Pattern Energy Reports First Quarter 2019 Financial Results

Press Release

– Declares dividend of $0.4220 per Class A common share for second quarter 2019 –

SAN FRANCISCO, May 10, 2019  — Pattern Energy Group Inc. (the “Company” or “Pattern Energy”) (NASDAQ & TSX: PEGI) today announced its financial results for the 2019 first quarter.

(Figures reported below are for the first quarter of fiscal 2019, unless otherwise noted)

• Proportional gigawatt hours (“GWh”) sold of 2,116 GWh, down 1%
• Net loss of $46 million
• Cash available for distribution (“CAFD”) of $53 million, up 23% and on track to meet full year guidance⁽¹⁾
• Adjusted EBITDA of $98 million, down 6%
• Revenue of $135 million, up 21%
• Declared a second quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter’s dividend
• Increased Pattern Energy’s total capital invested in Pattern Development to $190 million by fulfilling capital calls since January 1, 2019
• Added 400 megawatts (“MW”) of new wind projects to the identified right of first offer (“ROFO”) list, consisting of three projects in New Mexico with contracted sales to purchasers in the California market

“We continue to demonstrate a strong ability to manage the business for the wind variability experienced. We are on track for our 2019 full year guidance target with our effective capital management and growth strategy, despite wind resource levels that were below the long-term average in the Eastern United States,” said Mike Garland, CEO of Pattern Energy. “We are executing our strategy to grow our CAFD per share through 2020 without the requirement to issue new common equity. The actions we are taking are meant to ensure that we can maintain our dividend, drive down our payout ratio and fund the acquisition of identified ROFO projects. We have expanded our identified ROFO list to 1.3 GW with new projects in New Mexico during the quarter. Our investment in Pattern Development remains on track to deliver meaningful growth beyond 2019.”

(1) The forward looking measure of 2019 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net income as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking mark-to-market changes in derivatives and proportionate share of earnings from unconsolidated investments to arrive at net income and which are subtracted therefrom to arrive at CAFD.  A description of the adjustments to determine CAFD can be found within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Metrics, of Pattern Energy’s 2019 Quarterly Report on Form 10-Q for the period ended March 31, 2019.

Financial and Operating Results

Pattern Energy sold 2,115,855 megawatt hours (“MWh”) of electricity on a proportional basis in the first quarter of 2019, compared to 2,135,715 MWh sold in the same period last year. The 1% decrease in the quarterly period was primarily due to volume decreases as a result of divestitures in 2018 and unfavorable wind conditions partially offset by volume increases due to acquisitions in 2018 and less curtailment and congestion in the first quarter of 2019.

Net loss was $46 million in the first quarter of 2019, compared to a net loss of $13 million for the same period last year. The increase of $33 million in net loss in the quarterly period was primarily attributable to a $24 million increase in net loss at the operating business segment, mainly due to losses at existing projects, divestitures in 2018, derivative losses and a $10 million increase in the share of net loss at the development investment segment, which included impairment expense and increased cost of development including legal, professional and related party administrative expense.

Adjusted EBITDA decreased 6% to $98 million for the first quarter of 2019, compared to $104 million for the same period last year. The $6 million decrease in the quarterly period was primarily due to decreases of $13 million due to divestitures in 2018 and $10 million due to losses at our development investment segment. These decreases in Adjusted EBITDA were partially offset by increases of $16 million from new projects acquired in 2018 and $2 million from projects fully operational in both periods.

Cash available for distribution increased 23% to $53 million for the first quarter of 2019, compared to $43 million for the same period last year. The $10 million increase in the quarterly period was primarily due to increases of $9 million from projects fully operational in both periods and $7 million from new projects acquired in 2018, partially offset by a decrease of $6 million due to divestitures in 2018.

2019 Financial Guidance

Pattern Energy is re-confirming its targeted annual cash available for distribution⁽¹⁾ for 2019 within a range of $160 million to $190 million. For the full year 2020, Pattern Energy expects annual cash available for distribution⁽¹⁾ in a range of $185 million to $225 million.

(1) The forward looking measures of 2019 and 2020 full year cash available for distribution (CAFD) are non-GAAP measures that cannot be reconciled to net income as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking mark-to-market changes in derivatives and proportionate share of earnings from unconsolidated investments to arrive at net income and which are subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Metrics, of Pattern Energy’s 2019 Quarterly Report on Form 10-Q for the period ended March 31, 2019.

Quarterly Dividend

Pattern Energy declared a dividend for the second quarter 2019, payable on July 31, 2019, to holders of record on June 28, 2019 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the second quarter 2019 dividend is unchanged from the first quarter 2019 dividend.

Acquisition Pipeline

Pattern Development (formerly referred to as Pattern Energy Group 2 LP or Pattern Development 2.0) and Pattern Energy Group LP (formerly referred to as Pattern Development 1.0) have a pipeline of development projects totaling more than 10 gigawatts (“GW”). Pattern Energy has a ROFO on the pipeline of acquisition opportunities from these two companies. The identified ROFO list stands at 1.3 GW of total capacity and represents a portion of the pipeline of development projects, which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, more than 1.6 GW from Pattern Energy Group LP and Pattern Development and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

Pattern Energy has removed the 80 MW Crazy Mountain Wind project, located in Sweet Grass County, Montana, from its identified ROFO list due to the likelihood that the project will not continue as a result of a court order which has currently halted further development at the project.

Below is a summary of the identified ROFO projects that Pattern Energy has the right to purchase from Pattern Development and Pattern Energy Group LP in connection with its respective purchase rights:

												Capacity (MW)
Identified ROFO Projects		Status		Location		Construction Start (1)		Commercial Operations (2)		Contract Type		Rated (3)		Pattern Development Companies Owned (4)
Pattern Energy Group LP
Belle River		Operational		Ontario		2016		2017		PPA		100		43
North Kent		Operational		Ontario		2017		2018		PPA		100		35
Henvey Inlet		In construction		Ontario		2017		2019		PPA		300		150
Pattern Development
Grady		In construction		New Mexico		2018		2019		PPA		220		188
Sumita		Late stage development		Japan		2020		2022		PPA		100		55
Ishikari		Late stage development		Japan		2020		2022		PPA		112		112
Corona Wind Project(s)		Late stage development		New Mexico		2020		2021		PPA		400		340
												1,332		923

Pattern Energy Group Inc. Consolidated Statements of Operations (In millions of U.S. dollars, except share data) (Unaudited)
	Three months ended March 31,
	2019				2018
Revenue:
Electricity sales	$	123			$	102
Other revenue	12				10
Total revenue	135				112
Cost of revenue:
Project expense	40				35
Transmission costs	6				7
Depreciation, amortization and accretion	83				55
Total cost of revenue	129				97
Gross profit	6				15
Operating expenses:
General and administrative	11				11
Related party general and administrative	4				4
Total operating expenses	15				15
Operating income (loss)	(9)				—
Other income (expense):
Interest expense	(26)				(25)
Gain on derivatives	1				6
Earnings (loss) in unconsolidated investments, net	(6)				18
Net loss on transactions	—				(1)
Other expense, net	(2)				(4)
Total other expense	(33)				(6)
Net loss before income tax	(42)				(6)
Income tax provision	4				7
Net loss	(46)				(13)
Net loss attributable to noncontrolling interest	(16)				(149)
Net income (loss) attributable to Pattern Energy	$	(30)			$	136
Weighted-average number of common shares outstanding
Basic	97,568,427				97,428,388
Diluted	97,568,427				105,564,491
Net income (loss) per share attributable to Pattern Energy
Basic	$	(0.31)			$	1.39
Diluted	$	(0.31)			$	1.32

Read More: https://investors.patternenergy.com/news-releases/news-release-details/pattern-energy-reports-first-quarter-2019-financial-results

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