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): November 5, 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 November 5, 2018, we issued a press release announcing our financial results for the third quarter ended September 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.
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 November 5, 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 September 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: November 5, 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 Third Quarter 2018 Financial Results
- Declares dividend of $0.4220 per Class A common share for fourth quarter 2018 -

SAN FRANCISCO, California, November 5, 2018 - Pattern Energy Group Inc. (the “Company” or “Pattern Energy”) (NASDAQ & TSX: PEGI) today announced its financial results for the 2018 third quarter.

Highlights
(Comparisons made between fiscal Q3 2018 and fiscal Q3 2017 results, unless otherwise noted)
Proportional gigawatt hours (“GWh”) sold of 1,623 GWh, up 7%
Net cash provided by operating activities of $106.9 million
Cash available for distribution (“CAFD”) of $31.7 million, up 235% and on track to meet full year guidance(1) 
Net loss of $31.5 million
Adjusted EBITDA of $79.5 million, up 45%
Revenue of $118.4 million, up 29%
Declared a fourth quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter's dividend
Committed to a plan to repower the 283 MW Gulf Wind project starting in 2019
Acquired a 51% owned interest in the 143 MW Mont Sainte-Marguerite project in Québec, for a purchase price of $37.7 million, representing a 10x multiple of the five-year average CAFD(1) of the project
Completed the sale of the Company’s operations in Chile, which principally consist of its 81 MW owned interest in the 115 MW El Arrayán project (“El Arrayán”) for which Pattern Energy received cash proceeds of $70.4 million
“It was another solid quarter with CAFD up more than three times the same period last year, which puts us in a great position to achieve our targeted CAFD(1) for the year,” said Mike Garland, President of Pattern Energy. “We continue to take proactive measures to increase our CAFD without issuing common equity including, asset recycling, repowering Gulf Wind and the implementation of cost savings. During the quarter we sold El Arrayán at a premium to the multiple at which we trade and we are in the final stages of a second sale. This asset recycling provides us additional flexibility to make new investments in accretive opportunities, like the Mont Sainte-Marguerite acquisition or the Gulf Wind repowering, which increase CAFD. As the opportunity set at Pattern Energy Group 2 LP (“Pattern Development 2.0”) continues to mature and grow, especially in exciting markets like Japan, our material ownership interest in the development business is a clear differentiator to other players in the market.”
(1) The forward looking measures of 2018 full year cash available for distribution (CAFD) and the five-year average annual purchase price multiple are non-GAAP measures that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.

Financial and Operating Results
Pattern Energy sold 1,622,991 megawatt hours (“MWh”) of electricity on a proportional basis in the third quarter of 2018 compared to 1,513,997 MWh sold in the same period last year. Pattern Energy sold 6,021,515 MWh of electricity on a proportional basis for the nine months ended September 30, 2018 (“YTD 2018”) compared to 5,663,782 MWh sold in the same period last year. The 7% increase in the quarterly period was primarily due to volume increases as a result of acquisitions in 2017 and 2018, favorable wind and increased availability compared to last year. Production for the quarter was 8% below the long-term average forecast for the period with strength in Canada, Japan and Puerto Rico offset by weakness in the Eastern U.S.

1



Net cash provided by operating activities was $106.9 million for the third quarter of 2018 compared to $2.1 million for the same period last year. Net cash provided by operating activities was $230.5 million for YTD 2018 as compared to $159.3 million for the same period last year. The increase in the quarterly period of $104.8 million was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales), a $33.8 million increase in advanced lease revenue, decreased payments of $26.7 million in payable, accrued and current liabilities, due primarily to the timing of payments, a $13.6 million increase in other current assets primarily due to a $7.7 million increase in sales tax receivable and a $7.3 million increase in related party receivable, a $6.5 million decrease in interest payments, and a $1.7 million decrease in transmission costs. The increase to net cash provided by operating activities was partially offset by a decrease of $1.6 million in distributions from unconsolidated investments.
Cash available for distribution increased 235% to $31.7 million for the third quarter of 2018, compared to $9.5 million for the same period last year. Cash available for distribution increased 28% to $133.4 million for YTD 2018 compared to $103.8 million for the same period in the prior year. The $22.2 million increase in the quarterly period was primarily due to a $24.3 million increase in revenues (excluding the unrealized loss on the energy derivative and amortization included in electricity sales) due to acquisitions in 2017 and 2018, a $5.9 million decrease in principal payments of project-level debt, a $1.7 million decrease in transmission costs and a $0.8 million increase in the release of restricted cash. These increases were partially offset by a $3.0 million increase in distributions to noncontrolling interests, a $4.0 million decrease in distributions from unconsolidated investments and $1.4 million of costs related to the sale of El Arrayán.
Net loss was $31.5 million in the third quarter of 2018, compared to a net loss of $48.4 million for the same period last year. Net loss was $45.9 million for YTD 2018 compared to a net loss of $60.5 million in the same period last year. The improvement of $16.8 million in the quarterly period was primarily attributable to a $26.4 million increase in revenue due to 2017 and 2018 acquisitions and a $5.1 million decrease in other expense primarily due to gains on derivatives. These increases were partially offset by a $4.5 million increase in cost of revenue related to 2017 and 2018 acquisitions, a $3.3 million increase in operating expenses related to an impairment expense on the El Arrayán sale and a $6.9 million increase in tax provisions.
Adjusted EBITDA increased 45% to $79.5 million for the third quarter of 2018 compared to $54.7 million for the same period last year. Adjusted EBITDA increased 19% to $292.2 million for YTD 2018 compared to $244.8 million for the same period last year. The $24.8 million increase in the quarterly period was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales) primarily attributable to volume increases as a result of 2017 and 2018 acquisitions, favorable wind and increased availability compared to last year. Adjusted EBITDA for the third quarter also reflects a charge to earnings of approximately $4.3 million for the equity pick-up in the financial results of Pattern Development 2.0.
2018 Financial Guidance
Pattern Energy is re-confirming its targeted annual cash available for distribution(2) for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.
(2) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.
Quarterly Dividend
Pattern Energy declared a dividend for the fourth quarter 2018, payable on January 31, 2019, to holders of record on December 31, 2018 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the fourth quarter 2018 dividend is unchanged from the third quarter 2018 dividend.
Acquisition Pipeline
Pattern Energy Group LP (“Pattern Development 1.0”) and Pattern Development 2.0 (together, the “Pattern Development Companies”) have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a ROFO on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 743 MW of potential owned capacity and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

2



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
 
Operational
 
Montana
 
2018
 
2018
 
PPA
 
80
 
80
Crazy Mountain
 
Late stage development
 
Montana
 
2019
 
2019
 
PPA
 
80
 
80
Grady
 
In construction
 
New Mexico
 
2018
 
2019
 
PPA
 
220
 
188
Sumita
 
Late stage development
 
Japan
 
2019
 
2022
 
PPA
 
99
 
55
Ishikari
 
Late stage development
 
Japan
 
2020
 
2022
 
PPA
 
112
 
112
 
 
 
 
 
 
 
 
 
 
 
 
1,091
 
743
(1)
Represents year of actual or anticipated commencement of construction.
(2)
Represents year of actual or anticipated commencement of commercial operations.
(3)
Rated capacity represents the maximum electricity generating capacity of a project in MW. As a result of wind and other conditions, a project or a turbine will not operate at its rated capacity at all times and the amount of electricity generated will be less than its rated capacity. The amount of electricity generated may vary based on a variety of factors.
(4)
Pattern Development-Owned capacity represents the maximum, or rated, electricity generating capacity of the project in MW multiplied by Pattern Development 1.0's or Pattern Development 2.0's percentage ownership interest in the distributable cash flow of the project.

3



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 September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Net cash provided by operating activities(1)
$
106,922

 
$
2,147

 
$
230,466

 
$
159,330

Changes in operating assets and liabilities
(54,936
)
 
25,481

 
(36,439
)
 
(22,475
)
Network upgrade reimbursement
303

 
346

 
879

 
8,936

Release of restricted cash
759

 

 
3,247

 

Operations and maintenance capital expenditures
(169
)
 
(254
)
 
(440
)
 
(517
)
Distributions from unconsolidated investments
419

 
2,821

 
4,752

 
11,211

Other
(2,779
)
 
598

 
228

 
1,974

Less:

 

 

 

Distributions to noncontrolling interests
(7,592
)
 
(4,537
)
 
(28,867
)
 
(13,701
)
Principal payments paid from operating cash flows
(11,255
)
 
(17,140
)
 
(40,432
)
 
(40,911
)
Cash available for distribution
$
31,672

 
$
9,462

 
$
133,394

 
$
103,847

(1) Included in net cash provided by operating activities for the three and nine months ended September 30, 2018 and 2017 are the portions of distributions from unconsolidated investments paid from cumulative earnings representing the return on investment.
 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Net loss
$
(31,547
)
 
$
(48,376
)
 
$
(45,941
)
 
$
(60,521
)
Plus:
 
 
 
 
 
 
 
Interest expense, net of interest income
27,021

 
26,710

 
79,415

 
73,009

Tax provision (benefit)
3,043

 
(3,839
)
 
14,237

 
5,477

Depreciation, amortization and accretion
63,013

 
56,650

 
188,429

 
156,629

EBITDA
61,530

 
31,145

 
236,140

 
174,594

Unrealized loss on energy derivative (1)
318

 
3,113

 
14,991

 
10,134

(Gain) loss on derivatives
(1,536
)
 
6,288

 
(15,997
)
 
11,687

Impairment expense
2,325

 

 
6,563

 

Other
2,180

 
466

 
2,180

 
1,585

Plus, proportionate share from unconsolidated investments:
 
 
 
 
 
 
 
Interest expense, net of interest income
9,306

 
10,270

 
28,280

 
29,108

Tax provision
1,142

 

 
935

 

Depreciation, amortization and accretion
8,888

 
9,361

 
26,397

 
26,390

Gain on derivatives
(4,619
)
 
(5,908
)
 
(7,333
)
 
(8,696
)
Adjusted EBITDA
$
79,534

 
$
54,735

 
$
292,156

 
$
244,802

(1) Amount is included in electricity sales on the consolidated statements of operations.

4



Conference Call and Webcast
Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Monday, November 5, 2018. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 4369558. The replay recording will be available until 11:59 p.m. Eastern Time, November 28, 2018.
A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy’s website at www.patternenergy.com. An archived webcast will be available for one year.
About Pattern Energy
Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on the Nasdaq Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 24 wind and solar power facilities with a total owned interest of 2,861 MW in the United States, Canada and Japan that use proven, best-in-class technology. Pattern Energy’s wind and solar power facilities generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of Canadian securities laws, including statements regarding the ability to achieve the 2018 cash available for distribution target, the ability to consummate a repowering of the Gulf Wind project, the ability of the Company to consummate the second sale as part of its asset recycling strategy, the ability of the Company's measures to increase CAFD, the ability of the Company's ownership in Pattern Development 2.0 to differentiate it in the market, and the anticipated commencement date of construction and commercial operations of certain of the identified ROFO projects. These forward-looking statements represent the Company’s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.
Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Company's annual report on Form 10-K and any quarterly reports on Form 10-Q. The risk factors and other factors noted therein could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.
# # #

Contacts:
Media Relations
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)
 
September 30,
 
December 31,
 
2018
 
2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
125,689

 
$
116,753

Restricted cash
6,324

 
9,065

Counterparty collateral
5,855

 
29,780

Trade receivables
50,303

 
54,900

Derivative assets, current
15,842

 
19,445

Prepaid expenses
21,080

 
17,847

Deferred financing costs, current, net of accumulated amortization of $2,670 and $2,580 as of September 30, 2018 and December 31, 2017, respectively
1,482

 
1,415

Other current assets
13,584

 
21,105

Total current assets
240,159

 
270,310

Restricted cash
13,899

 
12,162

Major construction advances
71,406

 

Construction in progress
221,185

 

Property, plant and equipment, net
4,109,864

 
3,965,121

Unconsolidated investments
372,380

 
311,223

Derivative assets
24,757

 
9,628

Deferred financing costs
8,797

 
7,784

Net deferred tax assets
1,616

 
6,349

Finite-lived intangible assets, net
221,183

 
136,048

Goodwill
56,453

 

Other assets
30,372

 
22,906

Total assets
$
5,372,071

 
$
4,741,531

 
 
 
 

6



Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)
 
September 30,
 
December 31,
 
2018
 
2017
Liabilities and equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other accrued liabilities
$
57,360

 
$
53,615

Accrued construction costs
38,442

 
1,369

Counterparty collateral liability
5,855

 
29,780

Accrued interest
7,621

 
16,460

Dividends payable
42,185

 
41,387

Derivative liabilities, current
2,190

 
8,409

Revolving credit facility, current
186,372

 

Current portion of long-term debt, net
63,671

 
51,996

Contingent liabilities, current
24,771

 
2,592

Other current liabilities
12,955

 
11,426

Total current liabilities
441,422

 
217,034

Revolving credit facility
23,760

 

Long-term debt, net
2,105,834

 
1,878,735

Derivative liabilities
14,985

 
20,972

Net deferred tax liabilities
120,104

 
56,491

Finite-lived intangible liabilities, net
57,039

 
51,194

Contingent liabilities
140,048


62,398

Asset retirement obligations
192,006

 
56,619

Other long-term liabilities
64,033

 
49,946

Advanced lease revenue
28,268

 

Total liabilities
3,187,499

 
2,393,389

Commitments and contingencies
 
 
 
Equity:
 
 
 
Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 98,095,886 and 97,860,048 shares outstanding as of September 30, 2018 and December 31, 2017, respectively
983

 
980

Additional paid-in capital
1,170,450

 
1,234,846

Accumulated loss
(12,595
)
 
(112,175
)
Accumulated other comprehensive loss
(15,716
)
 
(25,691
)
Treasury stock, at cost; 178,783 and 157,812 shares of Class A common stock as of September 30, 2018 and December 31, 2017, respectively
(3,901
)
 
(3,511
)
Total equity before noncontrolling interest
1,139,221

 
1,094,449

Noncontrolling interest
1,045,351

 
1,253,693

Total equity
2,184,572

 
2,348,142

Total liabilities and equity
$
5,372,071

 
$
4,741,531


7



Pattern Energy Group Inc.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
Electricity sales
$
115,417

 
$
89,807

 
$
353,515

 
$
293,977

Other revenue
2,976

 
2,223

 
16,477

 
6,646

Total revenue
118,393

 
92,030

 
369,992

 
300,623

Cost of revenue:
 
 
 
 
 
 
 
Project expense
37,229

 
33,932

 
105,456

 
96,437

Transmission costs
5,700


7,421

 
20,533

 
12,213

Depreciation, amortization and accretion
55,267


52,379

 
165,698

 
144,637

Total cost of revenue
98,196

 
93,732

 
291,687

 
253,287

Gross profit (loss)
20,197

 
(1,702
)
 
78,305

 
47,336

Operating expenses:
 
 
 
 
 
 
 
General and administrative
9,305

 
9,068

 
29,100

 
31,969

Related party general and administrative
4,285

 
3,587

 
12,016

 
10,589

Impairment expense
2,325

 

 
6,563

 

Total operating expenses
15,915

 
12,655

 
47,679

 
42,558

Operating income (loss)
4,282

 
(14,357
)
 
30,626

 
4,778

Other expense:
 
 
 
 
 
 
 
Interest expense
(27,460
)
 
(27,147
)
 
(80,613
)
 
(74,541
)
Gain (loss) on derivatives
1,536

 
(6,288
)
 
15,997

 
(11,687
)
Earnings (loss) in unconsolidated investments, net
(4,304
)
 
(3,964
)
 
13,166

 
27,431

Net earnings (loss) on transactions
1,130

 
(466
)
 
(1,970
)
 
(1,585
)
Other income (expense), net
(3,688
)
 
7

 
(8,910
)
 
560

Total other expense
(32,786
)
 
(37,858
)
 
(62,330
)
 
(59,822
)
Net loss before income tax
(28,504
)
 
(52,215
)
 
(31,704
)
 
(55,044
)
Tax provision (benefit)
3,043

 
(3,839
)
 
14,237

 
5,477

Net loss
(31,547
)
 
(48,376
)
 
(45,941
)
 
(60,521
)
Net loss attributable to noncontrolling interest
(18,952
)
 
(18,548
)
 
(201,986
)
 
(50,566
)
Net income (loss) attributable to Pattern Energy
$
(12,595
)
 
$
(29,828
)
 
$
156,045

 
$
(9,955
)
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding
 
 
 
 
 
 
 
Basic
97,460,492

 
87,370,979

 
97,464,012

 
87,146,465

Diluted
97,460,492

 
87,370,979

 
105,788,848

 
87,146,465

Earnings (loss) per share attributable to Pattern Energy
 
 
 
 
 
 
 
Basic
$
(0.13
)
 
$
(0.34
)
 
$
1.60

 
$
(0.12
)
Diluted
$
(0.13
)
 
$
(0.34
)
 
$
1.58

 
$
(0.12
)

8



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

 
Nine months ended September 30,
 
2018
 
2017
Operating activities
 
 
 
Net loss
$
(45,941
)
 
$
(60,521
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
187,741

 
156,330

Impairment expense
6,563

 

Loss (gain) on derivatives
(3,236
)
 
17,869

Stock-based compensation
3,517

 
4,085

Deferred taxes
13,910

 
9,133

Intraperiod tax allocation

 
(3,656
)
Earnings in unconsolidated investments, net
(13,166
)
 
(27,431
)
Distributions from unconsolidated investments
42,838

 
43,093

Other reconciling items
1,802

 
(2,047
)
Changes in operating assets and liabilities:
 
 
 
Counterparty collateral asset
23,925

 
10,105

Trade receivables
(47
)
 
(2,861
)
Prepaid expenses
(1,241
)
 
(3,187
)
Other current assets
13,749

 
(9,790
)
Other assets (non-current)
(4,173
)
 
2,457

Advanced lease revenue
33,792

 

Accounts payable and other accrued liabilities
(1,801
)
 
16,389

Counterparty collateral liability
(23,925
)
 
(10,105
)
Accrued interest
(5,841
)
 
(3,884
)
Other current liabilities
(2,651
)
 
6,650

Contingent liabilities, current
24,070

 
1,390

Long-term liabilities
7,366

 
14,569

     Contingent liabilities
(27,013
)
 
742

Derivatives
228

 

Net cash provided by operating activities
230,466

 
159,330

Investing activities
 
 
 
Cash paid for acquisitions, net of cash and restricted cash acquired
(188,527
)
 
(229,329
)
Proceeds from sale of subsidiaries, net of cash and restricted cash distributed
55,820

 

Payment for construction advances/deposits
(68,937
)
 

Payment for construction in progress
(49,450
)
 

Payment for property,plant and equipment
(10,212
)
 
(44,295
)
Distributions from unconsolidated investments
4,752

 
11,211

Other assets
(781
)
 
7,607

Investment in Pattern Development 2.0
(86,254
)
 
(60,000
)
Net cash used in investing activities
(343,589
)
 
(314,806
)

9



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

 
Nine months ended September 30,
 
2018
 
2017
Financing activities
 
 
 
Proceeds from public offerings, net of issuance costs
$

 
$
22,431

Dividends paid
(123,616
)
 
(107,943
)
Capital contributions - noncontrolling interest
3,383

 

Capital distributions - noncontrolling interest
(28,867
)
 
(13,701
)
Payment for financing fees
(7,478
)
 
(7,763
)
Proceeds from revolving credit facility
488,907

 
323,000

Repayment of revolving credit facility
(279,000
)
 
(250,000
)
Proceeds from long-term debt
164,673

 
404,395

Repayment of long-term debt
(53,274
)
 
(192,109
)
Repayment of note payable - related party
(909
)
 

Repayment of short-term debt
(36,973
)
 

Payment for termination of designated derivatives

 
(14,372
)
Other financing activities
(2,771
)
 
(3,712
)
Net cash provided by financing activities
124,075

 
160,226

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(3,020
)
 
3,952

Net change in cash, cash equivalents and restricted cash
7,932

 
8,702

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

 
109,371

Cash, cash equivalents and restricted cash at end of period
$
145,912

 
$
118,073

Supplemental disclosures
 
 
 
Cash payments for income taxes
$
490

 
$
335

Cash payments for interest expense
$
79,302

 
$
70,100

Schedule of non-cash activities
 
 
 
Change in major construction advances, construction in progress and property, plant and equipment
$
225,898

 
$
619


10
Exhibit


Exhibit 99.2
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12529440&doc=4

Operating Metrics: Production Performance, Q3 2018

The table below presents the long term average production (LTA) for projects compared to actual production, including compensated curtailment:
Region
 
Q3 2018
 
Actual Results (% of LTA)
 
Resource Index
(% of LTA) 1
 
LTA (GWh)
 
Production (GWh)
 
 
 
 
 
 
Eastern US
 
755

 
632

 
84
%
 
87
%
Western U.S.
 
521

 
498

 
96
%
 
96
%
Canada
 
368

 
370

 
101
%
 
100
%
Other
 
113

 
123

 
109
%
 
10.8
%
Total
 
1,757

 
1,623

 
92
%
 
94
%

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.