Mr. Mike Garland reports
PATTERN ENERGY INCREASES ANNUAL CAFD PER SHARE GROWTH TARGET TO 12-15%; AGREES TO ACQUIRE THREE WIND FACILITIES, ADDING 360MW OR 22% TO OWNED CAPACITY
Pattern Energy Group Inc. has increased its growth target for cash available for distribution per share to a compound annual growth rate of 12 to 15 per cent for the next three years. Pattern Energy also today announced it has entered into definitive agreements to acquire three wind power facilities for a total combined equity purchase price of $372-million together with the assumption of $320-million in net debt and certain tax equity non-controlling interests.
- Company increases CAFD per share growth target to a 12-to-15-per-cent CAGR for the next three years;
- Agrees to acquire three wind facilities, adding 360 megawatts -- an increase of 22 per cent -- in owned capacity;
- The three facilities have long-term power sale contracts and best-in-class turbines;
- Acquisitions are immediately accretive, at attractive acquisition metrics of 11-to-12-times purchase price multiple on run-rate CAFD and 10-to-11-times total acquisition price multiple on run-rate adjusted earnings before interest, taxes, depreciation and amortization;
- Acquisitions to be financed with available cash and revolving credit facilities;
- Company provides update on first-quarter 2015 wind production, which is below the long-term average.
Increased growth target
Pattern Energy has entered into agreements with Wind Capital Group LLC to acquire two operational wind power facilities. The company has also agreed to acquire the K2 Wind facility from Pattern Energy Group LP. Upon closing, the acquisition of these three wind power facilities will add 360 megawatts of owned capacity to Pattern Energy's portfolio -- an increase of 22 per cent -- growing the portfolio to 15 wind power facilities with a total owned interest of 1,996 megawatts. The acquisitions expand Pattern Energy's operations into two new U.S. states, Kansas and Missouri, and increase the company's presence in Ontario.
"We are increasing our CAFD per share growth target to 12 to 15 per cent due to several key factors that give us added confidence in achieving or exceeding our growth objectives, including today's three acquisitions, advancement of our nearly 1,000 megawatts in identified ROFO projects and the expansion of our development pipeline, including visibility to more than 500 megawatts of projects that will be ready to be added to the identified ROFO list over the next 12 months," said Mike Garland, president and chief executive officer of Pattern Energy. "Growing our portfolio with three high-quality, fully contracted power facilities immediately increases our cash flow, adds important scale to our growing portfolio and provides us with a strong platform to achieve strategic and corporate finance objectives. The Wind Capital Group transaction demonstrates our ability to seek out accretive third party acquisitions of assets that are highly complementary to our fleet. The K2 Wind acquisition is another example of the deep value in our robust pipeline of projects from Pattern Development, which totals approximately 4,500 megawatts of potential future acquisitions."
Pattern Energy's list of identified ROFO projects with Pattern Development will be 887 megawatts after the completion of the purchase of K2 Wind. Pattern Development has recently significantly expanded its development pipeline to more than 4,500 megawatts, up from 3,000 megawatts. From the 4,500-megawatt pipeline, Pattern Energy anticipates adding significant new projects to the identified ROFO list in the coming year. Since its IPO, Pattern Energy has purchased 640 megawatts from Pattern Development.
Pattern Energy has entered into definitive agreements to acquire three wind power facilities for a total combined purchase price of $372-million together with the assumption of $320-million in net debt and certain tax equity non-controlling interests. The purchase price will be financed with available cash and Pattern Energy's revolving credit facility and represents an 11-to-12-times multiple on run-rate CAFD contribution from the facilities.
Post Rock wind and Lost Creek wind
Pattern Energy has entered into agreements with WCG to acquire two operational wind power facilities totalling 350 megawatts from WCG and its affiliates for a purchase price of $244-million plus assumed net debt of $102-million. The acquisition includes ownership interests in the 200-megawatt Post Rock wind facility in Kansas, which uses 134 1.5-megawatt GE turbines and the 150-megawatt Lost Creek wind facility in Missouri which uses 100 1.5-megawatt GE turbines. Pattern Energy expects to acquire a total combined owned interest of 270 megawatts in these two facilities.
Post Rock wind and Lost Creek wind, which have been operational for an average of approximately three years, are fully contracted under power purchase agreements with highly credit-worthy counterparties. The Post Rock wind facility in Kansas has a long-term contract with Westar, which has a BBB plus credit rating. The Lost Creek wind facility in Missouri has a long-term contract with Associated Electric Cooperative Inc., which has an AA credit rating. The average remaining life of the contracts is 17 years.
The WCG transactions are expected to close within 60 to 90 days, subject to receipt of certain regulatory approvals and satisfaction or waiver of other customary conditions.
Pattern Energy also entered into an agreement to acquire an owned interest of 90 megawatts in the K2 wind power facility from Pattern Development for a purchase price of $128-million plus assumed estimated proportionate debt at term conversion of $218-million U.S. dollar equivalent. Pattern Energy will hold a 33-per-cent equity interest in the facility, which is equally co-owned by Samsung Renewable Energy Inc. and Capital Power LP. K2 wind, a 270-megawatt project located in Ontario, is expected to reach commercial operation in the second quarter of 2015. The facility has a 20-year power purchase agreement with the Independent Electricity System Operator and uses 140 2.3-megawatt Siemens turbines, the same turbines used at Pattern Energy's operating facilities in Ontario.
The conflicts committee of the board of directors of Pattern Energy, which entirely comprises independent directors, reviewed and recommended the terms of the K2 wind acquisition to the board. The committee was advised on financial matters by Evercore Group LLC, which also provided fairness opinion, and on legal matters by Davis Polk & Wardwell LLP.
According to Vaisala, a globally recognized environmental measurement company with meteorological expertise, average wind conditions across the western United States and Texas were 20 per cent or more below normal for the first quarter of 2015. The low production is primarily the result of unusual weather conditions brought on by particular features of the current El Nino weather pattern over the Pacific Ocean. Meteorologists also attribute the abnormal wind conditions to the above average winter temperatures in these areas partly caused by the El Nino weather. Vaisala stated that the observed weather pattern is nothing unusual or outside of the range of the expected after their review of long-term global datasets.
Consistent with Vaisala's observations, Pattern Energy's first-quarter 2015 production at its wind power facilities in the western United States and Texas have been adversely affected by the El Nino weather, resulting in a reduction in expected production of approximately 5 per cent of the company's total annual expected production.
We seek Safe Harbor.
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