Pattern Energy Reports Third Quarter 2017 Financial Results

- Increases dividend to $0.422 per Class A common share for Q4 2017 -

SAN FRANCISCO, Nov. 9, 2017 /CNW/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (NASDAQ & TSX: PEGI) today announced its financial results for the 2017 third quarter.

Highlights

(Figures reported below are for the third quarter of fiscal 2017, unless otherwise noted)

• Proportional gigawatt hours ("GWh") sold of 1,514 GWh
• Net cash provided by operating activities of $2.1 million
• Cash available for distribution ("CAFD") of $9.5 million, and on track to meet the narrowed full year guidance⁽¹⁾
• Net loss of $48.4 million
• Adjusted EBITDA of $54.7 million
• Revenue of $92.0 million
• Declared a fourth quarter dividend of $0.422 per Class A common share or $1.69 on an annualized basis, subsequent to the end of the period, representing a 0.5% increase over the previous quarter's dividend
• Completed the acquisition of a 51% interest in the 179 MW Meikle Wind facility from Pattern Energy Group LP ("Pattern Development 1.0")⁽²⁾ for a total investment of approximately $68 million
• Announced the addition of the 100 megawatt ("MW") Ishikari wind project in Japan to the Company's identified ROFO ("right of first offer") list, and as such the identified ROFO list now totals 1,150 MW of potential owned capacity
• Completed an equity offering of approximately $215 million in gross proceeds, subsequent to the end of the period

"The strategic transactions we announced earlier this year together with the new capital we raised last month represent the beginning of the next phase of our growth strategy," said Mike Garland, President and CEO of Pattern Energy. "With the steps we have taken this year, the business is significantly stronger today. We have a clear opportunity to capitalize on the assets from the identified ROFO list and our investment in Pattern Development 2.0. The expansion of the identified ROFO list demonstrates the progress we are making toward achieving our goal of 5 gigawatts ("GW") by 2020."

Financial and Operating Results

Pattern Energy sold 1,513,997 megawatt hours ("MWh") of electricity on a proportional basis in the third quarter of 2017 compared to 1,472,300 MWh sold in the same period last year. Pattern Energy sold 5,663,782 MWh of electricity on a proportional basis for the nine months ended September 30, 2017 (YTD 2017) compared to 4,988,621 MWh sold in the same period last year. The 3% increase in the quarterly period was primarily attributable to the acquisition of new projects, specifically Armow in the fourth quarter of 2016, Broadview in the second quarter 2017 and Meikle in the third quarter of 2017, offset by unfavorable wind conditions as previously announced in the press release dated September 29, 2017. Production for the quarter was 15% below the long-term average forecast for the period.

Net cash provided by operating activities was $2.1 million for the third quarter of 2017 compared to $37.4 million for the same period last year. Net cash provided by operating activities was $159.3 million for YTD 2017 compared to $107.4 million for the same period last year. The change in the quarterly period was primarily due to increases of $21.6 million in cash payments for accounts payable and accrued liabilities due to timing of payments, $13.8 million in interest payments due to the issuance of the Unsecured Senior Notes in January 2017 and debt associated with the acquisitions in 2017, $7.3 million in transmission costs and $2.7 million in project expenses, as well as a decrease of $4.7 million in cash receipts due to timing of collections from trade receivables. These changes to net cash from operating activities were partially offset by a $11.4 million increase in distributions from unconsolidated investments and by a $2.6 million increase in revenues (excluding unrealized loss on energy derivative and amortization of PPAs).

Cash available for distribution was $9.5 million for the third quarter of 2017, which is above the midpoint of the guidance provided in the Company's press release dated September 29, 2017, compared to $20.2 million for the same period last year. Cash available for distribution was $103.8 million for YTD 2017 compared to $96.7 million for the same period in the prior year. The $10.7 million change in the quarterly period was primarily due to increases of $7.3 million in interest expense from the issuance of the Unsecured Senior Notes in January 2017 and debt associated with the acquisitions in 2017, $7.3 million in transmission costs, $2.7 million in project expenses and $1.0 million in distributions to noncontrolling interests. The change was partially offset by increases of $5.9 million in total distributions from unconsolidated investments, $2.6 million in revenues (excluding unrealized loss on energy derivative and amortization of PPAs), $0.3 million network upgrade reimbursement related to Broadview, as well as a decrease of $0.5 million in operating expense.

Net loss was $48.4 million in the third quarter of 2017, compared to $11.1 million for the same period last year. Net loss was $60.5 million for YTD 2017 compared to $55.7 million in the same period last year. The change in the quarterly period was primarily attributable to increases of $18.7 million in cost of revenues due to the acquisitions in 2017 and $24.4 million in other expense related to a decrease in earnings in unconsolidated investments, net of increases to interest expense, loss on undesignated derivatives and realized loss on designated derivatives. The impact of these items was partially offset by an increase in tax benefit of $5.2 million.

Adjusted EBITDA was $54.7 million for the third quarter of 2017 compared to $62.3 million for the same period last year. Adjusted EBITDA was $244.8 million for YTD 2017 compared to $219.0 million for the same period last year. The $7.6 million change in the quarterly period was primarily due to increases of $7.3 million in transmission costs and $2.7 million in project expense, and a decrease of $0.7 million in the proportionate share of Adjusted EBITDA from unconsolidated investments. These changes were partially offset by a $2.6 million increase in revenues (excluding unrealized loss on energy derivative and amortization of PPAs) and a $0.5 million decrease in operating expense.

Fourth Quarter Wind Conditions

Based on conditions to date in the fourth quarter of 2017, wind levels for the fourth quarter are in line with the long-term average forecast, which represents a substantial improvement from the wind levels in the first two months of the third quarter.

2017 Financial Guidance

Pattern Energy is narrowing its targeted annual cash available for distribution for 2017 to a range of $145 million to $160 million. The new range maintains the midpoint of the original range and that midpoint represents an increase of 15% compared to cash available for distribution in 2016. The range assumes long-term average proportionate production of the fleet for the remainder of 2017 and takes into account a potential adverse impact of any extended electric grid outage in Puerto Rico during the fourth quarter of 2017. As noted above, forward-looking cash available for distribution is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort for the reasons stated above.

Quarterly Dividend

Pattern Energy declared an increased dividend for the fourth quarter 2017, payable on January 31, 2018, to holders of record on December 29, 2017 in the amount of $0.422 per Class A common share, which represents $1.69 on an annualized basis. This is a 0.5% increase from the third quarter 2017 dividend of $0.42.

Operations Update

The completed evaluation of the 101 MW Santa Isabel project in Puerto Rico reported no material damage to the turbines or the project. While all of the turbines are operational, at present Santa Isabel has not been reconnected to the high voltage grid and the timing of when the project will be reconnected is not certain. Pattern Energy is working with the Puerto Rico Electric Power Authority ("PREPA"), the offtaker for the Santa Isabel project, to support PREPA's broader efforts to restore the high voltage grid so the project can help support providing much needed power to the Puerto Rican communities.

Project Acquisition

During the third quarter, Pattern Energy acquired a 91 MW owned interest in the 179 MW Meikle project, with PSP Investments acquiring the remaining 88 MW interest. The Meikle project, located in the Peace River Regional District of British Columbia, commenced commercial operations in the first quarter of 2017 and operates under a 25-year power purchase agreement with BC Hydro, which has a AAA/Aaa2 credit rating.

Pattern Energy acquired its 51% interest in Meikle for a total investment of approximately $68 million⁽¹⁾, paid at closing, which represents a CAFD multiple of 10x of the project's five-year average CAFD⁽²⁾.

Construction Pipeline

Pattern Energy has agreed to acquire a 51% interest in the 143 MW Mont Sainte-Marguerite project, located in the Chaudière-Appalaches region south of Québec City. The project is currently in the final stages of construction and commissioning and is expected to commence commercial operations in late 2017. The project will operate under a 25-year power purchase agreement with Hydro-Québec, which has a AA-/Aa2 credit rating.

Pattern Energy will acquire its 51% interest in Mont Sainte-Marguerite for a total investment of approximately $40 million⁽³⁾, which represents a CAFD multiple of 10x of the five-year average CAFD⁽²⁾. The acquisition is expected to close during the first quarter of 2018, following the commencement of commercial operations and subject to customary closing conditions. It will be funded at the time of closing using available liquidity.

Acquisition Pipeline

Pattern Development's pipeline of development projects totals more than 10 GW. Pattern Energy has a ROFO on a pipeline of acquisition opportunities from Pattern Development. The identified ROFO list stands at 1,150 MW of potential owned capacity and represents a portion of the Pattern Development pipeline of development projects, all of which are subject to Pattern Energy's ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,358 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

Below is a summary of the identified ROFO projects that Pattern Energy expects to acquire from Pattern Development in connection with Pattern Energy's project purchase rights:

Cash Available for Distribution and Adjusted EBITDA Non-GAAP Reconciliations

The following tables reconcile non-GAAP net cash provided by operating activities to cash available for distribution and net income (loss) to Adjusted EBITDA, respectively, for the periods presented (in thousands):

Conference Call and Webcast

Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time, today, November 9, 2017. 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 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 8787979. The replay recording will be available until 11:59 p.m. Eastern Time, November 30, 2017.

A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy'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 Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 20 wind power facilities, including one project it has agreed to acquire, with a total owned interest of 2,736 MW in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power facilities 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 ability to achieve the 2017 cash available for distribution target; achieve the five year average annual CAFD generated by Meikle and Mont Sainte-Marguerite; achieve the next phase of its growth strategy; capitalize on the assets from the iROFO list and investment in Pattern Development 2.0; achieve its target of 5 GW by 2020; the outcome of wind conditions in the fourth quarter; the timing for the Santa Isabel project to be reconnected to the high voltage grid or for PREPA to restore the high voltage grid in Puerto Rico; the timing of the consummation of the acquisition of Mont Sainte-Marguerite; and the ability of the Company to consummate additional acquisitions from the iROFO list. 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 Company's annual report on Form 10-K and any quarterly reports on Form 10-Q. 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.

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SOURCE Pattern Energy Group Inc.