Mr. Mike Garland reports
PATTERN ENERGY REPORTS FOURTH QUARTER AND FULL YEAR 2014 FINANCIAL RESULTS- DECLARES INCREASED DIVIDEND OF $0.342 PER CLASS A COMMON SHARE FOR FIRST QUARTER 2015 -- EXPANDS OWNED CAPACITY TO 1,636 MW AND IDENTIFIED ROFO LIST TO 977 MW
Pattern Energy Group Inc. has released its financial results for the fourth quarter and full year of 2014.
Highlights (comparisons made between fiscal 2014 and fiscal 2013 results, unless otherwise noted):
- Cash available for distribution of $62.1-million, up 46 per cent;
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $198.1-million, up 40 per cent;
- Proportional gigawatt-hours sold of 2,915 gigawatt-hours, up 65 per cent;
- Revenue of $265.5-million, up 32 per cent;
- Declared a first quarter dividend of 34.2 cents per Class A common share or $1.368 on an annualized basis, subsequent to the end of the period, representing a 2-per-cent increase over the previous quarter's dividend;
- Acquired Panhandle 2 and Logan's Gap from Pattern Development, expanding its portfolio to 1,636 megawatts in owned capacity and 12 wind projects;
- Initiated commercial operations at two projects: Panhandle 2, with an owned capacity of 147 megawatts, and Grand Renewable, with an owned capacity of 67 megawatts;
- Added three new projects to the identified right of first offer list for a total of 977 megawatts of owned capacity: Henvey Inlet and, subsequent to the end of the period, Amazon Web Services wind farm (Fowler Ridge) and Mont Sainte-Margueritel;
- Pattern Development acquired a majority stake in Tokyo-based Green Power Investment Corp., subsequent to the end of the period, which has more than 1,000 megawatts in near- and longer-term wind and solar projects in development and Pattern Development's interest in GPI's projects is subject to Pattern Energy's ROFO;
- Pattern Development signed a joint venture agreement with CEMEX Energia, a subsidiary of CEMX SAB, subsequent to the end of the period, to develop renewable energy projects throughout Mexico and Pattern Development's interest in the joint venture's projects is subject to Pattern Energy's ROFO;
- Completed a $351-million follow-on primary and secondary equity offering, subsequent to the end of the period.
"The $62.1-million in cash available for distribution we reported for 2014 exceeds the target we outlined during the IPO. This positive momentum reflects the continuous growth we have demonstrated in our portfolio, which now stands at 1,636 megawatts in owned capacity -- up 57 per cent since the IPO -- as well as in our identified ROFO list, which has grown by 781 MW in owned capacity -- an increase of 105 per cent since the IPO," said Mike Garland, president and chief executive officer of Pattern Energy. "At the same time, Pattern Development is also expanding our reach by entering new markets, like Japan and Mexico through its relationships with GPI and CEMEX, and contracting with new power buyers, like Walmart and Amazon. Our high-quality operating portfolio and the clear path for growth from our ROFO list underpin our stable and growing cash flow."
Financial results
Pattern Energy sold 888,577 megawatt-hours of electricity on a proportional basis in the fourth quarter of 2014 compared with 440,623 megawatt-hours sold in the same period in 2013. Pattern Energy sold 2,914,810 megawatt-hours of electricity on a proportional basis for the full year 2014 compared with 1,771,772 megawatt-hours sold in 2013. The increases were primarily attributable to the commencement of commercial operations at South Kent, El Arrayan, Panhandle 1 and Panhandle 2 at various times during the year and the 12-month figure also reflects an increase in production from an additional 42 megawatts at Ocotillo for the full year of 2014.
Net loss was $16.0-million in the fourth quarter of 2014 compared with $19.4-million in the same period last year. Net loss was $40.0-million for the full year 2014 compared with net income of $10.1-million in 2013. The change in the full-year results was due primarily to unrealized losses on interest rate and energy derivatives (including the company's proportion of the unrealized losses at its unconsolidated investments) which increased by $54.1-million for the year.
Adjusted EBITDA was $57.7-million for the fourth quarter of 2014 compared with $29.4-million in the same period last year. Adjusted EBITDA was $198.1-million for the full year 2014 compared with $141.8-million in 2013.
Cash available for distribution was $17.3-million in the fourth quarter of 2014 compared with $5.6-million in the same period last year. Cash available for distribution was $62.1-million for the full year 2014 compared with $42.6-million in 2013. The $11.7-million and $19.5-million increases, in the respective periods, were primarily the result of higher revenue primarily attributable to the commencement of commercial operations at both the El Arrayan and Panhandle 1 projects in June, 2014, and a distribution from unconsolidated investments, as well as, increased production at Ocotillo which impacted the full-year period.
Quarterly dividend
Pattern Energy declared an increased dividend for the first quarter 2015, payable on April 30, 2015, to holders of record on March 31, 2015, in the amount of 34.2 cents per Class A share, which represents $1.368 on an annualized basis. This is a 2-per-cent increase from the fourth quarter 2014 dividend of 33.5 cents.
Construction pipeline
Two projects completed construction and reached their commercial operation date on schedule during the fourth quarter of 2014. Pattern Energy acquired 147 megawatts of the 182-megawatt Panhandle 2 project at the time of commercial operation in November as agreed upon with Pattern Development. Pattern Energy also owns a 67-megawatt interest in the 149-megawatt Grand Renewable project which reached commercial operation in December. Pattern Energy currently has one project in construction.
PROJECT IN CONSTRUCTION
Asset Location Owned MW Commercial operation
Logan's Gap Texas 164 Q4 2015
Acquisition pipeline
Pattern Energy has the right of first offer on a pipeline of acquisition opportunities from Pattern Development. In addition, Pattern Energy may seek to acquire assets from third parties.
Since the beginning of the fourth quarter, Pattern Energy announced the addition of three new projects to its list of identified ROFO projects from Pattern Development, consisting of 150 megawatts of the 300-megawatt Henvey Inlet wind project in November, 116 megawatts of the 150-megawatt Amazon Web Services wind project (Fowler Ridge) in January and the 147-megawatt Mont Sainte Marguerite wind project in February. With these new additions, the identified ROFO list now consists of nine projects with a rated capacity of 1,719 megawatts and a total owned capacity of 977 megawatts.
The Henvey Inlet wind project, to be built in Parry Sound county, Ontario, is a 50/50 joint venture partnership between Pattern Development and Nigig Power Corp., which is wholly owned by Henvey Inlet First Nation. The project has a 20-year power purchase agreement with the Independent Electricity System Operator, formerly known as Ontario Power Authority, for 100 per cent of its expected production. Pattern Development expects to arrange both construction and long-term debt financing for Henvey Inlet in 2016. Upon completion, it will be the largest first nation wind project in Ontario.
The Amazon Web Services wind farm (Fowler Ridge), which is located in Benton county, Indiana, has a 13-year PPA to supply Amazon Web Services, an Amazon company, with electricity. Pattern Development currently owns 100 per cent of the 150-megawatt project and it is anticipated that Pattern Energy will acquire 116 megawatts of owned interest, with tax equity investors acquiring the balance. Pattern Development expects to begin construction of the Amazon Web Services wind farm (Fowler Ridge) project in April and anticipates reaching commercial operation in late 2015 or early 2016.
The Mont Sainte-Marguerite wind project, which is located approximately 50 kilometres south of Quebec City in the Chaudiere-Appalaches region, has entered into a 25-year power PPA with Hydro-Quebec. Pattern Development currently owns 100 per cent of the 147-megawatt project and it is anticipated that Pattern Energy will acquire the full owned interest in the project. Pattern Development expects to begin construction of the project in the third quarter of 2016 and anticipates reaching commercial operation in December, 2017.
The list of identified ROFO projects represents a portion of Pattern Development's 4,500-megawatt pipeline of development projects, all of which are subject to Pattern Energy's ROFO. The 4,500 megawatts include Pattern Development's interests in both its recently acquired majority stake in Tokyo-based GPI and its recently announced joint venture with CEMEX Energia in Mexico. GPI has up to 1,000 megawatts of near- and longer-term wind and solar projects in development. The joint venture between Pattern Development and CEMEX Energia has a goal of developing 1,000 megawatts of wind and solar generation in Mexico over the next five years where recent reforms set a mandate of 35 per cent of generation to come from clean resources by 2024.
CURRENT LIST OF IDENTIFIED ROFO PROJECTS
Asset Location Owned MW Commercial operations
Gulf Wind Texas 76 Operational
K2 Ontario 90 2015 (in construction)
Armow Ontario 90 2015 (in construction)
Meikle British Columbia 185 2016 (ready for financing)
Conejo Solar Chile 73 2016 (ready for financing)
Belle River Ontario 50 2017 (securing final permits)
Henvey Inlet Ontario 150 2017 (late-stage development)
Amazon (Fowler Ridge) Indiana 116 2015/2016 (ready for financing)
Mont Sainte-Marguerite Quebec 147 2017/2018 (late-stage development)
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Total 977
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 Monday, March 2, 2015. Mr. Garland and Mike Lyon, chief financial officer, will co-chair the call. Participants should call 416-260-0113 or 800-524-8950 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial 647-436-0148 or 888-203-1112 and enter access code 7127191. The replay recording will be available until 11:59 p.m. Eastern Time, March 9, 2015.
A live webcast of the conference call will be also available on the events page in the investor section of Pattern's website. An archived webcast will be available for one year.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of U.S. dollars, except per share data)
Three months ended Year ended
Dec. 31, Dec. 31,
2014 2013 2014 2013
Revenue
Electricity sales $ 60,847 $ 42,737 $245,022 $173,270
Energy derivative settlements 4,216 3,925 13,525 16,798
Unrealized gain (loss) on energy derivative 7,265 (6,050) (3,878) (11,272)
Related-party revenue 987 446 3,317 911
Other revenue 6,103 709 7,507 21,866
--------- --------- ---------- ---------
Total revenue 79,418 41,767 265,493 201,573
Cost of revenue
Project expense 21,166 15,616 77,775 57,677
Depreciation and accretion 31,941 21,422 104,417 83,180
--------- --------- ---------- ---------
Total cost of revenue 53,107 37,038 182,192 140,857
--------- --------- ---------- ---------
Gross profit 26,311 4,729 83,301 60,716
Operating expenses
General and administrative 6,570 4,256 22,533 4,819
Related-party general and administrative 1,632 (799) 5,787 8,169
--------- --------- ---------- ---------
Total operating expenses 8,202 3,457 28,320 12,988
--------- --------- ---------- ---------
Operating income 18,109 1,272 54,981 47,728
Other income (expense)
Interest expense (19,267) (15,445) (67,694) (63,614)
Interest rate derivative settlements (993) (1,040) (4,075) (2,099)
Unrealized (loss) gain on derivatives (5,069) 4,692 (11,668) 15,601
Equity in (losses) earnings in unconsolidated investments (4,057) 2,658 (25,295) 7,846
Related-party income 876 665 2,612 665
Net (loss) gain on transactions (626) (1,205) 13,843 5,995
Other (expense) income, net (318) 373 433 2,496
--------- --------- ---------- ---------
Total other expense 29,454) (9,302) (91,844) (33,110)
--------- --------- ---------- ---------
Net (loss) income before income tax (11,345) (8,030) (36,863) 14,618
Tax provision 4,641 11,346 3,136 4,546
--------- --------- ---------- ---------
Net (loss) income $(15,986) $(19,376) $ (39,999) $ 10,072
========= ========= ========== =========
Net income (loss) attributable to non-controlling interest 4,406 (6,197) (8,709) (6,887)
Net (loss) income attributable to controlling interest (20,392) (13,179) (31,290) 16,959
Less: net income attributable to controlling interest prior
to the IPO on Oct. 2, 2013 (157) (30,295)
Net (loss) attributable to controlling interest subsequent
to the IPO (13,336) (13,336)
Cash dividends declared on Class A common shares (15,581) (11,103) (56,976) (11,103)
Deemed dividends on Class B common shares (7,222) - (21,901) -
--------- --------- ---------- ---------
Net (loss) attributable to common stockholders (43,195) (24,439) (110,167) (24,439)
Earnings (loss) per share
Class A common stock
Basic and diluted (loss) per share $ (0.36) $ (0.17) $ (0.56) $ (0.17)
Class B common stock
Basic and diluted (loss) per share (0.23) (0.48) (0.49) (0.48)
Cash dividends declared per Class A common share 0.34 0.31 1.30 0.31
Deemed dividends per Class B common share 0.46 - 1.41 -
We seek Safe Harbor.
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