Pattern Energy Reports Second Quarter 2016 Financial Results

- Increases dividend to $0.40 per Class A common share for Q3 2016 -

SAN FRANCISCO, Aug. 5, 2016 /CNW/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (NASDAQ: PEGI) (TSX: PEG) today announced its financial results for the 2016 second quarter.

Highlights

(Comparisons made between fiscal Q2 2016 and fiscal Q2 2015 results, unless otherwise noted)

  • Proportional GWh sold of 1,715 GWh, up 40%
  • Net cash provided by operating activities of $54.3 million, up 68%
  • Cash available for distribution (CAFD) of $35.5 million, up 27% on track to meet full year guidance
  • Net loss of $15.6 million compared to net income of $5.7 million
  • Adjusted EBITDA of $78.6 million, up 18%
  • Revenue of $93.4 million, up 10%
  • Declared a third quarter dividend of $0.40 per Class A common share or $1.60 on an annualized basis, subsequent to the end of the period, representing a 2.6% increase over the previous quarter's dividend
  • Added 272 MW in owned capacity, which brings the total portfolio owned capacity to 2,554 MW, with the agreement to acquire the Broadview Wind project (Broadview), located in New Mexico, from Pattern Energy Group LP (Pattern Development)

"We remain on track to achieve our cash available for distribution target for 2016, reporting $35.5 million in the second quarter. Our prudent capital and cost management more than offset the expected lower wind levels," said Mike Garland, President and CEO of Pattern Energy.  "We continue to grow our portfolio, which now stands at 2,554 MW – an increase of 12% this quarter, with the agreement to acquire 272 MW of owned capacity in Broadview from Pattern Development at a 9.6x average cash available for distribution multiple over five years. As the capital markets improve, our identified ROFO list of assets provides clear visibility to 40% growth on our existing portfolio and we expect to add new projects to the list in the coming year."

Financial and Operating Results

Pattern Energy sold 1,715,286 MWh of electricity on a proportional basis in the second quarter of 2016 compared to 1,225,374 MWh sold in the same period last year. Pattern Energy sold 3,516,321 MWh of electricity on a proportional basis for the six-months ended June 30, 2016 (YTD 2016) compared to 2,161,408 MWh sold in the same period last year. The increase for the quarterly period was primarily attributable to volume increases of 444,745 MWh from controlling interests in consolidated MWh for projects which commenced commercial operations or were acquired since May 2015 and 45,167 MWh from unconsolidated investments primarily due to the acquisition of K2 in June 2015. As expected and planned for, El Niño conditions continued into the second quarter of 2016 which resulted in lower wind speeds and lower production than Pattern Energy's long-term average forecast.

Net cash provided by operating activities was $54.3 million for the second quarter of 2016 compared to $32.4 million for the same period last year. Net cash provided by operating activities was $69.0 million for YTD 2016 compared to $48.6 million for the same period last year. The change quarter over quarter is primarily due to higher revenues of $13.6 million (excluding unrealized loss on energy derivative and amortization of power purchase agreements) from projects which were acquired since May 2015 or which commenced commercial operations since the third quarter of 2015.  Also increasing cash flows from operations was the timing of payments associated with accruals and other long term liabilities. These increases were partially offset by increases of $5.4 million in project expenses and $1.8 million in operating expenses.

Cash available for distribution was $35.5 million for the second quarter of 2016 compared to $28.0 million for the same period in the prior year. Cash available for distribution was $76.5 million for YTD 2016 compared to $37.3 million for the same period in the prior year. The $7.5 million increase for the quarterly period was due to additional revenues of $13.6 million (excluding unrealized loss on energy derivative and amortization of power purchase agreements) primarily from projects which were acquired since May 2015 or which commenced commercial operation since the third quarter of 2015. Pattern Energy also received an increase of $4.2 million in cash distributions from its unconsolidated investments when compared to the same period last year due to a full period of operations at each of its unconsolidated investments in 2016. These increases were partially offset by increases in project expenses of $5.4 million and operating expenses of $1.8 million, primarily from projects which commenced commercial operations or were acquired during 2015, as well as, increased distributions to noncontrolling interests of $3.5 million.

Net loss was $15.6 million in the second quarter of 2016, compared to net income of $5.7 million for the same period in the prior year. Net loss was $44.7 million for YTD 2016 compared to $16.4 million in the same period last year. The change quarter over quarter of $21.3 million was primarily attributable to projects which were acquired since May 2015 or became commercially operable in late 2015. Also contributing to the change were increases in other expense items related to interest expense and net losses on undesignated derivatives.

Adjusted EBITDA was $78.6 million for the second quarter of 2016 compared to $66.8 million for the same period last year. Adjusted EBITDA was $156.7 million for YTD 2016 compared to $113.6 million for the same period last year. The increase for the quarterly period was primarily attributable to projects which commenced commercial operations or were acquired since May 2015.

2016 Financial Guidance

Pattern Energy reaffirms its targeted annual cash available for distribution for 2016 in a range of $125 million to $145 million, representing an increase of 46% at the midpoint of the range, compared to cash available for distribution in 2015. The 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 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 cash available for distribution. A description of the adjustments to determine cash available for distribution can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics, of Pattern Energy's 2016 Quarterly Report on Form 10-Q for the period ended June 30, 2016.

Quarterly Dividend

Pattern Energy declared an increased dividend for the third quarter 2016, payable on October 31, 2016, to holders of record on September 30, 2016 in the amount of $0.40 per Class A common share, which represents $1.60 on an annualized basis. This is a 2.6% increase from the second quarter 2016 dividend of $0.39.

Construction Pipeline

In June 2016, Pattern Energy agreed to acquire 272 MW of owned capacity in the 324 MW Broadview project, and the associated independent 35-mile 345 kV Western Interconnect transmission line, from Pattern Development for $269 million. Pattern Energy will fund the cash purchase price for its interest in the project, including the associated transmission line, at the commencement of commercial operations of the project which is expected in the first half of 2017. Pattern Energy's commitment to own and operate the facility was a core component of securing high-quality institutional equity investors for the project financing.

Pattern Energy can meet the contemplated cash purchase consideration using part of its available liquidity and the long-term project holding company debt financing commitments arranged at the time of the purchase commitment which total up to $160 million with various maturities from five to ten years. Management believes that Pattern Energy does not need to raise equity in order to complete the Broadview acquisition; however, it retains the flexibility to use retained cash flow or raise equity, corporate debt, project holding company debt or other financing arrangements prior to the closing of the Broadview acquisition in lieu of using one or more of project holding company debt financing commitments.

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.

The Broadview power facility, located 30 miles north of Clovis, New Mexico, will consist of 141 Siemens 2.3 MW wind turbines and has the capacity to generate 324 MW of energy, the power equivalent to the annual energy usage of approximately 180,000 California homes.

Acquisition Pipeline

Pattern Energy has the Right of First Offer (ROFO) on a pipeline of acquisition opportunities from Pattern Development. The identified ROFO list stands at 1,032 MW of total owned capacity. This list of identified ROFO projects represents a portion of Pattern Development's 5,900 MW pipeline of development projects, all of which are subject to Pattern Energy's ROFO.

Since its IPO, Pattern Energy has purchased 1,104 MW from Pattern Development and in aggregate grown the identified ROFO list from 746 MW to a total of 2,136 MW. The table below sets forth the current list of identified ROFO projects:

Asset


Location


Owned MW


Status

Armow


Ontario


90


Operational

Kanagi Solar


Japan


6


Operational

Futtsu Solar


Japan


19


Operational

Meikle


British Columbia


180


In construction

Conejo Solar


Chile


84


In construction

Belle River


Ontario


43


Securing final permits

North Kent


Ontario


43


Securing final permits

Grady


New Mexico


176


Late stage development

Henvey Inlet


Ontario


150


Late stage development

Mont Sainte-Marguerite


Québec


147


Late stage development

Ohorayama


Japan


31


Late stage development

Tsugaru


Japan


63


Late stage development

Total




1,032



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 loss to adjusted EBITDA, respectively, for the periods presented (in thousands):


Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

Net cash provided by operating activities

$

54,270



$

32,361



$

68,991



$

48,600


Changes in operating assets and liabilities

(12,669)



2,521



6,298



(2,136)


Network upgrade reimbursement



618





1,236


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



1,501



590



1,501


Operations and maintenance capital expenditures

(516)



(283)



(746)



(321)


Transaction costs for acquisitions

52



1,357



65



1,777


Distributions from unconsolidated investments

11,960



7,771



31,774



13,847


Other



(148)





(292)


Less:








Distributions to noncontrolling interests

(4,270)



(763)



(8,187)



(1,511)


Principal payments paid from operating cash flows

(13,319)



(16,948)



(22,262)



(25,383)


Cash available for distribution

$

35,508



$

27,987



$

76,523



$

37,318


 


Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

Net income (loss)

$

(15,646)



$

5,657



$

(44,694)



$

(16,402)


Plus:








Interest expense, net of interest income

21,008



18,715



41,323



36,414


Tax provision

1,429



3,603



2,727



2,857


Depreciation, amortization and accretion

45,835



34,785



91,219



63,841


EBITDA

52,626



62,760



90,575



86,710


Unrealized loss on energy derivative (1)

9,327



6,002



14,152



3,030


(Gain) loss on undesignated derivatives, net

5,879



(4,178)



19,510



(778)


Net loss on transactions

72



1,305



39



2,589


Adjustments from unconsolidated investments (2)

(9,422)





(11,134)




Plus, proportionate share from unconsolidated investments:








Interest expense, net of interest income

7,925



5,181



15,144



10,619


Depreciation, amortization and accretion

6,671



4,991



12,964



9,500


(Gain) loss on undesignated derivatives, net

5,555



(9,240)



15,471



1,894


Adjusted EBITDA

$

78,633



$

66,821



$

156,721



$

113,564




(1)

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



(2)

Amount consists of gains on distributions from unconsolidated investments and suspended equity losses of $7.5 million and $1.9 million for the three months ended June 30, 2016, respectively and $9.2 million and $1.9 million for the six months ended June 30, 2016, respectively.

 

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 Friday, August 5, 2016. 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 51243882. The replay recording will be available until 11:59 p.m. Eastern Time, August 19, 2016.

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. is an independent power company listed on The NASDAQ Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 17 wind power facilities, including one it has agreed to acquire, with a total owned interest of 2,554 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 consummate the agreement to acquire Broadview, the ability to achieve the 2016 cash available for distribution target, the ability to fund the contemplated cash purchase consideration for Broadview using available liquidity and long-term project holding company debt financing commitments, the ability to not need to raise equity in order to complete the Broadview acquisition, and the number of homes Broadview has the capacity to generate energy.  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)






June 30,
2016


December 31,
2015

Assets




Current assets:




Cash and cash equivalents

$

87,641



$

94,808


Restricted cash

12,228



14,609


Funds deposited by counterparty

49,480




Trade receivables

49,329



45,292


Related party receivable

689



734


Reimbursable interconnection costs



38


Derivative assets, current

18,381



24,338


Prepaid expenses

11,128



14,498


Other current assets

10,102



6,891


Deferred financing costs, current, net of accumulated amortization of $6,310 and $5,192 as of June 30, 2016 and December 31, 2015, respectively

2,158



2,121


Total current assets

241,136



203,329


Restricted cash

16,372



36,875


Property, plant and equipment, net of accumulated depreciation of $498,867 and $409,161 as of June 30, 2016 and December 31, 2015, respectively

3,225,658



3,294,620


Unconsolidated investments

92,792



116,473


Derivative assets

31,704



44,014


Deferred financing costs

3,572



4,572


Net deferred tax assets

10,888



6,804


Finite-lived intangible assets, net of accumulated amortization of $7,734 and $4,357 as of June 30, 2016 and December 31, 2015, respectively

94,256



97,722


Other assets

23,930



25,183


Total assets

$

3,740,308



$

3,829,592






Liabilities and equity




Current liabilities:




Accounts payable and other accrued liabilities

$

29,923



$

42,776


Accrued construction costs

4,494



23,565


Counterparty deposit liability

49,480




Related party payable

833



1,646


Accrued interest

8,916



9,035


Dividends payable

29,711



28,022


Derivative liabilities, current

15,711



14,343


Revolving credit facility

335,000



355,000


Current portion of long-term debt, net of financing costs of $3,638 and $3,671 as of June 30, 2016 and December 31, 2015, respectively

45,721



44,144


Other current liabilities

2,557



2,156


Total current liabilities

522,346



520,687


Long-term debt, net of financing costs of $21,036 and $22,632 as of June 30, 2016 and December 31, 2015, respectively

1,163,229



1,174,380


Convertible senior notes, net of financing costs of $4,449 and $5,014 as of June 30, 2016 and December 31, 2015, respectively

200,103



197,362


Derivative liabilities

69,842



28,659


Net deferred tax liabilities

22,860



22,183


Finite-lived intangible liability, net of accumulated amortization of $3,902 and $2,168 as of June 30, 2016 and December 31, 2015, respectively

56,398



58,132


Other long-term liabilities

60,004



52,427


Total liabilities

2,094,782



2,053,830


Commitments and contingencies




Equity:




Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 74,930,002 and 74,644,141 shares outstanding as of June 30, 2016 and December 31, 2015, respectively

750



747


Additional paid-in capital

927,812



982,814


Accumulated loss

(104,052)



(77,159)


Accumulated other comprehensive loss

(94,037)



(73,325)


Treasury stock, at cost; 67,344 and 65,301 shares of Class A common stock as of June 30, 2016 and December 31, 2015, respectively

(1,617)



(1,577)


Total equity before noncontrolling interest

728,856



831,500


Noncontrolling interest

916,670



944,262


Total equity

1,645,526



1,775,762


Total liabilities and equity

$

3,740,308



$

3,829,592


 

Pattern Energy Group Inc.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
(Unaudited)



Three months ended June 30,


Six months ended June 30,


2016


2015


2016


2015

Revenue:








Electricity sales

$

91,370



$

82,871



$

177,033



$

146,996


Related party revenue

1,332



872



2,547



1,675


Other revenue

736



928



1,497



866


Total revenue

93,438



84,671



181,077



149,537


Cost of revenue:








Project expense

33,359



27,981



65,605



53,227


Depreciation and accretion

43,678



34,342



87,089



63,398


Total cost of revenue

77,037



62,323



152,694



116,625


Gross profit

16,401



22,348



28,383



32,912


Operating expenses:








General and administrative

10,362



8,870



19,931



15,091


Related party general and administrative

1,931



1,621



3,828



3,429


Total operating expenses

12,293



10,491



23,759



18,520


Operating income

4,108



11,857



4,624



14,392


Other income (expense):








Interest expense

(21,275)



(18,943)



(42,336)



(36,861)


Gain (loss) on undesignated derivatives, net

(5,879)



4,178



(19,510)



778


Earnings in unconsolidated investments, net

7,240



13,801



11,070



10,719


Related party income

1,097



756



2,104



1,424


Net loss on transactions

(72)



(1,305)



(39)



(2,589)


Other income (expense), net

564



(1,084)



2,120



(1,408)


Total other expense

(18,325)



(2,597)



(46,591)



(27,937)


Net income (loss) before income tax

(14,217)



9,260



(41,967)



(13,545)


Tax provision

1,429



3,603



2,727



2,857


Net income (loss)

(15,646)



5,657



(44,694)



(16,402)


Net loss attributable to noncontrolling interest

(12,423)



(8,660)



(17,801)



(10,820)


Net income (loss) attributable to Pattern Energy

$

(3,223)



$

14,317



$

(26,893)



$

(5,582)










Weighted average number of shares:








Class A common stock - Basic

74,443,901



68,943,707



74,440,950



67,426,286


Class A common stock - Diluted

74,443,901



69,147,260



74,440,950



67,426,286


Earnings (loss) per share








Class A common stock:








Basic earnings (loss) per share

$

(0.04)



$

0.21



$

(0.36)



$

(0.08)


Diluted earnings (loss) per share

$

(0.04)



$

0.21



$

(0.36)



$

(0.08)


Dividends declared per Class A common share

$

0.39



$

0.35



$

0.77



$

0.71


 

Pattern Energy Group Inc.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)






Six months ended June 30,


2016


2015

Operating activities




Net loss

$

(44,694)



$

(16,402)


Adjustments to reconcile net loss to net cash provided by operating activities:




Depreciation and accretion

87,089



63,841


Amortization of financing costs

3,498



3,636


Amortization of debt discount/premium, net

2,074




Amortization of power purchase agreements, net

1,507




Loss on derivatives, net

32,209



333


Stock-based compensation

2,777



1,989


Deferred taxes

2,487



2,616


Earnings in unconsolidated investments

(11,070)



(10,719)


Distributions from unconsolidated investments

377




Other reconciling items

(965)



1,170


Changes in operating assets and liabilities:




Funds deposited by counterparty

(49,480)




Trade receivables

(3,753)



(4,924)


Prepaid expenses

3,400



3,107


Other current assets

(2,998)



334


Other assets (non-current)

1,839



(99)


Accounts payable and other accrued liabilities

(9,631)



615


Counterparty deposit liability

49,480




Related party receivable/payable

(735)



(7)


Accrued interest

(178)



689


Other current liabilities

381



1,151


Long-term liabilities

6,363



1,270


Increase in restricted cash

(986)




Net cash provided by operating activities

68,991



48,600


Investing activities




Cash paid for acquisitions, net of cash acquired



(404,377)


Decrease in restricted cash

20,561



25,277


Increase in restricted cash

(64)



(6,966)


Capital expenditures

(25,953)



(216,499)


Distributions from unconsolidated investments

31,774



13,847


Reimbursable interconnection receivable

38



1,246


Other assets (non-current)



(6,074)


Other investing activities

(163)




Net cash provided by (used in) investing activities

26,193



(593,546)


Financing activities




Proceeds from public offering, net of issuance costs

$



$

196,591


Repurchase of shares for employee tax withholding

(40)



(310)


Dividends paid

(56,097)



(39,170)


Payment for deferred equity issuance costs

(677)



(2,204)


Capital distributions - noncontrolling interest

(8,187)



(1,511)


Decrease in restricted cash

25,714



18,532


Increase in restricted cash

(22,342)



(21,718)


Refund of deposit for letters of credit



3,425


Payment for deferred financing costs

(134)



(5,614)


Proceeds from revolving credit facility

20,000



250,000


Repayment of revolving credit facility

(40,000)



(50,000)


Proceeds from construction loans



206,184


Repayment of long-term debt

(22,262)



(25,383)


Other financing activities

(343)




Net cash provided by (used in) financing activities

(104,368)



528,822


Effect of exchange rate changes on cash and cash equivalents

2,017



(2,596)


Net change in cash and cash equivalents

(7,167)



(18,720)


Cash and cash equivalents at beginning of period

94,808



101,656


Cash and cash equivalents at end of period

$

87,641



$

82,936


Supplemental disclosures




Cash payments for income taxes

$

155



$

186


Cash payments for interest expense, net of capitalized interest

36,535



24,447


Acquired property, plant and equipment from acquisitions



579,712


Schedule of non-cash activities




Change in property, plant and equipment

1,302



21,094


 

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SOURCE Pattern Energy Group Inc.


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