Pattern Energy Reports First Quarter 2018 Financial Results

- Declares dividend of $0.4220 per Class A common share for second quarter 2018 -

SAN FRANCISCO, May 10, 2018 /PRNewswire/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (NASDAQ & TSX: PEGI) today announced its financial results for the 2018 first quarter.

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

• Proportional gigawatt hours ("GWh") sold of 2,127 GWh, up 4%
• Net cash provided by operating activities of $27.8 million
• Cash available for distribution ("CAFD") of $43.1 million, and on track to meet full year guidance⁽¹⁾
• Net loss of $12.6 million
• Adjusted EBITDA of $104.2 million
• Revenue of $111.7 million, up 11%
• 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
• Acquired 206 megawatts ("MW") of owned capacity in five Japanese projects which represents the Company's entry into Japan, one of the most robust renewables markets in the world
• Invested $27 million in Pattern Energy Group 2 LP's ("Pattern Development 2.0") acquisition of the majority interest in Green Power Investments ("GPI") and the Japanese development pipeline from Pattern Energy Group LP ("Pattern Development 1.0")
• Commenced commercial operations at two projects, the 33 MW Ohorayama Wind power facility in Japan and, subsequent to the end of the period, the 143 MW Mont Sainte-Marguerite Wind power facility in Quebec which Pattern Energy has agreed to acquire with closing expected in the coming weeks

"Our solid performance in Q1 puts us right on track for our targeted CAFD⁽¹⁾ for the year and is the result of our portfolio continuing to operate at the top end of the industry," said Mike Garland, President and CEO of Pattern Energy. "In addition, we were able to successfully acquire five assets in Japan, one of the best renewable markets in the world, that form a strong platform to grow our business there and to improve the value of the projects over time. The Company is in an excellent position to make further acquisitions without raising any common equity, allowing us to grow our CAFD per share."

Financial and Operating Results

Pattern Energy sold 2,126,662 megawatt hours ("MWh") of electricity on a proportional basis in the first quarter of 2018 compared to 2,038,159 MWh sold in the same period last year. The 4% increase was primarily due to volume increases as a result of acquisitions in 2017 and 2018 and favorable wind at projects in Canada partially offset by unfavorable wind and curtailment primarily at projects in the Texas market and at Santa Isabel. Production for the quarter was 7% below the long-term average forecast for the period.

Net cash provided by operating activities was $27.8 million for the first quarter of 2018 compared to $43.8 million for the same period last year. The $15.9 million decrease was primarily due to a $12.6 million increase in transmission and projects costs primarily due to acquisitions in 2017 and 2018, a $10.0 million increase in interest payments and a $2.9 million decrease in distributions from unconsolidated investments. These decreases in net cash provided by operating activities were partially offset by a $10.8 million increase in revenue.

Cash available for distribution was $43.1 million for the first quarter of 2018, compared to $45.1 million for the same period last year. The $2.1 million decrease was primarily due to a $12.6 million increase in transmission and projects costs primarily due to acquisitions in 2017 and 2018, a $3.9 million increase in interest expense (excluding amortization of financing costs and debt discount/premium), a $6.5 million increase in distributions to noncontrolling interests, a $3.5 million increase in principal payments of project-level debt and a $0.9 million decrease in distributions from unconsolidated investments. These decreases in cash available for distribution were partially offset by increases of $20.2 million in revenue (excluding unrealized loss on energy derivative and amortization of PPAs), $2.5 million in release of restricted cash and $4.3 million in cash from other, primarily related to a $3.4 million project reserve funding requirement made in the first quarter 2017.

Net loss was $12.6 million in the first quarter of 2018, compared to a net income of $2.5 million for the same period last year. The change of $15.2 million was primarily attributable to increases of $24.3 million in cost of revenues due to the acquisitions in 2017 and 2018 and $2.0 million in tax provision. This change was partially offset a $10.8 million increase in revenue primarily due to acquisitions in 2017 and 2018 and the settlement of business interruption insurance related to our Santa Isabel project and a decrease of $0.5 million in other expense.

Adjusted EBITDA was $104.2 million for the first quarter of 2018 compared to $98.2 million for the same period last year. The $6.0 million increase in the quarterly period was primarily due to a $20.2 million increase in revenue (excluding unrealized loss on energy derivative and amortization of PPAs) primarily attributable to volume increases as a result of the 2017 and 2018 acquisitions and an insurance settlement for Santa Isabel partially offset by lower electricity sales as a result of changing prices, unfavorable wind and curtailment primarily at projects in the Texas market and at Santa Isabel.  This increase was partially offset by increases of $5.5 million in project expenses, $7.1 million in transmission costs and $0.8 million in transaction costs primarily related to the Japan acquisition.

2018 Financial Guidance

Pattern Energy is re-confirming its targeted annual cash available for distribution⁽²⁾ for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.

Quarterly Dividend

Pattern Energy declared a dividend for the second quarter 2018, payable on July 31, 2018, to holders of record on June 29, 2018 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 2018 dividend is unchanged from the first quarter 2018 dividend.

Project Acquisitions

During the first quarter of 2018, Pattern Energy acquired 206 MW of owned interest in five projects in operation or under construction located in Japan from Pattern Development 1.0 and GPI. The portfolio consists of two operating solar projects (Futtsu and Kanagi), two operating wind projects (Otsuki and Ohorayama, which commenced commercial operation during the quarter) and one wind project under construction (Tsugaru), each of which possess a 20-year power purchase agreement.

Pattern Energy acquired the 84 MW portfolio of Futtsu, Kanagi, Otsuki and Ohorayama for a cash purchase price of $131.5 million⁽³⁾, which represents approximately a 10.1x multiple of the five-year average CAFD⁽⁴⁾.

Pattern Energy acquired the 122 MW Tsugaru project at the start of construction, once fully financed on a non-recourse basis, for a total cash consideration of $194.0 million⁽³⁾, which represents a 9.3x multiple of the five-year average CAFD⁽⁴⁾ starting with the first full year of operations in 2021.

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 commenced commercial operations in the first quarter of 2018. The project has a 25-year power purchase agreement with Hydro-Québec, which has an AA-/Aa2 credit rating.

Pattern Energy will acquire its 51% interest in Mont Sainte-Marguerite for a total investment of approximately $40 million⁽⁵⁾, which represents approximately a 10x multiple of the five-year average CAFD⁽⁴⁾. The acquisition is expected to close in the coming weeks, with the recent 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 1.0 and Pattern Development 2.0 (together, the Pattern Development Companies) have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a Right of First Offer ("ROFO") on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 935 MW of potential owned capacity and and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy's ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 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 has the right to purchase from the Pattern Development Companies in connection with its respective 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 on Thursday, May 10, 2018. 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 5748379. The replay recording will be available until 11:59 p.m. Eastern Time, May 31, 2018.

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 25 wind and solar power facilities, including one project it has agreed to acquire, with a total owned interest of 2,942 MW in the United States, Canada, Japan and Chile that use proven, best-in-class technology. Pattern Energy's wind and solar 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 2018 cash available for distribution target; the ability to achieve the five year average annual CAFD generated by the Japan projects and Mont Sainte-Marguerite; the ability of the Japan assets to form a strong platform to grow the Company's business and improve the value of the projects; the ability to make further acquisitions without raising any common equity capital; the timing of the consummation of the acquisition of the Mont Sainte-Marguerite project; 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.