– Declares Increased Dividend of $0.328 Per Class A Common Share for Third Quarter 2014 –
– Adds 160 MW of Owned Interest to Identified ROFO Pipeline –
SAN FRANCISCO, Aug. 5, 2014 (GLOBE NEWSWIRE) -- Pattern Energy Group Inc. (Nasdaq:PEGI) (TSX:PEG) (Pattern Energy), an independent power company, today announced its financial results for the second quarter of 2014.
Highlights
(Comparisons made between fiscal Q2 2014 and fiscal Q2 2013 results, unless otherwise noted)
- Wind levels in Q2 across the fleet were at the long term expected average
- Cash available for distribution of $16.1 million; together with Q1 results (half year) total 61% of the total annual target
- Adjusted EBITDA of $58.8 million, up 28%
- Proportional electricity sales of 770 GWh, up 55%
- Revenue of $65.0 million, up 11%
- Increased owned megawatts to 1,472 MW with the acquisitions of a 172 MW owned interest in the Panhandle 1 project and an additional 44 MW of owned interest in the El Arrayán project
- Commenced commercial operations on both the Panhandle 1 and El Arrayán projects
- Added new wind project to the ROFO pipeline representing 160 MW of owned interest
- Declared a third quarter dividend of $0.328 per Class A common share, or $1.312 on an annualized basis, representing a 2% increase over the previous quarter's dividend
- Completed a $586 million follow-on equity offering including both primary and secondary components
"It was a strong quarter in which we improved our performance and continued to execute on our growth strategy. Our cash available for distribution at midyear is tracking ahead of the 2014 target we committed to at the IPO," said Mike Garland, President and CEO of Pattern Energy. "The acquisition and startup of the Panhandle 1 and El Arrayán projects grew our portfolio and allowed us to increase our distribution for the second consecutive quarter in anticipation of increased CAFD. In addition, we added 160 MW of owned interest to the identified ROFO pipeline, and there will be more additions to come."
Financial Results
Pattern Energy sold 769,619 MWh of electricity on a proportional basis in the second quarter of 2014 compared to 496,763 MWh sold in the same period in 2013.
Pattern Energy sold 1,315,908 MWh of electricity on a proportional basis for the six months ended June 30, 2014 compared to 965,383 MWh sold in the same period in 2013.
These increases in proportional MWh sold were primarily attributable to an increase in production at Ocotillo and Santa Isabel and also to the commencement of commercial operations at South Kent in March 2014.
Net income in the second quarter of 2014 was $7.2 million compared to $44.0 million in the same period last year. The change in net income was due primarily to unrealized losses on energy and interest rate derivatives and a higher recognition of deferred tax expense in 2014.
Net loss for the six months ended June 30, 2014 was $14.7 million compared to net income of $25.2 million in the same period last year. The change in net income (loss) was due primarily to unrealized losses on interest rate derivatives in 2014.
Adjusted EBITDA was $58.8 million for the second quarter of 2014 compared to $46.0 million in the same period last year. Adjusted EBITDA for the six months ended June 30, 2014 was $96.0 million compared to $80.4 million in the same period last year. A reconciliation of Adjusted EBITDA to net income (loss) determined in accordance with GAAP is shown below.
Cash available for distribution ("CAFD") in the second quarter of 2014 was $16.1 million compared to $16.2 million in the same period last year. This small change in CAFD was primarily the result of a $7.8 million increase in project revenue, exclusive of unrealized loss on energy derivative, offset by an aggregate $7.0 million increase in project and operating expenses.
CAFD for the six months ended June 30, 2014 was $33.9 million compared to $30.7 million in the same period last year. This $3.2 million increase was primarily the result of a $14.4 million increase in project revenue, exclusive of unrealized loss on energy derivative, offset by an aggregate $12.4 million increase in project and operating expenses.
Although Pattern Energy commenced commercial operations at each of the South Kent, El Arrayán and Panhandle 1 projects during the first six months of 2014, the projects did not provide any meaningful contribution to the Company's CAFD during the first half of the year. However, the Company expects each project to contribute to CAFD in the second half of the year.
A reconciliation of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP is shown below.
Quarterly Dividend Increase
Pattern Energy declared an increased dividend for the third quarter 2014, payable on October 30, 2014, to holders of record on September 30, 2014, in the amount of $0.328 per Class A share, which represents $1.312 on an annualized basis. This is a 2% increase from the second quarter 2014 dividend of $0.322.
Equity Offering
On May 14, 2014, Pattern Energy completed an underwritten public offering of its Class A common stock. In total, 21,117,171 shares of its Class A common stock were sold. Of this amount, Pattern Energy sold 10,810,810 shares of Class A common stock and Pattern Development, the selling stockholder, sold 10,306,361 shares of Class A common stock, including 2,754,413 shares upon exercise in full of the underwriters' overallotment option. Net proceeds generated for Pattern Energy were approximately $288.7 million before deduction of transaction expenses of approximately $2.0 million.
Construction Pipeline
The table below outlines Pattern Energy's projects currently in construction, the capacity owned or under contract to be acquired and each project's anticipated commencement date for commercial operations.
| Asset | Location | Owned MW | Commercial Operations |
| Panhandle 2 | Texas | 147 | Q4 2014 |
| Grand | Ontario | 67 | Q4 2014 |
| Total | 214 |
Acquisition Pipeline
Pattern Energy has the Right of First Offer (ROFO) on an identified pipeline of acquisition opportunities from Pattern Development. In addition, Pattern Energy may seek to acquire assets from third parties.
On August 5, 2014 Pattern Development announced that it had acquired the Logan's Gap project, a 200 MW wind project proposed to be built in Comanche County, Texas. Logan's Gap has a 10-year Power Purchase Agreement with Wal-Mart Stores, Inc. for approximately 60% of the expected production for the project. Pattern Development expects to arrange financing for and start full construction of the project in the fourth quarter of 2014 and expects to retain an owned interest in the project of approximately 160 MW. Logan's Gap is expected to begin commercial operation in late 2015.
Pattern Energy has added this project to its pipeline of identified ROFO projects. The table below sets forth the identified ROFO projects:
| Asset | Location | Owned MW | Commercial Operation |
| Gulf Wind | Texas | 76 | Operational |
| K2 | Ontario | 90 | 2015 (In construction) |
| Armow | Ontario | 90 | 2015 (Ready for financing) |
| Meikle | British Columbia | 185 | 2016 (Ready for financing) |
| Logan's Gap | Texas | 160 | 2015 (Ready for financing) |
| Total | 601 |
Amendment to Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2014
The Company has amended its quarterly report on Form 10-Q for the quarter ended March 31, 2014 to, among other things, correct its quarterly diluted loss per Class A common share calculation for such period from $0.20 to $0.29. The initial calculation did not correctly consider that upon the commercial operation date of South Kent on March 28, 2014, the "if-converted" method of calculating diluted earnings per share would result in a more dilutive result than the previously applied "two-class" method. The more dilutive result of these methods should have been reported. The basic loss per Class A common share and basic and diluted loss per Class B common share for the three month period ended March 31, 2014 were correctly reported.
Adjusted EBITDA and Cash Available for Distribution Reconciliations
The following tables reconcile net income (loss) to Adjusted EBITDA and net cash provided by operating activities to cash available for distribution, respectively, for the periods presented (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net income (loss) | $ 7,167 | $ 43,988 | $ (14,732) | $ 25,204 |
| Plus: | ||||
| Interest expense, net of interest income | 15,525 | 15,788 | 29,943 | 31,672 |
| Tax provision (benefit) | 4,065 | (7,688) | 2,033 | (7,394) |
| Depreciation and accretion | 21,284 | 17,998 | 42,461 | 40,564 |
| EBITDA | $ 48,041 | $ 70,086 | $ 59,705 | $ 90,046 |
| Unrealized loss on energy derivative | 6,549 | 5,078 | 14,282 | 11,881 |
| Unrealized loss (gain) on derivatives | 2,942 | (8,202) | 6,665 | (10,133) |
| Interest rate derivative settlements | 1,035 | -- | 2,052 | -- |
| Net gain on transactions | (14,537) | (7,200) | (14,537) | (7,200) |
| Plus, proportionate share from equity accounted investments: | ||||
| Interest expense, net of interest income | 4,944 | (50) | 5,197 | (52) |
| Tax provision (benefit) | 102 | (12) | 102 | (48) |
| Depreciation and accretion | 4,537 | 10 | 4,724 | 11 |
| Unrealized loss (gain) on interest rate and currency derivatives | 5,236 | (13,731) | 17,831 | (3,948) |
| Realized (gain) loss on interest rate and currency derivatives | -- | (14) | 22 | (153) |
| Adjusted EBITDA | $ 58,849 | $ 45,965 | $ 96,043 | $ 80,404 |
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net cash provided by operating activities | $ 44,417 | $ 33,266 | $ 60,822 | $ 41,657 |
| Changes in current operating assets and liabilities | (12,336) | (938) | (5,685) | 11,757 |
| Network upgrade reimbursement | 618 | 618 | 1,236 | 618 |
| Release of restricted cash to fund general and administrative costs | 7 | -- | 61 | -- |
| Operations and maintenance capital expenditures | (40) | (156) | (94) | (375) |
| Transaction costs for acquisitions | 1,128 | -- | 1,128 | -- |
| Less: | ||||
| Distributions to noncontrolling interests | (1,470) | (1,000) | (1,470) | (1,168) |
| Principal payments paid from operating cash flows | (16,266) | (15,584) | (22,096) | (21,815) |
| Cash available for distribution | $ 16,058 | $ 16,206 | $ 33,902 | $ 30,674 |
Conference Call and Webcast
Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Tuesday, August 5, 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 77007167. The replay recording will be available until 11:59 p.m. Eastern Time, August 19, 2014.
A live webcast of the conference call will be also available on the events page in the investor section of Pattern's website at www.patternenergy.com. An archived webcast will be available for one year.
About Pattern Energy
Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on the NASDAQ ("PEGI") and Toronto Stock Exchange ("PEG"). Pattern Energy has a portfolio of eleven wind power projects, including one project it has agreed to acquire, with a total owned interest of 1,472 MW, in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power projects generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of Canadian securities laws, including statements regarding the Company's ability to achieve the CAFD target set at the IPO, its ability to increase the ROFO pipeline, the anticipated commercial operation date of construction projects, its ability to acquire additional assets from third parties, and forward looking information regarding the Logan's Gap project that has been added to the ROFO pipeline.
These forward-looking statements represent the Company's expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved.
Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the documents filed with the SEC and applicable Canadian securities regulatory authorities, including the Company's annual report on Form 10-K. The risk factors and other factors noted therein could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.
| Pattern Energy Group Inc. | ||
| Consolidated Balance Sheets | ||
| (In thousands of U.S. dollars, except share data) | ||
| (Unaudited) | ||
| June 30, | December 31, | |
| 2014 | 2013 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 234,038 | $ 103,569 |
| Trade receivables | 40,620 | 20,951 |
| Related party receivable | 759 | 167 |
| Reimbursable interconnection costs | 38 | 1,455 |
| Derivative assets, current | 12,449 | 13,937 |
| Current deferred tax assets | 573 | 573 |
| Prepaid expenses and other current assets | 10,913 | 13,927 |
| Total current assets | 299,390 | 154,579 |
| Restricted cash | 44,387 | 32,636 |
| Property, plant and equipment, net of accumulated depreciation of $223,144 and $179,778 as of June 30, 2014 and December 31, 2013, respectively | 2,105,937 | 1,476,142 |
| Unconsolidated investments | 65,353 | 107,055 |
| Derivative assets | 54,808 | 82,167 |
| Deferred financing costs, net of accumulated amortization of $19,059 and $16,225 as of June 30, 2014 and December 31, 2013, respectively | 33,533 | 35,792 |
| Net deferred tax assets | 6,889 | 2,017 |
| Other assets | 13,673 | 13,243 |
| Total assets | $ 2,623,970 | $ 1,903,631 |
| Liabilities and equity | ||
| Current liabilities: | ||
| Accounts payable and other accrued liabilities | $ 23,523 | $ 15,550 |
| Accrued construction costs | 21,670 | 3,204 |
| Related party payable | 918 | 1,245 |
| Accrued interest | 2,273 | 495 |
| Dividend payable | 15,071 | 11,103 |
| Derivative liabilities, current | 17,804 | 16,171 |
| Current portion of long-term debt | 58,896 | 48,851 |
| Total current liabilities | 140,155 | 96,619 |
| Long-term debt | 1,377,159 | 1,200,367 |
| Derivative liabilities | 11,846 | 7,439 |
| Asset retirement obligations | 26,394 | 20,834 |
| Net deferred tax liabilities | 22,523 | 9,930 |
| Other long-term liabilities | 2,059 | 438 |
| Total liabilities | 1,580,136 | 1,335,627 |
| Equity: | ||
| Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 46,525,818 and 35,531,720 shares issued as of June 30, 2014 and December 31, 2013, respectively; 46,522,980 and 35,530,786 shares outstanding as of June 30, 2014 and December 31, 2013, respectively | 465 | 355 |
| Class B common stock, $0.01 par value per share: 20,000,000 shares authorized; 15,555,000 shares issued and outstanding as of June 30, 2014 and December 31, 2013 | 156 | 156 |
| Additional paid-in capital | 752,501 | 489,412 |
| Accumulated loss | (17,026) | (13,336) |
| Accumulated other comprehensive loss | (24,795) | (8,353) |
| Treasury stock, at cost; 2,838 and 934 shares of Class A common stock as of June 30, 2014 and December 31, 2013, respectively | (79) | (24) |
| Total equity before noncontrolling interest | 711,222 | 468,210 |
| Noncontrolling interest | 332,612 | 99,794 |
| Total equity | 1,043,834 | 568,004 |
| Total liabilities and equity | $ 2,623,970 | $ 1,903,631 |
| Pattern Energy Group Inc. | ||||
| Consolidated Statements of Operations | ||||
| (In thousands of U.S. dollars, except per share data) | ||||
| (Unaudited) | ||||
| Three months ended June 30, | Six months ended June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Revenue: | ||||
| Electricity sales | $ 66,053 | $ 47,351 | $ 119,924 | $ 92,583 |
| Energy derivative settlements | 3,983 | 4,809 | 6,718 | 10,217 |
| Unrealized loss on energy derivative | (6,549) | (5,078) | (14,282) | (11,881) |
| Related party revenue | 1,017 | 263 | 1,462 | 263 |
| Other revenue | 503 | 11,367 | 734 | 11,367 |
| Total revenue | 65,007 | 58,712 | 114,556 | 102,549 |
| Cost of revenue: | ||||
| Project expense | 16,700 | 14,492 | 32,774 | 27,469 |
| Depreciation and accretion | 21,284 | 17,998 | 42,461 | 40,564 |
| Total cost of revenue | 37,984 | 32,490 | 75,235 | 68,033 |
| Gross profit | 27,023 | 26,222 | 39,321 | 34,516 |
| Operating expenses: | ||||
| General and administrative | 6,288 | 205 | 10,191 | 349 |
| Related party general and administrative | 1,383 | 2,699 | 2,663 | 5,361 |
| Total operating expenses | 7,671 | 2,904 | 12,854 | 5,710 |
| Operating income | 19,352 | 23,318 | 26,467 | 28,806 |
| Other income (expense): | ||||
| Interest expense | (15,807) | (16,832) | (30,428) | (33,474) |
| Equity in (losses) earnings in unconsolidated investments | (3,688) | 13,368 | (16,236) | 3,343 |
| Interest rate derivative settlements | (1,035) | -- | (2,052) | -- |
| Unrealized (loss) gain on derivatives | (2,942) | 8,202 | (6,665) | 10,133 |
| Related party income | 376 | -- | 1,072 | -- |
| Net gain on transactions | 14,537 | 7,200 | 14,537 | 7,200 |
| Other income, net | 439 | 1,044 | 606 | 1,802 |
| Total other (expense) income | (8,120) | 12,982 | (39,166) | (10,996) |
| Net income (loss) before income tax | 11,232 | 36,300 | (12,699) | 17,810 |
| Tax provision (benefit) | 4,065 | (7,688) | 2,033 | (7,394) |
| Net income (loss) | 7,167 | 43,988 | (14,732) | 25,204 |
| Net loss attributable to noncontrolling interest | (4,032) | (359) | (11,042) | (3,938) |
| Net income (loss) attributable to controlling interest | $ 11,199 | $ 44,347 | $ (3,690) | $ 29,142 |
| Weighted average number of shares: | ||||
| Class A common stock - Basic | 41,174,697 | 38,331,595 | ||
| Class A common stock - Diluted | 57,065,219 | 54,214,953 | ||
| Class B common stock - Basic and diluted | 15,555,000 | 15,555,000 | ||
| Earnings (loss) per share | ||||
| Class A common stock: | ||||
| Basic earnings per share | $ 0.30 | $ 0.13 | ||
| Diluted earnings (loss) per share | $ 0.20 | $ (0.07) | ||
| Class B common stock: | ||||
| Basic and diluted loss per share | $ (0.07) | $ (0.55) | ||
| Cash dividends declared per Class A common share | $ 0.32 | $ 0.63 | ||
| 2013 pro forma information: | ||||
| Unaudited pro forma net income after tax: | ||||
| Net income before income tax | $ 17,810 | |||
| Pro forma tax provision | 674 | |||
| Pro forma net income | $ 17,136 | |||
| Pattern Energy Group Inc. | ||
| Consolidated Statements of Cash Flows | ||
| (In thousands of U.S. dollars) | ||
| (Unaudited) | ||
| Six months ended June 30, | ||
| 2014 | 2013 | |
| Operating activities | ||
| Net (loss) income | $ (14,732) | $ 25,204 |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
| Depreciation and accretion | 42,461 | 40,564 |
| Amortization of financing costs | 2,848 | 4,071 |
| Unrealized loss on derivatives | 20,947 | 1,748 |
| Stock-based compensation | 2,175 | -- |
| Net gain on transactions | (16,526) | (7,200) |
| Deferred taxes | 2,033 | (7,396) |
| Equity in earnings (losses) in unconsolidated investments | 16,236 | (3,343) |
| Changes in operating assets and liabilities: | ||
| Trade receivables | (13,895) | (5,512) |
| Reimbursable interconnection receivable | -- | (904) |
| Prepaid expenses and other current assets | 20,253 | (12,116) |
| Other assets (non-current) | (305) | (234) |
| Accounts payable and other accrued liabilities | 348 | 954 |
| Related party receivable/payable | (1,053) | (283) |
| Income taxes payable/receivable | 128 | -- |
| Accrued interest payable | (11) | 235 |
| Long term liabilities | (85) | 5,869 |
| Net cash provided by operating activities | 60,822 | 41,657 |
| Investing activities | ||
| Receipt of ITC Cash Grant | -- | 173,446 |
| Cash paid for acquisitions, net of cash acquired | (163,589) | -- |
| Proceeds from sale of investments | -- | 14,254 |
| Decrease in restricted cash | 1,316 | 2,893 |
| Increase in restricted cash | (2) | (13,976) |
| Capital expenditures | (544) | (111,062) |
| Deferred development costs | -- | (528) |
| Distribution from unconsolidated investments | -- | 10,463 |
| Contribution to unconsolidated investments | (1,880) | (6,524) |
| Reimbursable interconnection receivable | 1,417 | (6,674) |
| Other assets (non-current) | 1,236 | 1,122 |
| Net cash (used in) provided by investing activities | (162,046) | 63,414 |
| Financing activities | ||
| Proceeds from public offering, net of expenses | $ 287,943 | $ -- |
| Repurchase of shares for employee tax withholding | (55) | -- |
| Dividends paid | (22,170) | -- |
| Capital contributions - Pattern Development | -- | 27,018 |
| Capital distributions - Pattern Development | -- | (92,174) |
| Capital distributions - noncontrolling interest | (1,470) | (1,168) |
| Decrease in restricted cash | 13,508 | 8,763 |
| Increase in restricted cash | (8,840) | (116,654) |
| Payment for deferred financing costs | (542) | (257) |
| Proceeds from revolving credit facility | -- | 56,000 |
| Repayments of short-term debt | (14,840) | -- |
| Proceeds from long-term debt | -- | 117,987 |
| Repayment of long-term debt | (22,096) | (21,815) |
| Repayment of construction and grant loans | -- | (57,470) |
| Net cash provided by (used in) financing activities | 231,438 | (79,770) |
| Effect of exchange rate changes on cash and cash equivalents | 255 | (1,100) |
| Net change in cash and cash equivalents | 130,469 | 24,201 |
| Cash and cash equivalents at beginning of period | 103,569 | 17,574 |
| Cash and cash equivalents at end of period | $ 234,038 | $ 41,775 |
| Supplemental disclosure | ||
| Cash payments for interest and commitment fees | $ 26,963 | $ 29,710 |
| Acquired PP&E for El Arrayán and Panhandle 1 | 671,068 | -- |
| Schedule of non-cash activities | ||
| Change in fair value of interest rate swaps | (20,344) | 35,636 |
| Change in fair value of contingent liabilities | -- | 8,001 |
| Capitalized interest | 1,880 | 858 |
| Capitalized commitment fee | -- | 39 |
| Change in property, plant and equipment | (40,729) | (145,060) |
| Transfer of capitalized assets to South Kent joint venture | -- | 49,275 |
| Non-cash distribution to Pattern Development | -- | (3,283) |