Santiago Seage - CEO Francisco Martinez-Davis - CFO.

Josephine Moore - Bank of America Merrill Lynch Sophie Karp - Guggenheim Securities Shelby Tucker - RBC Capital.

Welcome to the Atlantica Yield First Quarter 2018 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 a replay of this call will be available at the Atlantica Yield corporate website. Atlantica Yield will be making forward-looking statements during this call based on current expectations and assumptions which are subject to risk and uncertainties.

Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today’s earnings presentation or the comments made during this conference call in the risk factor section of the accompanying representation on our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website.

Atlantica Yield does not undertake any duty to update any forward-looking statements. Joining us for today’s conference call is Atlantica Yield’s 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. I will now pass you over to Mr. Seage. Please go ahead, sir..

Thank you very much. Good afternoon, and thank you for joining us on the call today. On Page 3, we review the key messages for the first quarter 2018. We have achieved what we believe are very strong results in this first quarter. Our revenue reached $225 million, an increase of 14% compared to the same quarter last year.

Further, adjusted EBITDA, including unconsolidated affiliates, increased by 9% to reach approximately $180 million. CAFD in the quarter reached $43 million. Our Board of Directors have declared the quarterly dividend of $0.32 per share, representing an increase of 28% compared to the same quarter last year.

Additionally, our partnership with Algonquin is now a reality. During the first quarter, they closed the appreciation of 25% stake in the company, becoming our largest shareholder.

And additionally, Algonquin announced that they have reached an agreement to acquire an additional 16.5%, which is expected to close according to them in the second or third quarter of 2018. We have already started working together, and we are very confident that our partnership with Algonquin will be key to deliver accretive growth going forward.

On Page 6, we summarize our key financials. Revenue, as mentioned before, exceeded $225 million, a 14% increase. Further adjusted EBITDA, including unconsolidated affiliates, reached close to $180 million, a 9% more than in the same quarter last year.

CAFD reached $43 million, on track to meet our guidance for 2018 and a very good number considering seasonality. As a reminder, last year’s first quarter CAFD was unusually high for our first quarter.

On Page 7, we take a look at the business by geography and sector, and we can see that overall our portfolio of 22 assets has delivered very good numbers in the first quarter. By geography, starting with North America, revenues have been stable with a significant increase in EBITDA of 10%. In South America, revenues increased by a 4%.

Thanks to higher production at our wind assets. EBITDA decrease, given the $10 million one-off we had in the first quarter of last year. Without that effect, EBITDA would have increased in line with revenues in the quarter.

In our EMEA regions, revenues and EBITDA increased significantly by a 23% and a 25%, respectively, mainly due for higher production in our solar plant in South Africa. We are also benefited from the appreciation of the euro against the US dollar, since we are converting our revenue in euros higher at a higher exchange rate this quarter.

Looking below the results by sector, we can see similar effects. Renewable energy, we see a significant increases both in terms of revenues and EBITDA, north of 20% in revenues and 28% in EBITDA. Thanks to higher revenue throughout the portfolio. In efficient natural gas, our Mexican asset continues to show excellent performance.

EBITDA decrease is due to a scheduled major overhaul, a scheduled periodic overhaul at the end of this year. Operation and maintenance costs are higher in the quarters before a major maintenance overhaul. In our transmission line, revenues remained stable, while the variation in EBITDA corresponds to the one-off I mentioned before.

Finally, water keeps posting good numbers with similar EBITDA to last year. On the Slide number 8, we can take a look of the key operational metrics for our assets, overall a very strong quarter.

Electricity produced in our renewal energy assets increased by almost a 10% compared to the same quarter last year, reaching more than a 500 gigawatt hours in the first quarter of 2018. A significant part of this increase was due to the performance of our solar plant in South Africa. That demonstrated a strong performance during the summer down there.

In the US, production was as well higher than last year, while our wind assets in South America reached a good performance this quarter. Finally, in the Spain, production decreased mainly due lower radiation in March and too longer-than-expected scheduled maintenance stops in some of the assets. Overall, a very strong quarter in renewable energy.

Looking at our availability-based contracts. ACT keeps showing a consistent and very strong performance with availability levels around 100%. Finally, transmission lines and water. We see the availabilities have once again been very high. I will now turn the call to Francisco, who will take you through the financial numbers. .

Thank you, Santiago, and good afternoon, everyone. Let's move on to Slide 9 to walk through our first quarter 2018 cash flow. Our operating cash flow reached $130.5 million, improving by over 50% from the first quarter of 2017.

This was mainly due to higher operating results and better variations in working capital in the quarter when compared to the same quarter of 2017.

Net cash provided by investing activities amounted to $47.5 million for the quarter, and it includes 60.8 million from the total 77.5 million we received from Abengoa on March in relation to the DOE consent.

From the 77.5 million, we used $52.5 million to repay for Solana project debt, which are included in the financing cash flow, and $25 million have been classified as restricted cash. As a reminder, the amount received this quarter is an addition to the $42.5 million received in December 2017.

Finally, financing cash flow reflects schedule of principal debt repayments, dividends paid to shareholders and affiliate as well as the Solana project debt repayment I mentioned earlier.

On the next slide, Number 10, we are glad to announce that we have recently signed a new 215 million corporate revolving credit facility with a scheduled maturity in December 2021. This new revolving credit facility replaces the current $125 million facility, which has a scheduled maturity in December 2018.

The new RCF will improve our cost of debt by approximately 100 basis points with respect to our previous revolving credit facility. Additionally, our board of director has approved a dividend of $0.32 per share for Q1.

This represents an increase of 28% compared to the first quarter of 2017 dividend and an increase of $0.01 compared to the last quarterly distribution. As we have previously communicated, our target is to achieve an 80% payout in 2018. I will now turn the call over to Santiago for the strategic update..

Thanks, Francisco. On Slide 12, we would like to spend a minute reviewing what we believe is one of the key strengths of our value proposition, the CAFD generation and visibility on future cash flows.

An important principal in our portfolio, as all of you know, is the fact that each project, each assets, if we pay in, its own nonrecourse project that before generating CAFD.

As you know, our definition of CAFD is the cash that is upstreamed from the asset companies up to Atlantica, to the holding company, after paying their own project that service and obviously net of corporate general expenses and corporate interest expenses.

Therefore, this might obviously sound very obvious, but every year we have spent considerable amount of money of the operating cash flow we generate to be paid via scheduled project debt.

Actually on this chart, what we want to show is this debt, this project debt repayment, together with the CAFD as a return metric, and compare it with the same metric reported by my peers. If we look at the year 2017, for example, our company before debt repayment amounted to $380 million.

If you look at it on a per-share basis, you are seeing more or less the current share price, if we present a yield of almost of 19%. This, let’s call it CAFD before debt repayment yield, is clearly above -- we believe is clearly above all our peers, which are in the range, we believe, of 11% to 17%.

This tries to illustrate the strength of our cash generation. It’s not only the CAFD generation, but also the cash we generate every year with which we repay our project debt at the asset level. In addition, this debt repayment happens progressively over time. This is a reason why our CAFD profile is very stable.

Indeed, the length of most of our PPA exceeds the date of the last project debt repayment. We have what we call a tail, a period of time when asset has paid its project debt but still is enjoying the PPA.

As you can see in the graph below, our expected profile in terms of CAFD generation has a step up in the future, once the project debt in many of the assets has been fully amortized but still you have the PPA in place.

The visibility of our expected CAFD from the system portfolio is, therefore, we believe top class compared with our peers, with 25 years of cash flow visibility and 19 years of weighted contracted average life remaining.

It is important to mention that in this graph we are not considering any reconstructing or any, let’s call it, second life of the assets. On Page 13, we -- as you all know, Algonquin, a closed acquisition of a 25% equity stake in Atlantica, becoming our largest shareholders. In April, Algonquin reached an agreement to purchase an additional 16.5%.

We believe that these significant ownership guarantees our various strong alignment between both companies. More importantly, as you know, our strategic partnership with our new sponsor, Algonquin, brings important growth opportunities. The ROFO agreement with AAGES became effective in March.

And AAGES is already a reality and has started to work, including people with a long track record in development of renewable and water assets. In addition, we’re analyzing with Algonquin opportunities beyond their goal for agreement.

Finally, the shareholders agreement we sign with Algonquin maintains our strong corporate governance with a majority of independent directors in our board. As an illustration of the first steps that AAGES is taking in developing new assets, on Page 14, we can see we tried to provide you some visibility on ATN3.

AAGES has announced that they have reached an exclusivity agreement to potentially acquire the projects, and they are currently evaluating its attractiveness. ATN3 is 220-mile electric transmission line in Peru with a 30-year contract in U.S. dollars.

Once in operation, if AAGES bid secure the project -- once in operation, ATN3 could fit very well in our portfolio. As you know, this is the country where we own transmission lines, where we have critical mass already and where we would benefit from asset and operational synergies. With this, turning now to Page 15.

We remind you of our value proposition in terms of DPS growth. Our target is to deliver an 8% to 10% DPS growth over the next five years, both through our combination of growth/improvement within our current portfolio.

In fact, as you know, one of our priorities is to optimize the cash generation in the portfolio we own today by improving operations in certain assets, for example, by optimizing financing in many other cases.

On top of that, we expect to continue investing accretively having new investments to our high-quality existing portfolio, mainly through the ROFO agreements, but also through third-party opportunities. And in fact, we are currently evaluating and working on what we believe are several accretive potential investments.

And in order to be able to capture these accretive opportunities, we have at this point in time a strong balance sheet that should allow us to create value in any environment. With that, I conclude our presentation. Thank you for your attention. Operator, we will now open the lines for questions..

[Operator Instructions] We first go to Josephine Moore with Bank of America Merrill Lynch..

Just a few questions here.

The total corporate liquidity I think you say $222 million, does that reflect the increase in the RCFs as part of the refinancing?.

No, it doesn’t. Since the refinancing was closed after, we are reflecting the corporate liquidity to March 31, Josephine..

Got it. So there is like an additional $90 million, roughly, as an exchange..

That’s correct..

And then on the 2019 notes, can you give us an update here on the possibility for refinancing where that stands?.

The maturity of the 2019 – note this, November 19, they are currently trading with a yield to maturity of around 4%. We are looking at that to see one as the best that window for possible refinancing of those particular notes. .

Got it and then just on the remaining 16.5 stake to be acquired by Algonquin, what’s the states of the deal, your approval there?.

As you know, in that 16.5%, what Algonquin has said publically is that it expect closing of the transaction in Q2 or Q3 on top of the DOE, let’s say, approval. There are other conditions that we’re not part of. And therefore, regarding the timing of the transaction, we just can say what Algonquin has said publically, which is Q2 or Q3. .

And then lastly before I jump back into the queue.

Any update on the operational improvement at Solana and Kaxu?.

So as you heard in the call, the South African asset, the South African solar plant Kaxu has got a good Q1, and actually part of the improvement in our numbers comes from a good quarter in Kaxu. So we’re happy on that front. And Solana delivered better numbers. Still not up to where we expect to see Solana, but better numbers.

So in that we’re moderately optimistic on both assets. .

Next question comes from Sophie Karp with Guggenheim Securities..

First of all, congratulation on the great quarter. And one of the questions I had was about Mahaveer. I think you mentioned that you’re going to have delayed maintenance at that plant in Q1? Is that going to be happening in Q2 or later this year? And how should we think about the impact on the results in the next few quarters..

So this was delay of a small yearly maintenance, so the impact is very, very limited and what delaying from March to April. I mean, these happened already in April, so I wouldn’t expect much from that. .

Got it. Thank you. And then maybe when ATN3 was approximately the timeline for developing the project like that and do you – is Altantica Yield expected to continue capital through that project? And could you give us more color on when that’s going to happen and what is the magnitude? Thank you..

So ATN3, a transmission line typically -- and this is our gas – obviously, this is a project that is where AAGES is working on but typically would take a couple of years. Atlantica will principal. As of today, our plan is not to invest in the development and construction of that asset but to see the asset once its build through our agreement.

We believe that this could be offered to us once the asset is in construction, without needing to invest before. .

Got it. So you would only invest closure to this year deal of the asset. .

That’s a current plan, yes..

And what is – is there a something behind ATN3 in the list of the potential project that you’ve been contemplating or AAGES been contemplating it’s sort of [indiscernible] behind it that we should be looking connect?.

Yes. AAGES is working on number of projects. Publicly they have not spoken about any others, and I think earlier stages there are many things going on. We are working together very closely and actively involved in the things they are looking at. But at this point in time, I would mention is that we are very happy with the collaboration.

We are very happy with the way they are starting to work more than to talk about the specific assets at this point in time..

Next question comes from Shelby Tucker with RBC Capital..

Just a few questions on your growth prospects.

One, what milestones are you looking for now that the deal that your transaction with Algonquin has closed on the first 25%? What milestones should we expect to see before you can start actually buying assets from the AAGES?.

So in terms of milestones, I don’t think there is anything specific there. As you know, in terms of opportunities to grow accretively, we have the new ROFO with AAGES. We also have existing ROFO with Abengoa with the list of assets that we have been sharing with you during the last quarters.

So we will be working and analyzing those opportunities and deciding if we can make acquisitions accretively on top of looking at opportunities as well. But I don't see any milestone in front of us. I think that we have started to work with Algonquin is last eight years already..

And then on the Algonquin call, the management team suggested that the A3 team might not be a project they would consider for AAGES, at least they were less enthusiastic about that one.

Is there any update you can provide there in terms of the status of that project? But also, what would you need to see before you would consider buying that project?.

So [A3P], I remind everybody, is a natural gas cogeneration plant in Mexico that now is being built by Abengoa. We have a ROFO right on that asset. And what we would need to see in order to be, let's say, interested would be first of all the asset finishing construction. It’s very advanced, but you would need to finish construction.

The second thing the asset being fully or nearly fully contracted, that’s something where we understand that Abengoa is working on, but still there is some work to be done there. And after that we would be, like always, has discussion of price accretion, value creation. So it’s an asset we keep in our list.

Whenever the conditions I mentioned before and some others are fulfilled, we will be clearly looking at it. But still there are a number of things that need to happen before we can actually happy discussion..

And then the last question is the – I’d say, ff I’m recalling it correctly back in March you had a list about six projects in your ROFO pipeline are those projects still the same and has there been any more added?.

So the list of -- the list you’re referring to is the ROFO list with Abengoa. Those projects are there and I don’t think there has been much change there. These are opportunities we will be looking at, as we’ve explained to you in the past over the next, let’s say, couple of years. .

Next question comes from [Brian] with Raymond James..

Just any comments you can provide on what you’re M&A team is seeing in Latin America and I guess surrounding through recessions?.

So across the key countries for us, in Latin America, that as you known includes Mexico, includes Chile, Peru and some other smaller countries, we are very active and I think that what we see down there are opportunities across renewable energy, in some countries transmission and water as well.

We have significant list of all opportunities, many of them in dollars. Our competitive environment that I would never say that competition is to low anywhere, but clearly a different environment from what we see in North America.

We believe that the transactions in the region, you need to fight for them and you need to work a lot but you can do transactions at numbers that make sense and actually we believe that you can achieve accretive transactions in good project with long contracts in the region.

Obviously, we will continue and we can close transactions that are clearly accretive and are the best use of our balance sheet. .

Thanks and then just switch gears here, can you comment any of the recent discussions or thoughts on the Spain tariff reset that’s expected in 2019. .

Yes, that would be expected in the late ‘19. I don't think there's anything now on that front. We won’t expect anything to happen in the next few quarter and it’s very difficult to forecast and exactly was going to be the outcome. And we think that in 2019 is when we will know exactly what’s going to be the change. .

And, ladies and gentlemen, that does conclude today’s question-and-answer session. I would like to turn the conference back over to management for any closing remarks. .

Thank you very much to all of you for attending..

Thank you, ladies and gentleman. That does conclude today’s conference. We thank you for your participation. You may now disconnect..