Pattern Energy Reports Third Quarter 2018 Financial Results
- Declares dividend of $0.4220 per Class A common share for fourth quarter 2018 -
SAN FRANCISCO, Nov. 5, 2018 /PRNewswire/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (NASDAQ & TSX: PEGI) today announced its financial results for the 2018 third quarter.
Highlights
(Comparisons made between fiscal Q3 2018 and fiscal Q3 2017 results, unless otherwise noted)
-- Proportional gigawatt hours ("GWh") sold of 1,623 GWh, up 7%
-- Net cash provided by operating activities of $106.9 million
-- Cash available for distribution ("CAFD") of $31.7 million, up 235% and
on track to meet full year guidance((1))
-- Net loss of $31.5 million
-- Adjusted EBITDA of $79.5 million, up 45%
-- Revenue of $118.4 million, up 29%
-- 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
-- Committed to a plan to repower the 283 MW Gulf Wind project starting in
2019
-- Acquired a 51% owned interest in the 143 MW Mont Sainte-Marguerite
project in Québec, for a purchase price of $37.7 million, representing
a 10x multiple of the five-year average CAFD((1)) of the project
-- Completed the sale of the Company's operations in Chile, which
principally consist of its 81 MW owned interest in the 115 MW El
Arrayán project ("El Arrayán") for which Pattern Energy received cash
proceeds of $70.4 million
"It was another solid quarter with CAFD up more than three times the same period last year, which puts us in a great position to achieve our targeted CAFD((1)) for the year," said Mike Garland, President of Pattern Energy. "We continue to take proactive measures to increase our CAFD without issuing common equity including, asset recycling, repowering Gulf Wind and the implementation of cost savings. During the quarter we sold El Arrayán at a premium to the multiple at which we trade and we are in the final stages of a second sale. This asset recycling provides us additional flexibility to make new investments in accretive opportunities, like the Mont Sainte-Marguerite acquisition or the Gulf Wind repowering, which increase CAFD. As the opportunity set at Pattern Energy Group 2 LP ("Pattern Development 2.0") continues to mature and grow, especially in exciting markets like Japan, our material ownership interest in the development business is a clear differentiator to other players in the market."
(1) The forward looking measures of 2018 full year cash available for distribution (CAFD) and the five-year average annual purchase price multiple 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 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.
Financial and Operating Results
Pattern Energy sold 1,622,991 megawatt hours ("MWh") of electricity on a proportional basis in the third quarter of 2018 compared to 1,513,997 MWh sold in the same period last year. Pattern Energy sold 6,021,515 MWh of electricity on a proportional basis for the nine months ended September 30, 2018 ("YTD 2018") compared to 5,663,782 MWh sold in the same period last year. The 7% increase in the quarterly period was primarily due to volume increases as a result of acquisitions in 2017 and 2018, favorable wind and increased availability compared to last year. Production for the quarter was 8% below the long-term average forecast for the period with strength in Canada, Japan and Puerto Rico offset by weakness in the Eastern U.S.
Net cash provided by operating activities was $106.9 million for the third quarter of 2018 compared to $2.1 million for the same period last year. Net cash provided by operating activities was $230.5 million for YTD 2018 as compared to $159.3 million for the same period last year. The increase in the quarterly period of $104.8 million was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales), a $33.8 million increase in advanced lease revenue, decreased payments of $26.7 million in payable, accrued and current liabilities, due primarily to the timing of payments, a $13.6 million increase in other current assets primarily due to a $7.7 million increase in sales tax receivable and a $7.3 million increase in related party receivable, a $6.5 million decrease in interest payments, and a $1.7 million decrease in transmission costs. The increase to net cash provided by operating activities was partially offset by a decrease of $1.6 million in distributions from unconsolidated investments.
Cash available for distribution increased 235% to $31.7 million for the third quarter of 2018, compared to $9.5 million for the same period last year. Cash available for distribution increased 28% to $133.4 million for YTD 2018 compared to $103.8 million for the same period in the prior year. The $22.2 million increase in the quarterly period was primarily due to a $24.3 million increase in revenues (excluding the unrealized loss on the energy derivative and amortization included in electricity sales) due to acquisitions in 2017 and 2018, a $5.9 million decrease in principal payments of project-level debt, a $1.7 million decrease in transmission costs and a $0.8 million increase in the release of restricted cash. These increases were partially offset by a $3.0 million increase in distributions to noncontrolling interests, a $4.0 million decrease in distributions from unconsolidated investments and $1.4 million of costs related to the sale of El Arrayán.
Net loss was $31.5 million in the third quarter of 2018, compared to a net loss of $48.4 million for the same period last year. Net loss was $45.9 million for YTD 2018 compared to a net loss of $60.5 million in the same period last year. The improvement of $16.8 million in the quarterly period was primarily attributable to a $26.4 million increase in revenue due to 2017 and 2018 acquisitions and a $5.1 million decrease in other expense primarily due to gains on derivatives. These increases were partially offset by a $4.5 million increase in cost of revenue related to 2017 and 2018 acquisitions, a $3.3 million increase in operating expenses related to an impairment expense on the El Arrayán sale and a $6.9 million increase in tax provisions.
Adjusted EBITDA increased 45% to $79.5 million for the third quarter of 2018 compared to $54.7 million for the same period last year. Adjusted EBITDA increased 19% to $292.2 million for YTD 2018 compared to $244.8 million for the same period last year. The $24.8 million increase in the quarterly period was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales) primarily attributable to volume increases as a result of 2017 and 2018 acquisitions, favorable wind and increased availability compared to last year. Adjusted EBITDA for the third quarter also reflects a charge to earnings of approximately $4.3 million for the equity pick-up in the financial results of Pattern Development 2.0.
2018 Financial Guidance
Pattern Energy is re-confirming its targeted annual cash available for distribution((2)) for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.
(2) The forward looking measure of 2018 full year cash available for distribution (CAFD) 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 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 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.
Quarterly Dividend
Pattern Energy declared a dividend for the fourth quarter 2018, payable on January 31, 2019, to holders of record on December 31, 2018 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 2018 dividend is unchanged from the third quarter 2018 dividend.
Acquisition Pipeline
Pattern Energy Group LP ("Pattern Development 1.0") and Pattern Development 2.0 (together, the "Pattern Development Companies") have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a ROFO on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 743 MW of potential owned capacity and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy's ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.
Below is a summary of the identified ROFO projects that Pattern Energy has the right to purchase from the Pattern Development Companies in connection with its respective purchase rights:
Capacity (MW)
Identified
Status
Location
Construction
Commercial Contract Rated (3)
Pattern
ROFO Projects Start (1) Operations (2) Type Development-
Owned
(4)
---
Pattern Development 1.0 Projects
Belle River
Operational
Ontario 2016 2017
PPA 100 43
North Kent
Operational
Ontario 2017 2018
PPA 100 35
Henvey Inlet
In construction
Ontario 2017 2019
PPA 300 150
Pattern Development 2.0 Projects
Stillwater Big Sky
Operational
Montana 2018 2018
PPA 80 80
Crazy Mountain
Late stage development
Montana 2019 2019
PPA 80 80
Grady
In construction
New Mexico 2018 2019
PPA 220 188
Sumita
Late stage development
Japan 2019 2022
PPA 99 55
Ishikari
Late stage development
Japan 2020 2022
PPA 112 112
1,091 743
(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.
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 Nine months ended
September 30, September 30,
2018 2017 2018 2017
Net cash provided by
operating
activities(1) $
106,922 $
2,147 $
230,466 $
159,330
Changes in operating
assets and
liabilities (54,936) 25,481 (36,439) (22,475)
Network upgrade
reimbursement 303 346 879 8,936
Release of restricted
cash 759 3,247
Operations and
maintenance capital
expenditures (169) (254) (440) (517)
Distributions from
unconsolidated
investments 419 2,821 4,752 11,211
Other (2,779) 598 228 1,974
Less:
Distributions to
noncontrolling
interests (7,592) (4,537) (28,867) (13,701)
Principal payments
paid from operating
cash flows (11,255) (17,140) (40,432) (40,911)
Cash available for
distribution $
31,672 $
9,462 $
133,394 $
103,847
(1) Included in net cash provided by
operating activities for the three
and nine months ended September 30,
2018 and 2017 are the portions of
distributions from unconsolidated
investments paid from cumulative
earnings representing the return on
investment.
Three months ended Nine months ended
September 30, September 30,
2018 2017 2018 2017
Net loss $
(31,547) $
(48,376) $
(45,941) $
(60,521)
Plus:
Interest expense, net of
interest income 27,021 26,710 79,415 73,009
Tax provision (benefit) 3,043 (3,839) 14,237 5,477
Depreciation, amortization
and accretion 63,013 56,650 188,429 156,629
EBITDA 61,530 31,145 236,140 174,594
Unrealized loss on energy
derivative (1) 318 3,113 14,991 10,134
(Gain) loss on derivatives (1,536) 6,288 (15,997) 11,687
Impairment expense 2,325 6,563
Other 2,180 466 2,180 1,585
Plus, proportionate share
from unconsolidated
investments:
Interest expense, net of
interest income 9,306 10,270 28,280 29,108
Tax provision 1,142 935
Depreciation, amortization
and accretion 8,888 9,361 26,397 26,390
Gain on derivatives (4,619) (5,908) (7,333) (8,696)
Adjusted EBITDA $
79,534 $
54,735 $
292,156 $
244,802
(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 Monday, November 5, 2018. 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 4369558. The replay recording will be available until 11:59 p.m. Eastern Time, November 28, 2018.
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 24 wind and solar power facilities with a total owned interest of 2,861 MW in the United States, Canada and Japan that use proven, best-in-class technology. Pattern Energy's wind and solar 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 2018 cash available for distribution target, the ability to consummate a repowering of the Gulf Wind project, the ability of the Company to consummate the second sale as part of its asset recycling strategy, the ability of the Company's measures to increase CAFD, the ability of the Company's ownership in Pattern Development 2.0 to differentiate it in the market, and the anticipated commencement date of construction and commercial operations of certain of the identified ROFO projects. 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
Investor Relations
Matt Dallas
Ross Marshall
917-363-1333
416-526-1563
matt.dallas@patternenergy.com
ross.marshall@loderockadvisors.com
---
Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)
September 30, December 31,
2018 2017
---
Assets
Current assets:
Cash and cash
equivalents $
125,689 $
116,753
Restricted cash 6,324 9,065
Counterparty collateral 5,855 29,780
Trade receivables 50,303 54,900
Derivative assets,
current 15,842 19,445
Prepaid expenses 21,080 17,847
Deferred financing
costs, current, net of
accumulated
amortization of $2,670
and $2,580 as of
September 30, 2018 and
December 31, 2017,
respectively 1,482 1,415
Other current assets 13,584 21,105
Total current assets 240,159 270,310
Restricted cash 13,899 12,162
Major construction
advances 71,406
Construction in progress 221,185
Property, plant and
equipment, net 4,109,864 3,965,121
Unconsolidated
investments 372,380 311,223
Derivative assets 24,757 9,628
Deferred financing costs 8,797 7,784
Net deferred tax assets 1,616 6,349
Finite-lived intangible
assets, net 221,183 136,048
Goodwill 56,453
Other assets 30,372 22,906
Total assets $
5,372,071 $
4,741,531
Liabilities and equity
Current liabilities:
Accounts payable and
other accrued
liabilities $
57,360 $
53,615
Accrued construction
costs 38,442 1,369
Counterparty collateral
liability 5,855 29,780
Accrued interest 7,621 16,460
Dividends payable 42,185 41,387
Derivative liabilities,
current 2,190 8,409
Revolving credit
facility, current 186,372
Current portion of long-
term debt, net 63,671 51,996
Contingent liabilities,
current 24,771 2,592
Other current
liabilities 12,955 11,426
Total current
liabilities 441,422 217,034
Revolving credit
facility 23,760
Long-term debt, net 2,105,834 1,878,735
Derivative liabilities 14,985 20,972
Net deferred tax
liabilities 120,104 56,491
Finite-lived intangible
liabilities, net 57,039 51,194
Contingent liabilities 140,048 62,398
Asset retirement
obligations 192,006 56,619
Other long-term
liabilities 64,033 49,946
Advanced lease revenue 28,268
Total liabilities 3,187,499 2,393,389
Commitments and contingencies
Equity:
Class A common stock,
$0.01 par value per
share: 500,000,000
shares authorized;
98,095,886 and
97,860,048 shares
outstanding as of
September 30, 2018 and
December 31, 2017,
respectively 983 980
Additional paid-in
capital 1,170,450 1,234,846
Accumulated loss (12,595) (112,175)
Accumulated other
comprehensive loss (15,716) (25,691)
Treasury stock, at cost;
178,783 and 157,812
shares of Class A
common stock as of
September 30, 2018 and
December 31, 2017,
respectively (3,901) (3,511)
Total equity before
noncontrolling interest 1,139,221 1,094,449
Noncontrolling interest 1,045,351 1,253,693
Total equity 2,184,572 2,348,142
Total liabilities and
equity $
5,372,071 $
4,741,531
Pattern Energy Group Inc.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2018 2017 2018 2017
---
Revenue:
Electricity sales $
115,417 $
89,807 $
353,515 $
293,977
Other revenue 2,976 2,223 16,477 6,646
Total revenue 118,393 92,030 369,992 300,623
Cost of revenue:
Project expense 37,229 33,932 105,456 96,437
Transmission costs 5,700 7,421 20,533 12,213
Depreciation,
amortization and
accretion 55,267 52,379 165,698 144,637
Total cost of revenue 98,196 93,732 291,687 253,287
Gross profit (loss) 20,197 (1,702) 78,305 47,336
Operating expenses:
General and
administrative 9,305 9,068 29,100 31,969
Related party general
and administrative 4,285 3,587 12,016 10,589
Impairment expense 2,325 6,563
Total operating expenses 15,915 12,655 47,679 42,558
Operating income (loss) 4,282 (14,357) 30,626 4,778
Other expense:
Interest expense (27,460) (27,147) (80,613) (74,541)
Gain (loss) on
derivatives 1,536 (6,288) 15,997 (11,687)
Earnings (loss) in
unconsolidated
investments, net (4,304) (3,964) 13,166 27,431
Net earnings (loss) on
transactions 1,130 (466) (1,970) (1,585)
Other income (expense),
net (3,688) 7 (8,910) 560
Total other expense (32,786) (37,858) (62,330) (59,822)
Net loss before income
tax (28,504) (52,215) (31,704) (55,044)
Tax provision (benefit) 3,043 (3,839) 14,237 5,477
Net loss (31,547) (48,376) (45,941) (60,521)
Net loss attributable to
noncontrolling interest (18,952) (18,548) (201,986) (50,566)
Net income (loss)
attributable to Pattern
Energy $
(12,595) $
(29,828) $
156,045 $
(9,955)
Weighted-average number of common shares
outstanding
Basic 97,460,492 87,370,979 97,464,012 87,146,465
Diluted 97,460,492 87,370,979 105,788,848 87,146,465
Earnings (loss) per share attributable to
Pattern Energy
Basic $
(0.13) $
(0.34) $
1.60 $
(0.12)
Diluted $
(0.13) $
(0.34) $
1.58 $
(0.12)
Pattern Energy Group Inc.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
Nine months ended
September 30,
2018 2017
---
Operating activities
Net loss $
(45,941) $
(60,521)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, amortization
and accretion 187,741 156,330
Impairment expense 6,563
Loss (gain) on derivatives (3,236) 17,869
Stock-based compensation 3,517 4,085
Deferred taxes 13,910 9,133
Intraperiod tax allocation - (3,656)
Earnings in unconsolidated
investments, net (13,166) (27,431)
Distributions from
unconsolidated investments 42,838 43,093
Other reconciling items 1,802 (2,047)
Changes in operating assets and liabilities:
Counterparty collateral asset 23,925 10,105
Trade receivables (47) (2,861)
Prepaid expenses (1,241) (3,187)
Other current assets 13,749 (9,790)
Other assets (non-current) (4,173) 2,457
Advanced lease revenue 33,792
Accounts payable and other
accrued liabilities (1,801) 16,389
Counterparty collateral
liability (23,925) (10,105)
Accrued interest (5,841) (3,884)
Other current liabilities (2,651) 6,650
Contingent liabilities,
current 24,070 1,390
Long-term liabilities 7,366 14,569
Contingent liabilities (27,013) 742
Derivatives 228
Net cash provided by
operating activities 230,466 159,330
Investing activities
Cash paid for acquisitions,
net of cash and restricted
cash acquired (188,527) (229,329)
Proceeds from sale of
subsidiaries, net of cash
and restricted cash
distributed 55,820
Payment for construction
advances/deposits (68,937)
Payment for construction in
progress (49,450)
Payment for property,plant
and equipment (10,212) (44,295)
Distributions from
unconsolidated investments 4,752 11,211
Other assets (781) 7,607
Investment in Pattern
Development 2.0 (86,254) (60,000)
Net cash used in investing
activities (343,589) (314,806)
Financing activities
Proceeds from public
offerings, net of issuance
costs
$ $
22,431
Dividends paid (123,616) (107,943)
Capital contributions -
noncontrolling interest 3,383
Capital distributions -
noncontrolling interest (28,867) (13,701)
Payment for financing fees (7,478) (7,763)
Proceeds from revolving
credit facility 488,907 323,000
Repayment of revolving credit
facility (279,000) (250,000)
Proceeds from long-term debt 164,673 404,395
Repayment of long-term debt (53,274) (192,109)
Repayment of note payable -
related party (909)
Repayment of short-term debt (36,973)
Payment for termination of
designated derivatives - (14,372)
Other financing activities (2,771) (3,712)
Net cash provided by
financing activities 124,075 160,226
Effect of exchange rate
changes on cash, cash
equivalents and restricted
cash (3,020) 3,952
Net change in cash, cash
equivalents and restricted
cash 7,932 8,702
Cash, cash equivalents and
restricted cash at beginning
of period 137,980 109,371
Cash, cash equivalents and
restricted cash at end of
period $
145,912 $
118,073
Supplemental disclosures
Cash payments for income
taxes $
490 $
335
Cash payments for interest
expense $
79,302 $
70,100
Schedule of non-cash activities
Change in major construction
advances, construction in
progress and property, plant
and equipment $
225,898 $
619
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SOURCE Pattern Energy Group Inc.
