SAN FRANCISCO, and NEW YORK, and MONTRÉAL, June 19, 2017 /CNW/ -- Pattern Energy Group
Inc. (NASDAQ and TSX: PEGI) ("Pattern Energy" or the "Company"),
Pattern Energy Group LP ("Pattern Development 1.0"), Pattern Energy
Group 2 LP ("Pattern Development 2.0" and together with Pattern
Development 1.0, "Pattern Development"), Riverstone Holdings LLC
("Riverstone") and the Public Sector Pension Investment Board ("PSP
Investments") today announced a series of strategic initiatives to
significantly increase Pattern Energy's long-term growth outlook
and enhance its access to capital. Collectively, these strategic
initiatives position Pattern Energy to capture an increased share
of the annual $250 billion global
renewable energy market, and support its Pattern 2020 vision to
double its portfolio to 5 gigawatts ("GW") by 2020. All references
herein to "$" or dollars are to U.S. dollars.
The initiatives include a major increase in capital committed to
Pattern Development 2.0, and a minority investment by Pattern
Energy, as well as a significant expansion of the development
pipeline. In addition, Pattern Energy has created a strategic
relationship with PSP Investments, aligning it with one of the
world's leading long-term institutional investors. PSP Investments
will have a direct ownership stake in Pattern Energy and co-invest
in projects.
Highlights
Pattern Development secures long-term funding commitments for
expanded development business:
- The arrangements create increased opportunities for growth with
improved alignment with Pattern Energy's core business
strategy;
- Pattern Development's pipeline expands to 10 GW total capacity,
including an additional 275 megawatts ("MW") of owned capacity to
the identified right of first offer ("ROFO") list;
- $724 million in new long-term
funding commitments for Pattern Development 2.0, primarily from
major institutional investors through a Riverstone managed
investment entity; and
- A $60 million initial investment
by Pattern Energy, for a ~20% interest in Pattern Development 2.0,
ensuring access to an exclusive project pipeline and enhancing
alignment with the development business.
Strategic partnership with PSP Investments:
- PSP Investments to acquire 8.7 million shares (~9.9%) of
Pattern Energy stock from Pattern Development 1.0;
- PSP Investments to co-invest $500
million in projects acquired by Pattern Energy under the
Company's ROFO with Pattern Development, including investments in
the Meikle, Mont Sainte-Marguerite and Panhandle 2 projects (the
"Initial Projects"); and
- PSP Investments to have an indirect investment interest in
Pattern Development 2.0.
Accretive acquisition of two new projects and sale of a
minority interest in Panhandle 2:
- $65 million1
acquisition by Pattern Energy for a 51% interest in the 179 MW
Meikle project from Pattern Development 1.0, which represents a 10x
multiple of the five-year average cash available for
distribution2 ("CAFD"), PSP Investments will acquire the
remaining 49%;
- $40 million1
acquisition by Pattern Energy of a 51% interest in the 143 MW Mont
Sainte-Marguerite project from Pattern Development 1.0 at the
project's commercial operations date (expected in the first quarter
of 2018), which represents a 10x multiple of the project's
five-year average CAFD2, PSP Investments will acquire
the remaining 49%; and
- $59 million sale by Pattern
Energy of 49% of the Class B interest in the 182 MW Panhandle 2
project to PSP Investments, which represents a cash gain of 20%
over the Company's net investment basis and more than a 12x
multiple of the project's five-year average CAFD2.
1)
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Based on a CAD to USD
exchange rate of $1.32.
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2)
|
This forward looking
measure of five-year average annual purchase price multiple of cash
available for distribution (CAFD) contribution from the Meikle,
Mont Sainte-Marguerite and Panhandle 2 projects 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 primarily because of the uncertainties
involved in estimating forward-looking changes in working capital
balances which are added to earnings to arrive at cash provided by
operations and subtracted therefrom to arrive at CAFD. A
description of the adjustments to determine CAFD can be found on
page 60 of Pattern Energy's 2016 Annual Report on Form
10-K.
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The initial investment by Pattern Energy in Pattern Development
2.0, Meikle and Mont Sainte-Marguerite, net of the Panhandle 2
proceeds, will require $106 million
from Pattern Energy, which can be funded from available liquidity,
with no capital raise required. Closing of the above transactions,
which are subject to customary closing conditions, is expected to
occur in the next 60 days for the initial investment in Pattern
Development 2.0 and the acquisition of Meikle, 120 days for the
Panhandle 2 acquisition, and 210 days for the Mont
Sainte-Marguerite acquisition. The transactions are not conditioned
on closing of the other above transactions.
"With these exciting initiatives, we have created an
extraordinary opportunity to continue our growth. Pattern
Development has secured major long-term commitments, increased the
size of its pipeline by 70% and increased the identified ROFO list
by 43%," said Mike Garland, Chief
Executive Officer of Pattern Energy. "Pattern Energy's investment
in the development business allows us to improve our margins and
secure access to a tremendous pipeline of new projects. The
strategic relationship with PSP Investments provides us with
increased capital flexibility for new opportunities while allowing
us to meet our growth targets. PSP Investments' participation
demonstrates confidence in our business model, and in the
renewables sector. We believe these major initiatives support our
commitment to increase value for our shareholders, and we can make
all of these initial investments without an equity raise."
Pattern Development 2.0 Transaction
To support the expanded growth, Pattern Development has secured
$724 million in long-term capital
commitments from an investment entity managed by Riverstone and an
investment by Pattern Development management. This includes
commitments from leading pension, sovereign wealth, endowments,
family office, and investment funds.
Pattern Development 2.0 will initially own development assets,
subject to Pattern Energy's ROFO rights, and focus on wind, solar,
transmission and storage projects in the U.S., Canada and Mexico. Excluding the Grady and Crazy Mountain
projects, which are owned by Pattern Development 2.0, the balance
of the current identified ROFO assets will remain with Pattern
Development 1.0 and are subject to Pattern Energy's ROFO rights.
Pattern Development 1.0 will gradually wind up its business by
completing and selling the remaining projects.
To enhance alignment and allow Pattern Energy to benefit from
development, Pattern Energy has agreed to an initial investment of
$60 million in Pattern Development
2.0, which will result in an initial ownership of ~20%. Pattern
Energy will have the right, but not the obligation, to participate
in subsequent capital calls for a total commitment of up to
$300 million. If this right is
exercised for all future capital calls, this would increase Pattern
Energy's ownership to ~29%. All investors are investing on the same
financial terms.
Pattern Energy retains all its prior ROFO arrangements with
Pattern Development 1.0 and has enhanced certain of these rights
under the arrangements with Pattern Development 2.0. For example,
while Pattern Development 1.0 can under certain circumstances sell
assets to another party so long as the price is not less than 105%
of Pattern Energy's ROFO price, such threshold has now been
increased to 110% for Pattern Development 2.0.
"Riverstone and Pattern have had a successful and profitable
partnership over the last eight years. We continue to be excited
about both the sector and the Pattern team, and look forward to
supporting Pattern's further growth with a significant amount of
new capital," said Chris Hunt,
partner at Riverstone.
Expanded Development Pipeline and Identified ROFO
List
Pattern Development has expanded its pipeline to 10 GW of
development projects, which are subject to Pattern Energy's ROFO
rights.
From Pattern Development's expanded pipeline, Pattern Energy has
added 275 MW of owned capacity to its identified ROFO list, for a
total of 910 MW of owned capacity.
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:
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Capacity
(MW)
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Identified
ROFO Projects
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Status
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Location
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Construction
Start (1)
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Commercial
Operations (2)
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Contract
Type
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Rated
(3)
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Pattern
Development-
Owned (4)
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Pattern
Development 1.0 Projects
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Kanagi
Solar
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Operational
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Japan
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2014
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2016
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PPA
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14
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6
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Futtsu
Solar
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Operational
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Japan
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2014
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2016
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PPA
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42
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19
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Conejo
Solar(5)
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Operational
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Chile
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2015
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2016
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PPA
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104
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104
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Belle
River
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In
construction
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Ontario
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2016
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2017
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PPA
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100
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43
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Ohorayama
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In
construction
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Japan
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2016
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2018
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PPA
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33
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31
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North Kent
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In
construction
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Ontario
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2017
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2018
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PPA
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100
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35
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Henvey
Inlet
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Late stage
development
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Ontario
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2017
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2018
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PPA
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300
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150
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Tsugaru
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Late stage
development
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Japan
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2017
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2020
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PPA
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122
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91
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El Cabo
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Late stage
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U.S.
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2016
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2017
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PPA
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298
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125
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Sumita
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Late stage
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Japan
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2019
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2021
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PPA
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100
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50
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Pattern
Development 2.0 Projects
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Crazy
Mountain
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Late stage
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U.S.
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2018
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2018
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PPA
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80
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68
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Grady
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Late stage
development
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New Mexico
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2018
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2019
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PPA
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220
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188
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1,513
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910
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(1)
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Represents year of
actual or anticipated commencement of construction.
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(2)
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Represents year of
actual or anticipated commencement of commercial
operations.
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(3)
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Rated capacity
represents the maximum electricity generating capacity of a project
in MW. As a result of wind and other conditions, a project or a
turbine will not operate at its rated capacity at all times and the
amount of electricity generated will be less than its rated
capacity. The amount of electricity generated may vary based on a
variety of factors.
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(4)
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Pattern
Development-Owned capacity represents the maximum, or rated,
electricity generating capacity of the project in MW multiplied by
Pattern Development 1.0's or Pattern Development 2.0's percentage
ownership interest in the distributable cash flow of the
project.
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(5)
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From time to time, we
conduct strategic reviews of our markets. We have been
conducting a strategic review of the market, growth, and
opportunities in Chile. In the event we believe we can utilize
funds that have already been invested in Chile or funds that might
otherwise be invested in Chile in a more productive manner
elsewhere that could generate a higher return on investment, we may
decide to exit Chile for other opportunities with greater
potential. In addition, Pattern Development 1.0 is also
concurrently exploring strategic alternatives for its assets in
Chile.
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PSP Investments Transaction
Pattern Energy's strategic partnership with PSP Investments is
intended to expand capital access and improve flexibility in
managing capital requirements. As part of the transaction, PSP
Investments has agreed to purchase a 9.9% interest in Pattern
Energy from Pattern Development 1.0, at a 2.5% discount to the
20-day volume weighted average price of Pattern Energy as of
June 9, 2017, making it the largest
shareholder. A person designated by PSP Investments may be added to
the Pattern Energy Board of Directors at a future date.
In addition, Pattern Energy and PSP Investments will co-invest
in ROFO projects based on a process that will be controlled by
Pattern Energy. PSP Investments will invest at the same purchase
price and on the same terms as Pattern Energy. Pattern Energy
can elect the percentage interest to offer PSP Investments in each
project, which are expected to range from 30% to 49.9%. Pattern
Energy will continue to maintain operational and management
control.
PSP Investments has agreed to cooperate with Pattern Energy on
future third-party acquisitions and to support the Company's
funding through potential bridge financing for projects under
construction.
"We are pleased to partner with Pattern Energy, whose talented
leadership team has built a solid reputation in the renewables
sector, the fastest growing market of power generation," said
Patrick Samson, Managing Director,
Infrastructure Investments, PSP Investments. "This relationship
grants us access to a portfolio of projects and a source of new
assets in renewables, and we believe it will provide good and
stable returns for our contributors and beneficiaries. Furthermore,
it demonstrates our ability to structure large complex transactions
that fulfill both our needs and those of our partners."
"PSP Investments is a well-respected, experienced, global and
long-term investor in power assets, including renewable energy,"
added Mike Garland. "Their
commitment to provide up to $500
million in capital supports our growth strategy and our
ability to fund continued growth in the portfolio through
alternatives to conventional equity and debt. We look forward to
their participation in our business both at the Board level and as
co-investors in projects."
Project Acquisitions and Divestment
Pattern Energy will acquire interests in the Meikle and Mont
Sainte-Marguerite projects and will sell a partial interest in the
Panhandle 2 project. These three projects are also the first
projects included under the PSP Investments arrangement for
co-investment.
Meikle
Meikle will be jointly owned by Pattern Energy
and PSP Investments. The facility commenced commercial operations
in the first quarter of 2017 and operates under a 25-year power
purchase agreement with BC Hydro, which has a AA/Aaa credit
rating.
Located in the Peace River Regional District of British Columbia, Canada, the 179 MW project
consists of 61 GE wind turbines, including 35, 3.2 MW turbines and
26, 2.75 MW turbines.
Pattern Energy will acquire its 51% interest in Meikle for a
total investment of approximately $65
million1, which represents a CAFD multiple of 10x
of the project's five-year average CAFD2. The
acquisition will be funded with available liquidity and is expected
to close within the next 60 days, subject to customary closing
conditions.
Mont Sainte-Marguerite
Mont Sainte-Marguerite will be jointly owned by
Pattern Energy and PSP Investments. The facility is expected to
commence commercial operations in late 2017 and operate under a
25-year power purchase agreement with Hydro-Québec, which has a
A+/Aa2 credit rating.
Located in the Chaudière-Appalaches region south of Québec City,
Canada, the 143 MW project
consists of 46, 3.2 MW Siemens wind turbines.
Pattern Energy will acquire its 51% interest in Mont
Sainte-Marguerite for a total investment of approximately
$40 million1, which
represents a CAFD multiple of 10x of the five-year average
CAFD2. The acquisition is expected to close within 210
days, following the commencement of commercial operations and
subject to customary closing conditions. It will be funded at the
time of closing using available liquidity.
Panhandle 2
Pattern Energy has agreed to sell 49% of
the Class B interests in its Panhandle 2 project to PSP
Investments. The facility commenced commercial operations in the
fourth quarter of 2014 and approximately 80% of its production is
under a contracted hedge with Morgan Stanley.
Located in Carson County,
Texas, the 182 MW project consists of 79, 2.3 MW Siemens
wind turbines.
Pattern Energy will receive $59
million from PSP Investments in return for 49% of the Class
B ownership in the project, which represents a cash gain of 20%
over the Company's net investment basis and implies a CAFD
multiple2 of more than 12x on the five-year average
CAFD2. The acquisition is, subject to customary closing
conditions, expected to close in 120 days.
The Conflicts Committee of the Board of Directors of Pattern
Energy, which is comprised entirely of independent directors,
recommended the terms of the transactions with Pattern Development
and PSP Investments for approval by the Board of Directors, and
they were approved by the Board. The Conflicts Committee was
advised on financial matters by Evercore, which also provided
fairness opinions, and on legal matters by Davis Polk & Wardwell LLP.
1)
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Based on a CAD to USD
exchange rate of $1.32
|
2)
|
This forward looking
measure of five-year average annual purchase price multiple of Cash
Available for Distribution (CAFD) contribution from the Meikle,
Mont Sainte-Marguerite and Panhandle 2 projects 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 primarily because of the uncertainties
involved in estimating forward-looking changes in working capital
balances which are added to earnings to arrive at cash provided by
operations and subtracted therefrom to arrive at CAFD. A
description of the adjustments to determine CAFD can be found on
page 60 of Pattern Energy's 2016 Annual Report on Form
10-K.
|
Conference Call and Webcast
Pattern Energy will host a
conference call and webcast with slides to discuss the initiatives
at 10:30 a.m. Eastern Time on
Monday, June 19, 2017. Mike Garland, President and CEO, will chair the
call. Participants should call (888) 231-8191 or (647) 427-7450 and
ask an operator for the Pattern Energy conference 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 30185440.
The replay recording will be available until 11:59 p.m. Eastern Time, on July 10, 2017.
A live webcast of the conference call with slides will be also
available on the Events & Presentations page in the Investors
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 the
two projects 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.
About Pattern Development
Pattern Development is a
leader in developing renewable energy and transmission assets. With
a long history in wind energy, Pattern Development's highly
experienced team has developed, financed and placed into operation
more than 4.5 GW of wind and solar power projects. A strong
commitment to promoting environmental stewardship drives the
company's dedication in working closely with communities to create
renewable energy projects. Pattern Development includes its
affiliate Pattern Development 2.0, which is the long-term
development vehicle in which Pattern Energy intends to invest in.
Pattern Development has offices in San
Francisco, San Diego,
Houston, New York, Toronto, Mexico
City, Santiago, Chile, and
Tokyo, Japan. For more
information, visit www.patterndev.com.
About PSP Investments
The Public Sector Pension
Investment Board ("PSP Investments") is one of Canada's largest pension investment managers
with C$135.6 billion of net assets
under management as at March 31,
2017. It manages a diversified global portfolio composed of
investments in public financial markets, private equity, real
estate, infrastructure, natural resources and private debt.
Established in 1999, PSP Investments manages net contributions to
the pension funds of Canada's
federal Public Service, the Canadian Armed Forces, the Royal
Canadian Mounted Police and the Reserve Force. Headquartered in
Ottawa, Canada, PSP Investments
has its principal business office in Montréal and offices in
New York and London, its European hub. For more
information, visit www.investpsp.com, Twitter @InvestPSP or
LinkedIn.
About Riverstone Holdings LLC
Riverstone is an energy
and power-focused private investment firm founded in 2000 by
David M. Leuschen and Pierre F. Lapeyre, Jr. with approximately
$36 billion of capital raised.
Riverstone conducts buyout and growth capital investments in the
E&P, midstream, oilfield services, power, and renewable sectors
of the energy industry. With offices in New York, London, Houston, and Mexico
City, Riverstone has committed over $35 billion to more than 130 investments in
North America, South America, Europe, Africa, Asia,
and Australia.
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements contained in this press
release may 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. Readers can identify these statements by
forward-looking words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "plan," "potential,"
"should," "will," "would," or similar words. Readers should read
statements that contain these words carefully because they discuss
the Pattern Energy's current plans, strategies, prospects and
expectations concerning its business, operating results, financial
conditions, and other similar matters. While the Pattern Energy
believes that these forward-looking statements are reasonable as
and when made, there may be events in the future that it was not
able to predict accurately or control, and there can be no
assurance that future developments affecting the Pattern Energy
will be those that the Pattern Energy anticipates. Important
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, the ability of the transactions to support Pattern
Energy's long-term growth outlook, the ability to consummate the
investment into Pattern Development 2.0, the ability to consummate
future investments in Pattern Development 2.0, the ability of
Pattern Development 2.0 to buy back equity from its existing
investors, the ability of the strategic partnership with PSP
Investments to support Pattern Energy's growth plans, the ability
to consummate acquisitions of majority interests in the Meikle and
Mont Saint-Marguerite project, the ability to consummate the sale
of a minority interest in the Panhandle 2 project to PSP
Investments, the ability of PSP Investments to consummate project
co-investments, the CAFD multiple and five year average CAFD of
each of the Meikle, Mont Sainte-Marguerite, and Panhandle 2
projects, the ability of the Pattern Development 2.0 investment to
bring economic alignment and ongoing access to a pipeline of
projects, the ability to achieve a target of 5 GW of projects by
2020, the ability of the relationship with PSP Investments to
unlock value in the Pattern Energy portfolio and growth potential,
the ability of Pattern Development 2.0 to acquire the Mexican and
Canadian development assets of Pattern Development 1.0, the ability
of Pattern Development 1.0 to wind up its business, the ability of
an individual designated by PSP Investments to join Pattern
Energy's Board of Directors, the ability of PSP Investments to
consummate the purchase of minority interests in each of the Meikle
and Mont Sainte-Marguerite projects, the ability of PSP Investments
to provide up to $500 million in
capital to support Pattern Energy's growth, the ability of PSP
Investments to arrange for or provide bridge loans and construction
financing for Pattern Energy's acquisition funding commitment on
co-investment projects, and the ability to use proceeds from the
sale of a portion of Panhandle 2 to PSP Investments to fund part of
the purchase prices of Meikle and Mont-Sainte-Marguerite from
Pattern Development 1.0. These forward-looking statements represent
Pattern Energy'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 Pattern Energy'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, Pattern Energy
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 Pattern Energy to predict all such
factors. When considering these forward-looking statements, you
should keep in mind the risk factors and other cautionary
statements in Pattern Energy'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 Pattern Energy's actual
results to differ materially from those contained in any
forward-looking statement.
The forward-looking measures of CAFD multiple and five-year
average CAFD herein are non-GAAP measures that cannot be reconciled
to net cash provided by operating activities as the most directly
comparable GAAP financial measure without unreasonable effort
primarily because of the uncertainties involved in estimating
forward looking changes in working capital balances which are added
to earnings to arrive at cash provided by operations and subtracted
therefrom to arrive at CAFD.
Contacts:
Media
Relations
|
Investor
Relations
|
Matt
Dallas
|
Ross
Marshall
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917-363-1333
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416-526-1563
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matt.dallas@patternenergy.com
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ross.marshall@loderockadvisors.com
|
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Verena
Garofalo
|
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PSP
Investments
|
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514-218-3795
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media@investpsp.com
|
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SOURCE Pattern Energy Group Inc.