Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
 
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
 
 
 
Filed by the Registrant  ý  Filed by a Party other than the Registrant ¨
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Preliminary Proxy Statement
 
 
 
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
 
 
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Definitive Proxy Statement
 
 
 
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Definitive Additional Materials
 
 
 
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Soliciting Material Pursuant to § 240.14a-12
PATTERN ENERGY GROUP INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11530699&doc=7
April 14, 2017

To the Stockholders of Pattern Energy Group Inc.:
It is my pleasure to invite you to attend Pattern Energy Group Inc.’s 2017 Annual Meeting of Stockholders (the “Annual Meeting”), to be held on Thursday, June 1, 2017 at Pier 1, Bay 3, San Francisco, California. The Annual Meeting will begin promptly at 8:00 a.m., local time.
Details regarding the business to be conducted at the Annual Meeting are more fully described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Your vote is important. Whether or not you expect to attend, please date, sign, and return your proxy card in the enclosed envelope or vote by using the Internet according to the instructions in the Proxy Statement, as soon as possible, to assure that your shares will be represented and voted at the Annual Meeting. If you attend the Annual Meeting and follow the instructions in the Proxy Statement, you may vote your shares in person even though you have previously voted by proxy. On behalf of your Board of Directors, thank you for your continued support and interest.

                        
Sincerely,
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11530699&doc=6


Name: Michael M. Garland
Title: President and Chief Executive Officer

Pier 1, Bay 3
San Francisco, CA 94111
T 415.283.4000
www.patternenergy.com






Pattern Energy Group Inc.
Pier 1, Bay 3
San Francisco, CA 94111
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Thursday, June 1, 2017


To the Stockholders of Pattern Energy Group Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Pattern Energy Group Inc., a Delaware corporation (the “Company”). The Annual Meeting will be held on Thursday, June 1, 2017 at 8:00 a.m. local time at Pier 1, Bay 3, San Francisco, California, for the following purposes:
    1.    To elect seven directors to serve until the 2018 Annual Meeting of Stockholders.
2.
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.
3.    An advisory vote to approve executive compensation.
4.
To consider approval of the Amended and Restated 2013 Equity Incentive Award Plan.
5.     To transact such other business as may properly come before the meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement accompanying this Notice.
The record date for the Annual Meeting is April 7, 2017. Only stockholders of record at the close of business on that date may vote at the Annual Meeting or any adjournment thereof.
 
By Order of the Board of Directors
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Kim H. Liou
Corporate Secretary



San Francisco, California
April 14, 2017
 

You are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, please vote as soon as possible. We encourage you to vote via the Internet. For further details, see “Questions and Answers about This Proxy Material and Voting.”





Pattern Energy Group Inc.
Pier 1, Bay 3
San Francisco, CA 94111

PROXY STATEMENT
FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 1, 2017
AVAILABILITY OF PROXY MATERIALS
This Proxy Statement and proxy card are furnished in connection with the solicitation of proxies to be voted at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of Pattern Energy Group Inc., referred to herein as the “Company,” “we,” “our,” “us,” “our company,” or “Pattern Energy,” which will be held on Thursday, June 1, 2017, at 8:00 a.m. local time at Pier 1, Bay 3, San Francisco, California.
On or about April 19, 2017, we will mail to our stockholders of record and beneficial owners a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this Proxy Statement and our Annual Report on Form 10-K via the Internet and vote online. As a result, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. All stockholders will have the ability to access the proxy materials on a website referred to in the Notice and may request a printed set of the proxy materials by mail or electronically from such website. If you would like to receive a printed or electronic copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.

EXPLANATORY NOTE
For Canadian securities law purposes, we are an “SEC foreign issuer.” As such, we will satisfy applicable Canadian securities laws relating to information circulars, proxies and proxy solicitation if we comply with the requirements of applicable U.S. federal securities laws, file our proxy materials with the Canadian securities regulatory authorities and send our proxy materials to Canadian stockholders in the manner and at the time required by U.S. federal securities laws and any requirements of the NASDAQ Global Select Market (“NASDAQ”). This Proxy Statement is prepared in accordance with such requirements of U.S. federal securities laws.
All monetary amounts shown in this Proxy Statement are expressed in United States dollars unless otherwise expressly noted.




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QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why is the Company soliciting my proxy?
You have received these proxy materials because the board of directors of the Company is soliciting your proxy to vote at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”). This Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders summarizes the purposes of the meeting and the information you need to know to vote at the Annual Meeting.
Who can vote at the Annual Meeting?
Only stockholders of record who owned shares of our Class A common stock ("Class A Common Stock" or "Common Stock") at the close of business on April 7, 2017 will be entitled to vote at the Annual Meeting. On this record date, there were 87,616,747 shares of Common Stock outstanding. The holders of shares of Common Stock have the right to one vote for each share they held as of the record date.
In accordance with Delaware law, a list of stockholders of record entitled to vote at the Annual Meeting will be available at the place of the Annual Meeting on June 1, 2017 and will be accessible for ten days prior to the Annual Meeting at our principal place of business, Pier 1, Bay 3, San Francisco, CA 94111, between the hours of 9:00 a.m. and 5:00 p.m. local time.
How many votes do I have?
Each share of Common Stock that you own entitles you to one vote.
What am I voting on?
There are four matters scheduled for a vote:
Election of directors;
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017;
An advisory vote to approve executive compensation; and
To consider approval of the Amended and Restated 2013 Equity Incentive Award Plan.

How do I vote?
If on April 7, 2017, your shares were registered directly in your name with our stock transfer agent, Computershare, then you are a stockholder of record. Stockholders of record may vote by using the Internet, by telephone, or by mail as described below. Stockholders also may attend the Annual Meeting and vote in person. If you hold shares through a bank or broker, please refer to your proxy card, Notice or other information forwarded by your bank or broker to see which voting options are available to you.
Whether you plan to attend the Annual Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via telephone or Internet.
You may vote by using the Internet at www.envisionreports.com/PEGI and following the instructions for Internet voting on the proxy card mailed to you. Internet voting is available 24 hours a day and will be accessible until 1:00 a.m. Eastern Time on June 1, 2017. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.
You may vote by telephone by calling 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. Telephone voting is available 24 hours a day and will be accessible until 1:00 a.m. Eastern Time on June 1, 2017. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.
You may vote by mail by completing and mailing in a paper proxy card as outlined in this Proxy Statement.
You may vote in person at the meeting, by delivering a completed proxy card or by completing a ballot, which will be available at the meeting.

If your shares are held by your broker as your nominee (that is, in “street name”), you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Annual Meeting.


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Who is paying for this proxy solicitation?
The Company will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. The Company may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.
What is “householding” and how does it affect me?
The Securities and Exchange Commission (the “SEC”) has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are Pattern Energy stockholders may be “householding” our proxy materials. A single proxy statement may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you notify your broker or us that you no longer wish to participate in “householding.”
If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate copy of this Proxy Statement and our Annual Report on Form 10-K, you may (1) notify your broker, (2) direct your written request to: Pattern Energy Group Inc., Attn: Corporate Secretary, Pier 1, Bay 3, San Francisco, CA 94111, or (3) contact our Investor Relations department by telephone at 415-283-4000. Stockholders who currently receive multiple copies of this Proxy Statement at their address and would like to request “householding” of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of this Proxy Statement and our Annual Report on Form 10-K to a stockholder at a shared address to which a single copy of the documents was delivered.
Where may I request an additional copy of this Proxy Statement or the Company’s Annual Report?
Any stockholder of record who wishes to receive an additional copy of this Proxy Statement or of our Annual Report on Form 10-K as filed with the SEC without charge may (i) call the Company at 415-283-4000 or (ii) mail a request to: Pattern Energy Group Inc., Pier 1, Bay 3, San Francisco, CA 94111, Attention: Corporate Secretary, and we will promptly deliver the requested materials to you upon your request. You may also obtain our Annual Report on Form 10-K, as well as this Proxy Statement, on the SEC’s website (www.sec.gov), on the SEDAR website of the Canadian Securities Administrators (www.sedar.com), or on our investor relations website at investors.patternenergy.com under "Financial Information - SEC Filings."
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting selections, your shares will be voted (i) “For” the election of all nominees for director, (ii) “For” ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, (iii) “For” approval, on an advisory and non-binding basis, of the compensation for our named executive officers as disclosed in this Proxy Statement, and (iv) "For" approval of the Amended and Restated 2013 Equity Incentive Award Plan. However, with respect to each of (i), (iii) and (iv) of the preceding sentence, if you are not a record holder, such as where your shares are held through a broker, nominee, fiduciary or other custodian, you must provide voting instructions to the record holder of the shares in accordance with the record holder’s requirements in order for your shares to be properly voted. If any other matter is properly presented at the Annual Meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his best judgment.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. You may revoke your proxy in any one of these ways:
You may submit another properly completed proxy card with a later date;


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You may re-vote by Internet, as instructed above;
You may send a written notice that you are revoking your proxy to the Corporate Secretary of the Company at Pier 1, Bay 3, San Francisco, California 94111; or
You may attend the Annual Meeting, asking that your proxy be revoked, and voting in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.

How are votes counted?
Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count:
“For” votes, “Against” votes, abstentions and broker non-votes (with respect to each of the election of directors, the advisory vote to approve executive compensation, and the approval of the Amended and Restated 2013 Equity Incentive Award Plan); and
“For” votes, “Against” votes, and abstentions (with respect to the ratification of the Company's independent registered public accounting firm for fiscal year 2017).

If your shares are held in “street name,” you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under applicable rules on which your broker may vote shares held in street name without your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes. Under applicable rules, Proposal 2 (ratification of the Company's independent registered public accounting firm for fiscal year 2017) is considered “discretionary.” However, each of (i) Proposal 1 (election of directors), whether contested or uncontested, (ii) Proposal 3 (advisory vote to approve executive compensation), and (iii) Proposal 4 (approval of the Amended and Restated 2013 Equity Incentive Award Plan) is considered “non-discretionary,” and therefore brokers are not permitted to vote your shares held in street name for any of such proposals in the absence of instructions from you. Therefore, we encourage you to provide voting instructions to your bank, broker or other nominee. This ensures your shares will be voted at the Annual Meeting in the manner that you choose.
How many votes are needed to approve each proposal?
For Proposal 1, the election of directors, the seven nominees receiving the most “For” votes (among votes properly cast in person or by proxy) will be elected. Broker non-votes and abstentions will have no effect. The board of directors has adopted a majority voting policy pursuant to which if a nominee fails to receive “For” votes in an amount that exceeds the “Against” and/or “Withheld” votes in an election that is not a contested election, the nominating, governance and compensation committee shall make a recommendation to the board of directors as to whether to accept or reject the resignation of such director. See “Board of Directors and Corporate Governance - Majority Voting Policy.”
To be approved, Proposal 2 to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 must receive a “For” vote from the majority of all shares present in person or represented by proxy at the Annual Meeting and entitled to vote thereon either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote. If our stockholders do not ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal year ending December 31, 2017, our audit committee of our board of directors will reconsider its selection.
To be approved, Proposal 3 providing an advisory vote to approve executive compensation, must receive a “For” vote from the majority of all shares present in person or represented by proxy at the Annual Meeting and entitled to vote thereon either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote.
To be approved, Proposal 4 to approve the Amended and Restated 2013 Equity Incentive Award Plan must receive a “For” vote from the majority of all shares present in person or represented by proxy at the Annual Meeting and entitled to vote thereon either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid Annual Meeting. A quorum will be present if a majority of all shares of Common Stock outstanding on April 7, 2017, the record date, are represented at the Annual Meeting present in person or by proxy. If there are not enough shares of Common Stock present both in person and by timely and properly submitted proxies to constitute a quorum, the Annual Meeting may be adjourned until such time as a sufficient number of shares of Common Stock are present. On the record date, there were 87,616,747 shares of Common Stock outstanding and entitled to vote.


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Your shares of Common Stock will be counted for purposes of determining if there is a quorum if you properly cast your vote or a proxy card has been properly submitted by you or on your behalf. Proxies received but marked as “abstentions” and “broker non-votes” will each be counted as present for purposes of determining the presence of a quorum.
 Is voting confidential?
We will keep all the proxies, ballots and voting tabulations private. We only let our inspector of election, Computershare, examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to meet other legal requirements. We will, however, forward to management any written comments you provide on the proxy card or through other means.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be available on a Current Report on Form 8-K filed with the SEC within four business days after the end of the Annual Meeting.

A Note About the Company Website
Although we include references to our website (investors.patternenergy.com) throughout this Proxy Statement, information that is included on our website is not incorporated by reference into, and is not a part of, this Proxy Statement. Our website address is included as an inactive textual reference only.



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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
BOARD OF DIRECTORS
Our board of directors consists of seven members. Each director will be elected annually to serve until his or her successor is duly elected or appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal. See “Proposal 1 - Election of Directors.” The ages of our directors set forth below are as of December 31, 2016.
Name
 
Age
 
Position(s) Held
Alan R. Batkin
 
72
 
Director, Chairman(1)(2)(3)
Patricia S. Bellinger
 
55
 
Director (2)(3)
The Lord Browne of Madingley
 
68
 
Director
Michael M. Garland
 
66
 
Director, President and Chief Executive Officer
Douglas G. Hall
 
67
 
Director (1)(3)
Michael B. Hoffman
 
66
 
Director
Patricia M. Newson
 
60
 
Director (1)(3)

(1) Member of Audit Committee
(2) Member of Nominating, Governance and Compensation Committee
(3) Member of Conflicts Committee

Alan R. Batkin
Mr. Batkin is chairman and chief executive officer of Converse Associates, Inc., a strategic advisory firm. He has served as a member and chairman of our board of directors since October 2013. Mr. Batkin serves on the boards of Hasbro, Inc., Cantel Medical Corp. and Omnicom Group, Inc. During the past five years he has also served on the board of Overseas Shipping Group, Inc. He was vice chairman of Eton Park Capital Management, L.P., from 2007 to 2012. Prior thereto, he was the vice chairman of Kissinger Associates, Inc. from 1990 until 2006. He is an overseer, trustee or board member of a number of non-profit organizations, including, among others, the International Rescue Committee, the Brookings Institution, the Mailman School of Public Health of Columbia University, the Massachusetts General Hospital Center for Global Health and the New York City Police Foundation. We believe Mr. Batkin’s extensive public company, energy industry and leadership experience enables him to provide essential guidance to our board of directors and our management team.
Patricia S. Bellinger
Ms. Bellinger has served as a member of our board of directors since October 2013. Ms. Bellinger is a senior fellow at Harvard Kennedy School’s Center for Public Leadership as well as an adjunct lecturer at Harvard Kennedy School. She currently serves on the board of Sodexo SA and previously served on the board of Nordic Windpower Inc. from 2008 to 2010. Before joining Harvard Kennedy School, Ms. Bellinger was the executive director of executive education at Harvard Business School from 2011 to 2013, where she managed a $150 million portfolio of programs. Prior to joining Harvard Business School, Ms. Bellinger was group vice president at British Petroleum from 2000 to 2007, where she oversaw leadership development programs and established and led British Petroleum’s global diversity and inclusion transformation. Ms. Bellinger has a leadership role in a number of non-profit organizations, including uAspire. We believe Ms. Bellinger’s extensive public company, energy industry and leadership experience enables her to provide essential guidance to our board of directors and our management team.
The Lord Browne of Madingley
The Lord Browne of Madingley has served as a member of our board of directors since October 2013. Lord Browne is chairman of L1 Energy and chairman of Huawei (UK). Prior to joining L1 Energy in March 2015, Lord Browne was a partner at Riverstone Holdings LLC, an energy and power-focused private equity firm (“Riverstone”) for eight years. Lord Browne spent 41 years at British Petroleum, holding various senior management positions during that time. In 1991, he joined the board of The British Petroleum Company plc and was appointed group chief executive in 1995 and remained in this position until May 2007. Lord Browne was chairman of the advisory board of Apax Partners LLC from 2006 to 2007, a non-executive director of Goldman Sachs from 1999 to 2007, a non-executive director of Intel Corporation from 1997 to 2006, a trustee of The British Museum from 1995 to 2005, a member of the supervisory board of DaimlerChrysler AG from 1998 to 2001 and a non-executive director of SmithKline Beecham from 1996 to 1999.


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Lord Browne was the president of the Royal Academy of Engineering from 2006 to 2011 and is chairman of the trustees of the Queen Elizabeth prize for engineering. He is a fellow of the Royal Society and a foreign member of the U.S. Academy of Arts and Sciences. He was appointed a trustee of the Tate Gallery in August 2007 and chairman of the trustees in January 2009. He is also a member of the board of governors of the Folger Shakespeare Library in Washington, D.C. He was the chairman of the Independent Review of Higher Education Funding and Student Finance, which published its report in October 2010. He was the UK Government’s lead non-executive board member from June 2010 to January 2015. He was knighted in 1998 and made a life peer in 2001. We believe Lord Browne’s extensive leadership and financial and energy industry expertise enables him to contribute significant managerial, strategic and financial oversight skills to our board of directors.
Michael M. Garland
Mr. Garland has served as our president and chief executive officer and as a member of our board of directors since October 2012. Prior to joining our company, Mr. Garland served as chief executive officer of Pattern Energy Group LP (“Pattern Development 1.0”) since June 2009, a position he continues to hold. Prior to joining Pattern Development 1.0, Mr. Garland was a partner of Babcock & Brown from 1986 to 2009, where he initiated and managed project finance activities, energy development and energy investment, and led Babcock & Brown’s North American Infrastructure Group. Prior to that, Mr. Garland worked for the State of California as Chief of Energy Assessments from 1975 to 1986. Mr. Garland currently serves on the board of directors of SteelRiver Infrastructure Fund North America, GP. We believe Mr. Garland’s extensive leadership experience enables him to play a key role in all matters involving our board of directors and contribute an additional perspective from the energy industry.
Douglas G. Hall
Mr. Hall has served as a member of our board of directors since October 2013. Mr. Hall was a managing director at RBC Capital Markets covering public and private capital raising, mergers and acquisitions support and strategic advisory assignments for diversified industry groups from 1979 until his retirement in 2005. Mr. Hall is currently a director of Metamaterial Technologies, Millar Western Forest Products, and Stanfield's, and a member of the Advisory Board of Southwest Properties and Purpose Investments/NexC Partners. We believe Mr. Hall’s experience in investment banking as well as his experience and understanding of financial and disclosure matters enables him to provide essential guidance to our board of directors and our management team.
Michael B. Hoffman
Mr. Hoffman has served as a member of our board of directors since October 2012. Mr. Hoffman is a partner of Riverstone, where he is principally responsible for investments in power and renewable energy for Riverstone’s funds and is based in New York. Mr. Hoffman is head of Riverstone’s Renewable Energy Funds I and II. Before joining Riverstone in 2003, Mr. Hoffman was senior managing director and head of the mergers and acquisitions advisory business of The Blackstone Group for 15 years, where he also served on the firm’s principal group investment committee as well as its executive committee. Prior to joining Blackstone, Mr. Hoffman was managing director and co-head of the mergers and acquisitions department of Smith Barney, Harris Upham & Co. Mr. Hoffman is chairman of the board of directors of Onconova Therapeutics Inc., on the board of directors of Talen Energy Corporation, and a director of the general partner of Enviva Partners, LP. His non-profit board affiliations include Rockefeller University. We believe Mr. Hoffman’s extensive leadership, energy industry and financial expertise enables him to contribute significant managerial, strategic and financial oversight skills to our board of directors.
Patricia M. Newson
Ms. Newson has served as a member of our board of directors since October 2013. Ms. Newson currently is a director of Wolf Midstream Inc. and Quality Urban Energy Systems of Tomorrow (QUEST), a non-profit. Ms. Newson retired in 2011 from AltaGas Ltd. as president of the utility division and was previously president and chief executive officer of AltaGas Utility Group Inc. from 2005 to 2009, and senior vice president finance and chief financial officer of AltaGas Income Trust from 1996 to 2006. Her previous board experience includes the Alberta Electric System Operator, Brookfield Residential Properties Inc., Brookfield Asset Management Inc., AltaGas Utility Group Inc., Long Run Exploration Inc., Guide Exploration Inc., Heritage Gas Limited, Inuvik Gas Ltd., and the Canadian Gas Association. Ms. Newson is a Fellow Chartered Accountant. We believe Ms. Newson’s public company and energy industry experience as well as her experience and understanding of financial accounting, finance and disclosure matters enables her to provide essential guidance to our board of directors and our management team.

BOARD LEADERSHIP STRUCTURE
Our board of directors does not have a formal policy with respect to whether our Chief Executive Officer (CEO) should also serve as our chairman of the board (Chairman). Currently, Michael M. Garland is our Chief Executive Officer, and Alan R. Batkin is our Chairman. Our board of directors believes that its current leadership structure best promotes the board’s objective to effectively


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oversee management, the ability of our board of directors to carry out its roles and responsibilities on behalf of the stockholders, and our Company’s overall corporate governance. Our board of directors also believes that the current separation of the Chairman and Chief Executive Officer roles allows Mr. Garland to develop and execute the Company’s corporate strategy and focus on day-to-day operations and company performance while leveraging Mr. Batkin’s experience and independence. Our board of directors periodically reviews the leadership structure and may make changes in the future.
MAJORITY VOTING POLICY
Our board of directors has adopted a majority voting policy for uncontested director elections. Under such policy, in order for a person to become a nominee for election to the board of directors, such person must submit an irrevocable resignation, contingent on both (i) that person not receiving a “for” vote that exceeds the “against” and/or “withheld” vote in an election that is not a contested election and (ii) acceptance of that resignation by the board of directors in accordance with the policies and procedures of the board of directors adopted for such purpose. In the event a director nominee fails to receive a “for” vote that exceeds the “against” and/or “withheld” vote in an election that is not a contested election, the nominating, governance and compensation committee shall make a recommendation to the board of directors as to whether to accept or reject the resignation of such director. The board of directors shall act on the resignation, taking into account the recommendation of the nominating, governance and compensation committee, and publicly disclose its decision, including, if the resignation is rejected, the rationale for that decision. The nominating, governance and compensation committee in making its recommendation, and the board of directors in making its decision, may each consider all factors and information that they consider relevant and appropriate. The policy provides that the nominating, governance and compensation committee and the board of directors will consider these matters without the participation of the nominee in question. If the board of directors accepts a director’s resignation pursuant to this standard, then the board of directors may fill the resulting vacancy pursuant to the amended and restated bylaws of the Company.
At the Annual Meeting, the director nominees will be voted on individually and the voting results for each nominee will be publicly disclosed by us in a news release and on a Current Report on Form 8-K filed with the SEC, and with the Canadian securities administrators on their SEDAR website (www.sedar.com).



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CORPORATE GOVERNANCE AND BOARD MATTERS
Independence of the Board of Directors
As required under the listing standards of the NASDAQ, a majority of the members of a NASDAQ-listed company’s board of directors must qualify as “independent,” as affirmatively determined by its board of directors, or delegated committee. Consultations are made with counsel to ensure that such determinations are consistent with all relevant laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of NASDAQ, as in effect from time to time.
The nominating, governance and compensation committee has reviewed the directors’ responses to a questionnaire asking about their transactions, relationships and arrangements with the Company (and those of their immediate family members) and other potential conflicts of interest. Other than as set forth in this Proxy Statement, these questionnaires did not disclose any transactions, relationships, or arrangements that question the independence of our directors. After reviewing this information, under the NASDAQ Stock Market Rules, we have determined that all of our directors are independent directors, except Mr. Garland because he is an employee. The NASDAQ independence definitions include a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with the Company.
We currently qualify as an SEC foreign issuer under Canadian securities laws and are exempt from, among other things, requirements under those laws to (i) have an audit committee of at least three people consisting solely of independent directors, and (ii) disclose annually the extent to which we comply with certain recommendations of the Canadian Securities Administrators regarding, among other corporate governance matters, the composition of our board of directors and of committees of our board of directors, the director nomination process, director term limits, and information regarding the representation of women in director and executive officer positions.
A director is considered to be independent for the purposes of Canadian securities laws if the director has no direct or indirect material relationship to the Company. A “material relationship” is a relationship that could, in the view of the board, be reasonably expected to interfere with the exercise of a director’s independent judgment. Certain individuals, such as current or former (within three years) employees and executive officers of the Company or a parent or subsidiary of the Company, or persons having certain other specified relationships or having engaged in certain transactions with us, are deemed by Canadian securities laws to have a material relationship with the Company. Under Canadian securities laws our non-independent directors are Messrs. Garland, Hoffman and The Lord Browne. Mr. Garland is deemed to be non-independent because he is our Chief Executive Officer. Mr. Hoffman and The Lord Browne are also deemed non-independent because of their current or prior affiliations with Riverstone (which is the manager of funds that own interests in Pattern Development 1.0 (which was a majority shareholder of the Company until May 2014)).
Information Regarding the Board of Directors and its Committees
The board of directors met 8 times during 2016. As required under NASDAQ listing standards, our directors meet in various regularly scheduled executive sessions. Such executive sessions include sessions at which only the directors (including directors who are members of management) are present, a second session where only non-management directors are present, and then a session where only the directors who are independent under the requirements of both the NASDAQ Stock Market Rules and Canadian securities laws are present. The board has an audit committee, a conflicts committee, and a nominating, governance and compensation committee. The following table provides membership and meeting information for each of the board committees during 2016:
Name
 
Audit
 
Conflicts
 
Nominating, Governance and Compensation
Alan Batkin
 
Member
 
Member
 
Member
Patricia Bellinger
 
 
Member
 
Chair
The Lord Browne of Madingley
 
 
 
Michael Garland
 
 
 
Douglas Hall
 
Member
 
Chair
 
Michael Hoffman
 
 
 
Patricia Newson
 
Chair
 
Member
 
Total meetings held in fiscal year 2016
 
7
 
21
 
5



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Each board member attended at least 75% of the aggregate of the total number of meetings of the board and meetings held by all committees on which such board member served during fiscal 2016. Our corporate governance guidelines provide that directors are also expected to attend the Company’s annual meeting of stockholders. All directors, except for The Lord Browne, attended the 2016 annual meeting of stockholders.
Below is a description of each committee of the board of directors. The nominating, governance and compensation committee has determined that each member of the audit, conflicts, and nominating, governance and compensation committees meets the applicable rules and regulations regarding “independence” under both the NASDAQ and Canadian requirements and that each such member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to the Company.
Audit Committee
Our audit committee’s role and responsibilities are set forth in the committee’s written charter and the Company’s corporate governance policy and include:
approving and retaining the independent auditors to conduct the annual audit of our financial statements;
reviewing and pre-approving the audit and allowable non-audit services to be performed by our independent registered public accounting firm;
evaluating the qualifications, performance and independence of our independent registered public accounting firm;
monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
reviewing the adequacy and effectiveness of our internal control policies and procedures;
discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results;
preparing the audit committee report in our annual proxy statement;
establishing procedures for complaints received by us regarding accounting matters;
overseeing internal audit function; and
reviewing and evaluating, at least annually, its own performance and that of its members, including adequacy of its written charter.

Our audit committee charter can be found on the corporate governance section of our investor relations website at investors.patternenergy.com. Each of Ms. Newson and Messrs. Batkin and Hall served on the audit committee of the board of directors during 2016.
The nominating, governance and compensation committee annually reviews both Securities Exchange Act Rule 10A-3 and the NASDAQ listing standards definition of independence for audit committee members and has determined that all members of our audit committee are independent (as independence is currently defined in such standards). The board of directors concurred with the determination by the audit committee that Ms. Newson and Mr. Batkin are audit committee financial experts as defined by Item 407(d) of Regulation S-K. The board made a qualitative assessment of Ms. Newson’s level of knowledge and experience based on a number of factors, including her experience as a Chartered Accountant with Ernst & Young, as Chief Financial Officer of AltaGas Income Trust, and as a member of the audit committee of multiple public companies. The board made a qualitative assessment of Mr. Batkin’s level of knowledge and experience based on a number of factors, including his experience as a Certified Public Accountant with Coopers & Lybrand, and as a member of the audit committee of various public companies.
Nominating, Governance and Compensation Committee
Our nominating, governance and compensation committee’s role and responsibilities are set forth in the committee’s written charter and the Company’s corporate governance policy and include:
assisting our board of directors in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to the board of directors;
overseeing the annual evaluation of our board of directors and management;
recommending members for each board committee to our board of directors;
reviewing and monitoring our corporate governance guidelines and code of business conduct and ethics;
reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our board of directors;
reviewing and monitoring actual and potential conflicts of interest of members of our board of directors and officers;
approving the independence of members of committees required to have independent members;


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overseeing the development and implementation of our compensation philosophy and our benefits policies generally;
making recommendations to the board regarding adoption of equity-based compensation plans and other incentive compensation plans that are subject to board and/or stockholder approval;
overseeing administration of our equity compensation and other incentive compensation plans;
reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer and other senior executive officers, as well as evaluating their performance in light of the compensation program objectives;
making recommendations to the board regarding the compensation, benefits and other employment arrangements for our chief executive officer and our other senior executive officers;
overseeing compensation-related risk, stock ownership guidelines, and succession planning for our executive officers;
reviewing and recommending compensation goals and bonus and equity compensation criteria for our employees;
reviewing and recommending compensation programs for non-employee directors;
engaging and approving payment of compensation consultants to assist the committee in discharging its responsibilities; and
reviewing and evaluating, at least annually, its own performance and that of its members, including adequacy of its written charter.

A more detailed description of the committee’s functions can be found in our nominating, governance and compensation committee charter. The charter is published in the corporate governance section of our investor relations website at investors.patternenergy.com. Each of Ms. Bellinger and Mr. Batkin served on the nominating, governance and compensation committee of the board of directors during 2016. All members of the committee are independent (as independence is currently defined in the NASDAQ listing standards and the Canadian requirements).
Generally during the first quarter of each year, the committee reviews and makes recommendations to the board of directors regarding compensation for our senior executive officers, including our named executive officers, and for the pool of employees other than our senior executive officers. Mr. Garland, our principal executive officer, does not participate in the determination of his own compensation, but he makes recommendations to the committee regarding the amount and form of compensation of the other senior executive officers.
Our nominating, governance and compensation committee also reviews and discusses annually with management our “Compensation Discussion and Analysis.”
The nominating, governance and compensation committee will consider director candidates recommended by stockholders and evaluate them using the same criteria as candidates identified by the board or the nominating, governance and compensation committee for consideration. If a stockholder of the Company wishes to recommend a director candidate for consideration by the nominating, governance and compensation committee, the stockholder recommendation should be delivered to the Corporate Secretary of the Company at the principal executive offices of the Company, and must include information regarding the candidate and the stockholder making the recommendation. In evaluating candidates for the board, the nominating, governance and compensation committee may consider all factors it deems relevant, including the competencies and skills that the board considers to be necessary for the board as a whole to possess, the competencies and skills that the board considers each existing director to possess, and the competencies and skills each new nominee will bring to the boardroom. The nominating, governance and compensation committee shall also consider the amount of time and resources that nominees have available to fulfill their duties as a board member. In addition, the corporate governance guidelines indicate additional factors to consider include diversity, age, issues of judgment, and length of term served.
Conflicts Committee
Our conflicts committee reviews specific matters that the board of directors believes may involve conflicts of interest arising from material transactions with either Pattern Development 1.0 or Pattern Energy Group 2 LP ("Pattern Development 2.0", and together with Pattern Development 1.0, the "Pattern Development Companies") or their respective affiliates, and certain other matters the board determines to submit to the conflicts committee for review. We are required to seek the recommendation of the conflicts committee for any transaction involving the sale of a project from either of the Pattern Development Companies to us or for any amendments to the Multilateral Management Services Agreement among the Company and each of the Pattern Development Companies, and such recommendation is considered by the board of directors as they evaluate approval of the matter. The conflicts committee will determine if the resolution of the conflicts of interest in the relevant matter is fair and reasonable to us. The nominating, governance and compensation committee must unanimously determine that nominees for this committee meet the applicable independence requirements under both the NASDAQ and Canadian requirements. In addition, the board of directors must affirm the nominating, governance and compensation committee’s independence determinations before it places nominees on the committee. The members of the conflicts committee


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may not be officers or employees of either of the Pattern Development Companies or their respective affiliates, including Riverstone (which is the manager of funds which own interests in the Pattern Development Companies). Each of Messrs. Hall and Batkin and Ms. Bellinger and Newson served on the conflicts committee of the board of directors during 2016.
NOMINATING, GOVERNANCE AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of Ms. Bellinger and Mr. Batkin served on the nominating, governance and compensation committee of the board of directors during 2016. None of the members of the nominating, governance and compensation committee was at any time during the 2016 fiscal year (or at any other time) an officer or employee of the Company. None of the Company’s executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or nominating, governance and compensation committee.
RISK OVERSIGHT MANAGEMENT
Our board is responsible for ensuring that processes are in place to identify the principal risks of the Company’s businesses and ensuring that appropriate systems to measure and manage these risks are properly implemented. Our board provides risk oversight for our entire company by receiving risk assessments, and discussing these assessments with management. The board’s overall risk oversight is supplemented by the various committees. The audit committee discusses with management and our independent registered public accounting firm our risk management guidelines and policies, our major financial risk exposures and the steps taken to monitor and control such exposures. Our nominating, governance and compensation committee oversees risks related to our compensation programs and discusses with management its annual assessment of our employee compensation policies and programs. Our conflicts committee oversees risks related to related party transactions with either of the Pattern Development Companies and discusses with management risks related to acquisitions from and the multilateral management services agreement with each of the Pattern Development Companies.
In 2016, an internal risk committee comprising a cross section of executives with focus in various subject matters was formed. The risk committee meets quarterly to assess internal and external risks to the business, together with any mitigation plan, and provides reports to the audit committee and board.
STOCKHOLDER COMMUNICATIONS WITH OUR BOARD OF DIRECTORS
Stockholders and interested parties may communicate with our board of directors by sending correspondence to the board of directors, a specific committee of our board of directors or a director c/o our Corporate Secretary, at Pattern Energy Group Inc., Pier 1, Bay 3, San Francisco, California 94111.
Our Corporate Secretary reviews all communications to determine whether the contents include a message to a director and will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) to the applicable director or directors at each regularly scheduled meeting. The Corporate Secretary will alert individual directors to items that warrant a prompt response from the individual director prior to the next regularly scheduled meeting. Items warranting prompt response, but not addressed to a specific director, will be routed to the applicable committee chair.

CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted the Pattern Energy Group Inc. Code of Business Conduct and Ethics that applies to all directors, officers and employees. If the Company makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver in its public filings, as required by law or securities market regulations. In November 2016, the board adopted certain amendments to the Code of Business Conduct and Ethics which added the vice president of investor relations, government relations and corporate communications as an additional person, besides the chief executive officer, with authority to make determinations for the Company to engage in lobbying activities or become a member of trade associations (which associations may coincidentally engage in their own political contribution and lobbying activities).
In addition, later in November 2016 the Code of Business Conduct and Ethics was further revised. Section 5 of the Code of Business Conduct and Ethics relating to Conflicts of Interest, prior to revision, provided an exception to such provision for having an interest in Pattern Development 1.0 that is disclosed and subject to applicable governance arrangements. Disclosure of such interests in Pattern Development 1.0 is contained in the Company's registration statement filed in connection with its initial public offering (Registration No. 333-190538). As result of the restructuring of Pattern Development 1.0 which created Pattern Development 2.0, Pattern Development 2.0 had a similar equity ownership structure as Pattern Development 1.0 and certain persons (including the following executive officers, Michael M. Garland, Hunter H. Armistead, and Daniel


12



M. Elkort) hold similar types of interests in Pattern Development 2.0 as in Pattern Development 1.0. Section 5 of the Code of Business Conduct and Ethics was amended to provide a similar exception as the Pattern Development 1.0 exception for having an interest in Pattern Development 2.0. See "Certain Relationships and Related Party Transactions." A copy of the current Code of Business Conduct and Ethics is available on the corporate governance section of our investor relations website at investors.patternenergy.com.
CORPORATE GOVERNANCE GUIDELINES
The board has developed corporate governance guidelines to help it fulfill its responsibilities to stockholders. A copy is available on the corporate governance section of our investor relations website at investors.patternenergy.com. The purpose of the corporate governance guidelines is to assist the board in the exercise of its responsibilities and to provide a concise description of the corporate governance obligations, principles and practices of the board. In March 2016, the corporate governance guidelines relating to term limits and retirement age for directors were amended. The amendments provide that a director should not be renominated after 10 years of service or nominated or renominated if he or she is 75 years old or older. However, the board reserves discretion to nominate or renominate such a director on a case by case basis where it determines that it is in the best interest of the Company to do so, as the board recognizes that from time to time there may be circumstances where exceptions need to be made to retain needed continuity and expertise, or for other business reasons.  
STOCK OWNERSHIP POLICY FOR DIRECTORS
The corporate governance guidelines also provide that the board believes that directors should hold meaningful equity ownership positions in the Company. Until the Company's independent directors under both the NASDAQ and Canadian requirements have accumulated shares of our Common Stock with a market value equal to three times such director’s annual retainer (which shall include each board member’s base annual retainer amount and the board chairman’s incremental retainer, but not the committee chairs’ incremental retainers or the per meeting fees), a minimum of 65% of such annual retainer will be payable in the form of shares of our Common Stock or restricted stock units in lieu of cash. As of December 31, 2016, each of the Company's independent directors under both the NASDAQ and Canadian requirements have met the stock ownership policy standards, but each of such independent directors have elected to continue to receive at least 65% of the annual retainer paid in the form of shares or restricted stock units.
NON-EMPLOYEE DIRECTOR COMPENSATION
Our director compensation policy, which was not changed for 2016, provides that only our independent directors receive fees for serving as directors. They receive an annual retainer of (i) $125,000 and (ii) $15,000 annually for each committee chair held (except that the chair of our audit committee receives $20,000). Our chairman of the board also receives an additional annual retainer of $70,000. A minimum of 65% of the annual retainer (as described above) paid to each of our independent directors will be paid in our shares of Common Stock or restricted stock units until such independent director accumulates $375,000 (and, in the case of Mr. Batkin, $585,000) in shares of Common Stock or restricted stock units. In addition, such independent directors receive $1,500 for each committee meeting attended (or $1,000 if such committee meeting is telephonic). Amounts paid to our independent directors in cash and stock awards for 2016, as set forth in the table below, were based on this policy and elections made by the independent directors as noted below.
Effective January 1, 2017, the additional annual retainer received by our chairman of the board was increased from $70,000 to $100,000.
2016 Director Compensation. The following table sets forth information about the compensation of each person who served as a director during the 2016 fiscal year, other than our Chief Executive Officer, Mr. Garland, who did not receive separate compensation for his services as a director. Non-employee directors may defer all of the restricted stock unit awards they receive in connection with their service (together with dividend equivalents on such awards) until such time as their service as a director has terminated. As a result of the additional workload placed upon the members of the conflicts committee in light of efforts on reintegration, after evaluating the time, effort, and work required, the nominating, governance and compensation committee approved cash fees in 2016 of $17,500 to the chairman of the conflicts committee and $15,000 to the other members of the conflicts committee, and such fees were in lieu of meeting fees for certain of the conflicts committee meetings related to reintegration matters.


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Name
 
 
Fees Paid in Cash ($)
 
Stock Awards ($)(6)
 
Total ($)
Alan Batkin (1)
 
 
47,000
 
189,225
 
236,225
Patricia Bellinger (2)
 
 
80,396
 
90,980
 
171,376
The Lord Browne of Madingley(3)
 
 
 
 
Douglas Hall (4)
 
 
59,000
 
121,314
 
180,314
Michael Hoffman(3)
 
 
 
 
Patricia Newson (5)
 
 
61,500
 
121,314
 
182,814

(1)    In 2016, Mr. Batkin had elected to receive 100% of his annual retainer in the form of deferred restricted stock units. In addition, in 2016, Mr. Batkin accrued 1,324 deferred restricted stock units ($28,750) in dividend equivalents.
(2)    In 2016, Ms. Bellinger had elected to receive 75% of her annual retainer in the form of deferred restricted stock units. In addition, in 2016, Ms. Bellinger accrued 637 deferred restricted stock units ($13,823) in dividend equivalents.
(3)    Although they are non-employee directors, The Lord Browne and Mr. Hoffman did not receive compensation in 2016 for their services as directors because of their status as non-independent under Canadian Securities Administrators recommendations as described in the above section discussing the independence of the board of directors.
(4)    In 2016, Mr. Hall had elected to receive 100% of his annual retainer in the form of deferred restricted stock units. In addition, in 2016, Mr. Hall accrued 849 deferred restricted stock units ($18,430) in dividend equivalents.
(5)    In 2016, Ms. Newson had elected to receive 100% of her annual retainer in the form of deferred restricted stock units. In addition, in 2016, Ms. Newson accrued 849 deferred restricted stock units ($18,430) in dividend equivalents.
(6)    This column represents the grant date fair value for stock awards granted to the director in 2016, computed in accordance with Accounting Standards Codification 718, Compensation - Stock Compensation ("FASB ASC Topic No. 718"). For additional information, see Note 15 of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 1, 2017, for a discussion of our assumptions in determining the grant date fair values of equity awards. As of December 31, 2016, no non-employee director had any outstanding option awards or unvested stock awards.




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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us regarding beneficial ownership of our voting securities as of March 31, 2017 by:
each person known by us to be the beneficial owner of more than 5% of any class of our voting securities;
each of our directors;
each of our named executive officers; and
all executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as noted by footnote, and subject to community property laws where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. The table below is based upon information supplied by officers, directors and principal stockholders and Schedules 13G filed with the SEC.
This table lists applicable percentage ownership based on 87,616,747 shares of Common Stock outstanding as of March 31, 2017. Shares issuable upon exercise of options to purchase shares of our Common Stock that are exercisable within 60 days of March 31, 2017 are deemed to be beneficially owned by the persons holding these options for the purpose of computing percentage ownership of that person, but are not treated as outstanding for the purpose of computing any other person’s ownership percentage.

 
Beneficial Ownership
Name and Address of Beneficial Owner
 
 Shares of Common Stock
 
Percent of Total Outstanding Common Stock
5% Stockholders
 

 

Pattern Renewables LP and Pattern Development Finance Company LLC(1)
    Pier 1, Bay 3
San Francisco, CA 94111
 
16,962,546
 
19.4%
The Vanguard Group (2)
    100 Vanguard Blvd.
Malvern, PA 19355
 
5,511,072
 
6.3%
Blackrock, Inc. (3)
    55 East 52nd Street
New York, NY 10055
 
4,896,582
 
5.6%
Signature Global Asset Management (4)
    A Business Unit of CI Investments Inc.
2 Queen Street East, Twentieth Floor
Toronto, Ontario, M5C 3G7
 
4,385,192
 
5.0%

 

 

Directors and Named Executive Officers
 

 

Alan R. Batkin (5) (16)
 
27,609
 
*
Patricia S. Bellinger (6) (16)
 
15,397
 
*
The Lord Browne of Madingley
 
10,000
 
*
Douglas G. Hall (7) (16)
 
12,935
 
*
Michael B. Hoffman (8)
 
 
*
Patricia M. Newson (9) (16)
 
9,878
 
*
Michael M. Garland (10)
 
537,951
 
*
Michael J. Lyon (11)
 
179,497
 
*
Hunter H. Armistead (12)
 
240,345
 
*
Daniel M. Elkort (13)
 
123,556
 
*
Esben W. Pedersen (14)
 
183,728
 
*
All current directors and executive officers as a group (15 persons) (15)
 
1,363,457
 
1.6%


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* Less than one percent
(1)
Such entities are affiliated with Pattern Development 1.0. Pattern Renewables LP is the holder of 2 shares of Common Stock and Pattern Development Finance Company LLC is the holder of 16,962,544 shares of Common Stock. R/C Renewable Energy GP II, LLC is the managing member of Riverstone/Carlyle Renewable Energy Grant GP, L.L.C., which is the general partner of R/C Wind II LP, which is the managing member of Pattern Energy Group Holdings GP LLC, which is the managing member of Pattern Energy GP, LLC, which is the general partner of Pattern Development 1.0, which is the sole member of Pattern Renewables GP LLC, which is the general partner of Pattern Renewables LP. Accordingly, each of the foregoing entities may be deemed to share beneficial ownership of the shares held by Pattern Renewables LP. Pattern Development 1.0 is the sole member of Pattern Development Finance Company LLC. As a result, R/C Renewable Energy GP II, LLC, Riverstone/Carlyle Renewable Energy Grant GP, L.L.C., R/C Wind II LP, Pattern Energy Group Holdings GP LLC, Pattern Energy GP, LLC, and Pattern Development 1.0 may be deemed to share beneficial ownership of the shares held by Pattern Development Finance Company LLC. R/C Renewable Energy GP II, LLC is managed by a five-person investment committee. Pierre F. Lapeyre, Jr., David M. Leuschen, Michael B. Hoffman, Daniel A. D’Aniello and Edward J. Mathias, as the members of the investment committee of R/C Renewable Energy GP II, LLC, may be deemed to share beneficial ownership of the shares beneficially owned by Pattern Renewables LP. Such individuals expressly disclaim any such beneficial ownership.
(2)
Based on the number of shares disclosed in the Schedule 13G filed on February 10, 2017.
(3)
Based on the number of shares disclosed in the Schedule 13G filed on January 30, 2017.
(4)
Based on the number of shares disclosed in the Schedule 13G filed on February 10, 2017.
(5)
Includes 10,000 shares of Common Stock held by a trust of which Mr. Batkin is the trustee and beneficiary and 10,000 shares held by a family limited partnership of which Mr. Batkin is a partner. On January 3, 2017, the Company granted 10,269 deferred restricted stock units to Mr. Batkin.
(6)
Includes 11,000 shares of Common Stock held by Ms. Bellinger's spouse and 100 shares of Common Stock held by Ms. Bellinger’s child. On January 3, 2017, the Company granted 4,279 deferred restricted stock units to Ms. Bellinger.
(7)
Includes 4,000 shares of Common Stock held in a family trust. On January 3, 2017, the Company granted 6,583 deferred restricted stock units to Mr. Hall.
(8)
Mr. Hoffman is a member of the investment committee of R/C Renewable Energy GP II, LLC, and such entity may be deemed to share beneficial ownership of the shares beneficially owned by Pattern Renewables LP. The members of such investment committee, including Mr. Hoffman, have expressly disclaimed any such beneficial ownership. See footnote (1).
(9) On January 3, 2017, the Company granted 6,583 deferred restricted stock units to Ms. Newson.
(10) Includes 100,000 shares of Common Stock held by a trust of which Mr. Garland is the trustee and beneficiary. In addition, includes 175,012 shares of Common Stock that Mr. Garland has the right to acquire by exercise of stock options and 184,538 restricted stock awards that are subject to risk of forfeiture.
(11)
Includes 36,461 shares of Common Stock that Mr. Lyon has the right to acquire by exercise of stock options and 57,974 restricted stock awards that are subject to risk of forfeiture.
(12)
Includes 45,454 shares held by a trust of which Mr. Armistead is the trustee and beneficiary. In addition, includes 60,768 shares of Common Stock that Mr. Armistead has the right to acquire by exercise of stock options and 94,641 restricted stock awards that are subject to risk of forfeiture.
(13)
Includes 44,283 shares of Common Stock that Mr. Elkort has the right to acquire by exercise of stock options and 71,046 restricted stock awards that are subject to risk of forfeiture.
(14)
Includes 36,461 shares of Common Stock that Mr. Pedersen has the right to acquire by exercise of stock options and 63,664 restricted stock awards that are subject to risk of forfeiture.
(15) Includes 382,154 shares of Common Stock that the Company's officers have the right to acquire by exercise of stock options and 171,254 restricted stock awards that are subject to risk of forfeiture. The number of persons includes both the named executive officers and certain other executive officers listed under "Executive Officers and Executive Compensation - Executive Officers" and their respective beneficial ownership.
(16) Excludes deferred restricted stock units of 29,323 (Mr. Batkin), 13,441 (Ms. Bellinger), 18,798 (Mr. Hall) and 18,798 (Ms. Newson) granted through March 31, 2017.


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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers, and holders of more than 10% of our Common Stock to file reports regarding their ownership and changes in ownership of our securities with the SEC, and to furnish us with copies of all Section 16(a) reports that they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us and certain written representations provided to us, we believe that during the year ended December 31, 2016, and the period from January 1 to March 31, 2017, our directors, executive officers, and greater than 10% stockholders complied with all applicable Section 16(a) filing requirements, except that a Form 4 was filed on July 12, 2016 for Mr. Esben Pedersen reflecting the disposal of shares on July 1, 2016 pursuant to a previously established Rule 10b5-1 plan.




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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following sets forth a discussion of matters in which we are a participant and the amount involved exceeds $120,000, and in which current directors, executive officers, holders of more than 5% of our capital stock or any member of the immediate family of the foregoing had or will have a material interest. See also "Board of Directors and Corporate Governance - Non-employee Director Compensation" and "Executive Compensation - Employment and Severance Agreements."
Policies and Procedures for Related Party Transactions
As provided by our conflicts committee charter, our conflicts committee is responsible for reviewing and recommending to the board whether to approve in advance any material related party transactions between the Company and either of the Pattern Development Companies or their respective affiliates. The members of our conflicts committee determine whether to recommend a related party transaction in the exercise of their fiduciary duties as directors. Related party transactions not involving the Pattern Development Companies are reviewed by the nominating, governance and compensation committee under its charter.
Our Relationship with the Pattern Development Companies
In December 2016, certain investment funds managed by Riverstone Holdings LLC, which own interests in Pattern Development 1.0, engaged in a transaction in which (a) certain assets of Pattern Development 1.0 consisting principally of early and mid-stage U.S. development assets (including the Grady project which is an identified ROFO project) were transferred to a newly formed entity, Pattern Development 2.0, and (b) Pattern Development 1.0 retained the remainder of its assets consisting principally of the other identified ROFO projects, non-U.S. development assets, and its ownership interest in our Common Stock. The purpose of the transaction was to facilitate additional long-term capital raises by Pattern Development 2.0 to support the growth in the development pipeline. We also entered into other agreements with Pattern Development 2.0 which are substantially the same as existing agreements we have previously entered into with Pattern Development 1.0, including a purchase rights agreement discussed further below. Pattern Development 2.0 is structured to allow us to potentially invest in Pattern Development 2.0 in the future.
As of March 31, 2017, Pattern Development 1.0 owned approximately 19.4% of our outstanding Common Stock. Our continuing relationship with the Pattern Development Companies provides us with access to a pipeline of acquisition opportunities.
Our Purchase Rights
To promote our growth strategy we have entered into a purchase rights agreement with each of the Pattern Development Companies and their respective equity owners that provides us two distinct avenues to grow our business through acquisition opportunities from such companies:
a right of first offer with respect to any power project that such Pattern Development Company decides to sell, which we refer to together as our “Project Purchase Rights,” and separately as our "Pattern Development 1.0 Project Purchase Right" and "Pattern Development 2.0 Project Purchase Right;" and
a right of first offer with respect to such Pattern Development Company itself, or substantially all of its respective assets, if the equity owners of such Pattern Development Company decide to sell any material portion of the equity interests in such Pattern Development Company or substantially all of its respective assets, which we refer to together as our “Pattern Development Purchase Rights,” and separately as our "Pattern Development 1.0 Purchase Right" and "Pattern Development 2.0 Purchase Right."

We refer to this collection of rights as “our Purchase Rights.” Our Pattern Development 1.0 Project Purchase Right and Pattern Development 1.0 Purchase Right will terminate together upon the fifth anniversary of the completion of our initial public offering, or October 2, 2018. Our Pattern Development 2.0 Project Purchase Right and our Pattern Development 2.0 Purchase Right will terminate upon the fifth anniversary of the date of entry into the agreement creating such rights, or December 8, 2021. In each instance with respect to Pattern Development 1.0 and Pattern Development 2.0, however, such rights are subject to automatic five-year renewals unless either party dissents at the time of renewal. In addition, our respective Project Purchase Rights with respect to Pattern Development 1.0 and Pattern Development 2.0, and our Pattern Development 1.0 Purchase Rights and Pattern Development 2.0 Purchase Rights terminate upon the third occasion on which we decline to exercise our respective Project Purchase Right with respect to an operational or construction-ready project and following which Pattern Development 1.0 or Pattern Development 2.0, as the case may be, has sold the project to an unrelated third party. Following termination of our respective Project Purchase Rights, and our Pattern Development 1.0 Purchase Rights and Pattern Development 2.0 Purchase Rights, Pattern Development 1.0 or Pattern Development 2.0, as the case may be, will be under no obligation to offer any of its projects to us.


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Upon the termination of our respective Purchase Rights with Pattern Development 1.0 and/or Pattern Development 2.0, the Non-Competition Agreement with respect to Pattern Development 1.0 or Pattern Development 2.0, as the case may be (discussed below), will also terminate, and at such time, such respective Pattern Development Company will no longer be restricted from competing with us for acquisitions.
Any purchase of assets from either of the Pattern Development Companies, or of either Pattern Development Company itself, pursuant to our Purchase Rights will be subject to customary conditions precedent as well as the approval by the board of directors based on the recommendation to approve by the conflicts committee of our board of directors.
Our Project Purchase Rights
Pursuant to, and during the term of, our Project Purchase Rights, each of Pattern Development 1.0 and Pattern Development 2.0 has agreed to offer us a right of first offer with respect to any power project that it decides to sell. Our Project Purchase Rights extend to the sale of all of the projects of each of the Pattern Development Companies, including development projects. Operational or construction-ready projects that the Pattern Development Companies choose to sell will generally include projects that have secured a power sale agreement, real estate rights, required permits, interconnection rights and equipment supply and construction agreements. Under the terms of our Project Purchase Rights, once we are notified by one of the Pattern Development Companies that it is seeking a purchaser for one of its projects, we shall either (a) deliver a written offer, or the “First Rights Project Offer,” to such Pattern Development Company to purchase its entire interest in the project setting forth our offer price, or our “Project Offer Price” and other material terms and conditions on which we propose to purchase such project, or the “Project Sale Terms,” or (b) deliver a written notice to such Pattern Development Company that we will not make an offer to purchase such Pattern Development Company’s entire interest in the project. If such Pattern Development Company elects not to accept our First Rights Project Offer, it may sell the project to a third party, provided that it sells the project within nine months of such rejection at a price not less than 105% of our Project Offer Price set forth in the First Rights Project Offer and on terms not materially less favorable than the Project Sale Terms.
The following sets forth summaries of the terms of the purchase and sale agreements for projects that have been entered into with Pattern Development 1.0 since January 1, 2016. We did not enter into any purchase and sale agreements for projects with Pattern Development 2.0 in 2016.
Armow Purchase and Sale Agreement
On October 17, 2016, an indirect wholly owned subsidiary of the Company, Pattern Canada Finance Company ULC, a Nova Scotia unlimited liability company ("PCFC"), consummated a Purchase and Sale Agreement (the "Armow PSA") with Pattern Development 1.0 (the "Armow Seller"). Upon the terms and subject to the conditions set forth in the Armow PSA, PCFC purchased at the closing (the "Armow Closing") from affiliates of the Armow Seller a 50% limited partnership interest in SP Armow Wind Ontario LP (the "Armow Project Company"), as well as 100% of the issued and outstanding shares in the capital of Pattern Armow GP Holdings Inc. for consideration of approximately $133 million, plus accrued estimated proportionate debt of approximately $197 million U.S. dollar equivalent. The Armow Project Company operates the approximately 179 MW wind farm located in the Municipality of Kincardine in Bruce County, Ontario which achieved commercial operations in December 2015. Following the Armow Closing, PCFC (a) directly owns a 50% limited partnership interest in the Armow Project Company and (b) directly owns 50% of the issued and outstanding shares of SP Armow Wind Ontario GP Inc., thereby holding a 0.02% general partnership interest in the Armow Project Company.
Broadview Purchase and Sale Agreement
On June 30, 2016, the Company entered into a Purchase and Sale Agreement (the "Broadview PSA") with Pattern Renewables LP, a Delaware limited partnership and controlled affiliate of Pattern Development 1.0 ("Broadview Seller"), and Pattern Development 1.0. The Broadview PSA provides for, among other things, the purchase (the "Broadview Acquisition") by the Company at commercial operations of the Wind Projects (as defined below), currently estimated to occur in April 2017, of 100% of the membership interests in Broadview Finco Pledgor LLC (the "Target"), which indirectly owns 100% of the membership interests in Broadview B Member LLC (the "Class B Member"), which indirectly owns 100% of the membership interests in Broadview Energy Holdings LLC which owns 100% of the membership interests in Broadview Energy Project Finco LLC, which owns 100% of the membership interests in each of the Broadview Energy KW, LLC and Broadview Energy JN, LLC (the "Wind Project Companies"), which Wind Project Companies own the Broadview Energy KW wind project and the Broadview Energy JN wind project (together, the "Broadview Wind Projects") respectively, and the Target indirectly owns 99% of the membership interests in Western Interconnect LLC (the "Transmission Project Company"), which owns the Western Interconnect Transmission Line (the "Transmission Project" and together with the Broadview Wind Projects, the "Broadview Projects").


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The Broadview Wind Projects together form 324 MW of wind capacity along the New Mexico / Texas border, and the Transmission Project is a 35-mile transmission line which will run from the Broadview Wind Projects to the existing Public Service of New Mexico 345kV transmission system. Under the Broadview PSA, the purchase consideration includes, among other things, the payment by the Company to Broadview Seller of (1) a cash amount of approximately $269 million at the closing of the Broadview Acquisition and (2) in connection with the commercial operations of the Grady project, a further contingent post-closing payment currently estimated to be approximately $19 million. The Grady project is a wind project on the identified ROFO list being separately developed by Pattern Development 2.0 which is expected to begin full construction not earlier than 2017 and which intends to interconnect through the Transmission Project. The contingent post-closing payment is intended to reflect the fair value of the Company's interest in the incremental transmission wheeling revenue from the addition of the Grady project which the Transmission Project Company will receive from the Grady project subject to certain adjustments.
The obligations to consummate the transactions contemplated by the Broadview PSA are subject to the satisfaction or waiver of various customary conditions, including, among others, (1) no violation of governmental rules, and no order of any court or administrative agency being in effect which restrains or prohibits the transactions contemplated by the Broadview PSA, (2) subject to certain exceptions, the accuracy of the representations of the other party set forth in the Broadview PSA, and (3) in the case of the Company, confirmation that the tax equity investors are ready, willing, and able to fund their contributions under the Equity Capital Contribution Agreement by and among the tax equity investors, the Class B Member and Broadview Energy Holdings LLC with respect to the Broadview Wind Projects (the "ECCA").
The Broadview PSA provides for certain limited rights, held by both parties, to terminate the Broadview PSA, including if the transactions contemplated by the Broadview PSA have not been consummated by September 30, 2017.
The Broadview PSA includes customary representations by Broadview Seller and the Company, including as to due authorization, non-contravention, governmental consents and approvals, enforceability, ownership and title, no litigation or adverse claims, and tax matters with respect to the underlying Broadview Projects. The Broadview PSA provides for customary indemnification by Broadview Seller and by the Company, as applicable, for breaches of representations or covenants, which indemnification is subject to customary limitations including, among other things, a cap and time limits.
The aggregate funding by the Company to acquire and complete the Broadview Projects (including the cash purchase consideration described above and funds that will enable the Class B Member to perform its funding obligations under the ECCA, but excluding the contingent post-closing Grady additional payment) is estimated to be approximately $269 million.
At the closing of the Broadview Acquisition, the Company will also enter into assignment and assumption agreements pursuant to which the Company will assume certain rights and obligation relating to agreements Broadview Seller entered into with the original project developers of the Broadview Wind Projects and the Transmission Project and from whom Broadview Seller had purchased such Broadview Projects.



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Each of the purchases of Armow and the Broadview Projects were recommended by the conflicts committee, which is comprised solely of independent directors under both the NASDAQ and Canadian requirements, for approval by the board of directors, and approved by the board of directors.
Below is a summary of the identified ROFO projects that we expect to acquire from the Pattern Development Companies in connection with our Project Purchase Rights.
Identified
ROFO Projects
 
Status
 
Location
 
Construction
Start
(1)
 
Commercial
Operations
(2)
 
Contract
Type
 
Rated(3)
 
Pattern
Development-
Owned
(4)
Pattern Development 1.0 Projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kanagi Solar
 
Operational
 
Japan
 
2014
 
2016
 
PPA
 
14

 
6

Futtsu Solar
 
Operational
 
Japan
 
2014
 
2016
 
PPA
 
42

 
19

Conejo Solar(5)
 
Operational
 
Chile
 
2015
 
2016
 
PPA
 
104

 
104

Meikle
 
Operational
 
British Columbia
 
2015
 
2017
 
PPA
 
180

 
180

Belle River
 
In construction
 
Ontario
 
2016
 
2017
 
PPA
 
100

 
43

Ohorayama
 
In construction
 
Japan
 
2016
 
2018
 
PPA
 
33

 
31

Mont Sainte-Marguerite
 
In construction
 
Québec
 
2017
 
2017
 
PPA
 
147

 
147

Henvey Inlet
 
Late stage development
 
Ontario
 
2017
 
2018
 
PPA
 
300

 
150

North Kent
 
Late stage development
 
Ontario
 
2017
 
2018
 
PPA
 
100

 
43

Tsugaru
 
Late stage development
 
Japan
 
2017
 
2019
 
PPA
 
126

 
63

Pattern Development 2.0 Projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grady
 
Late stage development
 
New Mexico
 
2018
 
2019
 
PPA
 
220

 
176

 
 
 
 
 
 
 
 
 
 
 
 
1,366

 
962

(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 may be less than its rated capacity. The amount of electricity generated may vary based on a variety of factors.
(4)
Owned capacity represents the maximum, or rated, electricity generating capacity of the project in MW multiplied by either Pattern Development 1.0's or Pattern Development 2.0's percentage ownership interest in the distributable cash flow of the project.
(5)
From time to time, we conduct strategic reviews of our markets.  We have been conducting a strategic review of the market, growth, and opportunities in Chile.  In the event we believe we can utilize funds that have already been invested in Chile or funds that might otherwise be invested in Chile in a more productive manner elsewhere that could generate a higher return on investment, we may decide to exit Chile for other opportunities with greater potential.  In addition, Pattern Development 1.0 is also concurrently exploring strategic alternatives for its assets in Chile.

Our Pattern Development Purchase Rights

We have a right of first offer with respect to each of the Pattern Development Companies itself or substantially all of its respective assets, if the equity owners of such Pattern Development Company decide to sell a material portion of the equity interests in such Pattern Development Company or substantially all of its respective assets.

Under the terms of our Pattern Development Purchase Rights, the equity owners of the applicable Pattern Development Company will be required to notify us if they intend to sell such Pattern Development Company or substantially all of its respective assets, and we will be required to either (a) deliver a written offer, or the “First Rights Pattern Development Company Offer,” to purchase such Pattern Development Company or substantially all of its respective assets, setting forth our offer price, or our “Pattern Development Company Offer Price,” and the other material terms and conditions upon which we propose to purchase such Pattern


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Development Company, or the “Pattern Development Company Sale Terms,” or (b) deliver a written notice to the equity owners of such Pattern Development Company that we will not make an offer to purchase such Pattern Development Company or substantially all of its respective assets. If the equity owners of such Pattern Development Company elect not to accept our First Rights Pattern Development Company Offer, they may sell such Pattern Development Company or substantially all of its respective assets to another third party, provided that the sale is consummated within nine months of the date of the First Rights Pattern Development Company Offer, at a price not less than 105% of the Pattern Development Company Offer Price and otherwise on terms not materially less favorable than the Pattern Development Company Sale Terms.

Amended and Restated Non-Competition Agreement
Previously, in October 2013, the Company entered into a Non-Competition Agreement with Pattern Development 1.0. On December 8, 2016, the Non-Competition Agreement was amended and restated and Pattern Development 2.0 was added as a party thereto. Pursuant to the Amended and Restated Non-Competition Agreement, each of Pattern Development 1.0 and Pattern Development 2.0 has agreed that, for so long as any of the Pattern Development 1.0 Purchase Rights or Pattern Development 2.0 Purchase Rights, respectively, are exercisable, Pattern Development 1.0 and Pattern Development 2.0, as applicable, will not compete with the Company for acquisitions of power generation or transmission projects from third parties. Each of Pattern Development 1.0 and Pattern Development 2.0, as applicable, will notify the Company of opportunities to acquire power generation or transmission projects that it wishes to pursue, and, should the Company be interested in acquiring all or a portion of such projects, the Company will have the right to direct Pattern Development 1.0 and Pattern Development 2.0, as applicable, to forgo such opportunities and to cause employees of Pattern Development 1.0 and Pattern Development 2.0, as applicable, to assist the Company in connection with pursuing such acquisition as a result of the Multilateral Management Services Agreement (as discussed below). The Company may also elect to collaborate with Pattern Development 1.0 and Pattern Development 2.0, as applicable, to jointly pursue acquisition opportunities from time to time. Riverstone is not subject to the Amended and Restated Non-Competition Agreement.
Multilateral Management Services Agreement (the amended and restated Bilateral Management Services Agreement)
Previously, in October 2013, the Company entered into a Bilateral Management Services Agreement with Pattern Development 1.0. On December 8, 2016, the Bilateral Management Services Agreement was amended and restated, Pattern Development 2.0 was added as a party thereto, and such agreement was re-named as the Multilateral Management Services Agreement. Pursuant to the Multilateral Management Services Agreement:

Pattern Development 1.0 agrees to make its personnel available to each of the Company and Pattern Development 2.0 to provide certain services, including accounting and tax, construction and engineering, corporate legal, corporate support, finance and analysis, human resources, information technology support and project development; and
The Company agrees to make its personnel available to each of Pattern Development 1.0 and Pattern Development 2.0 to provide certain services to the extent required, including personnel to act as "shared PEG executives" (as defined below).
The Company's project operations personnel and executive officers are solely compensated by the Company. These executives lead the Company's business functions and rely on support from Pattern Development 1.0 employees for certain professional, technical and administrative functions. Pattern Development 1.0 employs those employees whose primary responsibilities relate to project development, construction or legal, financial or other administrative functions. The Multilateral Management Services Agreement provides each of the Company, Pattern Development 1.0, and Pattern Development 2.0 to benefit, primarily on a cost-reimbursement basis, from the Company's respective management and other professional, technical and administrative personnel, all of whom ultimately report to and are managed by the Company's executive officers. In the event that Pattern Development 1.0 or Pattern Development 2.0, as applicable, is, or substantially all of its assets are, acquired by an unrelated third party, the Company will also have the unilateral right to terminate the Multilateral Management Services Agreement with respect to Pattern Development 1.0 or Pattern Development 2.0, as applicable.


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Pursuant to the Multilateral Management Services Agreement, certain of the Company's executive officers, including the Company's CEO, also provide executive management services to Pattern Development 1.0 and Pattern Development 2.0 and devote their time to each of the Company, Pattern Development 1.0, and Pattern Development 2.0 as is prudent in carrying out their executive responsibilities and fiduciary duties. Employees who serve as executive officers of the Company and Pattern Development 1.0 and/or Pattern Development 2.0 are referred to as the “shared PEG executives.” The shared PEG executives have responsibilities for the Company and Pattern Development 1.0 and/or Pattern Development 2.0 and, as a result, these individuals do not devote all of their time to the Company's business. Under the terms of the Multilateral Management Services Agreement, Pattern Development 1.0 and/or Pattern Development 2.0, as applicable, are required to reimburse the Company for an allocation of the compensation paid to such shared PEG executives reflecting the percentage of time spent providing services to such entity/entities (as applicable).
The Multilateral Management Services Agreement entitles the Company to acquire from Pattern Development 1.0 or Pattern Development 2.0, as applicable, any assets reasonably necessary for the administration of the Company's business, such as computer hardware, software and data back-up infrastructure, and Pattern Development 1.0 and Pattern Development 2.0, as applicable, will be required to reimburse the Company for an allocation of the costs paid by the Company for its share of costs going forward to the extent these assets are subsequently used in the administration of Pattern Development 1.0’s or Pattern Development 2.0’s business, as applicable.
Employee Transfer of Pattern Development 1.0 Employees
The Multilateral Management Services Agreement continues to provide the Company the option to cause the employees of Pattern Development 1.0 to become the Company's employees. The Company refers to this event as the employee transfer. The Company has the option, exercisable by delivery of a written notice to Pattern Development 1.0 at any time prior to December 31, 2017, to require the employee transfer to occur. From and after the date of such notice, the Company, Pattern Development 1.0, and Pattern Development 2.0 will cooperate to cause such employee transfer to occur by the six month anniversary of such notice or as soon as reasonably practicable thereafter. The Company will not be required to make any payments to Pattern Development 1.0 or Pattern Development 2.0 upon the occurrence of the employee transfer, other than the payment of any statutory severance payments that may as a result be due and payable to employees in certain jurisdictions outside the United States. The occurrence of the employee transfer will not alter the Pattern Development 1.0 Purchase Rights or Pattern Development 2.0 Purchase Rights.
Following the employee transfer, the Company will continue to provide management and other services to Pattern Development 1.0 and Pattern Development 2.0 (including such capabilities that as a result of the employee transfer have become the Company's capabilities) to the extent requested in connection with Pattern Development 1.0’s and Pattern Development 2.0’s remaining development activities, and Pattern Development 1.0 and Pattern Development 2.0, as applicable, will continue to pay the Company for those services primarily on a cost reimbursement basis.
Service Mark License Agreement
The Company has entered into a Service Mark License Agreement with each of the Pattern Development Companies which provides each of the Pattern Development Companies with a license from the Company to use the Pattern Development logo and certain other service marks.
Assignment and Assumption of San Francisco Office Lease
Effective January 1, 2016, Pattern Development 1.0 assigned to the Company all of Pattern Development 1.0’s rights, title, and interest under that certain Office Lease, dated as of September 9, 2009, between AMB Pier One, LLC (the “Landlord”) and Pattern Development 1.0 (the “Existing Office Lease”) with respect to approximately 27,502 square feet of office space at Pier 1, Bay 3, San Francisco, California 94111 (the “Lease Assignment”). The Landlord consented to such Lease Assignment on January 25, 2016. As a result of the Lease Assignment, the Company assumed remaining rental commitments under the Existing Office Lease of approximately $1.6 million plus certain annual operating expense reimbursements and customary security deposits. Pursuant to the Management Services Agreement (as amended), the costs of the shared office space have been, and will continue to be, allocated on a cost reimbursement basis between the Company and Pattern Development 1.0 and Pattern Development 2.0.
Registration Rights Agreement
In connection with the issuance of our equity securities to Pattern Development 1.0 in connection with the contribution transactions at the time of our initial public offering, we entered into a registration rights agreement with Pattern Development 1.0 (“Registration Rights Agreement”) for the registration and sale of shares of Common Stock held by Pattern Development 1.0 under


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the U.S. Securities Act of 1933, as amended (the “Securities Act”) and/or the qualification for distribution of such shares of Common Stock under the securities laws of the provinces and territories of Canada.

Indemnification Agreements
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
Conflicts of Interest and Fiduciary Duties
While we believe our relationship with the Pattern Development Companies provides us with a significant advantage, it is also a potential source of conflicts of interest. None of our executive officers receive any compensation paid by either of the Pattern Development Companies, but some of our executive officers continue to have economic interests in the Pattern Development Companies.
Under the transaction which formed Pattern Development 2.0, the formation of Pattern Development 2.0 had a similar Class A equity ownership structure as Pattern Development 1.0 and certain officers (including the following named executive officers, Michael M. Garland, Hunter H. Armistead, and Daniel M. Elkort) hold similar types of Class A interests in Pattern Development 2.0 as in Pattern Development 1.0. The Class B equity ownership structure in Pattern Development 2.0 differs from the Class B equity ownership structure in Pattern Development 1.0. Certain of our executive officers hold Class B equity interests in the Pattern Development Companies as reflected in the tables below. In 2016, Section 5 of our Code of Business Conduct and Ethics was amended to provide a similar exception as the Pattern Development 1.0 exception for having an interest in Pattern Development 2.0.

In addition, Messrs. Garland and Armistead serve as directors of, and therefore have certain fiduciary duties to, each of the holding companies of the Pattern Development Companies. Messrs. Garland, Armistead, Elkort, Deters and Devlin also serve as officers of each of the Pattern Development Companies. As a result of these relationships, conflicts of interest may arise in the future between us (and our shareholders other than Pattern Development 1.0) and each of the Pattern Development Companies (and its owners and affiliates).
The officers and directors of each of the Pattern Development Companies have a fiduciary duty to manage the respective businesses in a manner beneficial to the respective owners and, in connection with fulfilling this duty, the ownership and management of each of the Pattern Development Companies may compete with us for the time and focus of the shared executives or for employment of other talented individuals, or may develop business plans in a manner that is incompatible with our objectives, any of which might result in our failure to realize the full benefits of the relationships that we currently contemplate and jeopardize our ability to execute our growth plan.
Any material transaction between us and either of the Pattern Development Companies will be subject to our corporate governance guidelines and the prior approval of the conflicts committee, which is comprised solely of all of the independent members of our board of directors under both the NASDAQ and Canadian requirements. Because certain of our directors and executive officers will continue to have economic interests in the Pattern Development Companies, these individuals will have an interest in any transaction between our company and the relevant Pattern Development Company in proportion to their respective economic interests in such Pattern Development Company. As a result, these individuals may be conflicted when advising the conflicts committee or otherwise participating in the negotiation or approval of such transactions on our behalf. The conflicts committee has the ability to consult with those of our executive officers and operating personnel who do not have economic interests in the Pattern Development Companies, including Mr. Lyon, our Chief Financial Officer, and Mr. Pedersen, our Chief Investment Officer, as well as other external advisors that the conflicts committee deems appropriate, in connection with reviewing a transaction with the Pattern Development Company. In addition, in some cases, transactions between our company and a Pattern Development Company will be related party transactions for the purposes of MI 61-101. MI 61-101 provides, among other things, that in certain circumstances a transaction between an issuer and a related party of the issuer is subject to formal valuation and minority shareholder approval requirements.
Among our executive officers, Mr. Garland, our Chief Executive Officer (and one of our directors), Mr. Armistead, our Executive Vice President, Business Development, and Mr. Elkort, our Executive Vice President and General Counsel, continue to hold direct and indirect limited partnership interests in each of Pattern Energy Group Holdings LP ("PEG Holdings 1") (in its capacity as the sole managing member of the general partner of Pattern Development 1.0) and Pattern Energy Group Holdings 2 LP ("PEG Holdings 2") (in its capacity as the sole managing member of the general partner of Pattern Development 2.0). The continuing interests of such officers in PEG Holdings 1 and PEG Holdings 2 will entitle them to indirectly receive a proportionate share of the distributable profits of Pattern Development 1.0 and Pattern Development 2.0, respectively, which would include a


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proportionate share of profits from the sale of a project by such Pattern Development Company to our company, or the sale of our shares by Pattern Development 1.0. Each of PEG Holdings 1 and PEG Holdings 2 has both A interests and B interests. The A interests and B interests effectively entitle holders thereof, in aggregate, to at least 85% and up to 15% of the cumulative profits of the respective Pattern Development Company, respectively. The tables below sets forth the number and percentage of A interests and B interests held by our executive officers in each of the PEG Holdings 1 and PEG Holdings 2, respectively.
Interests in PEG Holdings 1
A Interests
 
Direct and Indirect B Interests (1)
Name and Title
Number Held
 
Percentage of Total
 
Number Held
 
Percentage of Total
Michael M. Garland President and Chief
Executive Officer
1,869,762

 
0.25
%
 
246,839

 
24.82
%
Hunter H. Armistead Executive Vice
President, Business Development
1,416,124

 
0.19
%
 
216,957

 
21.82
%
Daniel M. Elkort Executive Vice President
       and General Counsel
193,080

 
0.02
%
 
89,400

 
8.99
%
Interests in PEG Holdings 2
A Interests
 
Direct and Indirect B Interests (1)
Name and Title
Number Held
 
Percentage of Total
 
Number Held
 
Percentage of Total
Michael M. Garland President and Chief
Executive Officer
470,845

 
0.22
%
 
3

 
50.00
%
Hunter H. Armistead Executive Vice
President, Business Development
353,998

 
0.17
%
 
2

 
33.33
%
Daniel M. Elkort Executive Vice President
       and General Counsel
47,015

 
0.02
%
 
1

 
16.67
%
(1)
The B interests held by each of Messrs. Garland, Armistead, and Elkort were issued subject to certain restrictions pursuant to which all or a portion of the B interests held by an individual would be forfeited in the event the individual ceased performing services to Pattern Development 1.0 and Pattern Development 2.0 and its affiliates, as the case may be, respectively. These forfeiture restrictions were initially scheduled to lapse over time in four equal annual installments or earlier upon satisfaction of certain specified conditions. As of March 31, 2017, 0% and 100% of the B interests in PEG Holdings 1 and PEG Holdings 2, respectively, held by the executive officers in the tables above remained subject to these forfeiture restrictions.
Additional of our executive officers may obtain direct and/or indirect limited partnership interests in PEG Holdings 2, and the interests of the executive officers set forth in the table above for PEG Holdings 2 are likely to change.



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EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
Executive Officers
The following table provides certain information regarding our executive officers who are not also directors. All of our officers serve at the discretion of our board of directors. The ages of our executive officers set forth below are as of December 31, 2016.
Name
 
Age
 
Position(s) Held
Michael J. Lyon
 
58
 
Chief Financial Officer
Hunter H. Armistead
 
48
 
Executive Vice President, Business Development
Daniel M. Elkort
 
59
 
Executive Vice President and General Counsel
Esben W. Pedersen
 
44
 
Chief Investment Officer
Christopher M. Shugart
 
45
 
Senior Vice President, Operations
Kevin E. Devlin
 
52
 
Senior Vice President, Strategic Operations
Richard A. Ostberg
 
51
 
Senior Vice President, Controller
Kevin J. Deters
 
44
 
Vice President, Engineering and Construction

Michael J. Lyon
Mr. Lyon has served as our Chief Financial Officer since October 2012. Prior to joining our company, Mr. Lyon served as Head of Structured Finance of Pattern Development 1.0 since May 2010. Prior to joining Pattern Development 1.0, Mr. Lyon independently managed a portfolio of investment assets from 2003 to 2010. He was a principal of Babcock & Brown from 1989 to 2003, where he advised clients on, and structured and placed debt and equity in, the independent power industry. He is a former Certified Public Accountant.
Hunter H. Armistead
Mr. Armistead has served as our Executive Vice President, Business Development since August 2013. Prior to joining our company, Mr. Armistead served as Executive Director of Pattern Development 1.0 since June 2009. Prior to joining Pattern Development 1.0, from 2000 to 2009, Mr. Armistead managed Babcock & Brown’s renewable energy group in North America, focusing on the origination, strategic evaluation and consummation of opportunities in the renewable energy sector.
Daniel M. Elkort
Mr. Elkort has served as our Executive Vice President and General Counsel since August 2013, and is our Chief Compliance Officer. Prior to joining our company, Mr. Elkort served as Director of Legal Services and Co-Head of Finance of Pattern Development 1.0 since June 2009. Prior to joining Pattern Development 1.0, from 1996 to 2009, Mr. Elkort was responsible for managing the various project financings of Babcock & Brown’s North American renewable energy projects and served as the senior legal officer in Babcock & Brown’s North American Infrastructure Group.
Esben W. Pedersen
Mr. Pedersen has served as our Chief Investment Officer since August 2013. Prior to joining our company, Mr. Pedersen served as Co-Head of Finance of Pattern Development 1.0 since June 2009. Prior to joining Pattern Development 1.0, Mr. Pedersen was employed by Babcock & Brown from 2007 to 2009, where he focused on the origination and execution of investments in the energy sector. He is a Chartered Financial Analyst.
Christopher M. Shugart
Mr. Shugart has served as our Senior Vice President, Operations since August 2013. Prior to joining our company, Mr. Shugart was employed by Pattern Development 1.0 beginning in 2009 where he was Director of Asset Operations and Maintenance. Prior to joining Pattern Development 1.0, Mr. Shugart was employed by Babcock & Brown from 2006 to 2009, where he focused on the development and management of transmission, wind and natural gas-fired power facilities.
Kevin E. Devlin
Mr. Devlin has served as our Senior Vice President, Strategic Operations since August 2016 where he has executive responsibility for various strategic change initiatives in the corporate and operational activities as well as line responsibility for corporate functions such as human resources, information technology, and procurement. Mr. Devlin has almost 30 years


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commercial, developmental, and operational experience in the energy sector covering all forms of renewables, oil and gas, and conventional thermal power generation. Prior to joining our company, he held executive responsibility for the operations of Iberdrola Renewables in the US. In this role, he led the formation and growth of the Asset Management and O&M functions at Iberdrola (formerly PPM Energy). Prior to PPM Energy, Mr. Devlin was director of commercial development for Scottish Power, one of the largest utilities in the United Kingdom. He holds a bachelor's degree in mechanical engineering from Queens University.
Richard A. Ostberg
Mr. Ostberg has served as our Senior Vice President, Controller since March 2017 and as our principal accounting officer. Prior to joining our company, Mr. Ostberg served as chief financial officer of SourceGas, a natural gas utility serving customers in four states, from 2013 to 2016. Mr. Ostberg was with Xcel Energy from 2007 to 2013 as their assistant controller initially and later as their associate vice president of revenue requirements. Prior to Xcel, Mr. Ostberg served as chief risk and compliance officer of Markwest Energy Partners from 2005 to 2007. He began his career with Deloitte and Touche and is a former certified public accountant.
Kevin J. Deters
Mr. Deters has served as our Vice President, Engineering and Construction since August 2014. Prior to joining our company, Mr. Deters worked for Mortenson Construction for 14 years where he most recently was the vice president and general manager of their electrical division. He had also served as the director of operations for Mortenson's US and Canadian wind farm construction. Mr. Deters has managed a variety of construction projects in his career, including manufacturing facilities, gas fired energy projects, wind farms, solar facilities, and high voltage transmission. He holds a bachelor's degree in civil engineering from Iowa State University.


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COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary

This compensation discussion and analysis describes our executive compensation programs. It provides information about the goals and the key elements of the program and explains the reasons behind the executive compensation decisions of the nominating, governance and compensation committee (the “NGC Committee”).

Our focus in this compensation discussion and analysis is the fiscal 2016 compensation of the following persons who are the "named executive officers" of the Company.

Name
 
Title
Michael M. Garland
 
President and Chief Executive Officer
Michael J. Lyon
 
Chief Financial Officer
Hunter H. Armistead
 
Executive Vice President, Business Development
Daniel M. Elkort
 
Executive Vice President and General Counsel
Esben W. Pedersen
 
Chief Investment Officer

Executive Compensation Philosophy

The primary objectives of our executive compensation program are to:

Attract and retain talented executives capable of producing outstanding business results for the Company;

Motivate and reward executives to achieve short and long-term financial and operational goals that drive shareholder value creation;

Provide strong pay-performance linkage and a wide range of incentive compensation outcomes to ensure alignment between cost of executive compensation and the Company’s performance; and

Implement policies and practices that are mindful of the concerns of our shareholders and good governance practices.

Furthermore, the design of the executive compensation programs should:

Emphasize variable compensation over fixed compensation;

Reflect the entrepreneurial nature of the Company;

Take into account both internal and external perspectives of pay and performance; and

Incorporate quantitative pay determination aspects but also provide limited room for judgment by the NGC Committee.

Fiscal 2016 Business Performance Highlights

The following are highlights of the Company’s performance for fiscal 2016. The comparisons made are between fiscal 2016 and fiscal 2015 results.

Revenue was $354.1 million, up 7%;

Proportional gigawatt hours ("GWh") sold was 6,806 GWh, up 33%;

Net cash provided by operating activities was $164 million, up 39%;

Cash available for distribution ("CAFD") was $133.0 million, up 44%;

Net loss was $52.3 million, an improvement of 6%;


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Adjusted EBITDA was $304.2 million, up 21%;

The Company paid aggregate dividends in 2016 of $1.58 per share of Common Stock to persons who were holders of record during 2016; and

The Company increased owned capacity 16% to 2,644 megawatts ("MW") and 18 wind projects at the end of fiscal 2016 (including one project it has agreed to acquire), compared to 2,282 MW in owned capacity and 16 wind projects at the end of fiscal 2015.

A reconciliation of generally accepted accounting principles ("GAAP") to non-GAAP financial measures is provided in Exhibit A to this Proxy Statement.

Fiscal 2016 Executive Compensation Highlights

Consistent with our performance and philosophy for performance-based compensation, highlights in our compensation for named executive officers in 2016 included the following:
Salary and target total direct compensation ("TDC") (which is salary plus incentive compensation) each increased by approximately 2.5% overall for our named executive officers as a group, reflecting the Company’s goal of managing both fixed pay and compensation expenses, respectively;

Actual total incentive compensation for our named executive officers for 2016 performance decreased between 13% to 29% from 2015 levels, with the overall decrease on an aggregated basis being 26%. Notwithstanding improvements in overall 2016 business performance from 2015 as described under "Fiscal 2016 Business Performance Highlights" above, the rigorous performance goals required even stronger levels of actual performance both on an absolute and relative basis, and therefore resulted in reduced incentive payments. Lower total incentive compensation was principally driven by application of lower multiples used in the computation of TDC for the named executive officers in 2016 compared to 2015. Lower TDC multiples in 2016 were generally driven by (i) below par performance on the "Other Corporate Growth-MWs added” corporate key performance indicator ("Corporate KPI") compared to above par performance in 2015, and partially offset by above par performance on each of the "Return on Equity Employed" and “Safety (TRIR)” Corporate KPIs in 2016 compared to at par performance in 2015, and (ii) a ranking in 2016 of 9th out of 11 companies with respect to annual total shareholder return ("TSR") performance when compared to the TSR peer group compared to a ranking in 2015 of 7th out of the 13 companies. While the actual 2016 “CAFD growth” Corporate KPI was approximately 14.5%, or above par performance, management recommended that the result of the “CAFD growth” Corporate KPI be treated as par performance because of overall business results. See further discussion below under “- Elements of Compensation - Determination of Total Incentive Compensation Based on Fiscal 2016 Performance;"

Consistent with 2015, a higher percentage allocation of total incentive compensation was long term incentive award than an annual cash incentive award for the named executive officers. Such percentage allocation was 67.5% for the chief executive officer and 57.5% for the other named executive officers in 2016 (except for one named executive officer who was 60.0%). See “-Elements of Compensation-Incentive Compensation-Allocation of Fiscal 2016 Total Incentive Compensation between Annual and Long-Term Incentive Awards;"

Similarly consistent with 2015 and in line with a performance-based compensation philosophy, 2016 compensation has half of the long term incentive award vesting at the end of three years based on relative TSR performance measured against the TSR peer group;

We continued our practice of generally not providing perquisites to our named executive officers; and

There have been no increases to executive benefits to our named executive officers, who largely participate in the same programs as provided to other employees.

Key Compensation and Governance Policies

The Committee continually reviews the Company’s executive compensation program to maintain compensation and governance practices that are in the best interests of our shareholders.



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What we do:

We deliver a significant portion of each named executive officer’s compensation in variable pay tied to objective performance criteria set forth in the KPIs;

We foster a highly performance-oriented and entrepreneurial culture by maintaining base salary levels that are generally below the median of our benchmarks while providing competitive total compensation opportunities through our formulaic, and performance-based, incentive plan;

We tie pay to performance using a combination of internal (company financial and operational goals) and external (relative TSR) goals in our incentive plan;

We focus on the long-term success of our organization by delivering the majority of our incentive compensation in the form of equity awards with 3-year vesting, with 50% of the equity awards to be earned based on forward-looking relative TSR performance;

We maintain an executive common stock ownership policy;

In the event of a change in control, our equity incentive plan does not provide for accelerated vesting of equity awards unless the successor corporation fails to assume or substitute for an award upon the change in control; and
 
The NGC Committee has retained a compensation consultant, Frederic W. Cook Co. ("F.W. Cook"), who reports directly to the NGC Committee. In 2016, Mercer (US) Inc. ("Mercer") also has provided compensation advice to the Company. The independence of each such advisor has been analyzed under the independence factors specified in the applicable requirements of the NASDAQ listing standard.

What we don’t do:

We do not permit the repricing of stock options without stockholder approval;

We do not provide perquisites or supplemental retirement plans to our named executive officers;

We do not permit hedging or pledging in Company stock;

We do not provide single-trigger change of control provisions in our employment agreements with our named executive officers; and

We do not provide excise tax gross up payments in our employment agreements or equity plan.

Process for Determination of Executive Compensation

Use of Peer Groups

The NGC Committee regularly reviews the Company’s executive compensation program against the programs of peer group companies. The Company seeks to confirm that each of its compensation elements, its compensation structure, and the compensation opportunities provided under the program, are appropriate for the Company in light of its business stage, culture, performance and strategy. While in prior years a single group of peer companies had been selected and utilized for the purposes of both (a) compensation benchmarking in assessing the reasonableness of base salaries and in determining target TDC opportunities for each named executive officer and (b) to determine the Company’s relative TSR performance, for 2016 the NGC Committee determined to utilize separate groups of peer companies for the two purposes.

Peer group companies are selected using the following criteria:
Market. Publicly traded on a major US or Canadian exchange;
Industry. Power producers and/or energy industry companies;
Size. Revenue and market capitalization generally ranging between one-third and three times Pattern Energy (companies outside the range may be included if they are particularly strong comparators based on the other criteria); and
Business model. High dividend yield companies, master limited partnership and yieldco companies where possible.



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After further review on behalf of the NGC Committee by F.W. Cook, the NGC Committee acted on the recommendation of Mercer and the Company's management to select the following twelve companies listed below, which are the same companies utilized for fiscal 2014 and fiscal 2015, as the Company's peer group for compensation benchmarking and in determining target TDC opportunities for each named executive officer (the "Compensation Peer Group"):
Algonquin Power & Utilities Corp
 
Innergex Renewables Energy Inc.
Atlantic Power Corp
 
 Legacy Reserves LP
Boralex Inc
 
Natural Resource Partners LP
BreitBurn Energy Partners LP
 
Niska Gas Storage Partners LLC
Capital Power Corp
 
Northland Power Inc.
Capstone Infrastructure Corp
 
Vanguard Natural Resources LLC

See the description in “Base Salary” and “Incentive Compensation” below for more details.

Similarly, after further review on behalf of the NGC Committee by F.W. Cook, the NGC Committee acted on the recommendation of Mercer and the Company's management to select the following ten companies listed below as the Company's peer group to determine the Company’s relative TSR performance (the "TSR Peer Group"). The bifurcation of peer groups for purposes of compensation benchmarking and determining the Company's relative TSR performance was made because the NGC Committee believed that that the Company's most comparable peer group for relative TSR performance is the "yieldco" sector; however, many of the companies in such sector do not have internal management and are therefore not useful in terms of pay benchmarking.
Brookfield Renewable Energy Partners
 
Boralex Inc.
NRG Yield
 
Innergex Renewables Energy Inc.
Northland Power
 
Hannon Armstrong
Algonquin power
 
8point3 Energy
Nextera Energy Partners
 
Transalta Renewables

In connection with determining the Company’s relative TSR performance.

At the end of the fiscal year, historical relative TSR performance is used as one factor in determining each named executive officer’s TDC for the year. This is discussed in more detail below under “- Elements of Compensation - Incentive Compensation.”

Future relative TSR performance is used to determine the vesting of a portion of each named executive officer’s long-term incentive award. This is described in more detail below, under “- Elements of Compensation - Incentive Compensation - 2017 Long-Term Incentive Award Grants Based on Fiscal 2016 Performance.”

Role of the NGC Committee, Management, and our Compensation Advisors
The process of our NGC Committee in determining executive compensation, and the role of the chief executive officer, in such process is described above under “Board of Directors and Corporate Governance - Corporate Governance and Board Matters - Information Regarding the Board of Directors and Its Committees - Nominating, Governance and Compensation Committee.”
Mercer was previously engaged by the Company to collaborate with management and provide specific recommendations to the NGC Committee regarding the executive compensation peer groups and the incentive compensation program design, and to provide the NGC Committee with peer group compensation benchmark data. The Compensation Peer Group compensation benchmark data was initially prepared to establish target TDC for fiscal 2014 executive compensation and was updated in each of 2015 and 2016 using an aging factor for use in establishing target TDC for fiscal 2016 executive compensation.
F.W. Cook was also previously engaged by the NGC Committee to provide a second review and serve as an objective, third party counsel on the reasonableness of amount and form of executive compensation levels and compensation program structure.
The NGC Committee considered whether any conflicts of interest were created by its retention of either Mercer or F.W. Cook taking into account various factors, and concluded that no conflicts of interest existed with respect to either Mercer or F.W. Cook.


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Elements of Compensation

The table below identifies the principal elements of our fiscal 2016 executive compensation program, and the subsequent narrative provides a fuller description of each element.
Compensation Element
Form of Compensation
Brief Description
Base Salary
Cash
Minimum guaranteed compensation to reward individual performance and contributions
Incentive Compensation
Annual incentive compensation
Cash
Ensure that named executive officer total compensation reflects Company performance, is appropriately positioned relative to peers and supports the entrepreneurial nature of the Company
Incentivize and reward company and individual performance goals
Long-term incentive compensation
Equity
Promote long-term company performance and stock ownership to align executive interests with shareholders

Restricted stock awards with 3-year vesting
-50% based on relative total shareholder return
-50% service-based vesting
Retirement Benefits
401(k) plan
Eligibility to participate in and receive Company contributions to our 401(k) plan (available to all employees)

Base Salary

The Company provides base salaries as a guaranteed minimum amount of compensation in consideration of day-to-day performance. Base salaries are designed to reward individual performance and contributions consistent with an executive officer's position and responsibilities. The NGC Committee annually reviews the base salaries of the named executive officers, and may adjust base salaries, typically at the beginning of a fiscal year, based upon consideration of:

The executive's current salary;

The executive's performance and contributions during the past fiscal year;

The executive's qualifications and responsibilities;

The executive's tenure with the Company and the position held by the executive;

The Company-wide cost-of-living and merit pool increase in the base salaries for all employees;

Competitive salary considerations relative to similar positions at other companies competing for talent in the Company's employment market, including the Company's Compensation Peer Group companies;

The overall economic environment within which we operate; and

The recommendation of the chief executive officer, in the case of all named executive officers other than himself.



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Based on consideration of these factors, and consistent with the overall cost-of-living and merit increase budget of the Company, the NGC Committee approved a 2.5% increase in base salary for each named executive officers in fiscal 2016:

Named Executive Officer
 
Fiscal 2016
Base Salary
 
Fiscal 2015
Base Salary
Michael M. Garland
 
$
430,756

 
$
420,250

Michael J. Lyon
 
$
248,358

 
$
242,300

Hunter H. Armistead
 
$
349,989

 
$
341,453

Daniel M. Elkort
 
$
312,298

 
$
304,681

Esben W. Pedersen
 
$
249,059

 
$
242,984


In alignment with the compensation philosophy and the Company's emphasis on the link between pay and performance, base salaries are a less significant percentage of TDC compared to the Company's variable performance-based compensation. Mercer’s executive compensation assessment conducted in 2014 confirmed that the named executive officer base salaries were all below median of the Compensation Peer Group. While a similar benchmark assessment was not performed in either 2015 or 2016, it is believed that such salaries remain below median of the Compensation Peer Group given the small 2.5% increases for each 2015 and 2016.

Incentive Compensation

The NGC Committee seeks to align the Company’s cash and equity based incentive programs provided as a part of named executive officer incentive compensation with the Company's overall executive compensation philosophy discussed above under "- Executive Summary - Executive Compensation Philosophy" and with the Company’s performance. The details of these programs, which were utilized in determining payouts for 2016, are described below.

Overview of the Incentive Compensation Plan Design and Award Determination Process

Under the design, cash and equity award levels are determined as follows:

Step 1. Prior to or at the start of the fiscal year, the NGC Committee determines a target TDC value (which includes salary plus incentive compensation) for each named executive officer taking into account the Company compensation philosophy and Compensation Peer Group compensation data. The NGC Committee also sets incentive plan goals or KPIs against which performance will be measured at the end of the fiscal year. KPIs incorporate Company financial and operational performance goals and individual performance goals (collectively, the "Corporate KPIs") and the Company's relative TSR performance over the year (the "TSR KPI").

Step 2. At the end of the fiscal year, performance is assessed against the Corporate KPIs into one of three levels of performance ("below par," "at par," or "above par") for each Corporate KPI separately. Each level of performance has a corresponding multiple range. This is used to formulaically calculate a performance multiple range to be applied to each named executive officer’s target TDC.

Step 3. Once the performance multiple range is determined in Step 2 for each Corporate KPI separately, the exact point within the range to be applied to target TDC is determined based on the TSR KPI performance. For example, relative TSR that exceeds all of the TSR Peer Group peers results in a performance multiple that is the highest point in the range. Conversely, relative TSR that is below all of the TSR Peer Group peers results in a performance multiple that is at the lowest point in the range. Relative TSR performance that is at the median, results in a performance multiple that is at the midpoint of the performance range. If the Company’s Corporate KPIs are below threshold and the Company’s relative TSR is less than all of the TSR Peer Group companies, there is no funding of incentive compensation.

Step 4. Base salary is subtracted from each named executive officer's TDC as determined above to determine total incentive compensation award values.

Step 5. Total incentive compensation award values are allocated between annual cash incentives (paid in the first quarter following fiscal year end) and long-term incentives (granted in the first quarter following fiscal year end). Allocations are determined using a sliding scale within a pre-determined range, with the weighting of long-term incentives increasing (and the weighting of annual cash incentives correspondingly decreasing) as actual TDC


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increases relative to target TDC. The NGC Committee determines the types of long-term incentive awards that will be granted each year and the vesting conditions for each award.

The NGC Committee retains the right to use its discretion, if appropriate, to adjust the calculated TDC values to take into account individual or corporate performance factors not otherwise captured in the process described above. The NGC Committee has not exercised this right to date.

Fiscal 2016 Target TDC and TDC Ranges by Named Executive Officer

The target TDC value for each named executive officer is determined by the NGC Committee to be competitively positioned relative to Compensation Peer Group median. The TDC ranges are designed to allow for variation in competitive positioning based on actual Company and individual performance. For fiscal 2016, the NGC Committee approved the following TDC ranges and incentive compensation allocation ranges for the named executive officers:

Named Executive Officer
 
Fiscal 2016
Target TDC
 
TDC Ranges Based on Performance of
Corporate and Relative TSR KPIs
Expressed as a Multiple of Target TDC
(1)
 
Incentive Compensation Allocation Ranges
Expressed as a Percent of Total Incentive Compensation
 
Performance
Below Par on Corporate KPIs
 
Performance
At Par on Corporate KPIs
 
Performance
Above Par on Corporate KPIs
 
Annual Cash
Incentive Weighting
 
Long-Term Incentive Weighting
Michael M. Garland
 
$1,938,000
 
0.22x - 0.67x
 
0.89x - 1.11x
 
1.33x - 3.33x
 
20% - 40%
 
60% - 80%
Michael J. Lyon
 
$807,000
 
0.31x - 0.69x
 
0.85x - 1.15x
 
1.31x - 3.0x
 
30% - 50%
 
50% - 70%
Hunter H. Armistead
 
$1,312,000
 
0.27x - 0.73x
 
0.87x - 1.13x
 
1.27x - 2.73x
 
30% - 50%
 
50% - 70%
Daniel M. Elkort
 
$1,015,000
 
0.31x - 0.69x
 
0.85x - 1.15x
 
1.31x - 3.0x
 
30% - 50%
 
50% - 70%
Esben W. Pedersen
 
$809,000
 
0.31x - 0.69x
 
0.85x - 1.15x
 
1.31x - 3.0x
 
30% - 50%
 
50% - 70%

(1)
For lowest performance and lowest TSR, the lowest level of TDC for each of the named executive officers would equal their base salary, implying the potential of zero additional payouts over base salary.

It is important to note that at-par performance on our Corporate KPIs results in a 1x multiple (i.e., target) in our incentive structure if our relative TSR is at the median for our TSR Peer Group (i.e., "at par" for the TSR KPI). A multiple above 1x is only achievable at par performance for the Corporate KPIs if performance exceeds target (i.e., median) on the TSR KPI. Similarly, our multiple can be below 1x at par performance for the Corporate KPIs if the TSR KPI is below target (i.e., median).



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Fiscal 2016 Incentive Compensation Plan KPIs

For fiscal 2016, the NGC Committee approved KPIs related to the following Company and individual performance metrics:

Corporate KPIs
 
Definition
 
Rationale For Inclusion
Cash Available for Distribution (“CAFD”) Growth
 
Cash available for distribution per share CAGR since 2014(1)(2)
 
CAFD growth is the Company’s principal financial target
Return on Equity Employed
 
2016 cash available for distribution divided by total equity before noncontrolling interest as of the beginning of the year
 
Return on equity employed provides an indication of management’s effectiveness in deploying capital
Other Corporate Growth
 
Megawatts (“MWs”) added in new construction or new PPAs (or equivalent)
 
Other corporate growth provides the foundation for achieving future growth
Safety
 
OSHA Total Recordable Incident Rate (“TRIR”)
 
Safety for the Company’s workforce is a top priority
Individual Performance Rating
 
Performance rating
 
Meeting organizational objectives requires outstanding performance by individuals
TSR KPI
 
 
 
 
Relative TSR
 
Ranking of the Company's TSR for the fiscal year compared to the TSR Peer Group
 
Relative TSR is an indicator of management's creation of shareholder value
(1)
The Company defines cash available for distribution as net cash provided by operating activities as adjusted for certain other cash flow items that it associates with its operations. It is a non-U.S. GAAP measure of the Company’s ability to generate cash to service its dividends. Cash available for distribution represents cash provided by operating activities as adjusted to (i) add or subtract changes in operating assets and liabilities, (ii) subtract net deposits into restricted cash accounts, which are required pursuant to the cash reserve requirements of financing agreements, to the extent they are paid from operating cash flows during a period, (iii) subtract cash distributions paid to noncontrolling interests, (iv) subtract scheduled project-level debt repayments in accordance with the related loan amortization schedule, to the extent they are paid from operating cash flows during a period, (v) subtract non-expansionary capital expenditures, to the extent they are paid from operating cash flows during a period, (vi) add cash distributions received from unconsolidated investments, to the extent such distributions were derived from operating cash flows and (vii) add or subtract other items as necessary to present the cash flows the Company deems representative of its core business operations.
The most directly comparable U.S. GAAP measure to cash available for distribution is net cash provided by operating activities.
(2)
The Company’s Corporate KPI for CAFD growth is determined by reference to its compound annual growth rate ("CAGR") for cash available for distribution per share for the three years from 2014 through 2016.



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The following table shows the weighting and performance targets for each fiscal 2016 Corporate KPI:
Corporate KPI
 
Weight
 
Level of Performance
 
Below
Threshold
 
Below
Par
 
Par
 
Above
Par
CAFD Growth
 
25%
 
<0%
 
<10%
 
10-12%
 
>12%
Return on Equity Employed
 
20%
 
<0%
 
<12%
 
12-15%
 
>15%
Other Corporate Growth - MWs added
 
30%
 
 
<225 owned MW
 
225-300 owned MW
 
>300 owned MW
Safety (TRIR)
 
5%
 
>4.0
 
> 3.0 (TRIR)
and CEO judgment
 
2-3 (TRIR)
and CEO judgment
 
< 2.0 (TRIR)
and CEO judgment
Individual Performance Ratings
 
20%
 
1
 
1.1-2.4
 
2.4-3.5
 
3.5-5

Performance goals were established and reviewed by the NGC Committee and board during fiscal 2016 at a time when performance relative to those goals remained substantially uncertain. 

Determination of Total Incentive Compensation Based on Fiscal 2016 Performance

The following table summarizes the achievement of fiscal 2016 Corporate KPIs:
Corporate KPI
 
Weight
 
Performance
Achievement
 
Performance
Relative to Par
CAFD Growth
 
25%
 
Approx. 14.5%
 
 At par (1)
Return on Equity Employed
 
20%
 
Approx. 16%
 
Above par
Other Corporate Growth - MWs added
 
30%
 
0 MW PPA & 346 MW Construction
 
Below par
Safety (TRIR)
 
5%
 
1.98
 
Above par
Individual Performance Ratings
 
20%
 
Varies by NEO
In range 2.4 - 4.0
 
At par for each NEO, except CIO rated above par

(1) Under the Corporate KPIs established by the NGC Committee, greater than 12% CAFD growth represents above par performance. Actual 2016 CAFD growth performance achieved was approximately 14.5%, or above par performance. Notwithstanding this formulaic determination, management recommended that the result of the CAFD growth performance Corporate KPI be treated as par performance because of the overall business results. The NGC Committee agreed with management’s recommendation.

Based on the TSRs of the companies in its TSR Peer Group, the Company ranked ninth out of eleven companies for the year ended December 31, 2016. This results in TDC multiples (except for one named executive officer) that are at 80% below the top of the ranges specified for each Corporate KPI in the compensation calculations.



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Based on the level of performance achieved for each Corporate KPI (including individual performance), the application of the weightings for each Corporate KPI, and the Company’s relative TSR performance to its TSR Peer Group, the NGC Committee approved the following total incentive compensation values for the named executive officers:

Named Executive Officer
 
Fiscal 2016
Base Salary
 
Fiscal 2016
Target TDC
 
NGC Committee Approved
Actual TDC and Total Incentive Compensation
TDC Multiple of Target(1)
 
TDC
Value
 
Total Incentive Compensation(2)
Michael M. Garland
 
$430,756
 
$1,938,000
 
0.95x
 
$1,835,000
 
$1,404,000
Michael J. Lyon
 
$248,358
 
$807,000
 
0.94x
 
$755,000
 
$507,000
Hunter H. Armistead
 
$349,989
 
$1,312,000
 
0.91x
 
$1,197,000
 
$847,000
Daniel M. Elkort
 
$312,298
 
$1,015,000
 
0.94x
 
$949,000
 
$637,000
Esben W. Pedersen
 
$249,059
 
$809,000
 
1.08x
 
$877,000
 
$628,000

(1)
The TDC multiples of target for all named executive officers, including for the chief executive officer, resulted from application of the same formula to each officer, although each named executive officer has his own set of ranges of multiples for the Corporate KPIs. See table above under “- Fiscal 2016 Target TDC and TDC Ranges by Named Executive Officer,” and note the starting range for multiples of the chief executive officer are higher for at or above par performance.
(2)
This is calculated by subtracting base salary from the TDC value.

Allocation of Fiscal 2016 Total Incentive Compensation between Annual and Long-Term Incentive Awards
 
Utilizing a sliding scale within a pre-determined range discussed above under "- Incentive Compensation - Overview of Incentive Compensation Plan Design and Award Determination Process - Step 5," approximately 32.5% of the chief executive officer’s total incentive compensation and 42.5% of other named executive officers’ total incentive compensation were allocated to the annual cash incentive (except for one named executive officer who had a percentage allocation of 40%), and the balances were allocated to long-term incentive awards as set forth in the table below. Under the Company's plan, the weighting of long-term incentives increases (and the weighting of annual cash incentives correspondingly decreases) as actual TDC increases relative to target TDC. As a result, for 2016, the indicated percentage representing the weighting to annual cash incentive is in the lower half of the pre-determined range, and the weighting to equity is lower, because the actual 2016 TDC for the NEOs is below the targeted TDC (except for one named executive officer who had received a higher individual performance rating).

Named Executive Officer
 
Total Incentive
Award Value
 
Annual Cash Incentive Award
 
Long-Term Incentive Award(1)
 
% Allocation
 
$ Value
 
% Allocation
 
$ Value
Michael M. Garland
 
$1,404,000
 
32.5%
 
$456,000
 
67.5%
 
$948,000
Michael J. Lyon
 
$507,000
 
42.5%
 
$215,000
 
57.5%
 
$291,000
Hunter H. Armistead
 
$847,000
 
42.5%
 
$360,000
 
57.5%
 
$487,000
Daniel M. Elkort
 
$637,000
 
42.5%
 
$271,000
 
57.5%
 
$366,000
Esben W. Pedersen
 
$628,000
 
40%
 
$251,000
 
60%
 
$377,000

(1)
The long-term incentive award was made in the form of service-based and performance-based restricted stock awards. Half of the award will vest ratably based on continued service over a three-year period and half will vest at the end of three years based on relative TSR measured against the TSR Peer Group. See “- 2017 Long-Term Incentive Award Grants Based on Fiscal 2016 Performance.”
 


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2017 Long-Term Incentive Award Grants Based on Fiscal 2016 Performance

As indicated in the footnote above, the long-term incentive award was made in the form of service-based and performance-based restricted stock awards. Half of the award will vest ratably based on continued service over a three-year period and half will vest at the end of three years based on relative TSR measured against the TSR Peer Group. Relative TSR was chosen as the long-term performance metric to provide additional alignment between shareholder interests and named executive officer compensation. Performance-based restricted stock awards will be earned as follows:
Relative TSR Performance vs TSR Peer Group
 
Shares Vesting as % of Target
Number of Shares Granted
Below 25th percentile
 
None
25th percentile
 
50%
50th percentile
 
100%
75th percentile or above
 
150%
Interpolation on a straight line method if between specified percentiles. Relative TSR is calculated over three years.

The restricted stock awards (service-based and performance-based) were granted on March 15, 2017 and, therefore, will be disclosed in the summary compensation table for 2017.

Retirement Benefits

The Company sponsors a 401(k) plan for all of its employees in which the named executive officers participate.

Perquisites

The Company does not provide perquisites to its named executive officers.

Employment Agreements

In anticipation of our October 2013 initial public offering, our board of directors approved new employment agreements for our named executive officers, which are described below under “Executive Compensation - Employment and Severance Agreements.” These include severance payments upon a termination by us without cause, by the named executive officer for good reason, or due to a non-extension of the agreement at our election.

We do not provide excise tax gross-ups or enhanced severance for terminations in connection with a change in control.

Key Executive Compensation and Governance Policies and Practices

The NGC Committee continually reviews the Company’s executive compensation program to maintain compensation and governance practices that are in the best interests of our shareholders. The following are compensation and governance policies and practices that have been implemented for the Company's named executive officers.

Executive Common Stock Ownership Policy

Because we believe that certain executives should own and hold equity interests in the Company to further align their interests and actions with the interests of our stockholders, management has adopted a policy regarding minimum executive ownership of the Company’s shares.

Under the policy, the chief executive officer has a target Common Stock holding of 5x base salary; each of the executive vice presidents, chief financial officer, and chief investment officer have a target holding of 3x base salary; and each of the senior vice presidents have a target holding of 2x base salary. Each target is expected to be attained within 5 years of initial employment by the Company or promotion to the referenced executive position through retention of stock awards received under the Company’s 2013 Equity Incentive Award Plan, as may be amended (the “Equity Plan”). The nominating, governance and compensation committee will evaluate the chief executive officer’s compliance with the target and the chief executive officer will evaluate the other officers’ compliance with their targets, including both periodic assessment of progress toward the targets and consideration of hardship requests for full or partial waiver of individual targets. For purposes of the policy, holdings include (i) stock beneficially


38



owned in a trust, by a spouse, and/or minor children and (ii) restricted stock awards and restricted stock units (both vested and unvested), but do not include stock options, whether vested or unvested.

Anti-Hedging and Anti-Pledging Policies

The Company’s statement of policy concerning insider trading prohibits officers and directors from pledging Company securities as security for financial indebtedness or otherwise. In addition, under the policy, the Company prohibits directors, officers, all other employees of the Company and Pattern Development 1.0, as well as partnerships, trusts, corporations, investment accounts and similar entities over which any of the foregoing individuals exercise control or direction (together, “Company Personnel”), from entering into a hedging transaction that has the effect of reducing or eliminating the investment risks associated with any Company stock owned by such person. The prohibition applies whether the stock has been acquired from the Company pursuant to an employee benefit plan, or has been purchased by the holder in the market.

The Company also prohibits Company Personnel from purchasing Company securities on margin or holding Company securities in a margin account, as well as trading in options on the Company’s stock.

Deductibility of Executive Compensation

Internal Revenue Code Section 162(m) generally prevents any public company from claiming a deduction for compensation in excess of $1 million for certain executive officers (namely, the chief executive officer and the three most highly compensated officers other than the chief executive officer and the chief financial officer), unless the compensation is “performance based” as defined under Section 162(m). The NGC Committee does not require our executive compensation to be tax deductible, but instead may balance the costs and benefits of tax deductibility against our executive compensation objectives.

Equity Grant Practices

The Company generally grants equity incentives once a year in the first quarter after the completion of its audit for the preceding fiscal year. With approval from the NGC Committee, the Company may grant equity incentives in connection with hiring a key employee.
 


39



Report of the Nominating, Governance and Compensation Committee of the Board of Directors (1) 

The nominating, governance and compensation committee of the board of directors furnishes the following report to the stockholders of the Company in accordance with applicable SEC rules.

The nominating, governance and compensation committee reviewed and discussed the Compensation Discussion and Analysis set forth above with the Company's management. Based on that review and discussion, the nominating, governance and compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

Dated April 14, 2017

Respectfully submitted by:

Patricia Bellinger, Chair
Alan Batkin





__________________
(1)
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Pattern Energy Group Inc. under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.





40



EXECUTIVE COMPENSATION

The following table provides information concerning compensation of our principal executive officer, principal financial officer and our other three most highly paid executive officers, referred to as named executive officers, for the fiscal years ended December 31, 2016, 2015 and 2014.

Summary Compensation Table

Name and Principal Position
 
Year
 
Salary ($)
 
 Bonus ($)
 
Non-Equity Incentive Plan Compensation ($)(7)
 
 Stock Awards
($)
(1)
 
 Option Awards
($)
 
 All Other Compensation ($)
 
 Total ($)
Michael M. Garland, President and Chief Executive Officer
 
2016
 
430,756

 


456,000

 
1,842,521

 

 
13,250

(2) 
2,742,527

 
 
2015
 
420,250

 


491,000

 
2,205,294

 

 
79,089


3,195,633

 
 
2014
 
410,000

 
591,000



 
1,331,903

 

 
37,625


2,370,528

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Michael J. Lyon, Chief Financial Officer
 
2016
 
248,358

 


215,000

 
583,745

 

 
12,418

(3) 
1,059,521

 
 
2015
 
242,300

 


251,000

 
704,035

 

 
31,645


1,228,980

 
 
2014
 
236,391

 
305,000



 
466,186

 

 
67,545


1,075,122

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Hunter H. Armistead, Executive Vice President, Business Development
 
2016
 
349,989

 


360,000

 
945,025

 

 
13,250

(4) 
1,668,264

 
 
2015
 
341,453

 


407,000

 
1,128,188

 

 
45,179


1,921,820

 
 
2014
 
333,125

 
489,000


 

 
763,868

 

 
25,100


1,611,093

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Daniel M. Elkort, Executive Vice President and General Counsel
 
2016
 
312,298

 


271,000

 
733,764

 

 
13,250

(5) 
1,330,312

 
 
2015
 
304,681

 


316,000

 
792,306

 

 
37,839


1,450,826

 
 
2014
 
297,250

 
343,000



 
584,659

 

 
22,370


1,247,279

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Esben W. Pedersen, Chief Investment Officer
 
2016
 
249,059

 


251,000

 
586,256

 

 
12,453

(6) 
1,098,768

 
 
2015
 
242,984

 


252,000

 
707,746

 

 
26,472


1,229,202

 
 
2014
 
237,057

 
306,000



 
248,757

 

 
216,655


1,008,469


(1)
This column represents the grant date fair value for stock awards granted to the officer in 2016, 2015, and 2014, computed in accordance with FASB ASC Topic No. 718. For additional information, refer to Note 16 to our consolidated financial statements in our Annual Report on Form 10-K for the years ended December 31, 2016, 2015 and 2014, for a discussion of our assumptions in determining the grant date fair values of equity awards.
(2)
Amount reflects 401(k) contributions made on behalf of Mr. Garland. Does not include dividends paid on stock awards during 2016 because those amounts were factored into the grant date fair value of the stock awards.
(3)
Amount reflects 401(k) contributions made on behalf of Mr. Lyon. Does not include dividends paid on stock awards during 2016 because those amounts were factored into the grant date fair value of the stock awards.


41



(4)
Amount reflects 401(k) contributions made on behalf of Mr. Armistead. Does not include dividends paid on stock awards during 2016 because those amounts were factored into the grant date fair value of the stock awards.
(5)
Amount reflects 401(k) contributions made on behalf of Mr. Elkort. Does not include dividends paid on stock awards during 2016 because those amounts were factored into the grant date fair value of the stock awards.
(6)
Amount reflects 401(k) contributions made on behalf of Mr. Pedersen. Does not include dividends paid on stock awards during 2016 because those amounts were factored into the grant date fair value of the stock awards.
(7)
For 2016, reflects the cash incentive award paid in early 2017 for 2016 performance as described in Compensation Discussion and Analysis.

The equity awards reflected in the table above under 2016 were granted in 2016 as described in the Grants of Plan-Based Awards table below, but the amounts were determined based on our 2015 performance, as described in the Company's proxy statement filed on April 29, 2016.



42



Grants of Plan-Based Awards
The following table provides information on all plan-based awards granted to the named executive officers during the fiscal year ended December 31, 2016.
 
 
 
 
 
 
Non-Equity Incentive Plan Compensation
 
Estimated Future Payouts Under Equity Incentive Plan Awards(1)
 
All Other Stock Awards: Number of Shares of Stock or Units
(#)
 
Grant Date Fair Value of Stock and Option Awards
($)
(2)
Name
 
Grant Date
 
Award Type
 
Target
($)
 
Target (#)
 
Maximum
(#)
 
 
Michael M. Garland
 
3/15/2016
 
Time-based RSAs
 
 
 
 
 

 
39,645

(3) 
743,740

 
 
3/15/2016
 
Performance-based RSAs
 
 
 
35,725

 
53,588

(4)


1,105,520

 
 
NA
 
Non-Equity Incentive Plan Compensation(5)
 

 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael J. Lyon
 
3/15/2016
 
Time-based RSAs
 
 
 
 
 

 
12,561

(3) 
235,644

 
 
3/15/2016
 
Performance-based RSAs
 
 
 
11,318

 
16,977

(4)


350,236

 
 
NA
 
Non-Equity Incentive Plan Compensation(5)
 

 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hunter H. Armistead
 
3/15/2016
 
Time-based RSAs
 
 
 
 
 

 
20,334

(3) 
381,466

 
 
3/15/2016
 
Performance-based RSAs
 
 
 
18,323

 
27,485

(4)


567,016

 
 
NA
 
Non-Equity Incentive Plan Compensation(5)
 

 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Daniel M. Elkort
 
3/15/2016
 
Time-based RSAs
 
 
 
 
 

 
15,788

(3) 
296,183

 
 
3/15/2016
 
Performance-based RSAs
 
 
 
14,277

 
21,341

(4)


440,265

 
 
NA
 
Non-Equity Incentive Plan Compensation(5)
 

 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Esben W. Pedersen
 
3/15/2016
 
Time-based RSAs
 
 
 
 
 

 
12,614

(3) 
236,639

 
 
3/15/2016
 
Performance-based RSAs
 
 
 
11,367

 
17,051

(4)


351,762

 
 
NA
 
Non-Equity Incentive Plan Compensation(5)
 

 
 
 
 
 
 
 




(1)
This column represents the target and maximum potential number of RSAs that will vest based upon the achievement of certain pre-determined performance conditions. The minimum future payout is zero if certain performance conditions are not met.
(2)
This column represents the grant date fair value computed in accordance with FASB ASC Topic No. 718 of restricted stock awards and stock options granted to the named executive officers. The grant date fair value is the amount that we would


43



expense in our financial statements over the award's service period. For additional information, refer to Note 15 to our consolidated financial statements in our Annual Report on Form 10-K for the years ended December 31, 2016, 2015, and 2014, for a discussion of our assumptions in determining the grant date fair values of equity awards.
(3)
Amounts represent time-vested RSAs granted to the named executive officers on March 15, 2016. One-third of the RSAs granted on March 15, 2016 vested in December 2016, with the remaining RSAs vesting in two approximately equal annual installments through December 2018.
(4)
Amounts represent performance-based RSAs granted on March 15, 2016 to the named executive officers. These RSAs will vest after December 31, 2018 based on achievement of relative TSR performance conditions. See “Compensation Discussion and Analysis” for a description of these type of awards.
(5)
Each individual does not have a target cash bonus. Instead, each individual has a target TDC (which includes salary and incentive opportunities), and the amount earned for the year is determined from this TDC amount. After subtracting salary from the amount determined, the incentive portion is then allocated between cash and grants of stock awards as described in Compensation Discussion and Analysis. The amount actually allocated to the cash incentive award for 2016 performance is set forth in the Summary Compensation Table.

Option Exercises and Stock Vested in Fiscal Year 2016
The following table provides information on stock option exercises and vesting of restricted stock awards during the fiscal year ended December 31, 2016.
 
 
Option Awards
 
Stock Awards
Name
 
Number of Shares Acquired on Exercise
(#)
 
Value Realized on Exercise
($)
(1)
 
Number of Shares Acquired on Vesting
(#)
 
Value Realized on Vesting
($)
(2)
Michael M. Garland
 

 

 
39,962

 
813,768

Michael J. Lyon
 

 

 
12,120

 
246,064

Hunter H. Armistead
 

 

 
19,394

 
393,860

Daniel M. Elkort
 

 

 
14,947

 
303,632

Esben W. Pedersen
 

 

 
12,154

 
246,750


(1)
The value realized on the exercise of the options (if any) represents the difference between the fair value of shares of our Common Stock on the date of exercise and the option exercise price, multiplied by the number of shares for which the option was exercised.
(2)
The value realized on the vesting of restricted stock awards represents the fair value of shares of our Common Stock on the vesting date, multiplied by the number of shares that vested.


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Outstanding Equity Awards at Fiscal Year End 2016
The following table provides information on all outstanding equity awards held by the named executive officers as of December 31, 2016.
 
 
Option Awards
Stock Awards
Name
 
Number of Securities Underlying Unexercised Options
(#) Exercisable
 
Number of Securities Underlying Unexercised Options
(#) Unexercisable
 
Option Exercise Price
($)
 
Option Expiration Date
 
 Number of Shares of Stock That Have Not Vested
 
Market Value of Shares of Stock that Have Not Vested ($) (5)
 
 Number of Unearned Stock Awards That Have Not Vested
 
Market Value of Unearned Stock Awards That Have Not Vested ($) (5)
Michael M. Garland
 
175,012

 

 
22.00

 
9/25/2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,867

(1) 
187,374

 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
33,957

(2) 
644,843

 
 
 
 
 
 
 
 
 
 
26,430

(3) 
181,854

 
 
 
 
 
 
 
 
 
 
 
 
 
 
53,588

(4) 
1,017,636

 
 
 
 
Michael J. Lyon
 
36,461

 

 
22.00

 
9/25/2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,151

(1) 
59,837

 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
10,841

(2) 
205,871

 
 
 
 
 
 
 
 
 
 
8,374

(3) 
159,022

 
 
 
 
 
 
 
 
 
 
 
 
 
 
16,977

(4) 
322,393

 
 
 
 
Hunter H. Armistead
 
60,768

 

 
22.00

 
9/25/2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,048

(1) 
95,862

 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
17,372

(2) 
329,894

 
 
 
 
 
 
 
 
 
 
13,556

(3) 
257,428

 
 
 
 
 
 
 
 
 
 
 
 
 
 
27,485

(4) 
521,940

 
 
 
 
Daniel M. Elkort
 
44,283

 

 
22.00

 
9/25/2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,546

(1) 
67,339

 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
12,200

(2) 
231,678

 
 
 
 
 
 
 
 
 
 
10,526

(3) 
199,889

 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,341

(4) 
405,266

 
 
 
 
Esben W. Pedersen
 
36,461

 

 
22.00

 
9/25/2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,167

(1) 
60,141

 
 
 
 
 
 
 
 
 
 
 
 
 
 





 
10,898

(2) 
206,953

 
 
 
 
 
 
 
 
 
 
8,410

(3) 
159,706

 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,051

(4) 
323,798

 
 
 
 
(1)
The RSAs were granted on April 10, 2015. One-third of the RSAs vested in December 2015 and one-third vested in December 2016. Subject to certain restrictions, the remaining RSAs will vest in December 2017.
(2)
The RSAs were granted on April 10, 2015 and are subject to relative TSR performance. The number of awards represents the maximum that would vest after December 31, 2017 subject to attaining the pre-determined performance conditions.
(3)
The RSAs were granted on March 15, 2016. One-third of the RSAs vested in December 2016. Subject to certain restrictions, the remaining RSAs will vest in two approximately equal installments in December 2017 and December 2018.
(4)
The RSAs were granted March 15, 2016 and are subject to relative TSR performance. The number of awards represents the maximum that would vest after December 31, 2018 subject to attaining the pre-determined performance conditions.
(5)
Market value is based on the fair value of shares of our Common Stock of $18.99 on December 31, 2016, as reported on the NASDAQ Global Select Market.


45



Potential Payments upon Termination and Change in Control

As described below under “- Employment and Severance Agreements,” the employment agreements of our named executive officers provide for a cash severance payment and continuation of medical and insurance benefits upon termination without cause, termination by the named executive officer for good reason, or termination due to non-extension of the agreement at our election. The employment agreements do not provide for additional severance payments, medical or insurance benefits or any other perquisites if their employment termination occurs following a change in control.

Our Equity Plan does not provide for accelerated vesting on a change of control, unless the successor corporation fails to assume or substitute for an award upon a change in control, in which case such award shall become fully vested and, if applicable, exercisable and all forfeiture restrictions on such award shall lapse immediately prior to the consummation of such change in control.


46




The following table provides information regarding potential payments to each of our named executive officers in connection with certain termination events, including termination related to a change of control of the Company, as of December 31, 2016.

 
 
Acceleration of Vesting
If Awards Not Assumed
 
 
 
 
 
Name
 
Stock Options
($)
(1)
 
Restricted Stock
($)
 (2)
 
Severance Payment
($)
 
Continuation of Benefits
($)
 
Total
($)
Michael M. Garland, President and Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
Termination without cause
 

 

 
2,531,917

 
23,944

 
2,555,911

Termination with good reason
 

 

 
2,531,917

 
23,944

 
2,555,911

Termination due to non-extension of employment term