Atlantica Sustainable Infrastructure PLC (AY) 2015 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for joining us today at the Westin, New York at Times Square for Abengoa Yield First Quarter 2015 Presentation. And also, thank you to those joining us for the conference call.

Just a reminder, today's event is being webcast live on the internet and the replay of this presentation will be available at the Abengoa Yield corporate website at abengoayield.com. This presentation will be followed by a Q&A session where we'll give priority to the questions from the audience and then we'll open the lines for the questions from those connected to the conference call.

Abengoa Yield is a total return company that owns a diversified portfolio of contracted renewable energy, power generation, electric transmission and water assets in North America, South America and EMEA. Abengoa Yield focuses on providing a predictable and growing quarterly dividend or yield to shareholders.

Finally, we remind everyone that this presentation contains forward-looking statements and actual results may differ from those statements. The presentation includes industry data and forecasts as well as certain non-GAAP financial measures. We refer you to slide two of the presentation which includes cautionary statements regarding the use of forward-looking statements and industry data and forecast, as well as a note regarding non-GAAP financial measures.

Joining us for today is Santiago Seage, Chief Executive Officer, and Eduard Soler, Executive Vice President and Chief Financial Officer.

I will now pass you over to Mr. Santiago Seage. Please go ahead, sir.

Thank you very much. So good morning, everybody.

We are going to be covering today three things. We are going to be covering our first quarter results, and we will be announcing and describing a fair drop-down of assets from Abengoa to ABY. After that, we'll be updating our guidance. And finally, we'll have a Q&A session where we will start with people here in the room, and we'll continue later with people on the phone.

I'm going to move directly to Q1 results where, as we can see, our Q1 numbers show solid results in terms of revenues and EBITDA with a very significant growth versus last year, and in both cases in line with our expectations. And a very good result in terms of cash available for distribution, $38.5 million, which is more than 25% of our CAFD guidance for the year and showing that Q1 was very strong in terms of cash generation.

On the following page, we will take a look at our results by geography and sector where we see a significant growth across the three geographies and across our three main sectors with numbers for the first time in water, and which, as you know, this is the first quarter where we have had assets in operation in this new segment.

And if we look at renewables, very high growth as we now have more assets in operation than a year ago, obviously, conventional good numbers with very good results from our asset in Mexico. And transmission, a significant growth as well.

Next page, we show a few key operational metrics with all segments delivering good results. In the case of transmission and conventional, very good results, very high availability. And in the others, renewable and water, results in line with what we expect for our first quarter. We see very significant growth versus last year.

We stop for a minute on page seven to talk about Mojave. Mojave is the last large asset we put in operation back in late 2014. What we can tell you now is that ramp up is over.

As planned, at this point in time, the asset is reaching its net capacity every day. And what we can say is that, for an asset that has been in operation for four or five months, it's doing slightly better than what we expected, has been able to meet budget in the last few months after a slower start in December, January with initial phases of the ramp up. So very happy with the asset and should be giving lots of very positive news in the next months in terms of cash generation.

If we move to page eight, in terms of cash flow, very solid as well operating cash flow generation of around $57.4 million. Investing cash flow of around $90 million narrative but the result obviously of the purchase of (inaudible) the second drop-down assets that we announced back in February. And financing cash flow of minus $19 million approximately, which obviously includes payment of the first of the dividend that we paid during the first quarter, and that is included as financing cash flow. So nothing surprising from a cash flow point of view.

If we move to page nine, in terms of leverage, at corporate level, we have cash of around $85 million at the end of the quarter. That means a net corporate debt position at holding level of $291 million. And if we look at our operating subsidiaries, we have a total net project finance debt of around $3.6 million.

In terms of leverage, that means that the [key] ratio, which is the net corporate debt divided by cash available for distribution and corporate debt service, we are in 1.8 at the end of the quarter which is well below our target of always being below three times cash available for distribution before debt service. That means that we have more room for leveraging in the future.

If I move to slide 10, our Board of Directors last week approved the dividend corresponding to this first quarter of 2015. And the level approved was exactly the guidance we have provided you for the quarter back in November 2014 when we updated guidance for the year and we gave you deeper guidance at the end of the quarter, $0.34 per share. That's a very significant increase versus the previous quarter and versus the IPO guidance that we had given to you for this first quarter 2015, 30% or 31% increase versus that.

And finally, before moving to the new acquisition that we are announcing today, in terms of an update of where we are in executing the second drop-down, two thirds of that second drop-down to be announced back in February, (inaudible) the acquisition has been completed. To be specific, the water assets under 30% of Helioenergy 1 and 2. And the remaining Shams and ATN2 are still pending of closing (inaudible).

Thank you very much. So Q1, what we believe are very solid results with a very strong cash generation. To give you an indication, payout ratio in this Q1 has just been slightly over 70%, so a very safe payout ratio, very conservative, if you want.

Let's talk about the second part of the agenda which is the third drop-down that we are announcing today. Abengoa Yield has entered an agreement with Abengoa to purchase $669 million worth of equity in assets, specifically 450 megawatts of renewable energy assets.

We are purchasing the 70% of Helioenergy that we don't own yet. As Eduard just explained, we purchased recently a 30%. With this, we would own 100% of this asset.

And additionally, we are purchasing another 250 megawatts of solar energy, Helios and Solnovas. These are another two assets located in the South of Spain that have been in operation for two and five years. So a very significant track record from an operational point of view -- the assets delivering very consistent generation and therefore, having for us a very low operational risk.

These assets are purchased -- these assets operate in Euros, but we are purchasing them over the next five years with a return in dollars, okay? As Eduardo will explain later, what we are doing is making sure that for the next five years, our return will come in dollars. And by hedging through a (inaudible) agreement, [both] euros.

Additionally, we are purchasing a 51% of another solar asset located in South Africa, in the north of South Africa. It's a 100-megawatt facility that has started operation earlier this year.

Contract with Abengoa has been signed already. The only condition is final documentation for each of the acquisitions and, in some cases, waivers than need to be obtained.

In terms of CAFD, in terms of cash available for distribution, these assets are expected to generate around $63 million of CAFD which results in a yield of a 9.4% for this acquisition. Financing of the transaction has already been secured through a capital increase that was priced last Friday at $33.14 per share pursuant to a private placement that results in an increase of 20.2 million shares, moving from 80 million to 100.2 million shares. This price represented a 3% discount versus the closing price of Thursday, which is the day that was used to define pricing.

This acquisition includes a call option that Abengoa Yield has signed with Abengoa in December 2014, and the transaction has obviously been approved by our Board of Directors and by the sellers' board of directors.

If we take a look at the assets, the three assets we are purchasing in Spain are very similar to the ones we already own. As I mentioned before, we have a very good track record from an operational point of view as they have been in operation for a number of years already. There are very significant synergies with existing assets in Spain.

And we have in front of us between 20 and 23 years of regulated revenue depending on each of the assets, with five years generating cash in US dollars including the swap agreement we will describe later. Each of the assets has got project finance in place. And we expect these assets to perform very well as they have been performing in the last few years.

If we take a look at the asset in South Africa, this is 100- megawatt facility where we are purchasing a 51%. The plant is located in the North, in the Kalahari Desert which is a very high solar radiation area. Radiation there, to give you an indication, is higher than in the Mojave Desert, for example, or than in Southern Arizona.

The rest of the shares, the main partner there is IDC. IDC is the largest industrial group in South Africa, owned by the state of South Africa, by the South African administration. And the plant has a 20-year power purchase agreement signed with Eskom, that is the utility in South Africa. Including a guarantee from the South African Department of Energy. There is a project finance in place and commercial operation was reached earlier this year.

One of the most important features of this transaction where we are acquiring some assets located in Europe is that we have also reached an agreement with Abengoa, the seller, to dollarize the cash flows coming from these assets. Through this, [pledge] agreement that we will sign with Abengoa, that the assets of this transaction will be dollarized using as a reference that change weight as of the date of the acquisition of the assets within five years. And on top of that, we have also [bid] with Abengoa that this hedging mechanism not only covers the assets that (inaudible) dealers that we purchasing as part of this transaction. But also, the assets (inaudible) in euro that we own from previous transactions including (inaudible). But basically, during five years, we [are removing] the euro exposure in our portfolio.

The early [currency] exposure that we will have outside the US dollars will come from the project we are acquiring in South Africa, Kaxu that will represent 7% of other cash available for distribution performance of this transaction. And it's below the 10% allowance for currencies not US dollars that we want to have and that we have always communicated to the market.

And in terms of a midterm, long-term protection on this currency exposure to [that one], what we have here is a PPA index for local inflation. So long-term economic theory says that there should be a high correlation between the precision of the currency and inflation. And that indexation mechanism to PPA should [shoot] offset in the long-term to a [larger than] any potential depreciation.

This agreement with Abengoa we believe is a very efficient way to cover the euro [risk]. Number one, it allows us not to use bank credit lines for hedging, which means that you can use them for leverage to finance acquisitions in the future. And number two, we take advantage of a [natural] hedge that exists without Abengoa.

We are a Company that operates in US dollars and we are purchasing assets in euros that we would like to hedge. And Abengoa, at the same time, is a Company that [sings] in euros, operates in euros, that has a stream in US dollars which are the dividends they receive from us. But that the fact that there is that mismatch, you want, allows us to create this mechanism of compensation where we dollarize the cash flows from this assets and Abengoa converting to euros or hedges into euro the stream of dollars they received from us.

So it's a mechanism that -- it's [capped] to the amount of dividends that Abengoa receives from us, but with their target exposure of 40% and considering the precise of our exposure to euros. It means a coverage for this mechanism of 1.3 times, which is -- it gives us a lot of comfort that this mechanism, it's very effective.

If we move to page 18, it gives you a flavor of how our portfolio looks like. Pro forma of this transaction, as I said, in terms of currency, we will be 93% dollar taking in to account the hedge agreement for five years that I just describe to you and 7% exposure to other currencies.

In terms of geography, we'll remain -- we remain having a portfolio with a very large North American component. Europe represents 27%, but as we acquire assets in the future has been -- will mainly be in other geographies including North America. That number should [dilute] over time to something around 15% to 20%.

And finally, in terms of sector, more surprises will remain largely renewable energy company with a large exposure to transmission and conventional.

In terms of risk profile, we are not changing anything more than 90% of the interest rate exposure (inaudible) long term because our project finance typically comes with a long term hedge of the interest rate and extremely a limited commodity exposure.

If I move to page 19, one of the key features of our portfolio is the long nature of our [conference] and that continues to be the case pro forma of this transaction. Our portfolio still has a weighted average remaining life of around 23 years, so no changes there, with very high quality off-takers, all of them investment [grade] except for a few that are not rated.

But those that are not rated represents less than 4% of the cash available for distribution. And on top of that, if they are not rated they have gone through the -- those off-takers having analyzed by advance providing project finance at project level which is a very good test of the [same] quality of those counter-parties.

And something very important, pro forma of this transaction, 60% of our CAFD, our cash available for distribution comes from assets where volumes are mainly based on availability and not on production. That means that 60% of our cash flow don't have an associated volume risk. And that means that in our portfolio the stability of cash flows is very, very high.

So in summary, what we announced today is large acquisition and what we believe is an attractive yield of a 9.4%, majority dollars and majority assets with a very long track record. That results in a pro forma portfolio that doesn't changed versus what you know. And we continue having the same strengths in terms of very long PPAs or regulated revenues in no interest rate or commodity exposure, and limited currency exposure.

With this transaction, what we want to do is update guidance. And what we are doing now is telling you that our 2016 guidance is increased from the $1.92 to $2 per share in terms of DPS that was provided in late 2014. We now increase that $2.10, this last $2.15 per share. This is up to a 9% increase and it means that our 2016 numbers in terms of DPS will be more than 30% higher. There would be more than a 30% growth versus our 2015 numbers.

At this point in time, we are not increasing our 2015 guidance. Obviously the transaction is accretive from 2015, but what we want is to save some good news for later in the year. And that's why we believe that increasing 2016, as you can see here, should make you comfortable that the transaction is significantly accretive. And hopefully later in the year we'll talk again about 2015 guidance.

In terms of DPIS goal forecast, for the first time we are providing you midterm growth targets. And now with this large acquisition with a very high visibility in our ROFO pipeline, we feel comfortable talking about guidance beyond 2016. As you can see on page 22, the guidance we are providing for 2016 is obviously much higher than the numbers shared at the time of VIPO.

And beyond 2016 we believe that given the visibility in our ROFO pipeline we can now talk about 12%/15% annual growth in terms of DPS. That kind of growth together with the more than 30% we have told you in 2016 versus 2015 would result in more than a 20% growth between the 2015 IPO numbers we gave you on our 2020 guidance.

Therefore, what we're trying to tell you here is this is the third drop-down we'll do for Abengoa (inaudible) a year. We will now go through that ROFO pipeline only counting on Abengoa. We can deliver a very significant growth with a very high visibility.

And where do we believe that this growth going forward is going to be coming from? We see four main areas of growth. These are not going to be the only ones but these are the four large areas for acquisitions. In first place, the US, renewable and water market where our objective is to combine acquisitions coming from Abengoa with acquisitions coming from third parties in three main sectors -- water, wind, and photovoltaics.

The second growth area is going to be Mexico where Abengoa has got several very large assets under construction. Three among these assets, three are large, natural gas bio plants, conventional assets with significant synergies with the asset we already own in Mexico. And additionally, Abengoa is building a very large water infrastructure asset that we should be offered, we believe, in the next few years through the ROFO agreement. Additionally, Mexico, Abengoa is working on a number of other opportunities that make us believe that there could even be further growth in Mexico.

Third, bucket of growth would Chile in solar, but not only in solar. Abengoa at this point in time has is building two very large solar assets there in Northern Chile that we believe will be offered as ROFO in the next few years. And Abengoa continues working on a number of other a projects under development that again make us believe that Chile will be a significant source of very attractive growth.

And finally, transmission lines, Abengoa is building at this point in time transmission lines in several countries in South America and is working on other developments that make us believe that in Peru, Brazil and Chile, and potentially in some other countries, we should be able to see in the next few years opportunities for growth.

And for the first time, we are providing you visibility regarding the CAFD that we expect to see through our ROFO agreement. So on page 24, we have included all the assets that Abengoa has in operation or construction and that we expect to see as ROFO proposals in the next few years divided by sector.

In total, we are talking about $350 million in CAFD, without including projects under development. So Abengoa, when they talk about assets they are working on, they include more assets than this list because some of them are under development. Here, we only include operation and construction.

Out of this $350million, most of it is in dollars. A significant majority would be in dollars. And obviously, every quarter this list should continue growing because Abengoa continues starting construction of new assets (inaudible) development [all the win] bidding processes. This is what makes us very comfortable that the 12% to 15% guidance we are giving you beyond 2016 is achievable, given the visibility we have on this pipeline, even without talking about third party acquisitions.

In summary, what we are announcing today is an acquisition, on page 25, of a very large, let's say, transaction in terms of equity price, $669 million with very long tenures as all of our other assets, 22 years on average and in US dollars, resulting in a portfolio where 93% of our cash will be in dollars. In second place, this is our third drop-down from Abengoa proving that the relationship is working, proving that we can achieve very significant growth from our sponsor.

Additionally, on top off the drop-downs that we have made, we now have a very long term visibility of potential ROFOs that will be coming from Abengoa and from the warehouse facility that Abengoa has created with a financial partner, Abengoa Project Warehouse number one. This makes us believe that over the next three years more or less the growth we need to achieve is there. If we can grow with third party acquisitions further, much better. But the growth we need in order to achieve our targets is already in operational construction.

Third, we have shown what we believe are very solid numbers for Q1, clearly ahead of the IPO forecast. In fourth place, we have talked about what we believe are attractive numbers in terms of acquisition with a 9.4% yield implying a significant billion per share accretion. And we have revised guidance for [aborts] up to $2.10, $2.15 per share in 2016.

And finally, remember that regarding growth beyond the acquisition we announced today, we will have a low leverage ratio. Our ratio after this dropdown will be around 1.6 times. Our corporate net debt versus CAFD will be only 1.6 times, leaving ample room for acquisitions with debt whenever we believe that that makes sense.

We are working on our credit rating. We expect to have that rating from two agencies available during the summer. We have shown you a very high visibility regarding future drop-downs and we'll continue working on third party acquisitions. All of these together make us believe that we should be able to close any acquisitions in the near future, allowing us to grow even further.

With that I will propose to start the Q&A session. We have a microphone here in the room for anybody who wants to [offer] questions, and we would kindly ask you to introduce yourself, name and company, before addressing the question.

Ladies and gentlemen, the Q&A session starts now. (Operator Instructions)

-- yield. This yield you announced today looks like a mixture of the two. I imagine Abengoa is going to talk on Thursday about continuing to drop down those assets by the end of the year. Does this imply you would do another drop-down in this calendar year?

Okay. So this is the transaction we have agreed with Abengoa. As you can imagine, after some months of negotiation, this is what we believe makes sense. We believe that the probability of being offered other assets in the rest of this calendar year is high. I obviously cannot promise whether we are going to which agreements or not, and therefore I wouldn't commit to anything. But the chance of being able do something else I think are high.

Eduard, in terms of this swap or hedge, this is unilateral across every drop-down that you do, Abengoa moving out, is that correct?

Yes. It's an agreement for this particular drop-down which is where we are purchasing euro-dominated assets, and we have extended it to the euro assets that we purchased in the past. And this only works with the euro, because there is that natural hedge between us and Abengoa. Because we receive euros from these assets and want dollars, and they receive dollars from us because they own part of us and they receive a portion of our dividends but they are a euro-denominated company.

And how much did it cost you to go with Abengoa via differential?

Well, the key differential, the key advantage of this structure is that it's the opportunity cost of the carrier line with banks that we say. Because building a hedge of this size obviously implies have very sizable hedging lines and the balance sheet that the banks can put at play with any given company are not infinite. And if you use them for these, you cannot use it for leverage to acquire assets. So the biggest cost advantage of doing it with Abengoa through this natural hedge is the opportunity cost of the hedging lines that we will not need to use.

My last question for [Pemex]. You're slated this summer to announce the new relationships both on production and downstream as they built out private -- deprivatized infrastructure in that country. [Have a go] and talk about potentially moving in to traditional infrastructure? I know there's some airport, things like that, if those are going to happen. Would you consider taking assets that are standard, conventional, transportation assets, or does it have to be renewable for you?

For us, we invest in five categories, which are the five categories where we are present today -- renewable energy, including solar and wind, conventional power which is natural gas, transmission and water. At this point in time we would not consider going beyond those five categories.

Good morning. Andrew Hughes from Bank of America Merrill Lynch. A couple of questions on the ROFO2 and then ROFO3. On ROFO2, can you explain what's holding up Shams and ATN2 and what the expected timing there is? And then also on the Spanish solar assets, what the time frame is for a potential feed-in tariff reset?

OK. So, regarding the second drop-down in ATN, the transmission line, construction has not finished. As we said, we would purchase once construction is finished. At this point in time the expectation is that construction should be finished by June and we would purchase shortly after that.

In the case of Shams, we have not secured the waivers we need to secure, and therefore we continue working on that. And we would purchase whenever those waivers are secured.

In the case of regulation in Spain, as many of you know, there's a regulation approved with [obligatory] period wherein the assets we are purchasing we have, as I mentioned, between 20 and 23 years in front of us. That regulation is based on a reasonable return principle, and every six years the government can review some metrics within that formula. The first time they would be able to review metrics would be into 2019, starting, or let's say, having an influence in the assets in 2020.

And then on ROFO3, and the highlight in the financing with the private placing, can you explain where Abengoa's ownership stake was prior to their participation? And I assume that their participation of private placement just holds that.

Yes. So Abengoa, before the private placement had a 51% ownership in ABY, they are taking a 51% in the capital increase, so they will have a 51% afterwards.

And is their goal still to deconsolidate?

Yes. Abengoa has publicly said several times that they plan to deconsolidate. And that continues being the case.

I'm Brian Chin with Bank of America. Just to follow-up on that last question, can you give update on the intention of where Abengoa [parent] ownership stake will likely get to at a certain point if they want to deconsolidate? Is there like a timetable and trajectory you can think about now?

I'm going to quote Abengoa because obviously this is a question for Abengoa. But Abengoa, what they have publicly said is that they want to go below a 50%, either by selling a 2% or diluting themselves in a future capital increase. Additionally, remember that Abengoa sold in March this year, if I recalled properly, they sold a bond exchangeable into ABY shares. That bond means that some investors will receive ABY shares like 20 months from now. It was a 2-year paper.

Okay. So those investors -- Abengoa owns that 9%, but the factor, there are investors who are going to receive those shares. Okay. So Abengoa would sell or get diluted by a small percentage, but also has effectively more or less sold that other 9%.

Hello. What is the status on the waivers and approvals that would allow the parent to sell to 2%?

So most of the -- I mean, trying to frame your question, if you know that for Abengoa to be able to go below a 51% is some of the financing agreements in our project companies would require a waiver so that Abengoa can go below that 51%. At this point in time, we have secured most of those waivers, but there are two that still we haven't secured. They should be obtained, we believe, in the next few weeks or few months. There's no reason to believe that it wouldn't be the case, but as of today, they have not been obtained, these last 2 waivers.

I just said that two more. One, if you included the development assets in that CAFD longer term target, 310 to 360, give a sense of what that number would be if you included some of the assets under development that Abengoa talks about.

I'm going to give you a number from the top of my head for that. What I can tell you is that if we look at assets that Abengoa has been able to add to this list in the last two quarters for example, probably we are talking about, you know, 20% to 30% of that. So in principle, Abengoa has been able to grow this list quicker than the speed at which we have been able to purchase.

So the inventory of assets available for us has been growing in spite for the fact that we have done three drop-downs in a year, which is very good news. We hope to be able to accelerate, and we hope that Abengoa continues accelerating.

And then is the invention -- just to go forward, to continue to roll any currency hedges forward at five years?

We will see. In each situation, we will see. As Eduard explained before, in the euro-dollar, there was a very nice natural hedge that we could play here. It might not be the case in every situation. In our case, as we have always said, we feel comfortable with a certain exposure to other currencies. We try to manage that.

In this transaction, what we are doing, if you want is resetting the counter, so we are moving from a 15% or 16% exposure to other currencies down to 7% in spite of growing. Therefore, we think this is a very important move, and very positive for ABY. We'll see in each transaction the future what's the solution.

Brian Chin with Bank of America again. I realize this is more of an Abengoa parent question, but can you give any color on how the [EIG JB] is going? Any sort of a (inaudible) thoughts there?

I mean, it's clearly an Abengoa question. What we know and Abengoa has said publicly is that the joint company has started and has invested in some of the assets. From an ABY point of view, we expect to look at assets coming from APW1 probably a year from now and not before that, because the assets that are going to APW1 are in construction, or even a starting construction. So it's not going to affect us a lot. I don't know if it's for a year or for 18 months, but in principle, everything is moving forward as planned.

Thanks. John Quealy from Canaccord, again. On the private placement, so I assume now it's public. So can you talk about if the deal oversubscribe, do you go out and top off the deal now that we've got several days to perfect it? How does it work?

So the deal has been priced, therefore investors have subscribed shares. Demand was very strong and allocation was not an easy process which is a very nice problem to have. We expect closing of the deal to happen later this week and to acquire the assets soon after that.

We have found a very good reception for this transaction, and we are very grateful obviously to investors. And I think that this shows that the investor community is there to support us if we find the right [goal of] opportunities where, as I showed before, we think we have a lot of them in front of us.

So the stock is still trading at a discount, it appears. Are there new investors potentially in this current round that broaden out the investor base that perhaps that over time, hopefully, will lower the discount, obviously unbiased with the buy rating? But you've got a couple of the transactions from competitors in the marketplace, in the yieldcos, now or soon. So can you comment -- do you have new investors in the book or is it more of a top off for existing? Thank you.

So I wouldn't get into lots of specifics regarding who are the investors. What I can tell you is that in the yieldco space, in general, and, specifically, in our case, what we have found are many investors who are looking for an opportunity to take meaningful positions in the stock, and perhaps the liquidity was not allowing them to do that. And therefore in this transaction, what we're seeing is many investors, who have been following us, now taking a significant position.

And in general, as I mentioned before, we have found a very good reception all across from different types of investors. And therefore we think that, going forward, we'll be able to do more. Obviously the fact that we have a higher yield than others obviously might be part of a reason why we have found such reception and why we believe that that gap should be closed going forward.

Mike Cerasoli from Eagle Global. Can you just talk about the equities for the remainder of the year? If there's a high probability for further drops, are you happy with where you are from an equity perspective? Or just --

But I think most important to do this transaction with equity, because this allows us to keep a significant, let's say, leverage capability in our balance sheet. If we are able to do another transaction this year, where I said that the probability is high, we will be deciding then how we finance it, obviously depending on where we trade, what kind of cost of debt we can look at.

Remember, we are going through a rating process, so it's very difficult today to forecast how we are going to finance ourselves. What I can tell you is that we'll be able to choose. We'll have a significant room in terms of debt.

And if it makes sense to do equity, we will. And if we can do a bit of both, we will as well. So at this point in time, the good thing is that we've done a lot of equity, and therefore we have some room for growth in debt if that makes sense in the future.

All right. Sorry. This is my last one. So the remaining assets that Abengoa is talking about for this year, I think the solar had been [one and six] and some PV assets. The PV you implied, Santiago, a lower cash flow yield or not, from your perspective?

I don't know. I mean, if we get offered those assets, we'll take a look. I wouldn't like to comment here on what Abengoa intends to do, because in a ROFO relationship, it's them who decide what to sell. Therefore, whenever they offer new assets, we'll be looking at them and deciding accordingly.

Andy Taylor from BlackRock again. Can you comment again on the environment in the third party markets and what sort of options and projects you've been able to take a look at, and potentially when we might see the first one of those?

Yes. So as we have told you from the beginning, we work on third-party acquisitions. And at this point in time, we are working on two areas. One is acquisitions in the US in renewal energy, in photovoltaics and wind.

At this point in time, we are working on one specific transaction where obviously we don't know who else is competing. But our sense is that there's high demand and there's a large number of competitors out there. So, we will continue trying, we will continue working. Now I cannot promise that we are going to close transactions, because the environment is very competitive and numbers are very demanding.

And the second area where we are working is assets in dollars in other geographies where we are present that have some sort of synergies with the assets we already own. There, we are finding situations with much lower competition and we continue working on them. We are fairly advanced in one situation as well, a small one, and we'll see if we can secure their transactions in the short term.

So we would love to do a transaction this year. I cannot promise that we are going to do it because we need to win, and we are not going to drop our numbers just to win.

Hi. Thank you. David Emami from RBC Capital Markets. With ROFO 3, you guys said the financing would close later this week. I was wondering when can we expect the cash to be up from these acquisitions or when would the acquisition actually close?

Most of the acquisitions will happen, I don't know, within a week after closing.

Brian Chin with Bank of America again. I think you had mentioned in your opening comments that your payout ratio right now is running at around a 70% level. How low are you comfortable with allowing that to go, given just the pace of additions and the trajectory of when your cash flows start to flow once assets come online? Different of your yieldco peers will have different thoughts on that. I'm just kind of curious where you stand right now.

So our target payout ratio, as you know, is 90%. In Q1, the number was significantly lower because Q1 was very strong from a cash generation point of view, and it shows that we started the year very strong from that point of view. Nevertheless, our expectation would be that that ratio in the rest of the year would be higher. And if we remain low, we would obviously review our guidance, because at the end of the day our target is 90%.

Ladies and gentlemen, we will now begin the Q&A session from the conference call participants. The next question comes from the line of [Jason Late]. Please go ahead.

Hi. I missed some of the call, so you may have already stated this. But for the ROFO 3, that was, I believe, estimated $225 million. What's the status of that actual transaction? They assume that this one is separate. But like I said I may have missed it, as some of the call.

Okay. Don't worry. So $225 million was the estimation for our third dropdown that we and Abengoa gave to the market several months ago. What we are doing today is announcing that third dropdown with a final size of $669 million. Okay? So the transaction we're announcing today is what, months ago, we thought was going to be between $200 million and $250 million. So it's finally a much larger transaction.

Okay. And then some of the other concessions that I would have expected in the second half of the year, I guess, are being done now, is that right? Like Solnova 1, 3, and 4?

It's a way of looking at it. So we are doing a larger transaction than what we anticipated because Abengoa has offered us more assets than what we thought. And we have ended up reaching an agreement that we are announcing today. So a way of looking at it is we might acquire those assets later in the year, but the fact of the matter is that they are now part of the third dropdown we are announcing today.

Understood. Thank you.

Thank you.

Our next question comes from the line of Sean McLoughlin from HSBC. Please go ahead.

Yes. Good afternoon. I was just wondering, in terms of consolidating the euro debts on the balance sheet, if you could explain how that will work and the FX assumptions behind that.

Secondly, looking at the 12% agreement you had for the first 100 million, we come up obviously with a lower than 9.4% yields for the remainder. Is this the kind of levels you'd expect for pricing for future acquisitions going forward or would you expect less of that?

I don't know if I fully understood your question. Sorry. The line was not very good. Let me try to answer what I understood and then you complement as required.

I think that you were asking whether the 9.4% yield is something you can believe we are going to be using going forward. Obviously, yields are negotiated between a seller and a buyer. Abengoa has got a different management team from ABY, therefore we negotiate every deal. And this 9.4% if the result of this negotiation, therefore I would not use it as an extrapolation going forward. Because depending on the assets, depending on that negotiation, the number will be different.

What else did you ask? Sorry.

That was my second question. The first question was just around consolidation of the euro denominated debt and what FX assumptions you would assume.

Anybody understood the question? We have difficulties to understand you here. Sorry.

Then can you hear me now?

A bit better, if you can get close to the phone and try again?

Okay. Is this better? It's a question regarding consolidation of the euro denominated debt on these assets and what FX assumptions you are using.

Well, I mean, we are buying more than -- it's actually 100% of those assets. So we are going to consolidate that debt. That debt is denominated in euros, but is paid out of a cash flow of a project that is denominated in euros.

Once we pay the project finance, that becomes CAFD, becomes cash available for distribution. And that's what we are hedging with Abengoa. So that's how it's going to work. And, yes, we're going to consolidate the debt of the euro denominated assets of course.

Was that the question? Sorry.

Yes. So what is the [easy] of these transactions in dollars?

It's irrelevant because of what I explained. Because the debt of those assets is in euros, it will be paid out of cash flow generated by those assets in euros. And that becomes the distribution, it becomes CAFD. And the CAFD is dollarized through the agreement with Abengoa.

So those are the mechanics of the process. So you don't really care about the exchange rate, [if you want].

Very good. Thanks.

There are no further questions.

Hi. On the Solana asset, I believe you had a projected, it's 940 megawatt hours or gigawatt hours that was projected per year. Are you going to hit that this year? And then if that isn't hit does Arizona Public Service to get a chance to claim any sort of penalties or how does that work?

No. So according to the PPA, we have in the case of Solana or in the case of Mojave as well, if one year we do not hit our internal target, nothing happens. There would only be consequences if we missed that number by a wide margin, by a lot. I don't remember now if it's like a 40% or something like that. Therefore there would be no consequences.

This year, most likely, we are not going to meet the number you are quoting in Solana, because it's the second year in operation, and therefore it's going to be in our internal forecast. We assume that it was going to be lower than the number you are quoting, which is more an ongoing rate. Typically in solar assets you have a [third year] is slightly lower, and in many cases a second, which is slightly lower as well.

How low below the 940 are you thinking for this year?

I wouldn't be able to answer from the top of my head. But more or less, the number we were expecting, which we can look at it offline. I don't remember now for Solana, specifically the number this year.

Thank you.

Hi. Regarding FX, as with the current -- couple of questions. One, is there any sort of collateral posting requirement over the course of that swap? And then two, given the hedge in -- the swap in place, does that change your debt capacity at the corporate? You previously had three times kind of max net debt to the CAFD, is that still intact or does this have any --

There's no formal collateral package as part of this agreement with Abengoa, to your first question.

To your second question, it doesn't affect our target ratio at all. What it does is it provides certainty for five years of the CAFD we're going to have, because we will move the euro dollar exchange rate risk, if you want. So that's the impact, if you want insight into that. But it doesn't change the policy, it doesn't change the target.

Okay. We will have no more questions. Thank you very much for those who came in person. And thanks a lot to those who joined on the phone. Thank you very much.

Operator, close whenever you want.

Abengoa Yield first quarter 2015 presentation is now over. You may disconnect your lines. Thank you.