Pattern Energy Enters Agreement to Sell K2 Wind Facility

07 Nov 2018

Pattern Energy Group Inc. (NASDAQ and TSX: PEGI) (“Pattern Energy” or the “Company”) announced it has entered into an agreement for the sale of the Company’s 90 megawatt (“MW”) minority owned interest in the K2 Wind power facility (“K2”) in Ontario for a purchase price of CAD$216.0 (US$166.0 million1), to a consortium of investors led by Axium Infrastructure (the “Axium Consortium”).

Highlights:

·      Sale reflects the significant intrinsic value of the assets in the portfolio compared to the value ascribed to the business in the public markets

·      Sale of the interest allows the Company to acquire or invest in more accretive assets

·      Success of the Company’s accretive asset recycling strategy

·      US$65.0 million to US$69.0 million1 gain on sale

·      Sold at 15.0x multiple of the ten-year average cash available for distribution2 (“CAFD”)

“K2 was a good candidate for recycling given our minority interest. The sale demonstrates the confidence of Canadian investors in the Ontario market. The proceeds provide us an opportunity to redeploy capital into more accretive opportunities – improving our CAFD without issuing common equity,” said Mike Garland, CEO of Pattern Energy. “We have now sold two assets, El Arrayán and K2, at significant premiums to the multiple at which we trade in the markets.” 

Pattern Energy expects to record a pretax gain in the range of approximately US$65.0 million to US$69.0 million on the sale, subject to fourth quarter results. Pattern Energy is also entitled to receive the cash flows from the facility through the end of calendar 2018.

K2 is a 270 MW wind power facility located in the Township of Ashfield-Colborne-Wawanosh and commenced commercial operations in June 2015. The facility is a joint venture between Pattern Energy, an Axium-led consortium and Capital Power Corporation. Capital Power Corporation has also agreed to sell its interest in the facility to the Axium Consortium under the same agreement.

The Company intends to use the net proceeds from the sale for general corporate purposes, which may include: funding investments, acquisitions or the repayment of indebtedness.

The transaction is expected to close on, or around, December 31, 2018, subject to customary closing conditions. 

  1. Based on a CAD to USD exchange rate of $1.30.
  2. This forward looking measure of ten-year average annual purchase price multiple of cash available for distribution (CAFD) contribution from the K2 project is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018. 

Pattern Energy | http://www.patternenergy.com.