the last part of the fourth quarter and as a result had a weak last part of the year and beginning of 2017.

Finally our wind assets in South America have shown stable performance although wind levels remain below projections. ACT our cogeneration plant in Mexico has maintained its outstanding operational performance exceeding contractual targets.

Finally transmission lines and water plants comfortably delivered or exceeded our forecasted availability levels. I will now turn to Francisco who will take you through the financial numbers..

Thank you, Santiago, and good afternoon everyone. Please turn now to Slide 9 to discuss our operating cash flow. The solid performance of the portfolio resulted in a strong operating cash flow for the year. We have reached $334.4 million which represents a double digit growth compared with the previous year.

Investing cash flow corresponds mainly to payments made for acquisitions and finally financing cash flow amounted to negative $226.1 million and corresponds primarily to the scheduled project debt repayments, as well as the dividend paid.

Moving on to the next slide on Page 10, we have closed the year with corporate cash of $122 million, an increase of almost $80 million with respect to December 2015. In addition, cash at project level companies as of December 2016 amounted to $472 million of which $236 million was restricted and the remaining $236 million non-restricted.

Restricted cash corresponds mainly to debt service accounts required by project financing at the asset level. In addition, in 2016 we funded some additional reserve accounts after securing waivers which is the main reason for the increase.

Short term financial investments are also restricted accounts with this total liquidity reached $674 million as of December 31, 2016. As a result of the strong corporate liquidity position we can see turning now to Slide 11, how our net corporate debt has decreased.

We closed 2016 with net corporate debt of $546 million which represents a $73 million reduction compared with position at the end of 2015. This represents a net corporate debt of 2.7 times CAFD pre-corporate debt service below our internal target of three times.

In addition, net project debt amounted to approximately $4.8 billion at the end of the year, a decrease of approximately $140 million as a result of schedule debt repayments. Turning to Slide 12 we show that movement of our consolidated net debt during the year including both corporate and project debt.

Total net debt at the end of the year was reduced in excess of $200 million mainly as a result of the amount of cash generated from our operations which before interest payments amounted to $668 million.

In addition, during the year we paid $334 million of interest principally at the project debt level, $41 million in acquisitions and $36 million in dividends. As we have mentioned previously, we made principal project debt repayments of in excess of $180 million during the year. I will now turn the call over to Santiago for a strategic update..

Thank you, Francisco. If you return to Page 14 I would like to start with a review of the strategic priorities we have set for the year for 2016. As we shared with you since the beginning of last year, 2016 was going to be a transition year during which we wanted to focus on execution and on reinforcing the company.

Looking at the full year results, we have delivered the guidance we gave you both in terms of EBITDA and CAFD. Additionally, we have managed to achieve full autonomy with our own team, our own processes and our own IT systems in place running for several quarters now.

We have also been able to obtain a majority of the waivers related to our sponsor in our project finance agreements although less you know we still have a few waivers to go. And finally we have recently closed the refinancing part of our corporate debt improving our financial structure.

Francisco will now cover the details of this new financing using the Slide 15..

We are pleased to announce that we have refinanced the corporate maturity we had in December 2017 with a private placement of a Note Issuance Facility of €275 million which is approximately $290 million which we signed with a leading international infrastructure fund.

The facility has three notes of approximately $92 million each with bullet maturities maturing in 2022, 2023 and 2024. We are now in the process of receiving the funds and closing an interest rate swap and as a result we expect the cost to be in the range of 5.6% to 5.7%.

Since a portion of our cash flows are generating Euros, we have the option to issue corporate debt in U.S. dollars or euro thus benefiting from the market with better conditions. As a result, we have decided to issue debt in Euros which is a natural hedge for our Euro denominated cash flows in the portfolio.

The proceeds will be used to repay and cancel transpire the revolving credit facility. From a financial perspective this transactions provides us with a much a stronger capital structure at the corporate level, as a result of a significantly longer average life of the new debt.

In the future we intend to maintain a prudent financial policy with corporate leverage always below three times CAFD pre corporate debt service. I will now turn the call back to Santiago again..

Thank you. Briefly financing we believe is very important for the recent Francisco has mentioned. It provides us a natural hedge for our year exposure but it also creates small maturities in different years something we believe is very useful for year, for a company like us giving us additional flexibility.

Moving on to Page 16 we are pleased to announce our Q4 dividend of $0.25 per share which represents more than 50% increase versus previous quarter.

Our Board of Directors has decided to approve this significantly higher dividend reflecting the waivers and forbearances obtained in the last few months and at the same time remain prudent until we secure some of the last waivers.

Following the recent as in previous quarters, the dividend has been based on the percentage of assets for which we don't require waivers. The percentage used has increased from a 45% in our last quarter to a number that is closed to a 70%.

Moving on to Slide 17, we would like to spend one minute reminding you on reviewing the strengths of our asset portfolio - of our current asset portfolio. As you all know our weighted average life of existing assets is 21 years. We believe the longest among peers.

Additionally all of our assets have contracted or regulated revenues with credit worth of takers for a 100% of the output during 100% over the life of the contract. We nearly have no exposure to commodity risks and as you know very significant, a very high percentage of our CAFD comes from what we call availability based assets.

In addition, we believe that we have a well balanced portfolio across geographies and technologies allowing us to diversify risks and to provide access to a broader range of opportunities. Additionally as you know over 90% of our CAFD is either denominated or hedged to U.S, dollars. Finally we don't have IDRs and we only have one class of shares.

If we move on to next page another important feature, feature of our portfolio on our business model is our debt structure where you know that all or most of our assets have project debt and in all cases our project debt is very [unprincipled ][ph] every year. We have amortizing principle in our project financing.

These probably sounds a bit basic for many of you but our debt is lower ever year thanks to that fact that we paid debt principle every year before we generate CAFD available for our shareholders.

In fact, as these pages show in, over the next five years our project debt is going to be reduced by more than $1.1 billion, simply because we are amortizing our debt. So we are generating cash for our shareholders, while at the same time we are lowering the debt therefore creating value we expect in both ways.

On Page 19, we would like to share with you the priorities that we have defined for 2017. Our first priority is to remain focused on execution, delivering the financial objectives in terms of EBITDA and CAFD that we have set for the year while we position the company to achieve the estimated run rate levels.

In second place, we expect to create value for our shareholders by smartly using the extra cash that we have today, and the extra cash we expect to have when we receive the financial instruments linked to the agreement we reached with our sponsor regarding our Brazilian investment.

Once that happens, our Board will decide if it creates more value to use that potential excess cash to invest in our own portfolio through corporate equity or through other asset specific instruments, or if there is a better use of funds at the time.

But in any case, when allocating that capital, the decision is going to be driven by which capital allocation creates more value given the price of each option available at the time, internal or external. Finally, the third priority will be to deliver accretive growth once again.

Accretive for us means accretive, and it also means value creating from a IRR point of view. We are confident that during 2017 we will capture such opportunities and we will be able to lay the foundations for our pipeline that will allow over time to harvest further opportunities.

Infrastructure investing is a key theme today in many of the regions and countries where we operate including obviously the U.S. and we expect to continue seeing very strong growth and opportunities in power generation but also in power transmission or in water. The need for a better, stronger transmission network in many regions of the U.S.

for example is clear. And we will play a role there. In some cases, we will play a role through acquisitions of assets in operation. In other cases, we will play a role through partnerships. We believe that we have a strong competitive advantage as a long-term infrastructure manager in power and water.

In the last few years, we have seen many new developers of assets. We have also seen many new infrastructure funds. But most of them need an exit. Most of them need to work with somebody who is going to hold the assets and optimize the assets over the long run.

And that's where we believe that we have opportunities to partner with other players, helping them to build a sustainable development pipeline while being able ourselves to grow going forward.

On Page 20 we show you our guidance - our initial guidance for 2017 considering only our existing portfolio of assets, not including any potential acquisitions.

We are estimating further adjusted EBITDA without acquisitions, including unconsolidated affiliates in the range of $760 million to $810 million, and CAFD in the range of $170 million to $190 million. This guidance assumes that 2017 could be a weak year in terms of cash distributions for Solana.

Additionally for Kaxu our plant in South Africa, we have been conservative because of the incidents - the technical incidents I described before that have affected the plant during the summer and because we do not have at this point in time a waiver for cross default nor minimum ownership.

In addition to CAFD it is very important to remember that we expect to receive debt and equity instruments from our sponsor, from Abengoa in compensation for our preferred equity investment in Brazil subject obviously to Abengoa closing the restructuring.

We intend to monetize during the year those instruments and therefore to obtain an additional cash that today it is difficult to estimate. In any case and as a result of these instruments, our total cash available in 2017 including this expected one-off should be significantly higher than the guidance I just mentioned.

We believe very probably well over $200 million although as I said very difficult to estimate as of to date. Regarding dividends, we expect to reach later in the year a pay-out ratio of 80% of CAFD assuming that we continue making progress on the last waivers.

Looking beyond 2017, we believe that our current portfolio without considering any acquisitions can achieve a run rate CAFD in the range of $200 million to $215 million. Moving on to Slide 21, we today announced a small but hopefully growing partnership with the Starwood Energy Group.

We have signed an agreement for the acquisition of a 12.5% interest in our 114 mile transmission line which will connect California and Arizona. The asset has long-term revenues guaranteed by Kaiser by the system operator in California and is currently under development. The Starwood currently owns 75% of the project.

We will also have the option to purchase an additional 12.5% after commercial operation date. The investment we are making now is very small and we invest to - we expect to invest up to $10 million in the coming years.

We believe that this is an excellent project in a region we know very well with the low risk technology, a very credible off-taker and a very credible partner and requiring very limited investment before operation. For this reason, we have decided to invest in a small steak well before the asset is in operation.

With that, I conclude the presentation of the 2016 results. Thank you very much for your attention. Just let me remind you that during this week we will be meeting investors in Boston and New York. Please contact our team in case you are interested. Operator, we are ready for questions..

[Operator Instructions] The first question comes from Julien Dumoulin-Smith from UBS. Please sir go ahead..

Hi, good afternoon everyone. So I wanted to just follow up on a couple of things you just said, with respect to the waivers where you stand on just finalizing a couple of them specifically ACBH because that was probably the next step on backyard..

We continue working on it Julien..

Okay, excellent. And then on the transmission acquisition, can you just would give us a little bit of a broader thought process here on growth investment. Obviously the little bit less traditional in the sense of buying something prior to COD but its seems like a pretty good value to get involved in a pretty decent project..

That has been our reasoning.

So we believe that it's difficult to find an opportunity like this when of transmission asset that fits so well us from a geographical point of view, from a technology point of view and with such a good off-taker and this is the reason why we are investing well below commercial operation having some rights to increase our investment when it reaches operation and hopefully we will end up owning even more although time will tell.

We believe that in order to build a pipeline that can show accretive growth and if we are able to find more opportunities like this one with such a high quality off-taker, partner, a low risk technology and so on we would be okay investing some resources before operation but clearly our focus remains like every other YieldCo in investing in derisked assets once they reach operation..

Got it, excellent.

And to that point can you talk about, your use of cash, obviously cash is improving in terms of unrestricted levels, thoughts on special dividend, share buybacks or rather other group projects whether other projects exist such as the transition one invest them today and more broadly thoughts on investing in 2017 in further ebb and go related project..

So as I explained before our line of thought is whenever we monetize the financial instruments which would be receiving in exchange for our investment in Brazil, we expect to have an amount of extra cash let's call it, in terms of capital location for that extra money we will be considering mostly in - let's call it internal investments more than external acquisitions because we believe that there are some internal investments with which we can create more value.

I would like to be more specific today because depending on where things trade, the decision might be one or the other but we are thinking about locating part of that money to create value for our shareholders, investing in our shelves, that obviously would be complemented with growth, we believe that we be able to find and we are finding interesting opportunities to be able to - during the year deploy some capital provided that they are accretive enough and value creating enough for us in general but this year is specifically we want with every transaction we make to show our investors that we care about the accretion of value creation much more than anything else..

Excellent. And last one I appreciate, in terms of the run way CAFD clearly you talked about a couple more executional issues on the specific project.

When do you think you will get to that run rate CAFD and what are the key milestones that you’re looking for?.

Okay. The key milestones is it to make sure that in the case of Solana the improvement we have been making are going to be enough to get where we want and we will need a few quarters of performance to know whether we are there or not.

So, I think that - after the summer, after we see two three quarters more we will know if we are positioned together or we need to take further action..

Got it. Excellent, well thank you very much for all the patience. Good luck for everything. .

Thank you very much. The next question is from Sophie Karp from Guggenheim Securities. Please go ahead. .

Hi, good afternoon guys. Congratulations on the excellent quarter and achieving these important milestones. I have a quick question on your thoughts on the capital markets. Clearly you went through private market, the debt issuance and it looks you've got favorable terms there.

What are your thoughts on the availability of capital markets both debt and equity to you at this juncture and how do you think about public versus private. Thank you..

I’ll take this one and then Francisco can help me. We believe that at this point in time that there wouldn't have - we would have any issue accessing the market for these transaction. The reason why we chose a private placement in Euros was among other things because we wanted something very specific.

As you saw we are talking about transacting Euros with maturities in three years so 90 million in each year which is what we believe makes sense for us as YieldCo we feel very comfortable with the smaller maturities every year and that specifically was more difficult to achieve in a public market versus a private placement that's the reason why this time we chose that would..

Then I think Sophie, what I mentioned during the presentation, I think for us to issue debt in Euros is a natural hedge towards our revenues in Euros out of our portfolio. So that also fits in very nicely..

Got it. Thank you. And then just real quick, just to make sure I heard you correctly, when you said that the additional proceeds from potential monetization of the Brazilian investment, your CAFD will be well over 200.

That's all in or just from the additional monetization?.

No. I mean, what we mean is – let's call it our CAFD before one off impacts. We gave you a guidance of 170 to 190. If you include the one-off coming from those instrument, we are saying it would clearly be over 200 including both things and I'm not saying it’s 200. I’m saying who knows but clearly above 200..

Thank you..

Thank you. The next question is from Michael Morosi from Avondale Partners. Please go ahead..

Hello. Thank you for taking my questions. First, I was just wondering if you could comment on the shelf offering in the market today from Abengoa, and just any comments there, and what you could say with respect to timing of their restructuring..

Okay. The filing we made this morning is simply a technical filing where - and forgive me if I don't get these properly the first time. I have some people here who might correct me. But it’s simply technically registering the shares that Abengoa owns.

Nevertheless, these filing does not allow us we [indiscernible] there, these filing does not allow Abengoa to sell the shares or anything like that. It's simply registering the shares so that in the future they can do what they believe they should do with those shares. But it doesn't trigger anything.

It's not a sign of anything, and obviously we don't know what Abengoa is going to be or when with the shares they own in Atlantica..

Understood. With respect to the Starwood transmission investment with prior small investment in Spain last year, you disclosed the IRR for that project. It was my understanding that that was going to become common practice going forward.

So I was wondering if you could give us anymore indication in terms of return or even a range of returns that you're targeting with this type of investment..

Yes. You're totally right and actually you asked me and I told you that we would always disclose the IRR. The reason why we're not disclosing it this time is simply because as part of the agreement we have there, we are not allowed at this point in time to disclose those numbers.

What I can tell you is that it’s a very healthy return, impossible to achieve in an asset like that, in operation or close to operation in the U.S. And today, forgive me, I cannot go beyond that because of documents we have signed in that transaction. As soon as we can disclose numbers, we will obviously..

Understood. That’s fair. As it relates to the corporate debt restructuring, I think you guys have done a really good job both in terms of the maturity structure and also managing the FX exposure.

Were those the primary benefits of that restructuring or did it also result in additional CAFD even at the margin in terms of maybe diminishing your debt service going forward?.

Michael, it's Francisco. No, I think the main benefits are the ones that you mentioned. I think it’s important for us to push out the average life which I think is extremely important. It’s a issue of the natural hedge.

And as Santiago mentioned, I think the way we negotiated the maturity profile, I think it's also very beneficial still for the main driver..

Yes, that's helpful.

And one more, you guys are doing a lot of the right things with respect to de-risking the corporate balance sheet, talking about buying back debt or equity at accretive levels being more transparent with respect to disclosures and you said one more thing in the longer term strategy talk and that was the notion of a YieldCo as a source of permanent capital in the infrastructure market and I think that's particularly insightful comment and I think a primary differentiation that YieldCo's can play.

And so I wondered if you could just elaborate that perhaps a little bit more as the YieldCo model is maturing and kind of finding its place in the capital structure and the capital formation because that comment seem to be important..

Yes, I mean what we are trying to share with you is the fact that when you ask yourself what is the competitive advantage of a YieldCo we believe that one of the important advantages in the current market is the fact that we believe we can be good holders of assets over the long run and we have been meeting lots of other investors in the space over the last year talking about potential partnerships, looking for additional sources of growth in our case and clearly the key value proposition we can bring to the table is the fact that we are or we can be a long-term investor in a space that is booming in the U.S.

obviously but in many other places. And most of the new players in the market come with a short term view believing that they can take an asset and flip it in a few years and make a high return.

That might be the case or not, what I can tell you is that if we are able to hold longer term the assets and make a decent return without taking risks, we are going to create a significant value for our shareholders and we are going to be able to find partners who need us in order to paying their business models.

And we believe that with some of our plans underway in many regions including the U.S. there are going to be large opportunities for investors like us because if you want to really improve your infrastructure in a country you need investor who can hold the assets over the long run at reasonable return..

That's great. Thank you for taking my questions..

The next question is from Jeff Friedman from GMO. Please sir go ahead..

Hi, congratulations guys on a great quarter and a good year. So my question is so it looks like your corporate cash balance is up about almost $40 million from 9/30/2016 to end of the year.

What do you view as your kind of maintenance corporate cash position on a run rate basis?.

Probably a number closer to what we had at the beginning of 2016..

So, close sort at $50 million..

Yes or a bit less than that..

Okay. So do you feel like you've then - like what are your plans with that extra $70 million of cash that you have..

That's what we tried to explain during the presentation while you were running all the numbers. What we tried to explain is that we believe we have today some extra cash either no restart number or different one but we believe today we have some extra cash.

We believe that extra cash will be higher once we receive the instruments from Abengoa related to our investment in Brazil. Once that happens, we will be sitting on some capital that we need to deploy this market and that's where we will consider several internal options, purchasing or investing in our portfolio overall i.e.

through purchasing equity or investing in some of our assets through purchasing different instruments. Obviously we will compare it with external opportunities but we believe that we could have depending on where prices are at the time but we could have some opportunities to create value investing in our shelves..

Okay, got it.

I didn't realize that you are referring to the existing cash and trying to use that as the way to invest in yourselves to - its sounds like you’re just going to way to monetize whatever happens with the Brazilian asset and then you'll look at your excess cash balance at that time and then you'll make allocation decision at that time is that right..

Yes, allocation decision would happen at that time including all the extra cash we have other time that we believe will be the extra money we have today plus the extra money we expect to receive. I don't know I was clear or not but okay..

Now that's a lot more clear. Thanks a lot..

The next question is from Angie Storozynski from Macquarie. Please go ahead..

Thank you. So I wanted some more clarity on your dividend target for 2017. So you mentioned you want to get to the 80% payout of CAFD in terms of like by the end of the year. Could you actually give us a little bit more clarity on the target here..

Yes, the 80% dividend payout which is what we believe we are going to be using going forward is subject to us having enough waivers let's say. Therefore our payout is going to be lower obviously and whenever we achieve all or substantially all or close to all the waivers is when our Board would probably approve moving up to the payout I mentioned..

So until we get the waivers in South Africa we should be assuming that the dividend stays at $0.25.

No. What I'm saying is between the current payout and the 80% in order to grow we need some more waivers. For example if we go South Africa, the expectation would be to increase the dividend but perhaps not to reach the 80% because we would be missing Mexico which is more important than South Africa in terms of distributions.

So this is a gradual process. If you ask me when we will get to 80% once we have all the waivers or close to all the waivers. If we get one waiver more, we should expect a higher dividend but perhaps not reaching the 80% yet..

Okay.

So I shouldn't for any instance any cash that you would be giving from the sale of equity and note that Abengoa would be used to support the other dividend in 2017?.

It could be as I described before we will be deciding the use of products to our cash. We will be deciding that when it happens. I described some of the potential uses of cash we would be considering but the decision we'll be taking up the time including all available options..

Good. Thank you..

The next question is from [Athron Orimont] [ph] from UBS. Please go ahead. Mr. Orimont the floor is yours..

My questions have been answered. Thank you..

Okay. So there are no further questions in today's call. I give you back the floor..

Okay. Thank you very much everybody for attending. Looking forward to seeing many of you in the next two or three days. We are done operator. Thank you..