Pattern Energy Group Inc.
Pattern Energy Group Inc. (Form: 10-Q, Received: 11/05/2015 07:26:22)

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549  
 
 
 
FORM 10-Q
 
 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015 .
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-36087
 
 
 
PATTERN ENERGY GROUP INC.
(Exact name of Registrant as specified in its charter)
 
 
 
Delaware
 
90-0893251
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Pier 1, Bay 3, San Francisco, CA 94111
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (415) 283-4000
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes   ¨     No   x
As of October 30, 2015 , there were 74,671,950 shares of Class A common stock outstanding with par value of $0.01 per share.
 


 
 


PATTERN ENERGY GROUP INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015
TABLE OF CONTENTS
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 6.
 



2

 
 


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q (“Form 10-Q”) may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
our ability to complete construction of our construction projects and transition them into financially successful operating projects;
our ability to complete the acquisition of power projects;
fluctuations in supply, demand, prices and other conditions for electricity, other commodities and RECs;
our electricity generation, our projections thereof and factors affecting production, including wind and other conditions, other weather conditions, availability and curtailment;
changes in law, including applicable tax laws;
public response to and changes in the local, state, provincial and federal regulatory framework affecting renewable energy projects, including the potential expiration or extension of the U.S. federal production tax credit ("PTC"), investment tax credit ("ITC") and potential reductions in Renewable Portfolio Standards ("RPS") requirements;
the ability of our counterparties to satisfy their financial commitments or business obligations;
the availability of financing, including tax equity financing, for our power projects;
an increase in interest rates;
our substantial short-term and long-term indebtedness, including additional debt in the future;
competition from other power project developers;
development constraints, including the availability of interconnection and transmission;
potential environmental liabilities and the cost and conditions of compliance with applicable environmental laws and regulations;
our ability to operate our business efficiently, manage capital expenditures and costs effectively and generate cash flow;
our ability to retain and attract executive officers and key employees;
our ability to keep pace with and take advantage of new technologies;
the effects of litigation, including administrative and other proceedings or investigations, relating to our wind power projects under construction and those in operation;
conditions in energy markets as well as financial markets generally, which will be affected by interest rates, foreign currency exchange rate fluctuations and general economic conditions;
the effectiveness of our currency risk management program;
the effective life and cost of maintenance of our wind turbines and other equipment;
the increased costs of, and tariffs on, spare parts;
scarcity of necessary equipment;
negative public or community response to wind power projects;
the value of collateral in the event of liquidation; and
other factors discussed under “Risk Factors.”

3

 
 



For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see Part II, “Item 1A. Risk Factors” in this report and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 and Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.


4

 
 


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Pattern Energy Group Inc.
Consolidated Balance Sheets
(In thousands of U.S. Dollars, except share data)
(Unaudited)

September 30, 2015

December 31,
2014
Assets



Current assets:



Cash and cash equivalents
$
103,196


$
101,656

Restricted cash
18,111


7,945

Trade receivables
37,540


35,759

Related party receivable
689


671

Reimbursable interconnection costs
663


2,532

Derivative assets, current
21,912


18,506

Current net deferred tax assets
307


318

Prepaid expenses and other current assets
23,595


27,954

Deferred financing costs, current, net of accumulated amortization of $4,699 and $3,493 as of September 30, 2015 and December 31, 2014, respectively
1,991


1,747

Total current assets
208,004


197,088

Restricted cash
34,196


39,745

Turbine advances
25,956


79,637

Construction in progress
180,115


26,195

Property, plant and equipment, net of accumulated depreciation of $370,713 and $278,291 as of September 30, 2015 and December 31, 2014, respectively
3,066,461


2,350,856

Unconsolidated investments
115,177


29,079

Derivative assets
47,033


49,369

Deferred financing costs
4,926


5,166

Net deferred tax assets
12,112


5,474

Finite-lived intangible assets, net of accumulated amortization of $2,761 and $154 as of September 30, 2015 and December 31, 2014, respectively
99,398


1,257

Other assets
27,906


11,421

Total assets
$
3,821,284


$
2,795,287


Liabilities and equity



Current liabilities:



Accounts payable and other accrued liabilities
$
36,107


$
24,793

Accrued construction costs
43,610


20,132

Related party payable
1,312


5,757

Accrued interest
6,598


3,634

Dividends payable
27,384


15,734

Derivative liabilities, current
16,360


16,307

Revolving credit facility
245,000


50,000

Current portion of long-term debt, net of financing costs of $5,082 and $11,868 as of September 30, 2015 and December 31, 2014, respectively
202,580


109,693

Current net deferred tax liabilities
149


149

Current portion of contingent liabilities
8,910


4,000

Total current liabilities
588,010


250,199

Long-term debt, net of financing costs of $19,959 and $24,887 as of September 30, 2015 and December 31, 2014, respectively
1,204,848


1,304,165

Convertible senior notes, net of financing costs of $5,271 and $0 as of September 30, 2015 and December 31, 2014, respectively
196,191



Derivative liabilities
33,203


17,467

Asset retirement obligations
41,553


29,272

Net deferred tax liabilities
24,140


20,418

Contingent liabilities
1,070


175

Finite-lived intangible liability, net of accumulated amortization of $1,301 and $0 as of September 30, 2015 and December 31, 2014, respectively
58,999



Other long-term liabilities
8,757


8,857

Total liabilities
2,156,771


1,630,553

Equity:



Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 74,671,950 and 62,062,841 shares outstanding as of September 30, 2015 and December 31, 2014, respectively
747


621

Additional paid-in capital
1,009,381


723,938

Accumulated loss
(79,613
)

(44,626
)
Accumulated other comprehensive loss
(75,666
)

(45,068
)
Treasury stock, at cost; 37,492 and 25,465 shares of Class A common stock as of September 30, 2015 and December 31, 2014, respectively
(1,048
)

(717
)
Total equity before noncontrolling interest
853,801


634,148

Noncontrolling interest
810,712


530,586

Total equity
1,664,513


1,164,734

Total liabilities and equity
$
3,821,284


$
2,795,287



See accompanying notes to consolidated financial statements
5



Pattern Energy Group Inc.
Consolidated Statements of Operations
(In thousands of U.S. Dollars, except share data)
(Unaudited)

 
Three months ended September 30,

Nine months ended September 30,
 
2015

2014

2015

2014
Revenue:







Electricity sales
$
80,657


$
64,251


$
218,586


$
184,175

Energy derivative settlements
2,969


2,591


15,066


9,309

Unrealized gain (loss) on energy derivative
4,630


3,139


1,600


(11,143
)
Related party revenue
955


868


2,630


2,330

Other revenue
486


670


1,352


1,404

Total revenue
89,697


71,519


239,234


186,075

Cost of revenue:







Project expense
28,848


23,835


82,075


56,609

Depreciation and accretion
38,599


30,015


101,997


72,476

Total cost of revenue
67,447


53,850


184,072


129,085

Gross profit
22,250


17,669


55,162


56,990

Operating expenses:







General and administrative
7,218


5,772


22,309


15,963

Related party general and administrative
1,887


1,492


5,316


4,155

Total operating expenses
9,105


7,264


27,625


20,118

Operating income
13,145


10,405


27,537


36,872

Other expense:







Interest expense
(19,941
)

(17,999
)

(56,802
)

(48,427
)
Interest rate derivative settlements
(2,412
)

(1,030
)

(4,331
)

(3,082
)
Unrealized (loss) gain on derivatives, net
(5,090
)

66


(2,393
)

(6,599
)
Realized loss on derivatives, net
(9,810
)



(9,810
)


Equity in (losses) earnings in unconsolidated investments
(9,951
)

(5,002
)

768


(21,238
)
Related party income
605


664


2,029


1,736

Early extinguishment of debt
(4,113
)



(4,113
)


Net (loss) gain on transactions
(74
)

(68
)

(2,663
)

14,469

Other income (expense), net
128


145


(1,280
)

751

Total other expense
(50,658
)

(23,224
)

(78,595
)

(62,390
)
Net loss before income tax
(37,513
)

(12,819
)

(51,058
)

(25,518
)
Tax (benefit) provision
(2,181
)

(3,538
)

676


(1,505
)
Net loss
(35,332
)

(9,281
)

(51,734
)

(24,013
)
Net loss attributable to noncontrolling interest
(5,927
)

(2,073
)

(16,747
)

(13,115
)
Net loss attributable to controlling interest
$
(29,405
)

$
(7,208
)

$
(34,987
)

$
(10,898
)
Loss per share information:







Net loss attributable to controlling interest
$
(29,405
)

$
(7,208
)

$
(34,987
)

$
(10,898
)
Dividends declared on Class A common shares
(27,113
)

(15,258
)

(75,117
)

(41,395
)
Deemed dividends on Class B common shares
N/A


(7,222
)

N/A


(14,679
)
Undistributed loss attributable to common stockholders
$
(56,518
)

$
(29,688
)

$
(110,104
)

$
(66,972
)
Weighted average number of shares:







Class A common stock - Basic
72,789,583


46,317,932


69,233,698


41,022,962

Class A common stock - Diluted
72,789,583


46,317,932


69,233,698


56,577,962

Class B common stock - Basic and diluted
N/A


15,555,000


N/A


15,555,000

Loss per share







Class A common stock:







Basic loss per share
$
(0.40
)

$
(0.15
)

$
(0.51
)

$
(0.17
)
Diluted loss per share
$
(0.40
)

$
(0.15
)

$
(0.51
)

$
(0.19
)
Class B common stock:







Basic and diluted loss per share
N/A


$
(0.02
)

N/A


$
(0.24
)
Dividends declared per Class A common share
$
0.36


$
0.33


$
1.06


$
0.96

Deemed dividends per Class B common share
N/A


$
0.46


N/A


$
0.94


See accompanying notes to consolidated financial statements
6



Pattern Energy Group Inc.
Consolidated Statements of Comprehensive Loss
(In thousands of U.S. Dollars)
(Unaudited)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Net loss
$
(35,332
)
 
$
(9,281
)
 
$
(51,734
)
 
$
(24,013
)
Other comprehensive loss:
 
 
 
 
 
 
 
Foreign currency translation, net of zero tax impact
(12,208
)
 
(5,706
)
 
(21,900
)
 
(6,575
)
Derivative activity:
 
 
 
 
 
 
 
Effective portion of change in fair market value of derivatives, net of tax benefit of $892, $132, $948 and $198, respectively
(15,600
)
 
(1,960
)
 
(16,257
)
 
(19,986
)
Reclassifications to net loss due to termination of interest rate derivatives, net of zero tax impact
11,221

 

 
11,221

 

Reclassifications to net loss, net of tax impact of $170, $132, $511 and $169, respectively
2,590

 
3,658

 
9,546

 
10,215

Total change in effective portion of change in fair market value of derivatives
(1,789
)
 
1,698

 
4,510

 
(9,771
)
Proportionate share of equity investee’s derivative activity:
 
 
 
 
 
 
 
Effective portion of change in fair market value of derivatives, net of tax benefit of $1,627, $109, $2,486, and $1,914, respectively
(4,513
)
 
(275
)
 
(6,895
)
 
(4,558
)
Reclassifications to net loss, net of tax impact of $194, $0, $571, and $0, respectively
537

 

 
1,582

 

Total change in effective portion of change in fair market value of derivatives
(3,976
)
 
(275
)
 
(5,313
)
 
(4,558
)
Total other comprehensive loss, net of tax
(17,973
)
 
(4,283
)
 
(22,703
)
 
(20,904
)
Comprehensive loss
(53,305
)
 
(13,564
)
 
(74,437
)
 
(44,917
)
Less comprehensive loss attributable to noncontrolling interest:
 
 
 
 
 
 
 
Net loss attributable to noncontrolling interest
(5,927
)
 
(2,073
)
 
(16,747
)
 
(13,115
)
Derivative activity:
 
 
 
 
 
 
 
Effective portion of change in fair market value of derivatives, net of tax benefit of $268, $40, $285 and $60, respectively
(1,023
)
 
330

 
(2,008
)
 
(1,565
)
Reclassifications to net loss, net of tax impact of $51, $40, $153 and $51, respectively
138

 
959

 
1,959

 
2,675

Total change in effective portion of change in fair market value of derivatives
(885
)
 
1,289

 
(49
)
 
1,110

Comprehensive loss attributable to noncontrolling interest
(6,812
)
 
(784
)
 
(16,796
)
 
(12,005
)
Comprehensive loss attributable to controlling interest
$
(46,493
)
 
$
(12,780
)
 
$
(57,641
)
 
$
(32,912
)


See accompanying notes to consolidated financial statements
7



Pattern Energy Group Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands of U.S. Dollars, except share data)
(Unaudited)

 
Controlling Interest
 
Noncontrolling Interest
 
 
 
Class A Common Stock
 
Class B Common Stock
 
 
 
 
 
 
 
Treasury Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Loss
 
Accumulated Other Comprehensive Loss
 
Shares
 
Amount
 
Total
 
Capital
 
Accumulated Income  (Loss)
 
Accumulated Other Comprehensive Loss
 
Total
 
Total Equity
Balances at December 31, 2013
35,531,720

 
$
355

 
15,555,000

 
$
156

 
$
489,412

 
$
(13,336
)
 
$
(8,353
)
 
(934
)
 
$
(24
)
 
$
468,210

 
$
90,217

 
$
18,601

 
$
(9,024
)
 
$
99,794

 
$
568,004

Issuance of Class A common stock related to the public offering, net of issuance costs
10,810,810

 
108

 

 

 
286,711

 

 

 

 

 
286,819

 

 

 

 

 
286,819

Issuances of Class A common stock under equity incentive award plan
175,915

 
2

 

 

 
(2
)
 

 

 

 

 

 

 

 

 

 

Issuance of Class A common stock upon exercise of stock options
12,431

 

 

 

 
273

 

 

 

 

 
273

 

 

 

 

 
273

Repurchase of shares for employee tax withholding

 

 

 

 

 

 

 
(11,780
)
 
(380
)
 
(380
)
 

 

 

 

 
(380
)
Stock-based compensation

 

 

 

 
3,128

 

 

 

 

 
3,128

 

 

 

 

 
3,128

Refund of issuance costs related to the IPO

 

 

 

 
163

 

 

 

 

 
163

 

 

 

 

 
163

Dividends declared on Class A common stock

 

 

 

 
(41,395
)
 

 

 

 

 
(41,395
)
 

 

 

 

 
(41,395
)
Recognition of beneficial conversion feature on Class B convertible common stock

 

 

 

 
(21,901
)
 

 

 

 

 
(21,901
)
 

 

 

 

 
(21,901
)
Adjustment to paid-in capital for beneficial conversion feature recognition

 

 

 

 
21,901

 

 

 

 

 
21,901

 

 

 

 

 
21,901

Accretion of the Class B common stock beneficial conversion feature

 

 

 

 
14,679

 

 

 

 

 
14,679

 

 

 

 

 
14,679

Deemed dividends on Class B convertible common stock

 

 

 

 
(14,679
)
 

 

 

 

 
(14,679
)
 

 

 

 

 
(14,679
)
Sale of Class A membership interests in Panhandle 1

 

 

 

 

 

 

 

 

 

 
210,250

 

 

 
210,250

 
210,250

Acquisition of AEI ownership in E1 Arrayan

 

 

 

 

 

 

 

 

 

 
35,259

 

 

 
35,259

 
35,259

Contribution from noncontrolling interest

 

 

 

 

 

 

 

 

 

 
2,550

 

 

 
2,550

 
2,550

Distribution to noncontrolling interest

 

 

 

 

 

 

 

 

 

 
(1,470
)
 

 

 
(1,470
)
 
(1,470
)
Net loss

 

 

 

 

 
(10,898
)
 

 

 

 
(10,898
)
 

 
(13,115
)
 

 
(13,115
)
 
(24,013
)
Other comprehensive (loss) income, net of tax

 

 

 

 

 

 
(22,014
)
 

 

 
(22,014
)
 

 

 
1,110

 
1,110

 
(20,904
)
Balances at September 30, 2014
46,530,876

 
$
465

 
15,555,000

 
$
156

 
$
738,290

 
$
(24,234
)
 
$
(30,367
)
 
(12,714
)
 
$
(404
)
 
$
683,906

 
$
336,806

 
$
5,486

 
$
(7,914
)
 
$
334,378

 
$
1,018,284

 

See accompanying notes to consolidated financial statements
8



Pattern Energy Group Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands of U.S. Dollars, except share data)
(Unaudited)

 
Controlling Interest
 
Noncontrolling Interest
 
 
 
Class A Common Stock
 
Class B Common Stock
 
 
 
 
 
 
 
Treasury Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Loss
 
Accumulated Other Comprehensive Loss
 
Shares
 
Amount
 
Total
 
Capital
 
Accumulated Income  (Loss)
 
Accumulated Other Comprehensive Loss
 
Total
 
Total Equity
Balances at December 31, 2014
62,088,306

 
$
621

 

 
$

 
$
723,938

 
$
(44,626
)
 
$
(45,068
)
 
(25,465
)
 
$
(717
)
 
$
634,148

 
$
529,539

 
$
9,892

 
$
(8,845
)
 
$
530,586

 
$
1,164,734

Issuance of Class A common stock related to the public offering, net of issuance costs
12,435,000

 
124

 

 

 
316,848

 

 

 

 

 
316,972

 

 

 

 

 
316,972

Issuance of Class A common stock under equity incentive award plan
186,136

 
2

 

 

 
(2
)
 

 

 

 

 

 

 

 

 

 

Repurchase of shares for employee tax withholding

 

 

 

 

 

 

 
(12,027
)
 
(331
)
 
(331
)
 

 

 

 

 
(331
)
Stock-based compensation

 

 

 

 
3,234

 

 

 

 

 
3,234

 

 

 

 

 
3,234

Dividends declared on Class A common stock

 

 

 

 
(75,117
)
 

 

 

 

 
(75,117
)
 

 

 

 

 
(75,117
)
Dividend equivalents declared upon vesting of deferred restricted stock units

 

 

 

 
11

 

 

 

 

 
11

 

 

 

 

 
11

Acquisition of Post Rock

 

 

 

 

 

 

 

 

 

 
205,100

 

 

 
205,100

 
205,100

Conversion option of convertible senior notes, net of issuance costs

 

 

 

 
23,754

 

 

 

 

 
23,754

 

 

 

 

 
23,754

Buyout of noncontrolling interests - Gulf Wind

 

 

 

 
17,189

 

 
(7,944
)
 

 

 
9,245

 
(88,747
)
 
(14,244
)
 
7,944

 
(95,047
)
 
(85,802
)
Buyout of noncontrolling interest - Lost Creek

 

 

 

 
(474
)
 

 

 

 

 
(474
)
 

 

 

 

 
(474
)
Contribution from noncontrolling interests - Logan's Gap, net of issuance costs

 

 

 

 

 

 

 

 

 

 
191,251

 

 

 
191,251

 
191,251

Distribution to noncontrolling interests

 

 

 

 

 

 

 

 

 

 
(4,382
)
 

 

 
(4,382
)
 
(4,382
)
Net loss

 

 

 

 

 
(34,987
)
 

 

 

 
(34,987
)
 

 
(16,747
)
 

 
(16,747
)
 
(51,734
)
Other comprehensive loss, net of tax

 

 

 

 

 

 
(22,654
)
 

 

 
(22,654
)
 

 

 
(49
)
 
(49
)
 
(22,703
)
Balances at September 30, 2015
74,709,442

 
$
747

 

 
$

 
$
1,009,381

 
$
(79,613
)
 
$
(75,666
)
 
(37,492
)
 
$
(1,048
)
 
$
853,801

 
$
832,761

 
$
(21,099
)
 
$
(950
)
 
$
810,712

 
$
1,664,513


See accompanying notes to consolidated financial statements
9



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

 
Nine months ended September 30,
 
2015

2014
Operating activities



Net loss
$
(51,734
)

$
(24,013
)
Adjustments to reconcile net loss to net cash provided by operating activities:




Depreciation, amortization and accretion
102,108


72,476

Loss on disposal of equipment
398



Amortization of financing costs
5,581


4,246

Unrealized loss on derivatives, net
793


17,742

Stock-based compensation
3,234


3,128

Net gain on transactions


(16,526
)
Deferred taxes
340


(1,505
)
Equity in (earnings) losses in unconsolidated investments
(813
)

21,238

Unrealized loss on exchange rate changes
823



Amortization of power purchase agreements, net
1,175



Amortization of debt discount/premium, net
798



Realized loss on derivatives, net
10,192



Early extinguishment of debt
3,958



Changes in operating assets and liabilities:





Trade receivables
5,657


(5,255
)
Prepaid expenses and other current assets
(2,589
)

13,139

Other assets (non-current)
(2,022
)

(503
)
Accounts payable and other accrued liabilities
4,180


1,642

Related party receivable/payable
506


(1,017
)
Accrued interest payable
1,970


(917
)
Contingent liabilities
764



Long-term liabilities
83


25

Increase in restricted cash
(2,120
)


Net cash provided by operating activities
83,282


83,900

Investing activities



Cash paid for acquisitions, net of cash acquired
(406,284
)

(167,585
)
Decrease in restricted cash
41,820


23,861

Increase in restricted cash
(33,890
)

(10,406
)
Capital expenditures
(315,954
)

(18,615
)
Distribution from unconsolidated investments
23,494


17,104

Contribution to unconsolidated investments


(2,320
)
Reimbursable interconnection receivable
1,869


1,418

Other assets
2,781


2,472

Net cash used in investing activities
(686,164
)

(154,071
)

See accompanying notes to consolidated financial statements
10



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

 
Nine months ended September 30,
 
2015

2014
Financing activities



Proceeds from public offering, net of expenses
$
317,822


$
286,834

Proceeds from issuance of convertible senior notes, net of issuance costs
219,557



Proceeds from exercise of stock options


273

Repurchase of shares for employee tax withholding
(331
)

(380
)
Dividends paid
(63,455
)

(37,104
)
Payment for deferred equity issuance costs
(1,940
)


Buyout of noncontrolling interest
(121,224
)


Capital contributions - noncontrolling interest
193,064


2,550

Capital distributions - noncontrolling interest
(4,382
)

(1,470
)
Decrease in restricted cash
41,429


13,508

Increase in restricted cash
(41,184
)

(13,508
)
Refund of deposit for letters of credit
3,425



Payment for deferred financing costs
(8,445
)

(603
)
Proceeds from revolving credit facility
295,000



Repayment of revolving credit facility
(100,000
)


Proceeds from construction loans
294,502


1,087

Repayment of long-term debt
(405,036
)

(53,085
)
Payment for interest rate derivatives
(11,061
)


Net cash provided by financing activities
607,741


198,102

Effect of exchange rate changes on cash and cash equivalents
(3,319
)

(842
)
Net change in cash and cash equivalents
1,540


127,089

Cash and cash equivalents at beginning of period
101,656


103,569

Cash and cash equivalents at end of period
$
103,196


$
230,658

Supplemental disclosures



Cash payments for interest expense, net of capitalized interest
$
38,241


$
43,040

Acquired property, plant and equipment from acquisitions
579,712


674,743

Schedule of non-cash activities





Change in fair value of designated interest rate swaps
4,510


(18,541
)
Change in property, plant and equipment
20,744


(97,051
)
Non-cash deemed dividends on Class B convertible common stock


14,679

Non-cash increase in additional paid-in capital from buyout of noncontrolling interests
16,715



Equity issuance costs paid in prior period related to current period offerings
433




See accompanying notes to consolidated financial statements
11



Pattern Energy Group Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1.      Organization
Pattern Energy Group Inc. (“Pattern Energy” or the “Company”) was organized in the state of Delaware on October 2, 2012. Pattern Energy issued 100 shares on October 17, 2012 to Pattern Renewables LP, a 100% owned subsidiary of Pattern Energy Group LP (“Pattern Development”). On September 24, 2013, Pattern Energy’s charter was amended, and the number of shares that Pattern Energy is authorized to issue was increased to 620,000,000 total shares; 500,000,000 of which are designated Class A common stock, 20,000,000 of which were designated Class B common stock, and 100,000,000 of which are designated Preferred Stock. On October 2, 2013, concurrent with the initial public offering, the Company also issued to Pattern Development 19,445,000 shares of Class A common stock, representing 63% of the Company's Class A common stock outstanding at the time, and 15,555,000 shares of Class B common stock. On December 31, 2014, the Company’s outstanding Class B common stock was converted into Class A common stock on a one-for-one basis . Shares of Class B common stock converted into shares of Class A common stock were retired. The Company is not authorized to reissue shares of Class B common stock.
On May 14, 2014, the Company completed an underwritten public offering of its Class A common stock resulting in a reduction of Pattern Development’s interest in the Company from approximately 63% to 35% . Consequently, the Company is no longer subject to ASC 805-50-30-5, Transactions between Entities under Common Control. All transactions with Pattern Development after May 14, 2014 are recognized at fair value on the measurement date in accordance with the Accounting Standard Codification (“ASC”) 805 – Business Combinations . On February 9, 2015, the Company completed an underwritten public offering of its Class A common stock, resulting in a further reduction of Pattern Development’s interest in the Company from 35% to 25% causing it to no longer be entitled to certain approval rights pursuant to the Shareholder Approval Rights Agreement dated October 2, 2013.
Pattern Energy is an independent energy generation company focused on constructing, owning and operating energy projects with long-term energy sales contracts located in the United States, Canada and Chile. The Company consists of the consolidated operations of certain entities and assets contributed by, or purchased principally from, Pattern Development. The Company owns 100% of Hatchet Ridge Wind, LLC (“Hatchet Ridge”), St. Joseph Windfarm Inc. (“St. Joseph”), Spring Valley Wind LLC (“Spring Valley”), Pattern Santa Isabel LLC (“Santa Isabel”), Ocotillo Express LLC (“Ocotillo”), Fowler Ridge IV Wind Farm LLC (“Amazon Wind Farm (Fowler Ridge)”), Pattern Gulf Wind LLC ("Gulf Wind") and Lost Creek Wind, LLC ("Lost Creek"). The Company owns a controlling interest in Parque Eólico El Arrayán SpA (“El Arrayán”), Panhandle Wind Holdings LLC (“Panhandle 1”), Panhandle B Member 2 LLC (“Panhandle 2”), Post Rock Wind Power Project, LLC (“Post Rock”) and Logan's Gap Wind LLC ("Logan's Gap"), and noncontrolling interests in South Kent Wind LP (“South Kent”), Grand Renewable Wind LP (“Grand”) and K2 Wind Ontario Limited Partnership (“K2”). The principal business objective of the Company is to produce stable and sustainable cash flows through the generation and sale of energy and to selectively grow its project portfolio.
2.      Summary of Significant Accounting Policies
As of September 30, 2015 , the Company has added the following significant accounting policies to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 : change in depreciable lives of property, plant and equipment, asset acquisitions, finite-lived intangible assets and change in presentation of deferred financing costs within short-term and long-term debt, as described below.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”). They include the results of wholly-owned and partially-owned subsidiaries in which the Company has a controlling interest with all significant intercompany accounts and transactions eliminated.
Unaudited Interim Financial Information
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim financial information reflects all adjustments of a normal recurring nature, necessary for a fair presentation of the Company’s financial position at September 30, 2015 , the results of operations and comprehensive

12



loss for the three and nine months ended September 30, 2015 and 2014 , respectively, and the cash flows for the nine months ended September 30, 2015 and 2014, respectively. The consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. This Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 .
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and such differences may be material to the financial statements.
Change in Depreciable Lives of Property, Plant and Equipment
The Company periodically reviews the estimated economic useful lives of its fixed assets. In 2015, this review indicated that the expected economic useful lives of certain wind farms were longer than the estimated economic useful lives used for depreciation purposes in the Company’s financial statements. As a result, effective January 1, 2015, the Company changed its estimate of the economic useful lives of wind farms for which construction began after 2011, from 20 to 25 years. All other wind farms continue to depreciate over an estimated economic useful life of 20 years. For the three and nine months ended September 30, 2015 , the effect of this change reduced depreciation expense by $3.6 million and $11.0 million , respectively, decreased net loss by $3.4 million and $10.4 million , net of tax, respectively, and decreased Class A basic and diluted loss per share by $0.02 and $0.07 , respectively.
Acquisitions
Business Combinations
The Company accounts for acquisitions of a controlling interest in entities that include inputs and processes and have the ability to create outputs as business combinations. The fair value of purchase consideration is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess, if any, of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Conversely, the excess, if any, of the net fair values of identifiable assets and liabilities over the fair value of purchase consideration is recorded as gain. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates and assumptions are inherently uncertain, and as a result, actual results may differ from estimates. Significant estimates include, but are not limited to, future expected cash flows, useful lives and discount rates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to either goodwill or gain, depending on whether the fair value of purchase consideration is in excess of or less than net assets acquired. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Transaction costs are expensed to the consolidated statements of operations in the period of acquisition.
Asset Acquisitions
When the Company acquires assets and liabilities that do not constitute a business, the fair value of the purchase consideration, including transaction costs of the asset acquisition, is assumed to be equal to the fair value of the net assets acquired and is allocated to the individual assets and liabilities assumed based on their relative fair values. Contingent consideration associated with the acquisition is generally recognized when the contingency is resolved. No goodwill is recognized in an asset acquisition.
Equity Method Investments
When the Company acquires a noncontrolling interest the investment is accounted for using the equity method of accounting and is initially recognized at cost.
Noncontrolling Interests
Noncontrolling interests represent the portion of the Company’s net income (loss), net assets and comprehensive income (loss) that is not allocable to the Company and is calculated based on ownership percentage, for applicable projects.

13



For the noncontrolling interests at the Company’s Panhandle 1, Panhandle 2, Post Rock and Logan's Gap projects, and previously the Company's Gulf Wind project prior to the acquisition of the noncontrolling interests in July 2015, the Company has determined that the operating partnership agreements do not allocate economic benefits pro rata to its two classes of investors and has determined that the appropriate methodology for calculating the noncontrolling interest balance that reflects the substantive profit sharing arrangement is a balance sheet approach using the hypothetical liquidation at book value (“HLBV”) method.
Under the HLBV method, the amount reported as noncontrolling interest in the consolidated balance sheets represents the amount the third party would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the operating partnership agreement assuming the net assets of the projects were liquidated at recorded amounts determined in accordance with U.S. GAAP and distributed to the investors. The noncontrolling interest in the results of operations and comprehensive income (loss) of the projects is determined as the difference in noncontrolling interests in the consolidated balance sheets at the start and end of each reporting period, after taking into account any capital transactions between the projects and the third party. The noncontrolling interest balances in the projects are reported as a component of equity in the consolidated balance sheets.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, trade receivables, derivative assets and liabilities. The Company places its cash and cash equivalents with high quality institutions.
The Company sells electricity and environmental attributes primarily to creditworthy utilities under long-term, fixed-priced Power Sale Arrangements (“PPAs”). During 2015, Standard & Poor’s Rating Services (“S&P”) further downgraded the credit rating of the Puerto Rico Electric Power Authority (“PREPA”) from CCC to CC. Through September 30, 2015 , Moody’s Investor Service’s credit rating of PREPA remains unchanged at Caa3. As of September 30, 2015 and November 5, 2015 , PREPA was current with respect to payments due under the PPA.
The following table presents significant customers who accounted for the following percentages of total revenues during the three and nine months ended September 30, 2015 and 2014 , respectively, and the related maximum amount of credit loss based on their respective percentages of total trade receivables:
 
Revenue
 
Trade Receivables
 
Three months ended September 30,
 
Nine months ended September 30,
 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
San Diego Gas & Electric
19.62
%
 
23.34
%
 
19.08
%
 
26.37
%
 
25.56
%
 
30.05
%
 
25.56
%
 
30.05
%
PREPA
9.17
%
 
10.90
%
 
9.54
%
 
11.04
%
 
11.80
%
 
13.46
%
 
11.80
%
 
13.46
%
The Independent Electricity System Operator (“IESO”) of Ontario, Canada is the customer for each of the Company’s Grand, K2 and South Kent projects. The Company accounts for these projects under the equity method of accounting and as a result, the Company’s ownership interest in these projects is recorded in equity in (losses) earnings in unconsolidated investments and not in revenue. As such, IESO is not included in the foregoing table of significant customers. However, we rely on a limited number of key power purchasers, including IESO, and face a concentration of credit risk from IESO as a customer.
The Company’s interest rate derivative instruments are placed with counterparties that are creditworthy institutions. An additional derivative instrument arises from an arrangement with Credit Suisse Energy LLC, the counterparty to a 10-year fixed-for-floating swap related to annual electricity generation at the Company’s Gulf Wind project. The Company’s reimbursements for prepaid interconnection network upgrades are with large creditworthy utility companies.
Finite-Lived Intangible Assets
Finite-lived intangible assets include PPAs, easements, land options and mining rights. PPAs obtained through acquisitions are valued at the time of acquisition and the difference between the contract price and the estimated fair value results in an intangible asset or an intangible liability. If the contract price is higher than the estimated fair value, the Company will recognize an intangible asset. If the contract price is lower than the estimated fair value, the Company will recognize an intangible liability. Easements, land options and mining rights are recognized at cost.

14



The Company amortizes intangible assets and liabilities associated with PPAs using the straight-line method over the remaining term of the related PPA. The intangible asset associated with the PPA is amortized over approximately 15 years and the intangible liability associated with the PPA is amortized over approximately 17 years. The Company amortizes easements, land options and mining rights using the straight-line method over the term of their estimated useful lives, which represents the term of the easements and land option and mining rights agreements, ranging from approximately 5 - 25 years. The Company periodically evaluates whether events or changes in circumstances have occurred that indicate the carrying amount of finite-lived intangible assets may not be recoverable, or information indicates that impairment may exist.
Reclassification
Certain prior period balances have been reclassified to conform to the current period presentation in the Company’s consolidated financial statements and the accompanying notes.
The Company has also revised its consolidated statements of comprehensive loss for the three and nine months ended September 30, 2014 to correct an immaterial classification error. The consolidated statements of comprehensive loss for the three and nine months ended September 30, 2014 has been corrected to reflect the reclassification of approximately $7.3 million and $20.4 million , respectively, between the effective portion of change in fair market value of derivatives and reclassification to net loss for controlling interest. The consolidated statements of comprehensive loss for the three and nine months ended September 30, 2014 has also been corrected to reflect the reclassification of approximately $1.9 million and $5.4 million , respectively, between the effective portion of change in fair market value of derivatives and reclassification to net loss for noncontrolling interest. These revisions had no impact on comprehensive loss or comprehensive loss attributable to noncontrolling interest. The accumulated other comprehensive loss footnote has also been corrected to reflect this immaterial error correction.
The Company has also revised its supplemental cash flow disclosures for cash payments of interest expenses, net of capitalized interest, to include $3.3 million of interest payments, which represents the correction of an immaterial error, for the nine months ended September 30, 2014.
Recently Issued Accounting Standards
In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments,” which requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments under ASU 2015-16 require that the acquirer record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 also requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods, if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for annual reporting periods beginning after December 15, 2015 and interim periods within those fiscal years. The amendments in this update should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company is currently assessing the future impact of this update on its consolidated financial statements and expects to adopt this update beginning January 1, 2016.
In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” to amend ASU 2015-09 “Revenue from Contracts with Customers” to defer the effective date of ASU 2014-09 for all entities by one year. The guidance in ASU 2014-09 provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. As a result of this amendment, ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2015 and interim periods within those fiscal years. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. In June 2015, the FASB voted to defer the effective date by one year, with early adoption permitted as of the original effective date. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures and expects to adopt this update beginning January 1, 2018.

15



In August 2015, the FASB issued ASU 2015-13, “Derivatives and Hedging: Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets” to allow the application of the normal purchases and normal sales scope exception to certain electricity contracts within nodal energy markets. The amendments specify that the purchase or sale of electricity on a forward basis within nodal energy markets does not cause that contract to fail to meet the physical delivery criterion of the normal purchases and normal sales scope exception. The amendments in this update are effective upon issuance and are in line with the Company’s current accounting policies. The adoption of ASU 2015-13 did not have an impact to the Company’s consolidated financial statements and related disclosures.
In July 2015, the FASB issued ASU 2015-11, “Inventory: Simplifying the Measurement of Inventory” which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value . Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments do not apply to inventory that is measured using last-in, first-out or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first out or average cost. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years. The amendments in this update should be applied prospectively. Early adoption is permitted as of the beginning of an interim or annual reporting period. The adoption of the provisions of ASU 2015-11 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures. The Company expects to adopt this update beginning January 1, 2017.
In June 2015, the FASB issued ASU 2015-10, “Technical Corrections and Improvements” which covers a wide range of topics in the Accounting Standards Codification (the “Codification”). The amendments in this update represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost on most entities. The amendments in ASU 2015-10 were effective immediately upon issuance and the adoption did not have material impact on the Company's consolidated financial statements and related disclosures.
In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs” to simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. ASU 2015-03 is effective for public companies for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and should be applied retrospectively. Early adoption is permitted for financial statements that have not been previously issued. Upon transition, an entity is required to comply with the applicable disclosures for a change in accounting principle. The Company adopted this standard in April 2015 and applied the change in accounting principle to the consolidated financial statements as of September 30, 2015 . As a result, the Company reclassified $25.0 million and $36.8 million in total deferred financing costs to long-term debt, of which $5.1 million and $11.9 million have been reclassified to current portion of long-term debt, as of September 30, 2015 and December 31, 2014, respectively, on the Company’s consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facility remains classified as an asset on the Company’s consolidated balance sheets. The adoption of ASU 2015-3 had no impact on the Company’s results of operations and cash flows.
In February 2015, the FASB issued ASU 2015-02, “Consolidation: Amendments to the Consolidation Analysis” to modify the analysis that companies must perform in order to determine whether a legal entity should be consolidated. ASU 2015-02 simplifies current guidance by reducing the number of consolidation models; eliminating the risk that a reporting entity may have to consolidate based on a fee arrangement with another legal entity; placing more weight on the risk of loss in order to identify the party that has a controlling financial interest; reducing the number of instances that related party guidance needs to be applied when determining the party that has a controlling financial interest; and changing rules for companies in certain industries that ordinarily employ limited partnership or VIE structures. ASU 2015-02 is effective for public companies for fiscal years beginning after December 15, 2015 and interim periods within those fiscal periods. Early adoption on a modified retrospective or full retrospective basis is permitted. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures and expects to adopt this update beginning January 1, 2016.

16



3.      Acquisitions
Business Combinations
Wind Capital Group Acquisition
On May 15, 2015, pursuant to a Purchase and Sale Agreement, the Company acquired 100% of the membership interests in Lost Creek Wind Finco, LLC (“Lost Creek Finco”) from Wind Capital Group LLC, an unrelated third party, and 100% of the membership interests in Lincoln County Wind Project Holdco, LLC (“Lincoln County Holdco”) from Lincoln County Wind Project Finco, LLC, an unrelated third party. Lost Creek Finco owns 100% of the Class B membership interests in Lost Creek Wind Holdco, LLC, (“Lost Creek Wind Holdco”) a company which owns a 100% interest in the Lost Creek wind project. Lincoln County Holdco owns 100% of the Class B membership interests in Post Rock Wind Power Project, LLC, a company which owns a 100% interest in the Post Rock wind project. The acquisition of 100% of the membership interests in Lost Creek Finco and Lincoln County Holdco was for an aggregate consideration of approximately $242.0 million , paid at closing. The Company also assumed certain project level indebtedness and ordinary course performance guarantees securing project obligations. Lost Creek is a 150 MW wind project in King City, Missouri, and Post Rock is a 201 MW wind project in Ellsworth and Lincoln Counties, Kansas.
The Company acquired assets and operating contracts for Lost Creek and Post Rock, including assumed liabilities. The identifiable assets and liabilities assumed were recorded at their fair values, which corresponded to the sum of the cash purchase price and the initial balance of the other investors’ noncontrolling interests.
The fair value of the assets acquired and liabilities assumed in connection with the acquisition are as follows (in thousands):
 
May 15, 2015
Cash and cash equivalents
$
3,501

Restricted cash, current
11,787

Trade receivables
7,910

Prepaid expenses and other current assets
1,676

Restricted cash
4,592

Property, plant and equipment
541,300

Finite-lived intangible assets, net of accumulated amortization
97,400

Other assets
19,935

Accounts payable and other accrued liabilities
(2,588
)
Accrued interest
(951
)
Derivative liabilities, current
(4,236
)
Current portion of long-term debt, net of financing costs
(7,463
)
Finite-lived intangible liabilities, net of accumulated amortization
(60,300
)
Asset retirement obligations
(6,994
)
Long-term debt, net of financing costs
(108,838
)
Derivative & other long-term liabilities, less current portion
(14,631
)
Total consideration before temporary equity and noncontrolling interests
482,100

Less: temporary equity
(35,000
)
Less: noncontrolling interests
(205,100
)
Total consideration after temporary equity and noncontrolling interests
$
242,000

Current assets and accounts payable and other accrued liabilities were recorded at carrying value, which is representative of the fair value on the date of acquisition. Property, plant and equipment, finite-lived intangible asset, finite-lived intangible liability and debt were recorded at fair value estimated using the income approach. The fair values of other assets, derivatives and asset retirement obligations were recorded at fair value using a combination of market data, operational data and discounted cash flows and were adjusted by a discount rate factor reflecting current market conditions at the time of acquisition.

17



The noncontrolling interest in Post Rock was recorded at fair value estimated using a discounted cash flow approach, adjusted for a discount rate reflecting the estimated return on investment required by participants in the tax equity market. The noncontrolling interest in Lost Creek was recorded at fair value estimated using the purchase price from a purchase agreement executed on May 15, 2015 between the Company and the tax equity investor.
The accounting for this acquisition is preliminary. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations and valuations, and the estimates and assumptions are subject to change as additional information is obtained for the estimates during the measurement period (up to one year from the acquisition date).
The Company incurred transaction related credits of $0.2 million and expenses of $1.7 million which were recorded in net (loss) gain on transactions in the consolidated statements of operations for the three and nine months ended September 30, 2015 , respectively.
On July 30, 2015, the Company acquired 100% of the Class A membership interests in Lost Creek Wind Holdco for a cash purchase price of approximately $35.2 million , which was previously recorded in temporary equity - noncontrolling interests, in the Company's consolidated balance sheets at June 30, 2015. As a result, Lost Creek is wholly owned as of September 30, 2015.
Panhandle 2 Acquisition
On November 10, 2014, the Company acquired 100% of the membership interests in the Panhandle 2 wind project through the acquisition of Panhandle B Member 2 LLC, from Pattern Development, for a purchase price of approximately $123.8 million .
Subsequent to the closing, certain tax equity investors made capital contributions to acquire 100% of the Class A membership interests in Panhandle 2 and were admitted as noncontrolling members in the entity and the Company received 100% of the Class B membership interests, resulting in the tax equity investors and the Company holding initial ownership interests of 19% and 81% , respectively, in the project’s distributable cash flows. The 182 MW wind project, located in Carson County, Texas, achieved commercial operations on November 7, 2014 . The Company has determined that the operating partnership agreement does not allocate economic benefits pro rata to its two classes of investors and will use the HLBV method to calculate the noncontrolling interest balance that reflects the substantive profit sharing arrangement.
The Company acquired the assets and operating contracts for Panhandle 2, including assumed liabilities. The identifiable assets acquired and liabilities assumed were recorded at their fair values which corresponded to the sum of the cash purchase price. The short-term debt presented in the table below consists of a construction loan that was repaid in full following the acquisition.
The accounting for the Panhandle 2 acquisition was completed as of March 31, 2015 at which point the fair values became final. The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of November 10, 2014 as well as adjustments made through March 31, 2015, when the allocation became final. The consolidated fair value of the assets acquired and liabilities assumed in connection with the Panhandle 2 acquisition are as follows (in thousands):
 
November 10, 2014
Cash and cash equivalents
$
240

Trade receivables
1,156

Prepaid expenses and other current assets
28,997

Property, plant and equipment
315,109

Accrued construction costs
(24,197
)
Related party payable
(121
)
Short-term debt
(195,351
)
Asset retirement obligation
(2,003
)
Total consideration
$
123,830

Current assets, accrued construction costs and related party payable were recorded at carrying value, which is representative of the fair value on the date of acquisition. In addition, the short-term debt was recorded at carrying value, representative of the fair value, which was repaid immediately after acquisition.

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Property, plant and equipment were recorded at the cost of construction plus the developer’s profit margin, which represents fair value. The asset retirement obligation was recorded at fair value using a combination of market data, operational data and discounted cash flows and was adjusted by a discount rate factor reflecting then current market conditions.
Logan’s Gap Acquisition
On December 19, 2014, the Company acquired 100% of the membership interests in the Logan’s Gap wind project, through the acquisition of Logan’s Gap B Member LLC, from Pattern Development, for a purchase price of approximately $15.1 million and an assumed contingent liability to a third party in the amount of $8.0 million associated with the close of construction financing and the achievement of either commercial operation or tax equity funding. The wind project was under construction at the time of acquisition and is located in Comanche County, Texas. The construction of the project was being financed primarily by construction debt and Pattern Energy equity. Following construction, it was expected that institutional tax equity investors would invest in the project, pursuant to an executed equity commitment agreement, so that the construction loan would be paid off such that long term financing for the project will be equity based. Following the achievement of commercial operations, in September 2015, the Company and certain tax equity investors made capital contributions to fund the repayment of the Logan's Gap construction loan. As a result, the Company and the tax equity investors hold initial ownership interests of 82% and 18% , respectively, in the project’s distributable cash flows.    
The Company acquired the assets and operating contracts for Logan’s Gap, including assumed liabilities. The identifiable assets acquired and liabilities assumed were recorded at their fair values which corresponded to the sum of the cash purchase price.
The accounting for the Logan’s Gap acquisition was completed as of March 31, 2015 at which point the fair values became final. The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of December 19, 2014, as well as adjustments made through March 31, 2015, when the allocation became final. The consolidated fair value of the assets acquired and liabilities assumed in connection with the Logan’s Gap acquisition are as follows (in thousands):
 
December 19, 2014
Cash and cash equivalents
$
2

Restricted cash, current
5,003

Prepaid expenses and other current assets
1,790

Deferred financing costs, current
2,882

Construction in progress
23,821

Property, plant and equipment
116

Other assets
80

Accrued construction costs
(5,617
)
Current portion of contingent liabilities
(7,975
)
Related party payable
(5,003
)
Total consideration
$
15,099

Current assets, current liabilities, property, plant and equipment, other assets, accrued construction costs and related party payable were recorded at carrying value, which is representative of the fair value on the date of acquisition. Construction in progress was recorded at fair value which is representative of the development effort, including the developer’s profit, and contracts acquired on the date of acquisition.
The Company recorded $8.0 million in contingent obligations, payable to a third party, at fair value upon and following the acquisition of the project. Of this amount, $4.0 million was paid in December 2014, upon the closing of construction financing. Of the remaining $4.0 million liability, $ 2.3 million was paid upon achievement of commercial operations in early September 2015. Pending final resolution among the parties of the appropriate amounts that would be payable either to the third party recipient or the local tax authorities, the Company has not yet made payment of the remainder and recorded $ 1.7 million in accrued liabilities as of September 30, 2015.

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Panhandle 1 Acquisition
On June 30, 2014 , the Company acquired 100% of the Class B membership interests in the Panhandle 1 wind project, representing a 79% initial ownership interest in the project’s distributable cash flow, through the acquisition of Panhandle Wind Holdings LLC, from Pattern Development, for a purchase price of approximately $124.4 million . The 218 MW wind project, located in Carson County, Texas, achieved commercial operations on June 25, 2014 .
Prior to the closing, certain tax equity investors made capital contributions to acquire 100% of the Class A membership interests in Panhandle 1 and have been admitted as noncontrolling members in the entity, with a 21% initial ownership interest in the project’s distributable cash flow. The Company has determined that the operating partnership agreement does not allocate economic benefits pro rata to its two classes of investors and will use the HLBV method to calculate the noncontrolling interest balance that reflects the substantive profit sharing arrangement.
The Company acquired the assets and operating contracts for Panhandle 1, including assumed liabilities. The identifiable assets acquired and liabilities assumed were recorded at their fair values, which corresponded to the sum of the cash purchase price and the initial balance of the other investors’ noncontrolling interests.
The accounting for the Panhandle 1 acquisition was completed as of December 31, 2014 at which point the fair values became final. The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of Jun