October 31, 2014

Pattern Energy Reports Third Quarter Results

- Declares increased dividend of $0.335 per Class A common share for fourth quarter 2014 -

- Adds 283 MW of owned capacity to identified ROFO list with
three new projects, including its first solar project -

SAN FRANCISCO, Oct. 31, 2014 (GLOBE NEWSWIRE) -- Pattern Energy Group Inc. (Nasdaq:PEGI) (TSX:PEG) (Pattern Energy), an independent power company, today announced its financial results for the third quarter of 2014.

Highlights

(Comparisons made between fiscal Q3 2014 and fiscal Q3 2013 results, unless otherwise noted)

  • Cash available for distribution of $10.9 million, up 73%
  • Adjusted EBITDA of $44.3 million, up 39%
  • Proportional electricity sales of 710 GWh, up 94%
  • Revenue of $71.5 million, up 25%
  • Added three new projects to the identified ROFO list, representing an addition of 283 MW of owned interest, including its first solar project
  • Declared a fourth quarter dividend of $0.335 per Class A common share, or $1.34 on an annualized basis, representing a 2% increase over the previous quarter's dividend

"It was a strong quarter as our production and cash flows clearly demonstrate. We continue to add projects to our list of identified ROFO projects which now totals 724 MW of owned capacity, including our first solar project which is ready for financing in Chile," said Mike Garland, President and CEO of Pattern Energy. "Our identified ROFO projects provide a clear view of our growth pipeline, while our track record of successfully bringing projects online demonstrates our ability to execute. With two more projects scheduled to commence commercial operations this year we expect to enter 2015 with strong momentum."

Financial Results

Pattern Energy sold 710,325 MWh of electricity on a proportional basis in the third quarter of 2014 compared to 365,766 MWh sold in the same period in 2013. Pattern Energy sold 2,026,233 MWh of electricity on a proportional basis for the nine months ended September 30, 2014 compared to 1,331,149 MWh sold in the same period in 2013. The increases in proportional MWh sold were primarily attributable to the commencement of commercial operations at South Kent, Panhandle 1 and El Arrayán and an increase in production at Ocotillo.

Net loss in the third quarter of 2014 was $9.3 million compared to net income of $4.2 million in the same period last year. Net loss for the nine months ended September 30, 2014 was $24.0 million compared to net income of $29.4 million in the same period last year. The changes in net income (loss) during the third quarter and year-to-date periods were due primarily to unrealized losses on interest rate and energy derivatives.

Adjusted EBITDA was $44.3 million for the third quarter of 2014 compared to $31.9 million in the same period last year. Adjusted EBITDA for the nine months ended September 30, 2014 was $140.4 million compared to $112.4 million in the same period last year. A reconciliation of Adjusted EBITDA to net income (loss) determined in accordance with GAAP is shown below.

Cash available for distribution (CAFD) in the third quarter of 2014 was $10.9 million compared to $6.3 million in the same period last year. CAFD for the nine months ended September 30, 2014 was $44.8 million compared to $37.0 million in the same period last year. The $4.6 million and $7.8 million increases, in the respective periods, were primarily the result of a distribution from unconsolidated investments and the commencement of commercial operations at the El Arrayán and Panhandle 1 projects. A reconciliation of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP is shown below.

Quarterly Dividend

Pattern Energy declared an increased dividend for the fourth quarter 2014, payable on January 30, 2015, to holders of record on December 31, 2014, in the amount of $0.335 per Class A share, which represents $1.34 on an annualized basis. This is a 2% increase from the third quarter 2014 dividend of $0.328.

Construction Pipeline

The table below outlines Pattern Energy's projects currently in construction, the capacity owned or under contract to be acquired and each project's anticipated commencement date for commercial operations.

 
Asset Location Owned MW Commercial Operations
Panhandle 2 Texas 147 Q4 2014
Grand Ontario 67 Q4 2014
Total   214  

Acquisition Pipeline

Pattern Energy has the Right of First Offer (ROFO) on a pipeline of acquisition opportunities from Pattern Development. In addition, Pattern Energy may seek to acquire assets from third parties.

On September 30, 2014, Pattern Energy announced the addition of two new projects, Conejo Solar and Belle River Wind, to its list of identified ROFO projects from Pattern Development. With these new additions, and the Logan's Gap project announced in August, Pattern Energy has now identified seven projects with a total owned capacity of 724 MW in the list of identified ROFO projects.

Conejo Solar is the first solar project identified within Pattern Energy's list of identified ROFO projects. It is a 104 MW photovoltaic solar project that is being constructed approximately 30 kilometers east of Taltal in Chile's Atacama Desert. Conejo Solar is 100% owned by Pattern Development, with Pattern Energy's ROFO providing at least a 73 MW owned interest in the project. A third party will have an option to buy a 30% stake. The project has a 22-year PPA with Minera Los Pelambres, an affiliate of Antofagasta Minerals SA, for approximately 70% of the project's output over the term of the agreement. Pattern Energy has an existing relationship with Minera Los Pelambres, which has a long-term agreement to purchase power produced by the El Arrayán Wind facility in Chile. Antofagasta Minerals SA owns a minority interest in the El Arrayán Wind facility. Conejo Solar has its required permits and interconnection rights and is ready for construction financing. Pattern Energy anticipates an end-of-year or early 2015 financial closing.

The 100 MW Belle River Wind project has been jointly developed by Pattern Development and Samsung Renewable Energy, Inc. The project, which will be built in Lakeshore, Ontario, has a 20-year PPA with the Ontario Power Authority. Belle River Wind is in the process of securing its final permits and construction is expected to begin in the fourth quarter of 2016.

The table below sets forth the identified ROFO projects:

 
Asset
Location
Owned MW
Commercial
Operation
Gulf Wind Texas 76 Operational
K2 Ontario 90 2015
(In construction)
Armow Ontario 90 2015
(In construction)
Meikle British Columbia 185 2016
(Ready for financing)
Logan's Gap Texas 160 2015
(Ready for financing)
Conejo Solar Chile 73 2016
(Ready for financing)
Belle River Ontario 50 2017
(Securing final permits)
Total   724  

Adjusted EBITDA and Cash Available for Distribution Reconciliations

The following tables reconcile net income (loss) to Adjusted EBITDA and net cash provided by operating activities to cash available for distribution, respectively, for the periods presented (in thousands):

         
Pattern Energy Group Inc.
Adjusted EBITDA
(In thousands of U.S. dollars)
   
   Three months ended September 30  Nine months ended September 30
  2014 2013 2014 2013
         
Net (loss) income  $ (9,281)  $ 4,243  $ (24,013)  $ 29,447
Plus:        
Interest expense, net of interest income  17,742  14,260  47,685  45,932
Tax (benefit) provision  (3,538)  595  (1,505)  (6,799)
Depreciation and accretion  30,015  21,194  72,476  61,758
EBITDA  $ 34,938  $ 40,292  $ 94,643  $ 130,338
Unrealized (gain) loss on energy derivative  (3,139)  (6,659)  11,143  5,222
Unrealized (gain) loss on derivatives  (66)  (776)  6,599  (10,909)
Interest rate derivative settlements  1,030  1,059  3,082  1,059
Net loss (gain) on transactions  68  --   (14,469)  (7,200)
Plus, proportionate share from equity accounted investments:        
Interest expense, net of interest income  4,000  91  9,197  39
Tax (benefit) provision  --   (36)  102  (84)
Depreciation and accretion  4,299  3  9,023  14
Unrealized loss (gain) on interest rate and currency derivatives  3,215  (2,143)  21,046  (6,091)
Realized loss (gain) on interest rate and currency derivatives  --   118  22  (35)
Adjusted EBITDA  $ 44,345  $ 31,949  $ 140,388  $ 112,353
         
   
   Three months ended September 30  Nine months ended September 30
  2014 2013 2014 2013
         
Net cash provided by operating activities  $ 23,078  $ 26,738  $ 83,900  $ 68,396
Changes in current operating assets and liabilities  (2,035)  (8,753)  (7,720)  3,004
Network upgrade reimbursement  1,236  618  2,472  1,236
Release of restricted cash to fund general and administrative costs  149  --   210  -- 
Operations and maintenance capital expenditures  (40)  (56)  (134)  (431)
Transaction costs for acquisitions  --   --   1,128  -- 
Operating CAFD from distribution from unconsolidated investment  4,704  --   4,704  -- 
Less:        
Distributions to noncontrolling interests  --   (258)  (1,470)  (1,426)
Principal payments paid from operating cash flows  (16,149)  (11,973)  (38,245)  (33,788)
Cash available for distribution  $ 10,943  $ 6,316  $ 44,845  $ 36,991
         

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 Friday, October 31, 2014. 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 10-15 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 22630205. The replay recording will be available until 11:59 p.m. Eastern Time, November 13, 2014.

A live webcast of the conference call will be also available on the events page in the investor section of Pattern'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 ("PEGI") and Toronto Stock Exchange ("PEG"). Pattern Energy has a portfolio of eleven wind power projects, including one project it has agreed to acquire, with a total owned interest of 1,472 MW, in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power projects 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 Company's ability to increase the ROFO pipeline, the anticipated commercial operation date of construction projects, its ability to acquire additional assets from third parties, and forward looking information regarding the Conejo Solar and Belle River Wind projects that have been added to the ROFO pipeline.

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.

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 documents filed with the SEC and applicable Canadian securities regulatory authorities, including the Company's annual report on Form 10-K. 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.

     
Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. dollars, except share data)
(Unaudited)
     
  September 30 December 31,
  2014 2013
Assets    
Current assets:    
Cash and cash equivalents  $ 230,658  $ 103,569
Trade receivables  31,782  20,951
Related party receivable  345  167
Reimbursable interconnection costs  38  1,455
Derivative assets, current  13,918  13,937
Current deferred tax assets  573  573
Prepaid expenses and other current assets  17,985  13,927
Total current assets  295,299  154,579
     
Restricted cash  36,913  32,636
Property, plant and equipment, net of accumulated depreciation of $248,718 and $179,778 as of September 30, 2014 and December 31, 2013, respectively  2,072,449  1,476,142
Unconsolidated investments  40,626  107,055
Derivative assets  55,814  82,167
Deferred financing costs, net of accumulated amortization of $20,399 and $16,225 as of September 30, 2014 and December 31, 2013, respectively  32,178  35,792
Net deferred tax assets  6,969  2,017
Other assets  13,092  13,243
Total assets  $ 2,553,340  $ 1,903,631
     
Liabilities and equity    
Current liabilities:    
Accounts payable and other accrued liabilities  $ 22,835  $ 15,550
Accrued construction costs  6,569  3,204
Related party payable  468  1,245
Accrued interest  1,350  495
Dividend payable  15,394  11,103
Derivative liabilities, current  17,612  16,171
Current portion of long-term debt  61,004  48,851
Total current liabilities  125,232  96,619
     
Long-term debt  1,349,079  1,200,367
Derivative liabilities  9,611  7,439
Asset retirement obligations  26,668  20,834
Net deferred tax liabilities  18,568  9,930
Other long-term liabilities  5,898  438
Total liabilities  1,535,056  1,335,627
     
Equity:    
Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 46,530,876 and 35,531,720 shares issued as of September 30, 2014 and December 31, 2013, respectively; 46,518,162 and 35,530,786 shares outstanding as of September 30, 2014 and December 31, 2013, respectively  465  355
Class B common stock, $0.01 par value per share: 20,000,000 shares authorized; 15,555,000 shares issued and outstanding as of September 30, 2014 and December 31, 2013  156  156
Additional paid-in capital  738,290  489,412
Accumulated loss  (24,234)  (13,336)
Accumulated other comprehensive loss  (30,367)  (8,353)
Treasury stock, at cost; 12,714 and 934 shares of Class A common stock as of September 30, 2014 and December 31, 2013, respectively  (404)  (24)
Total equity before noncontrolling interest  683,906  468,210
Noncontrolling interest  334,378  99,794
Total equity  1,018,284  568,004
Total liabilities and equity  $ 2,553,340  $ 1,903,631
     
         
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
  2014 2013 2014 2013
Revenue:        
Electricity sales  $ 64,251  $ 37,950  $ 184,175  $ 130,533
Energy derivative settlements   2,591  2,656  9,309  12,873
Unrealized gain (loss) on energy derivative  3,139  6,659  (11,143)  (5,222)
Related party revenue  868  202  2,330  465
Other revenue  670  9,790  1,404  21,157
Total revenue  71,519  57,257  186,075  159,806
         
Cost of revenue:        
Project expense   23,835  14,592  56,609  42,061
Depreciation and accretion   30,015  21,194  72,476  61,758
Total cost of revenue  53,850  35,786  129,085  103,819
         
Gross profit  17,669  21,471  56,990  55,987
         
Operating expenses:        
General and administrative  5,772  214  15,963  563
Related party general and administrative  1,492  3,607  4,155  8,968
Total operating expenses  7,264  3,821  20,118  9,531
         
Operating income  10,405  17,650  36,872  46,456
         
Other income (expense):        
Interest expense  (17,999)  (14,695)  (48,427)  (48,169)
Equity in (losses) earnings in unconsolidated investments  (5,002)  1,845  (21,238)  5,188
Interest rate derivative settlements  (1,030)  (1,059)  (3,082)  (1,059)
Unrealized gain (loss) on derivatives  66  776  (6,599)  10,909
Related party income  664  --   1,736  -- 
Net (loss) gain on transactions  (68)  --   14,469  7,200
Other income, net  145  321  751  2,123
Total other expense  (23,224)  (12,812)  (62,390)  (23,808)
         
Net (loss) income before income tax  (12,819)  4,838  (25,518)  22,648
Tax (benefit) provision  (3,538)  595  (1,505)  (6,799)
Net (loss) income  (9,281)  4,243  (24,013)  29,447
Net (loss) income attributable to noncontrolling interest  (2,073)  3,248  (13,115)  (690)
Net (loss) income attributable to controlling interest  $ (7,208)  $ 995  $ (10,898)  $ 30,137
         
Cash dividends declared on Class A common shares  (15,258)    (41,395)  
Deemed dividends on Class B common shares  (7,222)    (14,679)  
Net loss attributable to common stockholders  $ (29,688)    $ (66,972)  
         
Weighted average number of shares:        
Class A common stock - Basic  40,980,989    38,342,998  
Class A common stock - Diluted  56,860,637    54,201,701  
         
Class B common stock - Basic and diluted  15,555,000    15,555,000  
         
Earnings (loss) per share        
Class A common stock:        
Basic loss per share  $ (0.15)    $ (0.16)  
Diluted loss per share  $ (0.15)    $ (0.20)  
         
Class B common stock:        
Basic and diluted loss per share  $ (0.06)    $ (0.30)  
         
Cash dividends declared per Class A common share  $ 0.33    $ 0.96  
Deemed dividends per Class B common share  $ 0.46    $ 0.94  
         
2013 pro forma information:        
Unaudited pro forma net income after tax:        
Net income before income tax        $ 22,648
Pro forma tax benefit        (2,232)
Pro forma net income        $ 24,880
         
     
Pattern Energy Group Inc.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
     
   Nine months ended September 30
  2014 2013
Operating activities    
Net (loss) income  $ (24,013)  $ 29,447
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation and accretion  72,476  61,758
Amortization of financing costs  4,246  5,428
Unrealized loss (gain) on derivatives  17,742  (5,687)
Stock-based compensation  3,128  -- 
Net gain on transactions  (16,526)  (7,200)
Deferred taxes  (1,505)  (6,801)
Equity in losses (earnings) in unconsolidated investments  21,238  (5,188)
Changes in operating assets and liabilities:    
Trade receivables  (5,255)  (7,935)
Prepaid expenses and other current assets  13,139  (3,393)
Other assets (non-current)  (503)  (358)
Accounts payable and other accrued liabilities  1,514  4,862
Related party receivable/payable  (1,017)  (291)
Income taxes payable  128  -- 
Accrued interest payable  (917)  857
Long-term liabilities  25  2,896
Net cash provided by operating activities  83,900  68,395
     
Investing activities    
Receipt of ITC Cash Grant  --  173,446
Cash paid for acquisitions, net of cash acquired  (167,585)  --
Proceeds from sale of investments  --   14,254
Decrease in restricted cash  23,861  63,732
Increase in restricted cash  (10,406)  (80,567)
Capital expenditures  (18,615)  (120,965)
Deferred development costs  --   (528)
Distribution from unconsolidated investments  17,104  10,463
Contribution to unconsolidated investments  (2,320)  (8,737)
Reimbursable interconnection receivable  1,418  49,715
Other assets (non-current)  2,472  1,740
Net cash (used in) provided by investing activities  (154,071)  102,553
     
Financing activities    
Proceeds from public offering, net of expenses  $ 287,107  $ -- 
Repurchase of shares for employee tax withholding  (380)  -- 
Dividends paid  (37,104)  -- 
Capital contributions - Pattern Development  --   32,679
Capital contributions - noncontrolling interest  2,550  -- 
Capital distributions - Pattern Development  --   (98,886)
Capital distributions - noncontrolling interest  (1,470)  (1,426)
Decrease in restricted cash  13,508  116,654
Increase in restricted cash  (13,508)  (126,475)
Payment for deferred financing costs  (603)  (294)
Proceeds from revolving credit facility  --   56,000
Repayment of short-term debt  (14,840)  -- 
Proceeds from short-term debt  1,087  -- 
Repayment of long-term debt  (38,245)  (41,283)
Proceeds from long-term debt  --   138,620
Repayment of construction and grant loans  --   (114,056)
Net cash provided by (used in) financing activities  198,102  (38,467)
     
Effect of exchange rate changes on cash and cash equivalents  (842)  (966)
Net change in cash and cash equivalents  127,089  131,515
Cash and cash equivalents at beginning of period  103,569  17,574
Cash and cash equivalents at end of period  $ 230,658  $ 149,089
     
Supplemental disclosure    
Cash payments for interest and commitment fees  $ 42,084  $ 45,178
Acquired PP&E for El Arrayán and Panhandle 1  674,743  -- 
Schedule of non-cash activities    
Change in fair value of interest rate swaps  (18,541)  38,266
Change in fair value of contingent liabilities  --   8,001
Amortization of deferred financing costs  --   175
Capitalized interest  2,320  3,230
Capitalized commitment fee  --   39
Change in property, plant and equipment  (97,051)  (160,021)
Transfer of capitalized assets to South Kent joint venture  --   49,275
Non-cash distribution to Pattern Development  --   (5,748)
Non-cash deemed dividends on Class B convertible common stock  14,679  -- 
     
CONTACT: Ross Marshall

         Investor Relations

         T: (416) 815-0700 ext. 238

         E: rmarshall@tmxequicom.com



         Matt Dallas

         Media Relations

         T: (917) 363-1333

         E: matt.dallas@patternenergy.com

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