Pattern Energy Announces Key Strategic Initiatives for Major Expansion of Growth and Capital Opportunities with Pattern Development, Riverstone and PSP Investments
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- Up to $1 billion in new capital commitments for Pattern Development 2.0, including a $60 million minority investment by Pattern Energy (with a right but not an obligation to fund an additional $240 million) and more than $700 million primarily from institutional investors through a Riverstone managed entity
- Strategic co-investment relationship with PSP Investments, who becomes the largest shareholder in Pattern Energy
- Pattern Energy to acquire two accretive new dropdown projects with PSP Investments, and sell a partial interest in Panhandle 2 to PSP Investments
- Pattern Energy to host conference call today, Monday, June 19 at 10:30am ET
SAN FRANCISCO, and NEW YORK, and MONTRÉAL, June 19, 2017 /CNW/ -- Pattern Energy Group Inc. (NASDAQ and TSX: PEGI) ("Pattern Energy" or the "Company"), Pattern Energy Group LP ("Pattern Development 1.0"), Pattern Energy Group 2 LP ("Pattern Development 2.0" and together with Pattern Development 1.0, "Pattern Development"), Riverstone Holdings LLC ("Riverstone") and the Public Sector Pension Investment Board ("PSP Investments") today announced a series of strategic initiatives to significantly increase Pattern Energy's long-term growth outlook and enhance its access to capital. Collectively, these strategic initiatives position Pattern Energy to capture an increased share of the annual $250 billion global renewable energy market, and support its Pattern 2020 vision to double its portfolio to 5 gigawatts ("GW") by 2020. All references herein to "$" or dollars are to U.S. dollars.
The initiatives include a major increase in capital committed to Pattern Development 2.0, and a minority investment by Pattern Energy, as well as a significant expansion of the development pipeline. In addition, Pattern Energy has created a strategic relationship with PSP Investments, aligning it with one of the world's leading long-term institutional investors. PSP Investments will have a direct ownership stake in Pattern Energy and co-invest in projects.
Pattern Development secures long-term funding commitments for expanded development business:
- The arrangements create increased opportunities for growth with improved alignment with Pattern Energy's core business strategy;
- Pattern Development's pipeline expands to 10 GW total capacity, including an additional 275 megawatts ("MW") of owned capacity to the identified right of first offer ("ROFO") list;
- $724 million in new long-term funding commitments for Pattern Development 2.0, primarily from major institutional investors through a Riverstone managed investment entity; and
- A $60 million initial investment by Pattern Energy, for a ~20% interest in Pattern Development 2.0, ensuring access to an exclusive project pipeline and enhancing alignment with the development business.
Strategic partnership with PSP Investments:
- PSP Investments to acquire 8.7 million shares (~9.9%) of Pattern Energy stock from Pattern Development 1.0;
- PSP Investments to co-invest $500 million in projects acquired by Pattern Energy under the Company's ROFO with Pattern Development, including investments in the Meikle, Mont Sainte-Marguerite and Panhandle 2 projects (the "Initial Projects"); and
- PSP Investments to have an indirect investment interest in Pattern Development 2.0.
Accretive acquisition of two new projects and sale of a minority interest in Panhandle 2:
- $65 million (1) acquisition by Pattern Energy for a 51% interest in the 179 MW Meikle project from Pattern Development 1.0, which represents a 10x multiple of the five-year average cash available for distribution2 ("CAFD"), PSP Investments will acquire the remaining 49%;
- $40 million (1) acquisition by Pattern Energy of a 51% interest in the 143 MW Mont Sainte-Marguerite project from Pattern Development 1.0 at the project's commercial operations date (expected in the first quarter of 2018), which represents a 10x multiple of the project's five-year average CAFD2, PSP Investments will acquire the remaining 49%; and
- $59 million sale by Pattern Energy of 49% of the Class B interest in the 182 MW Panhandle 2 project to PSP Investments, which represents a cash gain of 20% over the Company's net investment basis and more than a 12x multiple of the project's five-year average CAFD (2).
(1) Based on a CAD to USD exchange rate of $1.32.
(2) This forward looking measure of five-year average annual purchase price multiple of cash available for distribution (CAFD) contribution from the Meikle, Mont Sainte-Marguerite and Panhandle 2 projects is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found on page 60 of Pattern Energy's 2016 Annual Report on Form 10-K.