Pattern Energy's (PEGI) first quarter was a bit mixed. On the one hand, several issues negatively impacted power production and earnings. Cash flow, on the other hand, soared thanks to some expansion-related initiatives. Overall, the renewable power company remains on track to achieve its two-year outlook.
A look at the numbers
|
Metric |
Q1 2019 |
Q1 2018 |
Change (YOY) |
|---|---|---|---|
|
Gigawatt-hours sold |
2,116 |
2,136 |
(0.9%) |
|
Adjusted EBITDA |
$98 million |
$104 million |
(5.8%) |
|
Cash available for distribution (CAFD) |
$53 million |
$43 million |
23.3% |
|
CAFD per share |
$0.54 |
$0.44 |
22.7% |
|
Dividend coverage ratio |
1.28 |
1.04 |
23.1% |
Data source: Pattern Energy Group. YOY = year over year.
The wind power company battled several headwinds, including unfavorable conditions and asset sales, which pinched production. It was only partially able to offset those challenges with a boost from recent acquisitions and less congestion on the Texas power grid.
EBITDA, meanwhile, declined by $6 million compared to the year-ago period. The decline was primarily due to $13 million in lost earnings from asset sales and $10 million in losses at its development investment segment. The company partially offset those negatives by generating an incremental $16 million in EBITDA from acquisitions and $2 million from new projects.
CAFD, on the other hand, improved by $10 million as acquisitions and expansion projects more than offset the lost cash flow from asset sales.
Image source: Getty Images.
A look at the outlook
Pattern Energy's healthy cash flow during the quarter kept the company on track to achieve its full-year CAFD forecast of $160 million to $190 million. The midpoint of that range implies 5% growth. The company also continues to expect to generate $185 million to $225 million in cash next year. This forecast implies a 17% increase from this year's estimate at the midpoint of both ranges. That would keep the company on track to grow cash flow at a 10% compound annual rate, which would improve the dividend payout ratio from last year's tight 99% to a more comfortable level of around 80% by 2020.
Pattern Energy expanded the list of projects where it holds the right of first offer to 1.3 gigawatts. That's a 400-megawatt increase during the quarter after its development arm secured three new projects in New Mexico. Those additions more than offset the loss of the 80-megawatt Crazy Mountain Wind project in Montana, which the company removed from the list after a court order halted further development. The growing list of opportunities provides the company with several acquisition options to power growth in the coming years. The company estimates that it will need to make $300 million to $500 million of acquisitions over the next two years to support its growth plan.
A solid start to the year
Pattern Energy generated solid first-quarter results as its portfolio maneuvers last year are paying off. That has the company on track to achieve its growth plan. However, the company still needs to figure out how it will fund the acquisitions required to power next year's accelerated growth rate, which is something investors need to watch in the coming quarters.
