PATTERN ENERGY GROUP INC. (NASDAQ:PEGI) Files An 8-K Results of Operations and Financial Condition
Item 2.02 Results of Operations and Financial Condition.
On March 1, 2019, we issued a press release announcing our financial results for the fourth quarter and the year ended December 31, 2018. A copy of our press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
Our press release, included herein, makes reference to non-U.S. GAAP financial measures, which management believes are useful for investors by offering the ability to better evaluate operating performance and to better understand how management evaluates the business. These non-U.S. GAAP financial measures are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by U.S. GAAP. Descriptions of the non-U.S. GAAP financial measures are discussed below.
We define Adjusted EBITDA as net income (loss) before net interest expense, income taxes, and depreciation, amortization and accretion, including our proportionate share of net income (loss) before interest expense, income taxes, and depreciation, amortization and accretion of unconsolidated investments. Adjusted EBITDA also excludes the effect of certain mark-to-market adjustments, gain or loss related to acquisitions, divestitures, or refinancing transactions, adjustments from unconsolidated investments, and infrequent items not related to normal or ongoing operations. In calculating Adjusted EBITDA, we exclude mark-to-market adjustments to the value of our derivatives because we believe that it is useful for investors to understand, as a supplement to net income (loss) and other traditional measures of operating results, the results of our operations without regard to periodic, and sometimes material, fluctuations in the market value of such assets or liabilities.
Management believes Adjusted EBITDA assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that our management believes are not indicative of our core operating performance and to compare our business to that of our peers. Using Adjusted EBITDA, which is a non-U.S. GAAP measure, enables our management to evaluate our operating performance, our ability to meet debt service and other capital obligations and to measure the effectiveness of our overall capital structure. The most directly comparable U.S. GAAP measure to Adjusted EBITDA is net income (loss).
However, Adjusted EBITDA has limitations as an analytical tool. Some of these limitations include:
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does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
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does not reflect changes in, or cash requirements for, our working capital needs; |
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does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, or our proportional interest in the interest expense of our unconsolidated investments or the cash requirements necessary to service interest or principal payments on the debt borne by our unconsolidated investments; |
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does not reflect our income taxes or the cash requirement to pay our taxes; or our proportional interest in income taxes of our unconsolidated investments or the cash requirements necessary to pay the taxes of our unconsolidated investments; |
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does not reflect depreciation, amortization and accretion which are non-cash charges; or our proportional interest in depreciation, amortization and accretion of our unconsolidated investments. The assets being depreciated, amortized and accreted will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and |
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does not reflect the effect of certain mark-to-market adjustments and non-recurring items or our proportional interest in the mark-to-market adjustments at our unconsolidated investments. |
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We do not have control, nor have any legal claim to the portion of the unconsolidated investees’ revenues and expenses allocable to our joint venture partners. As we do not control, but do exercise significant influence, we account for the unconsolidated investments in accordance with the equity method of accounting. Net earnings from these investments are reflected within our consolidated statements of operations in “Earnings in unconsolidated investments, net.” Adjustments related to our proportionate share from unconsolidated investments include only our proportionate amounts of interest expense, income taxes, depreciation, amortization and accretion, and mark-to-market adjustments included in “Earnings in unconsolidated investments, net;” and |
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Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. You should not consider Adjusted EBITDA as an alternative to net income (loss), as determined in accordance with U.S. GAAP.
We define cash available for distribution as Adjusted EBITDA further adjusted to (i)subtract unconsolidated investment earnings, (ii)subtract interest expense, less non-cash items, (iii)subtract distributions to noncontrolling interests, (iv)subtract principal payments paid from operating cash flows, (v) subtract income taxes, (vi) subtract non-expansionary capital expenditures, (vii) add distributions from unconsolidated investments, (viii) add net release of restricted cash, (ix) add stock-based compensation, (x) add pay-go contributions, and (xi) add or subtract other items as necessary to present the cash flows we deem representative of our core business operations.
Management believes that cash available for distribution is indicative of our core operating performance. As a result, as of December31,2018, we have changed our key metric, cash available for distribution, from a liquidity metric to a performance metric. For the periods presented, we reconcile Adjusted EBITDA and cash available for distribution to net income (loss), the most directly comparable GAAP financial measure. The change to a performance metric did not change the amount of cash available for distribution previously reported. Cash available for distribution is a supplemental performance measure used by management and external users of our financial statements to measure our performance across reporting periods on a consistent basis by excluding items that our management believes are not indicative of our core operating performance and to compare our business to that of our peers. Cash available for distribution serves as an important measure of our performance and enables our management to evaluate our ability to meet dividend expectations, the amount of internal capital available for new investment opportunities that can enhance our ability to grow our dividends over time, and the suitability of our corporate debt levels.
However, cash available for distribution has limitations as an analytical tool. Some of the limitations are:
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Cash available for distribution: |
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excludes depreciation, amortization and accretion; |
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does not capture the level of capital expenditures necessary to maintain the operating performance of our projects or complete the construction of acquired projects; |
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is not reduced for principal payments on our project indebtedness except to the extent they are paid from operating cash flows during a period; and |
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excludes the effect of certain other cash flow items, all of which could have a material effect on our financial condition and results from operations. |
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Other companies in our industry may calculate cash available for distribution differently than we do, limiting its usefulness as a comparative measure. |
Because of these limitations, cash available for distribution should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. You should not consider cash available for distribution as an alternative to net income (loss), determined in accordance with U.S. GAAP, nor does it represent funds actually available to fund our current dividend commitments.
Item 2.02 Regulation FD Disclosure.
In addition to the earnings press release discussed in Item 2.02 above, on March 1, 2019, we are also providing Operating Metrics: Production Performance for long-term average production (“LTA”) compared to actual production, including compensated curtailment for the quarter ended December 31, 2018 and expected long-term average production for 2019. Such information is furnished herewith as Exhibit 99.2.
The information included in this Current Report on Form 8-K, including the exhibits attached hereto under Items 2.02 and 7.01, is “furnished” and shall not be deemed “filed” for any purpose, including for the purposes of Section18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing. The information included in this Current Report on Form 8-K under this Item 2.02 (including Exhibit 99.2 hereto) will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.
Item 2.02 Financial Statements and Exhibits.
(d) Exhibits
Pattern Energy Group Inc. Exhibit
EX-99.1 2 pegi201812318kexhibit991.htm EXHIBIT 99.1 Exhibit Exhibit 99.1Pattern Energy Reports Fourth Quarter and Year End 2018 Financial Results- Declares dividend of $0.4220 per Class A common share for first quarter 2019 -SAN FRANCISCO,…
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About PATTERN ENERGY GROUP INC. (NASDAQ:PEGI)
Pattern Energy Group Inc. is an independent power company focused on owning and operating power projects. The Company holds interests in over 18 wind power projects located in the United States, Canada and Chile with total capacity of over 2,644 megawatts (MW). Each of its projects has contracted to sell its output pursuant to a power sale agreement. The Company sells its electricity and environmental attributes, including renewable energy credits (RECs), to local utilities under long-term and fixed-price power purchase agreements (PPAs). The Company’s operating projects are Gulf Wind, Texas; Hatchet Ridge, California; St. Joseph, Manitoba; Spring Valley, Nevada; Santa Isabel, Puerto Rico; Ocotillo, California; South Kent, Ontario; El Arrayan, Chile; Panhandle 1, Texas; Panhandle 2, Texas; Grand, Ontario; Post Rock, Kansas; Lost Creek, Missouri; K2, Ontario; Logan’s Gap, Texas, Amazon Wind Farm Fowler Ridge, Indiana, and Armow Wind power facility in Ontario, Canada.
