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TERRAFORM POWER, INC. filed this Form 8-K/A on 08/22/2018
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Saeta Yield, S.A.U. and Subsidiaries

2016 and 2017 were characterised by regulatory stability in the sector. The Spanish electricity system left behind the years of tariff shortfall and, for the third year in a row, the accounts are expected to close at a surplus. The situation once again enabled tariffs for consumers to be frozen, whereby Order ETU/1976/2016, of 23 December, establishing the electricity access tolls for 2017, sets these tolls at the same rates as in 2016.
In 2016 the first regulatory half-period was completed and, therefore, Ministerial Order ETU/130/2017, of 17 February, was published at the beginning of 2017, which updated the remuneration parameters for 2017-2019. Specifically, the following were reviewed:

Trend of actual prices compared to estimated prices for the first half-period already elapsed (2014-2016). A collection right for variances in the price included in the regulation of 2014 and 2016 that will be offset over the remaining useful life of the assets.

Update in the price trend for the second half-period (2017-2019). Given that market prices are lower than that estimated in 2014, it represents an increase in remuneration parameters.

Update the technological peak coefficients with data from the last three years.

There were no additional regulatory changes in the renewable energy sector in Spain in 2017 and 2016.

The first regulatory period of six years ends in 2019 and, in accordance with current regulations, the remuneration parameters (Rinv and Ro), as well as the reasonable return for the second period, which begins in 2020, may be revised.

The remuneration parameters that were revised are those that affect the calculation of Rinv and Ro, except for initial investment and regulatory useful life, i.e., the market prices for the following period and the adjustments of half-period ending in 2019; the alignment of the various technologies; O&M costs; etc.

Regulatory framework in Uruguay

The plants in Uruguay operate under the framework of a power purchase agreement (PPA) and, therefore, receive a fixed price of MWh produced, whose evolution is referenced to American market indexes.

The PPA was entered into in both cases with Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE). The amount of power under the PPA framework is all that generated by the plants.

The PPAs have a term of 20 years on average.

Regulatory framework in Portugal

The wind farms and their related extensions in Portugal are operated under the remuneration scheme of Decree Law 339-C/2001, as well as the amendments to Decree Law 51/2010 and Decree Law 35/2013.

The remuneration scheme consists of a feed in tariff, which includes various allotments of remuneration (fixed allotment, variable allotment and environmental allotment). Remuneration also depends on a “z” coefficient, which varies depending on the facility’s annual production. This remuneration is also updated according to monthly fluctuations in inflation.

The remuneration scheme of the wind farms is maintained the first 15 years at a fixed price, in addition to an extension of their regulatory useful life for an additional 7 years with a cap-and-floor system (Decree Law 35/2013).

Basis of presentation and basis of consolidation

Basis of presentation

These consolidated financial statements for 2017 and 2016 were prepared by the Parent’s directors in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS.

The financial statements have been prepared on a historical cost basis, except for the financial assets and liabilities (including derivative instruments).