TerraForm Power, Inc. (Nasdaq: TERP) (“TerraForm Power”) today
reported financial results for the quarter ended March 31, 2020.
Recent Highlights
- Net (Loss) Income attributable to Class A shareholders,
Adjusted EBITDA and CAFD of $(55) million, $180 million and $20
million, respectively, for the first quarter of 2020. This
represents an increase in Net (Loss) Income attributable to Class A
shareholders of $(46) million, an increase in Adjusted EBITDA of $2
million and a decrease in CAFD of $24 million, compared to the
first quarter of 2019;
- Entered into a definitive merger agreement with
Brookfield Renewable Partners (“BEP” or “Brookfield Renewable”) by
which BEP will acquire the balance of TerraForm Power shares
Brookfield and its affiliates do not already own for a per share
consideration of 0.381 in stock of either BEP or Brookfield
Renewable Corporation (“BEPC”);
- Transitioned to SMA Solar Technology (“SMA”) operations
and maintenance (“O&M”) services for ~540 MW
of our North American solar fleet, pursuant to the framework
agreement that we signed with SMA in November of
2019;
- Awarded 20-year Renewable Energy Certificate (“REC”)
contracts by the New York State Energy Research and Development
Authority (“NYSERDA”) for the 25% of incremental power production
from our two New York repowering projects;
- Completed a $246 million project-level refinancing of
one of our North American wind farms at a rate of 3.28%, which we
expect to achieve interest savings of $2.5 million per annum;
and
- Declared a Q2 2020 distribution of $0.2014 per
share“Since October of 2017, when Brookfield became our
sponsor, we have made tremendous progress enhancing the value of
our existing asset base and investing in accretive acquisitions to
expand our scope of operations,” said John Stinebaugh, CEO of
Terraform Power. “On March 17, Brookfield Renewable entered
into a merger agreement to acquire Terraform Power’s public shares
in exchange for a significant interest in the combined
business. We believe this offers Terraform Power’s public
shareholders an exciting opportunity to own an interest in one of
the largest, most diversified, renewable power companies
globally. Brookfield Renewable’s investment mandate with a
broad geographic scope that is opportunistic across the renewable
power value chain will help achieve its growth objectives.”
Results
|
Three Months Ended3/31/2020 |
Three Months Ended3/31/2019 |
Generation (GWh) |
|
2,336 |
|
2,399 |
|
Net Loss - Class A Shares
($M) |
|
(55) |
|
(9) |
|
Loss per Share1 |
$(0.24) |
$(0.04) |
|
Adjusted EBITDA2 ($M) |
|
180 |
|
178 |
|
CAFD2 ($M) |
|
20 |
|
44 |
|
CAFD per Share1,2,3 |
$0.09 |
$0.21 |
|
———
(1) Loss per share is calculated using Net
loss attributable to Class A common stockholders divided by the
weighted average anti-dilutive Class A common stock shares
outstanding. For the three months ended March 31, 2020 and March
31, 2019, weighted average anti-dilutive Class A common stock
shares outstanding totaled 226.5 million, and 209.1 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.
Update on Merger with
Brookfield
In March, we entered into a definitive merger
agreement for Brookfield Renewable to acquire all of the
outstanding shares of Class A common stock of TerraForm Power,
other than the approximately 62% currently owned by Brookfield
Renewable and its affiliates.
Each share of Class A common stock of TerraForm
Power will be acquired for consideration equivalent to 0.381 of a
Brookfield Renewable unit. For each share of TerraForm Power's
Class A common stock held, TerraForm Power shareholders will be
entitled to receive, at their election, either Class A shares of
Brookfield Renewable Corporation (“BEPC shares”) or limited
partnership units of Brookfield Renewable (“BEP units”).
The Special Committee of the Board of Directors
of TerraForm Power (the “Special Committee”), comprised solely of
non-executive, independent directors of TerraForm Power, has
unanimously recommended that TerraForm Power shareholders approve
the transaction. The Special Committee believes the transaction is
fair to and in the best interests of TerraForm Power and its
unaffiliated shareholders.
A preliminary version of Brookfield Renewable’s
F-1 merger proxy was recently filed with the Securities and
Exchange Commission (the “SEC”). Once the merger proxy is finalized
and filed with the SEC, the transaction is expected to be presented
for approval of TerraForm Power shareholders representing a
majority of the outstanding shares of TerraForm Power Class A
common stock not owned by Brookfield Renewable and its affiliates.
The transaction is also subject to other customary closing
conditions and is expected to close in the third quarter of
2020.
Growth Initiatives
We continued to make significant progress on the
repowerings of our ~160 MW Cohocton and Steel Winds projects in New
York. The projects were recently awarded REC contracts by NYSERDA
for the incremental production resulting from the repowerings (~25%
of the total). These REC contracts have 20 year terms at an
attractive price. We also have made substantial progress on the
related project agreements and are targeting executing a corporate
PPA, the NYSERDA REC contracts, the turbine supply agreement with
GE and tax equity agreements in the second quarter of 2020. We
remain on track to commence construction in the first half of 2021.
While we do not anticipate any delays due to supply chain issues
resulting from the COVID-19 pandemic, we continue to actively
monitor the situation.
Operations
To date, we have signed Long Term Service
Agreements (“LTSAs”) for ~540 MW of projects in our North American
solar portfolio and transitioned operations of these projects to
SMA. We have sent out consent packages to project lenders and tax
equity investors for the remaining ~450 MW of projects in our North
American solar fleet. Upon receipt of these consents, we are
targeting execution of the balance of the LTSAs and transfer of
operations to SMA by the end of the third quarter of 2020. Our new
O&M contracts are expected to reduce annualized costs by
approximately $5 million and convey robust performance guarantees
to our fleet.
Update on COVID-19
We have taken important steps to ensure that our
employees and contractors are safe. At the end of March, we closed
our New York City and Madrid offices and implemented our business
continuity plan. Currently, the majority of our corporate and
operations teams are working remotely with minimal disruption.We
are also proactively working with our O&M providers to mitigate
the impact of the pandemic on our operations. Over the past weeks,
we have engaged with O&M providers to ensure that they have
appropriate business continuity plans in place in order to
safeguard the health of our employees and contractors as well as to
ensure that our wind and solar plants continue to generate power.
To date, we have not seen any material degradation in the
performance of our assets as a result of the pandemic. However, at
a number of our distributed generation solar sites, we experienced
temporary inability to access sites due to limitations on
non-essential work. In such instances, we worked with local
authorities to clarify that these regulations do not apply to our
assets, and we now have access to these assets. We will continue to
monitor this developing situation and provide further updates, as
appropriate.
All-in-all, we believe that TerraForm Power is
well positioned to ride out the COVID-19 pandemic crisis given that
95% of our revenue is generated under long-term contracts, over 90%
of our PPA offtakers are either investment grade rated or
municipalities with investment grade characteristics, our business
is less labor intensive than most other industries and our assets
are predominantly operational, which mitigates our exposure to
supply chain disruptions.
Financial Results
In the first quarter of 2020, TerraForm Power
delivered Net Loss attributable to Class A common stockholders,
Adjusted EBITDA and CAFD of $(55) million, $180 million and $20
million, respectively. This represents an increase in Net Loss of
$(46) million, an increase in Adjusted EBITDA of $2 million and a
decrease in CAFD of $24 million, compared to the same period in
2019. Performance in the quarter was negatively impacted by a 36%
decline in market power prices in Spain as well as 6% lower wind
generation in North America, compared to the first quarter of 2019.
Offsetting these factors were contributions from recent
acquisitions as well as higher Solar Renewable Energy Certificate
(“SREC”) revenues.
The lower market prices in Spain were in part
caused by lower demand resulting from the economic slowdown caused
by COVID-19 pandemic. We expect this decline in market prices in
Spain to be mitigated through the price bands adjustment mechanism
defined under the Spanish regulated revenue framework, whereby any
shortfalls in the actual power price compared to the forecasted
power price outside of the price band are recouped in future
periods through an increase in the capacity payments that our
assets receive. The lower wind generation in North America was
mainly due to lower resource especially in our Central &
Northeast regions as production guarantees in our GE O&M
contracts largely offset availability that was below
expectation.
Liquidity Update
Despite the challenges COVID-19 posed to the
capital markets during the first quarter, we were able to continue
executing our plan to extend debt maturities and reduce financing
costs. In March, we completed $246 million in project-level
refinancing of one of our North American wind farms at a rate of
3.28%, which we expect to achieve interest savings of ~$2.5 million
per annum. The senior secured notes are fully amortizing with a
final maturity in June 2037. At the end of the first quarter, our
total corporate liquidity was $1.2 billion, inclusive of our $500
million sponsor line credit agreement with Brookfield Asset
Management (“Brookfield”).
Announcement of Quarterly
Distribution
On May 6, 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 June 15, 2020,
to stockholders of record as of June 1, 2020. This distribution
represents our tenth 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 2020 First Quarter 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 May 11, 2020
at 9:00 a.m. Eastern Time at
https://edge.media-server.com/mmc/p/k8qgu4e5. 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: 3682288.
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 the
COVID-19 pandemic, including its impact on personnel, contract
counterparties, power prices 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.
Additional Information and Where to Find It
This communication is neither a solicitation of
a proxy nor a substitute for any proxy statement or other filings
that may be made with the Securities and Exchange Commission (the
“SEC”). Any solicitation will only be made through materials filed
with the SEC. Nonetheless, this communication may be deemed to be
solicitation material in respect of the transactions by Brookfield
Renewable Partners L.P. (“Brookfield Renewable”) and TerraForm
Power (the “Transactions”) contemplated by the previously disclosed
Reorganization Agreement between Brookfield Renewable and TerraForm
Power. Brookfield Renewable and Brookfield Renewable Corporation
(“BEPC”) expect to file relevant materials with the SEC, including
a registration statement on Form F-4 that will include a proxy
statement of TerraForm Power that also constitutes a prospectus of
Brookfield Renewable and BEPC (the “F-4”). This communication is
not a substitute for the registration statement, definitive proxy
statement/prospectus or any other documents that Brookfield
Renewable, BEPC or TerraForm Power may file with the SEC or send to
shareholders in connection with the Transactions. SHAREHOLDERS OF
TERRAFORM POWER ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH
THE SEC (IF AND WHEN THEY BECOME AVAILABLE), INCLUDING THE PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE TRANSACTIONS.
Investors and security holders will be able to
obtain copies of the F-4, including the proxy statement/prospectus,
and other documents filed with the SEC (if and when available) free
of charge at the SEC’s website, www.sec.gov. Copies of documents
filed with the SEC by Terraform Power will be made available free
of charge on Terraform Power’s website at www.terraformpower.com.
Copies of documents filed with the SEC by Brookfield Renewable and
BEPC will be made available free of charge on Brookfield
Renewable’s website at bep.brookfield.com. Such documents are not
currently available.
Participants in Solicitation
TerraForm Power and its directors and executive
officers, BEPC and its directors and executive officers, and
Brookfield Renewable and its directors and executive officers may
be deemed to be participants in the solicitation of proxies from
the holders of TerraForm Power common stock in respect of the
Transactions. Information about the directors and executive
officers of TerraForm Power is set forth on its website at
www.terraformpower.com. Information about the directors and
executive officers of Brookfield Renewable is set forth on its
website at bep.brookfield.com. Information about the directors and
executive officers of BEPC are set forth on its preliminary Form
F-1. Investors may obtain additional information regarding the
interests of such participants by reading the proxy
statement/prospectus regarding the Transactions when it becomes
available. You may obtain free copies of these documents as
described in the preceding paragraph.
Non-solicitation
No securities regulatory authority has either
approved or disapproved of the contents of this communication. This
communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act.
TERRAFORM POWER, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)
|
Three Months
Ended March 31, |
|
2020 |
|
2019 |
Operating revenues, net |
$ |
246,762 |
|
|
|
$ |
225,332 |
|
|
Operating costs and
expenses: |
|
|
|
Cost of operations |
57,864 |
|
|
|
60,751 |
|
|
General and administrative expenses |
26,217 |
|
|
|
23,162 |
|
|
General and administrative expenses - affiliate |
9,777 |
|
|
|
5,164 |
|
|
Acquisition costs |
355 |
|
|
|
182 |
|
|
Acquisition costs - affiliate |
654 |
|
|
|
— |
|
|
Depreciation, accretion and amortization expense |
122,391 |
|
|
|
106,969 |
|
|
Total operating costs and expenses |
217,258 |
|
|
|
196,228 |
|
|
Operating income |
29,504 |
|
|
|
29,104 |
|
|
Other expenses (income): |
|
|
|
Interest expense, net |
77,959 |
|
|
|
86,287 |
|
|
Loss (gain) on modification and extinguishment of debt, net |
3,593 |
|
|
|
(5,543 |
) |
|
Gain on foreign currency exchange, net |
(4,871 |
) |
|
|
(8,752 |
) |
|
Other income, net |
(4,392 |
) |
|
|
(2,680 |
) |
|
Total other expenses, net |
72,289 |
|
|
|
69,312 |
|
|
Loss before income tax
expense |
(42,785 |
) |
|
|
(40,208 |
) |
|
Income tax expense
(benefit) |
24,461 |
|
|
|
(4,151 |
) |
|
Net loss |
(67,246 |
) |
|
|
(36,057 |
) |
|
Less: Net income (loss)
attributable to redeemable non-controlling interests |
12 |
|
|
|
(9,381 |
) |
|
Less: Net loss attributable to
non-controlling interests |
(12,187 |
) |
|
|
(18,049 |
) |
|
Net loss attributable to Class
A common stockholders |
$ |
(55,071 |
) |
|
|
$ |
(8,627 |
) |
|
|
|
|
|
Weighted average
number of shares: |
|
|
|
Class A common stock - Basic and diluted |
226,513 |
|
|
|
209,142 |
|
|
Loss per
share: |
|
|
|
Class A common stock - Basic and diluted |
$ |
(0.24 |
) |
|
|
$ |
(0.04 |
) |
|
Distributions declared
per share: |
|
|
|
Class A common stock |
$ |
0.2014 |
|
|
|
$ |
0.2014 |
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In thousands, except share and per share
data)
|
March
31, 2020 |
|
December 31,
2019 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
249,220 |
|
|
|
$ |
237,480 |
|
|
Restricted cash, current |
42,907 |
|
|
|
35,657 |
|
|
Accounts receivable, net |
190,745 |
|
|
|
167,865 |
|
|
Due from affiliates |
1,729 |
|
|
|
499 |
|
|
Derivative assets, current |
23,260 |
|
|
|
15,819 |
|
|
Deposit on acquisitions |
12,985 |
|
|
|
24,831 |
|
|
Prepaid expenses |
16,728 |
|
|
|
13,514 |
|
|
Other current assets |
56,863 |
|
|
|
57,682 |
|
|
Total current assets |
594,437 |
|
|
|
553,347 |
|
|
|
|
|
|
Renewable energy facilities, net, including consolidated variable
interest entities of $3,156,511 and $3,188,508 in 2020 and 2019,
respectively |
7,759,853 |
|
|
|
7,405,461 |
|
|
Intangible assets, net, including consolidated variable interest
entities of $678,894 and $690,594 in 2020 and 2019,
respectively |
1,921,229 |
|
|
|
1,793,292 |
|
|
Goodwill |
167,989 |
|
|
|
127,952 |
|
|
Restricted cash |
98,374 |
|
|
|
76,363 |
|
|
Derivative assets |
50,217 |
|
|
|
57,717 |
|
|
Other assets |
43,030 |
|
|
|
44,504 |
|
|
Total assets |
$ |
10,635,129 |
|
|
|
$ |
10,058,636 |
|
|
Liabilities, Redeemable Non-controlling Interests and
Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt, including consolidated variable
interest entities of $65,959 and $55,089 in 2020 and 2019,
respectively |
$ |
475,662 |
|
|
|
$ |
441,951 |
|
|
Accounts payable, accrued expenses and other current
liabilities |
188,612 |
|
|
|
178,796 |
|
|
Due to affiliates |
13,073 |
|
|
|
11,510 |
|
|
Derivative liabilities, current portion |
63,515 |
|
|
|
33,969 |
|
|
Total current liabilities |
740,862 |
|
|
|
666,226 |
|
|
Long-term debt, less current portion, including consolidated
variable interest entities of $1,162,180 and $932,862 in 2020 and
2019, respectively |
6,287,131 |
|
|
|
5,793,431 |
|
|
Operating lease obligations, less current portion, including
consolidated variable interest entities of $138,486 and $141,683 in
2020 and 2019, respectively |
286,620 |
|
|
|
272,894 |
|
|
Asset retirement obligations, including consolidated variable
interest entities of $118,961 and $116,159 in 2020 and 2019,
respectively |
315,146 |
|
|
|
287,288 |
|
|
Derivative liabilities |
242,494 |
|
|
|
101,394 |
|
|
Deferred income taxes |
197,850 |
|
|
|
194,539 |
|
|
Other liabilities |
103,191 |
|
|
|
112,072 |
|
|
Total liabilities |
8,173,294 |
|
|
|
7,427,844 |
|
|
|
|
|
|
Redeemable non-controlling interests |
8,010 |
|
|
|
22,884 |
|
|
Stockholders’ equity: |
|
|
|
Class A common stock, $0.01 par value per share, 1,200,000,000
shares authorized, 227,585,636 and 227,552,105 shares issued in
2020 and 2019, respectively |
2,277 |
|
|
|
2,276 |
|
|
Additional paid-in capital |
2,480,684 |
|
|
|
2,512,891 |
|
|
Accumulated deficit |
(563,358 |
) |
|
|
(508,287 |
) |
|
Accumulated other comprehensive (loss) income |
(16,664 |
) |
|
|
11,645 |
|
|
Treasury stock, 1,064,347 and 1,051,298 shares in 2020 and 2019,
respectively |
(15,412 |
) |
|
|
(15,168 |
) |
|
Total TerraForm Power, Inc. stockholders’ equity |
1,887,527 |
|
|
|
2,003,357 |
|
|
Non-controlling interests |
566,298 |
|
|
|
604,551 |
|
|
Total stockholders’ equity |
2,453,825 |
|
|
|
2,607,908 |
|
|
Total liabilities, redeemable non-controlling interests and
stockholders’ equity |
$ |
10,635,129 |
|
|
|
$ |
10,058,636 |
|
|
TERRAFORM POWER, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
Cash flows from operating activities: |
$ |
(67,246 |
) |
|
|
$ |
(36,057 |
) |
|
Net loss |
|
|
|
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation, accretion and amortization expense |
122,391 |
|
|
|
106,969 |
|
|
Amortization of favorable and unfavorable rate revenue contracts,
net |
9,903 |
|
|
|
9,138 |
|
|
Amortization of deferred financing costs, debt premiums and
discounts, net |
3,464 |
|
|
|
2,453 |
|
|
Unrealized loss on interest rate swaps |
3,131 |
|
|
|
13,925 |
|
|
Unrealized loss (gain) on commodity contract derivatives, net |
1,300 |
|
|
|
(804 |
) |
|
Stock-based compensation expense |
329 |
|
|
|
160 |
|
|
Loss (gain) on modification and extinguishment of debt, net |
3,593 |
|
|
|
(5,543 |
) |
|
Loss on disposal of renewable energy facilities |
889 |
|
|
|
1,933 |
|
|
Gain on foreign currency exchange, net |
(1,753 |
) |
|
|
(6,718 |
) |
|
Deferred taxes |
24,281 |
|
|
|
(4,318 |
) |
|
Charges to allowance for doubtful accounts |
540 |
|
|
|
166 |
|
|
Other, net |
207 |
|
|
|
(62 |
) |
|
Changes in assets and liabilities, excluding the effect of
acquisitions: |
|
|
|
Accounts receivable |
8,454 |
|
|
|
(9,058 |
) |
|
Prepaid expenses and other current assets |
(3,847 |
) |
|
|
10,345 |
|
|
Accounts payable, accrued expenses and other current
liabilities |
(9,825 |
) |
|
|
(1,888 |
) |
|
Due to affiliates, net |
(1,046 |
) |
|
|
(535 |
) |
|
Other, net |
(8,998 |
) |
|
|
4,893 |
|
|
Net cash provided by operating activities |
85,767 |
|
|
|
84,999 |
|
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
(1,006 |
) |
|
|
(7,368 |
) |
|
Proceeds from energy rebate and reimbursable interconnection
costs |
406 |
|
|
|
2,836 |
|
|
Proceeds from the settlement of foreign currency contracts,
net |
38,753 |
|
|
|
— |
|
|
Payments to acquire businesses, net of cash and restricted cash
acquired |
(79,433 |
) |
|
|
— |
|
|
Other investing activities |
— |
|
|
|
729 |
|
|
Net cash used in investing activities |
$ |
(41,280 |
) |
|
|
$ |
(3,803 |
) |
|
Cash flows from financing
activities: |
|
|
|
Revolver draws |
127,000 |
|
|
|
50,000 |
|
|
Revolver repayments |
(66,000 |
) |
|
|
(15,000 |
) |
|
Term Loan principal payments |
— |
|
|
|
(875 |
) |
|
Borrowings of non-recourse long-term debt |
275,624 |
|
|
|
— |
|
|
Principal payments and prepayments on non-recourse long-term
debt |
(242,113 |
) |
|
|
(50,194 |
) |
|
Debt financing fees paid |
(3,250 |
) |
|
|
(1,197 |
) |
|
Contributions from non-controlling interests |
3,008 |
|
|
|
5,562 |
|
|
Purchase of membership interests and distributions to
non-controlling interests |
(30,762 |
) |
|
|
(6,103 |
) |
|
Cash distributions to Class A common stockholders |
(45,488 |
) |
|
|
(41,987 |
) |
|
Payment to terminate interest rate swaps |
(16,331 |
) |
|
|
— |
|
|
Other financing activities |
(971 |
) |
|
|
— |
|
|
Net cash provided by (used in) by financing activities |
717 |
|
|
|
(59,794 |
) |
|
Net increase in cash, cash equivalents and restricted cash |
45,204 |
|
|
|
21,402 |
|
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
(4,203 |
) |
|
|
(4,377 |
) |
|
Cash, cash equivalents and
restricted cash at beginning of period |
349,500 |
|
|
|
392,809 |
|
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
390,501 |
|
|
|
$ |
409,834 |
|
|
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 March
31 |
(in millions) |
|
2020 |
2019 |
Reconciliation of Net
Loss to Adjusted EBITDA |
|
|
|
Net loss attributable to Class A common
stockholders |
|
$ |
(55 |
) |
|
$ |
(9 |
) |
|
Net loss attributable to
redeemable and non-redeemable non-controlling interests |
|
$ |
(12 |
) |
|
$ |
(27 |
) |
|
Net loss |
|
$ |
(67 |
) |
|
$ |
(36 |
) |
|
Depreciation, accretion and
amortization expense (a) |
|
132 |
|
|
117 |
|
|
Interest expense, net |
|
78 |
|
|
86 |
|
|
Non-operating general and
administrative expenses (b) |
|
13 |
|
|
12 |
|
|
Loss (gain) on modification
and extinguishment of debt |
|
4 |
|
|
(6 |
) |
|
Acquisition and related
costs |
|
1 |
|
|
— |
|
|
Income tax expense
(benefit) |
|
24 |
|
|
(4 |
) |
|
Regulated Solar and Wind price
band adjustment (c) |
|
(8 |
) |
|
5 |
|
|
Management Fee (d) |
|
9 |
|
|
5 |
|
|
Other non-cash or
non-operating items (e) |
|
(6 |
) |
|
(1 |
) |
|
Adjusted
EBITDA |
|
$ |
180 |
|
|
$ |
178 |
|
|
|
|
|
|
(in millions) |
|
Three Months Ended March
31 |
Reconciliation of
Operating Revenues, net to Adjusted Revenue |
|
2020 |
2019 |
Operating revenues, net |
|
$ |
247 |
|
|
$ |
225 |
|
|
Unrealized loss (gain) on
commodity contract derivatives, net (f) |
|
1 |
|
|
(1 |
) |
|
Amortization of favorable and
unfavorable rate revenue contracts, net (g) |
|
10 |
|
|
9 |
|
|
Regulated Solar and Wind price
band adjustment (c) |
|
(8 |
) |
|
5 |
|
|
Other items (h) |
|
— |
|
|
4 |
|
|
Adjusted
Revenue |
|
$ |
250 |
|
|
$ |
242 |
|
|
|
|
|
|
(in millions) |
|
Three Months Ended March
31 |
Reconciliation of
Adjusted Revenue to Adjusted EBITDA and Adjusted EBITDA to
CAFD |
|
2020 |
2019 |
Adjusted Revenue |
|
$ |
250 |
|
|
$ |
242 |
|
|
Direct Operating costs |
|
(72 |
) |
|
(65 |
) |
|
Settled FX gain |
|
2 |
|
|
1 |
|
|
Adjusted
EBITDA |
|
$ |
180 |
|
|
$ |
178 |
|
|
Fixed management fee (d) |
|
(4 |
) |
|
(3 |
) |
|
Variable management fee
(d) |
|
(5 |
) |
|
(2 |
) |
|
Adjusted interest expense
(i) |
|
(80 |
) |
|
(72 |
) |
|
Levelized principal payments
(j) |
|
(68 |
) |
|
(59 |
) |
|
Cash distributions to
non-controlling interests (k) |
|
(5 |
) |
|
(5 |
) |
|
Sustaining capital
expenditures (l) |
|
(2 |
) |
|
(2 |
) |
|
Other (m) |
|
4 |
|
|
9 |
|
|
Cash available for
distribution (CAFD) |
|
$ |
20 |
|
|
$ |
44 |
|
|
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 |
Q1 2020 |
Q1 2019 |
Operating general and administrative expenses in Corporate |
$(8) |
$(8) |
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, 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 |
Q1 2020 |
Q1 2019 |
Interest expense, net |
$ |
(78 |
) |
|
$ |
(86 |
) |
|
Amortization of deferred financing costs and debt discounts |
4 |
|
|
2 |
|
|
Other, primarily fair value changes in interest rate swaps and
purchase accounting adjustments due to acquisition |
(6 |
) |
|
12 |
|
|
Adjusted interest expense |
$ |
(80 |
) |
|
$ |
(72 |
) |
|
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 March 31, 2020 and 2019 is as follows:
$ in millions |
Q1 2020 |
Q1 2019 |
Purchase of
membership interests and distribution to non- controlling
interests |
(31 |
) |
|
(6 |
) |
|
Buyout of non-controlling interests |
2 |
|
|
1 |
|
|
Adjustment for non-operating cash distributions |
24 |
|
|
— |
|
|
Cash distributions to non-controlling
interests |
$ |
(5 |
) |
|
$ |
(5 |
) |
|
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.
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