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8-K - FORM 8-K - Pattern Energy Group Inc.d924767d8k.htm

Exhibit 99.1

 

LOGO

Pattern Energy Reports First Quarter Results

- Declares increased dividend of $0.352 per Class A common share for second quarter 2015 -

- Expands owned capacity to 2,112 MW and identified ROFO list to 814 MW -

SAN FRANCISCO, California, May 7, 2015 – Pattern Energy Group Inc. (the “Company” or “Pattern Energy”) (NASDAQ: PEGI) (TSX: PEG) today announced its financial results for the first quarter of 2015.

Highlights

(Comparisons made between fiscal Q1 2015 and fiscal Q1 2014 results, unless otherwise noted)

 

    Cash available for distribution (CAFD) of $9.3 million, down 48%

 

    Adjusted EBITDA of $46.7 million, up 26%

 

    Proportional GWh sold of 929 GWh, up 70%

 

    Revenue of $64.9 million, up 31%

 

    Declared a second quarter dividend of $0.3520 per Class A common share or $1.408 on an annualized basis, subsequent to the end of the period, representing a 3% increase over the previous quarter’s dividend

 

    Added three new projects to the identified Right of First Offer (ROFO) list consisting of Amazon Wind Farm (Fowler Ridge), Mont Sainte-Marguerite and, subsequent to the end of the period, North Kent; the identified ROFO list stands at 814 MW of owned capacity

 

    Entered into definitive agreements to acquire four wind power facilities, subsequent to the end of the period, K2 and Amazon Wind Farm (Fowler Ridge) from Pattern Development and Post Rock Wind and Lost Creek Wind from Wind Capital Group, LLC

 

    Increased its CAFD per share compound annual growth rate (CAGR) target to 12-15 percent from 10-12 percent over the next three years, subsequent to the end of the period

 

    Pattern Development acquired a majority stake in Tokyo-based Green Power Investment Corporation (GPI), which has approximately 1,000 MW in near and longer term wind and solar projects in development and Pattern Development’s interest in GPI’s projects is subject to Pattern Energy’s ROFO

 

    Pattern Development signed a joint venture agreement with CEMEX Energia, a subsidiary of CEMX S.A.B. (NYSE: CX), to develop renewable energy projects throughout Mexico and Pattern Development’s interest in the joint venture’s projects is subject to Pattern Energy’s ROFO

 

    Completed a $351 million follow-on primary and secondary equity offering

“We continue to grow our portfolio of high-quality assets which now stands at 2,112 MW of owned capacity with the recent addition of four new projects, including our first acquisition from a third party. At the same time, we continue to add new projects to our identified ROFO list, like the recent North Kent announcement. The identified ROFO list and Pattern Development’s pipeline of development-stage projects in North America, Japan and Mexico provide clear visibility into our growth trajectory. As such, we have increased our cash available for distribution per share CAGR target to 12-15 percent through 2017,” said Mike Garland, President and CEO of Pattern Energy. “It’s a great portfolio in strong markets. Despite the short-term wind variability in the first quarter, the underlying business continues to perform well – as we grow our portfolio and a strong pipeline of near-term projects.”


Financial Results

Pattern Energy sold 929,420 MWh of electricity on a proportional basis in the first quarter of 2015 compared to 546,290 MWh sold in the same period in 2014. The increase was primarily attributable to the commencement of commercial operations at South Kent, Panhandle 1, Panhandle 2, Grand and El Arrayán at various times in 2014. Overall, production for the first quarter was impacted by low wind levels which were independently reported to be 20 percent, or more, below normal across the western United States and Texas. These wind levels resulted in a 20 percent variance in Pattern Energy’s production during the first quarter compared to its long-term forecast.

Net loss was $22.1 million in the first quarter of 2015, which remained relatively unchanged compared to $21.9 million in the same period last year.

Adjusted EBITDA was $46.7 million for the first quarter of 2015 compared to $37.2 million in the same period last year. The increase in Adjusted EBITDA was primarily attributable to the commencement of commercial operations at the five projects referenced above. The increase was curbed by lower electricity production due to the low wind levels referenced above. A reconciliation of Adjusted EBITDA to net loss determined in accordance with GAAP is shown below.

Cash available for distribution was $9.3 million in the first quarter of 2015 compared to $17.8 million in the same period last year. The change is primarily attributable to lower electricity production due to the low wind levels referenced above as well as increases of $9.2 million in project expenses from commencement of operations at new projects, $2.8 million in operating expenses, $3.3 million in interest expense and $2.6 million in principal payments from operating cash. The impact was partially offset by additional electricity sales from the commencement of commercial operations at Panhandle 1, El Arrayán, and Panhandle 2 and a $6.1 million cash distribution from unconsolidated investments. A reconciliation of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP is shown below.

Quarterly Dividend

Pattern Energy declared an increased dividend for the second quarter 2015, payable on July 30, 2015, to holders of record on June 30, 2015, in the amount of $0.3520 per Class A share, which represents $1.408 on an annualized basis. This is a 3 percent increase from the first quarter 2015 dividend of $0.342.

Construction Pipeline

The table below outlines Pattern Energy’s projects currently in construction, the capacity owned or under contract to be acquired and each project’s anticipated commencement date for commercial operation.

 

Asset

  

Location

  

Owned MW

    

Commercial Operation

K2

   Ontario      90       Q2 2015

Logan’s Gap

   Texas      164       Q4 2015

Amazon Wind Farm

(Fowler Ridge)

   Indiana      116       Q4 2015

Total

        370      

In April 2015, Pattern Energy entered into an agreement to acquire an owned interest of 90 MW in the 270 MW K2 Wind power project located in Ontario, Canada from Pattern Development. The project has a 20-year power purchase agreement (PPA) with the Independent Electricity System Operator (IESO). The project is expected to reach commercial operation in the second quarter of 2015.

In April 2015, Pattern Energy acquired the 150 MW Amazon Wind Farm (Fowler Ridge) project located in Benton County, Indiana. The project has entered into a 13-year PPA with Amazon Web Services, an Amazon.com company, to supply electricity for its datacenters. The project is expected to reach commercial operation in late 2015.


Third-party Acquisitions

In April, Pattern Energy entered into definitive agreements with Wind Capital Group, LLC (“WCG”) to acquire an aggregate owned 270 MW interest in two operational wind power facilities from WCG and its affiliates.

Pattern Energy has agreed to acquire an interest in the 201 MW Post Rock Wind facility in Kansas, which is fully contracted under a long-term agreement with Westar, which has a BBB+ credit rating.

Pattern Energy also agreed to acquire an interest in the 150 MW Lost Creek Wind facility in Missouri, which is fully contracted under a long-term agreement with Associated Electric Cooperative Incorporated, which has an AA credit rating.

The transactions are expected to close within 30-60 days, subject to receipt of certain regulatory approvals and satisfaction or waiver of other customary conditions.

Acquisition Pipeline

Pattern Energy has the Right of First Offer (ROFO) on a pipeline of acquisition opportunities from Pattern Development.

In 2015, Pattern Energy has announced the addition of three new projects to its list of identified ROFO projects from Pattern Development, consisting of 116 MW of the 150 MW Amazon Wind Farm (Fowler Ridge) in January, which has also now been acquired from Pattern Development, the 147 MW Mont Sainte-Marguerite Wind project in February and 43 MW of the 100 MW North Kent Wind project in April. With these new additions, the identified ROFO list now consists of eight projects with a rated capacity of 1,399 MW and a total owned capacity of 814 MW.

The North Kent Wind project, which is located in the Regional Municipality of Chatham-Kent, Ontario, has a 20-year PPA to supply IESO with electricity. Construction of the project is expected to begin by the end of 2016 and it is expected to reach completion at the end of 2017.

Since its IPO, Pattern Energy has purchased 756 MW from Pattern Development. The table below sets forth the current list of identified ROFO projects:

 

Asset

  

Location

  

Owned MW

    

Commercial Operation

Gulf Wind

   Texas      76       Operational

Armow

   Ontario      90      

2015

(In construction)

Meikle

   British
Columbia
     185      

2016

(Ready for financing)

Conejo Solar

   Chile      73      

2016

(Ready for financing)

Belle River

   Ontario      50      

2017

(Securing final permits)

Henvey Inlet

   Ontario      150      

2017

(Late-stage development)

Mont Sainte-Marguerite

   Québec      147      

2017

(Late-stage development)

North Kent

   Ontario      43      

Late 2017

(Late-stage development)

Total

        814      


The list of identified ROFO projects represents a portion of Pattern Development’s 4,500 MW pipeline of development projects, all of which are subject to Pattern Energy’s ROFO. The 4,500 MW include Pattern Development’s interests in both its recently acquired majority stake in Tokyo-based GPI and its recently announced joint venture with CEMEX Energia in Mexico. GPI has up to 1,000 MW of near and longer term wind and solar projects in development. The joint venture between Pattern Development and CEMEX Energia has a goal of developing 1,000 MW of wind and solar generation in Mexico over the next five years where recent reforms set a mandate of 35% of generation to come from clean resources by 2024.

Adjusted EBITDA and Cash Available for Distribution Reconciliations

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

 

     Three months ended March 31,  
     2015      2014  

Net loss

   $ (22,059    $ (21,899

Plus:

     

Interest expense, net of interest income

     17,699         14,418   

Tax benefit

     (746      (2,032

Depreciation and accretion

     29,056         21,177   
  

 

 

    

 

 

 

EBITDA

$ 23,950    $ 11,664   
  

 

 

    

 

 

 

Unrealized (gain) loss on energy derivative

  (2,972   7,733   

Unrealized loss on derivatives, net

  2,441      3,723   

Interest rate derivative settlements

  959      1,017   

Net loss on transactions

  1,284      —     

Plus, proportionate share from equity accounted investments:

Interest expense, net of interest income

  5,438      253   

Depreciation and accretion

  4,509      187   

Unrealized loss on interest rate and currency derivatives, net

  11,134      12,595   

Realized loss on interest rate and currency derivatives

  —        22   
  

 

 

    

 

 

 

Adjusted EBITDA

$ 46,743    $ 37,194   
  

 

 

    

 

 

 

 

     Three months ended March 31,  
     2015      2014  

Net cash provided by operating activities

   $ 16,239       $ 16,405   

Changes in operating assets and liabilities

     (4,657      6,773   

Other

     (144      (122

Network upgrade reimbursement

     618         618   

Release of restricted cash to fund general and administrative costs

     —           54   

Operations and maintenance capital expenditures

     (38      (54

Transaction costs for acquisitions

     420         —     

Distributions from unconsolidated investment

     6,076         —     

Less:

     

Distributions to noncontrolling interests

     (748      —     

Principal payments paid from operating cash flows

     (8,435      (5,830
  

 

 

    

 

 

 

Cash available for distribution

$ 9,331    $ 17,844   
  

 

 

    

 

 

 


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 Thursday, May 7, 2015. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (800) 524-8950 or (416) 260-0113 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 (888) 203-1112 or (647) 436-0148 and enter access code 6681718. The replay recording will be available until 11:59 p.m. Eastern Time, May 14, 2015.

A live webcast of the conference call will be also available on the events page in the investor section of Pattern’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 (“PEGI”) and Toronto Stock Exchange (“PEG”). Pattern Energy has a portfolio of 16 wind power facilities, including three projects it has agreed to acquire, with a total owned interest of 2,112 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 the ability to achieve its increased CAFD per share CAGR target, the ability to consummate the acquisitions of each of Post Rock Wind and Lost Creek Wind from WCG, the ability of the Pattern Development joint venture with CEMEX Energia to develop renewable energy projects in the next five years, the anticipated commencement date for commercial operations for the projects in the Company’s construction pipeline, and the expected construction completion date of the K2 project. 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

Sarah Webster

415-283-4076

sarah.webster@patternenergy.com


Pattern Energy Group Inc.

Consolidated Balance Sheets

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

(Unaudited)

 

     March 31,
2015
    December 31,
2014
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 243,330      $ 101,656   

Restricted cash

     6,247        7,945   

Trade receivables

     35,020        35,759   

Related party receivable

     549        671   

Reimbursable interconnection costs

     1,909        2,532   

Derivative assets, current

     19,258        18,506   

Current net deferred tax assets

     307        318   

Prepaid expenses and other current assets

     14,280        27,954   

Deferred financing costs, current, net of accumulated amortization of $3,888 and $3,493 as of March 31, 2015 and December 31, 2014, respectively

     1,756        1,747   
  

 

 

   

 

 

 

Total current assets

  322,656      197,088   

Restricted cash

  23,133      39,745   

Turbine advances

  110,941      79,637   

Construction in progress

  57,163      26,195   

Property, plant and equipment, net of accumulated depreciation of $302,354 and $278,291 as of March 31, 2015 and December 31, 2014, respectively

  2,300,505      2,350,856   

Unconsolidated investments

  14,756      29,079   

Derivative assets

  49,204      49,369   

Deferred financing costs

  4,764      5,166   

Net deferred tax assets

  11,097      5,474   

Other assets

  14,335      12,678   
  

 

 

   

 

 

 

Total assets

$ 2,908,554    $ 2,795,287   
  

 

 

   

 

 

 

Liabilities and equity

Current liabilities:

Accounts payable and other accrued liabilities

$ 25,248    $ 24,793   

Accrued construction costs

  11,843      20,132   

Related party payable

  1,188      5,757   

Accrued interest

  1,237      3,634   

Dividends payable

  23,779      15,734   

Derivative liabilities, current

  16,498      16,307   

Revolving credit facility

  —        50,000   

Current portion of long-term debt, net of financing costs of $9,585 and $11,868 as of March 31, 2015 and December 31, 2014, respectively

  160,422      109,693   

Current net deferred tax liabilities

  149      149   

Current portion of contingent liabilities

  4,000      4,000   
  

 

 

   

 

 

 

Total current liabilities

  244,364      250,199   

Long-term debt, net of financing costs of $23,841 and $24,887 as of March 31, 2015 and December 31, 2014, respectively

  1,280,029      1,304,165   

Derivative liabilities

  25,109      17,467   

Asset retirement obligations

  28,721      29,272   

Net deferred tax liabilities

  23,500      20,418   

Contingent liabilities

  761      175   

Other long-term liabilities

  9,460      8,857   
  

 

 

   

 

 

 

Total liabilities

  1,611,944      1,630,553   
  

 

 

   

 

 

 

Equity:

Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 69,088,306 and 62,088,306 shares issued as of March 31, 2015 and December 31, 2014, respectively; 69,052,752 and 62,062,841 shares outstanding as of March 31, 2015 and December 31, 2014, respectively

  691      621   

Additional paid-in capital

  897,220      723,938   

Accumulated loss

  (64,525   (44,626

Accumulated other comprehensive loss

  (62,432   (45,068

Treasury stock, at cost; 35,554 and 25,465 shares of Class A common stock as of March 31, 2015 and December 31, 2014, respectively

  (998   (717
  

 

 

   

 

 

 

Total equity before noncontrolling interest

  769,956      634,148   

Noncontrolling interest

  526,654      530,586   
  

 

 

   

 

 

 

Total equity

  1,296,610      1,164,734   
  

 

 

   

 

 

 

Total liabilities and equity

$ 2,908,554    $ 2,795,287   


Pattern Energy Group Inc.

Consolidated Statements of Operations

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

(Unaudited)

 

     Three months ended March 31,  
     2015     2014  

Revenue:

    

Electricity sales

   $ 54,984      $ 53,871   

Energy derivative settlements

     6,169        2,735   

Unrealized gain (loss) on energy derivative

     2,972        (7,733

Related party revenue

     803        513   

Other revenue, net

     (62     231   
  

 

 

   

 

 

 

Total revenue

  64,866      49,617   
  

 

 

   

 

 

 

Cost of revenue:

Project expense

  25,246      16,074   

Depreciation and accretion

  29,056      21,177   
  

 

 

   

 

 

 

Total cost of revenue

  54,302      37,251   
  

 

 

   

 

 

 

Gross profit

  10,564      12,366   
  

 

 

   

 

 

 

Operating expenses:

General and administrative

  6,221      3,903   

Related party general and administrative

  1,808      1,280   
  

 

 

   

 

 

 

Total operating expenses

  8,029      5,183   
  

 

 

   

 

 

 

Operating income

  2,535      7,183   
  

 

 

   

 

 

 

Other income (expense):

Interest expense

  (17,918   (14,621

Interest rate derivative settlements

  (959   (1,017

Unrealized loss on derivatives, net

  (2,441   (3,723

Equity in losses in unconsolidated investments

  (3,082   (12,548

Related party income

  668      628   

Net loss on transactions

  (1,284   —     

Other (expense) income, net

  (324   167   
  

 

 

   

 

 

 

Total other expense

  (25,340   (31,114
  

 

 

   

 

 

 

Net loss before income tax

  (22,805   (23,931

Tax benefit

  (746   (2,032
  

 

 

   

 

 

 

Net loss

  (22,059   (21,899

Net loss attributable to noncontrolling interest

  (2,160   (7,010
  

 

 

   

 

 

 

Net loss attributable to controlling interest

$ (19,899 $ (14,889
  

 

 

   

 

 

 

Earnings per share information:

Cash dividends declared on Class A common shares

  (23,624   (11,179
  

 

 

   

 

 

 

Net loss attributable to common stockholders

$ (43,523 $ (26,068
  

 

 

   

 

 

 

Weighted average number of shares:

Class A common stock - Basic

  65,892,005      35,533,166   

Class A common stock - Diluted

  65,892,005      51,421,931   

Class B common stock - Basic and diluted

  N/A      15,555,000   

Earnings (loss) per share

Class A common stock:

Basic loss per share

$ (0.30 $ (0.20
  

 

 

   

 

 

 

Diluted loss per share

$ (0.30 $ (0.29
  

 

 

   

 

 

 

Class B common stock:

Basic and diluted loss per share

  N/A    $ (0.51
    

 

 

 

Cash dividends declared per Class A common share

$ 0.34    $ 0.31   
  

 

 

   

 

 

 


Pattern Energy Group Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)

 

     Three months ended March 31,  
     2015     2014  

Operating activities

    

Net loss

   $ (22,059   $ (21,899

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

    

Depreciation and accretion

     29,056        21,177   

Loss on disposal of equipments

     354        —     

Amortization of financing costs

     1,743        1,395   

Unrealized loss (gain) on derivatives

     (531     11,456   

Stock-based compensation

     815        533   

Deferred taxes

     (878     (2,032

Equity in losses (earnings) in unconsolidated investments

     3,082        12,548   

Changes in operating assets and liabilities:

    

Trade receivables

     288        (6,357

Prepaid expenses and other current assets

     5,207        4,027   

Other assets (non-current)

     (80     (122

Accounts payable and other accrued liabilities

     (688     (5,021

Related party receivable/payable

     565        (155

Accrued interest payable

     (2,374     855   

Contingent liabilities

     593        —     

Long-term liabilities

     1,146        —     
  

 

 

   

 

 

 

Net cash provided by operating activities

  16,239      16,405   
  

 

 

   

 

 

 

Investing activities

Decrease in restricted cash

  21,042      300   

Increase in restricted cash

  (5,055   (1

Capital expenditures

  (63,956   314   

Distribution from unconsolidated investments

  6,076      —     

Contribution to unconsolidated investments

  —        (1,283

Reimbursable interconnection receivable

  623      1,418   

Other assets (non-current)

  —        618   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

  (41,270   1,366   


Pattern Energy Group Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)

 

     Three months ended March 31,  
     2015     2014  

Financing activities

    

Proceeds from public offering, net of expenses

   $ 196,923      $ (135

Repurchase of shares for employee tax withholding

     (281     (26

Dividends paid

     (15,578     (11,082

Capital distributions - noncontrolling interest

     (748     —     

Decrease in restricted cash

     8,763        4,668   

Increase in restricted cash

     (12,062     (7,707

Refund of deposit for letters of credit

     3,425        —     

Payment for deferred financing costs

     (4     (589

Repayment of revolving credit facility

     (50,000     —     

Proceeds from short-term debt

     47,595        —     

Repayment of long-term debt

     (8,435     (5,830
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  169,598      (20,701
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

  (2,893   (296
  

 

 

   

 

 

 

Net change in cash and cash equivalents

  141,674      (3,226

Cash and cash equivalents at beginning of period

  101,656      103,569   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 243,330    $ 100,343   
  

 

 

   

 

 

 

Supplemental disclosure

Cash payments for interest expenses, net of capitalized interest

$ 18,442    $ 12,398   

Schedule of non-cash activities

Amortization of deferred financing costs - included as construction in progress

  2,515      —     

Change in property, plant and equipment

  (23,061   (9,897