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Pattern Energy Reports First Quarter 2017 Financial Results

By Pattern Energy Operations LP
May 9th, 2017
PR Newswire

- Increases dividend to $0.418 per Class A common share for Q2 2017 -

San Francisco, May 9, 2017 /CNW/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (NASDAQ & TSX: PEGI) today announced its financial results for the 2017 first quarter.

pattern_logo.jpg

Highlights

(Comparisons made between fiscal Q1 2017 and fiscal Q1 2016 results, unless otherwise noted)

  • Proportional gigawatt hours ("GWh") sold of 2,038 GWh, up 13%
  • Net cash provided by operating activities of $43.8 million, up 197%
  • Cash available for distribution ("CAFD") of $45.1 million, up 10% and on track to meet full year guidance(1)
  • Net income of $2.5 million
  • Adjusted EBITDA of $98.2 million, up 26%
  • Revenue of $100.8 million, up 15%
  • Declared a second quarter dividend of $0.418 per Class A common share or $1.672 on an annualized basis, subsequent to the end of the period, representing a 1.0% increase over the previous quarter's dividend.
  • Acquired a 272 megawatt ("MW") interest in the Broadview Wind ("Broadview") power facilities and the associated independent 345 kV Western Interconnect ("Western Interconnect") transmission line from Pattern Development 1.0(1) for a 9.3x multiple of the five-year average CAFD(2) starting in 2018, subsequent to the end of the quarter
  • Commenced commercial operations at Broadview in late March and as such, all 18 facilities in the Company's portfolio are fully operational with a total owned capacity of 2,644 MW
  • Published a white paper outlining the business model, investment thesis and phases of renewable energy development, subsequent to the end of the quarter

"Our fleet of high-quality wind assets continues to perform at a high level and production met our expectation for the quarter. As such, we are on track to achieve our CAFD target for 2017(2)," said Mike Garland, President and CEO of Pattern Energy. "With the acquisition and commencement of commercial operations at Broadview, all 18 of our projects are fully operational, providing a total owned capacity in excess of 2.6 GW. We believe significant and diverse opportunities exist to expand our portfolio on an accretive basis. Acquisitions from our identified ROFO list provide near-term opportunities to grow our CAFD per share in a manner, and at a pace, that reflects the valuation of the business and our cost of capital. The opportunity to potentially invest in the development business, through Pattern Development 2.0(1), offers us secure access to high-quality assets from a proven platform that can grow our CAFD per share in the medium and long-term. We believe that the outlook for renewable energy has never been better and we have the business model to deliver sustainable and growing returns for our shareholders."

(1) In December 2016, Pattern Energy Group LP ("Pattern Development 1.0"), formed Pattern Energy Group 2 LP ("Pattern Development 2.0")

(2) These forward looking measures of (a) 2017 full year cash available for distribution (CAFD) and (b) five-year average annual purchase price multiple of CAFD contribution from Broadview are non-GAAP measures that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2017 Quarterly Report on Form 10-Q for the period ended March 31, 2017.

Financial and Operating Results

Pattern Energy sold 2,038,159 megawatt hours ("MWh") of electricity on a proportional basis in the first quarter of 2017 compared to 1,801,034 MWh sold in the same period last year. The increase was primarily attributable to volume increases of 133,297 MWh from controlling interests in consolidated MWh due to less favorable wind conditions in the first quarter of 2016 compared to the current period and a 103,828 MWh increase from unconsolidated investments due to the acquisition of Armow in October 2016. Overall, production was at the Company's expectation for the first quarter compared to its long-term forecast.

Net cash provided by operating activities was $43.8 million for the first quarter of 2017 compared to $14.7 million for the same period last year. The $29.0 million improvement was primarily due to higher revenues of $10.7 million (excluding unrealized loss on energy derivative and amortization of power purchase agreements ("PPAs")), increased distributions from unconsolidated investments of $16.5 million and decreased project expense of $3.1 million. These increases were partially offset by a $4.1 million increase in operating expense.

Cash available for distribution was $45.1 million for the first quarter of 2017 compared to $41.0 million for the same period last year. The increase of $4.1 million, or approximately 10%, was primarily due to a $10.7 million increase in revenues (excluding unrealized loss on energy derivative and amortization of PPAs, a $3.1 million decrease in project expense, a $1.3 million decrease in distribution to noncontrolling interests, and a $0.9 million increase in total distributions from unconsolidated investment, as reported in operating and investing activities on the consolidated statements of cash flows. These increases were partially offset by increases in operating expense of $4.1 million, project reserve funding of $3.5 million, interest expense of $2.0 million and principal payments of $1.4 million.

Net income was $2.5 million in the first quarter of 2017, compared to a net loss of $29.0 million for the same period last year. The improvement of $31.6 million was primarily attributable to an increase in revenues of $13.2 million and decreases of $23.2 million in other expense and $3.1 million in project expense. These increases were partially offset by increases of $4.1 million in operating expense and $3.5 million in tax provision.

Adjusted EBITDA was $98.2 million for the first quarter of 2017 compared to $78.1 million for the same period last year. The 26% increase was primarily due to a $10.7 million increase in revenues (excluding unrealized loss on energy derivative and amortization of PPAs), a $9.6 million increase in our proportionate share of Adjusted EBITDA from unconsolidated investments, and a $3.1 million decrease in project expense. These increases were partially offset by an increase to operating expense of $4.1 million.

2017 Financial Guidance

Pattern Energy is re-confirming its targeted annual cash available for distribution for 2017 within a range of $140 million to $165 million, representing an increase of 15% at the midpoint of the range, compared to cash available for distribution in 2016. As noted above, forward-looking cash available for distribution is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort for the reasons stated above.

Quarterly Dividend

Pattern Energy declared an increased dividend for the second quarter 2017, payable on July 31, 2017, to holders of record on June 30, 2017 in the amount of $0.418 per Class A common share, which represents $1.672 on an annualized basis. This is a 1.0% increase from the first quarter 2017 dividend of $0.41375.

Acquisitions

Subsequent to the end of the quarter, Pattern Energy acquired a 272 MW interest in the 324 MW Broadview projects and the 35-mile 345 kV Western Interconnect transmission line from Pattern Development 1.0 for $269 million. The funding of the purchase price from Pattern Energy consisted of cash consideration of approximately $215 million from currently available liquidity and a project loan of approximately $54 million secured by Western Interconnect.

Based on the expected timing of cash flows and assuming normal wind conditions, Pattern Energy expects the CAFD contribution, after deduction of Western Interconnect financing costs, to be $18 million in 2018 and to increase approximately $2.5 million per year thereafter through 2022. This results in a five-year average CAFD of $23 million per year and a 9.3x CAFD multiple, based on the cash consideration of $215 million paid to acquire Broadview and Western Interconnect. As noted above, forward-looking five-year average and anticipated 2018 and annual cash available for distribution is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort for the reasons stated above.

Broadview, which is located 30 miles north of Clovis, New Mexico, commenced commercial operations in late March. Broadview has entered into two 20-year power purchase agreements with Southern California Edison, which has a BBB+/A2 credit rating, for sale of 100 percent of its output, up to a total of 297 MW, which has been factored into the project's economics.

Acquisition Pipeline

Pattern Energy has the Right of First Offer (ROFO) on a pipeline of acquisition opportunities from Pattern Development 1.0 and Pattern Development 2.0 (together, the "Pattern Development Companies"). The identified ROFO list stands at 962 MW of total owned capacity. This list of identified ROFO projects represents a portion of the Pattern Development Companies' 5,900 MW pipeline of development projects, all of which are subject to Pattern Energy's ROFO.

Since its IPO, Pattern Energy has purchased 1,194 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to a total of 2,156 MW. Below is a summary of the Identified ROFO Projects that the Company expects to acquire from the Pattern Development Companies in connection with Pattern Energy's project purchase rights:

                       

Capacity (MW)

Identified
ROFO Projects

 

Status

 

Location

 

Construction
Start (1)

 

Commercial
Operations (2)

 

Contract
Type

 

Rated (3)

 

Pattern
Development-
Owned (4)

Pattern Development 1.0 Projects

Kanagi Solar

 

Operational

 

Japan

 

2014

 

2016

 

PPA

 

14

 

6

Futtsu Solar

 

Operational

 

Japan

 

2014

 

2016

 

PPA

 

42

 

19

Conejo Solar(5)

 

Operational

 

Chile

 

2015

 

2016

 

PPA

 

104

 

104

Meikle

 

Operational

 

British Columbia

 

2015

 

2017

 

PPA

 

180

 

180

Belle River

 

In construction

 

Ontario

 

2016

 

2017

 

PPA

 

100

 

43

Ohorayama

 

In construction

 

Japan

 

2016

 

2018

 

PPA

 

33

 

31

Mont Sainte-Marguerite

 

In construction

 

Québec

 

2017

 

2017

 

PPA

 

147

 

147

North Kent

 

In construction

 

Ontario

 

2017

 

2018

 

PPA

 

100

 

43

Henvey Inlet

 

Late stage development

 

Ontario

 

2017

 

2018

 

PPA

 

300

 

150

Tsugaru

 

Late stage development

 

Japan

 

2017

 

2020

 

PPA

 

126

 

63

Pattern Development 2.0 Projects

Grady

 

Late stage development

 

New Mexico

 

2018

 

2019

 

PPA

 

220

 

176

                       

1366

 

962

   

(1)

Represents year of actual or anticipated commencement of construction.

(2)

Represents year of actual or anticipated commencement of commercial operations.

(3)

Rated capacity represents the maximum electricity generating capacity of a project in MW. As a result of wind and other conditions, a project or a turbine will not operate at its rated capacity at all times and the amount of electricity generated will be less than its rated capacity. The amount of electricity generated may vary based on a variety of factors.

(4)

Pattern Development-Owned capacity represents the maximum, or rated, electricity generating capacity of the project in MW multiplied by Pattern Development 1.0's or Pattern Development 2.0's percentage ownership interest in the distributable cash flow of the project.

(5)

From time to time, we conduct strategic reviews of our markets. We have been conducting a strategic review of the market, growth, and opportunities in Chile. In the event we believe we can utilize funds that have already been invested in Chile or funds that might otherwise be invested in Chile in a more productive manner elsewhere that could generate a higher return on investment, we may decide to exit Chile for other opportunities with greater potential. In addition, Pattern Development 1.0 is also concurrently exploring strategic alternatives for its assets in Chile.

Cash Available for Distribution and Adjusted EBITDA Non-GAAP Reconciliations

The following tables reconcile non-GAAP net cash provided by operating activities to cash available for distribution and net income (loss) to Adjusted EBITDA, respectively, for the periods presented (in thousands):

 

Three months ended March 31,

 

2017

 

2016

Net cash provided by operating activities

$

43,752

   

$

14,721

 

Changes in operating assets and liabilities

13,423

   

18,967

 

Network upgrade reimbursement

317

   

 

Release of restricted cash to fund project and general and administrative costs

   

590

 

Operations and maintenance capital expenditures

(146)

   

(230)

 

Distributions from unconsolidated investments

4,205

   

19,814

 

Other

(3,432)

   

13

 

Less:

     

Distributions to noncontrolling interests

(2,647)

   

(3,917)

 

Principal payments paid from operating cash flows

(10,326)

   

(8,943)

 

Cash available for distribution

$

45,146

   

$

41,015

 

 

 

Three months ended March 31,

 

2017

 

2016

Net income (loss)

$

2,539

   

$

(29,048)

 

Plus:

     

Interest expense, net of interest income

22,061

   

20,315

 

Tax provision

4,775

   

1,298

 

Depreciation, amortization and accretion

47,227

   

45,384

 

EBITDA

76,602

   

37,949

 

Unrealized loss on energy derivative (1)

2,358

   

4,825

 

Loss on undesignated derivatives, net

648

   

13,631

 

Net (gain) loss on transactions

312

   

(33)

 

Adjustments from unconsolidated investments

   

(1,712)

 

Plus, proportionate share from unconsolidated investments:

     

Interest expense, net of interest income

9,340

   

7,219

 

Depreciation, amortization and accretion

8,454

   

6,293

 

Loss on undesignated derivatives, net

484

   

9,916

 

Adjusted EBITDA

$

98,198

   

$

78,088

 
   

(1)

Amount is included in electricity sales on the consolidated statements of operations.

Conference Call and Webcast

Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Tuesday May 9, 2017. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 13895652. The replay recording will be available until 11:59 p.m. Eastern Time, May 30, 2017.

A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy's website at www.patternenergy.com. An archived webcast will be available for one year.

About Pattern Energy

Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on The NASDAQ Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 18 wind power facilities with a total owned interest of 2,644 MW in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power facilities generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of Canadian securities laws, including statements regarding the ability to achieve the 2017 cash available for distribution target, the 2018 and five year average annual CAFD generated by Broadview, the ability for a potential investment in Pattern Development 2.0 to offer the Company secure access to high-quality assets to grow CAFD per share, the outlook for renewable energy and the ability of the Company's business model to deliver sustainable and growing returns for the Company's shareholders. These forward-looking statements represent the Company's expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Company's annual report on Form 10-K and any quarterly reports on Form 10-Q. The risk factors and other factors noted therein could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.

Contacts:

     
       

Media Relations

Matt Dallas

917-363-1333

matt.dallas(at)patternenergy.com

 

Investor Relations

Ross Marshall

416-526-1563

ross.marshall(at)loderockadvisors.com

 

 

Pattern Energy Group Inc.

Consolidated Balance Sheets

(In thousands of U.S. Dollars, except share data)

(Unaudited)

 

March 31,

 

December 31,

 

2017

 

2016

Assets

     

Current assets:

     

Cash and cash equivalents

$

244,675

   

$

83,932

 

Restricted cash

8,493

   

11,793

 

Funds deposited by counterparty

41,977

   

43,635

 

Trade receivables

45,998

   

37,510

 

Derivative assets, current

18,098

   

17,578

 

Prepaid expenses

12,857

   

13,803

 

Deferred financing costs, current, net of accumulated amortization of $9,964 and $9,350 as of March 31, 2017 and December 31, 2016, respectively

2,449

   

2,456

 

Other current assets

11,387

   

7,350

 

Total current assets

385,934

   

218,057

 

Restricted cash

17,117

   

13,646

 

Property, plant and equipment, net

3,095,179

   

3,135,162

 

Unconsolidated investments

232,735

   

233,294

 

Derivative assets

23,385

   

26,712

 

Deferred financing costs

3,370

   

4,052

 

Net deferred tax assets

5,903

   

5,559

 

Finite-lived intangible assets, net

90,202

   

91,895

 

Other assets

21,399

   

24,390

 

Total assets

$

3,875,224

   

$

3,752,767

 

Liabilities and equity

     

Current liabilities:

     

Accounts payable and other accrued liabilities

$

26,847

   

$

31,305

 

Accrued construction costs

848

   

1,098

 

Counterparty deposit liability

41,977

   

43,635

 

Accrued interest

6,802

   

9,545

 

Dividends payable

36,527

   

35,960

 

Derivative liabilities, current

11,877

   

11,918

 

Revolving credit facility

   

180,000

 

Current portion of long-term debt, net

50,715

   

48,716

 

Other current liabilities

3,723

   

4,698

 

Total current liabilities

179,316

   

366,875

 

Long-term debt, net

1,669,680

   

1,334,956

 

Derivative liabilities

21,553

   

24,521

 

Net deferred tax liabilities

37,435

   

31,759

 

Finite-lived intangible liability, net

53,796

   

54,663

 

Other long-term liabilities

65,212

   

61,249

 

Total liabilities

2,026,992

   

1,874,023

 

Commitments and contingencies

     

Equity:

     

Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 87,616,747 and 87,410,687 shares outstanding as of March 31, 2017 and December 31, 2016, respectively

877

   

875

 

Additional paid-in capital

1,110,412

   

1,145,760

 

Accumulated loss

(88,617)

   

(94,270)

 

Accumulated other comprehensive loss

(57,492)

   

(62,367)

 

Treasury stock, at cost; 110,964 and 110,964 shares of Class A common stock as of March 31, 2017 and December 31, 2016, respectively

(2,500)

   

(2,500)

 

Total equity before noncontrolling interest

962,680

   

987,498

 

Noncontrolling interest

885,552

   

891,246

 

Total equity

1,848,232

   

1,878,744

 

Total liabilities and equity

$

3,875,224

   

$

3,752,767

 

 

 

 

 

Pattern Energy Group Inc.

Consolidated Statements of Operations

(In thousands of U.S. dollars, except per share data)
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 
 

Three months ended March 31,

 

2017

 

2016

Revenue:

     

Electricity sales

$

98,434

   

$

85,663

 

Other revenue

2,399

   

1,976

 

Total revenue

100,833

   

87,639

 

Cost of revenue:

     

Project expense

29,170

   

32,246

 

Depreciation and accretion

43,740

   

43,411

 

Total cost of revenue

72,910

   

75,657

 

Gross profit

27,923

   

11,982

 

Operating expenses:

     

General and administrative (Note 13)

11,124

   

8,562

 

Related party general and administrative

3,426

   

1,897

 

Total operating expenses

14,550

   

10,459

 

Operating income

13,373

   

1,523

 

Other income (expense):

     

Interest expense

(22,555)

   

(21,061)

 

Loss on undesignated derivatives, net

(648)

   

(13,631)

 

Earnings in unconsolidated investments

16,876

   

3,830

 

Net (loss) gain on transactions

(312)

   

33

 

Other income, net

580

   

1,556

 

Total other expense

(6,059)

   

(29,273)

 

Net income (loss) before income tax

7,314

   

(27,750)

 

Tax provision

4,775

   

1,298

 

Net income (loss)

2,539

   

(29,048)

 

Net loss attributable to noncontrolling interest

(3,114)

   

(5,378)

 

Net income (loss) attributable to Pattern Energy

$

5,653

   

$

(23,670)

 
       

Weighted-average number of common shares outstanding

     

Basic

87,062,612

   

74,437,998

 

Diluted

87,131,280

   

74,437,998

 

Earnings (loss) per share attributable to Pattern Energy

     

Class A common stock:

     

Basic and diluted

$

0.06

   

$

(0.32)

 

Dividends declared per Class A common share

$

0.41

   

$

0.38

 

 

Pattern Energy Group Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)

 

 

Three months ended March 31,

 

2017

 

2016

Operating activities

     

Net income (loss)

$

2,539

   

$

(29,048)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

     

Depreciation and accretion

43,740

   

43,411

 

Amortization of financing costs

1,858

   

1,746

 

Amortization of debt discount/premium, net

1,102

   

1,032

 

Amortization of power purchase agreements, net

736

   

753

 

Loss on derivatives, net

2,350

   

17,757

 

Stock-based compensation

985

   

1,195

 

Deferred taxes

4,693

   

1,143

 

Earnings in unconsolidated investments, net

(16,876)

   

(3,517)

 

Distributions from unconsolidated investments
 

16,487

   

 

Other reconciling items

(439)

   

(784)

 

Changes in operating assets and liabilities:

     

   Funds deposited by counterparty

1,658

   

(61,177)

 

   Trade receivables

(8,432)

   

3,215

 

   Prepaid expenses

946

   

1,360

 

   Other current assets

(4,083)

   

1,114

 

   Other assets (non-current)

2,992

   

(236)

 

   Accounts payable and other accrued liabilities

(4,418)

   

(18,671)

 

   Counterparty deposit liability

(1,658)

   

61,177

 

   Accrued interest

(2,725)

   

(6,235)

 

   Other current liabilities

(975)

   

(1,218)

 

   Long-term liabilities

3,272

   

1,704

 

Net cash provided by operating activities

43,752

   

14,721

 

Investing activities

     

Cash paid for acquisitions, net of cash acquired

(275)

   

 

Capital expenditures

(1,328)

   

(24,084)

 

Distributions from unconsolidated investments

4,205

   

19,814

 

Other investing activities

83

   

(125)

 

Net cash provided by (used in) investing activities

2,685

   

(4,395)

 

Financing activities

     

Dividends paid

(35,522)

   

(27,711)

 

Capital distributions - noncontrolling interest

(2,647)

   

(3,917)

 

Payment for deferred financing costs

(5,025)

   

 

Proceeds from revolving credit facility

   

20,000

 

Repayment of revolving credit facility

(180,000)

   

(20,000)

 

Proceeds from long-term debt

350,000

   

 

Repayment of long-term debt

(10,326)

   

(8,943)

 

Other financing activities

(2,003)

   

(143)

 

Net cash provided by (used in) financing activities

114,477

   

(40,714)

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

   

1,837

 

Net change in cash, cash equivalents and restricted cash

160,914

   

(28,551)

 

Cash, cash equivalents and restricted cash at beginning of period

109,371

   

146,292

 

Cash, cash equivalents and restricted cash at end of period

$

270,285

   

$

117,741

 

Supplemental disclosures

     

  Cash payments for income taxes

$

247

   

$

97

 

  Cash payments for interest expense, net of capitalized interest

$

22,607

   

$

24,204

 

Schedule of non-cash activities

     

  Change in property, plant and equipment

$

956

   

$

11,599

 

  Accrual of deferred financing costs

$

1,640

   

$

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pattern-energy-reports-first-quarter-2017-financial-results-300453929.html

SOURCE: Pattern Energy Group Inc.

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