Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
FORM 8-K
  
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 9, 2018
  
PATTERN ENERGY GROUP INC.
(Exact name of registrant as specified in its charter)

Delaware
001-36087
90-0893251
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification Number)
   
Pier 1, Bay 3
San Francisco, CA 94111
(Address and zip code of principal executive offices)
(415) 283-4000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17 CFR 230.405) or Rule 12b-2 of the Exchange Act (17 CFR 240.12b-2).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
 
 
 





Item 2.02 Results of Operations and Financial Condition.
On August 9, 2018, we issued a press release announcing our financial results for the second quarter ended June 30, 2018. A copy of our press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
Our press release, included herein, makes reference to non-U.S. GAAP financial measures, which management believes are useful for investors by offering the ability to better evaluate operating performance and to better understand how management evaluates the business. These non-U.S. GAAP financial measures are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by U.S. GAAP. Descriptions of the non-U.S. GAAP financial measures are discussed below.
We define cash available for distribution as net cash provided by operating activities as adjusted for certain other cash flow items that we associate with our operations. 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 (as reported in net cash used in investing activities), 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 we deem representative of our core business operations.
We disclose cash available for distribution because management recognizes that it will be used as a supplemental measure by investors and analysts to evaluate our liquidity. However, cash available for distribution has limitations as an analytical tool because it excludes depreciation, amortization and accretion, does not capture the level of capital expenditures necessary to maintain the operating performance of our projects, is not reduced for principal payments on our project indebtedness except to the extent they are paid from operating cash flows during a period, and excludes the effect of certain other cash flow items, all of which could have a material effect on our financial condition and results from operations. Cash available for distribution is a non-U.S. GAAP measure and should not be considered an alternative to net cash provided by operating activities or any other liquidity measure determined in accordance with U.S. GAAP, nor is it indicative of funds available to fund our cash needs. In addition, our calculation of cash available for distribution is not necessarily comparable to cash available for distribution as calculated by other companies
We define Adjusted EBITDA as net income (loss) before net interest expense, income taxes, and depreciation, amortization and accretion, including our proportionate share of net interest expense, income taxes, and depreciation, amortization and accretion of unconsolidated investments. Adjusted EBITDA also excludes the effect of certain mark-to-market adjustments and infrequent items not related to normal or ongoing operations, such as early payment of debt, realized derivative gain or loss from refinancing transactions, gain or loss related to acquisitions or divestitures, and adjustments from unconsolidated investments. In calculating Adjusted EBITDA, we exclude mark-to-market adjustments to the value of our derivatives because we believe that it is useful for investors to understand, as a supplement to net income (loss) and other traditional measures of operating results, the results of our operations without regard to periodic, and sometimes material, fluctuations in the market value of such assets or liabilities.
Adjustments from unconsolidated investments represent distributions received in excess of the carrying amount of our investment and suspended equity earnings, during periods of suspension of recognition of equity method earnings. We may suspend the recognition of equity method earnings when we receive distributions in excess of the carrying value of our investment. As we are not liable for the obligations of the investee nor otherwise committed to provide financial support, we record gains resulting from such excess distributions in the period the distributions occur. Additionally, when our carrying value in an unconsolidated investment is zero and we are not liable for the obligations of the investee nor otherwise committed to provide financial support, we will not recognize equity in earnings (losses) in other comprehensive income of unconsolidated investments.
We disclose Adjusted EBITDA, which is a non-U.S. GAAP measure, because management believes this metric assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that our management believes are not indicative of our core operating performance. We use Adjusted EBITDA to evaluate our operating performance. You should not consider Adjusted EBITDA as an alternative to net income (loss), determined in accordance with U.S. GAAP.





Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:
Adjusted EBITDA
does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
does not reflect changes in, or cash requirements for, our working capital needs;
does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, or our proportional interest in the interest expense of our unconsolidated investments or the cash requirements necessary to service interest or principal payments on the debt borne by our unconsolidated investments;
does not reflect our income taxes or the cash requirement to pay our taxes; or our proportional interest in income taxes of our unconsolidated investments or the cash requirements necessary to pay the taxes of our unconsolidated investments;
does not reflect depreciation, amortization and accretion which are non-cash charges; or our proportional interest in depreciation, amortization and accretion of our unconsolidated investments. The assets being depreciated, amortized and accreted will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
does not reflect the effect of certain mark-to-market adjustments and non-recurring items or our proportional interest in the mark-to-market adjustments at our unconsolidated investments.
We do not have control, nor have any legal claim to the portion of the unconsolidated investees' revenues and expenses allocable to our joint venture partners. As we do not control, but do exercise significant influence, we account for the unconsolidated investments in accordance with the equity method of accounting. Net earnings (losses) from these investments are reflected within our consolidated statements of operations in "Earnings (loss) in unconsolidated investments, net." Adjustments related to our proportionate share from unconsolidated investments include only our proportionate amounts of interest expense, income taxes, depreciation, amortization and accretion, and mark-to-market adjustments included in "Earnings (loss) in unconsolidated investments, net;" and
Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP.
Item 7.01 Regulation FD Disclosure.
In addition to the earnings press release discussed in Item 2.02 above, on August 9, 2018, we are also providing Operating Metrics: Production Performance for long-term average production ("LTA") compared to actual production, including compensated curtailment for the quarter ended June 30, 2018. Such information is furnished herewith as Exhibit 99.2.

The information included in this Current Report on Form 8-K, including the exhibits attached hereto under Items 2.02 and 7.01, is "furnished" and shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing. The information included in this Current Report on Form 8-K under this Item 7.01 (including Exhibit 99.2 hereto) will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.







Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
 
Exhibit
Number
Description
99.1
99.2





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Pattern Energy Group Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 9, 2018
 
 
 
 
 
 
PATTERN ENERGY GROUP INC.
 
 
 
 
 
 
By:
/s/ Michael J. Lyon
 
 
 
Name: Michael J. Lyon
 
 
 
Title:   Chief Financial Officer
 
 
 
(Principal Financial Officer)
 



Exhibit


Exhibit 99.1


Pattern Energy Reports Second Quarter 2018 Financial Results
- Declares dividend of $0.4220 per Class A common share for third quarter 2018 -

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

Highlights
(Comparisons made between fiscal Q2 2018 and fiscal Q2 2017 results, unless otherwise noted)
Proportional gigawatt hours ("GWh") sold of 2,263 GWh, up 7%
Net cash provided by operating activities of $95.7 million
Cash available for distribution ("CAFD") of $58.7 million, up 19% and on track to meet full year guidance(1) 
Net loss of $1.8 million
Adjusted EBITDA of $108.4 million, up 18%
Revenue of $139.9 million, up 30%
Declared a third quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter's dividend
Announced an agreement to sell the Company’s operations in Chile, which principally consist of its 81 megawatt (“MW”) owned interest in the 115 MW El Arrayán Wind project (“El Arrayán Wind”) for which Pattern Energy will receive cash consideration of $68.5 million
Returned the Santa Isabel project in Puerto Rico to full generating capacity with the consent of the Puerto Rico Electric Power Authority ("PREPA")
Since April 1, 2018, and including a funding to be made today, invested $50.9 million in Pattern Energy Group 2 LP ("Pattern Development 2.0"); Pattern Energy's ownership level will increase to approximately 29% following a redemption to occur shortly at Pattern Development 2.0
“It was a great quarter with CAFD up 19%, as production was solid and our disciplined cost management initiatives delivering results. We are on track to achieve our targeted CAFD(1) for the year,” said Mike Garland, President and CEO of Pattern Energy. “At 29% ownership of Pattern Development 2.0, we will have achieved our target ownership level in the development business which we believe will provide meaningful value to shareholders. Our identified ROFO ("right of first offer") list with Pattern Development 2.0 has grown by four new projects since our original investment in June of last year. We anticipate the first realized development transaction gains by the end of 2018 or early 2019, and returns from those gains will be retained and reinvested in the development business. Developing, owning and operating one of the very best portfolios in the renewables market can be challenging, but we are in a great position to generate long-term value in this exciting market.”
(1) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended June 30, 2018.

Financial and Operating Results
Pattern Energy sold 2,262,811 megawatt hours ("MWh") of electricity on a proportional basis in the second quarter of 2018 compared to 2,111,627 MWh sold in the same period last year. Pattern Energy sold 4,398,526 MWh of electricity on a proportional basis for the six months ended June 30, 2018 ("YTD 2018") compared to 4,135,510 MWh sold in the same period last year. The 7% increase in the quarterly period was primarily due to volume increases as a result of acquisitions in 2017 and 2018 and favorable wind compared to last year, partially offset by curtailment at the Santa Isabel project. Production for the quarter was 2% below the long-term average forecast for the period.

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Net cash provided by operating activities was $95.7 million for the second quarter of 2018 compared to $113.4 million for the same period last year. Net cash provided by operating activities was $123.5 million for YTD 2018 as compared to $157.2 million for the same period last year. The decrease in the quarterly period of $17.7 million was primarily due to $2.9 million in increased transmission costs due to acquisitions in 2017, increased interest payments of $3.6 million, and increased payments of $43.1 million in payable, accrued and current liabilities, due primarily to the timing of payments. The decrease to net cash provided by operating activities was partially offset by a $32.9 million increase in revenue (excluding unrealized loss on energy derivative and amortization of power purchase agreements ("PPAs")).
Cash available for distribution was $58.7 million for the second quarter of 2018, compared to $49.2 million for the same period last year. Cash available for distribution was $101.7 million for YTD 2018 compared to $94.4 million for the same period in the prior year. The $9.4 million, or 19.1% increase in the quarterly period was primarily due to a $32.9 million increase in revenues (excluding the unrealized loss on the energy derivative and amortization of PPAs) due to acquisitions in 2017 and early 2018 and a $4.4 million increase in total distributions from unconsolidated investments. The improvement was partially offset by a $8.0 million decrease in network upgrade reimbursement, a $5.6 million increase in distributions to noncontrolling interests, a $3.6 million increase in interest expense (excluding amortization of financing costs and debt discount/premium), a $2.9 million increase in transmission costs, a $2.7 million decrease in other and a $1.9 million increase in principal payments of project-level debt.
Net loss was $1.8 million in the second quarter of 2018, compared to a net loss of $14.7 million for the same period last year. Net loss was $14.4 million for YTD 2018 compared to $12.1 million in the same period last year. The improvement of $12.9 million in the quarterly period was primarily attributable to a $32.2 million increase in revenues due to acquisitions in 2017 and 2018, and a $2.7 million decrease in general and administrative expenses. These improvements were partially offset by increases of $9.6 million in cost of revenues due to the acquisitions in 2017 and 2018, a $4.2 million increase in impairment loss related to Chile assets held for sale, and a $8.1 million increase in other expense primarily related to decreased earnings from unconsolidated investments.
Adjusted EBITDA was $108.4 million for the second quarter of 2018 compared to $91.9 million for the same period last year. Adjusted EBITDA was $212.6 million for YTD 2018 compared to $190.1 million for the same period last year. The $16.5 million increase in the quarterly period was primarily due to a $32.9 million increase in revenue (excluding unrealized loss on energy derivative and amortization of PPAs) primarily attributable to volume increases as a result of the 2017 and 2018 acquisitions and favorable wind compared to last year, partially offset by curtailment at the Santa Isabel project and a $2.7 million decrease in general and administrative expenses primarily due to lower audit and consulting fees in 2018 compared to 2017. The increase was partially offset by a $17.2 million decrease in earnings from unconsolidated investments, a $2.9 million increase in transmission costs, and a $1.2 million increase in net loss on transactions, primarily related to the Chile assets held for sale.
2018 Financial Guidance
Pattern Energy is re-confirming its targeted annual cash available for distribution(2) for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.
(2) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended June 30, 2018.
Quarterly Dividend
Pattern Energy declared a dividend for the third quarter 2018, payable on October 31, 2018, to holders of record on September 28, 2018 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the third quarter 2018 dividend is unchanged from the second quarter 2018 dividend.
Acquisition Pipeline
Pattern Development 1.0 and Pattern Development 2.0 (together, the "Pattern Development Companies") have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a ROFO on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 706 MW of potential owned capacity and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

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Below is a summary of the identified ROFO projects that Pattern Energy has the right to purchase from the Pattern Development Companies in connection with its respective purchase rights:
 
 
 
 
 
 
 
 
 
 
 
 
Capacity (MW)
Identified
ROFO Projects
 
Status
 
Location
 
Construction
Start
 (1)
 
Commercial
Operations 
(2)
 
Contract
Type
 
Rated (3)
 
Pattern
Development-
Owned
(4)
Pattern Development 1.0 Projects
 
 
 
 
 
 
 
 
 
 
 
 
Belle River
 
Operational
 
Ontario
 
2016
 
2017
 
PPA
 
100
 
43
North Kent
 
Operational
 
Ontario
 
2017
 
2018
 
PPA
 
100
 
35
Henvey Inlet
 
In construction
 
Ontario
 
2017
 
2019
 
PPA
 
300
 
150
Pattern Development 2.0 Projects
 
 
 
 
 
 
 
 
 
 
 
 
Stillwater Big Sky
 
In construction
 
Montana
 
2017
 
2018
 
PPA
 
79
 
67
Crazy Mountain
 
Late stage development
 
Montana
 
2019
 
2019
 
PPA
 
80
 
68
Grady
 
In construction
 
New Mexico
 
2018
 
2019
 
PPA
 
220
 
188
Sumita
 
Late stage development
 
Japan
 
2019
 
2021
 
PPA
 
100
 
55
Ishikari
 
Late stage development
 
Japan
 
2019
 
2022
 
PPA
 
100
 
100
 
 
 
 
 
 
 
 
 
 
 
 
1,079
 
706
(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 weather and other conditions, a project or a turbine will not operate at its rated capacity at all times and the amount of electricity generated will be less than its rated capacity. The amount of electricity generated may vary based on a variety of factors.
(4)
Pattern Development-Owned capacity represents the maximum, or rated, electricity generating capacity of the project in MW multiplied by Pattern Development 1.0's or Pattern Development 2.0's percentage ownership interest in the distributable cash flow of the project.
Cash Available for Distribution and Adjusted EBITDA Non-GAAP Reconciliations
The following tables reconcile non-GAAP net cash provided by operating activities to cash available for distribution and net loss to Adjusted EBITDA, respectively, for the periods presented (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Net cash provided by operating activities(1)
$
95,720

 
$
113,431

 
$
123,544

 
$
157,183

Changes in operating assets and liabilities
(10,079
)
 
(61,379
)
 
18,497

 
(47,956
)
Network upgrade reimbursement
294

 
8,273

 
576

 
8,590

Release of restricted cash

 

 
2,488

 

Operations and maintenance capital expenditures
(10
)
 
(117
)
 
(271
)
 
(263
)
Distributions from unconsolidated investments(2)
(1,948
)
 
4,185

 
4,333

 
8,390

Other
2,147

 
4,808

 
3,007

 
1,376

Less:
 
 
 
 
 
 
 
Distributions to noncontrolling interests
(12,088
)
 
(6,517
)
 
(21,275
)
 
(9,164
)
Principal payments paid from operating cash flows
(15,374
)
 
(13,445
)
 
(29,177
)
 
(23,771
)
Cash available for distribution
$
58,662

 
$
49,239

 
$
101,722

 
$
94,385

(1) Included in net cash provided by operating activities for the three and six months ended June 30, 2018 and 2017 are the portions of distributions from unconsolidated investments paid from cumulative earnings representing the return on investment.
(2) Distributions from unconsolidated investments for the three months ended June 30, 2018 includes an adjustment for a March 2018 distribution received in April 2018 previously included in the first quarter 2018 cash available for distribution.
 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017

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Net loss
$
(1,774
)
 
$
(14,684
)
 
$
(14,394
)
 
$
(12,145
)
Plus:
 
 
 
 
 
 
 
Interest expense, net of interest income
27,284

 
24,238

 
52,394

 
46,299

Tax provision
4,410

 
4,541

 
11,194

 
9,316

Depreciation, amortization and accretion
62,766

 
52,752

 
125,416

 
99,979

EBITDA
92,686

 
66,847

 
174,610

 
143,449

Unrealized loss on energy derivative (1)
3,626

 
4,663

 
14,673

 
7,021

(Gain) loss on derivatives
(8,801
)
 
4,751

 
(14,461
)
 
5,399

Impairment loss
4,238

 

 
4,238

 

Other

 
807

 

 
1,119

Adjustments from unconsolidated investments

 

 

 

Plus, proportionate share from unconsolidated investments:
 
 
 
 
 
 
 
Interest expense, net of interest income
9,506

 
9,498

 
18,974

 
18,838

Tax benefit
(207
)
 

 
(207
)
 

Depreciation, amortization and accretion
8,741

 
8,575

 
17,509

 
17,029

Gain on derivatives
(1,379
)
 
(3,272
)
 
(2,714
)
 
(2,788
)
Adjusted EBITDA
$
108,410

 
$
91,869

 
$
212,622

 
$
190,067

(1)    Amount is included in electricity sales on the consolidated statements of operations.
Conference Call and Webcast
Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Thursday, August 9, 2018. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 3199694. The replay recording will be available until 11:59 p.m. Eastern Time, August 30, 2018.
A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy’s website at www.patternenergy.com. An archived webcast will be available for one year.
About Pattern Energy
Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on the NASDAQ Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 24 wind and solar power facilities, including one project it has agreed to acquire and one project it has agreed to sell, with a total owned interest of 2,861 MW in the United States, Canada, Japan and Chile that use proven, best-in-class technology. Pattern Energy’s wind and solar power facilities generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of Canadian securities laws, including statements regarding the ability to achieve the 2018 cash available for distribution target; the ability to fund an additional investment into Pattern Development 2.0 shortly and for redemptions of certain other investors in Pattern Development 2.0 to occur; the ability to consummate the agreement to sell the Company’s operations in Chile; the ability of the investments in development to provide meaningful value to shareholders; the timing of the receipt of the first development profits (if ever); and the ability of the Company’s portfolio to generate long-term value. These forward-looking statements represent the Company’s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.
Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When

4



considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Company's annual report on Form 10-K and any quarterly reports on Form 10-Q. The risk factors and other factors noted therein could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.
# # #

Contacts:
Media Relations
Matt Dallas
917-363-1333
matt.dallas@patternenergy.com
 
Investor Relations
Ross Marshall
416-526-1563
ross.marshall@loderockadvisors.com 
 


5




Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)
 
June 30,
 
December 31,
 
2018
 
2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
116,538

 
$
116,753

Restricted cash
4,336

 
9,065

Counterparty collateral
5,824

 
29,780

Trade receivables
59,371

 
54,900

Derivative assets, current
16,148

 
19,445

Prepaid expenses
18,660

 
17,847

Deferred financing costs, current, net of accumulated amortization of $2,409 and $2,580 as of June 30, 2018 and December 31, 2017, respectively
1,422

 
1,415

Assets held for sale
307,231

 

Other current assets
21,726

 
21,105

Total current assets
551,256

 
270,310

Restricted cash
10,004

 
12,162

Major construction advances
48,898

 

Construction in progress
192,317

 

Property, plant and equipment, net
3,797,098

 
3,965,121

Unconsolidated investments
343,512

 
311,223

Derivative assets
17,341

 
9,628

Deferred financing costs
8,744

 
7,784

Net deferred tax assets
3,353

 
6,349

Finite-lived intangible assets, net
226,422

 
136,048

Goodwill
57,736

 

Other assets
27,421

 
22,906

Total assets
$
5,284,102

 
$
4,741,531

 
 
 
 

6



Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)
 
June 30,
 
December 31,
 
2018
 
2017
Liabilities and equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other accrued liabilities
$
38,799

 
$
53,615

Accrued construction costs
9,383

 
1,369

Counterparty collateral liability
5,824

 
29,780

Accrued interest
14,383

 
16,460

Dividends payable
42,072

 
41,387

Derivative liabilities, current
3,188

 
8,409

Revolving credit facility
201,000

 

Current portion of long-term debt, net
61,583

 
51,996

Liabilities related to assets held for sale
207,073

 

Other current liabilities
25,643

 
14,018

Total current liabilities
608,948

 
217,034

Long-term debt, net
1,923,743

 
1,878,735

Derivative liabilities
24,464

 
20,972

Net deferred tax liabilities
116,849

 
56,491

Finite-lived intangible liability, net
58,195

 
51,194

Contingent liabilities
165,214


62,398

Other long-term liabilities
152,998

 
106,565

Total liabilities
3,050,411

 
2,393,389

Commitments and contingencies
 
 
 
Equity:
 
 
 
Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 98,096,323 and 97,860,048 shares outstanding as of June 30, 2018 and December 31, 2017, respectively
983

 
980

Additional paid-in capital
1,210,610

 
1,234,846

Accumulated income (loss)

 
(112,175
)
Accumulated other comprehensive loss
(32,756
)
 
(25,691
)
Treasury stock, at cost; 178,346 and 157,812 shares of Class A common stock as of June 30, 2018 and December 31, 2017, respectively
(3,892
)
 
(3,511
)
Total equity before noncontrolling interest
1,174,945

 
1,094,449

Noncontrolling interest
1,058,746

 
1,253,693

Total equity
2,233,691

 
2,348,142

Total liabilities and equity
$
5,284,102

 
$
4,741,531


7



Pattern Energy Group Inc.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
(Unaudited)
 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
Electricity sales
$
135,951

 
$
105,736

 
$
238,098

 
$
204,170

Other revenue
3,989

 
2,024

 
13,501

 
4,423

Total revenue
139,940

 
107,760

 
251,599

 
208,593

Cost of revenue:
 
 
 
 
 
 
 
Project expense
33,665

 
33,405

 
68,227

 
62,505

Transmission costs
7,643


4,722

 
14,833

 
4,792

Depreciation, amortization and accretion
54,979


48,518

 
110,431

 
92,258

Total cost of revenue
96,287

 
86,645

 
193,491

 
159,555

Gross profit
43,653

 
21,115

 
58,108

 
49,038

Operating expenses:
 
 
 
 
 
 
 
General and administrative
9,089

 
11,777

 
19,795

 
22,901

Related party general and administrative
3,663

 
3,576

 
7,731

 
7,002

Impairment loss
4,238

 

 
4,238

 

Total operating expenses
16,990

 
15,353

 
31,764

 
29,903

Operating income
26,663

 
5,762

 
26,344

 
19,135

Other expense:
 
 
 
 
 
 
 
Interest expense
(27,709
)
 
(24,839
)
 
(53,153
)
 
(47,394
)
Gain (loss) on derivatives
8,801

 
(4,751
)
 
14,461

 
(5,399
)
Earnings (loss) in unconsolidated investments, net
(742
)
 
14,519

 
17,470

 
31,395

Net loss on transactions
(2,002
)
 
(807
)
 
(3,100
)
 
(1,119
)
Other income (expense), net
(2,375
)
 
(27
)
 
(5,222
)
 
553

Total other expense
(24,027
)
 
(15,905
)
 
(29,544
)
 
(21,964
)
Net income (loss) before income tax
2,636

 
(10,143
)
 
(3,200
)
 
(2,829
)
Tax provision
4,410

 
4,541

 
11,194

 
9,316

Net loss
(1,774
)
 
(14,684
)
 
(14,394
)
 
(12,145
)
Net loss attributable to noncontrolling interest
(34,492
)
 
(28,904
)
 
(183,034
)
 
(32,018
)
Net income attributable to Pattern Energy
$
32,718

 
$
14,220

 
$
168,640

 
$
19,873

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding
 
 
 
 
 
 
 
Basic
97,459,472

 
87,065,591

 
97,444,016

 
87,064,110

Diluted
97,496,217

 
87,217,381

 
105,662,687

 
87,257,130

Earnings per share attributable to Pattern Energy
 
 
 
 
 
 
 
Class A common stock:
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.16

 
$
1.73

 
$
0.23

Diluted
$
0.34

 
$
0.16

 
$
1.67

 
$
0.23

Dividends declared per Class A common share
$
0.42

 
$
0.42

 
$
0.84

 
$
0.83


8



Pattern Energy Group Inc.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)

 
Six months ended June 30,
 
2018
 
2017
Operating activities
 
 
 
Net loss
$
(14,394
)
 
$
(12,145
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
110,431

 
92,258

Contingent liability accretion
5,716

 

Impairment loss
4,238

 

Amortization of financing costs
2,526

 
3,852

Amortization of debt discount/premium, net
2,477

 
2,227

Amortization of power purchase agreements, net
3,894

 
1,489

Loss (gain) on derivatives
(1,542
)
 
10,331

Stock-based compensation
2,277

 
2,768

Deferred taxes
10,914

 
9,149

Earnings in unconsolidated investments, net
(17,470
)
 
(31,395
)
Distributions from unconsolidated investments
33,041

 
31,710

Other reconciling items
(67
)
 
(1,017
)
Changes in operating assets and liabilities:
 
 
 
Counterparty collateral asset
23,956

 
9,199

Trade receivables
(9,689
)
 
(7,995
)
Prepaid expenses
899

 
2,202

Other current assets
6,316

 
(3,638
)
Other assets (non-current)
(1,737
)
 
2,561

Accounts payable and other accrued liabilities
(13,889
)
 
31,001

Counterparty collateral liability
(23,956
)
 
(9,199
)
Accrued interest
166

 
8,569

Other current liabilities
(7,141
)
 
4,333

Long-term liabilities
7,858

 
10,648

     Contingent liabilities
(1,508
)
 
275

Derivatives
228

 

Net cash provided by operating activities
123,544

 
157,183

Investing activities
 
 
 
Cash paid for acquisitions, net of cash and restricted cash acquired
(157,543
)
 
(170,028
)
Payment for construction advances/deposits
(53,727
)
 

Payment for construction in progress
(24,644
)
 

Capital expenditures
(7,441
)
 
(39,087
)
Distributions from unconsolidated investments
4,333

 
8,390

Other assets
(319
)
 
7,552

Investment in Pattern Development 2.0
(57,055
)
 

Other investing activities

 
12

Net cash used in investing activities
(296,396
)
 
(193,161
)

9



Pattern Energy Group Inc.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)

 
Six months ended June 30,
 
2018
 
2017
Financing activities
 
 
 
Dividends paid
(82,487
)
 
(71,544
)
Capital distributions - noncontrolling interest
(21,274
)
 
(9,163
)
Payment for financing fees
(6,954
)
 
(7,740
)
Proceeds from revolving credit facility
333,000

 
85,000

Repayment of revolving credit facility
(132,000
)
 
(205,000
)
Proceeds from long-term debt
126,775

 
404,395

Repayment of long-term debt
(34,541
)
 
(74,824
)
Repayment of note payable - related party
(909
)
 

Other financing activities
154

 
(3,618
)
Net cash provided by financing activities
181,764

 
117,506

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(2,388
)
 
2,248

Net increase in cash, cash equivalents and restricted cash including cash classified within current assets and liabilities held for sale
6,524

 
83,776

Add: Net (decrease) in cash classified within current assets and liabilities held for sale
(13,626
)
 

Net change in cash, cash equivalents and restricted cash
(7,102
)
 
83,776

Cash, cash equivalents and restricted cash at beginning of period
137,980

 
109,371

Cash, cash equivalents and restricted cash at end of period
$
130,878

 
$
193,147

Supplemental disclosures
 
 
 
Cash payments for income taxes
$
443

 
$
288

Cash payments for interest expense
$
48,721

 
$
33,666

Business combination:
 
 
 
Assets acquired, net of cash and restricted cash acquired
$
627,241

 
$
665,014

Liabilities assumed
352,570

 
148,456

Less: Noncontrolling interests
11,113

 
325,600

Net assets acquired, net of cash and restricted cash acquired
$
263,558

 
$
190,958

Schedule of non-cash activities
 
 
 
Change in property, plant and equipment
$
117,103

 
$
1,110

Change in other assets
$
202

 
$
2,492

Accrual of dividends
$
87

 
$



10
Exhibit


Exhibit 99.2
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12398825&doc=4

Operating Metrics: Production Performance, Q2 2018

The table below presents the long term average production (LTA) for projects compared to actual production, including compensated curtailment:
Region
 
Q2 2018
 
Actual Results (% of LTA)
 
Resource Index
(% of LTA) 1
 
LTA (GWh)
 
Production (GWh)
 
 
 
 
 
 
Eastern US
 
1,064

 
997

 
94
%
 
95
%
Western U.S.
 
696

 
721

 
104
%
 
106
%
Canada
 
489

 
427

 
87
%
 
87
%
Other
 
136

 
118

 
87
%
 
102
%
Total
 
2,385

 
2,263

 
95
%
 
97
%

1 Resource Index is defined as GWh that could have been produced from actual wind or solar during the period, divided by GWh that could have been produced from expected long term average resource.