TerraForm Power, Inc. (Nasdaq:TERP) (“
TerraForm
Power”) today reported financial results for the three
months ended September 30, 2017.
“We are very excited about the prospects for TerraForm Power,”
said John Stinebaugh, CEO of TerraForm Power. “With our
high-quality fleet of solar and wind assets and the support of our
sponsor, we are confident that we can deliver an attractive total
return to our shareholders comprised of a dividend backed by the
stable cash flow from our assets and growth that is sustainable
over the long term.”
Q3 2017 Results
|
Q3 2017 |
Q3 2016 |
|
9 Months Ended9/30/2017 |
9 Months Ended9/30/2016 |
Generation (GWh) 1 |
|
1,378 |
|
|
1,582 |
|
|
|
5,315 |
|
|
5,504 |
|
Net Loss ($M) |
$ |
(35 |
) |
$ |
(28 |
) |
|
$ |
(92 |
) |
$ |
(106 |
) |
per Share 2 |
$ |
(0.31 |
) |
$ |
(0.29 |
) |
|
$ |
(0.62 |
) |
$ |
(0.53 |
) |
Adj. EBITDA 1 |
$ |
109 |
|
$ |
119 |
|
|
$ |
344 |
|
$ |
369 |
|
CAFD ($M) 1 |
$ |
25 |
|
$ |
34 |
|
|
$ |
92 |
|
$ |
145 |
|
per Share 2 |
$ |
0.18 |
|
$ |
0.24 |
|
|
$ |
0.65 |
|
$ |
1.04 |
|
1 Adjusted for sale of our UK and Residential portfolios.
See discussion regarding use of non-GAAP measures at the end
of this press release2 Calculated on a fully diluted basis
Financial Results and Operations
During the third quarter, our portfolio performed slightly below
expectations, delivering adjusted EBITDA and CAFD of $109 million
and $25 million, respectively. This represents a decrease of
$10 million and $9 million, respectively, compared to the same
period last year when we delivered adjusted EBITDA and CAFD of $119
million and $34 million, respectively. The decrease was
largely due to unusually weak wind resource, which was ~20% below
average for the quarter, resulting in a 13% decrease in total
generation compared to the prior year. Wind resource was
particularly low at our Hawaii projects, which have a higher than
average contract price. Solar resource was also ~5% below
normal levels. During the quarter, our fleet availability of
96% continued to show improvement and has further room to increase
as we complete the transition to stand alone operations.
After quarter end, we signed an EPC contract to upgrade the
batteries at one of our Hawaii wind projects where we are replacing
lead acid batteries with lithium ion batteries. Due to lower
maintenance expense associated with these new batteries, we expect
to earn ~20% unlevered return on the investment of $11
million. In addition, we believe there may be opportunities
in the future to expand our battery farm in order to provide
further ancillary services for the local utility.
During the quarter, we revised our definition of CAFD to
adjusted EBITDA minus cash distributions to non-controlling
interest, annualized interest and project-level amortization
payments and average annualized long-term sustaining capital
expenditures required to maintain reliability and efficiency of our
assets, plus any operating items that are representative of our
core business operations. We revised our definition as we believe
it provides a more meaningful measure for investors to evaluate our
financial and operating performance and ability to pay
dividends. We encourage you to review the discussion
regarding the use of non-GAAP measures at the end of this
press release for more detail.
TerraForm Power’s Value
Proposition
Our goal is to deliver a total return of approximately 12% to
shareholders that is sustainable over the long term. We
expect this total return will be comprised of an attractive
dividend yield, supported by a payout ratio of 80-85% of CAFD, plus
dividend per share growth of 5-8%. Over the next five years,
we see multiple paths to achieving this growth plan and delivering
compelling returns to our investors.
1) Margin Enhancements
We believe there is significant opportunity to enhance our cash
flow through productivity enhancements. Within the first
year, we are targeting approximately $10 million of cost savings by
streamlining our organization structure. We are in the
process of implementing a structure which is flatter and eliminates
duplicative functions. In addition, we are planning to
automate a number of processes that are currently very labor
intensive and in-source asset management and certain back office
functions.
Over the next 2 to 3 years, we are targeting an additional $15
million in cost savings through reductions in O&M expense of $2
per MWh. We believe these O&M cost savings are achievable in
part because we have a number of legacy service agreements in our
wind fleet with prices that are significantly above current
market. Over the past few years, there has been increased
competition in the service sector as OEMs have been competing to
gain market share by offering contracts that offer both greater
coverage as well as lower rates as compared to those in our legacy
agreements. Alternatively, we are exploring whether we can achieve
greater benefits by adopting an in-sourcing operating model that
leverages Brookfield’s experience in establishing an organization
to self-perform its renewable power O&M. We are pleased that we
have two paths to achieve our cost savings objectives.
Whether we recontract with OEMs or in-source will ultimately depend
upon which option offers the best combination of lowest cost, risk
mitigation and flexibility for our operations. In total, we
expect these margin enhancements to provide cash flow increases to
largely fund our dividend per share growth targets through
2020.
2) Organic Growth
In addition to cost savings, we are very focused on developing a
robust organic growth pipeline comprised of opportunities to invest
in our existing fleet on accretive basis as well as add-on
acquisitions across our scope of operations. We have
identified several compelling opportunities to invest in our fleet,
including asset repowerings, site expansions and potentially adding
energy storage to existing sites.
There are potential opportunities to repower several of our wind
farms in the Northeast and Hawaii by replacing older turbines with
new turbines that have increased rotor diameter and superior power
generation. With these repowering opportunities, we would be able
to utilize existing infrastructure such as the wind farm’s
substation, electrical collection systems and potentially its
towers, subject to providing necessary reinforcement to the
foundations. The preliminary economics for these projects are quite
compelling, as they are able to generate incremental power at much
lower cost compared to new, greenfield wind projects.
However, we will be disciplined and only plan to proceed if we are
able to secure long term contracts that mitigate the price risk of
these projects.
Another opportunity for organic growth is the potential
repowering of projects in our distributed generation solar fleet.
Our distributed generation projects typically sell power to
customers “behind the meter” at rates that are at a discount to
their utility rate. As solar panel costs have declined
significantly over the last several years and the efficiency of the
panels has increased, there may be opportunities to replace older
panels with higher output, lower cost modules as well as to expand
the footprint of our solar arrays. We believe this type of
repowering represents a “win-win” situation, as our corporate and
municipal customers would see even greater savings on their
electricity bill, and TerraForm Power would be able to earn
attractive returns on its incremental capital investment.
In addition to these opportunities, we also will seek to develop
relationships with undercapitalized, private developers that have
local expertise and traction in key markets. With Brookfield’s
support, we should be able to offer these smaller developers
capital as well as assistance in developing their projects. In
return, we would look to secure a right of first offer on these
projects. We believe these relationships should produce add-on
acquisitions with attractive returns compared to auction
processes.
We look forward to providing further updates on these organic
growth initiatives as they progress.
3) Value-Oriented Acquisitions
We are currently evaluating a number of acquisition
opportunities, leveraging Brookfield’s significant business
development team in our target markets of North America and Western
Europe. With the relationships that Brookfield has developed,
its team has been very effective at sourcing off-market
transactions at more attractive valuations than auction
processes. Brookfield has a track record of executing
multi-faceted transactions such as take-privates and
recapitalizations that have historically enabled it to acquire high
quality assets at attractive relative values.
Furthermore, TerraForm Power has a right of first offer (ROFO)
to acquire renewable power assets in North America and Western
Europe owned by Brookfield and its affiliates. The ROFO
portfolio currently stands at 3,500 MW. Over time, as
Brookfield entities look to sell these assets, TerraForm Power will
have the opportunity to make offers for these assets and
potentially purchase them if the prices meet our investment
objectives.
We believe that TerraForm Power will be able to achieve its
dividend growth and total return objectives over the next five
years from cost savings and investments in organic growth
opportunities. Our five-year business plan requires a modest amount
of equity issuance of ~$100 million. This will allow us to be
patient and disciplined, and we will only pursue larger,
value-oriented acquisitions to the extent that they provide upside
to our business plan.
Balance Sheet
Since the Brookfield transaction was announced in March, we have
taken steps to strengthen our balance sheet and bolster our
liquidity. This progress was recently acknowledged when we
received upgrades in our corporate credit rating to BB- from
S&P and B1 from Moody’s. In the past six months, we have
repaid over $450 million of debt with proceeds from asset sales and
free cash flow. With the close of the Brookfield transaction, we
received a change of control waiver for our $1.25 billion of
unsecured bonds and executed a $450 million revolving credit
facility with relationship banks in replacement of our previous
facility. In early November, we issued a $350 million term
loan that was used to repay an intermediate holdco loan,
simplifying our capital structure. We are very pleased with
the execution of this financing, which we upsized by $50 million
and priced at LIBOR + 275, a tightening of 75 basis points below
initial price guidance. We believe this is an affirmation of
Brookfield’s sponsorship and our plan to further strengthen our
balance sheet over time
With the repayment of the intermediate holdco loan, there will
no longer be any debt between our projects and our corporate
debt. Going forward, we intend to reduce corporate leverage
by raising project debt on certain of our unlevered projects and
using the proceeds to repay corporate debt. As we grow, we
expect to finance acquisitions primarily using non-recourse debt
with investment grade metrics, further deleveraging our balance
sheet. Over the medium term, our objective is to reduce our
corporate debt to cash flow available for debt service (CFADS)
ratio to between 4-5 times.
About TerraForm Power
TerraForm Power owns and operates a best-in-class renewable
power portfolio of solar and wind assets located primarily in the
U.S., totaling more than 2,600 megawatts of installed
capacity. TerraForm Power has a mandate to acquire operating
solar and wind assets in North America and Western Europe.
TerraForm Power is listed on the Nasdaq stock exchange
(Nasdaq:TERP). It is sponsored by Brookfield Asset
Management, a leading global alternative asset manager with more
than US$250 billion of assets under management.
For more information about TerraForm Power, please visit:
www.terraformpower.com.
Contacts for Investors / Media:
Brett PriorTerraForm Powerinvestors@terraform.com
Quarterly Earnings Call Details
Investors, analysts and other interested parties can access
TerraForm Power’s 2017 Third Quarter Results as well as the Letter
to Shareholders and Supplemental Information on TerraForm Power’s
website at www.terraformpower.com.
The conference call can be accessed via webcast on November 10,
2017 at 9:30 a.m. Eastern Time at
https://edge.media-server.com/m6/p/g7z2anva or via teleconference
at 1-844-464-3938 toll free in North America. For overseas calls
please dial 1-765-507-2638, at approximately 9:20 a.m. Eastern
Time. A replay of the webcast will be available for those unable to
attend the live webcast.
Safe Harbor Disclosure
This communication contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements can be identified by the fact that they do not relate
strictly to historical or current facts. These statements involve
estimates, expectations, projections, goals, assumptions, known and
unknown risks, and uncertainties and typically include words or
variations of words such as “expect,” “anticipate,” “believe,”
“intend,” “plan,” “seek,” “estimate,” “predict,” “project,” “goal,”
“guidance,” “outlook,” “objective,” “forecast,” “target,”
“potential,” “continue,” “would,” “will,” “should,” “could,” or
“may” or other comparable terms and phrases. All statements that
address operating performance, events, or developments that
TerraForm Power expects or anticipates will occur in the future are
forward-looking statements. They may include estimates of cash
available for distribution (CAFD), dividend growth, cost savings
initiatives, earnings, adjusted EBITDA, revenues, income, loss,
capital expenditures, liquidity, capital structure, future growth,
and other financial performance items (including future dividends
per share), descriptions of management’s plans or objectives for
future operations, products, or services, or descriptions of
assumptions underlying any of the above. Forward-looking statements
provide TerraForm Power’s current expectations or predictions of
future conditions, events, or results and speak only as of the date
they are made. Although TerraForm Power believes its
expectations and assumptions are reasonable, it can give no
assurance that these expectations and assumptions will prove to
have been correct and actual results may vary materially.
By their nature, forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements.
Factors that might cause such differences include, but are not
limited to, risks related to the transition to Brookfield
sponsorship; risks related to the SunEdison bankruptcy, including
our transition away from reliance on SunEdison for certain services
including critical systems and information technology
infrastructure; risks related to wind conditions at our wind assets
or to weather conditions at our solar assets; risks related to
potential events of default at our project financings; risks
related to delays in our filing of periodic reports with the SEC;
risks related to the effectiveness of our internal controls over
financial reporting; pending and future litigation; our ability to
successfully identify, evaluate, and consummate acquisitions; our
ability to integrate the projects we acquire from third parties or
otherwise realize the anticipated benefits from such acquisitions;
the willingness and ability of counterparties to fulfill their
obligations under offtake agreements; price fluctuations,
termination provisions and buyout provisions in offtake agreements;
government regulation, including compliance with regulatory and
permit requirements and changes in market rules, rates, tariffs,
environmental laws and policies affecting renewable energy;
operating and financial restrictions under agreements governing
indebtedness; the condition of the debt and equity capital markets
and our ability to borrow additional funds and access capital
markets, as well as our substantial indebtedness and the
possibility that we may incur additional indebtedness going
forward; cash trapped at the project level, including the risk that
such project-level cash may not be released up to the Company in a
timely manner; risks related to the proposed relocation of the
Company’s headquarters; our ability to compete against traditional
and renewable energy companies; and hazards customary to the power
production industry and power generation operations, such as
unusual weather conditions and outages. Furthermore, any dividends
that we may pay in the future will be subject to available capital,
market conditions, and compliance with associated laws and
regulations. Many of these factors are beyond TerraForm Power’s
control.
TerraForm Power disclaims any obligation to publicly update or
revise any forward-looking statement to reflect changes in
underlying assumptions, factors, or expectations, new information,
data, or methods, future events, or other changes, except as
required by law. The foregoing list of factors that might cause
results to differ materially from those contemplated in the
forward-looking statements should be considered in connection with
information regarding risks and uncertainties which are described
in TerraForm Power’s Form 10-K for the fiscal year ended December
31, 2016, as well as additional factors it may describe from time
to time in other filings with the Securities and Exchange
Commission. You should understand that it is not possible to
predict or identify all such factors and, consequently, you should
not consider any such list to be a complete set of all potential
risks or uncertainties.
|
TERRAFORM POWER, INC AND
SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share
data) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Operating revenues,
net |
$ |
153,430 |
|
|
$ |
178,118 |
|
|
$ |
474,932 |
|
|
$ |
519,336 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Cost of
operations |
41,859 |
|
|
32,820 |
|
|
108,402 |
|
|
94,534 |
|
Cost of
operations - affiliate |
1,199 |
|
|
7,149 |
|
|
10,224 |
|
|
22,898 |
|
General
and administrative expenses |
21,664 |
|
|
26,510 |
|
|
99,644 |
|
|
64,750 |
|
General
and administrative expenses - affiliate |
2,192 |
|
|
2,943 |
|
|
6,893 |
|
|
10,614 |
|
Acquisition and related costs |
— |
|
|
— |
|
|
— |
|
|
2,743 |
|
Impairment of renewable energy facilities |
— |
|
|
— |
|
|
1,429 |
|
|
— |
|
Depreciation, accretion and amortization expense |
61,830 |
|
|
57,988 |
|
|
186,039 |
|
|
178,026 |
|
Total
operating costs and expenses |
128,744 |
|
|
127,410 |
|
|
412,631 |
|
|
373,565 |
|
Operating income |
24,686 |
|
|
50,708 |
|
|
62,301 |
|
|
145,771 |
|
Other expenses
(income): |
|
|
|
|
|
|
|
Interest
expense, net |
70,232 |
|
|
72,818 |
|
|
206,749 |
|
|
243,111 |
|
Gain on
sale of renewable energy facilities |
— |
|
|
— |
|
|
(37,116 |
) |
|
— |
|
(Gain)
loss on foreign currency exchange, net |
(1,078 |
) |
|
3,913 |
|
|
(5,695 |
) |
|
4,161 |
|
Loss on
receivables - affiliate |
— |
|
|
— |
|
|
— |
|
|
845 |
|
Other
(income) expenses, net |
(7,015 |
) |
|
548 |
|
|
(4,882 |
) |
|
692 |
|
Total
other expenses, net |
62,139 |
|
|
77,279 |
|
|
159,056 |
|
|
248,809 |
|
Loss before income tax
(benefit) expense |
(37,453 |
) |
|
(26,571 |
) |
|
(96,755 |
) |
|
(103,038 |
) |
Income tax (benefit)
expense |
(2,633 |
) |
|
1,140 |
|
|
(4,982 |
) |
|
3,115 |
|
Net loss |
(34,820 |
) |
|
(27,711 |
) |
|
(91,773 |
) |
|
(106,153 |
) |
Less: Net income
attributable to redeemable non-controlling interests |
6,803 |
|
|
4,642 |
|
|
18,162 |
|
|
16,374 |
|
Less: Net loss
attributable to non-controlling interests |
(15,077 |
) |
|
(6,182 |
) |
|
(59,045 |
) |
|
(74,968 |
) |
Net loss attributable
to Class A common stockholders |
$ |
(26,546 |
) |
|
$ |
(26,171 |
) |
|
$ |
(50,890 |
) |
|
$ |
(47,559 |
) |
|
|
|
|
|
|
|
|
Weighted
average number of shares: |
|
|
|
|
|
|
|
Class A common stock - Basic and diluted |
92,352 |
|
|
90,860 |
|
|
92,228 |
|
|
89,140 |
|
Loss per
share: |
|
|
|
|
|
|
|
Class A common stock - Basic and diluted |
$ |
(0.31 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.62 |
) |
|
$ |
(0.53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands, except share and per share
data) |
|
|
September 30, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
462,846 |
|
|
$ |
565,333 |
|
Restricted cash |
126,083 |
|
|
114,950 |
|
Accounts
receivable, net |
104,841 |
|
|
89,461 |
|
Prepaid
expenses and other current assets |
62,550 |
|
|
61,749 |
|
Assets
held for sale |
— |
|
|
61,523 |
|
Total
current assets |
756,320 |
|
|
893,016 |
|
|
|
|
|
Renewable energy
facilities, net, including consolidated variable interest entities
of $3,309,214 and $3,434,549 in 2017 and 2016, respectively |
4,854,303 |
|
|
4,993,251 |
|
Intangible assets, net,
including consolidated variable interest entities of $836,290 and
$875,095 in 2017 and 2016, respectively |
1,096,416 |
|
|
1,142,112 |
|
Deferred financing
costs, net |
4,585 |
|
|
7,798 |
|
Other assets |
133,539 |
|
|
114,863 |
|
Restricted cash |
26,080 |
|
|
2,554 |
|
Non-current assets held
for sale |
— |
|
|
552,271 |
|
Total
assets |
$ |
6,871,243 |
|
|
$ |
7,705,865 |
|
|
|
|
|
Liabilities,
Redeemable Non-controlling Interests and Stockholders'
Equity |
|
|
|
Current
liabilities: |
|
|
|
Current
portion of long-term debt and financing lease obligations,
including consolidated variable interest entities of $156,621 and
$594,442 in 2017 and 2016, respectively |
$ |
716,728 |
|
|
$ |
2,212,968 |
|
Accounts
payable, accrued expenses and other current liabilities, including
consolidated variable interest entities of $42,555 and $37,760 in
2017 and 2016, respectively |
145,276 |
|
|
125,596 |
|
Deferred
revenue |
17,992 |
|
|
18,179 |
|
Due to
SunEdison and affiliates, net |
15,775 |
|
|
16,692 |
|
Liabilities related to assets held for sale |
— |
|
|
21,798 |
|
Total
current liabilities |
895,771 |
|
|
2,395,233 |
|
Long-term debt and
financing lease obligations, less current portion, including
consolidated variable interest entities of $781,464 and $375,726 in
2017 and 2016, respectively |
2,864,666 |
|
|
1,737,946 |
|
Deferred revenue, less
current portion |
44,669 |
|
|
55,793 |
|
Deferred income
taxes |
32,889 |
|
|
27,723 |
|
Asset retirement
obligations, including consolidated variable interest entities of
$95,596 and $92,213 in 2017 and 2016, respectively |
150,743 |
|
|
148,575 |
|
Other long-term
liabilities |
33,261 |
|
|
31,470 |
|
Non-current liabilities
related to assets held for sale |
— |
|
|
410,759 |
|
Total
liabilities |
4,021,999 |
|
|
4,807,499 |
|
|
|
|
|
Redeemable
non-controlling interests |
198,031 |
|
|
180,367 |
|
Stockholders'
equity: |
|
|
|
Preferred
stock, $0.01 par value per share, 50,000,000 shares authorized, no
shares issued |
— |
|
|
— |
|
Class A
common stock, $0.01 par value per share, 850,000,000 shares
authorized, 92,770,614 and 92,476,776 shares issued in 2017 and
2016, respectively, and 92,408,596 and 92,223,089 shares
outstanding in 2017 and 2016, respectively |
928 |
|
|
920 |
|
Class B
common stock, $0.01 par value per share, 140,000,000 shares
authorized, 48,202,310 shares issued and outstanding in 2017 and
2016 |
482 |
|
|
482 |
|
Class B1
common stock, $0.01 par value per share, 260,000,000 shares
authorized, no shares issued |
— |
|
|
— |
|
Additional paid-in capital |
1,480,584 |
|
|
1,467,108 |
|
Accumulated deficit |
(285,330 |
) |
|
(234,440 |
) |
Accumulated other comprehensive income |
57,334 |
|
|
22,912 |
|
Treasury
stock, 362,018 and 253,687 shares in 2017 and 2016,
respectively |
(5,381 |
) |
|
(4,025 |
) |
Total
TerraForm Power, Inc. stockholders' equity |
1,248,617 |
|
|
1,252,957 |
|
Non-controlling interests |
1,402,596 |
|
|
1,465,042 |
|
Total
stockholders' equity |
2,651,213 |
|
|
2,717,999 |
|
Total liabilities,
redeemable non-controlling interests and stockholders' equity |
$ |
6,871,243 |
|
|
$ |
7,705,865 |
|
|
|
|
|
|
|
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS |
(In thousands) |
|
|
Nine Months Ended September 30, |
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
Net
loss |
$ |
(91,773 |
) |
|
$ |
(106,153 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation, accretion and amortization expense |
186,039 |
|
|
178,026 |
|
Amortization of favorable and unfavorable rate revenue contracts,
net |
29,459 |
|
|
30,128 |
|
Gain on
sale of renewable energy facilities |
(37,116 |
) |
|
— |
|
Impairment of renewable energy facilities |
1,429 |
|
|
— |
|
Amortization of deferred financing costs and debt discounts |
19,729 |
|
|
19,579 |
|
Unrealized loss on U.K. interest rate swaps |
2,425 |
|
|
35,840 |
|
Unrealized (gain) loss on commodity contract derivatives, net |
(1,244 |
) |
|
5,006 |
|
Recognition of deferred revenue |
(11,510 |
) |
|
(9,508 |
) |
Stock-based compensation expense |
7,049 |
|
|
3,857 |
|
Unrealized (gain) loss on foreign currency exchange, net |
(5,275 |
) |
|
6,349 |
|
Loss on
extinguishment of debt |
2,518 |
|
|
— |
|
Loss on
receivables - affiliate |
— |
|
|
845 |
|
Deferred
taxes |
5,166 |
|
|
3,014 |
|
Other,
net |
5,978 |
|
|
2,287 |
|
Changes
in assets and liabilities: |
|
|
|
Accounts
receivable |
(18,860 |
) |
|
(30,502 |
) |
Prepaid
expenses and other current assets |
(4,997 |
) |
|
(11,827 |
) |
Accounts
payable, accrued expenses and other current liabilities |
(758 |
) |
|
10,035 |
|
Deferred
revenue |
199 |
|
|
2,457 |
|
Other,
net |
3,907 |
|
|
5,483 |
|
Net cash
provided by operating activities |
92,365 |
|
|
144,916 |
|
Cash flows from
investing activities: |
|
|
|
Capital
expenditures |
(7,472 |
) |
|
(41,698 |
) |
Proceeds
from sale of renewable energy facilities, net of cash and
restricted cash disposed |
183,235 |
|
|
— |
|
Proceeds
from renewable energy state rebate |
15,542 |
|
|
— |
|
Proceeds
from reimbursable interconnection costs |
8,079 |
|
|
— |
|
Acquisitions of renewable energy facilities from third parties, net
of cash and restricted cash acquired |
— |
|
|
(4,064 |
) |
Net cash
provided by (used in) investing activities |
$ |
199,384 |
|
|
$ |
(45,762 |
) |
Cash flows from
financing activities: |
|
|
|
Borrowings of non-recourse long-term debt |
$ |
79,835 |
|
|
$ |
3,980 |
|
Principal
payments and prepayments on non-recourse long-term debt |
(199,481 |
) |
|
(122,597 |
) |
Revolver
repayments |
(275,000 |
) |
|
— |
|
Sale of
membership interests and contributions from non-controlling
interests in renewable energy facilities |
6,935 |
|
|
15,501 |
|
Distributions to non-controlling interests in renewable energy
facilities |
(23,017 |
) |
|
(19,365 |
) |
Net
SunEdison investment |
7,436 |
|
|
37,200 |
|
Due to
SunEdison and affiliates, net |
(3,097 |
) |
|
(29,036 |
) |
Debt
financing fees |
(10,228 |
) |
|
(12,958 |
) |
Other
financing activities |
(1,030 |
) |
|
— |
|
Net cash
used in financing activities |
(417,647 |
) |
|
(127,275 |
) |
Net
decrease in cash, cash equivalents and restricted cash |
(125,898 |
) |
|
(28,121 |
) |
Net change in cash,
cash equivalents and restricted cash classified within assets held
for sale |
54,806 |
|
|
(54,731 |
) |
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
3,264 |
|
|
(5,933 |
) |
Cash, cash equivalents
and restricted cash at beginning of period |
682,837 |
|
|
793,033 |
|
Cash, cash equivalents
and restricted cash at end of period |
$ |
615,009 |
|
|
$ |
704,248 |
|
Supplemental
Disclosures: |
|
|
|
Cash paid
for interest |
$ |
182,021 |
|
|
$ |
183,577 |
|
Cash paid
for income taxes |
— |
|
|
— |
|
|
|
|
|
|
|
Reconciliation of Non-GAAP
Measures
Adjusted Revenue, Adjusted EBITDA and CAFD are supplemental
non-GAAP measures that should not be viewed as alternatives to GAAP
measures of performance, including revenue, net income (loss),
operating income or net cash provided by operating activities. Our
definitions and calculation of these non-GAAP measures may not
necessarily be the same as those used by other companies. These
non-GAAP measures have certain limitations, which are described
below, and they should not be considered in isolation. We encourage
you to review, and evaluate the basis for, each of the adjustments
made to arrive at Adjusted Revenue, Adjusted EBITDA and CAFD.
Calculation of Non-GAAP Measures
We define adjusted revenue as operating revenues, net, adjusted
for non-cash items including unrealized gain/loss on derivatives,
amortization of favorable and unfavorable rate revenue contracts,
net and other non-cash revenue items.
We define adjusted EBITDA as net income (loss) plus
depreciation, accretion and amortization, non-cash general and
administrative costs, interest expense, income tax (benefit)
expense, acquisition related expenses, and certain other non-cash
charges, unusual or non-recurring items and other items that we
believe are not representative of our core business or future
operating performance.
We define “cash available for distribution” or “CAFD” as
adjusted EBITDA (i) minus cash distributions paid to
non-controlling interests in our renewable energy facilities, if
any, (ii) minus annualized scheduled interest and project level
amortization payments in accordance with the related borrowing
arrangements, (iii) minus average annual sustaining capital
expenditures (based on the long-sustaining capital expenditure
plans) which are recurring in nature and used to maintain the
reliability and efficiency of our power generating assets over our
long-term investment horizon, (iv) plus or minus operating items as
necessary to present the cash flows we deem representative of our
core business operations.
As compared to the preceding period, we revised our definition
of CAFD to (i) exclude adjustments related to deposits into and
withdrawals from restricted cash accounts, required by project
financing arrangements, (ii) replace sustaining capital
expenditures payment made in the year with the average annualized
long-term sustaining capital expenditures to maintain reliability
and efficiency of our assets, and (iii) annualized debt service
payments. We revised our definition as we believe it provides
a more meaningful measure for investors to evaluate our financial
and operating performance and ability to pay dividends.
For items presented on an annualized basis, we will present actual
cash payments as a proxy for an annualized number until the period
commencing January 1, 2018.
Furthermore, to provide investors with the most appropriate
measures to assess the financial and operating performance of our
existing fleet and the ability to pay dividends in the future, we
have excluded results associated with our UK solar and Residential
portfolios, which were sold in 2017, from adjusted revenue, EBITDA
and CAFD reported for all periods presented.
Use of Non-GAAP Measures
We disclose Adjusted Revenue because it presents the component
of our operating revenue that relates to the energy production from
our plants, and is, therefore, useful to investors and other
stakeholders in evaluating the performance of our renewable energy
assets and comparing that performance across periods in each case
without regard to non-cash revenue items.
We disclose Adjusted EBITDA because we believe it is useful to
investors and other stakeholders as a measure of financial and
operating performance and debt service capabilities. We believe
Adjusted EBITDA provides an additional tool to investors and
securities analysts to compare our performance across periods and
among us and our peer companies without regard to interest expense,
taxes and depreciation and amortization. Adjusted EBITDA has
certain limitations, including that it: (i) does not reflect cash
expenditures or future requirements for capital expenditures or
contractual liabilities or future working capital needs, (ii) does
not reflect the significant interest expenses that we expect to
incur or any income tax payments that we may incur, and (iii) does
not reflect depreciation and amortization and, although these
charges are non-cash, the assets to which they relate may need to
be replaced in the future, and (iv) does not take into account any
cash expenditures required to replace those assets. Adjusted EBITDA
also includes adjustments for goodwill impairment charges, gains
and losses on derivatives and foreign currency swaps, acquisition
related costs and items we believe are infrequent, unusual or
non-recurring, including adjustments for general and administrative
expenses we have incurred as a result of the SunEdison
bankruptcy.
We disclose CAFD because we believe cash available for
distribution is useful to investors in evaluating our operating
performance and because securities analysts and other stakeholders
analyze CAFD as a measure of our financial and operating
performance and our ability to pay dividends. CAFD is not a measure
of liquidity or profitability, nor is it indicative of the funds
needed by us to operate our business. CAFD has certain limitations,
such as the fact that CAFD includes all of the adjustments and
exclusions made to Adjusted EBITDA described above.
The adjustments made to Adjusted EBITDA and CAFD for infrequent,
unusual or non-recurring items and items that we do not believe are
representative of our core business involve the application of
management judgment, and the presentation of Adjusted EBITDA and
CAFD should not be construed to infer that our future results will
be unaffected by infrequent, non-operating, unusual or
non-recurring items.
In addition, these measures are used by our management for
internal planning purposes, including for certain aspects of our
consolidated operating budget, as well as evaluating the
attractiveness of investments and acquisitions. We believe these
Non-GAAP measures are useful as a planning tool because it allows
our management to compare performance across periods on a
consistent basis in order to more easily view and evaluate
operating and performance trends and as a means of forecasting
operating and financial performance and comparing actual
performance to forecasted expectations. For these reasons, we also
believe these Non-GAAP measures are also useful for communicating
with investors and other stakeholders.
The following table presents a reconciliation of Operating
Revenues to Adjusted Revenue and net loss to Adjusted EBITDA to
CAFD and has been adjusted to exclude asset sales in the UK and
Residential portfolios:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September
30, |
(in thousands) |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Adjustments to
reconcile Operating revenues, net to adjusted revenue |
|
|
|
|
|
|
|
|
Operating revenues,
net |
|
$ |
153,430 |
|
|
$ |
178,118 |
|
|
$ |
474,932 |
|
|
$ |
519,336 |
|
Unrealized (gain) loss on commodity contract derivatives, net
(a) |
|
|
(3,896 |
) |
|
|
(195 |
) |
|
|
(1,244 |
) |
|
|
5,006 |
|
Amortization of favorable and unfavorable rate revenue contracts,
net (b) |
|
|
9,936 |
|
|
|
9,803 |
|
|
|
29,460 |
|
|
|
30,128 |
|
Other
non-cash items (c) |
|
|
(4,958 |
) |
|
|
(4,823 |
) |
|
|
(10,074 |
) |
|
|
(8,647 |
) |
Adjustment for Asset Sales |
|
|
- |
|
|
|
(17,507 |
) |
|
|
(14,754 |
) |
|
|
(46,691 |
) |
Adjusted
revenue |
|
$ |
154,512 |
|
|
$ |
165,396 |
|
|
$ |
478,320 |
|
|
$ |
499,132 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Net loss |
|
$ |
(34,820 |
) |
|
$ |
(27,711 |
) |
|
$ |
(91,773 |
) |
|
$ |
(106,153 |
) |
Interest
expense, net |
|
|
70,232 |
|
|
|
72,818 |
|
|
|
206,749 |
|
|
|
243,111 |
|
Income
tax (benefit) expense |
|
|
(2,633 |
) |
|
|
1,140 |
|
|
|
(4,982 |
) |
|
|
3,115 |
|
Depreciation, accretion and amortization expense (d) |
|
|
71,761 |
|
|
|
67,791 |
|
|
|
215,494 |
|
|
|
208,154 |
|
Non-operating general and administrative expenses (e) |
|
|
13,084 |
|
|
|
13,879 |
|
|
|
66,845 |
|
|
|
41,452 |
|
Stock-based compensation expense |
|
|
1,856 |
|
|
|
1,411 |
|
|
|
7,049 |
|
|
|
3,857 |
|
Gain on
sale of U.K. renewable energy facilities |
|
|
- |
|
|
|
- |
|
|
|
(37,116 |
) |
|
|
- |
|
Adjustment for Asset Sales |
|
|
- |
|
|
|
(13,575 |
) |
|
|
(9,632 |
) |
|
|
(35,237 |
) |
Other
non-cash or non-operating items (f) |
|
|
(10,178 |
) |
|
|
3,042 |
|
|
|
(8,564 |
) |
|
|
10,264 |
|
Adjusted
EBITDA |
|
$ |
109,303 |
|
|
$ |
118,796 |
|
|
$ |
344,071 |
|
|
$ |
368,564 |
|
Interest
payments (g) |
|
|
(57,568 |
) |
|
|
(59,761 |
) |
|
|
(172,828 |
) |
|
|
(177,248 |
) |
Principal
payments (h) |
|
|
(23,022 |
) |
|
|
(17,778 |
) |
|
|
(64,843 |
) |
|
|
(58,546 |
) |
Cash
distributions to non-controlling interests, net |
|
|
(5,892 |
) |
|
|
(9,979 |
) |
|
|
(23,017 |
) |
|
|
(19,365 |
) |
Sustaining capital expenditures |
|
|
(1,130 |
) |
|
|
(650 |
) |
|
|
(8,235 |
) |
|
|
(6,308 |
) |
Other: |
|
|
|
|
|
|
|
|
Adjustment for Asset Sales |
|
|
- |
|
|
|
(28 |
) |
|
|
112 |
|
|
|
10,012 |
|
Other
items (i) |
|
|
3,650 |
|
|
|
3,753 |
|
|
|
16,453 |
|
|
|
28,163 |
|
Estimated cash
available for distribution |
|
$ |
25,341 |
|
|
$ |
34,353 |
|
|
$ |
91,713 |
|
|
$ |
145,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a) Represents unrealized (gain) loss on commodity
contracts associated with energy derivative contracts that are not
designated as hedges for accounting purposes whereby the change in
fair value is recorded in operating revenues, net. The amounts
added back represent changes in the value of the energy derivative
related to future operating periods, and are expected to have
little or no net economic impact since the change in value is
expected to be largely offset by changes in value of the underlying
energy sale in the spot or day-ahead market.
b) Represents net amortization of purchase accounting
related intangibles arising from past business combinations related
to favorable and unfavorable rate revenue contracts.
c) Primarily represents recognized deferred revenue
related to the upfront sale of investment tax credits.
d) Includes increases within operating revenues due to net
amortization of favorable and unfavorable rate revenue contracts as
detailed in the reconciliation of Adjusted Revenue.
e) Pursuant to the management services agreement,
SunEdison agreed to provide or arrange for other service providers
to provide management and administrative services to us. In the
three and nine months ended September 30, 2016 we accrued $3.4
million and $8.4 million, respectively, of routine G&A services
provided or arranged by SunEdison under the Management Services
Agreement that were not reimbursed by TerraForm Power and were
treated as an addback in the reconciliation of net income (loss) to
Adjusted EBITDA. In addition, non-operating items and other items
incurred directly by TerraForm Power that we do not consider
indicative of our core business operations are treated as an
addback in the reconciliation of net income (loss) to Adjusted
EBITDA. These items include extraordinary costs and expenses
related primarily to restructuring, legal, advisory and contractor
fees associated with the bankruptcy of SunEdison and certain of its
affiliates (the “SunEdison bankruptcy”) and investment banking,
legal, third party diligence and advisory fees associated with the
Brookfield transaction, dispositions and financings. The Company’s
normal general and administrative expenses, paid by Terraform
Power, are the amounts shown below and were not added back in the
reconciliation of net income (loss) to Adjusted EBITDA:
3Q 2017 |
3Q 2016 |
September 2017 YTD |
September 2016 YTD |
$5.7M |
$5.9M |
$22.8M |
$13.9M |
f) Represents other non-cash items as detailed in the
reconciliation of Adjusted Revenue and associated footnote and
certain other items that we believe are not representative of our
core business or future operating performance, including but not
limited to: acquisition related costs, impairment charges, loss
(gain) on FX, loss on investments and receivables with affiliate,
and loss on extinguishment of debt.
g) Represents project-level and other interest payments
and interest income attributed to normal operations. The
reconciliation from Interest expense, net as shown on the
Consolidated Statement of Operations to Interest payments
applicable to CAFD is as follows:
$ in millions |
3Q 2017 |
|
3Q 2016 |
|
Sep 2017 YTD |
|
Sep 2016 YTD |
|
Interest expense, net |
$ |
(70.2 |
) |
$ |
(72.8 |
) |
$ |
(206.7 |
) |
$ |
(243.1 |
) |
Amortization of deferred financing costs and debt discounts |
|
3.5 |
|
|
4.4 |
|
|
13.5 |
|
|
19.6 |
|
Unrealized loss on U.K. interest rate swaps |
|
0.0 |
|
|
4.6 |
|
|
2.4 |
|
|
34.5 |
|
Changes in accrued interest and other non-cash |
|
4.5 |
|
|
5.3 |
|
|
8.2 |
|
|
12.2 |
|
Loss on extinguishment of debt |
|
2.5 |
|
|
0.0 |
|
|
2.5 |
|
|
- |
|
Special interest on corporate bonds related to August 2016 waiver
agreements |
|
0.0 |
|
|
0.0 |
|
|
7.1 |
|
|
- |
|
Portfolio Term Loan extension fee recorded to unamortized discount,
net |
|
(1.8 |
) |
|
0.0 |
|
|
(4.2 |
) |
|
- |
|
Corporate bond backstop facility fee |
|
3.1 |
|
|
0.0 |
|
|
3.1 |
|
|
- |
|
Other, net |
|
0.8 |
|
|
(1.3 |
) |
|
1.3 |
|
|
(0.4 |
) |
Interest payments |
$ |
(57.6 |
) |
$ |
(59.8 |
) |
$ |
(172.8 |
) |
$ |
(177.2 |
) |
h) Represents project-level and other principal debt
payments to the extent paid from operating cash. The reconciliation
from Principal payments on non-recourse long-term debt as shown on
the Consolidated Statement of Cash Flows to Principal payments
applicable to CAFD is as follows:
$ in millions |
3Q 2017 |
|
3Q 2016 |
|
Sep 2017 YTD |
|
Sep 2016 YTD |
|
Principal payments on non-recourse long-term
debt |
$ |
(57.9 |
) |
$ |
(58.7 |
) |
$ |
(199.5 |
) |
$ |
(122.6 |
) |
Blackhawk repayment of construction loan by SunEdison |
|
- |
|
|
16.7 |
|
|
- |
|
|
38.1 |
|
Midco repayment of loan |
|
- |
|
|
- |
|
|
100.0 |
|
|
- |
|
CAP prepayment using EPC settlement proceeds |
|
4.8 |
|
|
- |
|
|
4.8 |
|
|
- |
|
TerraForm Private Operating II repayment of loan |
|
30.0 |
|
|
24.0 |
|
|
30.0 |
|
|
24.0 |
|
Other, net |
|
0.1 |
|
|
0.2 |
|
|
(0.1 |
) |
|
2.0 |
|
Principal payments |
$ |
(23.0 |
) |
$ |
(17.8 |
) |
$ |
(64.8 |
) |
$ |
(58.5 |
) |
i) Represents other cash flows as determined by management
to be representative of normal operations including, but not
limited to, wind plant “pay as you go” contributions received from
tax equity partners, interconnection upgrade reimbursements, major
maintenance reserve releases or (additions), releases or (postings)
of collateral held by counterparties of energy market hedges for
certain wind plants, and a cash contribution received in 2016 from
SunEdison under the Interest Payment Agreement.
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