Pattern Energy Reports Third Quarter 2019 Financial Results
- 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.
Capacity (MW)
Identified
Status Location
Construction
Commercial Contract Rated (1)
Pattern
ROFO Projects
Start
Operations
Type
Development
Owned (2)
---
Sumita
Late stage development
Japan 2020 2022
PPA 100 55
Ishikari
Late stage development
Japan 2020 2022
PPA 112 112
Corona Wind Project(s)
Late stage development
New Mexico 2020 2021
PPA 400 340
612 507
(1) Rated capacity represents the maximum
electricity generating capacity of a
project in MW. As a result of
weather and other conditions, a
project will not operate at its
rated capacity at all times and the
amount of electricity generated may
be less than its rated capacity. The
amount of electricity generated may
vary based on a variety of factors.
(2) Pattern Development owned capacity
represents the maximum, or rated,
electricity generating capacity of
the project in MW multiplied by
Pattern Development's percentage
ownership interest in the
distributable cash flow of the
project.
Sustainability Report
Pattern Energy released its inaugural sustainability report of its sustainable practices and environmental, social, and governance ("ESG") metrics in accordance with the GRI Reporting Standards: Core option.
Pattern Energy's 2018 ESG performance highlights include:
-- Generated pollution-free electricity to power the equivalent of 1.1
million U.S. homes and, when compared to coal-fired generation, avoided
11 million metric tons of carbon dioxide emissions, equivalent to taking
2.4 million cars off the roads, and conserved 6 billion gallons of
water.
-- Consumed approximately 35 GWh of electricity - less than half of one
percent of the clean energy generated by its wind facilities - for
business and facility operations.
-- Prioritized employee engagement, professional development, and diversity
and inclusion initiatives, resulting in the launch of three employee
resource groups, new staff training opportunities, and a "Total Rewards"
compensation infrastructure.
-- Contributed nearly $8 million dollars towards community benefits and
almost $20 million in local tax contributions through its operating
facilities. Local communities are projected to receive more than $1
billion in economic benefits over the life of the current fleet.
-- Completed first year of self-performing operations and maintenance
activities at five sites, with an average of 60 hours of
operations-related training per field employee and a Total Recordable
Injury Rate (TRIR) of 0.79 for Pattern Energy operations field staff.
Pattern Energy Group Inc.
Consolidated Statements of Operations
(In millions of U.S. dollars, except share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
---
Revenue:
Electricity sales $
115 $
116 $
373 $
354
Other revenue 4 2 21 16
Total revenue 119 118 394 370
Cost of revenue:
Project expense 41 36 121 105
Transmission costs 5 6 17 21
Depreciation,
amortization and
accretion 76 56 236 166
Total cost of revenue 122 98 374 292
Gross profit (loss) (3) 20 20 78
Operating expenses:
General and
administrative 12 9 34 29
Development expenses 13 13
Related party general
and administrative 4 4 12 12
Impairment expense - 3 7
Total operating expenses 29 16 59 48
Operating income (loss) (32) 4 (39) 30
Other income (expense):
Interest expense (27) (28) (78) (81)
Gain on derivatives 3 2 3 16
Earnings (loss) in
unconsolidated
investments, net (10) (4) (16) 13
Net gain (loss) on
transactions (3) 1 (5) (2)
Other expense, net (1) (3) (3) (8)
Total other expense (38) (32) (99) (62)
Net loss before income
tax (70) (28) (138) (32)
Income tax provision 1 3 9 14
Net loss (71) (31) (147) (46)
Net loss attributable to
noncontrolling interest (20) (18) (59) (202)
Net income (loss)
attributable to Pattern
Energy $
(51) $
(13) $
(88) $
156
Weighted-average number of common
shares outstanding
Basic 97,600,393 97,460,492 97,595,765 97,464,012
Diluted 97,600,393 97,460,492 97,595,765 105,788,848
Net income (loss) per share attributable
to Pattern Energy
Basic $
(0.53) $
(0.13) $
(0.91) $
1.60
Diluted $
(0.53) $
(0.13) $
(0.91) $
1.58
Adjusted EBITDA and Cash Available for Distribution Non-GAAP Reconciliations
The following tables present a reconciliation of Adjusted EBITDA and cash available for distribution to net loss, the most directly comparable GAAP financial measure, for the periods indicated (unaudited and in millions):
Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Net loss $
(71) $
(31) $
(147) $
(46)
Plus:
Interest expense, net of
interest income 26 28 76 80
Income tax provision 1 3 9 14
Depreciation, amortization
and accretion 85 63 257 188
EBITDA $
41 $
63 $
195 $
236
Unrealized (gain) loss on
derivatives (2) (1) 8 (1)
Impairment expense 3 7
Adjustments for
unconsolidated
investments(1) (5) (8)
Other(2) 13 1 15 2
Plus, proportionate share
from unconsolidated
investments:
Interest expense, net of
interest income 9 9 21 28
Income tax provision 1 1
Depreciation, amortization
and accretion 8 8 21 26
(Gain) loss on derivatives 1 (4) 13 (7)
Adjusted EBITDA $
65 $
80 $
265 $
292
Plus:
Distributions from
unconsolidated investments 9 10 35 48
Network upgrade
reimbursement 1 1
Release of restricted cash 1 6 3
Stock-based compensation 1 1 4 4
Other 3 (5) 5 (3)
Less:
Unconsolidated investment
earnings and proportionate
shares from EBITDA (6) (13) (38) (70)
Interest expense, less non-
cash items and interest
income (24) (23) (70) (72)
Income taxes (3)
Distributions to
noncontrolling interests (12) (8) (33) (29)
Principal payments paid
from operating cash flows (14) (11) (44) (41)
Cash available for
distribution $
22 $
32 $
128 $
133
Weighted-average number of
common shares outstanding
Basic 97,600,393 97,460,492 97,595,765 97,464,012
Cash available for
distribution per share
Basic $
0.23 $
0.33 $
1.31 $
1.36
(1) Amount consists of gains on
distributions from unconsolidated
investments of $5 million and $10
million for the three and nine
months ended September 30, 2019,
respectively, and suspended equity
earnings (losses) of less than $(1)
million and $2 million for the three
and nine months ended September 30,
2019, respectively.
(2) Included in Other for the three and
nine months ended September 30, 2019
is Development expense of $13
million related to the change in
contingent consideration for the
purchase of the Japan Transaction
and the Broadview Project
acquisition, more fully described in
the Company's 2018 Form 10-K, Note
5, Acquisitions and the Form 10-Q,
Note 13, Fair Value Measurements.
Pattern Energy Group Inc.
Consolidated Balance Sheets
(In millions of U.S. dollars, except share and par value data)
(Unaudited)
September 30, December 31,
2019 2018
---
Assets
Current assets:
Cash and cash equivalents $
106 $
101
Restricted cash - 4
Counterparty collateral - 6
Trade receivables 65 50
Derivative assets, current 3 14
Prepaid expenses 16 18
Deferred financing costs, current,
net of accumulated amortization of
$4 and $3 as of September 30, 2019
and December 31, 2018,
respectively 2 2
Sales tax receivable 27 1
Other current assets 22 15
Total current assets 241 211
Restricted cash 13 18
Major construction advances 46 84
Construction in progress 500 259
Property, plant and equipment, net 3,917 4,119
Unconsolidated investments 281 270
Derivative assets 7 9
Deferred financing costs 7 8
Net deferred tax assets 12 5
Intangible assets, net 211 219
Goodwill 60 58
Other assets 101 34
Total assets $
5,396 $
5,294
Liabilities and equity
Current liabilities:
Accounts payable and other accrued
liabilities $
66 $
67
Accrued construction costs 51 27
Counterparty collateral liability - 6
Accrued interest 7 14
Dividends payable 42 42
Derivative liabilities, current 6 2
Revolving credit facility, current 39 198
Current portion of long-term debt,
net 329 56
Asset retirement obligation,
current 21 24
Contingent liabilities, current 129 31
Other current liabilities 27 11
Total current liabilities 717 478
Revolving credit facility 25 25
Long-term debt, net 2,172 2,004
Derivative liabilities 81 31
Net deferred tax liabilities 123 117
Intangible liabilities, net 45 56
Contingent liabilities 37 142
Asset retirement obligations 213 185
Other long-term liabilities 128 71
Contract liability 26 26
Total liabilities 3,567 3,135
Commitments and contingencies
Equity:
Class A common stock, $0.01 par
value per share: 500,000,000
shares authorized; 98,240,118 and
98,051,629 shares outstanding as
of September 30, 2019 and December
31, 2018, respectively 1 1
Additional paid-in capital 1,009 1,130
Accumulated loss (115) (27)
Accumulated other comprehensive
loss (101) (52)
Treasury stock, at cost; 249,481
and 223,040 shares of Class A
common stock as of September 30,
2019 and December 31, 2018,
respectively (5) (5)
Total equity before noncontrolling
interest 789 1,047
Noncontrolling interest 1,040 1,112
Total equity 1,829 2,159
Total liabilities and equity $
5,396 $
5,294
Pattern Energy Group Inc.
Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
(Unaudited)
Nine months ended September 30,
2019 2018
---
Operating activities
Net loss $
(147) $
(46)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation,
amortization and
accretion 259 188
Impairment expense - 7
Loss (gain) on
derivatives 8 (3)
Stock-based
compensation 4 4
Deferred taxes 6 14
(Earnings) losses in
unconsolidated
investments, net 16 (13)
Distributions from
unconsolidated
investments 19 43
Other reconciling items - 2
Changes in operating assets and
liabilities:
Counterparty collateral
asset 6 24
Trade receivables (14)
Other current assets (21) 12
Other assets (non-
current) (8) (4)
Advanced lease revenue - 34
Accounts payable and
other accrued
liabilities (6) (3)
Counterparty collateral
liability (6) (24)
Contingent liabilities 7 (3)
Other current
liabilities (5) (9)
Other long-term
liabilities - 7
Net cash provided by
operating activities 118 230
Investing activities
Cash paid for
acquisitions and
investments, net of
cash and restricted
cash acquired (71) (275)
Proceeds from sale of
investments, net of
cash and restricted
cash distributed - 56
Capital expenditures (159) (129)
Distributions from
unconsolidated
investments 16 5
Other assets 1
Net cash used in
investing activities (213) (343)
Financing activities
Dividends paid (124) (124)
Capital contributions -
noncontrolling interest 24 3
Capital distributions -
noncontrolling interest (33) (29)
Payment for financing
fees (1) (7)
Proceeds from long-term
debt and other 430 165
Repayment of long-term
debt and other (44) (53)
Proceeds from short-
term debt 253 489
Repayment of short-term
debt (390) (317)
Cash paid for contingent
consideration (21)
Payment for termination
of designated
derivatives (3)
Other financing
activities (1) (3)
Net cash provided by
financing activities 90 124
Effect of exchange rate
changes on cash, cash
equivalents and
restricted cash 1 (3)
Net change in cash, cash
equivalents and
restricted cash (4) 8
Cash, cash equivalents
and restricted cash at
beginning of period 123 138
Cash, cash equivalents
and restricted cash at
end of period $
119 $
146
Supplemental disclosures
Cash payments for income
taxes $
16
$
Cash payments for
interest expense $
76 $
79
Schedule of non-cash activities
Change in property,
plant and equipment $
61 $
226
Accrual of equity
issuance costs $
1
$
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 28 renewable energy projects with an operating capacity of 4.4 GW 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 2019 and 2020 full year CAFD guidance targets, the ability to achieve the five year average CAFD multiple for the Henvey Inlet and Grady projects, the ability to achieve its growth objectives, the ability to meet the capital commitments for Gulf Wind repowering and Tsugaru, the continued progress and the timing of receipt of distributions from Pattern Development, the ability to fund the acquisition of identified ROFO projects and the amount of community benefits local communities are projected to receive over the life of the current fleet. 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 resulting from 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
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SOURCE Pattern Energy Group Inc.
