
December 31, 2023	Carrying amount		Fair value		Level 1		Level 2		Level 3
Long-term investments carried at fair value	$	1,115,729	$	1,115,729	$	1,054,665	$	—	$	61,064
Development loans and other receivables	158,110		155,735		—		155,735		—
Derivative instruments:



Interest rate swap designated as a hedge	72,936		72,936		—		72,936		—

Interest rate cap not designated as a hedge	1,854		1,854		—		1,854		—
Congestion revenue rights not designated as a cash flow hedge	8,458		8,458		—		—		8,458




Total derivative instruments	83,248		83,248		—		74,790		8,458
Total financial assets	$	1,357,087	$	1,354,712	$	1,054,665	$	230,525	$	69,522
Long-term debt	$	8,516,030	$	7,423,318	$	2,532,608	$	4,890,710	$	—
Notes payable to related party	25,808		15,320		—		15,320		—
Convertible debentures	230		276		276		—		—
Derivative instruments:
Energy contracts designated as a cash flow hedge	68,070		68,070		—		—		68,070
Energy contracts not designated as a cash flow hedge	5,593		5,593		—		—		5,593


Cross-currency swap designated as a net investment hedge	10,533		10,533		—		10,533		—
Currency forward contract designated as hedge	6,779		6,779		—		6,779		—
Interest rate swaps designated as a hedge	11,790		11,790		—		11,790		—
Cross currency swap designated as a cash flow hedge	5,547		5,547		—		5,547		—
Commodity contracts for regulated operations	2,564		2,564		—		2,564		—
Total derivative instruments	110,876		110,876		—		37,213		73,663
Total financial liabilities	$	8,652,944	$	7,549,790	$	2,532,884	$	4,943,243	$	73,663


December 31, 2022	Carrying amount		Fair value		Level 1		Level 2		Level 3
Long-term investment carried at fair value	$	1,344,207	$	1,344,221	$	1,270,138	$	—	$	74,083
Development loans and other receivables	53,680		50,300		—		50,300		—
Derivative instruments:

Energy contracts not designated as a cash flow hedge	393		393		—		—		393
Interest rate swap designated as a hedge	69,188		69,188		—		69,188		—
Currency forward contract not designated as a hedge	2,659		2,659		—		2,659		—
Congestion revenue rights not designated as a cash flow hedge	10,110		10,110		—		—		10,110
Cross-currency swap designated as a net investment hedge	1,267		1,267		—		1,267		—
Commodity contracts for regulated operations	283		283		—		283		—
Total derivative instruments	83,900		83,900		—		73,397		10,503
Total financial assets	$	1,481,787	$	1,478,421	$	1,270,138	$	123,697	$	84,586
Long-term debt	$	7,512,017	$	6,699,031	$	2,623,628	$	4,075,403	$	—
Notes payable to related party	25,808		15,180		—		15,180		—
Convertible debentures	245		276		276		—		—
Preferred shares, Series C	12,072		11,675		—		11,675		—
Derivative instruments:
Energy contracts designated as a cash flow hedge	120,284		120,284		—		—		120,284
Energy contracts not designated as a cash flow hedge	8,617		8,617		—		—		8,617
Cross-currency swap designated as a net investment hedge	24,371		24,371		—		24,371		—

Cross-currency swap designated as a cash flow hedge	15,435		15,435		—		15,435		—
Commodity contracts for regulated operations	1,614		1,614		—		1,614		—
Total derivative instruments	170,321		170,321		—		41,420		128,901
Total financial liabilities	$	7,720,463	$	6,896,483	$	2,623,904	$	4,143,678	$	128,901

The Company’s Level 1 fair value of long-term debt is measured at the closing price on the NYSE and the Canadian over-the-counter closing price. The Company’s Level 2 fair value of long-term debt at fixed interest rates and notes payable to related party have been determined using a discounted cash flow method and current interest rates. The Company’s Level 2 fair value of convertible debentures has been determined as the greater of their face value and the quoted value of AQN’s common shares on a converted basis.

The Company’s Level 2 fair value derivative instruments primarily consist of swaps, options, rights, caps, subscription agreements and forward physical derivatives where market data for pricing inputs are observable. Level 2 pricing inputs are obtained from various market indices and utilize discounting based on quoted interest rate curves, which are observable in the marketplace.

The Company’s Level 3 instruments consist of energy contracts for electricity sales, congestion revenue rights (“CRRs”) and the fair value of the Company’s investment in AYES Canada. The significant unobservable inputs used in the fair value measurement of energy contracts are the internally developed forward market prices ranging from $26.32 to $144.02 with a weighted average of $38.44 as of December 31, 2023. The weighted average forward market prices are developed based on the quantity of energy expected to be sold monthly and the expected forward price during that month. The change in the fair value of the energy contracts is detailed in notes 24(b)(ii) and 24(b)(iv). The significant unobservable inputs used in the fair value measurement of CRRs are recent CRR auction prices ranging from $nil to $$52.02 with a weighted average of $5.69 as of December 31, 2023. The fair value of the investment in AYES Canada is determined using a discounted cash flow approach combined with a binomial tree approach. The significant unobservable inputs used in the fair value measurement of the Company’s AYES Canada investment are the expected cash flows, the discount rates applied to these cash flows ranging from 8.00% to 8.50% with a weighted average of 8.27%, and the expected volatility of Atlantica’s share price ranging from 27.47% to 33.19% as of December 31, 2023. Significant increases (decreases) in expected cash flows or increases (decreases) in discount rate in isolation would have resulted in a significantly lower (higher) fair value measurement.

The Company uses derivative financial instruments to reduce the cash flow variability associated with the purchase price for a portion of future natural gas purchases associated with its regulated natural gas and electric service territories. The Company’s strategy is to minimize fluctuations in natural gas sale prices to regulated customers. As at December 31, 2023, the commodity volume, in dekatherms, associated with the above derivative contracts is 2,117,039.

The accounting for these derivative instruments is subject to guidance for rate-regulated enterprises. Therefore, the fair value of these derivatives is recorded as current or long-term assets and liabilities, with offsetting positions recorded as regulatory assets and regulatory liabilities in the consolidated balance sheets. Most of the gains or losses on the settlement of these contracts are included in the calculation of the fuel and commodity costs adjustments (note 7(a)). As a result, the changes in fair value of these natural gas derivative contracts and their offsetting adjustment to regulatory assets and liabilities had no earnings impact.

The Company mitigates the risk that interest rates will increase over the life of certain term loan facilities by entering into the following interest rate swap contracts. For an interest rate swap or cross-currency interest rate swap designated as hedging the exposure to variable cash flows of a future transaction, the effective portion of this derivative's gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings once the future transaction impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt.


Derivative	Notional quantity		Expiry	Hedged item
Forward-starting interest rate swap	$	350,000	July 2029	$350,000 subordinated unsecured notes
Cross-currency interest rate swap	C$	400,000	January 2032	C$400,000 subordinated unsecured notes
Forward-starting interest rate swap	$	750,000	April 2032	$750,000 subordinated unsecured notes
Forward-starting interest rate swap	$	575,000	June 2026	First $575,000 of the expected $1,150,000 senior unsecured notes issuance

The functional currency of most of AQN's operations is the U.S. dollar. The Company designates obligations denominated in Canadian dollars as a hedge of the foreign currency exposure of its net investment in its Canadian investments and subsidiaries. The related foreign currency transaction gain or loss designated as, and effective as, a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency loss of$12,330 for the year ended December 31, 2023 (2022 - gain of $2,262) was recorded in OCI.

On May 23, 2019, the Company entered into a cross-currency swap, coterminous with the subordinated unsecured notes issued on such date, to effectively convert the $350,000 U.S. dollar-denominated offering into Canadian dollars. The change in the carrying amount of the notes due to changes in spot exchange rates is recognized each period in the consolidated statements of operations as gain (loss) on foreign exchange. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap as a hedge of the foreign currency exposure related to cash flows for the interest and principal repayments on the notes. Upon the change in functional currency of AQN to the U.S. dollar on January 1, 2020, this hedge was dedesignated. The OCI related to this hedge will be amortized into earnings in the period that future interest payments affect earnings over the remaining life of the original hedge. The Company redesignated this swap as a hedge of AQN's net investment in its Canadian subsidiaries.

The related foreign currency transaction gain or loss designated as a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. The fair value of the derivative on the redesignation date will be amortized over the remaining life of the original hedge. A foreign currency gain of $6,976 for the year ended December 31, 2023 (2022 - gain of $22,091) was recorded in OCI.

The Company’s Canadian operations are determined to have the Canadian dollar as their functional currency and are exposed to currency fluctuations from their U.S. dollar transactions. The Company designates obligations denominated in U.S. dollars as a hedge of the foreign currency exposure of its net investment in its U.S. investments and subsidiaries. The related foreign currency transaction gain or loss designated as, and effective as, a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency gain of $606 for the year ended December 31, 2023 (2022 - loss of $18,561) was recorded in OCI.

The Company is party to C$300,000 (2022 - C$300,000) fixed-for-fixed cross-currency swaps to effectively convert Canadian dollar debentures into U.S. dollars. In February 2022, the Company settled the cross-currency swap related to its C$200,000 (2021 - C$150,000) debenture that was repaid. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap and related short-term U.S. dollar payables created by the monthly accruals of the swap settlement as a hedge of the foreign currency exposure of its net investment in the Renewable Energy Group's U.S. operations. The gain or loss related to the fair value changes of the swap and the related foreign currency gains and losses on the U.S. dollar accruals that are designated as, and are effective as, a hedge of the net investment in a foreign operation are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A gain of $5,959 for the year ended December 31, 2023 (2022 - loss of $11,082) was recorded in OCI.

On April 9, 2021, the Renewable Energy Group entered into a fixed-for-fixed cross-currency interest rate swap, coterminous with the senior unsecured debentures issued on such date, to effectively convert the C$400,000 Canadian-dollar-denominated offering into U.S. dollars. The Renewable Energy Group designated the entire notional amount of the fixed-for-fixed cross-currency interest rate swap and related short-term U.S. dollar payables created by the monthly accruals of the swap settlement as a hedge of the foreign currency exposure of its net investment in the Renewable Energy Group's U.S. operations. The gain or loss related to the fair value changes of the swap and the related foreign currency gains and losses on the U.S. dollar accruals that are designated as, and are effective as, a hedge of the net investment in a foreign operation are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A gain of $8,420 for the year ended December 31, 2023 (2022 - loss of $13,374) was recorded in OCI.

In the normal course of business, the Company is exposed to financial risks that potentially impact its operating results. The Company employs risk management strategies with a view to mitigating these risks to the extent possible on a cost-effective basis. Derivative financial instruments are used to manage certain exposures to fluctuations in exchange rates, interest rates and commodity prices. The Company does not enter into derivative financial agreements for speculative purposes. For derivatives that are not designated as hedges, the changes in the fair value are immediately recognized in earnings (loss).

The Company was party to interest rate swaps with a notional quantity of C$489,506 to mitigate the interest rate risk related to debt at its Blue Hill Wind Facility. The contract was novated upon the sale of the Blue Hill Wind Facility in 2022. A recognized loss of C$9,732 on the derivative was recorded as a reduction of the gain on sale of renewable assets on the audited consolidated statements of operations.

The Company mitigates the volatility of energy congestion charges at the ERCOT transmission grid by entering into CRRs, which as of December 31, 2023 had notional quantity of 5,486,961 MW-hours at prices ranging from $0.55 per MW-hr to $24.88 per MW-hr with a weighted average of $5.16 per MW-hr for January 2024 to June 2026. These CRRs are not designated as an accounting hedge.

The Company mitigates the price risk on the expected future sale of power generation of one of its solar facilities through a long-term energy derivative contract with a notional quantity of 516,202 MW-hours, a price of $25.15 per MW-hr and expiring in August 2030 as an economic hedge to the price of energy sales. The derivative contract is not designated as an accounting hedge.


	2023		2022
Unrealized gain (loss) on derivative financial instruments:


Energy derivative contracts	$	(372)	$	(945)

Commodity contracts	411		185
Total unrealized gain (loss) on derivative financial instruments	$	39	$	(760)
Realized gain (loss) on derivative financial instruments:
Energy derivative contracts	$	(4,896)	$	6,939

Interest rate swaps	—		(7,185)
Total realized loss on derivative financial instruments	$	(4,896)	$	(246)
Loss on derivative financial instruments not accounted for as hedges	(4,857)		(1,006)
Amortization of AOCI gains frozen as a result of hedge dedesignation	3,989		3,465
	$	(868)	$	2,459
Consolidated statements of operations classification:
Gain on derivative financial instruments	$	4,564	$	4,408

Renewable energy sales	(5,432)		5,236
Reduction to gain on sale of renewable assets	—		(7,185)
	$	(868)	$	2,459

In the normal course of business, the Company enters into supplier financing programs under which the suppliers can voluntarily elect to sell their receivables. The Company agrees to pay, on the invoice maturity date, the stated amount of the invoices that the Company has confirmed through the execution of bills of exchange. The terms of the trade payable arrangement are consistent with customary industry practice and are not impacted by the supplier’s decision to sell amounts under these arrangements.

Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company’s financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents, accounts receivable, notes receivable and derivative instruments. The Company limits its exposure to credit risk with respect to cash equivalents by ensuring available cash is deposited with its senior lenders, all of which have a credit rating of A or better. The Company does not consider the risk associated with the accounts receivable to be significant as the majority of revenue from power generation is earned from large utility customers having a credit rating of Baa2 or better by Moody's, or BBB or higher by S&P, or BBB or higher by DBRS. Revenue is generally invoiced and collected within 45 days.

The remaining revenue is primarily earned by the Regulated Services Group, which consists of electric, water distribution and wastewater, and natural gas utilities in the United States, Canada, Bermuda and Chile. In this regard, the credit risk related to Regulated Services Group accounts receivable balances of $364,084 is spread over hundreds of thousands of customers. The Company has processes in place to monitor and evaluate this risk on an ongoing basis including background credit checks and security deposits from new customers. In addition, most of the Regulators of the Regulated Services Group allow for a reasonable bad debt expense to be incorporated in the rates and therefore recovered from rate payers.

In addition, the Company monitors the creditworthiness of the counterparties to its foreign exchange, interest rate, and energy derivative contracts and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. The counterparties consist primarily of financial institutions. This concentration of counterparties may impact the Company’s overall exposure to credit risk, either positively or negatively, in that the counties may be similarly affected by changes in economic, regulatory or other conditions.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to take steps to ensure, to the extent possible, that it will have sufficient liquidity to meet liabilities when due. As of December 31, 2023, in addition to cash on hand of $56,147, the Company has $945,853 available to be drawn on its revolving and term credit facilities. Each of the Company’s revolving credit facilities contain covenants that may limit amounts available to be drawn.


	Due less than 1 year		Due 2 to 3 years		Due 4 to 5 years		Due after 5 years		Total
Long-term debt obligations	$	621,856	$	1,333,772	$	2,099,968	$	4,481,961	$	8,537,557

Interest on long-term debt	391,493		602,761		419,950		3,496,032		4,910,236
Purchase obligations	767,287		—		—		—		767,287
Environmental obligation	3,136		22,577		1,820		18,654		46,187
Advances in aid of construction	3,640		—		—		84,495		88,135
Derivative financial instruments:
Cross-currency swap	2,419		4,243		144		9,623		16,429
Interest rate forwards	11,790		—		—		—		11,790

Energy derivative and commodity contracts	14,276		29,273		20,550		12,127		76,226

Contract adjustment payments on Green Equity Units	39,590		—		—		—		39,590
Other obligations	27,796		2,901		2,304		247,480		280,481
Total obligations	$	1,883,283	$	1,995,527	$	2,544,736	$	8,350,372	$	14,773,918