Pattern Energy Reports First Quarter 2017 Financial Results

- 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.

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@patternenergy.com


Investor Relations

Ross Marshall

416-526-1563

ross.marshall@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



$


 

SOURCE Pattern Energy Group Inc.


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