Pattern Energy Reports Fourth Quarter and Full Year 2013 Financial Results

Pattern Energy Reports Fourth Quarter and Full Year 2013 Financial Results  Declares First Quarter 2014 Dividend of $0.3125 Per Class A Common Share  SAN FRANCISCO, Feb. 28, 2014 (GLOBE NEWSWIRE) -- Pattern Energy Group Inc. (Nasdaq:PEGI) (TSX:PEG) (Pattern Energy), an independent power company, today announced its financial results for the fourth quarter and full year of 2013.  Highlights    *Cash available for distribution of $42.6 million for 2013, up 141% from     2012   *Adjusted EBITDA of $141.8 million for 2013, up 88% from 2012   *Electricity sales of 2,259 GWh for 2013, up 35% from 2012   *Revenue of $202 million for 2013, up 76% from 2012   *Increased owned megawatts by 214 MW, up 21%   *Initiated quarterly cash dividend of $0.3125 per Class A common share in     Q4   *Declared Q1 2014 dividend of $0.3125 per Class A common share  "This was a tremendous year for Pattern Energy that included our successful IPO – the first U.S. listing of a wind power company – the growth of our portfolio to ten projects totaling 1,255 MW and the declaration of our first quarterly dividend," said Mike Garland, President and CEO of Pattern Energy. "With a strong balance sheet, a clearly identified pipeline of ROFO project acquisitions and significant opportunities for third-party acquisitions, we are optimally positioned to grow our portfolio of world-class wind power projects, which will increase our cash available for distribution and allow us to grow the quarterly dividend."  In 2013, Pattern Energy acquired 45% of the 149 MW Grand Renewable wind power project in Ontario and made a commitment to acquire 81% of the 182 MW Panhandle 2 wind power project in Texas upon its completion. Pattern Energy's portfolio now totals ten wind power projects, including Panhandle 2, with a total owned capacity of 1,255 MW.  Pattern Energy successfully closed its initial public offering (IPO) on October 2, 2013. Results for periods prior to the IPO are attributable to its predecessor entities.  Financial Results  Pattern Energy sold 532 GWh of electricity in the fourth quarter of 2013 compared to 453 GWh in the same period in 2012. For the year ended December 31, 2013, Pattern Energy sold 2,259 GWh of electricity, compared to 1,673 GWh in 2012 across a smaller fleet of projects. Electricity sold was lower than expected largely due to lost production from reimbursable turbine down time, which has been corrected, and from wind conditions that were lower than the long-term average.  Net income in the fourth quarter of 2013 was a loss of $19.4 million compared to a loss of $4.5 million for the same period last year. The decrease in the Company's fourth quarter net income was $14.9 million, which was primarily due to unrealized losses attributable to its energy hedge and to the impact of recording a U.S. income tax valuation allowance on certain deferred tax assets that were contributed to the Company at the time of its IPO, partially offset by unrealized gains attributable to interest rate swaps.  For the full year ended December 31, 2013, net income was $10.1 million, compared to a loss of $13.4 million in 2012. The increase in the Company's annual net income was primarily due to a full year of commercial operations at the Spring Valley, Santa Isabel and Ocotillo projects, as well as unrealized gains attributable to interest rate swaps.  Adjusted EBITDA  Adjusted EBITDA was $29.4 million for the fourth quarter of 2013 compared to $21.1 million in the same period last year. For the full year ended December 31, 2013, adjusted EBITDA was $141.8 million compared to $75.2 million for 2012. A reconciliation of adjusted EBITDA to net income determined in accordance with GAAP is shown below.  Cash Available For Distribution  Cash available for distribution in the fourth quarter of 2013 was $5.6 million compared to $5.6 million in the same period last year. For the full year ended December 31, 2013, cash available for distribution was near the expected result at $42.6 million compared to $17.7 million for 2012. A reconciliation of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP is shown below.  Quarterly Dividend  On November 26, 2013, Pattern Energy announced that its Board of Directors approved the introduction of a quarterly cash dividend in the amount of $0.3125 per Class A common share for the fourth quarter, which represents $1.25 on an annualized basis.  On February 26, 2014, the Board of Directors approved a quarterly dividend of $0.3125 per Class A common share for the first quarter of 2014, which represents $1.25 on an annualized basis. The dividend will be paid on April 30, 2014 to shareholders of record as of March 31, 2014.  Acquisition Pipeline  In addition to potential acquisitions of assets from third parties, Pattern Energy has the Right of First Offer (ROFO) on an identified pipeline of acquisition opportunities from Pattern Energy Group LP (Pattern Development). Since the IPO, the initial ROFO projects grew in size by 78 MW. In December, the Company acquired two ROFO projects. The remaining initial ROFO projects include the following:   Asset       Location          Owned MW Status Gulf Wind   Carson County, TX 76       Operational Panhandle 1 Panhandle, TX     179      Construction K2          Ontario, Canada   90       Financing in Process Armow       Ontario, Canada   90       Ready for Financing Meikle      BC, Canada        175      Pre-construction  Non-GAAP Financial Measures (unaudited)  The following tables reconcile net income (loss) to adjusted EBITDA and cash available for distribution, respectively, for the periods presented (in thousands):                              Pattern Energy Group Inc.                             Three Months Ended      For the Year Ended                              December 31,            December 31,                             2013         2012        2013        2012                                                                Net income (loss)            $(19,376)  $(4,455)  $10,072   $(13,376) Plus:                                                           Interest expense, net of     15,186      10,944     61,118     35,457 interest income Tax provision (benefit)      11,347      (4,851)    4,546      (3,604) Depreciation and accretion   21,422      14,476     83,180     49,027 EBITDA                       $28,579    $16,114   $158,916  $67,504 Unrealized (gain) loss on    6,050       7          11,272     6,951 energy derivative Unrealized (gain) loss on    (4,692)     4,921      (15,601)   4,953 interest rate derivatives Interest rate derivative     1,040       --        2,099      -- settlements Gain on transactions         1,205       --        (5,995)    (4,173) Plus, our proportionate share in the following from                                     our equity accounted investments: Interest expense, net of     228         44         267        44 interest income Tax (benefit) provision      (88)        (122)      (172)      (65) Depreciation and accretion   6           --        20         -- Unrealized gain on interest rate and currency            (2,985)     221        (9,076)    27 derivatives Realized loss (gain) on interest rate and currency   74          (38)       39         -- derivatives Adjusted EBITDA              $29,417    $21,147   $141,769  $75,241                                                                                            Pattern Energy Group Inc.                             Three Months Ended      For the Year Ended                              December 31,            December 31,                             2013         2012        2013        2012                                                                Net cash provided by         $9,756     $4,544    $78,152   $35,051 operating activities Changes in current operating 5,233       6,959      8,237      6,885 assets and liabilities Network upgrade              618         1,236      1,854      6,263 reimbursement Use of operating cash to fund maintenance and debt    --          (522)      --         (1,047) reserves Release of restricted cash to fund general and          318         --         318        -- administrative costs Operations and maintenancecapital          (388)       (19)       (819)      (623) expenditures Less:                                                           Distributions to             (866)       (244)      (2,292)    (1,298) noncontrolling interests Principal payments paid from (9,041)     (6,356)    (42,829)   (27,546) operating cash flows ^(1) Cash available for           $5,630     $5,598    $42,621   $17,685 distribution                                                                ^(1) Excludes $7,495 of principal pre-payments on our Ocotillo project which were paid from ITC cash grant proceeds for the year ended December 31, 2013  Conference Call and Webcast  Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. U.S. Eastern Time on Friday, February 28, 2014. 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 10-15 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 2062037. The replay recording will be available until 12:00 a.m. U.S. Eastern Time, March 14, 2014.  A live webcast of the conference call will be also available in the investor section of Pattern'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 ("PEGI") and Toronto Stock Exchange ("PEG"). Pattern Energy has a portfolio of ten wind power projects, with a total owned capacity of 1,255 MW, in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy's wind power projects 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. 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 prospectus filed with the SEC and applicable Canadian securities regulatory authorities in connection with the Company's initial public offering. The risk factors and other factors noted in the prospectus could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.  Pattern Energy Group Inc. Consolidated Balance Sheets (in thousands of U.S. dollars, except share data)                                                      December 31,                                                     2013         2012 Assets                                                            Current assets:                                                   Cash and cash equivalents                            $103,569   $17,574 Trade receivables                                    20,951      13,715 Related party receivable                             167         -- Reimbursable interconnection costs                  1,455       51,307 Derivative assets, current                           13,937      17,177 Current deferred tax assets                          573         -- Prepaid expenses and other current assets           13,927      13,794 Total current assets                                 154,579     113,567                                                                  Restricted cash                                      32,636      13,904 Turbine advances                                     --         44,150 Deferred development costs                           --         26,544 Construction in progress                            --         6,081 Property, plant and equipment, net of accumulated depreciation of $179,778 and $100,247 in 2013 and    1,476,142   1,668,302 2012, respectively Unconsolidated investments                          107,055     36,218 Derivative assets                                    82,167      62,895 Deferred financing costs, net of accumulated amortization of $16,225 and $9,311 in 2013 and 2012, 35,792      42,654 respectively Net deferred tax assets                              2,017       4,940 Other assets                                        13,243      16,475 Total assets                                         $1,903,631 $2,035,730                                                                  Liabilities and equity                                            Current liabilities:                                              Accounts payable and other accrued liabilities       $15,550    $7,750 Accrued construction costs                           3,204       67,206 Related party payable                                1,245       198 Accrued interest                                     495         559 Dividend payable                                     11,103      -- Contingent liabilities                               --         8,001 Derivative liabilities, current                      16,171      13,462 Current portion of long-term debt                    48,851      137,258 Total current liabilities                            96,619      234,434                                                                  Long-term debt                                       1,200,367   1,153,312 Derivative liabilities                               7,439       35,326 Asset retirement obligations                        20,834      19,056 Net deferred tax liabilities                         9,930       3,662 Other long-term liabilities                          438         528 Total liabilities                                   1,335,627   1,446,318                                                                  Equity:                                                           Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 35,530,786 and 100    355         -- shares issued and outstanding as of December 31, 2013 and 2012, respectively Class B common stock, $0.01 par value per share: 20,000,000 shares authorized; 15,555,000 shares      156         -- issued and outstanding at December 31, 2013 Additional paid-in capital                           489,388     1 Capital                                              --          545,471 Accumulated (loss) income                            (13,336)    2,903 Accumulated other comprehensive loss                 (8,353)     (34,264) Total equity before noncontrolling interest          468,210     514,111 Noncontrolling interest                              99,794      75,301 Total equity                                        568,004     589,412 Total liabilities and equity                         $1,903,631 $2,035,730                                                                   Pattern Energy Group Inc. Consolidated Statements of Operations (in thousands of U.S. dollars, except per share data)                         Three months ended December Year ended December 31,                         31,                        2013           2012          2013         2012                                                                Revenue:                                                        Electricity sales       $42,737      $29,675     $173,270   $101,835 Energy derivative       3,925         4,677        16,798      19,644 settlements Unrealized loss on      (6,050)       (7)          (11,272)    (6,951) energy derivative Related party revenue   446           --          911         -- Other revenue           709           --          21,866      -- Total revenue           41,767        34,345       201,573     114,528                                                                Cost of revenue:                                                Project expense        15,616        9,782        57,677      34,843 Depreciation and        21,422        14,476       83,180      49,027 accretion Total cost of revenue   37,038        24,258       140,857     83,870                                                                Gross profit            4,729         10,087       60,716      30,658                                                                Operating expenses:                                             Development expense     --           174          --         174 General and             4,256         271          4,819       858 administrative Related party general   (799)         3,017        8,169       10,604 and administrative Total operating         3,457         3,462        12,988      11,636 expenses                                                                Operating income        1,272         6,625        47,728      19,022                                                                Other income (expense):                                         Interest expense        (15,445)      (11,307)     (63,614)    (36,502) Equity in earnings (losses) in             2,658         (53)         7,846       (40) unconsolidated investments Interest rate           (1,040)       --          (2,099)     -- derivative settlements Unrealized gain (loss)  4,692         (4,921)      15,601      (4,953) on derivatives Net (loss) gain on      (1,205)       --          5,995       4,173 transactions Related party income    665           --          665         -- Other income, net       373           350          2,496       1,320 Total other expense     (9,302)       (15,931)     (33,110)    (36,002)                                                                Net (loss) income       (8,030)       (9,306)      14,618      (16,980) before income tax Tax provision           11,346        (4,851)      4,546       (3,604) (benefit) Net (loss) income       (19,376)      (4,455)      10,072      (13,376) Net loss attributable to noncontrolling       (6,197)       (1,146)      (6,887)     (7,089) interest Net (loss) income attributable to         $(13,179)    $(3,309)    $16,959    $(6,287) controlling interest                                                                Earnings per share                                              information: Less: Net income attributable to controlling interest    (157)                      (30,295)     prior to the IPO on October 2, 2013 Net loss attributable to controlling interest $(13,336)                 $(13,336)   subsequent to the IPO                                                                Weighted average number                                         of shares: Basic and diluted -     35,448,056                 35,448,056   Class A common stock Basic and diluted -     15,555,000                 15,555,000   Class B common stock                                                                Earnings per share for period subsequent to                                            the IPO Class A common stock:                                           Basic and diluted loss  $(0.17)                   $(0.17)     per share Class B common stock:                                           Basic and diluted loss  $(0.48)                   $(0.48)     per share                                                                                                                               2012 pro forma                                                  information: Unaudited pro forma net                                         loss after tax: Net loss before income                                         $(16,980) tax Pro forma tax provision                                        818 Pro forma net loss                                             $(17,798)                                                                 Pattern Energy Group Inc. Consolidated Statements of Cash Flows (in thousands of U.S. dollars)                               Three months ended    Year ended December 31,                               December 31,                              2013        2012       2013         2012 Operating activities                                            Net (loss) income             $(19,376) $(4,455) $10,072    $(13,376) Adjustments to reconcile net (loss) income to net cash                                       provided by operating activities: Depreciation and accretion    21,422     14,476    83,180      49,027 Amortization of financing     1,388      1,278     6,816       2,546 costs Unrealized loss (gain) on     1,358      4,928     (4,329)     11,904 derivatives Stock-based compensation      511        --        511         -- Net loss (gain) on            1,205      --        (5,995)     (4,173) transactions Deferred taxes                11,347     (4,851)   4,546       (3,604) Equity in (earnings) loss in  (2,658)    53        (7,846)     40 unconsolidated investments Changes in operating assets                                     and liabilities: Trade receivables             (786)      (3,014)   (8,721)     (298) Reimbursable interconnection  (11)       --        (11)        -- receivable Prepaid expenses and other    695        (2,464)   (2,698)     (5,842) current assets Other assets (non current)    (208)      (114)     (566)       (428) Accounts payable and other    (1,826)    552       3,036       (379) accrued liabilities Related party                 481        (782)     190         (100) receivable/payable Accrued interest payable      (890)      (1,063)   (33)        (78) Contingent liabilities        --         --        --          (188) Long-term liabilities         (2,896)    --        --          -- Net cash provided by          9,756      4,544     78,152      35,051 operating activities                                                                Investing activities                                            Receipt of ITC Cash Grant     --         79,910    173,446     79,910 Payment for acquisition from  (30,070)   --        (30,070)    -- Pattern Development Proceeds from sale of         --         --        14,254      4,173 investments and tax credits Decrease in restricted cash - 2,785      27,990    66,517      28,431 interconnect and PPA security Increase in restricted cash - (2)        (35,732)  (80,569)    (36,576) interconnect and PPA security Capital expenditures          (2,552)    (281,346) (123,517)   (641,422) Deferred development costs    --         (1,691)   (528)       (7,093) Distribution from             --         --        10,463      -- unconsolidated investments Contribution to               (941)      (1,433)   (9,678)     (22,387) unconsolidated investments Reimbursable interconnection  --         (5,663)   49,715      (47,055) receivable Other assets (non current)    618        1,231     2,358       3,066 Net cash (used in) provided   (30,162)   (216,734) 72,391      (638,953) by investing activities                                                                 Pattern Energy Group Inc. Consolidated Statements of Cash Flows (in thousands of U.S. dollars)                         Three months ended December Year ended December 31,                         31,                        2013           2012          2013         2012 Financing activities                                            Proceeds from IPO, net  $317,926     $--         $317,926   $-- of expenses Repurchase of shares for employee tax        (24)          --           (24)        -- withholding Capital distributions - Contribution            (232,640)     --           (232,640)   -- Transactions Payment for acquisition from Pattern            (49,430)      --           (49,430)    -- Development Capital contributions - --            46,732       32,679      281,519 controlling interest Capital distributions - --            (88,457)     (98,886)    (114,236) controlling interest Capital distributions - (866)         (244)        (2,292)     (1,298) noncontrolling interest Decrease in restricted cash - debt service     6,035         17,896       122,689     26,669 reserves Increase in restricted cash - debt service     (894)         (641)        (127,369)   (15,850) reserves Payment for deferred    --            (19,944)     (294)       (19,989) financing costs Proceeds from revolving --            --           56,000      -- credit facility Proceeds from long-term --            302,368      138,620     497,226 debt Repayment of revolving  (56,000)      --           (56,000)    -- credit facility Repayment of long-term  (9,041)       (6,356)      (50,324)    (27,546) debt Repayment of construction and grant  --            (53,328)     (114,056)   (53,328) loans Net cash (used in) provided by financing   (24,934)      198,026      (63,401)    573,167 activities                                                                Effect of exchange rate changes on cash and     (181)         (111)        (1,147)     637 cash equivalents Net change in cash and  (45,521)      (14,275)     85,995      (30,098) cash equivalents Cash and cash equivalents at          149,090       31,849       17,574      47,672 beginning of period Cash and cash equivalents at end of   $103,569     $17,574     $103,569   $17,574 period                                                                Supplemental disclosure                                         Cash payments for interest and commitment $12,327      $14,123     $57,505    $43,474 fees Schedule of non-cash                                            activities Change in fair value of 13,978        (957)        52,244      (11,173) interest rate swaps Change in fair value of --           (1,701)      --         (2,015) contingent liabilities Amortization of deferred financing costs - included as     --           1,395        175         3,824 construction in progress Capitalized interest    941           3,024        4,171       9,386 Capitalized commitment  --           317          39          873 fee Change in property,     (32,440)      (11,218)     (192,461)   30,154 plant and equipment Transfer of capitalized assets to South Kent    --           --           49,275      -- joint venture Non-cash distribution   --           --           (5,748)     -- to Pattern Development Assumption of liabilities related to  (4,207)       --           (4,207)     -- Contribution Transactions Accrued IPO stock       (884)         --           (884)       -- issuance costs  CONTACT: Ross Marshall          Investor Relations          T: (416) 815-0700 ext. 238          E: rmarshall@tmxequicom.com                   Matt Dallas          Media Relations          T: (917) 363-1333          E: matt.dallas@patternenergy.com  Pattern Energy Group Inc. 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