TerraForm Power, Inc. (Nasdaq: TERP) (“TerraForm Power”) today
reported financial results for the three months ended September 30,
2018.
Recent Highlights
- Successfully commissioned the battery energy storage
replacement project in Hawaii on budget and ahead of schedule
- Commenced implementation of GE long-term service agreements
(“LTSAs”) for 1.6 GW North American wind fleet, which we expect
will deliver significant cost savings, improve performance of fleet
to our long-term expectation, and further increase our wind output
through deployment of GE’s proprietary technology
- Progressed solar performance improvement plan by implementing
remediation plans that are expected to increase revenue by $7.5
million
- Closed project financing of certain unencumbered assets in
North America yielding net proceeds of ~$77 million
- Closed a €50 million upfinancing of the Montegordo wind farm in
Spain, yielding net proceeds of €12 million
- Renegotiated terms of $600 million corporate credit facility
and cancelled Saeta’s corporate credit facility yielding $3 million
of annual savings
- Declared a Q4 2018 dividend of $0.19 per share, implying $0.76
per share on an annual basis
“With contribution from our European platform
for a full quarter, Terraform Power’s results demonstrate the
benefits of its diversified asset base,” said John Stinebaugh, CEO
of TerraForm Power. “In the past year, we have made significant
strides to extract additional cash flow from our existing portfolio
of assets. As we look forward, we are turning our focus to
deploying capital to grow our business through organic growth
opportunities and add-on acquisitions.”
Results
$ in
millions, except per share amounts |
3 Months
Ended9/30/2018 |
3 Months
Ended9/30/2017 |
Generation
(GWh) |
|
2,006 |
|
|
1,378 |
|
Net Loss |
$(19) |
|
$(36) |
|
Earnings (Loss) per Share2 |
$(0.16) |
|
$(0.31) |
|
Adjusted EBITDA 1 |
$197 |
|
$110 |
|
CAFD1 |
$46 |
|
$19 |
|
per Share1,2 |
$0.22 |
|
$0.13 |
|
1Non-GAAP measures. See “Calculation and Use of Non-GAAP
Measures” and “Reconciliation of Non-GAAP Measures” sections.
Amounts in 2017 adjusted for sale of our UK and Residential
portfolios. 2 Loss per share is calculated using a weighted
average diluted Class A common stock shares outstanding. CAFD per
share is calculated using a weighted average diluted Class A common
stock and weighted average Class B common stock shares outstanding.
For three months ended September 30, 2018, weighted average diluted
Class A common stock shares outstanding totaled 209.1 million,
including insurance of 61 million to affiliates (three months ended
September 30, 2017: 92.7 million). For three months ended September
30, 2018, there were no weighted average Class B common stock
shares outstanding (three months ended September 30, 2017: 48.2
million).
Operations
We are pleased to report that we completed the
battery replacement project at our KWP II wind farm in Hawaii on
budget and ahead of schedule. We successfully commissioned the
lithium ion batteries in October. In addition, we have been working
diligently to implement the framework agreement with GE for turbine
O&M and balance of plant services for our 1.6 GW North American
wind fleet. We are putting in place all of the project-level
agreements, and we are completing necessary repair of wind turbine
blades as well as other “catch up” work from prior years in
preparation for handover. In parallel, we are working to obtain
lender and tax equity partner consents to change operators, and in
certain situations, we are in negotiations with current service
providers for early termination of our existing service contracts.
We expect full implementation of the LTSAs within the first half of
2019. Finally, we recently launched a competitive process to reduce
O&M costs and strengthen performance guarantees associated with
Saeta’s wind fleet. We expect to finalize this process in the
fourth quarter of 2018 and enter into long-term contracts that
generate savings of at least 15% compared to existing costs.
We commenced our solar performance improvement
plan this summer. After performing irradiation scans of our North
American assets, we identified opportunities to increase production
by at least 52 GWh to achieve our long term average production. We
are now working on business cases to quantify the required capital
investment and the corresponding revenue increase that is
achievable. Following an analysis of an initial subset of high
priority facilities, we have implemented remediation plans to
restore 45 GWh of production, which we believe equates to $7.5
million in additional annual revenue. We will continue our business
case analysis on the remaining assets, and we believe there is
significant additional revenue upside. We expect to have the solar
fleet performing at our LTA targets by the end of the first quarter
of 2019.
Growth Initiatives
We have been pursuing a number of strategies to
build our acquisition pipeline. We believe that there is a
consolidation play in Spanish renewables, which is very fragmented
with many assets owned by private, under-capitalized developers. We
believe that we can acquire assets at prices that yield attractive
returns and extract cost synergies by integrating these assets into
our European platform. Following the recent election, we are
evaluating a number of opportunities to invest in Mexican
renewables. Particularly after the decision to cancel the new
Mexico City airport, we believe there is greater uncertainty, which
may translate to attractive risk-adjusted returns.
Financial Results
In the third quarter, our portfolio delivered
Adjusted EBITDA, Net Loss and CAFD of $197 million, $19 million and
$46 million, respectively. This represents an increase in Adjusted
EBITDA of $87 million, a decrease in Net Loss of $17 million and an
increase in CAFD of $27 million, compared to the same period last
year. The increase in our results primarily reflects a full quarter
contribution from the Saeta acquisition. Savings in corporate
interest expense resulting from our Q4 2017 refinancing initiatives
were largely offset by lower wind incentive revenue in the
Northeast, timing of incentive revenue invoicing, and the impact of
ongoing maintenance to prepare the wind fleet for LTSA
implementation.
North American wind production was slightly
higher than Q3 2017, though at levels significantly below our
long-term averages. While poor wind resource, particularly in
Hawaii and the Midwest, was the main driver, revenues were also
impacted by greater than normal maintenance, which will be largely
mitigated upon full implementation of our LTSAs with GE. Our
European platform performed in-line with expectations, with lower
than expected solar resource offset by higher than expected market
revenues due to wholesale electricity prices in Spain which
year-to-date have averaged 10% higher than the prior year.
In the past few months, there were four
hurricanes or tropical storms that impacted regions in which we own
assets. In each instance, our emergency preparedness plans were in
effect prior to the storms making landfall. The impact of these
storms on our assets was minimal, and all of our assets were back
online shortly after the storm events.
Liquidity
During the quarter, we made progress on the $350
million non-recourse debt financing plan for the Saeta acquisition.
In September, we closed the second project financing of certain of
our unencumbered assets in the U.S., yielding net proceeds of ~$77
million. The financing is a fully amortizing structure with a final
maturity of 14 years and a very attractive coupon of 4.64% that
implies a spread over U.S. treasuries of 165 basis points. In
September, we closed a €50 million upfinancing of the Montegordo
wind farm in Spain, yielding net proceeds of €12 million and
optimizing the project’s CAFD profile. The loan is fully amortizing
with a final maturity of 12 years and a blended interest rate of
approximately 4.2%. Additionally, we recently launched a financing
of a portfolio of utility scale and distributed solar assets from
which we are targeting to raise approximately $100 million, with an
expected close in the fourth quarter. Over the next three months,
we plan to launch the final project financing to raise the balance
of the $350 million of proceeds. Once the financings are completed,
Terraform Power’s liquidity will be restored to over $900 million,
providing significant dry powder to invest in attractive
opportunities that we find within the sector.
Finally, in early October, we made certain
amendments to our existing $600 million revolver to bring pricing
in-line with our Term Loan B. We extended the tenor by two years
(through 2023), refreshed the $150 million accordion feature, and
reduced commitment fees by 12.5 basis points and the drawn spread
by 75 basis points. We also cancelled Saeta’s €120 million
revolving credit facility. Together, these actions are expected to
yield ~$3 million of annual interest savings on a run-rate
basis.
Appointment of Chief Financial
Officer
The Board of Directors of TerraForm Power is
pleased to announce the appointment of Michael Tebbutt as Chief
Financial Officer, effective Monday, November 12th. Michael is a
Chartered Accountant and first joined Brookfield Asset Management
in 2011. He has held a series of senior finance positions within
the group, previously serving as Chief Financial Officer of
Brookfield Properties U.S. retail business and Brookfield
Infrastructure’s Asia Pacific operations. Michael succeeds Matthew
Berger, who is rejoining Brookfield Property Group. We want to
thank Matt for all of his hard work and contributions over the past
year.
Announcement of Quarterly
Dividend
TerraForm Power today announced that, on
November 8, 2018, its Board declared a quarterly dividend with
respect to TerraForm Power’s Class A common stock of $0.19 per
share. The dividend is payable on December 17, 2018, to
stockholders of record as of December 3, 2018. This dividend
represents TerraForm Power’s fourth consecutive quarterly dividend
payment under Brookfield’s sponsorship.
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. and E.U., totaling more than 3,600
MW of installed capacity. TerraForm Power’s goal is 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 $330
billion of assets under management.
For more information about TerraForm Power,
please visit: www.terraformpower.com.
Contacts for Investors /
Media:
Chad ReedTerraForm
Powerinvestors@terraform.com
Quarterly Earnings Call
Details
Investors, analysts and other interested parties
can access TerraForm Power’s 2018 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 9, 2018 at 9:30 a.m. Eastern Time at
https://event.on24.com/wcc/r/1868899/535D3AA90E42BFE84348A1E0721D4251,
or via teleconference at 1-866-521-4909 toll free in North America.
For overseas calls please dial 1-647-427-2311, 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,” ”opportunities,” “goal,” “guidance,”
“outlook,” “initiatives,” “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 expected
cash available for distribution (CAFD), dividend growth, cost
savings initiatives, earnings, Adjusted EBITDA, revenues, income,
loss, capital expenditures, liquidity, capital structure, future
growth, financing arrangements 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: risks related to the
transition to Brookfield Asset Management Inc. sponsorship,
including our ability to realize the expected benefits of
sponsorship; risks related to wind conditions at our wind assets or
to weather conditions at our solar assets; risks related to the
effectiveness of our internal control over financial reporting;
pending and future litigation; the willingness and ability of
counterparties to fulfill their obligations under offtake
agreements; price fluctuations, termination provisions and buyout
provisions in offtake agreements; our ability to enter into
contracts to sell power on acceptable prices and terms, including
as our offtake agreements expire; our ability to compete against
traditional and renewable energy companies; government regulation,
including compliance with regulatory and permit requirements and
changes in tax laws, market rules, rates, tariffs, environmental
laws and policies affecting renewable energy; 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 in the future; operating and financial
restrictions placed on us and our subsidiaries related to
agreements governing indebtedness; risks related to our ability to
successfully integrate the operations, technologies and personnel
of Saeta; the regulated rate of return of renewable energy
facilities in Spain, including Saeta’s wind and solar assets, a
reduction of which could have a material negative impact on our
results of operations; our ability to successfully identify,
evaluate and consummate acquisitions; our ability to integrate the
projects we acquire from third parties, including Saeta, and our
ability to realize the anticipated benefits from such acquisitions;
and our ability to realize the benefit of our cost and performance
enhancement initiatives, including the LTSAs with an affiliate of
GE.
The Company 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 our most recent Annual Report on Form 10-K and and our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018, as well as
additional factors we may describe from time to time in other
filings with the SEC. We operate in a competitive and rapidly
changing environment. New risks and uncertainties emerge from time
to time, and 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
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data) |
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Operating revenues, net |
$ |
246,042 |
|
|
$ |
153,430 |
|
|
$ |
553,477 |
|
|
$ |
474,932 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
Cost of operations |
59,027 |
|
|
41,859 |
|
|
146,155 |
|
|
108,402 |
|
Cost of operations - affiliate |
— |
|
|
1,199 |
|
|
— |
|
|
10,224 |
|
General and administrative expenses |
21,334 |
|
|
21,664 |
|
|
65,483 |
|
|
99,644 |
|
General and administrative expenses - affiliate |
3,432 |
|
|
2,192 |
|
|
10,929 |
|
|
6,893 |
|
Acquisition-related costs |
1,655 |
|
|
— |
|
|
7,612 |
|
|
— |
|
Acquisition-related costs - affiliate |
335 |
|
|
— |
|
|
6,965 |
|
|
— |
|
Impairment of renewable energy facilities |
— |
|
|
— |
|
|
15,240 |
|
|
1,429 |
|
Depreciation, accretion and amortization
expense |
103,593 |
|
|
61,830 |
|
|
239,177 |
|
|
186,039 |
|
Total operating costs and expenses |
189,376 |
|
|
128,744 |
|
|
491,561 |
|
|
412,631 |
|
Operating income |
56,666 |
|
|
24,686 |
|
|
61,916 |
|
|
62,301 |
|
Other expenses (income): |
|
|
|
|
|
|
|
Interest expense, net |
72,416 |
|
|
70,232 |
|
|
176,862 |
|
|
206,749 |
|
Gain on sale of renewable energy facilities |
— |
|
|
— |
|
|
— |
|
|
(37,116 |
) |
Gain on foreign currency exchange, net |
(3,070 |
) |
|
(1,078 |
) |
|
(4,257 |
) |
|
(5,695 |
) |
Other expenses (income), net |
358 |
|
|
(7,015 |
) |
|
2,870 |
|
|
(4,882 |
) |
Total other expenses, net |
69,704 |
|
|
62,139 |
|
|
175,475 |
|
|
159,056 |
|
Loss before income tax expense (benefit) |
(13,038 |
) |
|
(37,453 |
) |
|
(113,559 |
) |
|
(96,755 |
) |
Income tax expense (benefit) |
6,013 |
|
|
(1,099 |
) |
|
9,417 |
|
|
(2,256 |
) |
Net loss |
(19,051 |
) |
|
(36,354 |
) |
|
(122,976 |
) |
|
(94,499 |
) |
Less: Net income attributable to redeemable non-controlling
interests |
12,443 |
|
|
4,895 |
|
|
15,101 |
|
|
10,264 |
|
Less: Net income (loss) attributable to non-controlling
interests |
2,096 |
|
|
(14,949 |
) |
|
(165,946 |
) |
|
(57,272 |
) |
Net (loss) income attributable to Class A common stockholders |
$ |
(33,590 |
) |
|
$ |
(26,300 |
) |
|
$ |
27,869 |
|
|
$ |
(47,491 |
) |
|
|
|
|
|
|
|
|
Weighted average number of shares: |
|
|
|
|
|
|
|
Class A common stock - Basic |
209,142 |
|
|
92,352 |
|
|
173,173 |
|
|
92,228 |
|
Class A common stock - Diluted |
209,142 |
|
|
92,352 |
|
|
173,186 |
|
|
92,228 |
|
|
|
|
|
|
|
|
|
(Loss) earnings per share: |
|
|
|
|
|
|
|
Class A common stock - Basic and diluted |
$ |
(0.16 |
) |
|
$ |
(0.31 |
) |
|
$ |
0.16 |
|
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
Dividends declared per share: |
|
|
|
|
|
|
|
Class A common stock |
$ |
0.19 |
|
|
$ |
— |
|
|
$ |
0.57 |
|
|
$ |
— |
|
TERRAFORM POWER, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share and per share
data) |
|
|
September 30,
2018 |
|
December 31,
2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
349,563 |
|
|
$ |
128,087 |
|
Restricted cash |
28,095 |
|
|
54,006 |
|
Accounts receivable, net |
178,094 |
|
|
89,680 |
|
Prepaid expenses and other current assets |
71,935 |
|
|
65,393 |
|
Due from affiliate |
350 |
|
|
4,370 |
|
Total current assets |
628,037 |
|
|
341,536 |
|
|
|
|
|
Renewable energy facilities, net, including consolidated variable
interest entities of $3,119,285 and $3,273,848 in 2018 and 2017,
respectively |
6,555,836 |
|
|
4,801,925 |
|
Intangible assets, net, including consolidated variable interest
entities of $761,299 and $823,629 in 2018 and 2017,
respectively |
2,000,893 |
|
|
1,077,786 |
|
Goodwill |
113,701 |
|
|
— |
|
Restricted cash |
132,337 |
|
|
42,694 |
|
Other assets |
145,173 |
|
|
123,080 |
|
Total assets |
$ |
9,575,977 |
|
|
$ |
6,387,021 |
|
|
|
|
|
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 $59,210 and $84,691 in 2018 and 2017, respectively |
$ |
454,351 |
|
|
$ |
403,488 |
|
Accounts payable, accrued expenses and other current
liabilities, including consolidated variable interest entities of
$37,862 and $34,199 in 2018 and 2017, respectively |
207,185 |
|
|
88,538 |
|
Deferred revenue |
1,720 |
|
|
17,859 |
|
Due to affiliates |
10,921 |
|
|
3,968 |
|
Total current liabilities |
674,177 |
|
|
513,853 |
|
|
|
|
|
Long-term debt and financing lease obligations, less current
portion, including consolidated variable interest entities of
$908,962 and $833,388 in 2018 and 2017, respectively |
5,499,731 |
|
|
3,195,312 |
|
Deferred revenue, less current portion |
12,444 |
|
|
38,074 |
|
Deferred income taxes |
204,157 |
|
|
24,972 |
|
Asset retirement obligations, including consolidated variable
interest entities of $98,955 and $97,467 in 2018 and 2017,
respectively |
173,202 |
|
|
154,515 |
|
Other long-term liabilities |
155,278 |
|
|
37,923 |
|
Total liabilities |
6,718,989 |
|
|
3,964,649 |
|
|
|
|
|
Redeemable non-controlling interests |
43,900 |
|
|
34,660 |
|
Stockholders' equity: |
|
|
|
Class A common stock, $0.01 par value per share,
1,200,000,000 shares authorized, 209,642,140 and 148,586,447 shares
issued in 2018 and 2017, respectively, and 209,141,720 and
148,086,027 shares outstanding in 2018 and 2017, respectively |
2,096 |
|
|
1,486 |
|
Additional paid-in capital |
2,427,612 |
|
|
1,872,125 |
|
Accumulated deficit |
(334,757 |
) |
|
(387,204 |
) |
Accumulated other comprehensive income |
44,436 |
|
|
48,018 |
|
Treasury stock, 500,420 shares in 2018 and 2017 |
(6,712 |
) |
|
(6,712 |
) |
Total TerraForm Power, Inc. stockholders'
equity |
2,132,675 |
|
|
1,527,713 |
|
Non-controlling interests |
680,413 |
|
|
859,999 |
|
Total stockholders' equity |
2,813,088 |
|
|
2,387,712 |
|
Total liabilities, redeemable non-controlling
interests and stockholders' equity |
$ |
9,575,977 |
|
|
$ |
6,387,021 |
|
|
|
|
|
|
|
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) |
|
|
Nine Months Ended September
30, |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
Net loss |
$ |
(122,976 |
) |
|
$ |
(94,499 |
) |
Adjustments to reconcile net loss to net cash
provided by operating activities: |
|
|
|
Depreciation, accretion and amortization expense |
239,177 |
|
|
186,039 |
|
Amortization of favorable and unfavorable rate
revenue contracts, net |
29,477 |
|
|
29,459 |
|
Gain on sale of renewable energy facilities |
— |
|
|
(37,116 |
) |
Impairment of renewable energy facilities |
15,240 |
|
|
1,429 |
|
Amortization of deferred financing costs and debt
discounts |
7,969 |
|
|
19,729 |
|
Unrealized (gain) loss on interest rate swaps |
(11,688 |
) |
|
2,425 |
|
Unrealized gain on commodity contract derivatives,
net |
(3,845 |
) |
|
(1,244 |
) |
Recognition of deferred revenue |
(1,344 |
) |
|
(11,510 |
) |
Stock-based compensation expense |
161 |
|
|
7,049 |
|
Loss on extinguishment of debt, net |
1,480 |
|
|
2,518 |
|
Loss on disposal of property, plant and
equipment |
6,764 |
|
|
— |
|
Unrealized gain on foreign currency exchange,
net |
(9,643 |
) |
|
(5,275 |
) |
Deferred taxes |
4,888 |
|
|
7,892 |
|
Other, net |
453 |
|
|
5,978 |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
(18,757 |
) |
|
(18,860 |
) |
Prepaid expenses and other current assets |
9,154 |
|
|
(4,997 |
) |
Accounts payable, accrued expenses and other current
liabilities |
(13,002 |
) |
|
(758 |
) |
Due to affiliates |
4,158 |
|
|
199 |
|
Other non-current assets and liabilities, net |
13,361 |
|
|
3,907 |
|
Net cash
provided by operating activities |
151,027 |
|
|
92,365 |
|
Cash flows from investing activities: |
|
|
|
Capital
expenditures |
(15,320 |
) |
|
(7,472 |
) |
Proceeds
from sale of renewable energy facilities, net of cash and
restricted cash disposed |
— |
|
|
183,235 |
|
Proceeds
from energy state rebate and reimbursable interconnection
costs |
8,224 |
|
|
23,621 |
|
Proceeds
from the settlement of foreign currency contracts |
22,429 |
|
|
— |
|
Acquisition of Saeta business, net of cash and restricted cash
acquired |
(886,104 |
) |
|
— |
|
Acquisition of renewable energy facilities from third parties, net
of cash and restricted cash acquired |
(4,105 |
) |
|
— |
|
Net cash
(used in) provided by investing activities |
$ |
(874,876 |
) |
|
$ |
199,384 |
|
Cash flows from financing activities: |
|
|
|
Proceeds
from issuance of Class A common stock to affiliates |
$ |
650,000 |
|
|
$ |
— |
|
Proceeds
from the Sponsor Line - affiliate |
86,000 |
|
|
— |
|
Repayments of the Sponsor Line - affiliate |
(86,000 |
) |
|
— |
|
Revolving
credit facility draws |
619,000 |
|
|
— |
|
Revolving
credit facility repayments |
(200,466 |
) |
|
(275,000 |
) |
Term Loan
principal payments |
(2,625 |
) |
|
— |
|
Borrowings of non-recourse long-term debt |
236,381 |
|
|
79,835 |
|
Principal
payments and prepayments on non-recourse long-term debt |
(180,124 |
) |
|
(199,481 |
) |
Debt
financing fees |
(7,422 |
) |
|
(10,228 |
) |
Sale of
membership interests and contributions from non-controlling
interests in renewable energy facilities |
7,685 |
|
|
6,935 |
|
Purchase
of membership interests and distributions to non-controlling
interests in renewable energy facilities |
(21,792 |
) |
|
(23,017 |
) |
Due
to/from affiliates, net |
4,803 |
|
|
(3,097 |
) |
Net
SunEdison investment |
— |
|
|
7,436 |
|
Payment
of dividends |
(95,627 |
) |
|
— |
|
Recovery
of related party short swing profit |
2,994 |
|
|
— |
|
Other
financing activities |
— |
|
|
(1,030 |
) |
Net cash
provided by (used in) financing activities |
1,012,807 |
|
|
(417,647 |
) |
Net
increase in cash, cash equivalents and restricted cash |
288,958 |
|
|
(125,898 |
) |
Net change in cash, cash equivalents and restricted cash classified
within assets held for sale |
— |
|
|
54,806 |
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
(3,750 |
) |
|
3,264 |
|
Cash, cash equivalents and restricted cash at beginning of
period |
224,787 |
|
|
682,837 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
509,995 |
|
|
$ |
615,009 |
|
Supplemental Disclosures: |
|
|
|
Cash paid
for interest |
$ |
170,549 |
|
|
$ |
182,021 |
|
Cash paid
for income taxes |
667 |
|
|
— |
|
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 (i)
unrealized gain/loss on derivatives, (ii) amortization of favorable
and unfavorable rate revenue contracts, net, and (iii) an
adjustment for wholesale market revenues to the extent above or
below the regulated price bands.
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.
Use of Non-GAAP Measures
We disclose Adjusted Revenue because it presents
the component of operating revenue that relates to energy
production from our plants, and is, therefore, useful to investors
and other stakeholders in evaluating 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 and other
stakeholders in evaluating our operating performance and as a
measure of 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 tables present 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 millions) |
|
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Adjustments to
reconcile operating revenues, net to adjusted revenue |
|
|
|
|
|
|
Operating revenues,
net |
|
$246 |
|
$153 |
|
|
$553 |
|
$475 |
|
Unrealized (gain) loss on commodity contract derivatives, net
(a) |
|
|
2 |
|
|
(4) |
|
|
|
(3) |
|
|
(1) |
|
Amortization of favorable and unfavorable rate revenue contracts,
net (b) |
|
|
10 |
|
|
11 |
|
|
|
30 |
|
|
30 |
|
Other
non-cash items (c) |
|
|
- |
|
|
(5) |
|
|
|
- |
|
|
(10) |
|
2017
incentive revenue recognition recast (m) |
|
|
- |
|
|
1 |
|
|
|
- |
|
|
(9) |
|
Regulated
Spain price band adjustment |
|
|
10 |
|
|
- |
|
|
|
10 |
|
|
- |
|
Adjustment for Asset Sales |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(15) |
|
Adjusted
revenue |
|
$268 |
|
$156 |
|
|
$590 |
|
$470 |
|
Direct
operating costs (d) |
|
|
(71) |
|
|
(46) |
|
|
|
(169) |
|
|
(142) |
|
Settled
FX gain (loss) |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
Adjusted
EBITDA |
|
$197 |
|
$110 |
|
|
$421 |
|
$328 |
|
Non-operating general and administrative expenses (e) |
|
|
(6) |
|
|
(13) |
|
|
|
(38) |
|
|
(67) |
|
Stock-based compensation expense |
|
|
- |
|
|
(2) |
|
|
|
- |
|
|
(7) |
|
Acquisition and related costs |
|
|
(2) |
|
|
- |
|
|
|
(15) |
|
|
- |
|
Depreciation, accretion and amortization expense (f) |
|
|
(113) |
|
|
(72) |
|
|
|
(269) |
|
|
(215) |
|
Impairment charges |
|
|
- |
|
|
1 |
|
|
|
(15) |
|
|
- |
|
Gain on
sale of U.K. renewable energy facilities |
|
|
- |
|
|
- |
|
|
|
- |
|
|
37 |
|
Interest
expense, net |
|
|
(72) |
|
|
(70) |
|
|
|
(177) |
|
|
(208) |
|
Income
tax benefit |
|
|
(7) |
|
|
1 |
|
|
|
(9) |
|
|
2 |
|
Adjustment for asset sales |
|
|
- |
|
|
- |
|
|
|
- |
|
|
10 |
|
Regulated
Spain price band adjustment |
|
|
(10) |
|
|
- |
|
|
|
(10) |
|
|
- |
|
Other
non-cash or non-operating items (g) |
|
|
(6) |
|
|
9 |
|
|
|
(11) |
|
|
26 |
|
Net
loss |
|
($19) |
|
($36) |
|
|
($123) |
|
($94) |
|
|
|
|
|
|
|
|
(in thousands) |
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
Reconciliation
of adjusted EBITDA to CAFD |
|
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Adjusted
EBITDA |
|
$197 |
|
$110 |
|
|
$421 |
|
$328 |
|
Fixed
management fee |
|
|
(3) |
|
|
- |
|
|
|
(8) |
|
|
- |
|
Variable
management fee |
|
|
(1) |
|
|
- |
|
|
|
(3) |
|
|
- |
|
Adjusted
interest expense (h) |
|
|
(78) |
|
|
(63) |
|
|
|
(184) |
|
|
(184) |
|
Levelized
principal payments (i) |
|
|
(57) |
|
|
(24) |
|
|
|
(111) |
|
|
(75) |
|
Cash
distributions to non-controlling interests (j) |
|
|
(7) |
|
|
(6) |
|
|
|
(19) |
|
|
(23) |
|
Sustaining capital expenditures (k) |
|
|
(2) |
|
|
(1) |
|
|
|
(6) |
|
|
(1) |
|
Adjustment for asset sales |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
Other
(l) |
|
|
(3) |
|
|
3 |
|
|
|
10 |
|
|
17 |
|
Cash available
for distribution (CAFD) (m) |
|
$46 |
|
$19 |
|
|
$100 |
|
$62 |
|
a) Represents unrealized (gain) loss on commodity contracts
associated with energy derivative contracts that are accounted for
at fair value with the changes 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 to
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) In the three months ended September 30, 2017, reclassifies
$0.5 million wind sustaining capital expenditure into direct
operating costs, which will now be covered under a new Full Service
Agreement. In the nine months ended September 30, 2017,
reclassifies $7 million wind sustaining capital expenditure into
direct operating costs.
e) Pursuant to the Management Services Agreement, SunEdison
agreed to provide or arrange for other service providers to provide
management and administrative services to us. In the three months
ended September 30, 2017, we accrued costs incurred for management
and administrative services that were provided by SunEdison under
the Management Services Agreement that were not reimbursed by
TerraForm Power and were treated as an addback in the
reconciliation of net loss to Adjusted EBITDA. In addition,
non-operating items and other items incurred directly by TerraForm
Power that we do not consider indicative of our core business
operations are treated as an addback in the reconciliation of net
loss to Adjusted EBITDA. These items include extraordinary costs
and expenses related primarily to restructuring, legal, advisory
and contractor fees associated with the bankruptcy of SunEdison and
certain of its affiliates (the “SunEdison bankruptcy”) and
investment banking, legal, third party diligence and advisory fees
associated with the Brookfield transaction, dispositions and
financings. The Company’s normal general and administrative
expenses, paid by Terraform Power, are the amounts shown below and
were not added back in the reconciliation of net loss to Adjusted
EBITDA ($ in millions):
Q3 2018 |
Q3 2017 |
YTD 2018 |
YTD 2017 |
$6 M |
$6 M |
$20 M |
$23 M |
f) Includes reductions (increases) within operating revenues due
to net amortization of favorable and unfavorable rate revenue
contracts as detailed in the reconciliation of Adjusted
Revenue.
g) 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: loss (gain) on foreign exchange (“FX”), unrealized loss
on commodity contracts, loss on investments and receivables with
affiliate, loss on disposal of renewable energy facilities, and
wind sustaining capital expenditure previously reclassified.
h) Represents project-level and other interest expense and
interest income attributed to normal operations. The reconciliation
from Interest expense, net as shown on the Unaudited Condensed
Consolidated Statement of Operations to adjusted interest expense
applicable to CAFD is as follows:
$ in millions |
Q3
2018 |
Q3
2017 |
YTD
2018 |
YTD
2017 |
Interest expense, net |
($72) |
|
($70) |
|
($177) |
|
($208) |
|
Amortization of deferred financing costs
and debt discounts |
|
3 |
|
|
10 |
|
|
7 |
|
|
20 |
|
Amortization of interest expense -
Affiliate |
|
- |
|
|
- |
|
|
1 |
|
|
- |
|
Adjustment for asset sales |
|
- |
|
|
- |
|
|
- |
|
|
8 |
|
Fair value changes in interest rate swaps
in Saeta |
|
(3) |
|
|
- |
|
|
(11) |
|
|
- |
|
Other |
|
(5) |
|
|
(3) |
|
|
3 |
|
|
(4) |
|
Adjusted interest
expense |
($77) |
|
($63) |
|
($106) |
|
($184) |
|
i) Represents levelized project-level and other principal
debt payments to the extent paid from operating cash.
j) Represents cash distributions paid to non-controlling
interests in our renewable energy facilities. The reconciliation
from Distributions to non-controlling interests as shown on the
Unaudited Condensed Consolidated Statement of Cash Flows to Cash
distributions to non-controlling interests, net for the three
months ended September 30, 2018 and 2017 is as follows:
$ in millions |
Q2 2018 |
Q2
2017 |
H1
2018 |
H1
2017 |
Distributions to non-controlling
interests |
($7) |
|
($6) |
|
($18) |
|
($23) |
|
Adjustment for non-operating cash
distributions |
|
- |
|
|
- |
|
|
1 |
|
|
- |
|
Cash distributions to
non-controlling interests, net |
($7) |
|
($67) |
|
($17) |
|
($23) |
|
k) Represents long-term average sustaining capex starting
in 2018 to maintain reliability and efficiency of the assets.
l) 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), and releases or (postings) of
collateral held by counterparties of energy market hedges for
certain wind plants.
m) CAFD in 2017 was recast as follows to present the
levelized principal payments, adjusted interest expense, and
incentive revenue recognition recast to provide period to period
comparisons that are consistent and more easily understood. The
2017 incentive revenue was recast based on an estimate in the same
proportions as the 2018 phasing, which differs from the actual 2017
phasing due to the adoption of the revenue recognition standard. In
the twelve months ended December 31, 2017, CAFD remained $88
million as reported previously.
$ in millions |
Q1
2017 |
Q2
2017 |
Q3
2017 |
Q4
2017 |
|
2017 |
|
Cash available for distribution
(CAFD) before debt service reported |
$104 |
|
$120 |
|
$106 |
|
$91 |
|
$421 |
|
Levelized principal payments |
|
(25) |
|
|
(25) |
|
|
(25) |
|
|
(24) |
|
|
(99) |
|
Adjusted interest expense |
|
(60) |
|
|
(61) |
|
|
(63) |
|
|
(50) |
|
|
(234) |
|
Estimated incentive revenue recognition
recast |
|
(1) |
|
|
(9) |
|
|
1 |
|
|
9 |
|
|
- |
|
Cash available for distribution
(CAFD), recast |
$18 |
|
$25 |
|
$19 |
|
$26 |
|
$88 |
|
n) Represents Regulated Solar and Wind Price Band
Adjustment to Return on Investment Revenue as dictated by market
conditions. To the extent that the wholesale market price is
greater or less than a price band centered around the market price
forecasted by the regulator during the preceding three years, the
difference in revenues assuming average generation accumulates in a
tracking account. The Return on Investment is either increased or
decreased in order to amortize the balance of the tracking account
over the remaining regulatory life of the assets.
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