TerraForm Power, Inc. (Nasdaq: TERP) (“TerraForm Power”) today
reported financial results for the quarter and full year ended
December 31, 2019.
2019 Highlights
- Net (Loss) Income
attributable to Class A shareholders, Adjusted EBITDA and CAFD of
$(149) million, $744 million and $173 million, respectively for the
full year of 2019. This represents a decrease in Net (Loss) Income
attributable to Class A shareholders of $(161) million, an increase
in Adjusted EBITDA of $154 million and an increase in CAFD of $47
million, compared to 2018;
- Executed value-adding
acquisitions totaling 480 MW, including the acquisition of 320 MW
of DG solar assets in the United States and recent acquisitions of
145 MW of solar plants in Spain, deploying equity of approximately
$440 million;
- Received all permits and a
non-materiality determination from the New York Independent System
Operator (“NYISO”) required for our two repowering projects in New
York that total 160 MW and continue to target a commercial
operation date in 2021;
- Upon signing project-level
Long Term Service Agreements (“LTSA”), transitioned 15 out of 16
wind farms in North America to GE who are providing O&M
services, an initiative that is expected to reduce annual O&M
expenses by $20 million;
- Replaced our legacy
operator in Europe with the original equipment manufacturers for
all of our wind farms and executed LTSAs that are expected to
lock-in an annualized cost reduction of $4 million;
- Signed a Framework
Agreement with SMA Solar Technology (“SMA”) to provide O&M
services for our North American solar fleet, an initiative that is
expected to reduce annualized costs by approximately $5 million and
convey robust performance guarantees to our fleet;
- Executed TerraForm Power’s
inaugural equity offering, raising $300 million at a price of
$16.77 per share or a 50% premium to the stock price as of the
beginning of 2019; and
- Declared a Q1 2020
distribution of $0.2014 per share
“In 2019, we continued to execute our growth
strategy, deploying $440 million of equity in accretive
acquisitions in North America and Europe, advancing our two
repowerings in New York and implementing full scope operations and
maintenance contracts with robust performance guarantees for our
wind and solar fleets,” said John Stinebaugh, CEO of TerraForm
Power. “Despite our substantial operational progress, 2019 was a
transitional year for TerraForm Power from a financial perspective
as these initiatives were phased-in over the course of the year.
Going forward, we believe we are well-positioned to reap the full
benefits from these initiatives.”
Results
|
Three Months Ended12/31/2019 |
Three Months Ended12/31/2018 |
Twelve Months
Ended12/31/2019 |
Twelve Months
Ended12/31/2018 |
Generation (GWh) |
2,329 |
2,214 |
9,242 |
8,088 |
Net Loss - Class A Shares
($M) |
(82) |
(15) |
(149) |
12 |
Earnings (loss) per
Share1 |
$(0.38) |
$(0.07) |
$(0.7) |
$0.07 |
Adjusted EBITDA2 ($M) |
176 |
170 |
744 |
590 |
CAFD2 ($M) |
35 |
27 |
173 |
126 |
CAFD per Share1,2,3 |
$0.16 |
$0.13 |
$0.81 |
$0.69 |
______
|
(1) Earnings (loss) per share is calculated using Net (loss)
income attributable to Class A common stockholders divided by the
weighted average anti-dilutive Class A common stock shares
outstanding. For the twelve months ended December 31, 2019 and
December 31, 2018, weighted average anti-dilutive Class A common
stock shares outstanding totaled 213 million, and 182 million,
respectively.(2) Non-GAAP measures. See “Reconciliation of Non-GAAP
Measures” section.(3) CAFD per share is calculated using CAFD
divided by the weighted average diluted Class A common stock shares
outstanding. |
Growth Initiatives
During 2019, we continued to execute our growth
strategy, focusing on organic growth initiatives and value-based,
third-party acquisitions.
With regards to repowerings of wind farms, we
made substantial progress on our two New York projects (Cohocton
and Steel Winds) totaling ~160 MW. We secured all New York state
permits required to commence the repowerings and received a
non-materiality determination from NYISO, ensuring that we will not
have to re-open our interconnection agreements to accommodate the
~25% increase in energy from this initiative. Finally, we executed
Payment in Lieu of Taxes (PILOT) agreements with local
municipalities for both projects ensuring favorable tax treatment
over the long-term. In terms of next steps, we are currently
negotiating key commercial terms of an agreement with GE to secure
80% PTC safe-harbored turbines, and we are in negotiations
regarding energy and renewable energy credit hedge agreements with
a combination of corporate customers and large financial
institutions. The New York repowerings are expected to earn a
blended, unlevered after-tax return in the low-teens and de-risk
cashflow from these facilities by replacing Clipper turbines, which
historically have had operational issues.
The biggest acquisition that we executed in 2019
was our ~$720 million acquisition of the AltaGas DG portfolio which
closed in September, adding approximately ~320 MW of DG solar
assets to our existing portfolio. We expect to earn a levered
return on equity within our targeted range of 9% to 11% on this
acquisition. We now own ~750 MW of DG, making TerraForm Power one
of the largest DG operators in the United States. Diversified
across 27 states, the District of Columbia, Puerto Rico and Canada,
and with over 300 commercial and industrial customers, our DG
portfolio is comprised of assets with an average age of 5 years
that have power purchase agreements with an average remaining term
of approximately 15 years.
In November, we entered into an agreement to
acquire a 100 MW portfolio of regulated Concentrated Solar Power
(“CSP”) projects in Spain for an equity investment of $103 million.
The Portfolio is comprised of two ~50 MW CSP plants with nine hours
of storage capacity that have an average remaining regulatory life
of 19 years. As part of the transaction, we are acquiring the
operating company which provides O&M services to the plants and
is regarded as one of the best CSP operators in the Spanish market.
We closed this acquisition in February of this year. In December,
we signed and closed the acquisition of 45 MW of regulated solar
Photovoltaic (“PV”) assets in Spain for an equity investment of $60
million. The portfolio is comprised of nine plants that have a
remaining regulatory life of 21 years. We expect to earn a blended
return on equity on these investments that exceeds our targeted
range of 9% to 11%.
Operations
During 2019, we continued to execute our plan of
outsourcing O&M of our wind and solar fleets to best-in-class
operators in order to lower our costs and shift operating risk
through robust performance guarantees. As of year-end, we have
successfully transitioned operatorship of 15 of 16 North American
wind farms to GE, positioning TerraForm Power to capture the lion’s
share of the $20 million of expected annualized cost reductions.
Negotiations are ongoing with tax equity investors of the final
wind farm, and our expectation is to transition this project to GE
by mid-year. Furthermore, we are pleased to report that as of
October 1, performance guarantees are in effect for all 15 wind
farms that GE is operating.
In Spain, we replaced the legacy operator for
all of our wind farms and executed LTSAs with the original
equipment manufacturers. In the case of Uruguay and Portugal, we
renegotiated the existing LTSAs to improve economics and drive
improvements in the plants’ operational performance. We expect to
lock-in annualized cost savings of $4 million, with attractive
availability guarantees, from these LTSA agreements.
In November, we signed a Framework Agreement
with SMA to provide O&M services for our North American solar
fleet. As a result, ~1,000 MW of our solar fleet will be covered by
the agreement, with expected annualized cost savings of ~$5
million. The Framework Agreement will help us mitigate operational
risk through performance guarantees and provides incentives for SMA
to identify opportunities to make accretive investments in our
fleet, such as repowerings and upgrades of inverters. The Framework
Agreement also includes a volume discount, whereby we can add
additional assets, such as our recently acquired DG portfolio, at
attractive pricing, provided we meet or exceed certain volume
thresholds. In January of 2020, we signed project LTSAs for ~510 MW
of our portfolio and expect to fully transition these projects to
SMA by April. Upon receipt of consent from project lenders and tax
equity investors, we are targeting execution of the balance of the
LTSAs and transfer of operations to SMA by mid-2020.
In February of 2020, we signed an amendment to
our O&M agreement with Cobra Instalaciones y Servicios
(“Cobra”) for five of our CSP plants in Spain. Under the amended
agreement, Cobra has agreed to pay for deferred maintenance that
will improve the physical condition of the plants and increase
production. In addition, the amended agreement provides for better
alignment of incentives between owner and operator. Cobra has
agreed to increase the minimum production guarantee from the plants
in exchange for greater sharing of upside above various production
thresholds.
Financial Results
Net (Loss) Income attributable to Class A
shareholders was $(149) million in 2019 compared to $12 million in
2018, primarily due to higher allocation of losses to
non-controlling interests in the prior year related to the
reduction in U.S. corporate tax rates.
In 2019, we generated CAFD of $173 million,
which was $47 million greater than 2018. On a per share basis, CAFD
was $0.81, which was a 17% increase over the prior year. The
increase was largely attributable to a full year contribution from
the Saeta acquisition, which closed in June of 2018, a partial year
contribution from our recent DG acquisition and cost savings from
the implementation of LTSAs in North America and Europe. This was
offset by lower availability from our North American wind fleet, as
we accelerated deferred maintenance in order to implement the
LTSAs, as well as lower realized prices in North American wind due
to contract roll-off and greater negative basis in Texas and a
decline in Spanish wholesale market prices.
On a same-store basis, TerraForm Power generated
Adjusted EBITDA in 2019 of $413 million, which was an increase of
$7 million or 2% compared to 2018. The increase in same-store
Adjusted EBITDA is mainly due to reduced O&M costs and
liquidated damages as a result of performance guarantees
attributable to our LTSAs with GE.
Liquidity Update
In 2019, we continued to capitalize on
attractive market conditions to bolster our liquidity and position
ourselves for growth. In October, we issued $300 million of equity
priced at $16.77 per share representing a 50% premium to our price
at the beginning of 2019. This issue was comprised of our inaugural
$250 million secondary public offering as well as a concurrent $50
million private placement to Brookfield Renewable.
During the year, we were very active on the
liability management front at both the corporate and project
levels, locking in historically low interest rates. We issued $700
million of 10-year senior notes at a coupon of 4.75% and used the
proceeds to repay our $300 million notes due 2025 and our $344
million Term Loan B due 2022. With that refinancing we expect to
realize debt service savings of ~$6 million per year and extend our
maturity profile such that we have no corporate maturities until
2023. Over the course of 2019, we also completed seven non-recourse
debt refinancings totaling $1.6 billion, raising net proceeds of
~$460 million and lowering our weighted average interest rate by
~50 bps.
As a result of these initiatives, our corporate
liquidity stood at $1.3 billion as of the end of 2019, including
our $500 million sponsor line with Brookfield.
Legal and Regulatory Update
In Spain, Royal Decree Law (“RDL”) 17/2019,
which established the new rate of reasonable return for renewable
energy was enacted in November and ratified in parliament.
According to the RDL, for certain plants already in operation on
September of 2013 and that do not have an open litigation process
against the Kingdom of Spain, the reasonable return will be
extended at the current level of 7.4% for the next two regulatory
periods until December 2031. This applies to all of our assets in
Spain, excluding the 45 MW of PV solar projects that we acquired in
December and the 100 MW of CSP projects that we acquired in
February 2020. These plants will earn a 7.1% return for the next
six-year regulatory period.
Announcement of Quarterly
Distribution
On March 16, 2020, our Board of Directors
declared a quarterly distribution with respect to our Class A
common stock of $0.2014 per share. The distribution is payable on
March 31, 2020, to stockholders of record as of March 27, 2020.
This distribution represents our ninth consecutive quarterly
distribution payment under Brookfield’s sponsorship.
About TerraForm Power
TerraForm Power owns and operates a
best-in-class renewable power portfolio of solar and wind assets
located primarily in the U.S. and E.U., totaling more than 4,200 MW
of installed capacity. TerraForm Power’s goal is to acquire
operating solar and wind assets in North America and Western
Europe. TerraForm Power is listed on the Nasdaq Stock Market
(Nasdaq: TERP). It is sponsored by Brookfield Asset Management, a
leading global alternative asset manager with more than $540
billion of assets under management.
For more information about TerraForm Power,
please visit: www.terraformpower.com.
Contacts for Investors /
Media:
Sherif El-AzzaziTerraForm
Powerinvestors@terraform.com
Quarterly Earnings Call Details
Investors, analysts and other interested parties
can access TerraForm Power’s 2019 Fourth Quarter and Full Year
Results, as well as the Letter to Shareholders and Supplemental
Information, on TerraForm Power’s website at
www.terraformpower.com.
The conference call can be accessed via webcast on March 17,
2020 at 9:00 a.m. Eastern Time at
https://edge.media-server.com/mmc/p/9g2wwrnn. A replay of the
webcast will be available for those unable to attend the live
webcast. To participate via teleconference, please dial
1-844-464-3938 toll free in North America, or 1-765-507-2638 for
overseas calls at approximately 8:50 a.m. Eastern Time; conference
ID: 5462778.
Safe Harbor Disclosure
This communication contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements can be identified by the fact that they
do not relate strictly to historical or current facts. These
statements involve estimates, expectations, projections, goals,
assumptions, known and unknown risks, and uncertainties and
typically include words or variations of words such as “expect,”
“anticipate,” “believe,” “intend,” “plan,” “seek,” “estimate,”
“predict,” “project,” “opportunities,” “goal,” “guidance,”
“outlook,” “initiatives,” “objective,” “forecast,” “target,”
“potential,” “continue,” “would,” “will,” “should,” “could,” or
“may” or other comparable terms and phrases. All statements that
address operating performance, events, or developments that
TerraForm Power expects or anticipates will occur in the future are
forward-looking statements. They may include estimates of expected
cash available for distribution ("CAFD"), distribution growth, CAFD
accretion, earnings, revenues, income, loss, capital expenditures,
liquidity, capital structure, margin enhancements, cost savings,
future growth, financing arrangements and other financial
performance items (including future distributions per share),
descriptions of management’s plans or objectives for future
operations, products, or services, or descriptions of assumptions
underlying any of the above. Forward-looking statements provide
TerraForm Power’s current expectations or predictions of future
conditions, events, or results and speak only as of the date they
are made. Although TerraForm Power believes its expectations and
assumptions are reasonable, it can give no assurance that these
expectations and assumptions will prove to have been correct and
actual results may vary materially.
Important factors that could cause actual
results to differ materially from TerraForm Power’s expectations,
or cautionary statements, include but are not limited to: risks
related to the proposed acquisition of all our outstanding common
stock by an affiliate of Brookfield Asset Management Inc.
(“Brookfield”) including whether it will be approved by
shareholders and ultimately consummated; risks related to weather
conditions at our wind and solar assets; the willingness and
ability of counterparties to fulfill their obligations under
offtake agreements; price fluctuations, termination provisions and
buyout provisions in offtake agreements; our ability to enter into
contracts to sell power at acceptable prices and terms, including
as our offtake agreements expire; our ability to compete against
traditional utilities and renewable energy companies; pending and
future litigation; our ability to successfully close the
acquisitions of, integrate or realize the anticipated benefits from
the projects that we acquire from third parties, including our
recently acquired portfolio of distributed generation assets; our
ability to close, implement and realize the benefit of our cost and
performance enhancement initiatives, including long-term service
agreements and our ability to realize the anticipated benefits from
such initiatives; equipment failure; risks related to the ability
of our hedging activities to adequately manage our exposure to
commodity and financial risk; risks related to the outbreak of
COVID-19 coronavirus, including its impact on supply chains,
personnel, contract counterparties and financial markets; risks
related to our operations being located internationally, including
our exposure to foreign currency exchange rate fluctuations and
political and economic uncertainties; government regulation,
including compliance with regulatory and permit requirements and
changes in tax laws, market rules, rates, tariffs, environmental
laws, consumer protection laws, data privacy laws and policies
affecting renewable energy; the regulated rate of return of
renewable energy facilities in our Regulated Solar and Wind
segment, a reduction of which could have a material negative impact
on our results of operations; our ability to grow and make
acquisitions with cash on hand, which may be limited by our cash
distribution policy; fraud, bribery, corruption or other illegal
acts; health, safety, security and environmental risk; the
condition of the debt and equity capital markets and our ability to
borrow additional funds and access capital markets, as well as our
substantial indebtedness and the possibility that we may incur
additional indebtedness in the future; operating and financial
restrictions placed on us and our subsidiaries related to
agreements governing indebtedness; risks related to our
relationship with Brookfield, including our ability to realize the
expected benefits of sponsorship; and risks related to the
effectiveness of our internal control over financial reporting.
TerraForm Power disclaims any obligation to
publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions, factors, or expectations, new
information, data, or methods, future events, or other changes,
except as required by law. The foregoing list of factors that might
cause results to differ materially from those contemplated in the
forward-looking statements should be considered in connection with
information regarding risks and uncertainties which are described
in our most recent Annual Report on Form 10-K and in subsequent
Quarterly Reports on Form 10-Q, as well as additional factors it
may describe from time to time in other filings with the Securities
and Exchange Commission. TerraForm Power operates in a competitive
and rapidly changing environment. New risks and uncertainties
emerge from time to time, and you should understand that it is not
possible to predict or identify all such factors and, consequently,
you should not consider any such list to be a complete set of all
potential risks or uncertainties.
TERRAFORM POWER, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)
|
Three Months
Ended December 31, |
|
Year Ended
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Operating revenues, net |
$ |
206,734 |
|
|
|
$ |
213,093 |
|
|
|
$ |
941,240 |
|
|
|
$ |
766,570 |
|
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Cost of operations |
72,533 |
|
|
|
74,752 |
|
|
|
279,896 |
|
|
|
220,907 |
|
|
Cost of operations - affiliate |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
General and administrative expenses |
20,447 |
|
|
|
22,239 |
|
|
|
81,063 |
|
|
|
87,722 |
|
|
General and administrative expenses - affiliate |
8,983 |
|
|
|
5,310 |
|
|
|
28,070 |
|
|
|
16,239 |
|
|
Acquisition costs |
2,313 |
|
|
|
(6,856 |
) |
|
|
3,751 |
|
|
|
7,721 |
|
|
Acquisition costs - affiliate |
920 |
|
|
|
6,925 |
|
|
|
920 |
|
|
|
6,925 |
|
|
Impairment of renewable energy facilities |
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,240 |
|
|
Depreciation, accretion and amortization expense |
112,505 |
|
|
|
102,660 |
|
|
|
434,110 |
|
|
|
341,837 |
|
|
Total operating costs and expenses |
217,701 |
|
|
|
205,030 |
|
|
|
827,810 |
|
|
|
696,591 |
|
|
Operating income |
(10,967 |
) |
|
|
8,063 |
|
|
|
113,430 |
|
|
|
69,979 |
|
|
Other expenses (income): |
|
|
|
|
|
|
|
Interest expense, net |
51,421 |
|
|
|
72,349 |
|
|
|
298,142 |
|
|
|
249,211 |
|
|
Loss on modification and extinguishment of debt, net |
31,141 |
|
|
|
1,480 |
|
|
|
26,953 |
|
|
|
1,480 |
|
|
Gain on sale of renewable energy facilities |
(2,252 |
) |
|
|
— |
|
|
|
(2,252 |
) |
|
|
— |
|
|
Gain on foreign currency exchange, net |
(8,509 |
) |
|
|
(6,736 |
) |
|
|
(12,726 |
) |
|
|
(10,993 |
) |
|
Other income, net |
(248 |
) |
|
|
(6,972 |
) |
|
|
(2,000 |
) |
|
|
(4,102 |
) |
|
Total other expenses, net |
71,553 |
|
|
|
60,121 |
|
|
|
308,117 |
|
|
|
235,596 |
|
|
Loss before income tax expense
(benefit) |
(82,520 |
) |
|
|
(52,058 |
) |
|
|
(194,687 |
) |
|
|
(165,617 |
) |
|
Income tax expense
(benefit) |
8,868 |
|
|
|
(21,707 |
) |
|
|
11,898 |
|
|
|
(12,290 |
) |
|
Net loss |
(91,388 |
) |
|
|
(30,351 |
) |
|
|
(206,585 |
) |
|
|
(153,327 |
) |
|
Less: Net (loss) income
attributable to redeemable non-controlling interests |
2,258 |
|
|
|
(5,893 |
) |
|
|
(11,983 |
) |
|
|
9,209 |
|
|
Less: Net loss attributable to
non-controlling interests |
(12,021 |
) |
|
|
(8,969 |
) |
|
|
(45,918 |
) |
|
|
(174,916 |
) |
|
Net (loss) income attributable
to Class A common stockholders |
$ |
(81,625 |
) |
|
|
$ |
(15,489 |
) |
|
|
$ |
(148,684 |
) |
|
|
$ |
12,380 |
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares: |
|
|
|
|
|
|
|
Class A common stock - Basic and diluted |
225,518 |
|
|
|
209,142 |
|
|
|
213,275 |
|
|
|
182,239 |
|
|
(Loss) earnings per
share: |
|
|
|
|
|
|
|
Class A common stock - Basic and diluted |
$ |
(0.36 |
) |
|
|
$ |
(0.07 |
) |
|
|
$ |
(0.70 |
) |
|
|
$ |
0.07 |
|
|
Distribution declared
per share: |
|
|
|
|
|
|
|
Class A common stock |
$ |
0.2014 |
|
|
|
$ |
0.1900 |
|
|
|
$ |
0.8056 |
|
|
|
$ |
0.7600 |
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In thousands, except share and per share
data)
|
As of December 31, |
|
2019 |
|
2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
237,480 |
|
|
|
$ |
248,524 |
|
|
Restricted cash |
35,657 |
|
|
|
27,784 |
|
|
Accounts receivable, net |
167,865 |
|
|
|
145,161 |
|
|
Derivative assets, current |
15,819 |
|
|
|
14,371 |
|
|
Prepaid expenses |
13,514 |
|
|
|
13,116 |
|
|
Other current assets |
57,682 |
|
|
|
52,033 |
|
|
Due from affiliates |
499 |
|
|
|
196 |
|
|
Deposit on acquisitions |
24,831 |
|
|
|
— |
|
|
Total current assets |
553,347 |
|
|
|
501,185 |
|
|
|
|
|
|
Renewable energy facilities, net, including consolidated variable
interest entities of $3,188,508 and $3,064,675 in 2019 and 2018,
respectively |
7,405,461 |
|
|
|
6,470,026 |
|
|
Intangible assets, net, including consolidated variable interest
entities of $690,594 and $751,377 in 2019 and 2018,
respectively |
1,793,292 |
|
|
|
1,996,404 |
|
|
Goodwill |
127,952 |
|
|
|
120,553 |
|
|
Restricted cash |
76,363 |
|
|
|
116,501 |
|
|
Derivative assets |
57,717 |
|
|
|
90,984 |
|
|
Other assets |
44,504 |
|
|
|
34,701 |
|
|
Total assets |
$ |
10,058,636 |
|
|
|
$ |
9,330,354 |
|
|
Liabilities,
Redeemable Non-controlling Interests and Stockholders’
Equity |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt and financing lease obligations,
including consolidated variable interest entities of $55,089 and
$64,251 in 2019 and 2018, respectively |
$ |
441,951 |
|
|
|
$ |
464,332 |
|
|
Accounts payable, accrued expenses and other current
liabilities |
178,796 |
|
|
|
181,400 |
|
|
Due to affiliates |
11,510 |
|
|
|
6,991 |
|
|
Derivative liabilities, current |
33,969 |
|
|
|
35,559 |
|
|
Total current liabilities |
666,226 |
|
|
|
688,282 |
|
|
Long-term debt and financing lease obligations, less current
portion, including consolidated variable interest entities of
$932,862 and $885,760 in 2019 and 2018, respectively |
5,793,431 |
|
|
|
5,297,513 |
|
|
Operating lease obligations, less current portion, including
consolidated variable interest entities of $138,816 in 2019 |
272,894 |
|
|
|
— |
|
|
Asset retirement obligations, including consolidated variable
interest entities of $116,159 and $86,456 in 2019 and 2018,
respectively |
287,288 |
|
|
|
212,657 |
|
|
Derivative liabilities |
101,394 |
|
|
|
93,848 |
|
|
Deferred income taxes |
194,539 |
|
|
|
178,849 |
|
|
Other liabilities |
112,072 |
|
|
|
90,788 |
|
|
Total liabilities |
7,427,844 |
|
|
|
6,561,937 |
|
|
|
|
|
|
Redeemable non-controlling
interests |
22,884 |
|
|
|
33,495 |
|
|
Stockholders’ equity: |
|
|
|
Class A common stock, $0.01 par value per share, 1,200,000,000
shares authorized, 227,552,105 and 209,642,140 shares issued in
2019, and 2018, respectively |
2,276 |
|
|
|
2,096 |
|
|
Additional paid-in capital |
2,512,891 |
|
|
|
2,391,435 |
|
|
Accumulated deficit |
(508,287 |
) |
|
|
(359,603 |
) |
|
Accumulated other comprehensive income |
11,645 |
|
|
|
40,238 |
|
|
Treasury stock, 1,051,298 and 500,420 shares in 2019 and 2018,
respectively |
(15,168 |
) |
|
|
(6,712 |
) |
|
Total TerraForm Power, Inc. stockholders’
equity |
2,003,357 |
|
|
|
2,067,454 |
|
|
Non-controlling interests |
604,551 |
|
|
|
667,468 |
|
|
Total stockholders’ equity |
2,607,908 |
|
|
|
2,734,922 |
|
|
Total liabilities, redeemable non-controlling interests and
stockholders’ equity |
$ |
10,058,636 |
|
|
|
$ |
9,330,354 |
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands)
|
Year Ended December 31, |
|
2019 |
|
2018 |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(206,585 |
) |
|
|
$ |
(153,327 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation, accretion and amortization expense |
434,110 |
|
|
|
341,837 |
|
|
Amortization of favorable and unfavorable rate revenue contracts,
net |
39,940 |
|
|
|
38,767 |
|
|
Loss on modification and extinguishment of debt, net |
26,953 |
|
|
|
1,480 |
|
|
Gain on sale of renewable energy facilities |
(2,252 |
) |
|
|
— |
|
|
Impairment of renewable energy facilities |
— |
|
|
|
15,240 |
|
|
Loss on disposal of renewable energy facilities |
15,483 |
|
|
|
6,231 |
|
|
Amortization of deferred financing costs, debt discounts, and
premiums |
14,224 |
|
|
|
11,009 |
|
|
Unrealized (gain) loss on interest rate swaps |
(4,658 |
) |
|
|
(13,116 |
) |
|
(Reductions) charges to allowance for doubtful accounts, net |
(4,239 |
) |
|
|
4,510 |
|
|
Unrealized loss on commodity contract derivatives, net |
14,036 |
|
|
|
4,497 |
|
|
Recognition of deferred revenue |
(3,457 |
) |
|
|
(1,320 |
) |
|
Stock-based compensation expense |
492 |
|
|
|
257 |
|
|
Gain on foreign currency exchange, net |
(11,480 |
) |
|
|
(12,899 |
) |
|
Deferred taxes |
6,983 |
|
|
|
(14,891 |
) |
|
Other, net |
231 |
|
|
|
— |
|
|
Changes in assets and liabilities, excluding the effect of
acquisitions and divestitures: |
|
|
|
Accounts receivable |
(8,310 |
) |
|
|
12,569 |
|
|
Prepaid expenses and other current assets |
975 |
|
|
|
(5,512 |
) |
|
Accounts payable, accrued expenses and other current
liabilities |
(17,000 |
) |
|
|
(18,976 |
) |
|
Due to affiliates, net |
4,215 |
|
|
|
3,023 |
|
|
Other, net |
28,783 |
|
|
|
33,822 |
|
|
Net cash provided by operating activities |
328,444 |
|
|
|
253,201 |
|
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
(21,184 |
) |
|
|
(22,445 |
) |
|
Proceeds from insurance reimbursement |
— |
|
|
|
1,543 |
|
|
Proceeds from the settlement of foreign currency contracts,
net |
29,806 |
|
|
|
47,590 |
|
|
Proceeds from divestiture of renewable energy facilities, net of
cash and restricted cash disposed |
10,848 |
|
|
|
— |
|
|
Proceeds from energy rebate and reimbursable interconnection
costs |
5,117 |
|
|
|
8,733 |
|
|
Payments to acquire businesses, net of cash and restricted cash
acquired |
(731,782 |
) |
|
|
(886,104 |
) |
|
Payments to acquire renewable energy facilities from third parties,
net of cash and restricted cash acquired |
(73,682 |
) |
|
|
(8,315 |
) |
|
Other investing activities |
6,244 |
|
|
|
— |
|
|
Net cash (used in) provided by investing activities |
$ |
(774,633 |
) |
|
|
$ |
(858,998 |
) |
|
Cash flows from financing
activities: |
|
|
|
Proceeds from issuance of Class A common stock, net of issuance
costs |
298,767 |
|
|
|
650,000 |
|
|
Purchase of treasury stock |
(8,353 |
) |
|
|
— |
|
|
Proceeds from the Senior Notes due 2030 |
700,000 |
|
|
|
— |
|
|
Repayment of Senior Notes due 2025 |
(300,000 |
) |
|
|
— |
|
|
Revolver draws |
492,500 |
|
|
|
679,000 |
|
|
Revolver repayments |
(869,500 |
) |
|
|
(362,000 |
) |
|
Termination of the Term Loan |
(343,875 |
) |
|
|
— |
|
|
Term Loan principal repayments |
(2,625 |
) |
|
|
(3,500 |
) |
|
Proceeds from borrowings of non-recourse long-term debt |
792,216 |
|
|
|
236,251 |
|
|
Principal payments and prepayments on non-recourse long-term
debt |
(557,099 |
) |
|
|
(259,017 |
) |
|
Proceeds from the Bridge Facility |
475,000 |
|
|
|
— |
|
|
Proceeds from the Sponsor Line - affiliate |
— |
|
|
|
86,000 |
|
|
Repayments of the Sponsor Line - affiliate |
— |
|
|
|
(86,000 |
) |
|
Senior Notes prepayment penalties |
(18,366 |
) |
|
|
— |
|
|
Debt financing fees paid |
(37,597 |
) |
|
|
(9,318 |
) |
|
Sale of membership interests and contributions from non-controlling
interests |
6,356 |
|
|
|
7,685 |
|
|
Purchase of membership interests and distributions to
non-controlling interests |
(30,509 |
) |
|
|
(29,163 |
) |
|
Due to affiliates, net |
— |
|
|
|
4,803 |
|
|
Cash distributions to Class A common stockholders |
(171,503 |
) |
|
|
(135,234 |
) |
|
Payments to terminate interest rate swaps |
(18,600 |
) |
|
|
— |
|
|
Recovery of related party short-swing profit |
— |
|
|
|
2,994 |
|
|
Net cash provided by financing activities |
406,812 |
|
|
|
782,501 |
|
|
Net (decrease) increase in cash, cash equivalents and restricted
cash |
(39,377 |
) |
|
|
176,704 |
|
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
(3,932 |
) |
|
|
(8,682 |
) |
|
Cash, cash equivalents and
restricted cash at the beginning of the year |
392,809 |
|
|
|
224,787 |
|
|
Cash, cash equivalents and
restricted cash at the end of the year |
$ |
349,500 |
|
|
|
$ |
392,809 |
|
|
Reconciliation of Non-GAAP Measures
This communication contains references to
Adjusted Revenue, Adjusted EBITDA, and cash available for
distribution (“CAFD”), which are supplemental Non-GAAP measures
that should not be viewed as alternatives to GAAP measures of
performance, including revenue, net income (loss), operating income
or net cash provided by operating activities. Our definitions and
calculation of these Non-GAAP measures may differ from definitions
of Adjusted Revenue, Adjusted EBITDA and CAFD or other similarly
titled measures used by other companies. We believe that Adjusted
Revenue, Adjusted EBITDA and CAFD are useful supplemental measures
that may assist investors in assessing the financial performance of
TerraForm Power. None of these Non-GAAP measures should be
considered as the sole measure of our performance, nor should they
be considered in isolation from, or as a substitute for, analysis
of our financial statements prepared in accordance with GAAP, which
are available on our website at www.terraform.com, as well as at
www.sec.gov. We encourage you to review, and evaluate the basis
for, each of the adjustments made to arrive at Adjusted Revenue,
Adjusted EBITDA and CAFD.
Calculation of Non-GAAP
Measures
We define Adjusted Revenue as operating
revenues, net, adjusted for non-cash items, including (i)
unrealized gain/loss on derivatives, net, (ii) amortization of
favorable and unfavorable rate revenue contracts, net, (iii) an
adjustment for wholesale market revenues to the extent above or
below the regulated price bands, and (iv) other items that we
believe are representative of our core business or future operating
performance.
We define Adjusted EBITDA as net income (loss)
plus depreciation, accretion and amortization, non-operating
general and administrative costs, management fees to Brookfield,
interest expense, income tax (benefit) expense, acquisition related
expenses, and certain other non-cash charges, unusual or
non-recurring items and other items that we believe are not
representative of our core business or future operating
performance.
We define “cash available for distribution” or
“CAFD” as Adjusted EBITDA (i) minus management fees to Brookfield,
(ii) minus cash distributions paid to non-controlling interests in
our renewable energy facilities, if any, (iii) minus annualized
scheduled interest and project level amortization payments in
accordance with the related borrowing arrangements, (iv) minus
average annual sustaining capital expenditures (based on the
long-sustaining capital expenditure plans) which are recurring in
nature and used to maintain the reliability and efficiency of our
power generating assets over our long-term investment horizon, (v)
plus or minus operating items as necessary to present the cash
flows we deem representative of our core business operations.
Use of Non-GAAP Measures
We disclose Adjusted Revenue because it presents
the component of operating revenue that relates to energy
production from our plants, and is, therefore, useful to investors
and other stakeholders in evaluating performance of our renewable
energy assets and comparing that performance across periods in each
case without regard to non-cash revenue items.
We disclose Adjusted EBITDA because we believe
it is useful to investors and other stakeholders as a measure of
our financial and operating performance and debt service
capabilities. We believe Adjusted EBITDA provides an additional
tool to investors and securities analysts to compare our
performance across periods without regard to interest expense,
taxes and depreciation and amortization. Adjusted EBITDA has
certain limitations, including that it: (i) does not reflect cash
expenditures or future requirements for capital expenditures or
contractual liabilities or future working capital needs, (ii) does
not reflect the significant interest expenses that we expect to
incur or any income tax payments that we may incur, and (iii) does
not reflect depreciation and amortization and, although these
charges are non-cash, the assets to which they relate may need to
be replaced in the future, and (iv) does not take into account any
cash expenditures required to replace those assets. Adjusted EBITDA
also includes adjustments for impairment charges, gains and losses
on derivatives and foreign currency swaps, acquisition related
costs and items we believe are infrequent, unusual or
non-recurring, including adjustments for general and administrative
expenses we have incurred as a result of the SunEdison
bankruptcy.
We disclose CAFD because we believe cash
available for distribution is useful to investors and other
stakeholders in evaluating our operating performance and as a
measure of our ability to pay distributions. CAFD is not a measure
of liquidity or profitability, nor is it indicative of the funds
needed by us to operate our business. CAFD has certain limitations,
such as the fact that CAFD includes all of the adjustments and
exclusions made to Adjusted EBITDA described above.
The adjustments made to Adjusted EBITDA and CAFD
for infrequent, unusual or non-recurring items and items that we do
not believe are representative of our core business involve the
application of management's judgment, and the presentation of
Adjusted EBITDA and CAFD should not be construed to infer that our
future results will be unaffected by infrequent, non-operating,
unusual or non-recurring items.
In addition, these measures are used by our
management for internal planning purposes, including for certain
aspects of our consolidated operating budget, as well as evaluating
the attractiveness of investments and acquisitions. We believe
these Non-GAAP measures are useful as a planning tool because they
allow our management to compare performance across periods on a
consistent basis in order to more easily view and evaluate
operating and performance trends and as a means of forecasting
operating and financial performance and comparing actual
performance to forecasted expectations. For these reasons, we also
believe these Non-GAAP measures are also useful for communicating
with investors and other stakeholders.
The following tables present a reconciliation of
operating revenues to Adjusted Revenue and net loss to Adjusted
EBITDA and to CAFD:
|
|
Three Months Ended December 31 |
Twelve Months Ended December 31 |
(in millions) |
|
2019 |
2018 |
2019 |
2018 |
Reconciliation of Net
Loss to Adjusted EBITDA |
|
|
|
|
|
Net (loss) income attributable to Class A common
stockholders |
|
$ |
(82 |
) |
|
$ |
(15 |
) |
|
$ |
(149 |
) |
|
$ |
12 |
|
|
Net income attributable to
redeemable and non-redeemable non-controlling interests |
|
$ |
(9 |
) |
|
$ |
(15 |
) |
|
$ |
(58 |
) |
|
$ |
(165 |
) |
|
Net loss |
|
$ |
(91 |
) |
|
$ |
(30 |
) |
|
$ |
(207 |
) |
|
$ |
(153 |
) |
|
Depreciation, accretion and
amortization expense (a) |
|
125 |
|
|
112 |
|
|
489 |
|
|
380 |
|
|
Interest expense, net |
|
51 |
|
|
72 |
|
|
298 |
|
|
249 |
|
|
Non-operating general and
administrative expenses (b) |
|
9 |
|
|
11 |
|
|
36 |
|
|
49 |
|
|
Impairment charges |
|
— |
|
|
— |
|
|
— |
|
|
15 |
|
|
Loss (gain) on extinguishment
of debt |
|
31 |
|
|
(1 |
) |
|
27 |
|
|
(1 |
) |
|
Acquisition and related
costs |
|
3 |
|
|
— |
|
|
5 |
|
|
15 |
|
|
Income tax expense |
|
9 |
|
|
(22 |
) |
|
12 |
|
|
(12 |
) |
|
Regulated Solar and Wind price
band adjustment (c) |
|
5 |
|
|
2 |
|
|
14 |
|
|
12 |
|
|
Management Fee (d) |
|
9 |
|
|
4 |
|
|
27 |
|
|
15 |
|
|
Other non-cash or
non-operating items (e) |
|
25 |
|
|
22 |
|
|
43 |
|
|
21 |
|
|
Adjusted
EBITDA |
|
$ |
176 |
|
|
$ |
170 |
|
|
$ |
744 |
|
|
$ |
590 |
|
|
|
|
|
|
|
|
(in millions) |
|
Three Months Ended December 31 |
Twelve Months Ended December 31 |
Reconciliation of
Operating Revenues, net to Adjusted Revenue |
|
2019 |
2018 |
2019 |
2018 |
Operating revenues, net |
|
$ |
207 |
|
|
$ |
213 |
|
|
$ |
941 |
|
|
$ |
767 |
|
|
Unrealized (gain) loss on
commodity contract derivatives, net (f) |
|
18 |
|
|
8 |
|
|
14 |
|
|
4 |
|
|
Amortization of favorable and
unfavorable rate revenue contracts, net (g) |
|
11 |
|
|
10 |
|
|
40 |
|
|
39 |
|
|
Regulated Solar and Wind price
band adjustment (c) |
|
5 |
|
|
2 |
|
|
14 |
|
|
12 |
|
|
Other items (h) |
|
1 |
|
|
2 |
|
|
2 |
|
|
2 |
|
|
Adjusted
Revenue |
|
$ |
242 |
|
|
$ |
235 |
|
|
$ |
1,011 |
|
|
$ |
824 |
|
|
|
|
|
|
|
|
(in millions) |
|
Three Months Ended December 31 |
Twelve Months Ended December 31 |
Reconciliation of
Adjusted Revenue to Adjusted EBITDA and Adjusted EBITDA to
CAFD |
|
2019 |
2018 |
2019 |
2018 |
Adjusted Revenue |
|
$ |
242 |
|
|
$ |
235 |
|
|
$ |
1,011 |
|
|
$ |
824 |
|
|
Direct Operating costs |
|
(68 |
) |
|
(66 |
) |
|
(274 |
) |
|
(235 |
) |
|
Settled FX gain (loss) |
|
2 |
|
|
1 |
|
|
7 |
|
|
1 |
|
|
Adjusted
EBITDA |
|
$ |
176 |
|
|
$ |
170 |
|
|
$ |
744 |
|
|
$ |
590 |
|
|
Fixed management fee (d) |
|
(4 |
) |
|
(3 |
) |
|
(13 |
) |
|
(10 |
) |
|
Variable management fee
(d) |
|
(5 |
) |
|
(2 |
) |
|
(14 |
) |
|
(5 |
) |
|
Adjusted interest expense
(i) |
|
(72 |
) |
|
(72 |
) |
|
(289 |
) |
|
(256 |
) |
|
Levelized principal payments
(j) |
|
(53 |
) |
|
(60 |
) |
|
(239 |
) |
|
(173 |
) |
|
Cash distributions to
non-controlling interests (k) |
|
(7 |
) |
|
(6 |
) |
|
(20 |
) |
|
(26 |
) |
|
Sustaining capital
expenditures (l) |
|
(2 |
) |
|
(2 |
) |
|
(8 |
) |
|
(8 |
) |
|
Other (m) |
|
2 |
|
|
2 |
|
|
12 |
|
|
14 |
|
|
Cash available for
distribution (CAFD) |
|
$ |
35 |
|
|
$ |
27 |
|
|
$ |
173 |
|
|
$ |
126 |
|
|
(a) |
Includes
reductions/(increases) within operating revenues due to net
amortization of favorable and unfavorable rate revenue contracts as
detailed in the reconciliation of Adjusted Revenue, and losses on
disposal of property, plant and equipment. |
(b) |
Non-operating items and other items incurred directly by
TerraForm Power that we do not consider indicative of our core
business operations are treated as an addback in the reconciliation
of net loss to Adjusted EBITDA. These items include, but are not
limited to, extraordinary costs and expenses related primarily to
IT system arrangements, relocation of the headquarters to New York,
and legal, third party diligence, contractor fees and advisory fees
associated with acquisitions, dispositions, financings, and other
non-recurring activities. TerraForm Power’s normal, recurring
general and administrative expenses in Corporate, paid by TerraForm
Power, are the amounts shown below and were not added back in the
reconciliation of net loss to Adjusted EBITDA: |
$ in millions |
Q4 2019 |
Q4 2018 |
YTD 2019 |
YTD 2018 |
Operating general and administrative expenses in Corporate |
$9 |
$9 |
$34 |
$29 |
(c) |
Represents the
Regulated Solar and Wind segment’s Price Band Adjustment to Return
on Investment Revenue as dictated by market conditions. To the
extent that the wholesale market price is greater or less than a
price band centered around the market price forecasted by the
Spanish regulator during the preceding three years, the difference
in revenues assuming average generation accumulates in a tracking
account. The Return on Investment is either increased or decreased
in order to amortize the balance of the tracking account over the
remaining regulatory life of the assets. |
(d) |
Represents management fee that is not included in Direct
operating costs. |
(e) |
Represents other non-cash or non-operating items as detailed in
the reconciliation of Adjusted Revenue and associated footnote and
certain other items that we believe are not representative of our
core business or future operating performance, including but not
limited to: loss/(gain) on foreign exchange (“FX”), unrealized loss
on commodity contracts, loss on investments and receivables with
affiliate, and one-time blade repairs related to the preparation
for GE transition. |
(f) |
Represents unrealized (gain)/loss on commodity contracts
associated with energy derivative contracts that are accounted for
at fair value with the changes recorded in operating revenues, net.
The amounts added back represent changes in the value of the energy
derivative related to future operating periods, and are expected to
have little or no net economic impact since the change in value is
expected to be largely offset by changes in value of the underlying
energy sale in the spot or day-ahead market. |
(g) |
Represents net amortization of purchase accounting related to
intangibles arising from past business combinations related to
favorable and unfavorable rate revenue contracts. |
(h) |
Primarily represents insurance compensation for revenue losses,
transmission capacity revenue, and adjustments for solar renewable
energy certificate (”SREC”) recognition and other revenue due to
timing. |
(i) |
Represents project-level and other interest expense and
interest income attributed to normal operations. The reconciliation
from Interest expense, net as shown on the Consolidated Statements
of Operations to adjusted interest expense applicable to CAFD is as
follows: |
$ in
millions |
Q4 2019 |
Q4 2018 |
YTD 2019 |
YTD 2018 |
Interest expense, net |
$ |
(51 |
) |
|
$ |
(72 |
) |
|
$ |
(298 |
) |
|
$ |
(249 |
) |
|
Amortization of deferred financing costs and debt discounts |
6 |
|
|
3 |
|
|
14 |
|
|
11 |
|
|
Other, primarily fair value changes in interest rate swaps and
purchase accounting adjustments due to acquisition |
(27 |
) |
|
(3 |
) |
|
(5 |
) |
|
(18 |
) |
|
Adjusted interest expense |
$ |
(72 |
) |
|
$ |
(72 |
) |
|
$ |
(289 |
) |
|
$ |
(256 |
) |
|
(j) |
Represents
levelized project-level and other principal debt payments to the
extent paid from operating cash. |
(k) |
Represents cash distributions paid to non-controlling interests
in our renewable energy facilities. The reconciliation from
Distributions to non-controlling interests as shown on the
Consolidated Statement of Cash Flows to Cash distributions to
non-controlling interests, net for the three months December 31,
2019 and 2018 is as follows: |
$ in
millions |
Q4 2019 |
Q4 2018 |
YTD 2019 |
YTD 2018 |
Purchase of membership interests |
$ |
(13 |
) |
|
$ |
(8 |
) |
|
$ |
(31 |
) |
|
$ |
(29 |
) |
|
Buyout of non-controlling interests and Additional Paid in
Capital |
— |
|
|
2 |
|
|
4 |
|
|
2 |
|
|
Adjustment for non-operating cash distributions |
9 |
|
|
— |
|
|
10 |
|
|
1 |
|
|
Normalized distributions to non-controlling interests |
$ |
(3 |
) |
|
$ |
— |
|
|
$ |
(3 |
) |
|
$ |
— |
|
|
Purchase of membership interests and distributions to
non-controlling interests |
$ |
(7 |
) |
|
$ |
(6 |
) |
|
$ |
(20 |
) |
|
$ |
(26 |
) |
|
(l) |
Represents
long-term average sustaining capital expenditures to maintain
reliability and efficiency of the assets. |
(m) |
Represents other cash flows as determined by management to be
representative of normal operations including, but not limited to,
wind plant “pay as you go” contributions received from tax equity
partners, interconnection upgrade reimbursements, cash tax
payments, and recognized SREC gains that are covered by loan
agreements. |
TerraForm Power (NASDAQ:TERP)
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TerraForm Power (NASDAQ:TERP)
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