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Pattern Energy Reports Third Quarter 2019 Financial Results

Press Release

Declares dividend of $0.4220 per Class A common share for fourth quarter 2019 –

SAN FRANCISCO, Nov. 4, 2019 /PRNewswire/ — Pattern Energy Group Inc. (the “Company” or “Pattern Energy”) (NASDAQ & TSX: PEGI) today announced its financial results for the 2019 third quarter.

Highlights

  • Proportional gigawatt hours (“GWh”) sold of 1,736 GWh
  • Revenue of $119 million
  • Net loss of $71 million
  • Adjusted EBITDA of $65 million
  • Cash available for distribution (“CAFD”) of $22 million, and on track to meet full year guidance(1)
  • Declared a fourth quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter’s dividend
  • Acquired 251 megawatts (“MW”) of owned capacity, subsequent to the end of the quarter, in two facilities, Henvey Inlet Wind (“Henvey Inlet”) and Grady Wind (“Grady”), located in Ontario and New Mexico, respectively, for a total purchase price of $293 million, representing a 10x multiple of the five-year average CAFD(1) of the two projects, with a weighted average PPA life remaining of more than 22 years
  • Received $256 million in a private placement of 10.4 million shares of perpetual preferred stock (the “Series A Preferred Stock”), subsequent to the end of the quarter
  • Issued its inaugural sustainability report, subsequent to the end of the quarter, outlining the Company’s sustainable practices and environmental, social, and governance metrics

“The fleet continues to perform well and production was at our long term average forecast during the quarter,” said Mike Garland, CEO of Pattern Energy. “We have successfully achieved a series of milestones which put us in a great position to achieve our growth objectives. These milestones include the acquisition of four accretive dropdowns, securing attractively priced capital to fund these acquisitions with sufficient existing liquidity to meet our capital commitments for Gulf Wind repowering and Tsugaru, as well as continued progress at Pattern Development. The Henvey Inlet acquisition represents the completion of our Canadian portfolio at this time, and the Grady acquisition expands our footprint in the New Mexico market. Our ability to successfully execute in strategic markets like Ontario, New Mexico and Japan underpin our confidence in the business.”

(1) The forward looking measures of 2019 full year cash available for distribution (CAFD) and CAFD multiple are non-GAAP measures that cannot be reconciled to net income as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking mark-to-market changes in derivatives and proportionate share of earnings from unconsolidated investments to arrive at net income and which are 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 Performance Metrics, of Pattern Energy’s 2019 Quarterly Report on Form 10-Q for the period ended September 30, 2019.

Financial and Operating Results

Pattern Energy sold 1,735,937 megawatt hours (“MWh”) of electricity on a proportional basis in the third quarter of 2019, compared to 1,622,991 MWh sold in the same period last year. Pattern Energy sold 5,965,313 MWh of electricity on a proportional basis in the nine months ended September 30, 2019 (“YTD 2019”), compared to 6,021,515 MWh for the same period in 2018. The 7% improvement in the quarterly period was primarily due to volume increases resulting from acquisitions and less favorable wind conditions in 2018 partially offset by volume decreases due to divestitures.

Net loss was $71 million in the third quarter of 2019, compared to a net loss of $31 million for the same period last year. Net loss for the YTD 2019 was $147 million compared to $46 million for the same period in 2018, an increase of $101 million. The $40 million increase in net loss in the quarterly period was primarily attributable to a $20 million increase in depreciation due to accelerated depreciation at the Gulf Wind facility resulting from the repowering of such project, a $3 million increase in corrective maintenance, a $9 million increase in contingent consideration payable to Pattern Energy Group LP resulting from construction cost savings at the Tsugaru project and a $7 million increase in proportionate share of net loss in earnings of Pattern Development.

Adjusted EBITDA decreased 19% to $65 million for the third quarter of 2019, compared to $80 million for the same period last year. Adjusted EBITDA for the YTD 2019 was $265 million compared to $292 million for the same period in 2018. The $15 million decrease in the quarterly period was primarily due to an $11 million decrease in earnings from projects fully operational in both periods, a $5 million increase in Pattern Energy’s share of net loss at its development investment segment and a $3 million decrease in earnings resulting from its divestiture of K2, partially offset by a $4 million increase in earnings due to new projects acquired. The decrease in earnings from projects fully operational in both periods was primarily due to increased corrective maintenance expense and general and administrative costs.

Cash available for distribution was $22 million for the third quarter of 2019, a decrease of 31% compared to $32 million for the same period last year. Cash available for distribution in the YTD 2019 was $128 million compared to $133 million in the same period in 2018. The $10 million decrease in the quarterly period was primarily due to a $2 million reduction resulting from divestitures, a $9 million decrease in contributions from projects fully operational in both periods partially offset by $1 million contributed from new projects acquired.

2019 Financial Guidance

Pattern Energy is re-confirming its targeted annual cash available for distribution(1) for 2019 within a range of $160 million to $190 million. Pattern Energy is re-affirming its full year 2020 targeted annual cash available for distribution(1) in a range of $185 million to $225 million.

(1) The forward looking measures of 2019 and 2020 full year cash available for distribution (CAFD) are non-GAAP measures that cannot be reconciled to net income as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking mark-to-market changes in derivatives and proportionate share of earnings from unconsolidated investments to arrive at net income and which are 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 Performance Metrics, of Pattern Energy’s 2019 Quarterly Report on Form 10-Q for the period ended September 30, 2019.

Common Dividend

Pattern Energy declared a dividend for the fourth quarter 2019, payable on January 31, 2020, to common equity holders of record on December 31, 2019 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the fourth quarter 2019 dividend is unchanged from the third quarter 2019 dividend.

Preferred Dividend

Pattern Energy declared a base dividend, payable on January 31, 2020, to holders of the Series A Preferred Stock aggregating to $3.9 million.

New Acquisitions

Pattern Energy acquired two wind projects, Henvey Inlet and Grady, from Pattern Energy Group LP and Pattern Energy Group 2 LP (“Pattern Development”), respectively, for total cash consideration of $294 million.

  • Pattern Energy acquired 100% of Pattern Energy Group LP’s 50% equity ownership interest in the 300 MW Henvey Inlet facility for approximately $193 million, subject to adjustment, for an owned interest of 150 MW. Henvey Inlet is located on the northeast shore of Georgian Bay in Ontario and commenced commercial operation in September 2019. The facility utilizes 87 Vestas 3.45 MW turbines and has a 20-year PPA with the Independent Electricity System Operator for 100% of its production.
  • Pattern Energy acquired 51% of Pattern Development’s Class B member interest in the 220 MW Grady facility for approximately $100 million for an owned interest of 101 MW. Grady is located in Curry County, New Mexico and commenced commercial operation in August 2019. The facility utilizes 84 Siemens Gamesa 2.625 MW turbines and has a 25-year PPA with Sacramento Municipal Utility District for 100% of its production, up to 200 MW.

New Financing Arrangement

In October 2019, Pattern Energy issued 10.4 million shares of Series A Perpetual Preferred Stock with a par value of $260 million issued at a 1.5% discount. The Series A Preferred Shares are entitled to receive, when declared by the board of directors, cumulative cash dividends at an initial annual rate of 5.625%, based on the $25.00 per share liquidation preference. The annual dividend rate shall increase by 0.5% every year starting on the third anniversary of issuance date to a maximum of four escalations, or 7.625%. The Series A Preferred Shares are entitled to receive 12.6% of any cash distributions, including the return of capital, made by Pattern Development to the Company or any of its subsidiaries not to exceed $3.25 per Series A Preferred Share. Pattern Energy received net proceeds of $256 million which it used to fund the acquisition of Henvey Inlet, partially repay borrowings under the revolving credit facility and pay related expenses and fees.

Acquisition Pipeline

Pattern Development has a pipeline of development projects totaling more than 10 gigawatts (“GW”). Pattern Energy has a right of first offer (“ROFO”) on the entire pipeline of acquisition opportunities. The identified ROFO list stands at 612 MW of total capacity and represents a portion of the pipeline of development projects, which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased more than 1.9 GW from Pattern Energy Group LP and Pattern Development. Pattern Energy Group LP is winding up operations and following the Company’s acquisition of Henvey Inlet discussed above under “New Acquisitions” there are no remaining Identified ROFO Projects at Pattern Energy Group LP.

Read More: https://investors.patternenergy.com/news-releases/news-release-details/pattern-energy-reports-third-quarter-2019-financial-results

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