Atlantica Sustainable Infrastructure (AY) 6-KCurrent report (foreign)

Exhibit 99.1

Atlantica in Two Minutes

¹ 100% Contracted or regulated. Regulated revenues in Spain, Chile TL 3 and Italy and non-contracted nor regulated in the case of Chile PV 1 and Chile PV 3.

² Based on CAFD estimates for the 2024-2027 period as of March 1, 2024, for the assets as of December 31, 2023, including assets that have reached COD before March 1, 2023.

³ We refer to section “Strategic Report” for further detail regarding the pipeline description.

⁴ The target does not include the waste generated during end-of-life decommissioning of the assets.

⁵ We refer to section “Occupational Health and Safety” for further detail.

Our Purpose and Values

Our purpose is to support the transition towards a more sustainable world by developing, building, investing in and managing sustainable infrastructure assets, while creating long-term value for our stakeholders.

Our values define who we are and how we behave both as individuals and as a Company. These values, described below in order of importance, serve as a compass for our day-to-day decisions and guide our relationships with stakeholders.

	Integrity, Compliance and Safety. We will always do what is right. We are strongly committed to complying with all rules and regulations.
	Value creation. We pursue a proactive approach to creating long-term value for our shareholders. Our core corporate policies are supported by a solid commitment to risk management that guides all our decisions.
	Sustainability. We invest in assets that are environmentally sustainable and we manage them in a sustainable manner. We follow policies that analyse, evaluate, and propose measures aimed at minimising the environmental impacts of our business activity.
	Excellence and Efficiency. We believe in outstanding and disciplined asset management of our operations to be the best-in-class operator, while seeking excellence on a cost-efficient basis.
	Collaborative Environment. Respect and Teamwork are key to achieving our goals. We treat others as we would like to be treated ourselves and we put the team ahead of personal success. To build strong teams, we recruit, train, and promote the best people.

About This Report

Atlantica Sustainable Infrastructure plc and its subsidiaries (“Atlantica” or “the Company”), as part of its commitment to transparency and reporting best practices, has published an Integrated Annual Report, which integrates our financial and non-financial information, including environment, social and governance (ESG) disclosures.

Integrated Annual Report Information

Atlantica’s Integrated Annual Report has been prepared in accordance with the relevant U.K. requirements for the year ended December 31, 2023.

The Consolidated Financial Statements contained in this Report have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”) and UK adopted International Accounting Standards (collectively as “IFRS”), on a basis consistent with the prior year. The Parent Company Financial Statements have been prepared in conformity with Financial Reporting Standard 101 “Reduced Disclosure Framework (“FRS 101”)”. We refer to Note 2 to the Consolidated Financial Statements, and Note 1 to the Parent Company Financial Statements for accounting policies detailed information.

In addition, this report has been prepared by Management in accordance with the Global Reporting Initiative (GRI) Standards. We report GRI in line with the matters that are important and / or material to our business.

This report has also been prepared by Management in accordance with the SASB Electric Utilities & Power Generators sustainability accounting standard and its reporting requirements. In addition, we have followed SASB Solar Technology & Project Developers sustainability accounting standards and its reporting requirements for aspects which are material to our business.

Data in this report for the year ended and as of December 31, 2023, except where otherwise noted. Comparative data for the years ended December 31, 2022, and 2021 is also provided. Our 2022, 2021 and 2020 Integrated Annual Report, U.K. Annual Reports and ESG Reports are available for download from our website.

ESG data reported corresponds to all consolidated subsidiaries. For Companies where Atlantica has joint financial control, we are consolidating the percentage of equity ownership for each of the ESG KPIs reported. Green House Gas emissions are accounted for following the financial control approach from the GHG Protocol. Emissions from joint ventures where partners have joint financial control are accounted for based on the equity share approach. We are accounting for proportional scope 1 and scope 2 emissions of equity investments in scope 3, category 15 (Investments).

A multi-disciplinary team participated in the preparation of this report.

Currency amounts are expressed in U.S. Dollars unless otherwise noted.

ESG Data Review

Atlantica’s management is responsible for the completeness, accuracy and validity of the information contained in this report. The data presented is based on the input received from internal data collection, management systems and external stakeholders. Certain parts of this report have been subject to external and/or internal assurance. We conduct regular internal audits to review our management system, including the procedures to collect information from our assets and the main data reported.

In 2023, independent third parties have been engaged to verify our reported Scope 1, 2 and 3 GHG emissions under a reasonable level of assurance.

DNV, an independent expert in assurance and risk management, verifies all our reported Scope 1, 2 and 3 GHG emissions in all the geographies where we are present. In addition, we also hired:

In addition, DNV has also been engaged to verify Atlantica’s air quality (i.e., non-GHG emissions), waste and water indicators and their compliance with GRI Reporting under a limited level of assurance.

In addition, in 2023 Atlantica’s Internal Audit team reviewed the completeness and accuracy of certain environmental, social and governance performance indicators, including GHG emissions, water and waste management, health and safety, energy consumption, supply chain, people and culture and investment in local communities.

Furthermore, Atlantica’s Accounting and Disclosure Committee reviewed this Integrated Annual Report prior to its publication.

Atlantica’s Board of Directors approved this report prior to its publication.

Non-GAAP Financial Measures:

This report contains non-GAAP financial measures including Adjusted EBITDA, CAFD and CAFD per share.

Non-GAAP financial measures are not measurements of our performance or liquidity under IFRS and should not be considered alternatives to operating profit or profit for the period or any other performance measures derived in accordance with IFRS or any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities. Please refer to the section “Other Information- Reconciliation of non-GAAP measures” of this report for a reconciliation of the non-GAAP financial measures included in this Report to the most directly comparable financial measures prepared in accordance with IFRS. Also, please refer to the following paragraphs in this section for an explanation of the reasons why management believes the use of non-GAAP financial measures (including CAFD, CAFD per share and Adjusted EBITDA) in this Report provides useful information to investors.

We present non-GAAP financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. The non-GAAP financial measures may not be comparable to other similarly titled measures employed by other companies and they may have limitations as analytical tools. These measures may not be fit for isolated consideration or as a substitute for analysis of our operating results as reported under IFRS as issued by the IASB. Non-GAAP financial measures and ratios are not measurements of our performance or liquidity under IFRS as issued by the IASB. Thus, they should not be considered as alternatives to operating profit, profit for the period, any other performance measures derived in accordance with IFRS as issued by the IASB, any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities. Some of the limitations of these non-GAAP measures are:

Some of the limitations of these non-GAAP measures are:

We define Adjusted EBITDA as profit/(loss) for the period attributable to the parent company, after adding back loss/(profit) attributable to noncontrolling interest, income tax expense, financial expense (net), depreciation, amortisation and impairment charges of entities included in our Annual Consolidated Financial Statements and depreciation and amortisation, financial expense and income tax expense of unconsolidated affiliates (pro-rata of our equity ownership). CAFD is calculated as cash distributions received by the Company from its subsidiaries minus cash expenses of the Company, including third-party debt service and general and administrative expenses and including proceeds from the sale of assets. CAFD per share is calculated as CAFD divided by the weighted average number of outstanding ordinary shares of the Company during the period.

Our management believes Adjusted EBITDA, CAFD and CAFD per share are useful to investors and other users of our financial statements in evaluating our operating performance because such measures provide investors with additional tools to compare business performance across companies and across periods. Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortisation, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Our management believes CAFD and CAFD per share are relevant supplemental measure of the Company’s ability to earn and distribute cash returns to investors and is useful to investors in evaluating our operating performance because securities analysts and other interested parties use such calculations as a measure of our ability to make quarterly distributions. In addition, CAFD and CAFD per share are used by our management team for determining future acquisitions and managing our growth. Our management uses Adjusted EBITDA, CAFD and CAFD per share as measures of operating performance to assist in comparing performance from period to period and aims to use them on a consistent basis moving forward. They also readily view operating trends as a measure for planning and forecasting overall expectations, for evaluating actual results against such expectations, and for communicating with our board of directors, shareholders, creditors, analysts and investors concerning our financial performance. Adjusted EBITDA, CAFD and CAFD per share are widely used by other companies in the same industry.

Information presented as the pro rata share of our unconsolidated affiliates reflects our proportionate ownership of each asset in our portfolio that we do not consolidate and has been calculated by multiplying our unconsolidated affiliates’ financial statement line items by the Company’s percentage ownership thereto. Note 7 to the Annual Consolidated Financial Statements includes a description of our unconsolidated affiliates and our pro rata share thereof. We do not control the unconsolidated affiliates. Multiplying our unconsolidated affiliates’ financial statement line items by the Company’s percentage ownership may not accurately represent the legal and economic implications of holding a non-controlling interest in an unconsolidated affiliate. We include depreciation and amortisation, financial expense and income tax expense of unconsolidated affiliates (pro rata of our equity ownership) because we believe it assists investors in estimating the effect of such items in the profit/(loss) of entities carried under the equity method (which is included in the calculation of our Adjusted EBITDA) based on our economic interest in such unconsolidated affiliates. Each unconsolidated affiliate may report a specific line item in its financial statements in a different manner. In addition, other companies in our industry may calculate their proportionate interest in unconsolidated affiliates differently than we do, limiting the usefulness of such information as a comparative measure. Because of these limitations, the information presented as the pro rata share of our unconsolidated affiliates should not be considered in isolation or as a substitute for our or such unconsolidated affiliates’ financial statements as reported under applicable accounting principles. Please refer to “Other Information” section for additional information regarding reconciliations from non-GAAP measures.

Strategic Report

This Strategic Report has been prepared to provide shareholders with information that will aid them in assessing Atlantica’s strategies and the potential of such strategies to succeed.

The Strategic Report contains certain forward-looking statements that are made by the directors in good faith and based on the information available to them up to the time of their approval of this report. These statements should be treated with caution due to the uncertainties, including both economic and business risk factors, inherent in such forward-looking information.

The directors have prepared this Strategic Report in compliance with Section 414C of the Companies Act 2006.

The Strategic Report discusses the following areas:

Our Sustainable Business Model and Strategy

Our Business

We are a sustainable infrastructure company with a majority of our business in renewable energy assets. Our purpose is to support the transition towards a more sustainable world by developing, building, investing and managing sustainable infrastructure assets, while creating long-term value for our investors and the rest of our stakeholders. In 2023, renewables represented 73% of our revenue, with solar energy representing 63%. We complement our renewable assets portfolio with storage, efficient natural gas and transmission infrastructure assets, as enablers of the transition towards a clean energy mix. We also hold water assets, a relevant sector for sustainable development.

As of the date of this annual report, we own or have an interest in a portfolio of assets and new projects under development diversified in terms of business sector and geographic footprint. Our portfolio consists of 45 assets with 2,171 MW of aggregate renewable energy installed generation capacity (of which approximately 73% is solar), 343 MW of efficient natural gas-fired power generation capacity, 55 MWt of district heating capacity, 1,229 miles of electric transmission lines and 17.5 M ft3 per day of water desalination.

We currently own and manage operating facilities and projects under development in North America (United States, Canada and Mexico), South America (Peru, Chile, Colombia and Uruguay) and EMEA (Spain, Italy, Algeria and South Africa). Our assets generally have contracted or regulated revenue. As of December 31, 2023, our assets had a weighted average remaining contract life of approximately 13 years⁶.

We intend to grow our business through the development and construction of projects including expansion and repowering opportunities, as well as greenfield developments, third-party acquisitions, and the optimisation of our existing portfolio. We currently have a pipeline of assets under development of approximately 2.2 GW of renewable energy and 6.0 GWh of storage. Approximately 47% of the projects are PV, 41% storage, 11% wind and 1% other projects, while 22% are expected to reach ready-to-build (“RTB”) in 2024-2025, 28% are in an advanced development stage and 50% are in early stage. Also, 20% are expansion or repowering opportunities of existing assets and 80% greenfield developments.

Our objective is to pay a consistent and growing cash dividend to shareholders that is sustainable on a long-term basis. We expect to distribute a significant percentage of our cash available for distribution as cash dividends and we will seek to increase such cash dividends over time through organic growth, investments in new assets and acquisitions.

Our plan for executing this strategy includes the following key components:

Grow our business by developing new projects and investing in new assets with a focus on renewable energy and storage.

We intend to develop new assets and, in some cases, to invest in assets under development or construction. We believe that our know-how and operating expertise in our key markets together with a critical mass of assets in several geographic areas as well as our access to capital will assist us in achieving our growth plans.

Focus on stable assets in renewable energy, storage and transmission, generally contracted or regulated.

We intend to focus on owning and operating stable, sustainable infrastructure assets, with long useful lives, generally contracted, for which we believe we have extensive experience and proven systems and management processes, as well as the critical mass to benefit from operating efficiencies and scale. We intend to maintain a diversified portfolio with a large majority of our Adjusted EBITDA generated from low-carbon footprint assets, as we believe these sectors will see significant growth in our targeted geographies.

Maintain diversification across our business sectors and geographies.

Our focus on three core geographies, North America, Europe and South America, helps to ensure exposure to markets in which we believe renewable energy, storage and transmission will continue to grow significantly. We believe that our diversification by business sector and geography limits risks, reinforces stability and provides us with better growth opportunities.

Grow our business through the optimisation of the existing portfolio and through investments in the expansion of our current assets.

We intend to grow our business through organic growth that we expect to deliver through the optimisation of the existing portfolio, price escalation factors in many of our assets as well as through investments in the expansion and repowering of our current assets and hybridisation of existing assets with other complementary technologies including storage, particularly in our renewable energy assets and transmission lines.

⁶ Calculated as weighted average years remaining as of December 31, 2023 based on CAFD estimates for the 2024-2027 period, including assets that have reached COD before March 1, 2024.

Maintain a low-risk approach.

We intend to maintain a portfolio of sustainable infrastructure assets, generally totally or partially contracted, with a low-risk profile for a significant part of our revenue. We generally seek to invest in assets with proven technologies in which we generally have significant experience, located in countries where we believe conditions to be stable and safe. We may complement our portfolio with investments or co-investments in assets with shorter contracts or with partially contracted or merchant revenue or in assets with revenue in currencies other than the U.S. dollar or euro. We have a set of policies and a risk management system in place which define thorough risk management processes.

Maintain a prudent financial policy and financial flexibility.

Non-recourse project debt is an important principle for us. We intend to continue financing our assets with project debt progressively amortised using the cash flows from each asset and where lenders do not have recourse to the holding company assets. The majority of our consolidated debt is project debt.

In addition, we hedge a significant portion of our interest rate risk exposure. We estimate that as of December 31, 2023, approximately 93% of our total interest risk exposure was fixed or hedged, generally for the long-term. We also limit our foreign exchange exposure. We intend to ensure that at least 80% of our cash available for distribution is always in U.S. dollars and euros. Furthermore, we hedge net distributions in euros for the upcoming 24 months on a rolling basis.

We also intend to maintain a solid financial position through a combination of cash on hand and undrawn credit facilities. In order to maintain financial flexibility, we use diversified sources of financing in our project and corporate debt including banks, capital markets and private investor financing. In recent years we have been active in green financing initiatives, improving our access to new debt investors.

Our Competitive Strengths

We believe that we are well-positioned to execute our business strategies thanks to the following competitive strengths:

Stable and predictable long-term cash flows.

We believe that our portfolio of sustainable infrastructure has a stable cash flow profile. We estimate that the off-take agreements or regulation in place at our assets have a weighted average remaining term of approximately 13⁷ years as of December 31, 2023, providing long-term cash flow visibility. In 2023, approximately 54% of our revenue was non-dependent on natural resource, not subject to the volatility that natural resource may have, especially solar and wind resources. This includes our transmission lines, our efficient natural gas plant, our water assets and approximately 76% of the revenue received from our solar assets in Spain with most of their revenues based on capacity in accordance with the regulation in place. In these assets, our revenue is not subject to (or has low dependence on) solar, wind or geothermal resources, which translates into a more stable cash-flow generation. Going forward, our new investments will probably be more dependent on the natural resource. Additionally, our facilities have minimal or no fuel risk.

Our diversification by geography and business sector also strengthens the stability of our cash flow generation. We expect our well-diversified asset portfolio, in terms of business sector and geography to maintain cash flow stability.

Positioned in business sectors with high growth prospects.

The renewable energy industry has grown significantly in recent years and it is expected to continue to grow in the coming decades. According to Bloomberg New Energy Finance (BNEF), the next three decades will require between $46 trillion and $131 trillion of investment which translates into an annual range of $1.5-$4.4 trillion. BNEF projects an annual investment of $1.2-$3.9 trillion in low-carbon energy sources, including renewables, surpassing the $1 trillion invested in 2022⁸. Furthermore, clean energy is on track to set new records. Global installation of wind, solar and storage is expected to exceed 680 GW in 2024, up 22% from 2023. Solar is anticipated to lead the way in 2024 with over 500 GW expected to be installed; which will likely make it the largest source of new capacity and new generation worldwide. Onshore wind follows as the second-highest, with close to 100 GW projected to be installed in 2024, followed by storage capacity, of which around 50 GW is expected to be installed⁹.

The significant increase expected in the renewable energy space over the coming decades also requires significant new investments in electric transmission and distribution lines for power supply, as well as storage and natural gas generation for dispatchability, with each becoming key elements to support additional wind and solar energy generation. We believe that we are well positioned in sectors with solid growth expectations.

We also believe that our diversified exposure to international markets will allow us to pursue improved growth opportunities and achieve higher returns than we would have if we had a narrower geographic or technological focus. If certain geographies and business sectors become more competitive for investments in the future, we believe we can continue to execute on our growth strategy by having the flexibility to invest in other regions or in other business sectors.

⁷ Calculated as weighted average years remaining as of December 31, 2023 based on CAFD estimates for the 2024-2027 period, including assets that have reached COD before March 1, 2024.

⁸ BNEF Theme: Energy Investment and Climate Scenarios.

⁹ Where Energy Markets and Climate Policy Are Headed in 2024: BNEF.

Well positioned to capture growth opportunities.

We have in-house development capabilities and partnerships with third parties to co-develop new projects. Our development asset identification is supported by rigorous analysis and deeply rooted industry knowledge and experience. In addition, we follow a disciplined approach to make capital allocation decisions and we have strict minimum required returns for development projects and acquisitions that we update frequently. In addition, our current portfolio of assets offers growth opportunities through the expansion and repowering of existing assets and through hybridisation of existing assets with other complementary technologies. We can also grow by adding storage to our existing renewable assets or by developing standalone storage close to our existing assets.

Proven capabilities in operation and maintenance.

We perform operation and maintenance in-house in a majority of our assets. We believe this approach allows us to have full control of our assets and to optimise their performance. We can benefit from synergies in shared resources and centralised purchasing management, among other advantages. Our corporate operations departments have a plan to periodically review all our assets in detail to identify best practices and improvement actions which are then implemented across the portfolio.

Solid financing expertise.

Our Finance team has extensive experience in project financing and project refinancing in our different geographies. In our corporate financing, we have access to different pools of capital. We have issued bonds in the public markets, including convertibles, private placements with different types of investors, bank financing and commercial paper. Since a portion of the assets have revenues denominated in euros, we can issue corporate financings in euros, to take advantage of lower costs.

Lean corporate structure focused on value added activities.

We operate a lean and efficient organisation where corporate functions support each operating asset. Our core corporate policies are supported by a solid commitment to risk management that guides all our decisions. We believe that our internal management system ensures a nimble decision-making process while ensuring compliance with our policies and risk management system.

Well positioned in ESG.

In 2023, 72% of our Adjusted EBITDA was derived from renewable energy and 62% of our Adjusted EBITDA corresponded to solar energy production. Adjusted EBITDA from low carbon footprint assets represented 89%, including renewable energy, transmission infrastructure, as well as water assets. We have set a target to maintain over 85% of our Adjusted EBITDA generated from low-carbon footprint assets.

We have set a target to reduce our scope 1 and scope 2 GHG emissions per unit of energy generated¹⁰ by 70% by 2035, with 2020 as base year. This target was validated in 2021 by the Science Based Targets initiative. We have also set a target to reduce our scope 3 emissions per unit of energy generated by 70% by 2035 from a 2020 base year. With this, we target to achieve net zero GHG emissions by 2040. Additionally, we have also set targets to reduce non-GHG emissions per unit of energy generated and to reduce our water consumption per unit of energy generated.

In 2023, our key health and safety indicators met annual targets and remained below the sector average in all our geographies. Health and Safety is our number one priority, and we want our employees, partners, and contractors to apply the highest standards to ensure safe and sustainable operations.

¹⁰ Including thermal generation.

Regarding our local communities, we acknowledge that our day-to-day activities have impacts on nearby communities. We recognise that the communities where we operate are where some of our employees and other stakeholders live and raise their families, and where part of our future workforce is educated and trained. We foster communities’ economic prosperity through local purchases and by hiring local employees. As such, it is key for us to be both proactive and a valued member of our communities. In 2023 we invested $1.5 million. Atlantica’s investments in local communities are focused on improving infrastructure and supporting education.

In terms of governance, we maintain a simple structure with one class of shares. The majority of our Directors are independent, and all the board committees are formed exclusively by independent directors. 22% of our directors are women. We believe that we have a solid compliance framework with a set of policies approved and reviewed annually by the Board of Directors, a Code of Conduct which is acknowledged by all employees annually and internal procedures aimed at ensuring that all geographies comply with our policies.

We have been rated by various ESG rating agencies, which we believe can provide relevant information for investors.

Growth Visibility

Development Pipeline

We are developing new projects in most of our core geographies. In some cases, we do this with our local in-house teams and in other cases we have been working with local partners with whom we jointly invest in developing projects or with whom we have agreements based on milestones.

By focusing our development activities on locations where we already have assets in operation and by working in many cases with partners, we have been able to maintain our development cost at what we believe are low levels.

We currently have a pipeline of assets under development of approximately 2.2 GW of renewable energy and 6.0 GWh of storage. Approximately 47% of the projects are in PV, 41% in storage and 11% in wind, while 22% of the projects are expected to reach ready to build (“Rtb”) in 2023 or 2024, 28% are in an advanced development stage and 50% are in early stage.

Pipeline of Assets Under Development¹¹

¹¹ Only includes projects estimated to be ready to build before or in 2030 of approximately 3.7 GW, 2.2 GW of renewable energy and 1.5 GW of storage (equivalent to 6.0 GWh). Capacity measured by multiplying the size of each project by Atlantica’s ownership. Potential expansions of transmission lines not included. 

Events During the Period

Assets that entered into operation

During 2023, four assets that were under construction entered into operation:

Assets under construction

As of December 31, 2023 we had the following assets under construction or ready to start construction in the short-term:

Notes-

(1) Includes nominal capacity on a 100% basis, not considering Atlantica’s ownership.

(2) Atlantica owns 49% of the shares, with joint control, in Chile PMGD.

(3) Corresponds to the expected investment by Atlantica.

(4) Atlantica owns 50% of the shares in Honda 1, Honda 2 and Apulo 1.

Coso Batteries 1 is a standalone battery storage project of 100 MWh (4 hours) capacity located inside Coso, our geothermal asset in California. Additionally, Coso Batteries 2 is a standalone battery storage project with 80 MWh (4 hours) capacity also located inside Coso. Our investment is expected to be in the range of $40 million to $50 million for Coso Batteries 1, and in the range of $35 to $45 million for Coso Batteries 2. Both projects were fully developed in-house and are now under construction. We have closed a contract with Tesla for the procurement of the batteries. COD is expected in 2025 for both projects.

Advanced Projects

Potential Asset Sale

Our partner in Monterrey initiated a process to sell its 70% stake in the asset. Such process is well advanced and, as part of it, we intend to sell our interest as well under the same terms. The net proceeds to Atlantica are expected to be in the range of $45 to $52 million, after tax. The closing of the transaction is subject to certain conditions precedent. We cannot guarantee that the transaction will finally close.

Project Debt Refinancing

In March 2023, we refinanced the Solaben 2 and Solaben 3 project debt by entering into two green senior euro-denominated loan agreements for the two assets with a syndicate of banks for a total amount of €198.0 million. The new project debt replaced the previous project loans for a similar amount and maturity was extended from December 2030 to June 2037.

In addition, in June 2023 we extended the maturity of the debt for Logrosan Solar Inversiones, S.A, the subsidiary-holding company of Solaben 2 & 3 and Solaben 1 & 6 from April 2025 to December 2028. We refer to section “Liquidity” under “Financial Review” for more information.

Operation and Maintenance

In March 2023, we completed the process of transitioning in-house the O&M services for our assets in Spain through the acquisition of the business of an Abengoa subsidiary which was still providing those services to some of our assets.

In addition, in July 2023 we internalised the O&M services for ATN, which were previously performed by Omega Peru. Additionally, the O&M contract for ATS with Omega Peru, which could be terminated every five years was modified and can now be terminated every three years (or two years under certain circumstances) and the contract for ATN2, which was a long-term contract expiring in 2027, was also amended to reflect the same termination provision.

Currently, we perform O&M services with our own personnel for assets representing approximately 74% of our consolidated revenue for the year ended December 31, 2023.

Regulation in Spain

In June 2023, the final parameters for the year 2023 were published, including a revised assumption for electricity prices for the years 2023, 2024 and 2025.

Strategic Review

On February 21, 2023, Atlantica’s board of directors commenced a process to explore and evaluate potential strategic alternatives that may be available to Atlantica to maximise shareholder value. The Company believes it has attractive growth and other opportunities in front of it and is committed to ensuring it is best positioned to take advantage of those opportunities. The decision has the support of the Company’s largest shareholder, Algonquin. Atlantica expects to continue executing on its existing plans while the review of strategic alternatives is ongoing, including its current growth plan. As of the date of this annual report, the strategic review is ongoing. There is no assurance that any specific transaction will be consummated, or other strategic change will be implemented as a result of this strategic review. Please refer to the section: “Principal Risk and Uncertainties”.

Main ESG Actions during the year

Investing in and developing new sustainable infrastructure projects are only one part of our strategy. Managing those assets in a sustainable way is key to creating long-term value. We have launched several initiatives to ensure that we efficiently and sustainably manage key areas of our Company:

These policies are available on our website.

In 2023 we did two green project refinancings:

In 2023 we have assessed the trade associations with whom we collaborate. We refer to section “Trade Associations” under the “Governance” section for further detail.

Contribution to the Sustainable Development Goals

Atlantica is a signatory to the UNGC, the world’s largest corporate sustainability initiative with more than 20,000 signatories in over 160 countries. The UNGC is an initiative that encourages companies and organisations worldwide to adopt sustainable and socially responsible policies. Participation in the UNGC is voluntary and those entities that sign it pledge to uphold and promote the principles and report on their progress once they apply them in their management.

Atlantica formally adopted the ten fundamental UNGC principles in the fields of human rights, labour, environment, and anti-corruption and made the UNGC and its principles an integral part of our strategy, culture, and day-to-day operations.

The table below summarises Atlantica’s contribution to achieving 7 of the 17 Sustainable Development Goals (SDG): climate action; affordable and clean energy; clean water and sanitation; decent work and economic growth; gender equality; life on land; and industry, innovation, and infrastructure.

	We are committed to using water efficiently in our power generation and water desalination activities. We plan to reduce our water consumption at our generating assets that use cycled water in the turbine circuit and in refrigeration processes. In 2023, we recycled 17% more water, which mainly contributed to a 4% decrease in our overall water consumption. In addition, we have a target approved by the Board of Directors to reduce our water consumption per unit of energy generated (KWh) by 50% by 2035, from a 2020 base year. In 2023, our water consumption per unit of energy generated decreased by 5% compared to 2022. We invest in water desalination plants that generate drinking water for local communities and industries through the desalination of sea water. In 2023, these assets generated purified seawater to meet the water needs of approximately 3 million people in regions with limited access to fresh water. We encourage you to read our water management section for more detailed information.
	The renewable energy industry has grown significantly in recent years and it is expected to continue to grow in the coming decades. This requires significant new investments in, among others, storage for dispatchability to support additional wind and solar energy generation. In 2023, our renewable sector accounted for 73% of our revenue, with solar energy representing 63%. We intend to grow our business through the development and construction of projects including expansion and repowering opportunities, as well as greenfield developments, third-party acquisitions and the optimisation of our portfolio. During 2023, four assets that were under construction entered into operation: -  Albisu, the 10 MW PV asset reached COD in January 2023. -  La Tolua and Tierra Linda, two PV assets with a combined capacity of 30 MW both reached COD in the first quarter of 2023. -  Honda 1, a 10 MW PV asset reached COD in December 2023. In addition, we have 3 PV projects, 2 storage projects and 2 transmission lines that are currently under construction. We currently have a pipeline of assets under development of approximately 2.2 GW of renewable energy and 6.0 GWh of storage. We are also in the process of selling our 30% stake in one of our efficient natural gas assets. We encourage you to read section “Growth visibility” for further details on affordable and clean energy investments.

	We protect labour rights and are committed to promoting safe and secure working environments for all workers. We are committed to providing decent work for all women and men, young people and persons with disabilities and equal pay for work of equal value. We have always prioritised the health and safety of all our employees, contractors and partners working at our premises. Our key health and safety indicators met 2023 targets, improved with respect to 2022 and remained below the sector average in all our geographies. We have internal policies and procedures to support and ensure human rights, including the Human Rights Policy, the Code of Conduct and the Supplier Code of Conduct (available on our website). Our internal compliance team annually: (i) monitors human rights are internally respected, (ii) provides human rights related training to our employees, and (iii) assesses the supply chain across the jurisdictions in which we operate to identify any potential breach regarding human rights. In May 2023, the Board amended and approved our “U.K. Anti-Modern Slavery and Human Trafficking Statements” under the Modern Slavery Act, 2015 (available on our website). No human rights incidents were reported or identified during 2023. We are committed to supporting long-term development of the communities where we operate as part of our culture at Atlantica. It is key for us to be a proactive and valued member of our communities and to foster communities’ economic prosperity. In addition, we support local economic growth by choosing to buy from local businesses. In 2023, more than 90% of our total purchases in the geographies where we have assets were made to local suppliers. We encourage you to read our Social and Governance sections for details on occupational health and safety, human rights, supply chain management and training-related activities.
	Our activity has a positive impact on mitigating climate change. We are committed to the reduction of greenhouse gas emissions (GHG) by investing in renewable energy assets. Following our long-term commitment to sustainability, we have set an ambitious plan to reduce: 1.  Our GHG emissions. We target to: (i)  reduce our Scopes 1 and 2 GHG emissions per kWh of energy generated by 70% by 2035 from a 2020 base year12. This target has been approved by the Science Based Targets initiative (SBTi) (ii)  reduce Scope 3 GHG emissions per kWh of energy generated by 70% by 2035 from a 2020 base year, and (iii) achieve Net Zero GHG emissions by 2040. 2.  Our non-GHG emissions. We target to reduce our non-GHG emissions per kWh of energy generated by 50% by 2035 from a 2020 base year. In addition, we have a goal to maintain over 85% of our adjusted EBITDA generated from low carbon footprint assets including renewable energy, storage, transmission infrastructure and water assets. In 2023, we reduced (i) our Scopes 1 and 2 GHG emissions per kWh of energy generated by 14% compared to 2020 and (ii) our Scope 3 GHG emissions per kWh of energy generated by 20% compared to 2020. In addition, we helped avoid up to 7.0 million tonnes of equivalent CO2 compared to a 100% fossil fuel-based generation plant. Please read our Environmental Sustainability section for further details on our climate change related activities.

¹² The target boundary includes steam generation.

Atlantica also supports other SDGs, as outlined below:

	We promote equal opportunities for our employees and stakeholders. Atlantica’s Diversity and Inclusion Policy was approved by the Board of Directors in May 2020 and was last amended in December 2021 Atlantica stands for greater equality for women. We work to ensure that men and women are treated equally and have the same work opportunities. We aim to perform a human capital analysis every 4 years at certain locations. The objective of this analysis is to guarantee equal opportunities to our employees and to promote a culture of diversity and inclusion. We analyse gender pay gap, for the year ended December 31, 2023 the total overall pay gap decreased and was 5%. We encourage you to read the Social and Governance sections for further details on gender equality.
	We work to protect flora and fauna in and around our assets. We are committed to achieving “no net loss” of biodiversity and “no net deforestation” in the areas where we operate and in all project phases through the application of the Mitigation Hierarchy. In 2023, we continued to: (i) monitor the impact of spinning blades on local species of birds at our wind farms in Uruguay, and (ii) collaborate with local administrations and other key stakeholders to protect species settled close to our assets in the U.S. and Spain. We have set a target to reduce our hazardous and non-hazardous waste per unit of energy generated by 30% and 40%, respectively, by 2035 from a 2023 base year. In addition, in 2023 we continued to deliver on our reforestation programme in Spain, where we invested approximately $445 thousand in reforesting a new 48-hectare area and maintaining previously reforested areas. We encourage you to read the Environmental Sustainability section for further details on our biodiversity initiatives.
	Infrastructure is a key driver of economic growth and social value creation. At Atlantica, we produce and transport electricity and we provide drinking water to approximately 3 million people living in high or extremely high-water stress areas. Our solar asset in South Africa contributes to providing clean electricity in a country that requires additional power capacity. In South America, our transmission lines help transport electricity to remote areas. In addition, we foster communities’ economic prosperity through local purchasing and by hiring local employees. In 2023, four PV assets that were under construction reached COD in Uruguay and Colombia. In addition, as of December 31, 2023, we have 2 battery storage projects in the U.S., 1 PV project in Chile, 2 transmission lines in Peru and 2 additional PV projects in Colombia that are under construction and that we expect will reach COD during 2024-2025. We also have a pipeline of assets under development of approximately 2.2 GW of renewable energy and 6.0 GWh of storage. Within the energy sector, innovation contributes to the fight against climate change through new or enhanced technologies that enable more sustainable, reliable and efficient solutions, including storage and green hydrogen solutions. To ensure reliability of our assets we: (1) own 22 patents and technology licences, as well as 4 patents currently in approval process, related to key components of our assets, to processes and to solutions to monitor, operate and maintain our assets in a sustainable and cost effective manner, (2) have an operations department to identify potential measures to improve asset performance, reducing operating costs and developing tools to manage our assets more efficiently, and (3) have an advanced analytics team to improve the performance of our technologies through data analytics and machine learning technologies. We encourage you to read the Asset Management and Innovation sections for further details on our industry, innovation and infrastructure initiatives.

Communication on Progress (COP):

This Integrated Annual Report constitutes Atlantica’s “Communication on Progress” under the UNGC.

Key Performance Indicators

We closely monitor the following key drivers of our business sectors’ performance to plan for our needs, and to adjust our expectations, financial budgets, and forecasts appropriately.

¹³ Represents total installed capacity in assets owned or consolidated at the end of the year, regardless of our percentage of ownership in each of the assets except for Vento II for which we have included our 49% interest.

¹⁴ Includes 49% of Vento II wind portfolio production since its acquisition. Includes curtailment in wind assets for which we receive compensation.

¹⁵ Includes 43 MW corresponding to our 30% share in Monterrey and 55 MWt corresponding to Calgary District Heating.

¹⁶ GWh produced includes 30% of the production from Monterrey.

Notes:

Selected Social Metrics

Notes:

A Fair Review of the Business

Factors that Affect Comparability of our Results of Operations

The results of operations of Chile TL4, Italy PV 4 and Chile PV 3 have been fully consolidated since January 2022, April 2022 and September 2022, respectively and the results of Albisu, Tierra Linda and La Tolua have been fully consolidated since these assets entered into operation in the first quarter of 2023. For the full year 2023, these investments represented revenues and Adjusted EBITDA of $14.1 million and $10.5 million respectively, which represents an increase of $7.9 million in revenue and $7.6 million in Adjusted EBITDA for the year ended December 31, 2023 with respect to 2022.

In 2023, considering that expected electricity prices in Chile over the remaining useful life of Chile PV1 have decreased, we have identified an impairment triggering event, in accordance with IAS 36 (Impairment of Assets). As a result, an impairment test has been performed and resulted in an impairment loss of $16.1 million in 2023 in the line “Depreciation, amortisation, and impairment charges”. In 2022, we also recorded an impairment loss of $20.4 million in Chile PV1 and Chile PV2. Our equity interest in Chile PV 1 and Chile PV 2 is 35%. As a result, the impact of the impairment charges in “Profit / (loss) for the year attributable to the parent company” after non-controlling interest was $5.6 million in 2023 and $7.1 million in 2022.

During 2022 we recorded an impairment loss of $41.2 million in Solana with no corresponding triggering event and impairment in 2023.

In addition, IFRS 9 requires impairment provisions to be based on expected credit losses on financial assets rather than on actual credit losses, which affects the concessional assets accounted for as financial assets. For the year 2023 we recorded a decrease in the expected credit loss impairment provision of $13.2 million reflected in the line item “Depreciation, amortisation, and impairment charges” and was primarily related to ACT ($10.9 million). In 2022 we recorded an increase in the expected credit loss impairment provision of $6.7 million, also primarily related to ACT ($4.0 million).

Total revenues in Spain were stable in 2023 compared to the previous year. In addition to regulated revenue, our solar assets in Spain receive revenue from the sale of electricity at market prices. The average electricity market price captured by our assets was approximately €69.9 per MWh during 2023 compared to approximately €145.3 per MWh during 2022. Revenue from the sale of electricity at current market prices represented $84.3 million during 2023, compared to $142.9 million in 2022. Regulated revenues are revised periodically to reflect, among other things, the difference between expected and actual market prices if the difference is higher than a pre-defined threshold and as a result, we record a provision. We decreased our provision by $3.5 million in 2023, with no cash impact, compared to an increase of $25.3 million in the previous year.

In 2023, we have calculated the provision assuming that the average market price must be corrected using the solar time of day adjustment factor (“coeficiente de apuntamiento”), as it was stated in the regulations published since 2020. This factor, which is 90% for 2023, aims to capture the difference between the daily (24 hours) average market price and the price captured by solar assets. Although the factor is not mentioned in the regulation for 2023, we believe the last order includes a clerical error that we expect is going to be corrected.

On May 12, 2022, remuneration parameters in Spain for the year 2022 were published and became final on December 14, 2022, with a decrease in regulated revenue. In addition, on June 30, 2023, the new parameters were published, including a revised assumption on electricity prices for the years 2023, 2024 and 2025. Revenue from the sale of electricity at market prices net of the incremental market price provision was $84.0 million for the full year 2023, compared to $117.6 million for the full year 2022. This decrease was offset by higher production in 2023.

Additionally, in 2022 we collected revenue from our assets in line with the parameters corresponding to the regulation in place at the beginning of the year 2022, however revenue for the year ended December 31, 2022 was recorded in accordance with the new parameters that became final on December 14, 2022, which were lower. Collections were regularised in the first quarter of 2023.

We refer to “Exchange rates” below.

Significant Trends Affecting Results of Operations

If the recently built assets and the recently closed acquisitions perform as anticipated, we expect these assets to positively impact our results of operations in 2024 and upcoming years.

The availability of solar, wind and geothermal resources affects the financial performance of our renewable assets, which may impact our overall financial performance. Due to the variable nature of solar, wind and geothermal resources, we cannot predict future availabilities or potential variances from expected performance levels from quarter to quarter. Based on the extent to which the solar, wind and geothermal resources are not available at expected levels, this could have a negative impact on our results of operations.

The capital markets in general are subject to volatility that is unrelated to the operating performance of companies. Our growth strategy depends on our ability to close acquisitions, which often requires access to debt and equity financing to complete these acquisitions. Fluctuations in capital markets may affect our ability to access this capital through debt or equity financings.

Our presentation currency and the functional currency of most of our subsidiaries is the U.S. dollar, as most of their revenue and expenses are denominated or linked to U.S. dollars. All our companies located in North America, with the exception of Calgary, with revenue in Canadian dollars, and most of our companies in South America have their revenue and financing contracts signed in or indexed totally or partially to U.S. dollars. Our solar power plants in Europe have their revenue and expenses denominated in euros; Kaxu, our solar plant in South Africa, has its revenue and expenses denominated in South African rand, La Sierpe, La Tolua and Tierra Linda, Honda 1, our solar plants in Colombia, have their revenue and expenses denominated in Colombian pesos and Albisu, our solar plant in Uruguay, has its revenue denominated in Uruguayan pesos, with a maximum and a minimum price in U.S. dollars.

Project financing is typically denominated in the same currency as that of the contracted revenue agreement, which limits our exposure to foreign exchange risk. In addition, we maintain part of our corporate general and administrative expenses and part of our corporate debt in euros which creates a natural hedge for the distributions we receive from our assets in Europe. To further mitigate this exposure, our strategy is to hedge cash distributions from our assets in Europe. We hedge the exchange rate for the net distributions in euros (after deducting interest payments and general and administrative expenses in euros). Through currency options, we have hedged 100% of our euro-denominated net exposure for the next 12 months and 75% of our euro-denominated net exposure for the following 12 months. We expect to continue with this hedging strategy on a rolling basis.

Although we hedge cash-flows in euros, fluctuations in the value of the euro in relation to the U.S. dollar may affect our operating results. For example, revenue in euro-denominated companies could decrease when translated to U.S. dollars at the average foreign exchange rate solely due to a decrease in the average foreign exchange rate, in spite of revenue in the original currency being stable. Fluctuations in the value of the South African rand and Colombian peso with respect to the U.S. dollar may also affect our operating results.

In our discussion of operating results, we have included foreign exchange impacts in our revenue by providing constant currency revenue growth. The constant currency presentation is not a measure recognised under IFRS and excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations. We calculate constant currency amounts by converting our current period local currency revenue using the prior period foreign currency average exchange rates and comparing these adjusted amounts to our prior period reported results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to substitute recorded amounts presented in conformity with IFRS as issued by the IASB, nor should such amounts be considered in isolation.

We incur significant indebtedness at the corporate and asset level. The interest rate risk arises mainly from indebtedness at variable interest rates. To mitigate interest rate risk, we primarily use long-term interest rate swaps and interest rate options which, in exchange for a fee, offer protection against a rise in interest rates. As of December 31, 2023, approximately 92% of our project debt and close to 94% of our corporate debt either has fixed interest rates or has been hedged with swaps or caps. Nevertheless, our results of operations can be affected by changes in interest rates with respect to the unhedged portion of our indebtedness that bears interest at floating rates, which typically bear a spread over EURIBOR or SOFR.

As previously discussed, our solar assets in Spain receive revenue from the sale of electricity at market prices in addition to regulated revenue. Regulated revenues are revised periodically to reflect the difference between expected and actual market prices if the difference is higher than a pre-defined threshold. Additionally, our assets in Italy have contracted revenues through a regulated feed-in premium in addition to merchant revenues for the energy sold to the wholesale market.

Furthermore, we currently have three assets with merchant revenues (Chile PV 1 and Chile PV 3, where we have a 35% ownership, and Lone Star II, where we have a 49% ownership) and one asset with partially contracted revenues (Chile PV 2, where we have a 35% ownership). Our exposure to merchant electricity prices represents less than 1% of our portfolio in terms of Adjusted EBITDA. At Lone Star II we are analysing, together with our partner, the option to repower or recontract the asset in the context of the IRA, at a point in time to be determined.

Due to low electricity prices in Chile, the project debts of Chile PV 1 and 2 are under an event of default as of December 31, 2023 and as of the date of this report. Chile PV 1 was not able to maintain the minimum required cash in its debt service reserve account as of December 31, 2023 and did not make its debt service payment in January. In addition, in October 2023, Chile PV 2 did not make its debt service payment. This asset obtained additional financing from the banks and made the debt service payment in December, although it was not able to fund its debt service reserve account subsequently. As a result, although we do not expect an acceleration of the debt to be declared by the credit entities, as of December 31, 2023 Chile PV 1 and 2 did not have an unconditional right to defer the settlement of the debt for at least twelve months and the project debt was classified as current in our Annual Consolidated Financial Statements. We are in conversations with the banks, together with our partner, regarding a potential waiver. Impairments were recorded in these assets in 2023 and 2022. The value of the net assets contributed by Chile PV 1 and 2 to the Annual Consolidated Financial Statements, excluding non-controlling interest, was close to zero as of December 31, 2023.

Financial Review

Note:

Production in the renewable business sector increased by 2.6% in 2023, compared to 2022. The increase was largely due to an increase in production in our solar assets in Spain and to the contribution from the assets recently consolidated or which have entered into operation recently, including Chile PV 3, La Tolua, Tierra Linda, Albisu and Italy PV 4, bringing approximately 147.9 MWh of additional electricity generation during the year 2023.

Our efficient natural gas and heat assets, our water assets and our transmission lines, for which revenue is based on availability, continued at very high levels during 2023.

Results of Operations

The table below details our results of operations for the years ended December 31, 2023, and 2022.

Notes:

Revenue

Revenue decreased to $1,099.9 million for the year 2023 compared to $1,102.0 million for 2022. Revenue decreased primarily due to the decrease in production at Kaxu resulting from the unscheduled outage and the maintenance stop previously explained. Revenue at Kaxu decreased by $45.8 million. Part of the damage and the business interruption is covered by our insurance property policy, after deductibles, and as such we have recorded a $15.3 million insurance income in Other operating income.

These effects were partially offset by higher revenues at our solar assets in the U.S. due to higher electricity production especially in Solana, as previously explained. Revenue also increased at our transmission lines in 2023 compared to 2022 mostly as a result of inflation adjustments to tariffs, including a positive tariff adjustment in Chile TL 3 corresponding to previous years, which was published in the second quarter of 2023. In addition, the Company generated additional revenue from assets recently consolidated and assets that entered into operation recently, which together represented a total of $14.1 million of revenue in 2023 compared to $6.2 million in 2022. Revenue remained stable at our solar assets in Spain, since higher production during the period was offset by lower electricity prices, net of its corresponding accounting provision (due to the factors described under “—Factors that Affect Comparability of our Results of Operations — Electricity Market prices”).

Other Operating Income

The following table details our other operating income for the years ended December 31, 2023, and 2022:

“Grants” represent the financial support provided by the U.S. Department of the Treasury to Solana and Mojave and consist of an ITC Cash Grant and an implicit grant related to the below market interest rates of the project loans with the Federal Financing Bank. Grants were stable during 2023, compared to 2022.

“Insurance proceeds and other” increased by $14.1 million in 2023 compared to 2022. In 2023, “Insurance proceeds and other” included $15.3 million of insurance proceeds related to the Kaxu unscheduled outage, as previously explained. In addition, it included $4.6 million income from the sale of part of our equity interest in our development company in Colombia to a partner who now holds a 50% equity interest, with joint control. Finally, it includes $4.8 million related to improvements in our Calgary district heating asset which are re-invoiced to the municipality, with the corresponding cost recorded in “Other operating expenses”. In 2022, “Insurance proceeds and other” included an insurance income of $9.5 million.

“Income from construction services for our assets and concessions” is related to the construction of ATS Expansion 1 and ATN Expansion 3. Since these assets are accounted for under IFRIC 12, we are required to account for income from construction services as “Other operating income”, with the corresponding construction cost recorded within “Other operating expenses, Construction costs”.

Employee Benefit Expenses

Employee benefit expenses increased by 29.7% to $104.1 million for 2023, compared to $80.2 million in 2022 mainly due to the internalisation of the O&M services at Kaxu in 2022 and at our solar assets in Spain in 2022 and 2023.

Depreciation, Amortisation, and Impairment Charges

Depreciation, amortisation, and impairment charges decreased by 11.7% to $418.3 million for the year ended December 31, 2023, compared to $473.6 million for the year ended December 31, 2022. The decrease was mainly due to the $41 million impairment loss recorded at Solana in 2022, with no corresponding amount in 2023. The decrease was also due to a decrease of the expected credit loss impairment provision at ACT. IFRS 9 requires impairment provisions to be based on the expected credit loss of the financial assets in addition to actual credit losses. ACT recorded a decrease in the credit loss impairment provision of $10.9 million in 2023, while in 2022, it recorded an increase in the credit loss impairment provision of $4.0 million. In Chile, we recorded an impairment of $16.1 million related to Chile PV1. In 2022 we also recorded an impairment of $20.4 million at Chile PV 1 and Chile PV 2. On the other hand, these effects on depreciation, amortisation and impairment were partially offset by increased charges due to the consolidation of assets recently acquired or which entered in operation recently.

Other Operating Expenses

The following table details our other operating expenses for the years ended December 31, 2023, and 2022:

Other operating expenses decreased by 4.2% to $336.6 million for the year ended December 31, 2023, compared to $351.3 million for the year ended December 31, 2022 mainly due to lower cost of “Supplies” and lower “Operation and maintenance” costs.

Cost of supplies decreased mostly due to lower price of electricity in our assets in Spain. In addition, our operation and maintenance costs decreased during 2023, compared to 2022 mainly due to lower O&M costs in Spain, where these services have been internalised and are now provided by employees of Atlantica, with the cost classified in “Employee benefit” expenses.

On the other hand, the cost of “Raw Materials” increased in the subsidiaries which are now performing the operation and maintenance which was previously subcontracted, as these costs are now assumed directly by subsidiaries of Atlantica. “Other expenses” include costs related to improvements in our Calgary district heating asset which are re-invoiced to the municipality, as previously discussed.

“Construction costs” refers to the cost of construction of ATS Expansion 1 and ATN Expansion 3.

Operating Profit

As a result of the previously above-mentioned factors, operating profit increased by 23.2% to $342.0 million for the year ended December 31, 2023, compared with $277.7 million for the year ended December 31, 2022.

Financial Income and Financial Expense¹⁷

¹⁷ Classification within Financial income and financial expense has been revised to show a more meaningful classification of financial income and expense following the increase in interest rates. Prior period classification has been revised accordingly.

Financial Income

The following table details our financial income for the years ended December 31, 2023, and 2022:

Financial income increased from $10.1 million in 2022 to $25.0 million 2023 mostly due to higher remuneration of deposits resulting from higher interest rates.

Financial Expense

The following table details our financial expense for the years ended December 31, 2023, and 2022:

Financial expense decreased to $323.8 million in 2023 compared to $330.4 million in 2022. Interest rates have been higher in 2023 than in 2022, causing an increase in interest on loans and notes, which has been more than offset by the impact in our income statement of the derivatives hedging our loans. The decrease is due to a $26.6 million gain in “Interest rate gains/losses on derivatives: cash flow hedges”, where we record transfers from equity to the income statement when the hedged item impacts profit and loss compared to a $38.4 million loss in 2022, due to the increase in the reference rates in 2023, compared to 2022. Considering interest gains on hedge instruments of such loans and notes, total interest decreased in 2023 as in 2022, which is primarily due to the repayment of project and corporate debt in accordance with the financing arrangements.

Net Exchange Differences

Net exchange differences decreased to a $2.5 million loss in 2023 compared to a $10.3 million income in 2022. The decrease was mainly due to the change in fair value of caps hedging our net cash flows in Euros, which was largely stable in 2023 while it increased in 2022.

Other Financial Income/(Expense), Net

Other financial income/(expense), net increased to a net expense of $16.7 million in 2023, compared to a net expense of $0.9 million in 2022.

Other financial income in 2023, primarily includes an income of $3.9 million corresponding to the change in the fair value of the conversion option of the Green Exchangeable Notes in the period, (compared to $12.0 million in 2022). Other financial income also includes a non-monetary change to the fair value of derivatives of Kaxu for which hedge accounting is not applied for $0.1 million (compared to $6.2 million in the 2022) and a one-time income related to the extension in the maturity of the Green Project Finance, which qualifies as a refinancing from an accounting perspective.

Other financial expense increased in 2023, mainly due to the financial impact related to the electricity market prices provision recorded at our solar assets in Spain. This is a long-term provision recorded at present value in accordance with the effective interest method, which progressively accrues a financial expense. Other financial expense also includes expenses for guarantees and letters of credit, wire transfers, other bank fees and other minor financial expenses.

Share of Profit of Associates Carried Under the Equity Method

Share of profit of associates carried under the equity method decreased to $13.2 million in the year ended December 31, 2023, compared to $21.4 million in the year ended December 31, 2022 primarily due to a lower profit at Vento II, resulting from lower production and a lower price at Lone Star II after its PPA expired in January 2023.

Profit/(loss) Before Income Tax

As a result of the previously mentioned factors, we reported a profit before income tax of $37.2 million for the year ended December 31, 2023, compared to a loss before income tax of $11.8 million for the year ended December 31, 2022.

Income Tax

The reconciliation between the theoretical income tax resulting from applying an average statutory tax rate to profit before income tax and the actual income tax expense recognised in the consolidated income statements for the years ended December 31, 2023 and 2022, is as follows:

Note:

For the year ended December 31, 2023 the overall effective tax rate was different than the statutory rate of 25% primarily due to permanent differences, most of which relate to exchange rate differences in Mexico, where taxes are calculated in local currency, which was partially offset by unrecognized tax credits in several jurisdictions.

Loss/(profit) Attributable to Non-Controlling Interests

Loss attributable to non-controlling interests was $6.9 million for the year ended December 31, 2023 compared to $3.4 million profit for the year ended December 31, 2022. Loss /(profit) attributable to non-controlling interests corresponds to the portion attributable to our partners in the assets that we consolidate (Kaxu, Skikda, Solaben 2 & 3, Solacor 1 & 2, Seville PV, Chile PV 1, Chile PV 2, Chile PV 3 and Tenes). The loss in profit attributable to non-controlling interest in 2023 was mainly due to the loss reported in Kaxu resulting from lower production as previously explained.

Profit / (Loss) Attributable to the Parent Company

As a result of the previously mentioned factors, profit attributable to the parent company was $43.4 million for the year ended December 31, 2023, compared to a loss of $5.4 million for the year ended December 31, 2022.

Comparison of the Years Ended December 31, 2022 and 2021

The significant variances or variances of the significant components of the results of operations between the years ended December 31, 2021 and December 31, 2021, are discussed in the 2022 Consolidated Annual Report and Financial Statements.

Our Segment Reporting

We organise our business into the following three geographies where the contracted assets and concessions are located: North America, South America and EMEA. In addition, we have identified four business sectors based on the type of activity: Renewable energy, Efficient natural gas and heat, Transmission lines and Water. We report our results in accordance with both criteria.

Note:

Volume produced/availability

Note:

North America

Revenue increased by 4.9% to $424.9 million for the year ended December 31, 2023, compared to $405.1 million for the year ended December 31, 2022, while Adjusted EBITDA increased by 3.0% to $319.3 million for the year ended December 31, 2023, compared to $310.0 million for 2022. The increase in revenue was mainly due to higher electricity production in our solar assets in the U.S. as previously discussed, together with higher revenue at ACT (see “Efficient natural gas & heat” below), which was partially offset by lower revenue at Coso due to lower production. Adjusted EBITDA increased mainly due to the increase in revenue and lower costs in our solar assets in the US, mostly caused by lower insurance costs and lower O&M costs at Mojave. These effects were partially offset by lower EBITDA at Vento II, caused by lower production and lower prices at Lone Star II after the end of its PPA.

South America

Revenue increased by 13.0% to $188.1 million for the year ended December 31, 2023, compared to $166.4 million for the year ended December 31, 2022. The increase was mainly due to indexation to inflation in our revenue in transmission lines, including a positive tariff adjustment in Chile TL 3 corresponding to previous years which was published in the second quarter of 2023, and in wind assets in South America. Revenue also increased due to assets recently consolidated and assets which entered in operation recently. This increase was partially offset by lower revenue at our PV assets in Chile, where production decreased mostly due to lower electricity prices and, to a lower extent, curtailments. Adjusted EBITDA increased by 15.9% to $146.7 million for the year ended December 31, 2023, compared to $126.5 million for the year ended December 31, 2022, mostly due to the increase in revenue and to a $4.6 million gain from the sale of part of our equity interest in our development company in Colombia to a partner in the first quarter of 2023.

EMEA

Revenue decreased to $486.9 million for the year ended December 31, 2023, which represents a decrease of 8.2% compared to $530.5 million for the year ended December 31, 2022. The decrease was mainly due to lower revenue at Kaxu by $45.8 million, mostly due to an unscheduled outage coupled with a prolonged maintenance stop, as previously explained. Revenue at our solar assets in Spain remained stable.

Adjusted EBITDA decreased to $328.9 million for the year ended December 31, 2023, which represents a decrease of 8.8% compared to $360.6 million for the year ended December 31, 2022. Adjusted EBITDA decreased mainly due to the outage at Kaxu causing a $26.6 million decrease in EBITDA. The impact in Adjusted EBITDA was lower as a result of insurance income.

Note:

Volume produced/availability

Note:

Renewable Energy

Revenue decreased to $802.8 million for the year ended December 31, 2023, which represents a decrease of 2.3% compared to $821.4 million for the year ended December 31, 2022. The decrease in revenue was primarily due to lower revenue at Kaxu as previously discussed. On the other hand, revenue increased at our solar assets in the U.S. due to higher electricity production as previously explained and at our wind assets in South America due to higher production and price indexation to inflation, together with the contribution of assets recently consolidated. As previously explained, revenue at our solar assets in Spain remained stable.

Adjusted EBITDA decreased to $575.7 million for the year ended December 31, 2023, which represents a decrease of 2.1% compared to $588.0 million for the year ended December 31, 2022. The decrease in Adjusted EBITDA was mainly due to the decrease in revenue and to lower EBITDA at Vento II, as previously explained.

Efficient Natural Gas and Heat

Revenue increased by 4.2% to $118.4 million for the year ended December 31, 2023, compared to $113.6 million for the year ended December 31, 2022, while Adjusted EBITDA increased by 3.3% to $87.4 million for the year ended December 31, 2023, compared to $84.6 million for the year ended December 31, 2022. Revenue and Adjusted EBITDA increased at ACT with Adjusted EBITDA increasing by less mainly due to higher O&M costs, since there is a portion of revenue related to O&M services plus a margin.

Transmission Lines

Revenue increased by 9.0% to $123.5 million for the year ended December 31, 2023, compared to $113.2 million for year ended December 31, 2022, while Adjusted EBITDA increased by 9.1% to $96.0 million for the year ended December 31, 2023 compared to $88.0 million for the year ended December 31, 2022. The increase in revenue and Adjusted EBITDA was mainly due to tariff indexation to inflation including a positive tariff adjustment in Chile TL 3 corresponding to previous years.

Water

Revenue increased to $55.2 million for the year ended December 31, 2023, which represents a 2.6% increase compared to $53.8 million for the year ended December 31, 2022. Adjusted EBITDA decreased to $35.7 million for the year ended December 31, 2023, which represents a 1.9% decrease compared to $36.5 million for year ended December 31, 2022. Adjusted EBITDA decreased while Revenue increased because of higher O&M costs, which are indexed to inflation.

Comparison of the Years Ended December 31, 2022 and 2021

The significant variances in the revenue and volume, by geographic region and business sector, between the years ended December 31, 2022 and December 31, 2021, are discussed in the Form 20-F filed with the SEC on February 28, 2023.

Liquidity and Capital Resources

Our principal liquidity and capital requirements consist of the following:

As part of our business, depending on market conditions, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. In addition, any of the items discussed in detail under “Principal Risk and Uncertainties” and other factors may also significantly impact our liquidity.

Liquidity Position

Note:

Cash at the project level includes $177.0 million and $207.6 million restricted cash balances as of December 31, 2023 and 2022, respectively. Restricted cash consists primarily of funds required to meet the requirements of certain project debt arrangements. In the case of Solana, part of the restricted cash is being used and is expected to be used for equipment replacement.

As of December 31, 2023, $16.9 million of letters of credit were outstanding under the Revolving Credit Facility and we had $55 million of borrowings. As a result, as of December 31, 2023, $378.1 million was available under the Revolving Credit Facility. As of December 31, 2022, we had $30 million of borrowings and $34.9 million of letters of credit outstanding and $385.1 million was available under our Revolving Credit Facility.

Non-restricted cash at project companies includes among others, the cash that is required for day-to-day management of the companies, as well as amounts that are earmarked to be used for debt service and distributions in the future.

Management believes that the Company’s liquidity position, cash flows from operations and availability under its Revolving Credit Facility will be adequate to meet the Company’s working capital requirements, financial commitments and debt obligations; growth, operating and maintenance capital expenditures; and dividend distributions to shareholders. Management continues to regularly monitor the Company’s ability to finance the needs of its operating, financing and investing activities within the guidelines of prudent balance sheet management.

Credit Ratings

Credit rating agencies rate us and part of our debt securities. These ratings are used by the debt markets to evaluate our credit risk. Ratings influence the price paid to issue new debt securities as they indicate to the market our ability to pay principal, interest and dividends.

The following table summarises our credit ratings as of December 31, 2023. The ratings outlook is stable for S&P and Fitch.

Sources of Liquidity

We expect our ongoing sources of liquidity to include cash on hand, cash generated from our operations, project debt arrangements, corporate debt and the issuance of additional equity securities, as appropriate, and given market conditions. Our financing agreements consist mainly of the project-level financing for our various assets and our corporate debt financings, including our Green Exchangeable Notes, the Note Issuance Facility 2020, the 2020 Green Private Placement, the Green Senior Notes, the Revolving Credit Facility, the “at-the-market programme”, other credit lines and our commercial paper programme.

Note:

A) Corporate Debt Agreements

Green Senior Notes

On May 18, 2021, we issued the Green Senior Notes with an aggregate principal amount of $400 million due in 2028. The Green Senior Notes bear interest at a rate of 4.125% per year, payable on June 15 and December 15 of each year, commencing December 15, 2021, and will mature on June 15, 2028.

The Green Senior Notes were issued pursuant to an Indenture, dated May 18, 2021, by and among Atlantica as issuer, Atlantica Peru S.A., ACT Holding, S.A. de C.V., Atlantica Infraestructura Sostenible, S.L.U., Atlantica Investments Limited, Atlantica Newco Limited, Atlantica North America LLC, as guarantors, BNY Mellon Corporate Trustee Services Limited, as trustee, The Bank of New York Mellon, London Branch, as paying agent, and The Bank of New York Mellon SA/NV, Dublin Branch, as registrar and transfer agent.

Our obligations under the Green Senior Notes rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the 2020 Green Private Placement, the Note Issuance Facility 2020, the Green Exchangeable Notes and the credit line with Export Development Canada.

Green Exchangeable Notes

On July 17, 2020, we issued 4.00% Green Exchangeable Notes amounting to an aggregate principal amount of $100 million due in 2025. On July 29, 2020, we issued an additional $15 million aggregate principal amount in Green Exchangeable Notes. The Green Exchangeable Notes are the senior unsecured obligations of Atlantica Jersey, a wholly owned subsidiary of Atlantica, and fully and unconditionally guaranteed by Atlantica on a senior, unsecured basis. The notes mature on July 15, 2025, unless they are repurchased or redeemed earlier by Atlantica or exchanged, and bear interest at a rate of 4.00% per annum.

Noteholders may exchange all or any portion of their notes at their option at any time prior to the close of business on the scheduled trading day immediately preceding April 15, 2025, only during certain periods and upon satisfaction of certain conditions. Noteholders may exchange all or any portion of their notes during any calendar quarter if the last reported sale price of Atlantica’s ordinary shares for at least 20 trading days during a period of 30 consecutive trading days, ending on the last trading day of the immediately preceding calendar quarter is greater than 120% of the exchange price on each applicable trading day. On or after April 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date thereof, noteholders may exchange any of their notes at any time, at the option of the noteholder. Upon exchange, the notes may be settled, at our election, into Atlantica ordinary shares, cash or a combination of both. The initial exchange rate of the notes is 29.1070 ordinary shares per $1,000 of the principal amount of notes (which is equivalent to an initial exchange price of $34.36 per ordinary share). The exchange rate is subject to adjustment upon the occurrence of certain events.

Our obligations under the Green Exchangeable Notes rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the 2020 Green Private Placement, the Note Issuance Facility 2020, the Green Senior Notes, and the credit line with Export Development Canada.

Note Issuance Facility 2020

On July 8, 2020, we entered into the Note Issuance Facility 2020, a senior unsecured euro-denominated financing with a group of funds managed by Westbourne Capital as purchasers of the notes issued thereunder for a total amount of €140 million ($155 million). The notes under the Note Issuance Facility 2020 were issued on August 12, 2020 and are due on August 12, 2027. Interest accrues at a rate per annum equal to the sum of the three-month EURIBOR plus a margin of 5.25% with a floor of 0% for the EURIBOR. We had a cap at 0% for the EURIBOR with 3.5 years maturity and in December 2023, we entered into a cap at 4% to hedge the variable interest rate risk with maturity on December 31, 2024.

Our obligations under the Note Issuance Facility 2020 rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the 2020 Green Private Placement, the Green Exchangeable Notes, the Green Senior Notes, and the credit line with Export Development Canada. The notes issued under the Note Issuance Facility 2020 are guaranteed on a senior unsecured basis by our subsidiaries Atlantica Infraestructura Sostenible, S.L.U., Atlantica Peru, S.A., ACT Holding, S.A. de C.V., Atlantica Investments Limited, Atlantica Newco Limited and Atlantica North America LLC.

2020 Green Private Placement

On March 20, 2020, we entered into a senior secured note purchase agreement with a group of institutional investors as purchasers providing for the 2020 Green Private Placement. The transaction closed on April 1, 2020, and we issued notes for a total principal amount of €290 million ($320 million), maturing on June 20, 2026. Interest accrues at a rate per annum equal to 1.96%. If at any time the rating of these senior secured notes is below investment grade, the interest rate thereon would increase by 100 basis points until such notes are again rated investment grade.

Our obligations under the 2020 Green Private Placement rank equal in right of payment with our outstanding obligations under the Revolving Credit Facility, the Note Issuance Facility 2020, the Green Senior Notes and the credit line with Export Development Canada. Our payment obligations under the 2020 Green Private Placement are guaranteed on a senior secured basis by our subsidiaries Atlantica Infraestructura Sostenible, S.L.U., Atlantica Peru, S.A., ACT Holding, S.A. de C.V., Atlantica Investments Limited, Atlantica Newco Limited and Atlantica North America LLC. The 2020 Green Private Placement is also secured with a pledge over the shares of the subsidiary guarantors, the collateral of which is shared with the lenders under the Revolving Credit Facility.

Revolving Credit Facility

On May 10, 2018, we entered into a $215 million Revolving Credit Facility with a syndicate of banks. The Revolving Credit Facility was increased by $85 million to $300 million on January 25, 2019, and was further increased by $125 million (to a total limit of $425 million) on August 2, 2019. On March 1, 2021, this facility was further increased by $25 million (to a total limit of $450 million). On May 30, 2023, the maturity of the Revolving Credit Facility was extended to December 31, 2025. Under the Revolving Credit Facility, we are also able to request the issuance of letters of credit, which are subject to a sublimit of $100 million that are included in the aggregate commitments available under the Revolving Credit Facility.

Loans under the Revolving Credit Facility accrue interest at a rate per annum equal to: (A) for Eurodollar rate loans, Term SOFR, plus a Term SOFR Adjustment equal to 0.10% per annum, plus a percentage determined by reference to our leverage ratio, ranging between 1.60% and 2.25% and (B) for base rate loans, the highest of (i) the rate per annum equal to the weighted average of the rates on overnight U.S. Federal funds transactions with members of the U.S. Federal Reserve System arranged by U.S. federal funds brokers on such day plus ½ of 1.00%, (ii) the prime rate of the administrative agent under the Revolving Credit Facility and (iii) Term SOFR plus 1.00%, in any case, plus a percentage determined by reference to our leverage ratio, ranging between 0.60% and 1.00%.

Our obligations under the Revolving Credit Facility rank equal in right of payment with our outstanding obligations under the 2020 Green Private Placement, the Note Issuance Facility 2020, the Green Exchangeable Notes, the Green Senior Notes and the credit line with Export Development Canada. Our payment obligations under the Revolving Credit Facility are guaranteed on a senior secured basis by Atlantica Infraestructura Sostenible, S.L.U., Atlantica Peru, S.A., ACT Holding, S.A. de C.V., Atlantica Investments Limited, Atlantica Newco Limited and Atlantica North America LLC. The Revolving Credit Facility is also secured with a pledge over the shares of the subsidiary guarantors, the collateral of which is shared with the holders of the notes issued under the 2020 Green Private Placement.

Credit Line with Export Development Canada

In June 2023 we entered into a senior unsecured $50 million line of credit with Export Development Canada with a 3 year maturity. The purpose of the credit line is to finance the construction of sustainable projects. The interest is at a rate per annum equal to Term SOFR plus a percentage determined by reference to our leverage ratio, ranging between 2.46% and 3.11%, with a floor of 0% for the Term SOFR. The facility matures on May 25, 2026 and was fully available as of December 31, 2023.

Our obligations under this credit line are equal in right of payment with our outstanding obligations under the 2020 Green Private Placement, the Note Issuance Facility 2020, the Green Exchangeable Notes, the Green Senior Notes, the Revolving Credit Facility. Our payment obligations under this line are guaranteed on a senior secured basis by Atlantica Infraestructura Sostenible, S.L.U., Atlantica Peru, S.A., ACT Holding, S.A. de C.V., Atlantica Investments Limited, Atlantica Newco Limited and Atlantica North America LLC, and are also secured with a pledge over the shares of the subsidiary guarantors, the collateral of which is shared with the holders of the notes issued under the 2020 Green Private Placement.

Other Credit Lines

In July 2017, we signed a line of credit with a bank for up to €10.0 million ($11.0 million) which was available in Euros or U.S. Dollars. Amounts drawn accrue interest at a rate per annum equal to the sum of the three-month EURIBOR or SOFR, plus a margin of 2%, with a floor of 0% for the EURIBOR or SOFR. On August 7, 2023 the limit was increased to €15 million ($16.6 million) and the maturity was extended until July 2025. As of December 31, 2023, €9.0 million ($9.9 million) where drawn from this credit line.

In December 2020 and January 2022, we also entered into two different loans with banks for €5 million ($5.5 million) each. The maturity dates are December 4, 2025 and January 31, 2026, respectively, and such loans accrue interest at a rate per annum equal to 2.50% and 1.90%, respectively. Furthermore, in February 2023, we entered into a loan with a bank for €7 million ($7.7 million) with maturity in February 2028 accrues interest at a rate per annum equal to 4.2%.

Commercial Paper Programme

On November 21, 2023, we filed a euro commercial paper programme with the Alternative Fixed Income Market (MARF) in Spain. The programme has a maturity of twelve months. The programme allows Atlantica to issue short term notes for up to €100 million, with such notes having a tenor of up to two years. As of December 31, 2023, we had €23.3 million ($25.7 million) issued and outstanding under the Commercial Paper Programme at an average cost of 5.23% maturing on or before June 2024.

Covenants, restrictions, and events of default

The Note Issuance Facility 2020, the 2020 Green Private Placement, the Green Senior Notes and the Revolving Credit Facility contain covenants that limit certain of our and the guarantors’ activities. The Note Issuance Facility 2020, the 2020 Green Private Placement and the Green Exchangeable Notes also contain customary events of default, including a cross-default with respect to our indebtedness, indebtedness of the guarantors thereunder and indebtedness of our material non-recourse subsidiaries (project-subsidiaries) representing more than 25% of our cash available for distribution distributed in the previous four fiscal quarters, which in excess of certain thresholds could trigger a default. Additionally, under the 2020 Green Private Placement, the Revolving Credit Facility and the Note Issuance Facility 2020 we are required to comply with a leverage ratio of our corporate indebtedness excluding non-recourse project debt to our cash available for distribution of 5.00:1.00 (which may be increased under certain conditions to 5.50:1.00 for a limited period in the event we consummate certain acquisitions).

Furthermore, our corporate debt agreements contain customary change of control provisions (as such term is defined in each of those agreements) or similar provisions. Under the Revolving Credit Facility, a change of control without required lenders’ consent would trigger an event of default. In the other corporate debt agreements or securities, a change of control or similar provision without the consent of the relevant required holders would trigger the obligation to make an offer to purchase the respective notes at (i) 100% of the principal amount in the case of the 2020 Green Private Placement and Green Exchangeable Notes and at (ii) 101% of the principal amount in the case of the Note Issuance Facility 2020 and the Green Senior Notes. In the case of the Green Senior Notes, such prepayment obligation would be triggered only if there is a credit rating downgrade by any of the agencies.

B) At-The-Market Programme

On February 28, 2022, we established an “at-the-market programme” and entered into the Distribution Agreement with BofA Securities, Inc., MUFG Securities Americas Inc. and RBC Capital Markets LLC, as our sales agents, under which we may offer and sell from time to time up to $150 million of our ordinary shares, including in “at-the-market” offerings under our shelf registration statement on Form F-3 filed with the SEC on August 3, 2021, and a prospectus supplement that we filed on February 28, 2022. During the year 2023, we did not issue and sell any ordinary shares under the programme.

C) Project debt refinancing

In March 2023 we refinanced Solaben 2&3. We entered into two green senior euro-denominated loan agreements for the two assets with a syndicate of banks for a total amount of €198.0 million. The new project debt replaced the previous project loans and maturity was extended from December 2030 to June 2037. The interest on the loans accrues at a rate per annum equal to the sum of six-month EURIBOR plus a margin of 1.50% between 2023 and June 2028, 1.60% between June 2028 and June 2033 and 1.70% from June 2033 onwards. The principal is 90% hedged for the life of the loan through a combination of the following instruments:

The financing agreement also includes a mechanism under which, in the case that electricity market prices are above certain levels defined in the contract, a reserve account should be established and funded on a six-month rolling basis for the additional revenue arising from the difference between actual prices and prices defined in the agreement. Under certain conditions, such amounts, if any, should be used for early prepayments upon regulatory parameters changes.

The total outstanding balance of these loans as of December 31, 2023 was $202.9 million for both Solaben 2 and Solaben 3. The financing arrangements permit cash distributions to shareholders twice per year if the debt service coverage ratio is at least 1.10x.

In addition, on April 8, 2020, Logrosan Solar Inversiones, S.A, the subsidiary-holding company of Solaben 2 & 3 and Solaben 1 & 6 entered into the Green Project Finance with ING Bank, B.V. and Banco Santander S.A. The facility is a green project financing euro-denominated agreement. The Green Project Finance is guaranteed by the shares of Logrosan and its lenders have no recourse to Atlantica corporate level.

In June 2023 we extended the maturity of the debt from April 2025 to December 2028. The facility had an initial notional of €140 million of which approximately 37% is amortised between the signing date and maturity. The outstanding balance of this facility as of December 31, 2023, was $118.2 million, of which €23.2 million is progressively amortised with a two-year grace period and the remaining €87.8 million is expected to be refinanced at maturity.

The interest on the loans accrues at a rate per annum equal to the sum of six-month EURIBOR plus a margin of 3.25%. The principal is 100% hedged for the life of the loan through a combination of the following instruments:

The Green Project Finance permits cash distribution to shareholders twice per year if Logrosan sub-holding company debt service coverage ratio is at least 1.20x and the debt service coverage ratio of the sub-consolidated group of Logrosan and the Solaben 1 & 6 and Solaben 2 & 3 assets is at least 1.075x.

The financing agreement also includes a mechanism under which, in the case that electricity market prices are above certain levels defined in the contract, a reserve account should be established and funded on a six-month rolling basis for the additional revenue arising from the difference between actual prices and prices defined in the agreement. Under certain conditions, such amounts, if any, should be used for early prepayments upon regulatory parameters changes.

Use of Liquidity and Capital Requirements

Principal payments on debt as of December 31, 2023, are due in the following periods according to their contracted maturities:

Note: 

In addition to the principal repayment debt obligations detailed above, we have other contractual obligations to make future payments. The material obligations consist of interest related to our project debt and corporate debt and agreements in which we enter in the normal course of business.

Purchase obligations include agreements for the purchase of goods or services that are enforceable and legally binding and that specify all significant terms.

Accrued interest estimate during the useful life of loans represents the estimation for the total amount of interest to be paid or accumulated over the useful life of the loans, notes and bonds, taking into consideration the hedging contracts.

We intend to distribute a significant portion of our cash available for distribution to shareholders on an annual basis less reserves for the prudent conduct of our business, on an annual basis. We intend to distribute a quarterly dividend to shareholders. Our board of directors may, by resolution, amend the cash dividend policy at any time (See “Directors Report”).

The investments and the assets under construction detailed in “Significant events in 2023” have been part of the use of our liquidity in 2023. In addition, we have made investments in assets which are currently under development or construction.

We intend to grow our business through the development and construction of our project pipeline including expansion and repowering opportunities, as well as greenfield developments, third-party acquisitions and the optimisation of our existing portfolio. We currently have a pipeline of assets under development of approximately 2.2 GW of renewable energy and 6.0 GWh of storage. Approximately 47% of the projects are PV, 41% storage, 11% wind and 1% other projects, while 22% are expected to reach ready-to-build (“RTB”) in 2024-2025, 28% are in an advanced development stage and 50% are in early stage. Also, 20% are expansion or repowering opportunities of existing assets and 80% greenfield developments.

In 2023, we invested $27.9 million in maintenance capital expenditures in our assets. In 2022, we invested $39.1 million in maintenance capital expenditures in our assets, mainly corresponding to capital expenditures and equipment replacements at Solana. In some cases, maintenance capex is included in the operation and maintenance agreement, therefore it is included in operating expenses within our income statement.