Pattern Energy Group Inc.
Pattern Energy Group Inc. (Form: 8-K, Received: 11/09/2017 06:24:50)


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 9, 2017
   
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 9, 2017 , we issued a press release announcing our financial results for the third quarter ended September 30, 2017 . 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 provided by 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 November 9, 2017 , we are also providing Operating Metrics: Production Performance for long-term average production ("LTA") compared to actual production, including compensated curtailment for our wind farms for the quarter ended September 30, 2017 , 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
 





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 9, 2017
 
 
 
 
 
 
PATTERN ENERGY GROUP INC.
 
 
 
 
 
 
By:
/s/ Michael J. Lyon
 
 
 
Name: Michael J. Lyon
 
 
 
Title:   Chief Financial Officer
 
 
 
(Principal Financial Officer)
 





Exhibit 99.1


Pattern Energy Reports Third Quarter 2017 Financial Results
- Increases dividend to $ 0.422 per Class A common share for Q4 2017 -

SAN FRANCISCO, California, November 9, 2017 - Pattern Energy Group Inc. (the “Company” or “Pattern Energy”) (NASDAQ & TSX: PEGI) today announced its financial results for the 2017 third quarter.

Highlights
(Figures reported below are for the third quarter of fiscal 2017, unless otherwise noted)
Proportional gigawatt hours ("GWh") sold of 1,514 GWh
Net cash provided by operating activities of $2.1 million
Cash available for distribution ("CAFD") of $9.5 million , and on track to meet the narrowed full year guidance (1)  
Net loss of $48.4 million
Adjusted EBITDA of $54.7 million
Revenue of $92.0 million
Declared a fourth quarter dividend of $ 0.422 per Class A common share or $1.69 on an annualized basis, subsequent to the end of the period, representing a 0.5% increase over the previous quarter’s dividend
Completed the acquisition of a 51% interest in the 179 MW Meikle Wind facility from Pattern Energy Group LP ("Pattern Development 1.0") (2) for a total investment of approximately $68 million
Announced the addition of the 100 megawatt (“MW”) Ishikari wind project in Japan to the Company's identified ROFO ("right of first offer") list, and as such the identified ROFO list now totals 1,150 MW of potential owned capacity
Completed an equity offering of approximately $215 million in gross proceeds, subsequent to the end of the period
“The strategic transactions we announced earlier this year together with the new capital we raised last month represent the beginning of the next phase of our growth strategy,” said Mike Garland, President and CEO of Pattern Energy. “With the steps we have taken this year, the business is significantly stronger today. We have a clear opportunity to capitalize on the assets from the identified ROFO list and our investment in Pattern Development 2.0. The expansion of the identified ROFO list demonstrates the progress we are making toward achieving our goal of 5 gigawatts ("GW") by 2020.”
(1) The forward looking measure of 2017 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 2017 Quarterly Report on Form 10-Q for the period ended September 30, 2017.
(2) In December 2016, Pattern Energy Group LP ("Pattern Development 1.0") formed Pattern Energy Group 2 LP ("Pattern Development 2.0"), and together such companies are referred to as "Pattern Development".

Financial and Operating Results
Pattern Energy sold 1,513,997 megawatt hours ("MWh") of electricity on a proportional basis in the third quarter of 2017 compared to 1,472,300 MWh sold in the same period last year. Pattern Energy sold 5,663,782 MWh of electricity on a proportional basis for the nine months ended September 30, 2017 (YTD 2017) compared to 4,988,621 MWh sold in the same period last year. The 3% increase in the quarterly period was primarily attributable to the acquisition of new projects, specifically Armow in the fourth quarter of 2016, Broadview in the second quarter 2017 and Meikle in the third quarter of 2017, offset by unfavorable wind conditions as previously announced in the press release dated September 29, 2017. Production for the quarter was 15% below the long-term average forecast for the period.

1



Net cash provided by operating activities was $2.1 million for the third quarter of 2017 compared to $37.4 million for the same period last year. Net cash provided by operating activities was $159.3 million for YTD 2017 compared to $107.4 million for the same period last year. The change in the quarterly period was primarily due to increases of $21.6 million in cash payments for accounts payable and accrued liabilities due to timing of payments, $13.8 million in interest payments due to the issuance of the Unsecured Senior Notes in January 2017 and debt associated with the acquisitions in 2017, $7.3 million in transmission costs and $2.7 million in project expenses, as well as a decrease of $4.7 million in cash receipts due to timing of collections from trade receivables. These changes to net cash from operating activities were partially offset by a $11.4 million increase in distributions from unconsolidated investments and by a $2.6 million increase in revenues (excluding unrealized loss on energy derivative and amortization of PPAs) .
Cash available for distribution was $9.5 million for the third quarter of 2017 , which is above the midpoint of the guidance provided in the Company's press release dated September 29, 2017, compared to $20.2 million for the same period last year. Cash available for distribution was $103.8 million for YTD 2017 compared to $96.7 million for the same period in the prior year. The $10.7 million change in the quarterly period was primarily due to increases of $7.3 million in interest expense from the issuance of the Unsecured Senior Notes in January 2017 and debt associated with the acquisitions in 2017, $7.3 million in transmission costs, $2.7 million in project expenses and $ 1.0 million in distributions to noncontrolling interests. The change was partially offset by increases of $5.9 million in total distributions from unconsolidated investments, $2.6 million in revenues (excluding unrealized loss on energy derivative and amortization of PPAs), $0.3 million network upgrade reimbursement related to Broadview, as well as a decrease of $0.5 million in operating expense.
Net loss was $48.4 million in the third quarter of 2017 , compared to $11.1 million for the same period last year. Net loss was $60.5 million for YTD 2017 compared to $55.7 million in the same period last year. The change in the quarterly period was primarily attributable to increases of $18.7 million in cost of revenues due to the acquisitions in 2017 and $24.4 million in other expense related to a decrease in earnings in unconsolidated investments, net of increases to interest expense, loss on undesignated derivatives and realized loss on designated derivatives. The impact of these items was partially offset by an increase in tax benefit of $5.2 million .
Adjusted EBITDA was $54.7 million for the third quarter of 2017 compared to $62.3 million for the same period last year. Adjusted EBITDA was $244.8 million for YTD 2017 compared to $219.0 million for the same period last year. The $7.6 million change in the quarterly period was primarily due to increases of $7.3 million in transmission costs and $2.7 million in project expense, and a decrease of $0.7 million in the proportionate share of Adjusted EBITDA from unconsolidated investments. These changes were partially offset by a $2.6 million increase in revenues (excluding unrealized loss on energy derivative and amortization of PPAs) and a $0.5 million decrease in operating expense.
Fourth Quarter Wind Conditions
Based on conditions to date in the fourth quarter of 2017, wind levels for the fourth quarter are in line with the long-term average forecast, which represents a substantial improvement from the wind levels in the first two months of the third quarter.
2017 Financial Guidance
Pattern Energy is narrowing its targeted annual cash available for distribution for 2017 to a range of $145 million to $160 million. The new range maintains the midpoint of the original range and that midpoint represents an increase of 15% compared to cash available for distribution in 2016. The range assumes long-term average proportionate production of the fleet for the remainder of 2017 and takes into account a potential adverse impact of any extended electric grid outage in Puerto Rico during the fourth quarter of 2017. As noted above, forward-looking cash available for distribution 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 for the reasons stated above.
Quarterly Dividend
Pattern Energy declared an increased dividend for the fourth quarter 2017 , payable on January 31, 2018, to holders of record on December 29, 2017 in the amount of $ 0.422 per Class A common share, which represents $ 1.69 on an annualized basis. This is a 0.5% increase from the third quarter 2017 dividend of $ 0.42 .
Operations Update
The completed evaluation of the 101 MW Santa Isabel project in Puerto Rico reported no material damage to the turbines or the project. While all of the turbines are operational, at present Santa Isabel has not been reconnected to the high voltage grid and the

2



timing of when the project will be reconnected is not certain. Pattern Energy is working with the Puerto Rico Electric Power Authority ("PREPA"), the offtaker for the Santa Isabel project, to support PREPA's broader efforts to restore the high voltage grid so the project can help support providing much needed power to the Puerto Rican communities.

Project Acquisition
During the third quarter, Pattern Energy acquired a 91 MW owned interest in the 179 MW Meikle project, with PSP Investments acquiring the remaining 88 MW interest. The Meikle project, located in the Peace River Regional District of British Columbia, commenced commercial operations in the first quarter of 2017 and operates under a 25-year power purchase agreement with BC Hydro, which has a AAA/Aaa2 credit rating.
Pattern Energy acquired its 51% interest in Meikle for a total investment of approximately $68 million (1) , paid at closing, which represents a CAFD multiple of 10x of the project’s five-year average CAFD (2) .
Construction Pipeline
Pattern Energy has agreed to acquire a 51% interest in the 143 MW Mont Sainte-Marguerite project, located in the Chaudière-Appalaches region south of Québec City. The project is currently in the final stages of construction and commissioning and is expected to commence commercial operations in late 2017. The project will operate under a 25-year power purchase agreement with Hydro-Québec, which has a AA-/Aa2 credit rating.

Pattern Energy will acquire its 51% interest in Mont Sainte-Marguerite for a total investment of approximately $40 million (3) , which represents a CAFD multiple of 10x of the five-year average CAFD (2) . The acquisition is expected to close during the first quarter of 2018, following the commencement of commercial operations and subject to customary closing conditions. It will be funded at the time of closing using available liquidity.

(1)
Based on a CAD to USD exchange rate of $1.27
(2)
This forward looking measure of five-year average annual purchase price multiple of CAFD contribution from the Meikle and Mont Sainte-Marguerite projects 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 2017 Quarterly Report on Form 10-Q for the period ended September 30, 2017.
(3)
Based on a CAD to USD exchange rate of $1.32
Acquisition Pipeline
Pattern Development's pipeline of development projects totals more than 10 GW. Pattern Energy has a ROFO on a pipeline of acquisition opportunities from Pattern Development. The identified ROFO list stands at 1,150 MW of potential owned capacity and represents a portion of the Pattern Development pipeline of development projects, all of which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,358 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

3



Below is a summary of the identified ROFO projects that Pattern Energy expects to acquire from Pattern Development in connection with Pattern Energy's project 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
 
 
 
 
 
 
 
 
 
 
 
 
Otsuki Wind
 
Operational
 
Japan
 
n/a
 
2006
 
PPA
 
12
 
12
Kanagi Solar
 
Operational
 
Japan
 
2014
 
2016
 
PPA
 
10
 
10
Futtsu Solar
 
Operational
 
Japan
 
2014
 
2016
 
PPA
 
31
 
31
Conejo Solar (5)
 
Operational
 
Chile
 
2015
 
2016
 
PPA
 
104
 
104
El Cabo
 
In construction
 
New Mexico
 
2016
 
2017
 
PPA
 
298
 
125
Belle River
 
In construction
 
Ontario
 
2016
 
2017
 
PPA
 
100
 
43
Ohorayama
 
In construction
 
Japan
 
2016
 
2018
 
PPA
 
33
 
33
North Kent
 
In construction
 
Ontario
 
2017
 
2018
 
PPA
 
100
 
35
Henvey Inlet
 
Late stage development
 
Ontario
 
2017
 
2019
 
PPA
 
300
 
150
Tsugaru
 
Late stage development
 
Japan
 
2017
 
2020
 
PPA
 
122
 
122
Sumita
 
Late stage development
 
Japan
 
2019
 
2021
 
PPA
 
100
 
62
Pattern Development 2.0 Projects
 
 
 
 
 
 
 
 
 
 
 
 
Stillwater Big Sky
 
Late stage development
 
Montana
 
2017
 
2018
 
PPA
 
79
 
67
Crazy Mountain
 
Late stage development
 
Montana
 
2017
 
2019
 
PPA
 
80
 
68
Grady
 
Late stage development
 
New Mexico
 
2018
 
2019
 
PPA
 
220
 
188
Ishikari
 
Late stage development
 
Japan
 
2019
 
2022
 
PPA
 
100
 
100
 
 
 
 
 
 
 
 
 
 
 
 
1,689
 
1,150
(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.
(5)
From time to time, the Company conducts strategic reviews of its markets. Pattern Energy is conducting a strategic review of the market, growth, and opportunities in Chile. In the event management believes the Company can utilize funds that have already been invested in Chile or funds that might otherwise be invested in Chile in a more productive manner elsewhere that could generate a higher return on investment, the Company may decide to exit Chile for other opportunities with greater potential. In addition, Pattern Development 1.0 is also concurrently exploring strategic alternatives for its assets in Chile.

4



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 income (loss) to Adjusted EBITDA, respectively, for the periods presented (in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Net cash provided by operating activities (1)
$
2,147

 
$
37,395

 
$
159,330

 
$
107,371

Changes in operating assets and liabilities
25,481

 
(4,513
)
 
(22,475
)
 
800

Network upgrade reimbursement
346

 

 
8,936

 

Release of restricted cash to fund project and general and administrative costs

 

 

 
590

Operations and maintenance capital expenditures
(254
)
 
(133
)
 
(517
)
 
(879
)
Distributions from unconsolidated investments
2,821

 
8,292

 
11,211

 
40,066

Other
598

 
(195
)
 
1,974

 
(130
)
Less:
 
 
 
 
 
 
 
Distributions to noncontrolling interests
(4,537
)
 
(3,584
)
 
(13,701
)
 
(11,771
)
Principal payments paid from operating cash flows
(17,140
)
 
(17,060
)
 
(40,911
)
 
(39,322
)
Cash available for distribution
$
9,462

 
$
20,202

 
$
103,847

 
$
96,725

(1) Included in net cash provided by operating activities is the portion of distributions from unconsolidated investments paid from cumulative earnings representing the return on investment.
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Net loss
$
(48,376
)
 
$
(11,050
)
 
$
(60,521
)
 
$
(55,744
)
Plus:
 
 
 
 
 
 
 
Interest expense, net of interest income
26,710

 
19,583

 
73,009

 
60,906

Tax (benefit) provision
(3,839
)
 
1,311

 
5,477

 
4,038

Depreciation, amortization and accretion
56,650

 
45,755

 
156,629

 
136,974

EBITDA
31,145

 
55,599

 
174,594

 
146,174

Unrealized loss on energy derivative  (1)
3,113

 
818

 
10,134

 
14,970

Gain (loss) on undesignated derivatives, net
4,081

 
(1,825
)
 
9,480

 
17,685

Realized loss on derivatives

2,207

 

 
2,207

 

Net loss on transactions
466

 
314

 
1,585

 
353

Adjustments from unconsolidated investments

 
(8,439
)
 

 
(19,573
)
Plus , proportionate share from unconsolidated investments:
 
 
 
 
 
 
 
Interest expense, net of interest income
10,270

 
7,634

 
29,108

 
22,778

Depreciation, amortization and accretion
9,361

 
6,660

 
26,390

 
19,624

(Gain) loss on undesignated derivatives, net
(5,908
)
 
1,544

 
(8,696
)
 
17,015

Adjusted EBITDA
$
54,735

 
$
62,305

 
$
244,802

 
$
219,026

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

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Conference Call and Webcast
Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time, today, November 9, 2017. 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 8787979. The replay recording will be available until 11:59 p.m. Eastern Time, November 30, 2017.
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 20 wind power facilities, including one project it has agreed to acquire, with a total owned interest of 2,736 MW in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy’s wind 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 2017 cash available for distribution target; achieve the five year average annual CAFD generated by Meikle and Mont Sainte-Marguerite; achieve the next phase of its growth strategy; capitalize on the assets from the iROFO list and investment in Pattern Development 2.0; achieve its target of 5 GW by 2020; the outcome of wind conditions in the fourth quarter; the timing for the Santa Isabel project to be reconnected to the high voltage grid or for PREPA to restore the high voltage grid in Puerto Rico; the timing of the consummation of the acquisition of Mont Sainte-Marguerite; and the ability of the Company to consummate additional acquisitions from the iROFO list. 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  
 


6




Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)
 
September 30,
 
December 31,
 
2017
 
2016
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
91,057

 
$
83,932

Restricted cash
7,150

 
11,793

Funds deposited by counterparty
33,530

 
43,635

Trade receivables
48,960

 
37,510

Derivative assets, current
18,824

 
17,578

Prepaid expenses
18,405

 
13,803

Deferred financing costs, current, net of accumulated amortization of $11,360 and $9,350 as of September 30, 2017 and December 31, 2016, respectively
2,514

 
2,456

Other current assets
19,058

 
7,350

Total current assets
239,498

 
218,057

Restricted cash
19,866

 
13,646

Property, plant and equipment, net
4,023,355

 
3,135,162

Unconsolidated investments
303,833

 
233,294

Derivative assets
14,865

 
26,712

Deferred financing costs
4,339

 
4,052

Net deferred tax assets
6,107

 
5,559

Finite-lived intangible assets, net
138,516

 
91,895

Other assets
22,649

 
24,390

Total assets
$
4,773,028

 
$
3,752,767

 
 
 
 

7



Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)
 
September 30,
 
December 31,
 
2017
 
2016
Liabilities and equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other accrued liabilities
$
53,200

 
$
31,305

Accrued construction costs
2,765

 
1,098

Counterparty deposit liability
33,530

 
43,635

Accrued interest
7,043

 
9,545

Dividends payable
37,645

 
35,960

Derivative liabilities, current
12,095

 
11,918

Revolving credit facility
253,000

 
180,000

Current portion of long-term debt, net
58,213

 
48,716

Other current liabilities
13,133

 
4,698

Total current liabilities
470,624

 
366,875

Long-term debt, net
1,871,607

 
1,334,956

Derivative liabilities
21,979

 
24,521

Net deferred tax liabilities
50,573

 
31,759

Finite-lived intangible liability, net
52,062

 
54,663

Contingent liabilities
58,820


576

Other long-term liabilities
98,519

 
60,673

Total liabilities
2,624,184

 
1,874,023

Commitments and contingencies
 
 
 
Equity:
 
 
 
Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 88,569,377 and 87,410,687 shares outstanding as of September 30, 2017 and December 31, 2016, respectively
886

 
875

Additional paid-in capital
1,062,252

 
1,145,760

Accumulated loss
(104,225
)
 
(94,270
)
Accumulated other comprehensive loss
(24,821
)
 
(62,367
)
Treasury stock, at cost; 115,146 and 110,964 shares of Class A common stock as of September 30, 2017 and December 31, 2016, respectively
(2,597
)
 
(2,500
)
Total equity before noncontrolling interest
931,495

 
987,498

Noncontrolling interest
1,217,349

 
891,246

Total equity
2,148,844

 
1,878,744

Total liabilities and equity
$
4,773,028

 
$
3,752,767


8



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,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Electricity sales
$
89,807

 
$
89,919

 
$
293,977

 
$
266,952

Other revenue
2,223

 
1,995

 
6,646

 
6,039

Total revenue
92,030

 
91,914

 
300,623

 
272,991

Cost of revenue:
 
 
 
 
 
 
 
Project expense
33,932

 
31,271

 
96,437

 
96,711

Transmission costs
7,421


113

 
12,213

 
278

Depreciation and accretion
52,379


43,693

 
144,637

 
130,782

Total cost of revenue
93,732

 
75,077

 
253,287

 
227,771

Gross profit (loss)
(1,702
)
 
16,837

 
47,336

 
45,220

Operating expenses:
 
 
 
 
 
 
 
General and administrative
9,068

 
9,598

 
31,969

 
27,425

Related party general and administrative
3,587

 
3,553

 
10,589

 
7,381

Total operating expenses
12,655

 
13,151

 
42,558

 
34,806

Operating income (loss)
(14,357
)
 
3,686

 
4,778

 
10,414

Other income (expense):
 
 
 
 
 
 
 
Interest expense
(27,147
)
 
(19,798
)
 
(74,541
)
 
(62,134
)
Gain (loss) on undesignated derivatives, net
(4,081
)
 
1,825

 
(9,480
)
 
(17,685
)
Realized loss on designated derivatives
(2,207
)
 

 
(2,207
)
 

Earnings (loss) in unconsolidated investments, net
(3,964
)
 
4,685

 
27,431

 
15,755

Net loss on transactions
(466
)
 
(314
)
 
(1,585
)
 
(353
)
Other income, net
7

 
177

 
560

 
2,297

Total other expense
(37,858
)
 
(13,425
)
 
(59,822
)
 
(62,120
)
Net loss before income tax
(52,215
)
 
(9,739
)
 
(55,044
)
 
(51,706
)
Tax (benefit) provision
(3,839
)
 
1,311

 
5,477

 
4,038

Net loss
(48,376
)
 
(11,050
)
 
(60,521
)
 
(55,744
)
Net loss attributable to noncontrolling interest
(18,548
)
 
(7,037
)
 
(50,566
)
 
(24,838
)
Net loss attributable to Pattern Energy
$
(29,828
)
 
$
(4,013
)
 
$
(9,955
)
 
$
(30,906
)
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding
 
 
 
 
 
 
 
Basic and diluted
87,370,979

 
81,531,775

 
87,146,465

 
76,821,811

Loss per share attributable to Pattern Energy
 
 
 
 
 
 
 
Class A common stock:
 
 
 
 
 
 
 
Basic and diluted
$
(0.34
)
 
$
(0.05
)
 
$
(0.12
)
 
$
(0.40
)
Dividends declared per Class A common share
$
0.42

 
$
0.40

 
$
1.25

 
$
1.17


9



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

 
Nine months ended September 30,
 
2017
 
2016
Operating activities
 
 
 
Net loss
$
(60,521
)
 
$
(55,744
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and accretion
144,637

 
130,782

Amortization of financing costs
5,879

 
5,242

Amortization of debt discount/premium, net
3,379

 
3,147

Amortization of power purchase agreements, net
2,435

 
2,278

Loss on derivatives, net
15,662

 
29,757

Realized loss on derivatives, net
2,207

 

Stock-based compensation
4,085

 
4,362

Deferred taxes
9,133

 
3,681

Intraperiod tax allocation
(3,656
)
 

Earnings in unconsolidated investments, net
(27,431
)
 
(15,755
)
Distributions from unconsolidated investments
43,093

 
377

Other reconciling items
(2,047
)
 
44

Changes in operating assets and liabilities:
 
 
 
Funds deposited by counterparty
10,105

 
(46,643
)
Trade receivables
(2,861
)
 
6,078

Prepaid expenses
(3,187
)
 
(1,005
)
Other current assets
(9,790
)
 
(3,709
)
Other assets (non-current)
2,457

 
865

Accounts payable and other accrued liabilities
16,389

 
(2,658
)
Counterparty deposit liability
(10,105
)
 
46,643

Accrued interest
(3,884
)
 
(6,017
)
Other current liabilities
8,040

 
811

Long-term liabilities
14,569

 
4,952

     Contingent liabilities
742

 
(117
)
Net cash provided by operating activities
159,330

 
107,371

Investing activities
 
 
 
Cash paid for acquisitions, net of cash and restricted cash acquired
(289,329
)
 
(4,024
)
Capital expenditures
(44,295
)
 
(31,554
)
Distributions from unconsolidated investments
11,211

 
40,066

Other assets
7,607

 
1,619

Other investing activities

 
(136
)
Net cash provided by (used in) investing activities
(314,806
)
 
5,971


10



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

 
Nine months ended September 30,
 
2017
 
2016
Financing activities
 
 
 
Proceeds from public offering, net of issuance costs
$
22,431

 
$
286,583

Dividends paid
(107,943
)
 
(85,159
)
Capital distributions - noncontrolling interest
(13,701
)
 
(11,771
)
Payment for deferred financing costs
(7,763
)
 
(134
)
Proceeds from revolving credit facility
323,000

 
20,000

Repayment of revolving credit facility
(250,000
)
 
(340,000
)
Proceeds from debt
404,395

 

Repayment of debt
(192,109
)
 
(39,322
)
Payment for interest rate swaps
(14,372
)
 

Other financing activities
(3,712
)
 
(634
)
Net cash provided by (used in) financing activities
160,226

 
(170,437
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
3,952

 
1,750

Net change in cash, cash equivalents and restricted cash
8,702

 
(55,345
)
Cash, cash equivalents and restricted cash at beginning of period
109,371

 
146,292

Cash, cash equivalents and restricted cash at end of period
$
118,073

 
$
90,947

Supplemental disclosures
 
 
 
Cash payments for income taxes
$
335

 
$
233

Cash payments for interest expense
$
70,100

 
$
59,172

Schedule of non-cash activities
 
 
 
Change in property, plant and equipment
$
619

 
$
6,132



11


Exhibit 99.2
PATTERNIMAGEPRESSRELEASE.JPG

Operating Metrics: Production Performance, Q3 2017

The table below presents the long term average production (LTA) for wind farms compared to actual production, including compensated curtailment:
Region
 
Q3 2017
 
Actual Results (% of LTA)
 
Wind Index
(% of LTA)
 
LTA (GWh)
 
Production (GWh)
 
 
 
 
 
 
Eastern US
 
840

 
707

 
84
%
 
88
%
Western U.S.
 
514

 
434

 
84
%
 
84
%
Canada
 
325

 
292

 
90
%
 
88
%
Other
 
112

 
81

 
72
%
 
81
%
Total
 
1,791

 
1,514

 
85
%
 
87
%

Wind Index is defined as GWh that could have been produced from actual wind, divided by GWh that could have been produced from expected wind.