Pattern Energy adds to growing list of projects and project possibilities

Pattern Energy Group Inc. (NASDAQ: PEGI) (TSX: PEG) said May 7 that it had a number of highlights in the first quarter of this year, including the addition of two new projects to the identified Right of First Offer (ROFO) list consisting of Amazon Wind Farm (Fowler Ridge), and Mont Sainte-Marguerite, and then subsequent to the end of the period it added the North Kent project.

Pattern Energy is growing its business through third-party acquisitions, including from Pattern Energy Group LP (Pattern Development), its main shareholder and a premier North American power developer.

“We continue to grow our portfolio of high-quality assets which now stands at 2,112 MW of owned capacity with the recent addition of four new projects, including our first acquisition from a third party. At the same time, we continue to add new projects to our identified ROFO list, like the recent North Kent announcement. The identified ROFO list and Pattern Development’s pipeline of development-stage projects in North America, Japan and Mexico provide clear visibility into our growth trajectory. As such, we have increased our cash available for distribution per share CAGR target to 12-15 percent through 2017,” said Mike Garland, President and CEO of Pattern Energy. “It’s a great portfolio in strong markets. Despite the short-term wind variability in the first quarter, the underlying business continues to perform well – as we grow our portfolio and a strong pipeline of near-term projects.”

Pattern Energy sold 929,420 MWh of electricity on a proportional basis in the first quarter of 2015 compared to 546,290 MWh sold in the same period in 2014. The increase was primarily attributable to the commencement of commercial operations at South Kent, Panhandle 1, Panhandle 2, Grand and El Arrayán at various times in 2014. Overall, production for the first quarter was impacted by low wind levels which were independently reported to be 20%, or more, below normal across the western United States and Texas. These wind levels resulted in a 20% variance in Pattern Energy’s production during the first quarter compared to its long-term forecast.

Pattern Energy’s projects currently in construction are, with owned or to-be-acquired capacities:

  • K2, Ontario, 90 MW, commercial operation in Q2 2015;
  • Logan’s Gap, Texas, 164 MW, commercial operation in Q4 2015; and
  • Amazon Wind Farm (Fowler Ridge), Indiana, 116 MW, commercial operation in Q4 2015.

In April 2015, Pattern Energy entered into an agreement to acquire an owned interest of 90 MW in the 270-MW K2 wind project located in Ontario, Canada, from Pattern Development. The project has a 20-year power purchase agreement (PPA) with the Independent Electricity System Operator (IESO).

In April 2015, Pattern Energy acquired the 150-MW Amazon Wind Farm (Fowler Ridge) project located in Benton County, Indiana. The project has entered into a 13-year PPA with Amazon Web Services, an Amazon.com company, to supply electricity for its datacenters. 

In April 2015, Pattern Energy entered into definitive agreements with Wind Capital Group LLC (WCG) to acquire an aggregate owned 270 MW interest in two operational wind power facilities from WCG and its affiliates.

  • Pattern Energy has agreed to acquire an interest in the 201-MW Post Rock Wind facility in Kansas, which is fully contracted under a long-term agreement with Westar, which has a BBB+ credit rating.
  • Pattern Energy also agreed to acquire an interest in the 150-MW Lost Creek Wind facility in Missouri, which is fully contracted under a long-term agreement with Associated Electric Cooperative, which has an AA credit rating.

These transactions are expected to close within 30-60 days, subject to receipt of certain regulatory approvals and satisfaction or waiver of other customary conditions.

Acquisition Pipeline

Pattern Energy has the Right of First Offer (ROFO) on a pipeline of acquisition opportunities from Pattern Development. In 2015, Pattern Energy has so far announced the addition of three new projects to its list of identified ROFO projects from Pattern Development, consisting of 116 MW of the 150-MW Amazon Wind Farm (Fowler Ridge) in January, which has also now been acquired from Pattern Development, the 147-MW Mont Sainte-Marguerite Wind project in February and 43 MW of the 100-MW North Kent Wind project in April. With these new additions, the identified ROFO list now consists of eight projects with a rated capacity of 1,399 MW and a total owned capacity of 814 MW. 

The North Kent Wind project, which is located in the Regional Municipality of Chatham-Kent, Ontario, has a 20-year PPA to supply IESO with electricity. Construction of the project is expected to begin by the end of 2016 and it is expected to reach completion at the end of 2017.

Since its IPO, Pattern Energy has purchased 756 MW from Pattern Development. The current list of identified ROFO projects is:

  • Gulf Wind, Texas, 76 MW owned, commercial operation in 2015;
  • Armow, Ontario, 90 MW owned, in construction, commercial operation in 2016;
  • Meikle, British Columbia, 185 MW owned, ready for financing, commercial operation in 2016;
  • Conejo Solar, Chile, 73 MW owned, ready for financing, commercial operation in 2017;
  • Belle River, Ontario, 50 MW owned, securing final permits, commercial operation in 2017;
  • Henvey Inlet, Ontario, 150 MW owned, late sate development, commercial in 2017;
  • Mont Sainte-Marguerite, Quebec, 147 MW owned, late stage development, commercial in late 2017; and
  • North Kent, Ontario, 43 MW owned, late stage development.

The list of identified ROFO projects represents a portion of Pattern Development’s 4,500 MW pipeline of development projects, all of which are subject to Pattern Energy’s ROFO. The 4,500 MW include Pattern Development’s interests in both its recently acquired majority stake in Tokyo-based GPI and its recently announced joint venture with CEMEX Energia in Mexico. GPI has up to 1,000 MW of near and longer term wind and solar projects in development. The joint venture between Pattern Development and CEMEX Energia has a goal of developing 1,000 MW of wind and solar generation in Mexico over the next five years where recent reforms set a mandate of 35% of generation to come from clean resources by 2024.

Pattern Energy Group Inc. is an independent power company listed on the NASDAQ and the Toronto Stock Exchange. Pattern Energy has a portfolio of 16 wind power facilities, including three projects it has agreed to acquire, with a total owned interest of 2,112 MW, in the United States, Canada and Chile.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.