Pattern Energy adds 3 wind farms to portfolio

The Nasdaq-listed company will pay a total of $692m for assets located in Kansas, Missouri and Ontario, Canada, increasing its owned capacity to nearly 2GW.

Pattern Energy has agreed to buy two wind farms from Wind Capital Group (WCG) and one from Pattern Energy Group (Pattern Development), a company backed by private equity firm Riverstone Holdings and parent of Pattern Energy.

The acquisitions, which are expected to close later this year, will bring Pattern Energy’s total owned wind capacity to 1,996 megawatts (MW) – a 22 percent boost. Following their completion, the company's portfolio will comprise 15 facilities in the US, Canada and Chile. 

Pattern Energy will use available cash, as well as its revolving credit facility, to fund the purchase. Of the $692 million overall price tag, $320 million represents net debt and certain tax equity non-controlling interests, the company said in a statement.

The two facilities Pattern Energy is acquiring from WCG – Post Rock Wind and Lost Creek Wind – have been in operation for an average of three years. Both have long-term purchase agreements in place; the former with Westar, the largest electric utility in Kansas which is rated BBB+, while Lost Creek Wind in Missouri has a long-term contract with Associated Electric Cooperative, which provides wholesale power generation and high-voltage transmission to its six transmission co-op member-owners and is rated AA. The average remaining life of the contracts is 17 years.

While the WCG facilities mark Pattern Energy’s foray into two new US states, K2, the wind farm the company has agreed to buy from its parent group, will expand Pattern Energy’s presence in Ontario, Canada. The facility is expected to begin operating in the second quarter of 2015. Like the other two wind farms to be acquired, K2 has a 20-year power purchase agreement in place with the Independent Electricity System Operator (IESO).

Pattern Energy will hold a 33 percent stake in K2, which is equally co-owned by Samsung Renewable Energy and Capital Power.

“Growing our portfolio with three high-quality, fully contracted power facilities immediately increases our cash flow, adds important scale to our growing portfolio and provides us with a strong platform to achieve strategic and corporate finance objectives,” Pattern Energy president and chief executive Mike Garland said.

The three acquisitions, as well as the expansion of the company’s development pipeline, are among the reasons Pattern Energy also decided to increase its growth target for cash available for distribution (CAFD) per share to between 12 and 15 percent for the next three years, according to the statement.

Pattern Energy is Pattern Development’s yieldco. When it initially listed in September 2013, it raised net proceeds of $319 million. However, it is a “different” type of yieldco, as it was designed to become a fully-fledged project developer – and not just an owner of operational assets, as most yieldcos are – once its market capitalisation hits $2.5 billion, according to a report from law firm Chadbourne & Parke.

When that happens, the yieldco will inherit the workforce of its parent company. The yieldco also has an option to buy its parent company should its current owners decide to sell a significant portion of its equity or assets.

New York-based Riverstone invested in Pattern Development in June 2009 but has not disclosed the ownership interest it holds in the company.

Since being established in 2000, the private equity firm, which focuses on the power and energy sectors, has raised more than $28 billion of equity capital and has committed approximately $28 billion to 114 investments in North America, Latin America, Europe, Africa and Asia.

The firm conducts buyout and growth capital investments in the exploration and production, midstream, oilfield services, power and renewable sectors.