Notes to Consolidated Financial Statements
(Unaudited)
1.
Organization
Pattern Energy Group Inc. (Pattern Energy or the Company) was organized in the state of Delaware on October 2, 2012. Pattern Energy is an independent energy generation company focused on constructing, owning and operating energy projects with long-term energy sales contracts located in the United States, Canada and Chile. Pattern Energy Group LP (Pattern Development 1.0) owns a
9%
interest in the Company. The Pattern Development Companies (Pattern Development 1.0, Pattern Energy Group 2 LP (Pattern Development 2.0) and their respective subsidiaries) are leading developers of renewable energy and transmission projects.
The Company consists of the consolidated operations of certain entities and assets contributed by, or purchased principally from, Pattern Development 1.0, except for purchases of Lost Creek, Post Rock and certain additional interests in El Arrayán, each as defined below, which were purchased from third-parties. Each of the Company's wind projects and certain assets are consolidated into the Company's subsidiaries which are organized by geographic location as follows:
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•
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Pattern US Operations Holdings LLC (which consists primarily of
100%
ownership of Hatchet Ridge Wind, LLC (Hatchet Ridge), Spring Valley Wind LLC (Spring Valley), Pattern Santa Isabel LLC (Santa Isabel), Ocotillo Express LLC (Ocotillo), Pattern Gulf Wind LLC (Gulf Wind) and Lost Creek Wind, LLC (Lost Creek), as well as the following consolidated controlling interest in Panhandle Wind LLC (Panhandle 1), Panhandle Wind 2 LLC (Panhandle 2), Post Rock Wind Power Project, LLC (Post Rock), Logan's Gap Wind LLC (Logan's Gap), Fowler Ridge IV Wind Farm LLC (Amazon Wind Farm Fowler Ridge), and Broadview Project Finco Pledgor (Broadview Project) (which consists primarily of Broadview Energy KW, LLC and Broadview Energy JN, LLC (together, Broadview) and Western Interconnect transmission line (Western Interconnect)));
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•
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Pattern Canada Operations Holdings ULC (which consists primarily of
100%
ownership of St. Joseph Windfarm Inc. (St. Joseph), a consolidated controlling interest in Meikle Wind Energy Limited Partnership (Meikle) and noncontrolling interests in South Kent Wind LP (South Kent), Grand Renewable Wind LP (Grand), K2 Wind Ontario Limited Partnership (K2), and SP Armow Wind Ontario LP (Armow) which are accounted for as unconsolidated investments); and
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•
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Pattern Chile Holdings LLC (which includes a controlling interest in Parque Eólico El Arrayán SpA (El Arrayán) and a controlling interest in Don Goyo Transmisi
ó
n S.A. (Don Goyo), a transmission asset of El Arrayán).
|
On July 27, 2017, the Company funded an initial
$60 million
capital call under the Second Amended and Restated Agreement of Limited Partnership of Pattern Energy Group Holdings 2 LP (PEGH 2), dated as of June 16, 2017, by and among PEGH 2, the Class A Limited Partners set forth therein and the Class B Limited Partners set forth therein. As a result of such funding, and the related funding by other investors in PEGH 2 and consummation of certain redemptions, the Company holds an approximate
20%
ownership interest in PEGH 2 representing the Company's interest in Pattern Development 2.0.
2.
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the results of wholly-owned and partially-owned subsidiaries in which the Company has a controlling interest with all significant intercompany accounts and transactions eliminated in consolidation.
Unaudited Interim Financial Information
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim financial information reflects all adjustments of a normal recurring nature, necessary for a fair presentation of the Company’s financial position at
September 30, 2017
, the results of operations and comprehensive income (loss) for the
three and nine
months ended
September 30, 2017
and
2016
, respectively, and the cash flows for the
nine
months ended
September 30, 2017
and
2016
, respectively. The consolidated balance sheet at
December 31, 2016
has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. This Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2016
.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and such differences may be material to the financial statements.
Reclassification
Certain prior period balances have been reclassified to conform to the current period presentation in the Company’s consolidated financial statements and the accompanying notes.
The Company adopted the provisions of Accounting Standards Update (ASU) 2016-18
Statement of Cash Flows (Topic 230): Restricted Cash
as of December 31, 2016 and has revised its consolidated statements of cash flows for the nine months ended September 30, 2016 to reflect amounts described as restricted cash and restricted cash equivalents included with cash and cash equivalents in the reconciliation of beginning of period and end of period total amounts shown on the consolidated statements of cash flows.
Reconciliation of Cash and Cash Equivalents and Restricted Cash as Presented on the Statements of Cash Flows
Restricted cash consists of cash balances which are restricted as to withdrawal or usage and includes cash to collateralize bank letters of credit related primarily to interconnection rights, power sale agreements (PSA) and for certain reserves required under the Company's loan agreements. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
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|
|
|
|
|
|
|
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|
|
|
|
|
|
September 30, 2017
|
|
December 31,
2016
|
|
September 30,
2016
|
December 31,
2015
|
Cash and cash equivalents
|
|
$
|
91,057
|
|
|
$
|
83,932
|
|
|
$
|
65,733
|
|
$
|
94,808
|
|
Restricted cash - current
|
|
7,150
|
|
|
11,793
|
|
|
11,562
|
|
14,609
|
|
Restricted cash
|
|
19,866
|
|
|
13,646
|
|
|
13,652
|
|
36,875
|
|
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows
|
|
$
|
118,073
|
|
|
$
|
109,371
|
|
|
$
|
90,947
|
|
$
|
146,292
|
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Recently Issued Accounting Standards
Except for the evaluation of recently issued accounting standards set forth below, there have been no changes to the Company's evaluation of other recently issued accounting standards disclosed in Note 2,
Summary of Significant Accounting Policies,
in the Notes to Consolidated Financial Statements, contained in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2016
.
In September 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-13,
Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comment
s (ASU 2017-13), which amends the early adoption date option for certain companies related to the adoption of ASU 2014-09 and ASU 2016-02. The SEC staff stated the SEC would not object to a public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC adopting Topic 606 and Topic 842 using the adoption dates available for non-public entities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial statements and related disclosures; however, certain of the Company's unconsolidated investments, for which the Company may be required to include in its Form 10-K, may elect to utilize the adoption date available for non-public entities.
In August 2017, the FASB issued ASU 2017-12,
Targeted Improvements to Accounting for Hedging Activities
(ASU 2017-12), which amends the presentation and disclosure requirements and changes how companies assess effectiveness. The amendments are intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early application is permitted. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-01,
Clarifying the Definition of a Business
(ASU 2017-01), which provides a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early application permitted. The Company adopted ASU 2017-01 on July 1, 2017. The adoption of ASU 2017-01 resulted in the acquisition of Meikle being accounted for as an asset acquisition.
In February 2016, the FASB issued ASU 2016-02,
Leases
(ASU 2016-02), which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. Under the new guidance, lessor accounting is largely unchanged. ASU 2016-02 simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company does not plan to early adopt, and accordingly, will adopt the new standard effective January 1, 2019. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is in the initial stages of evaluating the impact of the new standard on its accounting policies, processes and system requirements. The Company has assigned internal resources in addition to the engagement of a third party service provider to assist in evaluation. The Company is also assessing the accounting impact of the ASU 2016-02 as it applies to its PPAs, land leases, office leases and equipment leases. As the Company progresses further in its analysis, the scope of this assessment could be expanded to review other types of contracts.
In May 2014, the FASB issued a new standard, ASU 2014-09, which creates Accounting Standards Codification (ASC) Topic 606
, Revenue from Contracts with Customers
and supersedes ASC Topic 605,
Revenue Recognition
(ASU 2014-09). The new standard replaces industry-specific guidance and establishes a single five-step model to identify and recognize revenue. The core principle of the new standard is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the new standard requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. In March 2016, the FASB issued ASU 2016-08,
Revenue from Contracts with Customers
(Topic 606) Principal versus Agent Considerations (Reporting Revenue Gross versus Net
), which clarifies how to apply the implementation guidance on principal versus agent considerations related to the sale of goods or services to a customer as updated by ASU 2014-09. In April 2016, the FASB issued ASU 2016-10,
Revenue from Contracts with Customers
(
Topic 606
)
Identifying Performance Obligations and Licensing,
which clarifies two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas, as updated by ASU 2014-09.
In May 2016, the FASB issued ASU 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
, which makes narrow scope amendments to Topic 606 including implementation issues on collectability, non-cash consideration and completed contracts at transition. In December 2016, the FASB issued ASU 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
, which
make additional narrow scope amendments to Topic 606 including loan guarantee fees, impairment testing of contract costs, provisions for losses on construction-type and production-type contracts.
The new standard permits adoption by either using (i) the full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. The Company plans to adopt using the modified retrospective approach. The new standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016. The Company will adopt the new standard effective January 1, 2018.
The Company has reached preliminary conclusions on key accounting assessments related to the standard. Based on the Company’s assessment and review of the revenue transactions with its customers, the Company does not expect the adoption to have a material impact on its consolidated financial statements. The Company expects that the revenue recognition related to sales of electricity
and renewable energy credits to remain substantially unchanged. The Company will continue to monitor and assess the impact of any changes to the standard and interpretations as they become available.
3.
Acquisitions
Business Combination
Broadview Project Acquisition
On April 21, 2017, pursuant to a Purchase and Sale Agreement with Pattern Development 1.0, the Company acquired a
100%
ownership interest in Broadview Project which indirectly owns both
100%
of the Class B membership interest in Broadview Energy Holdings LLC (Broadview Holdings) and a
99%
ownership interest in Western Interconnect, a
35
-mile
345
kV transmission line. Broadview Holdings owns
100%
ownership interests that comprise the
324
MW Broadview wind power projects, which achieved commercial operations in the first quarter of 2017. The acquisition is in alignment with the Company's growth strategy to expand its portfolio of generating projects. The Company's indirect Class B membership interest in Broadview Holdings represents an
84%
interest in initial distributable cash flow from Broadview. Consideration consisted of
$214.7 million
of cash, a
$2.4 million
assumed liability and a post-closing payment of approximately
$21.3 million
contingent upon the commercial operation of the Grady Project (as defined below). As part of the acquisition, the Company also assumed
$51.2 million
of construction debt and related accrued interest outstanding at Western Interconnect which was immediately extinguished, and concurrently the Company entered into a variable rate term loan for
$54.4 million
. The Grady Wind Energy Center, LLC (the Grady Project) is a wind power project on the identified ROFO list being developed by Pattern Development 2.0 separately from Broadview, which is expected to begin full construction not earlier than 2018, and which will be interconnected through Western Interconnect. Following the commencement of commercial operations of the Grady Project, at which time the Grady Project will begin making transmission service payments to Western Interconnect, the Company will make the aforementioned contingent post-closing payment.
The identifiable assets, operating contracts and liabilities assumed for Broadview and Western Interconnect were recorded at their fair values, which corresponded to the sum of the cash purchase price, contingent consideration payment, and the fair value of the other investors' noncontrolling interests.
The fair values are as follows (in thousands):
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April 21, 2017
|
Cash and cash equivalents
|
|
$
|
3,022
|
|
Trade receivables
|
|
3,259
|
|
Prepaid expenses
|
|
187
|
|
Other current assets
|
|
9,830
|
|
Restricted cash
|
|
44,383
|
|
Deferred financing costs, net
|
|
1,890
|
|
Property, plant and equipment
|
|
627,648
|
|
Intangible assets
|
|
22,346
|
|
Accounts payable and other accrued liabilities
|
|
(2,956
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)
|
Accrued interest
|
|
(108
|
)
|
Long-term debt, current portion
|
|
(51,053
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)
|
Accrued construction costs
|
|
(38,960
|
)
|
Related party payable
|
|
(674
|
)
|
Contingent liability
|
|
(36,205
|
)
|
Asset retirement obligation
|
|
(6,296
|
)
|
Other long-term liabilities
|
|
(12,350
|
)
|
Total consideration before non-controlling interest
|
|
563,963
|
|
Less: noncontrolling interests
|
|
(325,600
|
)
|
Total consideration
|
|
$
|
238,363
|
|
Current assets, non-current restricted cash, accounts payable, other accrued liabilities, accrued interest, accrued construction costs, related party payable and current portion of long-term debt were recorded at carrying value, which was representative of the fair value on the date of acquisition. Property, plant and equipment, finite-lived intangible assets, contingent liabilities and long-term liabilities were recorded at fair value estimated using the cost and income approach. The fair value of asset retirement obligations was recorded at fair value using a combination of market data, operational data and discounted cash flows and was adjusted by a discount rate factor reflecting current market conditions at the time of acquisition.
Concurrent with the closing, certain tax equity investors made capital contributions to acquire
100%
of the Class A membership interests in Broadview Holdings and have been admitted as noncontrolling members in the entity, with a
16%
initial interest in the distributable cash flow from Broadview. The noncontrolling interest was recorded at fair value estimated using the purchase price from the purchase agreement executed on April 21, 2017 among the Company and the tax equity investors.
The Company recorded a
$7.2 million
contingent obligation, payable to a third party who holds a
1%
interest in Western Interconnect, at fair value upon the acquisition of the Broadview Project. These contingent payments are subject to certain conditions, including the actual energy production of Broadview in a production year and the continued operation of Broadview. Additionally, the Company recorded a
$29.0 million
contingent obligation, payable to the same counterparty, at fair value upon the acquisition of the Broadview Project. These contingent payments are subject to certain conditions, including the commercial operation of the Grady Project. The contingent payment is calculated as a percentage of additional transmission revenue earned by Western Interconnect upon the Grady Project's commercial operation.
The Broadview Project acquisition includes contingent consideration, which requires the Company to make an additional payment upon the commercial operation of the Grady Project. See Note 12,
Fair Value Measurements
, for further discussion on the fair value of the contingent consideration.
The Company incurred transaction-related expense of
$0.4 million
which were recorded in net loss on transactions in the consolidated statements of operations for the
three and nine
months ended
September 30, 2017
.
The accounting for this acquisition is preliminary. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations and valuations, and the estimates and assumptions are subject to change as additional information is obtained for the estimates during the measurement period (up to one year from the acquisition date). During the three months ended September 30, 2017, the Company adjusted the initial valuation and decreased property, plant and equipment by
$0.9 million
, decreased accrued construction costs by
$1.2 million
and increased asset retirement obligations by
$0.3 million
. These changes are as a result of the updated inputs, assumptions and methodologies used in determining the fair value of these assets and liabilities.
The Company has determined that the operating partnership agreement does not allocate economic benefits pro rata to its two classes of investors for Broadview and will use the hypothetical liquidation at book value (HLBV) method to calculate the noncontrolling interest balance that reflects the substantive profit sharing arrangement.
Asset Acquisition
Meikle
On August 10, 2017, pursuant to a Purchase and Sale Agreement by and among the Company, Pattern Development 1.0, and Public Sector Pension Investment Board (PSP), the Company acquired
50.99%
of the limited partner interests in Meikle and
70%
of the issued and outstanding shares of Meikle Wind Energy Corp. (Meikle Corp) for a purchase price of
$67.4
million, paid at closing, in addition to
$1.1 million
of capitalized transaction-related expenses. PSP acquired
48.99%
of the limited partner interest in Meikle and
30%
of the issued and outstanding shares of Meikle Corp for a purchase price of
$64.8 million
. Meikle operates the approximately
179
MW wind farm located in the Peace River Regional District of British Columbia, Canada, which achieved commercial operations in the first quarter of 2017.
The fair value of the purchase consideration, including transaction-related expenses of the asset acquisition, and fair value of the noncontrolling interest is allocated to the relative fair value of the individual assets, operating contracts and liabilities assumed. The noncontrolling interest was recorded at fair value estimated using the purchase price paid by PSP pursuant to the Purchase and Sale Agreement. The preliminary fair value of the assets acquired and liabilities assumed in connection with the Meikle acquisition are as follows (in thousands):
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|
|
|
|
|
August 10, 2017
|
Cash and cash equivalents
|
$
|
3,865
|
|
Trade receivables
|
5,432
|
|
Prepaid expenses
|
1,194
|
|
Deferred financing costs, current
|
36
|
|
Other current assets
|
432
|
|
Restricted cash
|
6,808
|
|
Deferred financing costs
|
726
|
|
Property, plant and equipment
|
375,717
|
|
Finite lived intangible asset
|
29,287
|
|
Other assets
|
80
|
|
Accounts payable and other accrued liabilities
|
(4,676
|
)
|
Accrued construction costs
|
(1,762
|
)
|
Related party payable
|
(96
|
)
|
Accrued interest
|
(1,180
|
)
|
Derivative liabilities, current
|
(1,980
|
)
|
Current portion of long-term debt
|
(7,291
|
)
|
Long-term debt, net
|
(258,303
|
)
|
Derivative liabilities, noncurrent
|
(13,198
|
)
|
Other long-term liabilities
|
(1,816
|
)
|
Total consideration before non-controlling interest
|
133,275
|
|
Less: noncontrolling interests
|
(64,789
|
)
|
Total consideration
|
$
|
68,486
|
|
The accounting for this acquisition is preliminary. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations and valuations, and the estimates and assumptions are subject to change as additional information is obtained for the estimates during the measurement period (up to one year from the acquisition date).
Supplemental Pro Forma Data (unaudited)
Broadview reached commercial operations in March 2017 and until approximately three weeks before acquisition, Broadview was still under construction. Therefore, pro forma data for Broadview has not been provided as there is no material difference between pro forma data that give effects to the Broadview Project acquisition as if it had occurred on January 1, 2016 and actual data reported for the three and nine months ended September 30, 2017 and 2016.
Meikle was under construction throughout 2016 and did not reach commercial operations until February 1, 2017. Meikle's statements of operations and balance sheets for the year ended December 31, 2016 reflect development and construction activity, whose costs were primarily being capitalized to construction in progress, and include no revenue or operating expenses. Therefore, the Company has determined there is no material difference between pro forma data that give effects to the Meikle acquisition as if it had occurred on January 1, 2016 and the commercial operations date. The unaudited pro forma data is presented for illustrative purposes only and is not intended to be indicative of actual results that would have been achieved had the acquisition been consummated as of February 1, 2017 when Meikle reached commercial operations. The unaudited pro forma data should not be considered representative of the Company’s future financial condition or results of operations.
|
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|
|
|
|
|
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Unaudited pro forma data (in thousands)
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
Pro forma total revenue
|
|
$
|
94,820
|
|
|
$
|
312,116
|
|
Pro forma total expenses
|
|
(144,170
|
)
|
|
(376,980
|
)
|
Pro forma net loss
|
|
(49,350
|
)
|
|
(64,864
|
)
|
Less: pro forma net loss attributable to noncontrolling interest
|
|
(19,025
|
)
|
|
(52,694
|
)
|
Pro forma net loss attributable to Pattern Energy
|
|
$
|
(30,325
|
)
|
|
$
|
(12,170
|
)
|
The following table presents the amounts included in the consolidated statements of operations for the acquisitions discussed above since their respective dates of acquisition:
|
|
|
|
|
|
|
|
|
|
Unaudited data (in thousands)
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
Total revenue
|
|
$
|
16,556
|
|
|
$
|
25,357
|
|
Total expenses
|
|
(22,859
|
)
|
|
(35,856
|
)
|
Net loss
|
|
(6,303
|
)
|
|
(10,499
|
)
|
Less: net loss attributable to noncontrolling interest
|
|
(7,019
|
)
|
|
(11,274
|
)
|
Net income attributable to Pattern Energy
|
|
$
|
716
|
|
|
$
|
775
|
|
Unconsolidated Investment
PEGH 2
On July 27, 2017, the Company funded an initial
$60 million
capital call under the Second Amended and Restated Agreement of Limited Partnership of PEGH 2, dated as of June 16, 2017, by and among PEGH 2, the Class A Limited Partners set forth therein and the Class B Limited Partners set forth therein. As a result of such funding, and the related funding by other investors in PEGH 2 and consummation of certain redemptions, the Company holds an approximate
20%
ownership interest in PEGH 2. The Company is a noncontrolling investor in PEGH 2, but has significant influence over PEGH 2. Accordingly, the investment is accounted for under the equity method of accounting.
The Company capitalized
$1.5 million
of transaction costs for the nine months ended September 30, 2017. The cost of the Company's investment in PEGH 2 was
$40.6
million higher than the Company's underlying equity in the net assets of PEGH 2. This equity method basis difference was primarily attributable to equity method goodwill.
4.
Property, Plant and Equipment
The following presents the categories within property, plant and equipment (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2017
|
|
2016
|
Operating wind farms
|
$
|
4,740,532
|
|
|
$
|
3,707,823
|
|
Furniture, fixtures and equipment
|
12,631
|
|
|
9,307
|
|
Land
|
141
|
|
|
141
|
|
Subtotal
|
4,753,304
|
|
|
3,717,271
|
|
Less: accumulated depreciation
|
(729,949
|
)
|
|
(582,109
|
)
|
Property, plant and equipment, net
|
$
|
4,023,355
|
|
|
$
|
3,135,162
|
|
The Company recorded depreciation expense related to property, plant and equipment of
$51.4 million
and
$141.9 million
for the
three and nine
months ended
September 30, 2017
, respectively, and recorded
$43.0 million
and
$128.7 million
for the same periods in the prior year.
5.
Finite-Lived Intangible Assets and Liability
Finite-Lived Intangible Assets and Liability
The following presents the major components of the finite-lived intangible assets and liability (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
Weighted Average Remaining Life
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
Intangible assets
|
|
|
|
|
|
|
|
|
Power purchase agreement
|
|
16
|
|
$
|
127,330
|
|
|
$
|
(15,668
|
)
|
|
$
|
111,662
|
|
Industrial revenue bond tax savings
|
|
25
|
|
12,778
|
|
|
(223
|
)
|
|
12,555
|
|
Other intangible assets
|
|
34
|
|
15,234
|
|
|
(935
|
)
|
|
14,299
|
|
Total intangible assets
|
|
|
|
$
|
155,342
|
|
|
$
|
(16,826
|
)
|
|
$
|
138,516
|
|
Intangible liability
|
|
|
|
|
|
|
|
|
Power purchase agreement
|
|
15
|
|
$
|
60,300
|
|
|
$
|
(8,238
|
)
|
|
$
|
52,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Weighted Average Remaining Life
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
Intangible assets
|
|
|
|
|
|
|
|
|
Power purchase agreement
|
|
13
|
|
$
|
97,400
|
|
|
$
|
(10,632
|
)
|
|
$
|
86,768
|
|
Other intangible assets
|
|
15
|
|
5,666
|
|
|
(539
|
)
|
|
5,127
|
|
Total intangible assets
|
|
|
|
$
|
103,066
|
|
|
$
|
(11,171
|
)
|
|
$
|
91,895
|
|
Intangible liability
|
|
|
|
|
|
|
|
|
Power purchase agreement
|
|
16
|
|
$
|
60,300
|
|
|
$
|
(5,637
|
)
|
|
$
|
54,663
|
|
The Company presents amortization of the PPA assets and PPA liability as an offset to electricity sales in the consolidated statements of operations, which resulted in net expense of
$0.9 million
and
$2.4 million
in electricity sales for the
three and nine
months ended
September 30, 2017
and net expense of
$0.7 million
and
$2.3 million
for the same periods in
2016
. For other intangible assets, the Company includes the amortization in depreciation and accretion in the consolidated statements of operations and recorded amortization expense of
$0.1 million
and
$0.4 million
for the
three and nine
months ended
September 30, 2017
and amortization expense of
$0.1 million
and
$0.2 million
for the same periods in
2016
.
The acquisition of the Broadview Project provided for future property tax savings as a result of the issuance of industrial revenue bonds during construction of the Broadview Project. The Company considered the future tax savings an intangible asset and calculated the fair value of the asset at the acquisition date. The tax savings was calculated by forecasting the difference between the property tax payments that the Broadview Project would be liable for if the industrial revenue bond structure was not in place and the actual payments in lieu of tax. The fair value of the property tax savings was recorded to finite-lived intangible assets, net on the consolidated balance sheets at the acquisition date, and such value will be amortized to depreciation and accretion in the consolidated statements of operations over the
25
year exemption period that remains as of the acquisition date. The Company recorded amortization expense of
$0.1 million
and
$0.2 million
for the
three and nine
months ended
September 30, 2017
, respectively, related to the industrial revenue bond tax savings intangible asset.
The following table presents estimated future amortization for the next five years related to the Company's finite lived intangible assets and liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Power purchase agreements, net
|
|
Industrial revenue bond tax savings
|
|
Other intangible assets
|
2017 (remainder)
|
|
$
|
1,079
|
|
|
$
|
128
|
|
|
$
|
152
|
|
2018
|
|
4,253
|
|
|
513
|
|
|
605
|
|
2019
|
|
4,253
|
|
|
513
|
|
|
605
|
|
2020
|
|
4,274
|
|
|
513
|
|
|
605
|
|
2021
|
|
4,253
|
|
|
513
|
|
|
605
|
|
Thereafter
|
|
41,488
|
|
|
10,375
|
|
|
11,727
|
|
6.
Variable Interest Entities
The Company has determined that Logan's Gap, Panhandle 1, Panhandle 2, Post Rock, Amazon Wind Farm Fowler Ridge and Broadview Holdings are variable interest entities (VIEs) in accordance with ASU 2015-02 primarily because the tax equity interests in these operating entities lack substantive kick-out and participating rights. The Company determined that as the managing member it is the primary beneficiary of each VIE by reference to the power and benefits criterion under ASC 810,
Consolidation
. The Company considered responsibilities within the contractual agreements, which grant it the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. Such activities include management of the wind farms' operations and maintenance, budgeting, policies and procedures. In addition, the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs on the basis of the income allocations and cash distributions.
The Company’s equity method investment in PEGH 2 is considered to be a VIE in accordance with ASU 2015-02 primarily because the total equity at risk is not sufficient to permit PEGH 2 to finance its activities without additional subordinated financial support by the equity holders. The Company does not hold the power or benefits to be the primary beneficiary and does not consolidate the VIE. The carrying value of its unconsolidated investment in PEGH 2 was
$59.3 million
at September 30, 2017. The Company's maximum exposure to loss is equal to the carrying value of its investment in PEGH 2. See Note 3,
Acquisitions
, for additional information.
The following presents the carrying amounts of the consolidated VIEs' assets and liabilities included in the consolidated balance sheets (in thousands). Assets presented below are restricted for settlement of the consolidated VIEs' obligations and all liabilities presented below can only be settled using the VIE resources.
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
(1)
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
26,442
|
|
|
$
|
12,745
|
|
Restricted cash
|
4,305
|
|
|
4,291
|
|
Trade receivables
|
8,694
|
|
|
6,290
|
|
Prepaid expenses
|
4,964
|
|
|
4,468
|
|
Other current assets
|
4,274
|
|
|
1,456
|
|
Total current assets
|
48,679
|
|
|
29,250
|
|
|
|
|
|
Restricted cash
|
3,517
|
|
|
3,203
|
|
Property, plant and equipment, net
|
2,008,700
|
|
|
1,538,793
|
|
Finite-lived intangible assets, net
|
12,364
|
|
|
2,070
|
|
Other assets
|
13,499
|
|
|
13,622
|
|
Total assets
|
$
|
2,086,759
|
|
|
$
|
1,586,938
|
|
|
|
|
|
Liabilities
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable and other accrued liabilities
|
$
|
24,754
|
|
|
12,635
|
|
Accrued construction costs
|
1,560
|
|
|
709
|
|
Accrued interest
|
80
|
|
|
77
|
|
Other current liabilities
|
4,084
|
|
|
2,090
|
|
Total current liabilities
|
30,478
|
|
|
15,511
|
|
|
|
|
|
Finite-lived intangible liability, net
|
52,062
|
|
|
54,663
|
|
Other long-term liabilities
|
40,505
|
|
|
20,081
|
|
Total liabilities
|
$
|
123,045
|
|
|
$
|
90,255
|
|
|
|
(1)
|
Does not include Broadview Holdings as it was acquired in April 2017.
|
7.
Unconsolidated Investments
The Company's unconsolidated investments consist of the following for the periods presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Ownership
|
|
September 30,
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
South Kent
|
$
|
3,732
|
|
|
$
|
1,537
|
|
|
50.0
|
%
|
|
50.0
|
%
|
Grand
|
5,758
|
|
|
3,459
|
|
|
45.0
|
%
|
|
45.0
|
%
|
K2
|
102,019
|
|
|
97,051
|
|
|
33.3
|
%
|
|
33.3
|
%
|
Armow
|
133,063
|
|
|
131,247
|
|
|
50.0
|
%
|
|
50.0
|
%
|
PEGH 2
|
59,261
|
|
|
—
|
|
|
20.2
|
%
|
|
NA
|
|
Unconsolidated investments
|
$
|
303,833
|
|
|
$
|
233,294
|
|
|
|
|
|
Basis Amortization of Unconsolidated Investments
The cost of the Company’s investment in the net assets of unconsolidated investments was higher than the fair value of the Company’s equity interest in the underlying net assets of its unconsolidated investments. The basis differences were primarily attributable to property, plant and equipment, PPAs, and equity method goodwill. The Company amortizes the basis difference attributable to property, plant and equipment, and PPAs over their useful life and contractual life, respectively. The Company does not amortize equity method goodwill. For the
three and nine
months ended
September 30, 2017
, the Company recorded basis difference amortization for its unconsolidated investments of
$2.9 million
and
$8.5 million
, respectively, and for the same periods in
2016
, the Company recorded basis difference amortization of
$1.3 million
and
$3.8 million
, respectively, in earnings (loss) in unconsolidated investments, net on the consolidated statements of operations.
Suspension of Equity Method Accounting
As discussed in Note 2
, Summary of Significant Accounting Policies
in the Company's 2016 Form 10-K, the Company may suspend recognition of equity method earnings when the Company receives distributions in excess of the carrying value of its investment, and the Company is not liable for the obligations of the investee nor otherwise committed to provide financial support. The Company records gains resulting from such excess distributions in the period the distributions occur. Additionally, when the Company's carrying value in an unconsolidated investment is
zero
and the Company is not liable for the obligations of the investee nor otherwise committed to provide financial support, the Company does not recognize equity in earnings (losses) or equity in other comprehensive income of unconsolidated investments.
As of
September 30, 2017
, none of the Company's unconsolidated investments were in suspension. As of
September 30, 2016
, the Company's equity method balances for South Kent and Grand were
zero
. In accordance with ASC 323,
Investments - Equity Method and Joint Ventures
, the Company suspended recognition of South Kent's and Grand's equity method earnings or losses until the fourth quarter of 2016 when their cumulative equity method earnings exceeded cumulative distributions received and cumulative equity method losses. As the Company has no explicit or implicit commitment to fund losses at the unconsolidated investments, the Company recorded distributions received in excess of the carrying amount of its unconsolidated investments as gains. Earnings (loss) in unconsolidated investments, net as reported on the consolidated statements of operations attributable to South Kent and Grand included
$5.8 million
and
$15.0 million
for the
three and nine
months ended
September 30, 2016
, respectively, in distributions received in excess of the carrying amount of the Company's investment.
During the suspension period, the Company maintains a memo ledger that records the components of the suspended activity. As of
September 30, 2016
, the memo ledger balance was made up of distributions received in excess of the carrying amount of the Company's investment of
$5.8 million
, suspended equity losses of
$2.7 million
and suspended other comprehensive income of
$0.5 million
.
Significant Equity Method Investees
The following table presents summarized statements of operations information for the
three and nine
months ended
September 30, 2017
and
2016
as required for the Company's significant equity method investees, South Kent, Grand, K2, Armow, and PEGH 2 pursuant to Regulation S-X Rule 10-01(b)(1) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
2017
|
|
2016
(1)
|
|
2017
|
|
2016
(1)
|
Revenue
|
$
|
45,008
|
|
|
$
|
40,863
|
|
|
$
|
228,111
|
|
|
$
|
167,426
|
|
Cost of revenue
|
31,550
|
|
|
23,768
|
|
|
89,288
|
|
|
69,367
|
|
Operating expenses
|
11,030
|
|
|
459
|
|
|
12,663
|
|
|
1,928
|
|
Other expense
|
12,062
|
|
|
21,553
|
|
|
50,038
|
|
|
89,820
|
|
Net income (loss)
|
$
|
(9,634
|
)
|
|
$
|
(4,917
|
)
|
|
$
|
76,122
|
|
|
$
|
6,311
|
|
|
|
(1)
|
Results for the three and nine months ended September 30, 2016 do not include Armow, which was acquired in October 2016 and PEGH 2, which was acquired in July 2017.
|
8.
Debt
The Company’s debt consists of the following for periods presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2017
|
|
September 30, 2017
|
|
December 31, 2016
|
|
Contractual Interest Rate
|
|
Effective Interest Rate
|
|
|
|
|
|
|
|
Maturity
|
Corporate-level
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility
|
$
|
253,000
|
|
|
$
|
180,000
|
|
|
varies
|
|
(1)
|
4.23
|
%
|
(1)
|
December 2018
|
2020 Notes
|
225,000
|
|
|
225,000
|
|
|
4.00
|
%
|
|
6.60
|
%
|
|
July 2020
|
2024 Notes
|
350,000
|
|
|
—
|
|
|
5.88
|
%
|
|
5.88
|
%
|
|
February 2024
|
Project-level
|
|
|
|
|
|
|
|
|
|
Fixed interest rate
|
|
|
|
|
|
|
|
|
|
El Arrayán EKF term loan
|
99,112
|
|
|
103,904
|
|
|
5.56
|
%
|
|
5.56
|
%
|
|
March 2029
|
Santa Isabel term loan
|
104,540
|
|
|
107,090
|
|
|
4.57
|
%
|
|
4.57
|
%
|
|
September 2033
|
Variable interest rate
|
|
|
|
|
|
|
|
|
|
Ocotillo commercial term loan
(2)
|
179,298
|
|
|
193,257
|
|
|
3.33
|
%
|
|
4.09
|
%
|
(3)
|
August 2020
|
Lost Creek term loan
(4)
|
—
|
|
|
103,846
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
El Arrayán commercial term loan
|
90,102
|
|
|
94,458
|
|
|
4.25
|
%
|
|
5.72
|
%
|
(3)
|
March 2029
|
Spring Valley term loan
|
127,392
|
|
|
130,658
|
|
|
3.09
|
%
|
|
5.19
|
%
|
(3)
|
June 2030
|
Ocotillo development term loan
|
101,200
|
|
|
102,300
|
|
|
3.43
|
%
|
|
4.44
|
%
|
(3)
|
August 2033
|
St. Joseph term loan
(2)
|
174,413
|
|
|
162,356
|
|
|
3.04
|
%
|
|
3.89
|
%
|
(3)
|
November 2033
|
Western Interconnect term loan
(2)
|
54,395
|
|
|
—
|
|
|
3.34
|
%
|
|
4.23
|
%
|
(3)
|
April 2027
|
Meikle term loan
(2)
|
271,042
|
|
|
—
|
|
|
2.92
|
%
|
|
3.89
|
%
|
(3)
|
May 2024
|
Imputed interest rate
|
|
|
|
|
|
|
|
|
|
Hatchet Ridge financing lease obligation
|
196,363
|
|
|
202,593
|
|
|
1.43
|
%
|
|
1.43
|
%
|
|
December 2032
|
|
2,225,857
|
|
|
1,605,462
|
|
|
|
|
|
|
|
Unamortized premium/discount, net
(4)
|
(14,673
|
)
|
|
(17,019
|
)
|
|
|
|
|
|
|
Unamortized financing costs
|
(28,364
|
)
|
|
(24,771
|
)
|
|
|
|
|
|
|
Total debt, net
|
$
|
2,182,820
|
|
|
1,563,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reflected on the consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
Revolving credit facility
|
$
|
253,000
|
|
|
$
|
180,000
|
|
|
|
|
|
|
|
Current portion of long-term debt, net of financing costs
|
58,213
|
|
|
48,716
|
|
|
|
|
|
|
|
Long term debt, net of financing costs
|
1,871,607
|
|
|
1,334,956
|
|
|
|
|
|
|
|
Total debt, net
|
$
|
2,182,820
|
|
|
$
|
1,563,672
|
|
|
|
|
|
|
|
|
|
(1)
|
Refer to Revolving Credit Facility for interest rate details.
|
|
|
(2)
|
The amortization for the Ocotillo commercial term loan, the St. Joseph term loan, the Western Interconnect term loan and the Meikle term loan are through June 2030, September 2036, March 2036 and December 2038, respectively, which differs from the stated maturity date of such loans due to prepayment requirements.
|
|
|
(3)
|
Includes impact of interest rate swaps. See Note
10
,
Derivative Instruments
, for discussion of interest rate swaps.
|
|
|
(4)
|
The discount relates to the 2020 Notes and the premium relates to the Lost Creek term loan as of December 31, 2016, as the Lost Creek term loan was terminated in September 2017.
|
Interest and commitment fees incurred and interest expense for debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Corporate-level interest and commitment fees incurred
|
$
|
9,215
|
|
|
$
|
4,200
|
|
|
$
|
24,827
|
|
|
$
|
14,205
|
|
Project-level interest and commitment fees incurred
(1)
|
14,635
|
|
|
12,611
|
|
|
40,103
|
|
|
39,055
|
|
Amortization of debt discount/premium, net
|
1,153
|
|
|
1,073
|
|
|
3,379
|
|
|
3,147
|
|
Amortization of financing costs
|
2,028
|
|
|
1,745
|
|
|
5,879
|
|
|
5,242
|
|
Other interest
|
116
|
|
|
169
|
|
|
353
|
|
|
485
|
|
Interest expense
|
$
|
27,147
|
|
|
$
|
19,798
|
|
|
$
|
74,541
|
|
|
$
|
62,134
|
|
|
|
(1)
|
Includes reclassification of realized gains (losses) on derivative instruments that qualifies as cash flow hedges from accumulated OCI into interest expense and the ineffective portion of the instruments.
|
Corporate Level Debt
Revolving Credit Facility
As of
September 30, 2017
,
$210.7 million
was available for borrowing under the
$500.0 million
Revolving Credit Facility. The Revolving Credit Facility is secured by pledges of the capital stock and ownership interests in certain of the Company’s holding company subsidiaries. The Revolving Credit Facility contains a broad range of covenants that, subject to certain exceptions, restrict the Company’s holding company subsidiaries' ability to incur debt, grant liens, sell or lease assets, transfer equity interests, dissolve, pay distributions and change its business. As of
September 30, 2017
, the Company's holding company subsidiaries were in compliance with covenants contained in the Revolving Credit Facility.
The loans under the Company's Revolving Credit Facility are either base rate loans or Eurodollar rate loans. The base rate loans accrue interest at the fluctuating rate per annum equal to the greatest of the (i) the prime rate, (ii) the federal funds rate plus
0.50%
and (iii) the Eurodollar rate that would be in effect for a Eurodollar rate loan with an interest period of one month plus
1.0%
, plus an applicable margin ranging from
1.25%
to
1.75%
(corresponding to applicable leverage ratios of the borrower). The Eurodollar rate loans accrue interest at a rate per annum equal to International Continental Exchange London Interbank Offered Rate (LIBOR), as published by Reuters plus an applicable margin ranging from
2.25%
to
2.75%
(corresponding to applicable leverage ratios of the borrower). Under the Revolving Credit Facility, the Company pays a revolving commitment fee equal to the average of the daily difference between revolving commitments and the total utilization of revolving commitments times
0.50%
. The Company also pays letter of credit fees.
As of
September 30, 2017
and
December 31, 2016
, letters of credit of
$36.3 million
and
$31.7 million
were issued under the Revolving Credit Facility.
Unsecured Senior Notes due 2024
In January 2017, the Company issued unsecured senior notes with an aggregate principal amount of
$350.0 million
(Unsecured Senior Notes or 2024 Notes). Net proceeds to the Company were approximately
$345.0 million
, after deducting the initial purchasers’ discount, commissions and transaction expenses. The 2024 Notes bear interest at a rate of
5.875%
per year, payable semiannually in arrears on February 1 and August 1, beginning on August 1, 2017 and maturing on February 1, 2024, unless repurchased or redeemed at an earlier date. The 2024 Notes are guaranteed on a senior unsecured basis by Pattern US Finance Company, one of the Company's subsidiaries.
Convertible Senior Notes due 2020
In July 2015, the Company issued
$225.0 million
aggregate principal amount of
4.00%
convertible senior notes due 2020 (Convertible Senior Notes or 2020 Notes). The 2020 Notes bear interest at a rate of
4.00%
per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2016. The 2020 Notes will mature on July 15, 2020. The 2020 Notes were sold in a private placement.
The 2020 Notes are guaranteed on a senior unsecured basis by a subsidiary of the Company and are general unsecured obligations of the Company. The obligations rank senior in rights of payment to the Company’s subordinated debt, equal in right of payment
to the Company’s unsubordinated debt and effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness.
The following table presents a summary of the equity and liability components of the 2020 Notes (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31,
2016
|
Principal
|
$
|
225,000
|
|
|
$
|
225,000
|
|
Less:
|
|
|
|
Unamortized debt discount
|
(14,673
|
)
|
|
(18,196
|
)
|
Unamortized financing costs
|
(3,072
|
)
|
|
(3,894
|
)
|
Carrying value of convertible senior notes
|
$
|
207,255
|
|
|
$
|
202,910
|
|
Carrying value of the equity component
(1)
|
$
|
23,743
|
|
|
$
|
23,743
|
|
|
|
(1)
|
Included in the consolidated balance sheets as additional paid-in capital, net of
$0.7 million
in equity issuance costs.
|
Project level debt
Western Interconnect
In April 2017, in connection with the Broadview Project acquisition, the Company assumed a
$51.2 million
senior construction loan facility, including accrued interest, which was immediately extinguished and concurrently, the Company entered into a variable rate term loan maturing on April 21, 2027 for
$54.4 million
. The interest rate on the term loan is LIBOR plus
2.00%
(with periodic increases of
0.25%
every
four years
).
Collateral for the term loan includes Western Interconnect's tangible assets and contractual rights and cash on deposit with the depository agent. Such loan agreement contains a broad range of covenants that, subject to certain exceptions, restrict Western Interconnect's ability to incur debt, grant liens, sell or lease certain assets, transfer equity interests, dissolve, make distributions, or change its business.
Meikle
In August 2017, in connection with the Meikle acquisition, the Company assumed a
$265.6 million
variable rate term loan maturing on May 12, 2024. The interest rate on the term loan is Canadian Dollar Offered Rate plus
1.50%
.
Collateral for the term loan includes Meikle’s tangible assets and contractual rights and cash on deposit with the collateral agent. Such credit agreement contains a broad range of covenants that, subject to certain exceptions, restrict Meikle's ability to incur debt, grant liens, sell or lease certain assets, transfer equity interests, dissolve, make distributions, or change its business.
Lost Creek
On September 28, 2017, the Company prepaid
100%
of the outstanding balance of the Lost Creek project's term loan of
$100.1 million
. A
$0.1 million
loss on the debt extinguishment was recorded in other income, net in the consolidated statements of operations, primarily due to the offsetting impact of writing-off the debt premium and deferred financing costs. As a result of the early extinguishment of debt, the Company terminated the related interest rate swaps. See Note
10
,
Derivative Instruments
, for additional information.
9.
Asset Retirement Obligation
The Company's asset retirement obligations represent the estimated cost of decommissioning the turbines, removing above-ground installations and restoring the sites at the end of its estimated economic useful life.
The following table presents a reconciliation of the beginning and ending aggregate carrying amounts of asset retirement obligation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
2017
|
|
2016
|
Beginning asset retirement obligations
|
|
$
|
44,783
|
|
|
$
|
42,197
|
|
Net additions during the period
(1)
|
|
8,112
|
|
|
—
|
|
Foreign currency translation adjustment
|
|
233
|
|
|
120
|
|
Accretion expense
|
|
2,130
|
|
|
1,892
|
|
Ending asset retirement obligations
|
|
$
|
55,258
|
|
|
$
|
44,209
|
|
(1)
Reflects additions due to acquisition of the Broadview Project and Meikle. See Note
3
,
Acquisitions
, for discussion of the acquisitions.
10.
Derivative Instruments
The Company employs a variety of derivative instruments to manage its exposure to fluctuations in electricity prices, interest rates and foreign currency exchange rates. Energy prices are subject to wide swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. Interest rate risk exists primarily on variable-rate debt for which the cash flows vary based upon movement in interest rates. Additionally, the Company is exposed to foreign currency exchange rate risk primarily from its business operations in Canada and Chile. The Company’s objectives for holding these derivative instruments include reducing, eliminating and efficiently managing the economic impact of these exposures as effectively as possible. The Company does not hedge all of its electricity price risk, interest rate risks, and foreign currency exchange rate risks, thereby exposing the unhedged portions to changes in market prices.
As of
September 30, 2017
, the Company had other energy-related contracts that did not meet the definition of a derivative instrument or qualified for the normal purchase normal sale scope exception and were therefore exempt from fair value accounting treatment.
The following tables present the fair values of the Company's derivative instruments on a gross basis as reflected on the Company’s consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
Derivative Assets
|
|
Derivative Liabilities
(1)
|
|
|
Current
|
|
Long-Term
|
|
Current
|
|
Long-Term
|
Fair Value of Designated Derivatives
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
2,044
|
|
|
$
|
6,490
|
|
|
$
|
18,014
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Undesignated Derivatives
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
863
|
|
|
$
|
2,005
|
|
|
$
|
2,970
|
|
Energy derivative
|
|
18,824
|
|
|
11,958
|
|
|
—
|
|
|
—
|
|
Foreign currency forward contracts
|
|
—
|
|
|
—
|
|
|
3,600
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value
|
|
$
|
18,824
|
|
|
$
|
14,865
|
|
|
$
|
12,095
|
|
|
$
|
21,979
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
|
Current
|
|
Long-Term
|
|
Current
|
|
Long-Term
|
Fair Value of Designated Derivatives
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
8,289
|
|
|
$
|
21,058
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Undesignated Derivatives
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
1,788
|
|
|
$
|
3,238
|
|
|
$
|
3,463
|
|
Energy derivative
|
|
16,209
|
|
|
24,707
|
|
|
—
|
|
|
—
|
|
Foreign currency forward contracts
|
|
1,369
|
|
|
177
|
|
|
391
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value
|
|
$
|
17,578
|
|
|
$
|
26,712
|
|
|
$
|
11,918
|
|
|
$
|
24,521
|
|
|
|
(1)
|
Inclusive of Western Interconnect interest rate swaps which are effective as of June 30, 2017 and Meikle interest rate swaps which are effective as of August 10, 2017.
|
The following table summarizes the notional amounts of the Company's outstanding derivative instruments (in thousands except for MWh):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit of Measure
|
|
September 30,
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
Designated Derivative Instruments
|
|
|
|
|
|
|
Interest rate swaps
(1)
|
|
USD
|
|
$
|
337,531
|
|
|
$
|
365,443
|
|
Interest rate swaps
|
|
CAD
|
|
$
|
740,375
|
|
|
$
|
196,425
|
|
|
|
|
|
|
|
|
Undesignated Derivative Instruments
|
|
|
|
|
|
|
Interest rate swaps
|
|
USD
|
|
$
|
225,884
|
|
|
$
|
257,389
|
|
Energy derivative
|
|
MWh
|
|
818,168
|
|
|
1,201,691
|
|
Foreign currency forward contracts
|
|
CAD
|
|
$
|
120,500
|
|
|
$
|
95,800
|
|
|
|
(1)
|
Inclusive of Western Interconnect interest rate swaps which are effective as of June 30, 2017 and Meikle interest rate swaps which are effective as of August 10, 2017.
|
Derivatives Designated as Hedging Instruments
Cash Flow Hedges
The Company has interest rate swap agreements to hedge variable rate project-level debt. Under these interest rate swaps, the projects make fixed-rate interest payments and the counterparties to the agreements make variable-rate interest payments. For interest swaps that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive loss and reclassified into earnings in the period or periods during which cash settlement occurs. The designated interest rate swaps have remaining maturities ranging from approximately
6.2 years
to
21.3 years
.
On September 28, 2017, in connection with the early extinguishment of Lost Creek's term loan, the Company terminated the related interest rate swaps which resulted in the reclassification of
$2.2 million
in accumulated other comprehensive loss to realized loss on designated derivatives in the consolidated statements of operations.
The following table presents the pre-tax effect of the derivative instruments designated as cash flow recognized in accumulated other comprehensive loss, amounts reclassified to earnings for the following periods, as well as, amounts recognized in interest expense (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
Description
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Gains (losses) recognized in accumulated OCI
|
|
Effective portion of change in fair value
|
|
$
|
3,205
|
|
|
$
|
(527
|
)
|
|
$
|
(1,154
|
)
|
|
$
|
(35,290
|
)
|
Gains (losses) reclassified from accumulated OCI into:
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
Derivative settlements
|
|
$
|
(2,891
|
)
|
|
$
|
(3,020
|
)
|
|
$
|
(7,861
|
)
|
|
$
|
(9,226
|
)
|
Realized loss on designated derivatives
|
|
Termination of derivatives
|
|
$
|
(2,207
|
)
|
|
$
|
—
|
|
|
$
|
(2,207
|
)
|
|
$
|
—
|
|
Interest expense
|
|
Ineffective portion
|
|
$
|
329
|
|
|
$
|
365
|
|
|
$
|
252
|
|
|
$
|
(147
|
)
|
The Company estimates that
$5.1 million
in accumulated other comprehensive loss will be reclassified into earnings over the next twelve months.
Derivatives Not Designated as Hedging Instruments
The following table presents gains and losses on derivatives not designated as hedges (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statement Line Item
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
Derivative Type
|
|
|
Description
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Interest rate swaps
|
|
Gain (loss) on undesignated derivatives, net
|
|
Change in fair value, net of settlements
|
|
$
|
358
|
|
|
$
|
2,305
|
|
|
$
|
(29
|
)
|
|
$
|
(10,513
|
)
|
Interest rate swaps
|
|
Gain (loss) on undesignated derivatives, net
|
|
Derivative settlements
|
|
$
|
(494
|
)
|
|
$
|
(1,272
|
)
|
|
$
|
(2,327
|
)
|
|
$
|
(3,878
|
)
|
Energy derivative
|
|
Electricity sales
|
|
Change in fair value, net of settlements
|
|
$
|
(3,113
|
)
|
|
$
|
(818
|
)
|
|
$
|
(10,134
|
)
|
|
$
|
(14,970
|
)
|
Energy derivative
|
|
Electricity sales
|
|
Derivative settlements
|
|
$
|
3,196
|
|
|
$
|
3,144
|
|
|
$
|
14,278
|
|
|
$
|
16,629
|
|
Foreign currency forward contracts
|
|
Gain (loss) on undesignated derivatives, net
|
|
Change in fair value, net of settlements
|
|
$
|
(2,904
|
)
|
|
$
|
487
|
|
|
$
|
(5,749
|
)
|
|
$
|
(4,128
|
)
|
Foreign currency forward contracts
|
|
Gain (loss) on undesignated derivatives, net
|
|
Derivative settlements
|
|
$
|
(1,041
|
)
|
|
$
|
305
|
|
|
$
|
(1,375
|
)
|
|
$
|
834
|
|
Interest Rate Swaps
The Company has interest rate swap agreements to hedge variable rate project-level debt. Under these interest rate swaps, the projects make fixed-rate interest payments and the counterparties to the agreements make variable-rate interest payments. For interest rate swaps that are not designated and do not qualify as cash flow hedges, the changes in fair value are recorded in gain (loss) on undesignated derivatives, net in the consolidated statements of operations as these hedges are not accounted for under hedge accounting. All of the Company's undesignated interest rate swaps have a remaining maturity of
12.8 years
.
Energy Derivative
In 2010, Gulf Wind acquired an energy derivative instrument to manage its exposure to variable electricity prices over the life of the arrangement. The energy price swap fixes the price for a predetermined volume of production (the notional volume) over the life of the swap contract, through
April 2019
, by locking in a fixed price per MWh. The notional volume agreed to by the parties is approximately
504,220
MWh per year. The energy derivative instrument does not meet the criteria required to adopt hedge accounting. As a result, changes in fair value are recorded in electricity sales in the consolidated statements of operations.
As a result of the counterparty's credit rating downgrade, the Company received cash collateral related to the energy derivative agreement. The Company does not have the right to pledge, invest, or use the cash collateral for general corporate purposes. As of
September 30, 2017
, the Company has recorded a current asset of
$33.5 million
to funds deposited by counterparty and a current liability of
$33.5 million
to counterparty deposit liability representing the cash collateral received and corresponding obligation to return the cash collateral, respectively. The cash was deposited into a separate custodial account for which the Company is not entitled to the interest earned on the cash collateral.
Foreign Currency Forward Contracts
The Company has established a currency risk management program. The objective of the program is to mitigate the foreign exchange rate risk arising from transactions or cash flows that have a direct or underlying exposure in non-U.S. dollar denominated currencies in order to reduce volatility in the Company’s cash flow, which may have an adverse impact to the Company's short-term liquidity or financial condition. A majority of the Company’s power sale agreements and operating expenditures are transacted in U.S. dollars, with a growing portion transacted in currencies other than the U.S. dollar, primarily the Canadian dollar. The Company enters into foreign currency forward contracts at various times to mitigate the currency exchange rate risk on Canadian dollar denominated cash flows. These instruments have remaining maturities ranging from
two
to
twenty
months. The foreign currency forward contracts are considered non-designated derivative instruments and are not used for trading or speculative purposes. As a result, changes in fair value and settlements are recorded in gain (loss) on undesignated derivatives, net in the consolidated statements of operations.
11.
Accumulated Other Comprehensive Loss
The following tables summarize the changes in the accumulated other comprehensive loss balance, net of tax, by component (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
|
|
Effective Portion of Change in Fair Value of Derivatives
|
|
Proportionate Share of Equity Investee’s OCI
|
|
Total
|
Balances at December 31, 2015
|
$
|
(48,285
|
)
|
|
$
|
(13,462
|
)
|
|
$
|
(12,131
|
)
|
|
$
|
(73,878
|
)
|
Other comprehensive income (loss) before reclassifications
|
9,874
|
|
|
(30,990
|
)
|
|
(11,684
|
)
|
|
(32,800
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
8,359
|
|
|
2,752
|
|
|
11,111
|
|
Net current period other comprehensive income (loss)
|
9,874
|
|
|
(22,631
|
)
|
|
(8,932
|
)
|
|
(21,689
|
)
|
Balances at September 30, 2016
|
$
|
(38,411
|
)
|
|
$
|
(36,093
|
)
|
|
$
|
(21,063
|
)
|
|
$
|
(95,567
|
)
|
Less: accumulated other comprehensive loss attributable to noncontrolling interest, September 30, 2016
|
—
|
|
|
(1,418
|
)
|
|
—
|
|
|
(1,418
|
)
|
Accumulated other comprehensive loss attributable to Pattern Energy, September 30, 2016
|
$
|
(38,411
|
)
|
|
$
|
(34,675
|
)
|
|
$
|
(21,063
|
)
|
|
$
|
(94,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
|
|
Effective Portion of Change in Fair Value of Derivatives
|
|
Proportionate Share of Equity Investee’s OCI
|
|
Total
|
Balances at December 31, 2016
|
$
|
(43,500
|
)
|
|
$
|
(12,751
|
)
|
|
$
|
(6,498
|
)
|
|
$
|
(62,749
|
)
|
Other comprehensive income (loss) before reclassifications
|
17,979
|
|
|
(2,498
|
)
|
|
6,546
|
|
|
22,027
|
|
Amounts reclassified from accumulated other comprehensive loss due to termination of interest rate swaps
|
—
|
|
|
2,207
|
|
|
—
|
|
|
2,207
|
|
Other amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
7,023
|
|
|
6,471
|
|
|
13,494
|
|
Net current period other comprehensive income
|
17,979
|
|
|
6,732
|
|
|
13,017
|
|
|
37,728
|
|
Balances at September 30, 2017
|
$
|
(25,521
|
)
|
|
$
|
(6,019
|
)
|
|
$
|
6,519
|
|
|
$
|
(25,021
|
)
|
Less: accumulated other comprehensive loss attributable to noncontrolling interest, September 30, 2017
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
(200
|
)
|
Accumulated other comprehensive loss attributable to Pattern Energy, September 30, 2017
|
$
|
(25,521
|
)
|
|
$
|
(5,819
|
)
|
|
$
|
6,519
|
|
|
$
|
(24,821
|
)
|
Amounts reclassified from accumulated other comprehensive loss into net loss for the effective portion of change in fair value of derivatives is recorded to interest expense in the consolidated statements of operations. Amounts reclassified from accumulated other comprehensive loss into net loss for the Company’s proportionate share of equity investee’s other comprehensive loss is recorded to earnings (loss) in unconsolidated investments, net in the consolidated statements of operations.
12.
Fair Value Measurements
The Company’s fair value measurements incorporate various factors, including the credit standing and performance risk of the counterparties, the applicable exit market, and specific risks inherent in the instrument. Nonperformance and credit risk adjustments on risk management instruments are based on current market inputs when available, such as credit default hedge spreads. When such information is not available, internal models may be used.
Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to valuation of these assets or liabilities are set forth below. Transfers between levels are recognized at the end of each quarter. The Company did not recognize any transfers between levels during the periods presented.
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuations technique and the risk inherent in the inputs to the model.
Financial Instruments
The carrying value of financial instruments classified as current assets and current liabilities approximates their fair value, based on the nature and short maturity of these instruments, and they are presented in the Company’s financial statements at carrying cost. Certain other assets and liabilities were measured at fair value upon initial recognition and unless conditions give rise to an impairment, are not remeasured.
Financial Instruments Measured at Fair Value on a Recurring Basis
The Company’s financial assets and liabilities which require fair value measurement on a recurring basis are classified within the fair value hierarchy as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
2,907
|
|
|
$
|
—
|
|
|
$
|
2,907
|
|
Energy derivative
|
—
|
|
|
—
|
|
|
30,782
|
|
|
30,782
|
|
|
$
|
—
|
|
|
$
|
2,907
|
|
|
$
|
30,782
|
|
|
$
|
33,689
|
|
Liabilities
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
29,479
|
|
|
$
|
—
|
|
|
$
|
29,479
|
|
Foreign currency forward contracts
|
—
|
|
|
4,595
|
|
|
—
|
|
|
4,595
|
|
Contingent consideration
|
—
|
|
|
—
|
|
|
21,505
|
|
|
21,505
|
|
|
$
|
—
|
|
|
$
|
34,074
|
|
|
$
|
21,505
|
|
|
$
|
55,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
1,828
|
|
|
$
|
—
|
|
|
$
|
1,828
|
|
Energy derivative
|
—
|
|
|
—
|
|
|
40,916
|
|
|
40,916
|
|
Foreign currency forward contracts
|
—
|
|
|
1,546
|
|
|
—
|
|
|
1,546
|
|
|
$
|
—
|
|
|
$
|
3,374
|
|
|
$
|
40,916
|
|
|
$
|
44,290
|
|
Liabilities
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
36,048
|
|
|
$
|
—
|
|
|
$
|
36,048
|
|
Foreign currency forward contracts
|
—
|
|
|
391
|
|
|
—
|
|
|
391
|
|
|
$
|
—
|
|
|
$
|
36,439
|
|
|
$
|
—
|
|
|
$
|
36,439
|
|
Level 2 Inputs
Derivative instruments subject to re-measurement are presented in the financial statements at fair value. The Company's interest rate swaps were valued by discounting the net cash flows using the forward LIBOR curve with the valuations adjusted by the Company’s credit default hedge rate. The Company’s foreign currency forward contracts were valued using the income approach based on the present value of the forward rates less the contract rates, multiplied by the notional amounts.
Level 3 Inputs
Energy Hedge
The fair value of the energy derivative instrument is determined based on a third-party valuation model. The methodology and inputs are evaluated by management for consistency and reasonableness by comparing inputs used by the third-party valuation provider to another third-party pricing service for identical or similar instruments and also reconciling inputs used in the third-party valuation model to the derivative contract for accuracy. Any significant changes are further evaluated for reasonableness by obtaining additional documentation from the third-party valuation provider.
The energy derivative instrument is valued by discounting the projected net cash flows over the remaining life of the derivative instrument using forward electricity prices which are derived from observable prices, such as forward gas curves, adjusted by a non-observable heat rate for when the contract term extends beyond a period for which market data is available. The significant unobservable input in calculating the fair value of the energy derivative instrument is forward electricity prices. Significant increases or decreases in this unobservable input would result in a significantly lower or higher fair value measurement.
Contingent Consideration
The Broadview Project acquisition includes contingent consideration, which requires the Company to make an additional payment upon the commercial operation of the Grady Project. The contingent post-closing payment reflects the fair value of the Company's interest in the increase in the projected 25-year transmission wheeling revenue Western Interconnect will receive from the Grady Project, adjusted for the estimated production loss incurred by Broadview due to wake effects and transmission losses induced by the operation of the Grady Project. The fair value of the contingent consideration at the acquisition date was
$21.3 million
. The estimated fair value of the contingent consideration was calculated by using a discounted cash flow technique which utilized unobservable inputs presented in the table below. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. As of September 30, 2017, there were no significant changes in the recognized amount for the contingent consideration recognized as a result of the acquisition of the Broadview Project. Significant changes in these unobservable inputs may result in significant changes in fair value.
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows (in thousands, for fair value):
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Fair Value
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Range
|
Energy derivative
|
|
$30,782
|
|
Discounted cash flow
|
|
Forward electricity prices
|
|
$14.72 - $67.91
(1)
|
|
|
|
|
|
|
Discount rate
|
|
1.33% - 1.67%
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$21,505
|
|
Discounted cash flow
|
|
Discount rate
|
|
4.0% - 8.0%
|
|
|
|
|
|
|
Annual energy production loss
|
|
1%
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Fair Value
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Range
|
Energy derivative
|
|
$40,916
|
|
Discounted cash flow
|
|
Forward electricity prices
|
|
$15.83 - $81.76
(1)
|
|
|
|
|
|
|
Discount rate
|
|
1.00% - 1.52%
|
|
|
(1)
|
Represents price per MWh.
|
The following tables present a reconciliation of the energy derivative contract and contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
Energy Derivative
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Balances, beginning of period
|
|
$
|
33,895
|
|
|
$
|
49,531
|
|
|
$
|
40,916
|
|
|
$
|
63,683
|
|
Total gain (loss) included in electricity sales
|
|
83
|
|
|
2,326
|
|
|
4,144
|
|
|
1,659
|
|
Settlements
|
|
(3,196
|
)
|
|
(3,144
|
)
|
|
(14,278
|
)
|
|
(16,629
|
)
|
Balances, end of period
|
|
$
|
30,782
|
|
|
$
|
48,713
|
|
|
$
|
30,782
|
|
|
$
|
48,713
|
|
During the
three and nine
months ended
September 30, 2017
, the Company recognized an unrealized loss on the energy derivative of
$3.1 million
and
$10.1 million
, respectively, and
$0.8 million
and
$15.0 million
, respectively, for the same periods in the prior year, which were recorded to electricity sales on the consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
Contingent Consideration Liability
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Balances, beginning of period
|
|
$
|
21,502
|
|
|
N/A
|
|
$
|
—
|
|
|
N/A
|
Purchase
|
|
—
|
|
|
N/A
|
|
21,284
|
|
|
N/A
|
Total loss included in other income, net
|
|
3
|
|
|
N/A
|
|
221
|
|
|
N/A
|
Settlement
|
|
—
|
|
|
N/A
|
|
—
|
|
|
N/A
|
Balances, end of period
|
|
$
|
21,505
|
|
|
N/A
|
|
$
|
21,505
|
|
|
N/A
|
During the
three and nine
months ended
September 30, 2017
, the Company recognized an immaterial amount and
$0.2 million
, of unrealized loss on the contingent consideration liability, which was recorded to other income, net on the consolidated statements of operations.
Financial Instruments Not Measured at Fair Value
The following table presents the carrying amount and fair value and the fair value hierarchy of the Company’s financial liabilities that are not measured at fair value in the consolidated balance sheets, but for which fair value is disclosed (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
As reflected on the balance sheet
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
|
$
|
2,182,820
|
|
|
$
|
—
|
|
|
$
|
2,187,346
|
|
|
$
|
—
|
|
|
$
|
2,187,346
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
|
$
|
1,383,672
|
|
|
$
|
—
|
|
|
$
|
1,382,038
|
|
|
$
|
—
|
|
|
$
|
1,382,038
|
|
Long-term debt is presented on the consolidated balance sheets, net of financing costs, discounts and premiums. The fair value of variable interest rate long-term debt is approximated by its carrying cost. The fair value of fixed interest rate long-term debt is estimated based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied, using the net present value of cash flow streams over the term using estimated market rates for similar instruments and remaining terms.
13.
Stockholders' Equity
Common Stock
On May 9, 2016, the Company entered into an Equity Distribution Agreement with RBC Capital Markets, LLC, KeyBanc Capital Markets Inc. and Morgan Stanley & Co. LLC (collectively, the Agents). Pursuant to the terms of the Equity Distribution Agreement, the Company may offer and sell shares of the Company’s Class A common stock, par value
$0.01
per share, from time to time through the Agents, as the Company’s sales agents for the offer and sale of the shares, up to an aggregate sales price of
$200.0 million
. The Company intends to use the net proceeds from the sale of the shares for general corporate purposes, which may include the repayment of indebtedness and the funding of acquisitions and investments. For the
nine
months ended
September 30, 2017
, the Company sold
931,561
shares under the Equity Distribution Agreement; net proceeds under the issuance were
$22.5 million
and the aggregate compensation paid by the Company to the Agents with respect to such sales was
$0.2 million
. As of
September 30, 2017
, approximately
$147.5 million
in aggregate offering price remained available to be sold under the agreement.
Dividends
The following table presents cash dividends declared on Class A common stock for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
Per Share
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
2017:
|
|
|
|
|
|
|
|
Third Quarter
|
$
|
0.4200
|
|
|
August 3, 2017
|
|
September 29, 2017
|
|
October 31, 2017
|
Second Quarter
|
$
|
0.4180
|
|
|
May 4, 2017
|
|
June 30, 2017
|
|
July 31, 2017
|
First Quarter
|
$
|
0.4138
|
|
|
February 24, 2017
|
|
March 31, 2017
|
|
April 28, 2017
|
Noncontrolling Interests
The following table presents the balances for noncontrolling interests by project (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2017
|
|
2016
|
El Arrayán
|
$
|
31,476
|
|
|
$
|
32,237
|
|
Logan's Gap
|
171,882
|
|
|
180,092
|
|
Panhandle 1
|
178,471
|
|
|
190,415
|
|
Panhandle 2
|
155,989
|
|
|
170,139
|
|
Post Rock
|
165,572
|
|
|
178,676
|
|
Amazon Wind Farm Fowler Ridge
|
135,176
|
|
|
139,687
|
|
Broadview Project
|
313,275
|
|
|
—
|
|
Meikle
|
65,508
|
|
|
—
|
|
Noncontrolling interest
|
$
|
1,217,349
|
|
|
$
|
891,246
|
|
On June 16, 2017, the Company entered into a Purchase and Sale Agreement (the PH2 PSA) with PSP. Upon the terms and subject to the conditions set forth in the PH2 PSA, at the closing, the Company (or one or more of its affiliates) will sell to the investor
49%
of the Class B membership interests in Panhandle 2 holdings (which holds
100%
of the membership interests in Panhandle 2) for consideration of
$58.8 million
(subject to certain adjustments).
The following table presents the components of total noncontrolling interest as reported in stockholders’ equity and the consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
Accumulated Loss
|
|
Accumulated Other Comprehensive Loss
|
|
Noncontrolling Interest
|
Balances at December 31, 2015
|
$
|
972,241
|
|
|
$
|
(27,426
|
)
|
|
$
|
(553
|
)
|
|
$
|
944,262
|
|
Distributions to noncontrolling interests
|
(11,771
|
)
|
|
—
|
|
|
—
|
|
|
(11,771
|
)
|
Other
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
Net loss
|
—
|
|
|
(24,838
|
)
|
|
—
|
|
|
(24,838
|
)
|
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
(865
|
)
|
|
(865
|
)
|
Balances at September 30, 2016
|
$
|
960,367
|
|
|
$
|
(52,264
|
)
|
|
$
|
(1,418
|
)
|
|
$
|
906,685
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016
|
$
|
954,242
|
|
|
$
|
(62,614
|
)
|
|
$
|
(382
|
)
|
|
$
|
891,246
|
|
Acquisition of Broadview Project and Meikle
|
390,389
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
390,389
|
|
Distributions to noncontrolling interests
|
(13,701
|
)
|
|
—
|
|
|
—
|
|
|
(13,701
|
)
|
Other
|
(201
|
)
|
|
—
|
|
|
—
|
|
|
(201
|
)
|
Net loss
|
—
|
|
|
(50,566
|
)
|
|
—
|
|
|
(50,566
|
)
|
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
182
|
|
|
182
|
|
Balances at September 30, 2017
|
$
|
1,330,729
|
|
|
$
|
(113,180
|
)
|
|
$
|
(200
|
)
|
|
$
|
1,217,349
|
|
14.
Loss Per Share
Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the reportable period. Diluted earnings (loss) per share is computed by adjusting basic earnings (loss) per share for the effect of all potential common shares unless they are anti-dilutive. For purpose of this calculation, potentially dilutive securities are determined by applying the treasury stock method to the assumed exercise of in-the-money stock options and the assumed vesting of outstanding restricted stock awards (RSAs) and release of deferred restricted stock units (RSUs). Potentially dilutive securities related to convertible senior notes are determined using the if-converted method.
The Company's vested deferred RSUs have non-forfeitable rights to dividends prior to release and are considered participating securities. Accordingly, they are included in the computation of basic and diluted loss per share, pursuant to the two-class method. Under the two-class method, distributed and undistributed earnings allocated to participating securities are excluded from net earnings (loss) attributable to common stockholders for purposes of calculating basic and diluted earnings (loss) per share. However, net losses are not allocated to participating securities since they are not contractually obligated to share in the losses of the Company.
Potentially dilutive securities excluded from the calculation of diluted earnings (loss) per share because their effect would have been anti-dilutive were
9,014,397
and
8,967,019
, respectively, for the
three and nine
months ended
September 30, 2017
and
8,121,850
and
8,115,741
, respectively, for the
three and nine
months ended
September 30, 2016
.
The computations for Class A basic and diluted loss per share are as follows (in thousands except share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Numerator for basic and diluted loss per share:
|
|
|
|
|
|
|
|
Net loss attributable to Pattern Energy
|
$
|
(29,828
|
)
|
|
$
|
(4,013
|
)
|
|
$
|
(9,955
|
)
|
|
$
|
(30,906
|
)
|
Less: loss allocated to participating securities
|
(29
|
)
|
|
(16
|
)
|
|
(74
|
)
|
|
(36
|
)
|
Net loss attributable to common stockholders
|
$
|
(29,857
|
)
|
|
$
|
(4,029
|
)
|
|
$
|
(10,029
|
)
|
|
$
|
(30,942
|
)
|
|
|
|
|
|
|
|
|
Denominator for loss per share:
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
Class A common stock - basic
|
87,370,979
|
|
|
81,531,775
|
|
|
87,146,465
|
|
|
76,821,811
|
|
Class A common stock - diluted
|
87,370,979
|
|
|
81,531,775
|
|
|
87,146,465
|
|
|
76,821,811
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
Class A common stock:
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.34
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.40
|
)
|
|
|
|
|
|
|
|
|
Dividends declared per Class A common share
|
$
|
0.42
|
|
|
$
|
0.40
|
|
|
$
|
1.25
|
|
|
$
|
1.17
|
|
15.
Commitments and Contingencies
Commitments
Acquisition commitments
On June 16, 2017, the Company entered into a purchase and sale agreement with Pattern Development 1.0 to purchase (i) a
51%
limited partner interest in a newly-formed limited partnership (which will hold
100%
of the economic interests in Mont Sainte-Marguerite Wind Farm LP (MSM), (ii) a
70%
interest in Pattern MSM GP Holdings Inc., and (iii) a
70%
interest in Pattern Development MSM Management ULC, in exchange for aggregate consideration of CAD
$53.0 million
(subject to certain adjustments). MSM operates the approximately
143
MW wind farm located near Québec City, Canada.
Investment commitments
On June 16, 2017, the Company entered into the Second Amended and Restated Agreement of Limited Partnership (A&R PEGH 2 LPA) of PEGH 2. In July 2017, PEGH 2 made a capital call of its new limited partners under the A&R PEGH 2 LPA (the Initial PEGH 2 Capital Call). In connection with the Initial PEGH 2 Capital Call, the Company made a contribution to PEGH 2 of approximately
$60.0 million
. As a result of the funding under the Initial PEGH 2 Capital Call and the consummation of certain redemptions, the Company holds an approximate
20%
ownership interest in PEGH 2. See Note 3,
Acquisitions
, for discussion of the acquisition
.
Under the A&R PEGH 2 LPA, the Company has also committed to contribute up to an additional approximately
$240.0 million
to PEGH 2 in one or more subsequent rounds of financing, which could result in the Company's ownership interest in PEGH 2 increasing to up to approximately
29%
. If the Company elects not to participate in such subsequent rounds of financing, its ownership interest in PEGH 2 may be diluted on a pro rata basis based on fair market value.
Completed Acquisition Commitments
As part of the acquisitions completed in 2017, the Company became party to various agreements and future commitments. The following table summarizes estimates of future commitments related to the various agreements entered into as part of the acquisitions completed in 2017 (in thousands) as of
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder of 2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
Transmission service agreements
(1)
|
$
|
6,723
|
|
|
$
|
23,600
|
|
|
$
|
23,600
|
|
|
$
|
23,600
|
|
|
$
|
23,600
|
|
|
$
|
543,246
|
|
|
$
|
644,369
|
|
Payments in lieu of taxes
|
121
|
|
|
481
|
|
|
476
|
|
|
412
|
|
|
406
|
|
|
9,635
|
|
|
11,531
|
|
Operating leases
|
55
|
|
|
1,504
|
|
|
1,956
|
|
|
1,957
|
|
|
1,958
|
|
|
57,982
|
|
|
65,412
|
|
Service and maintenance agreements
|
2,728
|
|
|
10,999
|
|
|
5,866
|
|
|
4,208
|
|
|
4,292
|
|
|
365
|
|
|
28,458
|
|
Other
|
270
|
|
|
701
|
|
|
714
|
|
|
498
|
|
|
430
|
|
|
3,536
|
|
|
6,149
|
|
Total commitments
|
$
|
9,897
|
|
|
$
|
37,285
|
|
|
$
|
32,612
|
|
|
$
|
30,675
|
|
|
$
|
30,686
|
|
|
$
|
614,764
|
|
|
$
|
755,919
|
|
(1) Future commitments under the transmission service agreements are based on current rates, which are subject to future changes.
Transmission Service Agreements
In connection with the Broadview Project acquisition, the Company became a party to various long-term transmission service agreements expiring between
25
-
30
years. The Company recorded transmission service costs related to such agreements of
$7.4 million
and
$12.0 million
for the three and nine months ended
September 30, 2017
, respectively.
Payments in Lieu of Taxes
As discussed earlier in Note 5,
Finite-Lived Intangible Assets and Liability,
in connection with the Broadview Project acquisition, the Company is required to make payments in lieu of taxes as a result of tax savings realized as part of the issuance of the industrial revenue bonds.
Other Commitments
Operating Leases
The Company has entered into various long-term operating lease agreements related to lands for its wind farms. For the nine months ended September 30, 2017 and
2016
, the Company recorded rent expenses of
$10.2 million
and
$9.8 million
, respectively, in project expense in its consolidated statements of operations.
Service and Maintenance Agreements
In March 2017, the Company entered into revised Long-term Service Agreements (LTSAs) at certain of its projects pursuant to which the turbine manufacturer will continue to provide routine and corrective maintenance service, but the Company has become responsible for a portion of the maintenance and repairs, including on major component parts. As a result of the revised LTSAs, the fixed contract commitments were reduced from that disclosed in the Company's 2016 Form 10-K by
$102.2 million
over a period of
ten years
.
Letters of Credit
Power Sale Agreements
The Company owns and operates wind power projects, and has entered into various long-term power sale agreements that terminate from
2019
to
2042
. The terms of these agreements generally provide for the annual delivery of a minimum amount of electricity at fixed prices and in some cases include price escalation over the term of the agreement. Under the terms of these agreements, as of
September 30, 2017
, the Company issued irrevocable letters of credits to guarantee its performance for the duration of the agreements totaling
$156.6 million
.
Project Finance and Lease Agreements
The Company has various project finance and lease agreements which obligate the Company to provide certain reserves to enhance its credit worthiness and facilitate the availability of credit. As of
September 30, 2017
, the Company issued irrevocable letters of credit totaling
$162.0 million
which includes letters of credit issued under the Revolving Credit Facility to ensure performance under the various project finance and lease agreements.
Contingencies
Turbine Operating Warranties and Service Guarantees
The Company has various turbine availability warranties from its turbine manufacturers and service guarantees from its service and maintenance providers. Pursuant to these guarantees, if a turbine operates at less than minimum availability during the guarantee measurement period, the service provider is obligated to pay, as liquidated damages at the end of the warranty measurement period, an amount for each percent that the turbine operates below the minimum availability threshold. In addition, pursuant to certain of these guarantees, if a turbine operates at more than a specified availability during the guarantee measurement period, the Company has an obligation to pay a bonus to the service provider at the end of the warranty measurement period. As of
September 30, 2017
, the Company recorded liabilities of
$1.8 million
associated with bonuses payable to the turbine manufacturers and service providers.
Contingencies in connection with the Broadview Project Acquisition
The Company recorded a
$7.2 million
contingent obligation, payable to a third party who holds a
1%
interest in Western Interconnect, at fair value upon the acquisition of the Broadview Project. These contingent payments are subject to certain conditions, including the actual energy production of Broadview in a production year and the continued operation of Broadview. Additionally, the Company recorded a
$29.0 million
contingent obligation, payable to the same counterparty, at fair value upon the acquisition of the Broadview Project. These contingent payments are subject to certain conditions, including the commercial operation of the Grady Project. The contingent payment is calculated as a percentage of additional transmission revenue earned by Western Interconnect upon the Grady Project's commercial operation.
Legal Matters
From time to time, the Company has become involved in claims and legal matters arising in the ordinary course of business. Management is not currently aware of any matters that will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
Indemnity
The Company provides a variety of indemnities in the ordinary course of business to contractual counterparties and to its lenders and other financial partners. The Company is party to certain indemnities for the benefit of project finance lenders and tax equity partners of certain projects. These consist principally of indemnities that protect the project finance lenders from, among other things, the potential effect of any recapture by the U.S. Department of the Treasury of any amount of the Cash Grants previously received by the projects and eligibility of production tax credits and certain legal matters, limited to the amount of certain related costs and expenses.
16.
Related Party Transactions
Management Fees
The Company provides management services and receives a fee for such services under agreements with its joint venture investees, South Kent, Grand, K2, and Armow, in addition to various Pattern Development 1.0 subsidiaries and equity method investments. The Company reclassified its presentation of management service fees received from related party revenue, as disclosed in prior periods, to other revenue on the consolidated statements of operations.
Management Services Agreement and Shared Management
The Company has entered into a Multilateral Management Services Agreement (MSA) with the Pattern Development Companies, which provides for the Company and the Pattern Development Companies to benefit, primarily on a cost-reimbursement basis, from the parties’ respective management and other professional, technical and administrative personnel, all of whom report to the Company’s executive officers. Costs and expenses incurred at the Pattern Development Companies or their respective subsidiaries on the Company's behalf will be allocated to the Company. Conversely, costs and expenses incurred at the Company or its respective subsidiaries on the behalf of a Pattern Development Company will be allocated to the respective Pattern Development Company.
Pursuant to the MSA, certain of the Company’s executive officers, including its Chief Executive Officer (shared PEG executives), also serve as executive officers of the Pattern Development Companies and devote their time to both the Company and the Pattern Development Companies as is prudent in carrying out their executive responsibilities and fiduciary duties. The shared PEG executives have responsibilities for both the Company and the respective Pattern Development Companies and, as a result, these individuals do not devote all of their time to the Company’s business. Under the terms of the MSA, each of the respective Pattern Development Companies is required to reimburse the Company for an allocation of the compensation paid to such shared PEG executives reflecting the percentage of time spent providing services to such Pattern Development Company. The Company reclassified its presentation of related party receivables and payables as disclosed in prior periods to be presented within other current assets and other current liabilities on the consolidated balance sheets, respectively. In addition, the Company reclassified its presentation of reimbursements received by the Pattern Development Companies under the MSA from related party income, as disclosed in prior periods, to a reduction to general and administrative expense on the consolidated statements of operations. The MSA costs incurred by the Company are included in related party general and administrative on the consolidated statements of operations. The MSA had been further amended and restated in June 2017.
Related
Party Transactions
The table below presents amounts due from and to related parties as included in the consolidated balance sheets for the following periods (in millions):
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
Other current assets:
|
|
|
|
Amounts due from Pattern Development 1.0
|
$
|
6.1
|
|
|
$
|
0.4
|
|
Amounts due from Pattern Development 2.0
|
0.9
|
|
|
0.2
|
|
Amounts due from unconsolidated investments
|
0.5
|
|
|
0.5
|
|
Total due from related parties
|
$
|
7.5
|
|
|
$
|
1.1
|
|
|
|
|
|
Other current liabilities:
|
|
|
|
Amounts due to Pattern Development 1.0
|
$
|
11.3
|
|
|
$
|
1.3
|
|
Total due to related parties
|
$
|
11.3
|
|
|
$
|
1.3
|
|
The table below presents revenue, reimbursement and (expenses) recognized for management fees and the MSA, as included in the statements of operations for the following periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
Related Party Agreement
|
|
Financial Statement Line Item
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Management fees
|
|
Other revenue
|
$
|
1,883
|
|
|
$
|
1,574
|
|
|
$
|
5,887
|
|
|
$
|
4,121
|
|
MSA reimbursement
|
|
General and administrative
|
$
|
2,194
|
|
|
$
|
1,593
|
|
|
$
|
6,083
|
|
|
$
|
3,697
|
|
MSA costs
|
|
Related party general and administrative expense
|
$
|
(3,587
|
)
|
|
$
|
(3,553
|
)
|
|
$
|
(10,589
|
)
|
|
$
|
(7,381
|
)
|
Purchase and Sales Agreements
During the nine months ended September 30, 2017, the Company consummated the following acquisitions with Pattern Development 1.0 and 2.0 which are further detailed in Note
3
,
Acquisitions
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions from Pattern Development 2.0
|
|
Date of Acquisition
|
|
Cash Consideration
|
|
Debt Assumed
|
|
Contingent Consideration
|
PEGH 2 Investment
|
|
July 27, 2017
|
|
$
|
60.0
|
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions from Pattern Development 1.0
|
|
Date of Acquisition
|
|
Cash Consideration
|
|
Debt Assumed
|
|
Contingent Consideration
|
Broadview Project
|
|
April 21, 2017
|
|
$
|
214.7
|
|
|
$
|
51.2
|
|
|
$
|
21.3
|
|
Meikle
|
|
August 10, 2017
|
|
$
|
67.4
|
|
|
265.6
|
|
|
N/A
|
|
PSP Joint Venture
The Company entered into a Joint Venture Agreement with PSP pursuant to which PSP will have the right to co-invest up to an aggregate amount of approximately
$500 million
in projects acquired by the Company under its ROFO with the Pattern Development Companies, including investments in Meikle, MSM and Panhandle 2. On
June 16, 2017
, PSP purchased approximately
8.7 million
shares of the Company's common stock from Pattern Development 1.0. As a result, PSP has an approximate
9.8%
ownership interest in the Company as of
September 30, 2017
. PSP purchased an additional
641,025
shares from the Company's public offering that occurred on
October 23, 2017
. See Note 17,
Subsequent Events
for additional details of the Company's public offering.
17.
Subsequent Events
On
October 26, 2017
, the Company declared an increased dividend for the fourth quarter, payable on
January 31, 2018
, to holders of record on
December 29, 2017
, in the amount of
$0.422
per Class A share, or
$1.69
on an annualized basis. This is a
0.5%
increase from the third quarter of 2017.
On
October 23, 2017
, the Company completed an underwritten public offering of its Class A common stock. In total,
9,200,000
shares of the Company's Class A common stock were sold at a public offering price of
$23.40
per share. This includes
1,200,000
shares purchased by the underwriters to cover over-allotments. Aggregate net proceeds of the equity offering, including the proceeds of the over-allotment option, were approximately
$212.1 million
after deduction of underwriting discounts, commissions, and transaction expenses.