Pattern Energy Reports Second Quarter 2018 Financial Results

by pmnationtalk on August 9, 201854 Views

Declares dividend of $0.4220 per Class A common share for third quarter 2018 –

SAN FRANCISCO, Aug. 9, 2018 — Pattern Energy Group Inc. (the “Company” or “Pattern Energy”) (NASDAQ & TSX: PEGI) today announced its financial results for the 2018 second quarter.

Highlights
(Comparisons made between fiscal Q2 2018 and fiscal Q2 2017 results, unless otherwise noted)

  • Proportional gigawatt hours (“GWh”) sold of 2,263 GWh, up 7%
  • Net cash provided by operating activities of $95.7 million
  • Cash available for distribution (“CAFD”) of $58.7 million, up 19% and on track to meet full year guidance(1)
  • Net loss of $1.8 million
  • Adjusted EBITDA of $108.4 million, up 18%
  • Revenue of $139.9 million, up 30%
  • Declared a third 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
  • Announced an agreement to sell the Company’s operations in Chile, which principally consist of its 81 megawatt (“MW”) owned interest in the 115 MW El Arrayán Wind project (“El Arrayán Wind”) for which Pattern Energy will receive cash consideration of $68.5 million
  • Returned the Santa Isabel project in Puerto Rico to full generating capacity with the consent of the Puerto Rico Electric Power Authority (“PREPA”)
  • Since April 1, 2018, and including a funding to be made today, invested $50.9 millionin Pattern Energy Group 2 LP (“Pattern Development 2.0”); Pattern Energy’sownership level will increase to approximately 29% following a redemption to occur shortly at Pattern Development 2.0

“It was a great quarter with CAFD up 19%, as production was solid and our disciplined cost management initiatives delivering results. We are on track to achieve our targeted CAFD(1) for the year,” said Mike Garland, President and CEO of Pattern Energy. “At 29% ownership of Pattern Development 2.0, we will have achieved our target ownership level in the development business which we believe will provide meaningful value to shareholders. Our identified ROFO (“right of first offer”) list with Pattern Development2.0 has grown by four new projects since our original investment in June of last year. We anticipate the first realized development transaction gains by the end of 2018 or early 2019, and returns from those gains will be retained and reinvested in the development business. Developing, owning and operating one of the very best portfolios in the renewables market can be challenging, but we are in a great position to generate long-term value in this exciting market.”

(1) 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 June 30, 2018.

Financial and Operating Results

Pattern Energy sold 2,262,811 megawatt hours (“MWh”) of electricity on a proportional basis in the second quarter of 2018 compared to 2,111,627 MWh sold in the same period last year.  Pattern Energy sold 4,398,526 MWh of electricity on a proportional basis for the six months ended June 30, 2018 (“YTD 2018”) compared to 4,135,510 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 and favorable wind compared to last year, partially offset by curtailment at the Santa Isabel project. Production for the quarter was 2% below the long-term average forecast for the period.

Net cash provided by operating activities was $95.7 million for the second quarter of 2018 compared to $113.4 million for the same period last year. Net cash provided by operating activities was $123.5 million for YTD 2018 as compared to $157.2 million for the same period last year. The decrease in the quarterly period of $17.7 million was primarily due to $2.9 million in increased transmission costs due to acquisitions in 2017, increased interest payments of $3.6 million, and increased payments of $43.1 million in payable, accrued and current liabilities, due primarily to the timing of payments. The decrease to net cash provided by operating activities was partially offset by a $32.9 million increase in revenue (excluding unrealized loss on energy derivative and amortization of power purchase agreements (“PPAs”)).

Cash available for distribution was $58.7 million for the second quarter of 2018, compared to $49.2 million for the same period last year. Cash available for distribution was $101.7 million for YTD 2018 compared to $94.4 million for the same period in the prior year. The $9.4 million, or 19.1% increase in the quarterly period was primarily due to a $32.9 millionincrease in revenues (excluding the unrealized loss on the energy derivative and amortization of PPAs) due to acquisitions in 2017 and early 2018 and a $4.4 millionincrease in total distributions from unconsolidated investments. The improvement was partially offset by a $8.0 million decrease in network upgrade reimbursement, a $5.6 million increase in distributions to noncontrolling interests, a $3.6 million increase in interest expense (excluding amortization of financing costs and debt discount/premium), a $2.9 million increase in transmission costs, a $2.7 million decrease in other and a $1.9 million increase in principal payments of project-level debt.

Net loss was $1.8 million in the second quarter of 2018, compared to a net loss of $14.7 million for the same period last year. Net loss was $14.4 million for YTD 2018 compared to $12.1 million in the same period last year. The improvement of $12.9 million in the quarterly period was primarily attributable to a $32.2 million increase in revenues due to acquisitions in 2017 and 2018, and a $2.7 million decrease in general and administrative expenses. These improvements were partially offset by increases of $9.6 million in cost of revenues due to the acquisitions in 2017 and 2018, a $4.2 million increase in impairment loss related to Chile assets held for sale, and a $8.1 million increase in other expense primarily related to decreased earnings from unconsolidated investments.

Adjusted EBITDA was $108.4 million for the second quarter of 2018 compared to $91.9 million for the same period last year. Adjusted EBITDA was $212.6 million for YTD 2018 compared to $190.1 million for the same period last year. The $16.5 million increase in the quarterly period was primarily due to a $32.9 million increase in revenue (excluding unrealized loss on energy derivative and amortization of PPAs) primarily attributable to volume increases as a result of the 2017 and 2018 acquisitions and favorable wind compared to last year, partially offset by curtailment at the Santa Isabel project and a $2.7 million decrease in general and administrative expenses primarily due to lower audit and consulting fees in 2018 compared to 2017. The increase was partially offset by a $17.2 million decrease in earnings from unconsolidated investments, a $2.9 million increase in transmission costs, and a $1.2 million increase in net loss on transactions, primarily related to the Chile assets held for sale.

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 June 30, 2018.

Quarterly Dividend

Pattern Energy declared a dividend for the third quarter 2018, payable on October 31, 2018, to holders of record on September 28, 2018 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the third quarter 2018 dividend is unchanged from the second quarter 2018 dividend.

Acquisition Pipeline

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 706 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.

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