Pattern Energy Reports Second Quarter Results

Aug 10, 2015, 06:00 ET from Pattern Energy Group Inc.

- $28 million in cash available for distribution meets high end of Q2 estimate -

- Declares increased dividend of $0.363 per Class A common share for third quarter 2015 -

SAN FRANCISCO, Aug. 10, 2015 /PRNewswire/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (NASDAQ: PEGI) (TSX: PEG) today announced its financial results for the second quarter of 2015.

Highlights

(Comparisons made between fiscal Q2 2015 and fiscal Q2 2014 results, unless otherwise noted)

  • Cash available for distribution (CAFD) of $28.0 million, up 74%
  • Adjusted EBITDA of $66.8 million, up 14%
  • Proportional GWh sold of 1,202 GWh, up 56%
  • Revenue of $84.7 million, up 30%
  • Declared a third quarter dividend of $0.363 per Class A common share or $1.452 on an annualized basis, subsequent to the end of the period, representing a 3% increase over the previous quarter's dividend
  • Acquired remaining interests resulting in 100% ownership of the 283 MW Gulf Wind project, subsequent to the end of the period, and recapitalized the project by repaying the short maturity project debt with long term debt
  • Increased owned capacity to 2,282 MW through five acquisitions, Lost Creek, Post Rock, Amazon Wind Farm (Fowler Ridge), K2, as well as, Gulf Wind
  • Added 526 MW in owned capacity to the identified Right of First Offer (ROFO) list including the first five Japanese projects from Pattern Development's relationship with GPI; the identified ROFO list stands at 1,270 MW of owned capacity
  • Increased its CAFD per share compound annual growth rate (CAGR) target to 12-15% for the three-year period through 2017
  • Established a 5,000 MW owned capacity target for YE 2019, representing a 119% increase in its current owned capacity
  • Completed a $350 million capital raise consisting of a $225 million convertible note private placement and a $125 million common equity public offering, subsequent to the end of the period

"We have well exceeded our asset ownership, CAFD, CAFD per share and dividend targets outlined at the IPO. We have grown our portfolio of owned capacity by nearly 120 percent since the IPO, to 2,282 MW, our CAFD for Q2 was up 74 percent over last year and our dividend is up 16 percent since the IPO," said Mike Garland, President and CEO of Pattern Energy. "At the same time, we continue to grow our identified ROFO list with Pattern Development, which now stands at 1,270 MW including the first group of projects from GPI in Japan. Given this visibility into our growth, during the quarter we increased our cash available for distribution per share CAGR target to 12-15 percent through 2017."

Financial Results Pattern Energy sold 1,201,940 MWh of electricity on a proportional basis in the second quarter of 2015 compared to 769,619 MWh sold in the same period in 2014. Pattern Energy sold 2,131,323 MWh of electricity on a proportional basis for the six months ended June 30, 2015 compared to 1,315,909 MWh sold in the same period in 2014. The increase during the quarterly period was primarily attributable to the commencement of commercial operations at Panhandle 1 and El Arrayán in June 2014 and Panhandle 2 in November 2014 and the acquisitions of Lost Creek and Post Rock in May 2015. Overall, production for the second quarter was impacted by low wind levels which resulted in a 10 percent variance in Pattern Energy's production during the second quarter compared to its long-term forecast after adjusting for certain production losses, which were unrelated to wind and were compensated by contractual counterparties.  

Net income was $5.7 million in the second quarter of 2015, which remained relatively unchanged compared to $7.2 million in the same period last year. Net loss was $16.4 million for the six months ended June 30, 2015 compared to $14.7 million for the same period in 2014.

Adjusted EBITDA was $66.8 million for the second quarter of 2015 compared to $58.8 million in the same period last year. The increase was primarily attributable to the commencement of commercial operations at South Kent, Grand, Panhandle 1, Panhandle 2 and El Arrayán at various times in 2014 and the acquisitions of Lost Creek and Post Rock in May 2015.

Adjusted EBITDA was $113.6 million for the six months ended June 30, 2015 compared to $96.0 million in the same period last year. The increase was primarily attributable to the commencement of commercial operations and acquisitions referenced above. The Company also recorded a $5.4 million increase in energy derivative settlements at Gulf Wind during the first half of 2015 compared to the same period last year. These increases were partially offset by lower electricity production due to low wind levels. Reconciliations of Adjusted EBITDA to net income or loss determined in accordance with GAAP for both the quarterly and six month periods are shown below.

Cash available for distribution was $28.0 million in the second quarter of 2015 compared to $16.1 million in the same period last year. The increase is primarily attributable to electricity sales from the commencement of operations and acquisitions referenced above, as well as, a $7.8 million cash distribution from unconsolidated investments and a $1.9 million increase from energy derivative settlements. These increases were partially offset by increases in project expenses of $11.3 million, operating expenses of $2.8 million and interest expense of $3.1 million primarily from the commencement of operations at Panhandle 1, El Arrayán and Panhandle 2 and the Lost Creek and Post Rock acquisitions.

Cash available for distribution was $37.3 million for the six months ended June 30, 2015 compared to $33.9 million in the same period last year. The increase is primarily due to additional electricity sales from the commencement of commercial operations and acquisitions referenced above, a $13.8 million cash distribution from unconsolidated investments, and a $5.4 million increase from energy derivative settlements. These increases were partially offset by increases in project expenses of $20.5 million, operating expenses of $5.7 million, interest expense of $6.4 million and principal payments from operating cash of $3.3 million each of which are primarily due to the commencement of operations and acquisitions referenced above. Reconciliations of cash available for distribution to net cash provided by operating activities for both the quarterly and six month periods determined in accordance with GAAP are shown below.

Quarterly Dividend On July 21, 2015, Pattern Energy declared an increased dividend for the third quarter 2015, payable on October 30, 2015, to holders of record on September 30, 2015, in the amount of $0.3630 per Class A share, which represents $1.452 on an annualized basis. This is a 3 percent increase from the second quarter 2015 dividend of $0.3520.

Construction Pipeline The table below outlines Pattern Energy's projects currently in construction, the capacity owned and each project's anticipated commencement date for commercial operation.

Asset

Location

Owned MW

Commercial Operation

Logan's Gap

Texas

164

Q3 2015

Amazon Wind Farm

(Fowler Ridge)

Indiana

116

Q4 2015

Total

280

Third-party Acquisitions In July 2015, Pattern Energy purchased the remaining 170 MW in the 283 MW Gulf Wind facility from MetLife Capital, Limited Partnership and Pattern Development. With the purchases, Pattern Energy now owns 100% of the membership interests in the Gulf Wind facility. Pattern Energy also prepaid 100% of the outstanding balance of the Gulf Wind facility's term loan of approximately $154.1 million shortly after closing the two acquisitions.

In May 2015, Pattern Energy acquired an aggregate owned 270 MW interest in two operational wind power facilities from Wind Capital Group, LLC ("WCG") and its affiliates. Pattern Energy acquired 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 acquired 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.

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

In the second quarter of 2015, Pattern Energy announced the addition of seven new projects to its list of identified ROFO projects from Pattern Development consisting of: the first five Japanese projects, representing 128 MW of wind and solar assets, from Pattern Development's relationship with GPI; 398 MW of the 497 MW New Mexico / California project; and 43 MW of the 100 MW North Kent Wind project.

With these new additions, the identified ROFO list stands at 1,270 MW of total owned capacity. Since its IPO, Pattern Energy has purchased 832 MW from Pattern Development and in aggregate grown the identified ROFO list from 746 MW to a total of 2,102 MW. The table below sets forth the current list of identified ROFO projects:

Asset

Location

Owned MW

Commercial Operation

Armow

Ontario

90

2015

(In construction)

Meikle

British Columbia

180

2016

(In construction)

Conejo Solar

Chile

84

2016

(In construction)

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

2017

(Late-stage development)

New Mexico/California

New Mexico

398

2016/2017

(Late-stage development)

Tsugaru

Japan

63

2018

(Late-stage development)

Ohorayama

Japan

31

2017

(Late-stage development)

Kanagi Solar

Japan

5

2016

(In construction)

Futtsu Solar

Japan

17

2016

(In construction)

Otsuki

Japan

12

Operational

Total

1,270

The 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. The 5,900 MW include Pattern Development's interests in both its majority stake in Tokyo-based GPI and its 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 Non-GAAP Reconciliations The following tables reconcile non-GAAP net income or 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 June 30,

Six months ended June 30,

2015

2014

2015

2014

Net income (loss)

$ 5,657

$ 7,167

$ (16,402)

$ (14,732)

Plus:

Interest expense, net of interest income

18,715

15,525

36,414

29,943

Tax provision

3,603

4,065

2,857

2,033

Depreciation, amortization and accretion

34,785

21,284

63,841

42,461

EBITDA

$ 62,760

$ 48,041

$ 86,710

$ 59,705

Unrealized loss on energy derivative

6,002

6,549

3,030

14,282

Interest rate derivative settlements

960

1,035

1,919

2,052

Unrealized (gain) loss on derivatives, net

(5,138)

2,942

(2,697)

6,665

Net loss (gain) on transactions

1,305

(14,537)

2,589

(14,537)

Plus, proportionate share from equity accounted investments:

      Interest expense, net of interest income

5,181

4,944

10,619

5,197

     Tax provision

-

102

-

102

     Depreciation, amortization and accretion

4,991

4,537

9,500

4,724

     Unrealized (gain) loss on interest rate and currency derivatives, net

(9,240)

5,236

1,894

17,831

     Realized loss on interest rate and currency derivatives

-

-

-

22

Adjusted EBITDA

$ 66,821

$ 58,849

$ 113,564

$ 96,043

 

 Three months ended June 30, 

 Six months ended June 30, 

2015

2014

2015

2014

Net cash provided by operating activities

$     32,361

$   44,417

$    48,600

$    60,822

Changes in operating assets and liabilities

2,521

(12,336)

(2,136)

(5,685)

Other

(148)

-

(292)

-

Network upgrade reimbursement 

618

618

1,236

1,236

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

1,501

7

1,501

61

Operations and maintenance capital expenditures

(283)

(40)

(321)

(94)

Transaction costs for acquisitions

1,357

1,128

1,777

1,128

Distributions from unconsolidated investment

7,771

-

13,847

-

Less:

Distributions to noncontrolling interests 

(763)

(1,470)

(1,511)

(1,470)

Principal payments paid from operating cash flows 

(16,948)

(16,266)

(25,383)

(22,096)

Cash available for distribution

$     27,987

$   16,058

$    37,318

$   33,902

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 Monday, August 10, 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 5827702. The replay recording will be available until 11:59 p.m. Eastern Time, August 24, 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. is an independent power company listed on The NASDAQ Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 16 wind power projects with a total owned interest of 2,282 MW in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power projects 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 the statements; the ability to achieve the YE 2019 owned capacity target, the ability to achieve its CAFD per share CAGR growth target, the anticipated commercial operations dates of the construction projects and projects on the identified ROFO list, and the ability of the joint venture between Pattern Development and CEMEX Energia to achieve its five-year development goal. 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)

June 30,

December 31,

2015

2014

Assets

Current assets:

  Cash and cash equivalents

$   82,936

$    101,656

  Restricted cash

26,283

7,945

  Trade receivables

48,363

35,759

  Related party receivable

820

671

  Reimbursable interconnection costs 

1,286

2,532

  Derivative assets, current

18,415

18,506

  Current net deferred tax assets

307

318

  Prepaid expenses and other current assets 

26,041

27,954

  Deferred financing costs, current, net of accumulated amortization of $4,340 and      $3,493 as of June 30, 2015 and December 31, 2014, respectively

1,903

1,747

Total current assets

206,354

197,088

Restricted cash

17,142

39,745

Turbine advances

60,893

79,637

Construction in progress

338,906

26,195

Property, plant and equipment, net of accumulated depreciation of $429,939

and $278,291 as of June 30, 2015 and December 31, 2014, respectively

2,812,203

2,350,856

Unconsolidated investments 

147,644

29,079

Derivative assets

50,354

49,369

Deferred financing costs

4,838

5,166

Net deferred tax assets

6,927

5,474

Finite-lived intangible assets, net of accumulated amortization of $1,077 and $154 as of   June 30, 2015 and December 31, 2014, respectively

101,082

1,257

Other assets 

31,646

11,421

Total assets

$   3,777,989

$   2,795,287

Liabilities and equity

Current liabilities:

  Accounts payable and other accrued liabilities

$   29,273

$    24,793

  Accrued construction costs

42,115

20,132

  Related party payable

881

5,757

  Accrued interest

5,423

3,634

  Dividends payable

24,563

15,734

  Derivative liabilities, current

19,788

16,307

  Revolving credit facility

250,000

50,000

  Current portion of long-term debt, net of financing costs of $10,166 and

    $11,868 as of June 30, 2015 and December 31, 2014, respectively

332,226

109,693

  Current net deferred tax liabilities

149

149

  Current portion of contingent liabilities

11,468

4,000

Total current liabilities

715,886

250,199

Long-term debt, net of financing costs of $22,883 and $24,887 as of   June 30, 2015 and December 31, 2014, respectively

1,369,135

1,304,165

Derivative liabilities

27,495

17,467

Asset retirement obligations 

38,940

29,272

Net deferred tax liabilities

23,872

20,418

Contingent liabilities

1,189

175

Finite-lived intangible liability, net of accumulated amortization of $434 and $0 as of   June 30, 2015 and December 31, 2014, respectively

59,866

-

Other long-term liabilities

9,576

8,857

Total liabilities 

2,245,959

1,630,553

Temporary equity - noncontrolling interests

35,000

-

Equity:

  Class A common stock, $0.01 par value per share: 500,000,000 shares authorized;    69,237,919 and 62,062,841 shares outstanding as of June 30, 2015 and December 31,    2014, respectively

693

621

  Additional paid-in capital

874,015

723,938

  Accumulated loss

(50,208)

(44,626)

  Accumulated other comprehensive loss

(50,634)

(45,068)

  Treasury stock, at cost; 36,523 and 25,465 shares of Class A common stock as of    June 30, 2015 and December 31, 2014, respectively

(1,027)

(717)

  Total equity before noncontrolling interest

772,839

634,148

  Noncontrolling interest

724,191

530,586

Total equity  

1,497,030

1,164,734

Total liabilities, temporary equity, and equity

$   3,777,989

$    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 June 30, 

 Six months ended June 30, 

2015

2014

2015

2014

Revenue:

  Electricity sales

$   82,945

$    66,053

$   137,929

$    119,924

  Energy derivative settlements 

5,928

3,983

12,097

6,718

  Unrealized loss on energy derivative

(6,002)

(6,549)

(3,030)

(14,282)

  Related party revenue

872

949

1,675

1,462

  Other revenue

928

503

866

734

Total revenue

84,671

64,939

149,537

114,556

Cost of revenue:

  Project expense

27,981

16,700

53,227

32,774

  Depreciation and accretion

34,342

21,284

63,398

42,461

Total cost of revenue

62,323

37,984

116,625

75,235

Gross profit

22,348

26,955

32,912

39,321

Operating expenses:

  General and administrative

8,870

6,288

15,091

10,191

  Related party general and administrative

1,621

1,383

3,429

2,663

Total operating expenses

10,491

7,671

18,520

12,854

Operating income

11,857

19,284

14,392

26,467

Other expense:

  Interest expense

(18,943)

(15,807)

(36,861)

(30,428)

  Interest rate derivative settlements

(960)

(1,035)

(1,919)

(2,052)

  Unrealized gain (loss) on derivatives

5,138

(2,942)

2,697

(6,665)

  Equity in earnings (losses) in   unconsolidated investments

13,801

(3,688)

10,719

(16,236)

  Related party income

756

444

1,424

1,072

  Net (loss) gain on transactions

(1,305)

14,537

(2,589)

14,537

  Other (expense) income, net

(1,084)

439

(1,408)

606

Total other expense

(2,597)

(8,052)

(27,937)

(39,166)

Net income (loss) before income tax

9,260

11,232

(13,545)

(12,699)

  Tax provision

3,603

4,065

2,857

2,033

Net income (loss)

5,657

7,167

(16,402)

(14,732)

Net loss attributable to noncontrolling interest

(8,660)

(4,032)

(10,820)

(11,042)

Net income (loss) attributable to controlling interest

$    14,317

$    11,199

$     (5,582)

$    (3,690)

Earnings per share information:

Net income (loss) attributable to controlling interest

$    14,317

$    11,199

$     (5,582)

$    (3,690)

Cash dividends declared on Class A common shares

(24,380)

(14,981)

(48,003)

(26,138)

Deemed dividends on Class B common shares

-

(7,457)

-

(7,457)

Net loss attributable to common stockholders

$   (10,063)

$   (11,239)

$    (53,585)

$   (37,285)

Weighted average number of shares:

Class A common stock - Basic

68,943,707

41,174,697

67,426,286

38,331,595

Class A common stock - Diluted

69,147,260

41,510,219

67,426,286

53,886,595

Class B common stock - Basic and diluted

-

15,555,000

-

15,555,000

Earnings (loss) per share

Class A common stock:

  Basic earnings (loss) per share

$     0.21

$     0.17

$     (0.08)

$     (0.01)

  Diluted earnings (loss) per share

$     0.21

$     0.16

$     (0.08)

$     (0.07)

Class B common stock:

Basic and diluted earnings (loss) per share

$           -

$     0.28

$            -

$     (0.21)

Dividends declared per Class A common share

$      0.35

$     0.32

$      0.71

$      0.63

Deemed dividends per Class B common share

$            -

$     0.48

$            -

$      0.48

 

Pattern Energy Group Inc.

Consolidated Statements of Cash Flows 

(In thousands of U.S. dollars)

(Unaudited)

 Six months ended June 30, 

2015

2014

Operating activities

Net loss

$    (16,402)

$   (14,732)

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

  Depreciation, amortization and accretion

63,841

42,461

  Loss on disposal of equipment

347

-

  Amortization of financing costs

3,636

2,848

  Unrealized loss on derivatives

333

20,947

  Stock-based compensation

1,989

2,175

  Net gain on transactions

-

(16,526)

  Deferred taxes

2,616

2,033

  Equity in (earnings) losses in unconsolidated investments

(10,719)

16,236

  Unrealized loss on exchange rate changes

823

-

  Changes in operating assets and liabilities:

   Trade receivables

(4,924)

(13,895)

   Prepaid expenses and other current assets

3,441

20,253

   Other assets (non-current)

(99)

(305)

   Accounts payable and other accrued liabilities

615

348

   Related party receivable/payable

(7)

(1,053)

   Income taxes payable/receivable

-

128

   Accrued interest payable

689

(11)

   Contingent liabilities

1,151

-

   Long-term liabilities

1,270

(85)

Net cash provided by operating activities

48,600

60,822

Investing activities

Cash paid for acquisitions, net of cash acquired

(404,377)

(163,589)

Decrease in restricted cash

25,277

1,316

Increase in restricted cash

(6,966)

(2)

Capital expenditures

(216,499)

(544)

Distribution from unconsolidated investments

13,847

-

Contribution to unconsolidated investments

-

(1,880)

Reimbursable interconnection receivable

1,246

1,417

Other assets

(6,074)

1,236

Net cash used in investing activities

(593,546)

(162,046)

Financing activities

Proceeds from public offering, net of expenses

196,591

287,943

Repurchase of shares for employee tax withholding

(310)

(55)

Dividends paid

(39,170)

(22,170)

Payment for deferred equity issuance costs

(2,204)

-

Capital distributions - noncontrolling interest

(1,511)

(1,470)

Decrease in restricted cash

18,532

13,508

Increase in restricted cash

(21,718)

(8,840)

Refund of deposit for letters of credit

3,425

-

Payment for deferred financing costs

(5,614)

(542)

Proceeds from revolving credit facility

250,000

-

Repayment of revolving credit facility

(50,000)

-

Repayment of VAT facility

-

(14,840)

Proceeds from construction loan

206,184

-

Repayment of long-term debt

(25,383)

(22,096)

Net cash provided by financing activities

528,822

231,438

Effect of exchange rate changes on cash and cash equivalents

(2,596)

255

Net change in cash and cash equivalents

(18,720)

130,469

Cash and cash equivalents at beginning of period  

101,656

103,569

Cash and cash equivalents at end of period

$        82,936

$       234,038

Supplemental disclosure

    Cash payments for interest expenses, net of capitalized interest

$        24,447

$         27,296

    Acquired property, plant and equipment from acquisitions

579,712

671,068

Schedule of non-cash activities

    Change in fair value of designated interest rate swaps

6,299

(20,344)

    Change in property, plant and equipment

21,094

(40,729)

    Non-cash deemed dividends on Class B convertible common stock

-

7,457

 

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SOURCE Pattern Energy Group Inc.



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