Hello and welcome to Atlantica’s Second Quarter 2023 Financial Results Conference Call. Atlantica is a sustainable infrastructure company. Just a reminder that this call is being webcast live on the internet and a replay of this call will be available on Atlantica’s corporate website.

Atlantica will be making forward-looking statements during this call based on current expectations and assumptions which are subject to risks and uncertainties. Financial results could differ materially from our forward-looking statements.

If any of our peer assumptions are incorrect or because of other factors discussed in today’s earnings presentation or because of other factors discussed including the risk factors section of the accompanying presentation and in our latest reports and filings with the Securities and Exchange Commission, all of which can be found on our website.

Atlantica does not undertake any duty to update any forward-looking statements. Joining us on today’s conference call are Atlantica’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 morning, and thank you for joining us for our second quarter 2023 conference call. In the second quarter and in general, the first half of the year we believe shows the strength of our long-term contracted and highly diversified asset portfolio.

While many of our peers, many companies in our sector have been talking about soft wind resources in the U.S., the fact that we have a more diversified portfolio, both by technology and by geography means that in the first half of the year, revenue and adjusted EBITDA have increased by a 1.4% and 1.9% respectively, on a comparable basis.

At the same time, cash available for distribution has increased by 2.6% on a comparable basis, reaching $124.6 million. We believe that this is another quarter of solid results thanks to these well-contracted, highly diversified portfolio. I will now turn the call over to Francisco who will take us through our financial results. .

Thank you, Santiago and good morning to everyone. Please turn to Slide Number 4 where I will present our key financial results for the first half of 2023. Revenue reached 554.6 million, which represents a 1.4% growth on a comparable basis excluding the effect of foreign exchange.

Adjusted EBITDA was 403.8 million representing an increase of 1.9% on a comparable basis. Regarding cash available for distribution, we generated 124.6 million in the first half of 2023, an increase of 2.6% on a comparable basis, and 6.2 year-over-year growth.

On the following Slide Number 5, you could see our performance by geography and business sector. In North America, revenue increased by 1% to 202.2 million in the first half of 2023 compared to the same period of last year, mostly due to higher production in our solar assets in the U.S., in spite of lower solar radiation in the period.

Adjusted EBITDA on the other hand decreased by 4% mainly due to lower EBITDA at our wind portfolio in the U.S. as production was lower due to lower wind resources across the U.S. in the second quarter. In South America, revenue increased by 17% compared with the first half of 2022 up to 91.5 million and EBITDA increased 27% to 74.4 million.

The increase was mainly due to assets which recently entered in operation, inflation indexation mechanism in our contracts and a gain corresponding to the sale or part of our equity interest in our development company in Colombia through a partner in the first quarter.

In EMEA region on a constant currency basis, revenue and adjusted EBITDA decreased by 3% and 1% respectively. This was mostly due to lower revenue in our solar assets in Spain, despite higher production during the period, mainly due to lower electricity prices compared with those in the same period last year.

As you are aware, these assets are regulated and are entitled to receive a predefined rate of return, the fluctuation and market prices do not affect the value of the asset. This decrease was partially offset by high revenue at Kaxu, thanks through higher production and revenue indexation to inflation.

Looking below at the result by business sector, we can see similar effects. Let’s now please turn to Slide Number 6, where I will review our operational performance.

Electricity produced by our renewable assets reached 2803 gigawatt hours in the first half of 2023, an increase of 6% versus the same period of 2022, mainly due to the increase in production in our solar assets in Spain, where solar radiation was higher in the period and the contribution from the recently consolidated assets and those have that have entered operation recently.

Production also increased in our solar assets in United States. Even though solar radiation was lower than the same period of the previous year, our assets have shown better performance.

Looking at our availability based contracts, in our efficient natural gas and heat segment availability decreased mostly due to scheduled maintenance stop during the period, which will not impact revenue. Our water assets and transmission lines continue to achieve very high availability levels in the first half of 2023.

As you can see, even though production at our wind assets in the U.S. was lower as a result of lower wind across the country, Atlantica benefits from a well-diversified portfolio in which part of the revenue is based on availability, thus allowing the company to offset this negative impact.

On the next Slide Number 7, we would like to review our net debt position. We closed the quarter with a net corporate debt of 978 million. With this our net corporate debt to CAFD pre-corporate debt service ratio stood at 3.4 times. In addition, net project debt as of June 30, 2023, was $4,024 million remaining flat compared to December 2022.

We continue to have ample liquidity to finance the growth with $72.8 million in cash at the corporate level and 393.1 million available under our revolving credit facility, which totaled 465.9 million of corporate liquidity. I will now turn the call back over to Santiago..

Great. Thank you, Francisco. During the second quarter of 2023, we have continued to make good progress in construction of new assets we have developed.

This includes, as you can see on Page 8, the Coso Batteries 1 project, a 100-megawatt hours co-located with our geothermal asset in California, where we continue advancing as expected and includes a number of portable pipe plants under construction in South America.

Additionally, in South America as well, we are now starting to build two expansions of the transmission lines we have down there. These are, we believe, very attractive projects, both in terms of returns, profitability, and in terms of the risk profile.

Additionally, on Page 9, you have an update of our current pipeline of assets under development and that includes around 2 gigawatts of renewable energy and close to 6 gigawatt hours of storage.

And clearly, the pipeline continues being a significant part our plan and we do expect that in the coming years, a significant part of our investments will be linked to building these assets we are developing. With that, we would conclude today's presentation. Thanks for joining us and we will now open the lines for questions.

Operator, we are ready whenever you want..

Thank you. [Operator Instructions]. Our first question today comes from the line of David Quezada from Raymond James. David, please go ahead. Your line is now open. .

Thanks, good morning everyone. Maybe first question just on your development activities and the projects that you're advancing. Do you think the efforts in the U.S.

to speed up connection to the grid for renewable projects could help accelerate any of the projects that you're working on and maybe just a general comment around where you see the best opportunities for new development projects going forward, is it still the U.S., are you seeing other opportunities internationally?.

Great. Thank you for the question, David. We do believe that the efforts that are being taken in the U.S. to streamline the process, obviously, are in the right direction and they might be helpful. We don't expect a huge change, to tell you the truth. But incrementally, it should be positive.

Regarding where we see opportunities, we believe that the same way our existing portfolio because of the fact that it's more diversified by geography and technology, brings a number of advantages and we saw it this quarter. We also believe that the fact that our development pipeline is also diversified brings advantages. We do believe that the U.S.

market is attractive. We do believe that at this point in time in the market, pricing is reasonable or constructive in terms of PPAs, and therefore, companies like us should be able to build projects with reasonable returns. We also believe that there are significant opportunities outside of the U.S.

and that's why our intention is to continue developing a portfolio where the U.S. will be a very significant part, no question about that. It will be the core but complemented with profitable projects in other geographies where we are present..

Okay, excellent. Thank you for that color Santiago. And then maybe just turning to acquisitions, just curious what you're seeing across your key regions and I think in North America, you could say we've seen a handful of transactions happen at lower multiples.

I'm just curious if you're -- just if your view has shifted at all with respect to how attractive an acquisition might be for you today?.

No, probably we will continue seeing a little bit -- a similar picture to what we saw last quarter, meaning, we do believe that at this point in time, sellers and buyers expectations are more difficult to meet. And the fact that interest rates are higher, obviously, play a role there.

At this point in time, probably if you ask bankers, they would tell you that it takes longer to make sure that buyers and sellers can agree on prices and there are situations where projects do not close because of that difference. I think that it's a question of time. There's a certain probably readjustment there.

And for us, as an investor in projects, this should translate into opportunities. We'll see if that happens in the very short term or it takes a bit longer to readjust, but we do believe that we should be able to find opportunities at reasonable returns, which was not that easy in 2022, for example..

Excellent. Appreciate that color, thank you. Maybe just one last one for me. The regulatory change you see in Spain in the quarter, I'm just wondering if you're able to roughly quantify the impact of that financially.

I certainly appreciate that doesn't affect the returns or evaluation of those assets, but just curious if you could talk about like maybe the EBITDA impact of that in the quarter?.

So I'll give you a quick answer and Francisco can complement if needed. As we all know, assets are regulated and therefore, whatever short-term changes happen have no impact. This year, what we have seen is market power prices are lower than last year in Europe and regulation has been adjusted accordingly, and increased the payments we received.

That's why bottom line, the impact there in the full year should not be material.

And obviously, from a value point of view, there should be no impact because at the end of the day, regulation complements whatever revenues you are making in the market, plus, in our case, in the solar assets we have in Spain, market revenues are a much smaller part than the regulated payments we will receive.

Very different from other technologies like wind, where market revenues are more important. In our case, most of our revenues are coming from regulation. So nothing material there. If you want more detail, I'm sure Francisco and Investor Relations will be able to help you there..

Excellent, thank you. .

Thank you. The next question today comes from the line of Agnieszka Storozynski from Seaport. Please go ahead, Angie. Your line is now open. .

Good morning. So I might have missed it, but did you guys comment on where we are at your strategic review process, has there been any change in the direction of this review given changes that are happening at your majority owner and rising interest rates? Thanks. .

Thank you, Angie and good morning. So I don't have -- we don't have any update regarding the strategic review and that continues the review is ongoing, and there's not much I can add there..

Okay. And just moving on, you talked about the recent regulatory changes in Spain. When I look at your portfolio of assets, you have tariff resets in 2026 and then 2032.

I'm just wondering, when you look at the current CAFD or EBITDA of these assets, would you actually expect that level to be sustained following those future resets? Again, I think we all know the formula, but just wondering what your take is currently?.

So probably my best answer would be, as you rightly pointed out, more or less half of our revenues will be reviewed in early 2026. The other half would be reviewed in early 2032. So I would say that that review is still too far away to be able to make lots of predictions.

As you know, that review is based on a calculation by the regulator, where they try to estimate simplifying a lot the cost of capital of the industry. And therefore, I think that the answer to your question is going to depend on what happened with some of the macro variables in the next few years. We would not expect anything significant there.

But depending on what happens, again, with the variables you use to calculate a WAC [ph] the answer might be slightly different..

That’s all I have, thank you. .

Thank you Angie..

Thank you. The next question today is from the line of Nelson Ng from RBC Capital Markets. Nelson, please go ahead. Your line is now open..

Great, thanks and good morning everyone. So on your developments, I just want to ask about the potential cost pressures, labor and supply chain dynamics. So you have projects in both North and South America. Obviously, the U.S. labor market is pretty tight.

But can you just comment on how you're managing the -- I guess, the labor market dynamics in the U.S.

in terms of the Coso Battery development? And then can you also comment on the labor markets in South America?.

Yes, thanks for the question. So obviously, what you described, I would agree with, the U.S. currently being tight from a labor market point of view. It is not the case elsewhere in the -- in our markets in the Americas, let's say. So that's a very U.S. specific situation.

We are not seeing that in the other markets where we operate, and we are not having risks of cost increases or labor inflation beyond what we expect in the rest of the markets. In the case of the U.S., obviously, we navigate every day through that, both in the plants we operate and in the assets we build.

And up to now we believe that we understand the situation and we are able -- we have been able to find suppliers locally with whom we have been able to work and manage the context that you described. So until now, I wouldn't say that that's top of the list from a worry or from a risk point of view for us.

It's one, obviously, other factors, but I wouldn't say it's top of the list..

Okay, thanks. That's good color. And then obviously, in the U.S., you have a few wind facilities. I think one of them is merchants and the contracted term for the remaining -- for the others are pretty short.

So have you started discussions with your partner on potentially repowering those projects? And I guess the other question is like, is it also better to just wait on the repowering, given that the tax credits don't expire for another decade or so in terms of qualified for tax credits?.

So my answer would be, yes, the advantage of the tax credit situation we have today, as you rightly mentioned, is that we should not be in a rush.

We have plenty of time in front of us to try to find the best moment to repower assets as PPAs expire and to decide how to repower, when to repower, try to guess what will be the CAPEX in wind in that specific case. So a number of moving variables there, and we will try with our partner to make the best decision.

But again, we don't need to be rushed into a decision. So we will be working and we are working as you suggested, but the best timing might not be in the very short-term..

Okay, thanks Santiago. I will leave it there. .

Great, thank you. .

Thank you. The next question today comes from the line of Rupert Merer from National Bank of Canada. Rupert, please go ahead. Your line is now open..

Thank you, good afternoon. Your disclosures highlight that 15% of your development pipeline would be ready to build in 2023 or 2024.

What do you think is a sustainable pace for organic growth in the medium and long term for your company, given the state of your pipeline and the resources that you have available to bring those projects to construction?.

So good morning Rupert. As you know, our target in terms of investment every year is to invest something like $300 million of course on average.

And we believe that given the size of our pipeline and the maturity of the pipeline, a very large part of those $300 million in the coming years should come from construction of projects we have developed that are coming from the pipeline.

So a very high percentage, whether that would be a 70% and 80% or 63%, we will see, but a very significant percentage..

Maybe this is something you'll look at in your strategic review, but is there an opportunity to increase that pace of investment in the future, do you have the resources to do that and I don't just mean capital, but perhaps also the infrastructure to develop projects?.

Yes.

So if you look at us over the last few years, we have been spending time building that pipeline and our expectation is that quarter after quarter that pipeline will continue increasing, and we do believe that there are -- we have significant opportunities in front of us that should yield good returns, and therefore, our expectation would be to continue increasing that over time in both the pipeline and the percentage of our investments that would be coming from our own pipeline..

Thank you. And then finally, as a follow-up to Nelson's question, your disclosures highlight that you're working on procuring batteries for the Coso project.

How are you seeing the cost and availability of batteries in the market today and do they meet the expectations that you had initially and are your costs going to be in line with your initial forecast?.

Without getting into many details that might not be helpful in our conversations with suppliers, overall, we are finding and then we have been finding for the last few quarters, a market that I would say is normal in the current environment, meaning we do find suppliers who can deliver at the cost we expected within the time frame we expected.

Obviously, you need to do realistically regarding those two things. So if your expectation is that you're going to purchase something today for a delivery in the very short-term, that's not going to happen. But the delivery time lines we are seeing are what you would expect in the renewable energy market in the U.S.

where the market is growing significantly. So part of our business as usual, if you want..

Great, thank you very much. I will leave it there. .

Thank you. .

Thank you. The next question today comes from the line of Mark Jarvi from CIBC. Please go ahead, Mark. Your line is now open. .

Thanks. Hi, everyone. Just going back to the strategic review, I think the prior comments kind of insinuated that you thought the process could happen or wrap up a little quicker than the last strategic review.

Do you still think that's reasonable in terms of time lines and is there anything you've now ruled out as part of the strategic review or a direction that you've contemplated that no longer makes any sense?.

So regarding the review, we have never given any guidance regarding timing, and I'm not going to do it either today. And as I mentioned at the beginning, there's no update I can give you, so I wouldn't be able to answer the second part of the question..

Fair enough, okay.

And then just in light of higher bond yields and where the market is and higher risk on, I guess, labor construction and project execution, have you changed your return hurdles at all across any of your jurisdictions?.

The way we work in, let's say, in investment policies, is we have a very dynamic methodology to calculate minimum returns and hurdle rates. And obviously, hurdle rates move with interest rates and with our perception regarding the market.

So the short answer would be, yes, of course, we adjust our expectations as our investment committee believes we should be doing for in our methodology. But in general, returns today with the interest rates where they are and minimum hurdle rates should be higher than a couple of years ago, no question..

That makes sense to me.

And I'm just wondering with you changing your hurdle rates, do you still feel like you can find projects that meet that, I guess, ultimately, has the industry adjusted and/or your competition to the point where everyone is trying to achieve higher rates so that you're not losing out on prospective projects?.

I think two comments I would make. One, I believe that for a rational company with a balance sheet, there are more opportunities today than two years ago. Two years ago, two guys in a rented car, sorry for the expression, were able to raise money and deploy capital at very low returns. Today, probably those two guys in a rented car cannot do that.

And that means that the market is becoming more rational from that point of view. So we feel more comfortable in this environment. And we do believe that we have opportunities where we can deploy capital at what we consider are reasonable returns..

Makes sense. Last question for me, just in terms of what you think equity deployment will be this year. I think the last disclosure we saw was $165 million to $185 million.

Is that still roughly where you're tracking or have you raised that number since the last update?.

Mark, we're tracking towards that number right now. That's our estimate that we gave at the beginning of the year. So that's the latest estimate that we have, Mark..

Perfect, thank you. Thanks for the time today. .

Thank you Mark..

Thank you. The next question today comes from the line of Julien Dumoulin-Smith from Bank of America. Please go ahead, Julien. Your line is now open. .

Hey, good afternoon or good morning team. Thanks for the time, appreciate it. Look, I wanted to check in real quickly, just as you think about pipeline development, you guys provided the slide to get once more, hasn't really changed since the start of the year.

How are you thinking about just pursuing organic development, heard your comments earlier but in light of the strategic review and given the comments for what's ready to build in 2023 and 2024 seems fairly modest as a total contributor to your annual goals here on contribution to organic growth but would love to hear how that fits into and is any reflection on your intent to pursue strategic alternatives in lieu of organic opportunities?.

So forgetting a little bit about the strategic review, which is ongoing. As I mentioned before, our strategy, as I mentioned, is to have a very significant part of our investments coming from the pipeline. We believe that with the pipeline that you have in front of you, we are going to be able to do that.

Obviously, as you can see there, there's a significant part of the pipeline around the storage there, and when you translate that to dollars, you end up with higher numbers.

And over the next quarters, we expect, as I mentioned, irrespective of the strategic review, we expect to continue growing our pipeline so that it can become a very significant part of our investments every year.

Complemented with M&A whenever we find opportunities that create value and that are accretive which, as I mentioned before, we believe now it's much more probable than a year or year and half ago, and that's why our strategy would be let's build what we are developing and let's complement that with some M&A whenever the numbers work..

Got it.

Your point is, don't read into any kind of pipeline statements about your intent to pivot towards strategic alternatives, right, regardless of the fact that the pipeline has sustainable market?.

Yes. Agreed..

Okay.

And there's no dedicated time line for when that -- when we could see kind of a return to the pipeline expansion or when we could see kind of resolution on the strategic process, right, I know you've left is really generic?.

No. As you know, the strategic review is being led by the Board, and we think that the Board should be able to lead that process without putting a deadline somewhere because obviously, we want to do things properly..

Alright, fair enough. I will leave it there, thank you guys. .

Thank you Julien..

Thank you. The next question today comes from the line of William Grippin from UBS. Please go ahead. Your line is now open. .

Great, thanks, good morning. My first question -- actually, most of my questions have been answered. So I just wanted to ask one here.

But just on the storage pipeline, could you speak to what extent the storage you have in the pipeline is co-located with your existing projects, I know you have Coso, but just outside of that and then what opportunities are you seeing here to kind of leverage your existing asset base to deploy storage versus new opportunities elsewhere, given the stand-alone tax credit?.

So probably within storage, we have three types of developments. We have situations like Coso 1, where it is physically co-located with another asset, but from a contractual/client point of view, it has nothing to do. So Coso 1 is physically inside the geothermal plant.

It would be operated by the same people, but it will have a totally separate PPA with a totally different client. That would be type 1. We are leveraging our existing footprint, but it's -- commercially, it's a separate project.

Then a second type of opportunities would be situations where we co-locate and not only we co-locate but we leverage the commercial agreement. So you include storage in an existing asset and you are going to leverage the PPA or sign a new PPA using whatever the PV component and storage.

And then the third bucket would be a stand-alone totally new developments. If I look at our portfolio, we have the three types of projects. In the U.S., we have a lot of the first one at this point in time, leveraging our assets from a co-location point of view and some of the third bucket. And over time, the second one will become more important.

So situations where we can add storage to an existing plant in the short term, probably they are more outside the U.S., like in Chile. We have discussed in the past a situation where we have a PV plant where we plan to include storage next year. So it's a little bit of the three.

Again, in the short-term, more the first and then the second -- sorry, then the third and later the second option, where you include storage in an existing plant sharing the client. I hope I confused you enough..

No, I appreciate the color there. That’s all for me. .

Thank you. .

Thank you. The next question today comes from the line of Antoine Aurimond from Bank of America. Please go ahead, Antoine. Your line is now open. .

Thanks for taking my question. Hope you are well. So just on the credit side, I think you mentioned that you have corporate debt over CAFD of 3.4 times.

Can you please remind us how you see parent leverage going forward? And related to that, any sort of insight in terms of potential capital markets activity at the corporate level for the back half of the year and next year?.

Okay, Antoine, good morning. We do have the 3.4 times that have been steady. You know that we have a target at Atlantica of keeping our leverage around the 3-ish, 3 times x leverage multiple. So right now, what you saw in the materials, as I said, we have good liquidity.

And going forward, as I said, we would look for a combination of what's the best capital structure going forward, the combination of both debt and equity with maintaining that target that we have. It's important to remember that, that's a target, that's not a covenant in the financial debt that we have at the holding company.

So our target continues to be this 3 times, and we look -- we're always monitoring the market to see what's the most competitive way to be able to finance the company Antoine..

Okay, good. Thanks Francisco. Have a good one guys. .

Thank you. There are no additional questions waiting at this time. So I'd like to pass the conference back over to Mr. Seage for any closing remarks. Please go ahead..

Thank you. So thanks, everybody, for joining us today. And like always, our Investor Relations team will be available for further clarification and questions. Thank you, operator..

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines..