Pattern Energy Posts Financial Results for 2016

Pattern Energy Group (NASDAQ:PEGI) presented their financial results for the fourth quarter of 2016 and the whole year.
As quoted in the press release:

Highlights
(Comparisons made between fiscal 2016 and fiscal 2015 results, unless otherwise noted)

• Proportional GWh sold of 6,806 GWh, up 33%
• Net cash provided by operating activities of $164 million, up 39%
• Cash available for distribution (CAFD) of $133.0 million, up 44%
• Net loss of $52.3 million, an improvement of 6%
• Adjusted EBITDA of $304.2 million, up 21%
• Revenue of $354.1 million, up 7%
• Declared a first quarter dividend of $0.41375 per Class A common share or $1.655 on an annualized basis, subsequent to the end of the period, representing a 1.4% increase over the previous quarter’s dividend and the twelfth consecutive dividend increase
• Increased owned capacity by 16% to 2,644 MW during 2016 with the acquisition of a 90 MW owned interest in the Armow project and an agreement to acquire a 272 MW owned interest in the Broadview projects, including the associated interconnect transmission line
• Reported construction progress is on schedule at Broadview and the commencement of commercial operations is expected in April 2017, at which time Pattern Energy has agreed to acquire its owned interest
• Completed a $350 million senior notes offering at 5.875% which matures in 2024, subsequent to the end of the period

“We delivered 44 percent growth in our cash available for distribution in 2016 which is approximately the midpoint of our guidance range. Our high-quality portfolio of 18 assets continues to supply stable cash flows. The outlook for renewables has never been stronger as technology improvements continue to drive the delivered cost of power lower. Lower technology costs and our proven ability to develop new investment opportunities position us to continue to achieve high growth rates for the next several years and beyond,” said Mike Garland, President and CEO of Pattern Energy. “In order to deliver on this potential, in September we launched an internal initiative called Pattern 2020 that outlined our vision for the business through 2020. The Pattern 2020 vision has three goals: 1) to make Pattern the best place to work in the industry; 2) to double the size of our portfolio; and 3) to continue to be a top competitor, which will include aggressively lowering our costs through operational initiatives, improved systems and automation and other actions. It’s a vision that brings focus throughout the whole organization as we execute our day-to-day work to deliver safe, reliable, low cost renewable energy to communities.”
Financial Results
Pattern Energy sold 1,817,651 MWh of electricity on a proportional basis in the fourth quarter of 2016 compared to 1,714,884 MWh sold for the same period in 2015. Pattern Energy sold 6,806,272 MWh of electricity on a proportional basis for the year ended December 31, 2016 (the “full year 2016”), compared to 5,136,675 MWh sold in 2015. The increase for the quarterly period is primarily due to the commencement of commercial operations of Amazon Wind Farm Fowler Ridge in December 2015 and the acquisition of Armow in the fourth quarter of 2016. Overall, production was modestly below the Company’s expectation for the fourth quarter compared to its long-term forecast. The increase in proportional MWh sold for the annual period was primarily attributable to a 1,425,038 MWh increase in volume from controlling interest in consolidated MWh and a 244,559 MWh increase in volume from unconsolidated investments due to the acquisitions of Armow in October 2016 and K2 in June 2015.
Net cash provided by operating activities was $56.3 million for the fourth quarter of 2016 compared to $32.4 million for the same period in 2015. The change quarter over quarter is primarily due to increases in working capital of $13.5 million, increased distributions from unconsolidated investments of $14.6 million and decreased cash payments for interest of $2.9 million. These increases were partially offset by decreases in revenues of $4.1 million (excluding unrealized loss on energy derivative and amortization of PPAs) primarily due to decreases in MWh sold and increases in operating expenses of $2.2 million.
Net cash provided by operating activities was $163.7 million for the full year 2016 compared to $117.8 million in 2015, an increase of $45.8 million, or approximately 38.9%. The increase was primarily due to higher revenues of $47.3 million (excluding unrealized loss on energy derivative and amortization of PPAs) from projects which were acquired since May 2015 or which commenced commercial operations since September 2015, increased distributions from unconsolidated investments of $15.0 million, increased working capital of $4.1 million, a decrease in transaction costs of $3.1 million, and a $2.4 million increase in related party income. These increases were partially offset by increased project expenses of $14.2 million and operating expenses of $13.1 million.
Cash available for distribution was $36.2 million in the fourth quarter of 2016 compared to $32.9 million for the same period in 2015. The $3.3 million increase in cash available for distribution is due to increases of $5.5 million in distributions from unconsolidated investments, a $4.2 million increase in network upgrade reimbursements, increased related party income of $0.7 million, decreased net losses on transactions of $0.7 million, decreased project expenses of $0.7 million, and decreased principal payments of $0.7 million. These increases were partially offset by decreases in revenues of $4.1 million (excluding unrealized loss on energy derivative and amortization of PPAs) due primarily to decreases in volumes, increases in operating expenses of $2.2 million, and increased distributions to noncontrolling interests of $2.6 million.
Cash available for distribution was $133.0 million for the full year 2016 compared to $92.4 million for 2015. Based on dividends paid during 2016, Pattern Energy’s dividend payout ratio was 90% of 2016 cash available for distribution. The $40.5 million increase in cash available for distribution was due to additional revenues of $47.3 million (excluding unrealized loss on energy derivative and amortization of PPAs) primarily from projects which were acquired or commenced commercial operations during 2015. In addition, the Company received an increase of $22.5 million in cash distributions from its unconsolidated investments when compared to the same period in the prior year which was due to full year operations at K2 and the acquisition of Armow in the fourth quarter of 2016, reduced principal payments of project-level debt by $6.4 million, decreased net losses on transactions of $3.1 million, and increased related party income of $2.4 million. These increases were partially offset by increased project expenses of $14.2 million, operating expenses of $13.1 million, increased distributions to noncontrolling interests of $10.0 million, and the $6.2 million cash distribution from the partial refund of a deposit associated with the Gulf Wind energy derivative in 2015. Reconciliations of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP for both the quarterly and annual periods are shown below.
Net income was $3.4 million in the fourth quarter of 2016, compared to a net loss of $3.9 million for the same period in 2015. The improvement in the quarterly period was primarily due to other income items related to gains on undesignated derivatives and lower interest expense. These improvements were offset by decreased revenues (including the unrealized loss on energy derivative) as well as increased operating expenses.
Net loss was $52.3 million for the full year 2016 compared to $55.6 million for 2015. The improvement in net loss for the annual period was primarily due to increased earnings in unconsolidated investments and increased revenues, partially offset by increased project expense, operating expenses and tax provision.

Click here to read the full press release.