Pattern Energy Reports Fourth Quarter and Full Year 2013 Financial Results

Declares First Quarter 2014 Dividend of $0.3125 Per Class A Common Share

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| Source: Pattern Energy Group Inc.

SAN FRANCISCO, Feb. 28, 2014 (GLOBE NEWSWIRE) -- Pattern Energy Group Inc. (Nasdaq:PEGI) (TSX:PEG) (Pattern Energy), an independent power company, today announced its financial results for the fourth quarter and full year of 2013.

Highlights

  • Cash available for distribution of $42.6 million for 2013, up 141% from 2012
  • Adjusted EBITDA of $141.8 million for 2013, up 88% from 2012
  • Electricity sales of 2,259 GWh for 2013, up 35% from 2012
  • Revenue of $202 million for 2013, up 76% from 2012
  • Increased owned megawatts by 214 MW, up 21%
  • Initiated quarterly cash dividend of $0.3125 per Class A common share in Q4
  • Declared Q1 2014 dividend of $0.3125 per Class A common share

"This was a tremendous year for Pattern Energy that included our successful IPO – the first U.S. listing of a wind power company – the growth of our portfolio to ten projects totaling 1,255 MW and the declaration of our first quarterly dividend," said Mike Garland, President and CEO of Pattern Energy. "With a strong balance sheet, a clearly identified pipeline of ROFO project acquisitions and significant opportunities for third-party acquisitions, we are optimally positioned to grow our portfolio of world-class wind power projects, which will increase our cash available for distribution and allow us to grow the quarterly dividend."

In 2013, Pattern Energy acquired 45% of the 149 MW Grand Renewable wind power project in Ontario and made a commitment to acquire 81% of the 182 MW Panhandle 2 wind power project in Texas upon its completion. Pattern Energy's portfolio now totals ten wind power projects, including Panhandle 2, with a total owned capacity of 1,255 MW.

Pattern Energy successfully closed its initial public offering (IPO) on October 2, 2013. Results for periods prior to the IPO are attributable to its predecessor entities.

Financial Results

Pattern Energy sold 532 GWh of electricity in the fourth quarter of 2013 compared to 453 GWh in the same period in 2012. For the year ended December 31, 2013, Pattern Energy sold 2,259 GWh of electricity, compared to 1,673 GWh in 2012 across a smaller fleet of projects. Electricity sold was lower than expected largely due to lost production from reimbursable turbine down time, which has been corrected, and from wind conditions that were lower than the long-term average.

Net income in the fourth quarter of 2013 was a loss of $19.4 million compared to a loss of $4.5 million for the same period last year. The decrease in the Company's fourth quarter net income was $14.9 million, which was primarily due to unrealized losses attributable to its energy hedge and to the impact of recording a U.S. income tax valuation allowance on certain deferred tax assets that were contributed to the Company at the time of its IPO, partially offset by unrealized gains attributable to interest rate swaps.

For the full year ended December 31, 2013, net income was $10.1 million, compared to a loss of $13.4 million in 2012. The increase in the Company's annual net income was primarily due to a full year of commercial operations at the Spring Valley, Santa Isabel and Ocotillo projects, as well as unrealized gains attributable to interest rate swaps.

Adjusted EBITDA

Adjusted EBITDA was $29.4 million for the fourth quarter of 2013 compared to $21.1 million in the same period last year. For the full year ended December 31, 2013, adjusted EBITDA was $141.8 million compared to $75.2 million for 2012. A reconciliation of adjusted EBITDA to net income determined in accordance with GAAP is shown below.

Cash Available For Distribution

Cash available for distribution in the fourth quarter of 2013 was $5.6 million compared to $5.6 million in the same period last year. For the full year ended December 31, 2013, cash available for distribution was near the expected result at $42.6 million compared to $17.7 million for 2012. A reconciliation of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP is shown below.

Quarterly Dividend

On November 26, 2013, Pattern Energy announced that its Board of Directors approved the introduction of a quarterly cash dividend in the amount of $0.3125 per Class A common share for the fourth quarter, which represents $1.25 on an annualized basis.

On February 26, 2014, the Board of Directors approved a quarterly dividend of $0.3125 per Class A common share for the first quarter of 2014, which represents $1.25 on an annualized basis. The dividend will be paid on April 30, 2014 to shareholders of record as of March 31, 2014.

Acquisition Pipeline

In addition to potential acquisitions of assets from third parties, Pattern Energy has the Right of First Offer (ROFO) on an identified pipeline of acquisition opportunities from Pattern Energy Group LP (Pattern Development). Since the IPO, the initial ROFO projects grew in size by 78 MW. In December, the Company acquired two ROFO projects. The remaining initial ROFO projects include the following:

 
Asset Location Owned MW Status
Gulf Wind Carson County, TX 76 Operational
Panhandle 1 Panhandle, TX 179 Construction
K2 Ontario, Canada 90 Financing in Process
Armow Ontario, Canada 90 Ready for Financing
Meikle BC, Canada 175 Pre-construction

Non-GAAP Financial Measures (unaudited)

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

   Pattern Energy Group Inc. 
   Three Months Ended December 31,   For the Year Ended December 31, 
  2013 2012 2013 2012
         
Net income (loss)  $ (19,376)  $ (4,455)  $ 10,072  $ (13,376)
Plus:        
Interest expense, net of interest income  15,186  10,944  61,118  35,457
Tax provision (benefit)  11,347  (4,851)  4,546  (3,604)
Depreciation and accretion  21,422  14,476  83,180  49,027
EBITDA  $ 28,579  $ 16,114  $ 158,916  $ 67,504
Unrealized (gain) loss on energy derivative  6,050  7  11,272  6,951
Unrealized (gain) loss on interest rate derivatives  (4,692)  4,921  (15,601)  4,953
Interest rate derivative settlements  1,040  --   2,099  -- 
Gain on transactions  1,205  --   (5,995)  (4,173)
Plus, our proportionate share in the following from our equity accounted investments:        
Interest expense, net of interest income  228  44  267  44
Tax (benefit) provision  (88)  (122)  (172)  (65)
Depreciation and accretion  6  --   20  -- 
Unrealized gain on interest rate and currency derivatives  (2,985)  221  (9,076)  27
Realized loss (gain) on interest rate and currency derivatives  74  (38)  39  -- 
Adjusted EBITDA  $ 29,417  $ 21,147  $ 141,769  $ 75,241
         
   Pattern Energy Group Inc. 
   Three Months Ended December 31,   For the Year Ended December 31, 
  2013 2012 2013 2012
         
Net cash provided by operating activities  $ 9,756  $ 4,544  $ 78,152  $ 35,051
Changes in current operating assets and liabilities  5,233  6,959  8,237  6,885
Network upgrade reimbursement   618  1,236  1,854  6,263
Use of operating cash to fund maintenance and debt reserves  --  (522)  --  (1,047)
Release of restricted cash to fund general and administrative costs  318  --  318  --
Operations and maintenance capital expenditures  (388)  (19)  (819)  (623)
Less:        
Distributions to noncontrolling interests   (866)  (244)  (2,292)  (1,298)
Principal payments paid from operating cash flows (1)  (9,041)  (6,356)  (42,829)  (27,546)
Cash available for distribution  $ 5,630  $ 5,598  $ 42,621  $ 17,685
         
(1) Excludes $7,495 of principal pre-payments on our Ocotillo project which were paid from ITC cash grant proceeds for the year ended December 31, 2013

Conference Call and Webcast

Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. U.S. Eastern Time on Friday, February 28, 2014. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10-15 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 2062037. The replay recording will be available until 12:00 a.m. U.S. Eastern Time, March 14, 2014.

A live webcast of the conference call will be also available in the investor section of Pattern's website at www.patternenergy.com. An archived webcast will be available for one year.

About Pattern Energy

Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on the NASDAQ ("PEGI") and Toronto Stock Exchange ("PEG"). Pattern Energy has a portfolio of ten wind power projects, with a total owned capacity of 1,255 MW, in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power projects generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of Canadian securities laws. 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 prospectus filed with the SEC and applicable Canadian securities regulatory authorities in connection with the Company's initial public offering. The risk factors and other factors noted in the prospectus could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.

Pattern Energy Group Inc.
Consolidated Balance Sheets
(in thousands of U.S. dollars, except share data)
 
   December 31, 
  2013 2012
Assets    
Current assets:    
Cash and cash equivalents  $ 103,569  $ 17,574
Trade receivables  20,951  13,715
Related party receivable  167  -- 
Reimbursable interconnection costs   1,455  51,307
Derivative assets, current  13,937  17,177
Current deferred tax assets  573  -- 
Prepaid expenses and other current assets   13,927  13,794
Total current assets  154,579  113,567
     
Restricted cash  32,636  13,904
Turbine advances  --   44,150
Deferred development costs  --   26,544
Construction in progress   --   6,081
Property, plant and equipment, net of accumulated depreciation of $179,778 and $100,247 in 2013 and 2012, respectively  1,476,142  1,668,302
Unconsolidated investments   107,055  36,218
Derivative assets  82,167  62,895
Deferred financing costs, net of accumulated amortization of $16,225 and $9,311 in 2013 and 2012, respectively  35,792  42,654
Net deferred tax assets  2,017  4,940
Other assets   13,243  16,475
Total assets  $ 1,903,631  $ 2,035,730
     
Liabilities and equity    
Current liabilities:    
Accounts payable and other accrued liabilities  $ 15,550  $ 7,750
Accrued construction costs  3,204  67,206
Related party payable  1,245  198
Accrued interest  495  559
Dividend payable  11,103  -- 
Contingent liabilities  --   8,001
Derivative liabilities, current  16,171  13,462
Current portion of long-term debt  48,851  137,258
Total current liabilities  96,619  234,434
     
Long-term debt  1,200,367  1,153,312
Derivative liabilities  7,439  35,326
Asset retirement obligations   20,834  19,056
Net deferred tax liabilities  9,930  3,662
Other long-term liabilities  438  528
Total liabilities   1,335,627  1,446,318
     
Equity:    
Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 35,530,786 and 100 shares issued and outstanding as of December 31, 2013 and 2012, respectively  355  -- 
Class B common stock, $0.01 par value per share: 20,000,000 shares authorized; 15,555,000 shares issued and outstanding at December 31, 2013  156  -- 
Additional paid-in capital  489,388  1
Capital  --  545,471
Accumulated (loss) income  (13,336)  2,903
Accumulated other comprehensive loss  (8,353)  (34,264)
Total equity before noncontrolling interest  468,210  514,111
Noncontrolling interest  99,794  75,301
Total equity   568,004  589,412
Total liabilities and equity  $ 1,903,631  $ 2,035,730
     
Pattern Energy Group Inc.
Consolidated Statements of Operations
(in thousands of U.S. dollars, except per share data)
 
   Three months ended December 31,   Year ended December 31, 
  2013 2012 2013 2012
         
Revenue:        
Electricity sales  $ 42,737  $ 29,675  $ 173,270  $ 101,835
Energy derivative settlements   3,925  4,677  16,798  19,644
Unrealized loss on energy derivative  (6,050)  (7)  (11,272)  (6,951)
Related party revenue  446  --   911  -- 
Other revenue  709  --   21,866  -- 
Total revenue  41,767  34,345  201,573  114,528
         
Cost of revenue:        
Project expense   15,616  9,782  57,677  34,843
Depreciation and accretion   21,422  14,476  83,180  49,027
Total cost of revenue  37,038  24,258  140,857  83,870
         
Gross profit  4,729  10,087  60,716  30,658
         
Operating expenses:        
Development expense  --   174  --   174
General and administrative  4,256  271  4,819  858
Related party general and administrative  (799)  3,017  8,169  10,604
Total operating expenses  3,457  3,462  12,988  11,636
         
Operating income  1,272  6,625  47,728  19,022
         
Other income (expense):        
Interest expense  (15,445)  (11,307)  (63,614)  (36,502)
Equity in earnings (losses) in unconsolidated investments  2,658  (53)  7,846  (40)
Interest rate derivative settlements  (1,040)  --   (2,099)  -- 
Unrealized gain (loss) on derivatives  4,692  (4,921)  15,601  (4,953)
Net (loss) gain on transactions  (1,205)  --   5,995  4,173
Related party income  665  --   665  -- 
Other income, net  373  350  2,496  1,320
Total other expense  (9,302)  (15,931)  (33,110)  (36,002)
         
Net (loss) income before income tax  (8,030)  (9,306)  14,618  (16,980)
Tax provision (benefit)   11,346  (4,851)  4,546  (3,604)
Net (loss) income  (19,376)  (4,455)  10,072  (13,376)
Net loss attributable to noncontrolling interest  (6,197)  (1,146)  (6,887)  (7,089)
Net (loss) income attributable to controlling interest  $ (13,179)  $ (3,309)  $ 16,959  $ (6,287)
         
Earnings per share information:        
Less: Net income attributable to controlling interest prior to the IPO on October 2, 2013  (157)    (30,295)  
Net loss attributable to controlling interest subsequent to the IPO  $ (13,336)    $ (13,336)  
         
Weighted average number of shares:        
Basic and diluted - Class A common stock  35,448,056    35,448,056  
Basic and diluted - Class B common stock  15,555,000    15,555,000  
         
Earnings per share for period subsequent to the IPO        
Class A common stock:        
Basic and diluted loss per share  $ (0.17)    $ (0.17)  
Class B common stock:        
Basic and diluted loss per share  $ (0.48)    $ (0.48)  
         
         
2012 pro forma information:        
Unaudited pro forma net loss after tax:        
Net loss before income tax        $ (16,980)
Pro forma tax provision       818
Pro forma net loss        $ (17,798)
         
Pattern Energy Group Inc.
Consolidated Statements of Cash Flows 
(in thousands of U.S. dollars)
 
   Three months ended December 31,   Year ended December 31, 
  2013 2012 2013 2012
Operating activities        
Net (loss) income  $ (19,376)  $ (4,455)  $ 10,072  $ (13,376)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:        
Depreciation and accretion  21,422  14,476  83,180  49,027
Amortization of financing costs  1,388  1,278  6,816  2,546
Unrealized loss (gain) on derivatives  1,358  4,928  (4,329)  11,904
Stock-based compensation  511  --  511  --
Net loss (gain) on transactions  1,205  --  (5,995)  (4,173)
Deferred taxes  11,347  (4,851)  4,546  (3,604)
Equity in (earnings) loss in unconsolidated investments  (2,658)  53  (7,846)  40
Changes in operating assets and liabilities:        
Trade receivables  (786)  (3,014)  (8,721)  (298)
Reimbursable interconnection receivable  (11)  --  (11)  --
Prepaid expenses and other current assets  695  (2,464)  (2,698)  (5,842)
Other assets (non current)  (208)  (114)  (566)  (428)
Accounts payable and other accrued liabilities  (1,826)  552  3,036  (379)
Related party receivable/payable  481  (782)  190  (100)
Accrued interest payable  (890)  (1,063)  (33)  (78)
Contingent liabilities  --  --  --  (188)
Long-term liabilities  (2,896)  --  --  --
Net cash provided by operating activities  9,756  4,544  78,152  35,051
         
Investing activities        
Receipt of ITC Cash Grant  --  79,910  173,446  79,910
Payment for acquisition from Pattern Development  (30,070)  --  (30,070)  --
Proceeds from sale of investments and tax credits  --  --  14,254  4,173
Decrease in restricted cash - interconnect and PPA security  2,785  27,990  66,517  28,431
Increase in restricted cash - interconnect and PPA security  (2)  (35,732)  (80,569)  (36,576)
Capital expenditures  (2,552)  (281,346)  (123,517)  (641,422)
Deferred development costs  --  (1,691)  (528)  (7,093)
Distribution from unconsolidated investments  --  --  10,463  --
Contribution to unconsolidated investments  (941)  (1,433)  (9,678)  (22,387)
Reimbursable interconnection receivable  --  (5,663)  49,715  (47,055)
Other assets (non current)  618  1,231  2,358  3,066
Net cash (used in) provided by investing activities  (30,162)  (216,734)  72,391  (638,953)
         
Pattern Energy Group Inc.
Consolidated Statements of Cash Flows 
(in thousands of U.S. dollars)
 
   Three months ended December 31,   Year ended December 31, 
  2013 2012 2013 2012
Financing activities        
Proceeds from IPO, net of expenses  $ 317,926  $ --  $ 317,926  $ --
Repurchase of shares for employee tax withholding  (24)  --  (24)  --
Capital distributions - Contribution Transactions  (232,640)  --  (232,640)  --
Payment for acquisition from Pattern Development  (49,430)  --  (49,430)  --
Capital contributions - controlling interest  --  46,732  32,679  281,519
Capital distributions - controlling interest  --  (88,457)  (98,886)  (114,236)
Capital distributions - noncontrolling interest  (866)  (244)  (2,292)  (1,298)
Decrease in restricted cash - debt service reserves  6,035  17,896  122,689  26,669
Increase in restricted cash - debt service reserves  (894)  (641)  (127,369)  (15,850)
Payment for deferred financing costs  --  (19,944)  (294)  (19,989)
Proceeds from revolving credit facility  --  --  56,000  --
Proceeds from long-term debt  --  302,368  138,620  497,226
Repayment of revolving credit facility  (56,000)  --  (56,000)  --
Repayment of long-term debt  (9,041)  (6,356)  (50,324)  (27,546)
Repayment of construction and grant loans  --  (53,328)  (114,056)  (53,328)
Net cash (used in) provided by financing activities  (24,934)  198,026  (63,401)  573,167
         
Effect of exchange rate changes on cash and cash equivalents  (181)  (111)  (1,147)  637
Net change in cash and cash equivalents  (45,521)  (14,275)  85,995  (30,098)
Cash and cash equivalents at beginning of period   149,090  31,849  17,574  47,672
Cash and cash equivalents at end of period  $ 103,569  $ 17,574  $ 103,569  $ 17,574
         
Supplemental disclosure        
Cash payments for interest and commitment fees   $ 12,327  $ 14,123  $ 57,505  $ 43,474
Schedule of non-cash activities        
Change in fair value of interest rate swaps  13,978  (957)  52,244  (11,173)
Change in fair value of contingent liabilities  --   (1,701)  --   (2,015)
Amortization of deferred financing costs - included as construction in progress  --   1,395  175  3,824
Capitalized interest  941  3,024  4,171  9,386
Capitalized commitment fee  --   317  39  873
Change in property, plant and equipment  (32,440)  (11,218)  (192,461)  30,154
Transfer of capitalized assets to South Kent joint venture  --   --  49,275  --
Non-cash distribution to Pattern Development  --   --  (5,748)  --
Assumption of liabilities related to Contribution Transactions  (4,207)  --  (4,207)  --
Accrued IPO stock issuance costs  (884)  --  (884)  --
Ross Marshall
Investor Relations
T: (416) 815-0700 ext. 238
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Matt Dallas
Media Relations
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