Form 8-K Pattern Energy Group For: Oct 31

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section�13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October�31, 2014

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PATTERN ENERGY GROUP INC.

(Exact name of registrant as specified in its charter)

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Delaware	�	001-36087	�	90-0893251
(State or other jurisdiction of incorporation)	�	(Commission File Number)	�	(IRS Employer Identification Number)

Pier 1, Bay 3

San Francisco, CA 94111

(Address and zip code of principal executive offices)

(415) 283-4000

(Registrant�s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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�	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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�	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

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�	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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�	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item�2.02. Results of Operations and Financial Condition.

On October�31, 2014, we issued a press release announcing our financial results for the third quarter ended September�30, 2014. A copy of our press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. This information is furnished pursuant to Item�2.02 and shall not be deemed �filed� for any purpose, including for the purposes of Section�18 of the Securities Exchange Act of 1934, as amended (the �Exchange Act�), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

Our press release, included herein, makes reference to non-U.S. GAAP financial measures, which management believes are useful for investors by offering the ability to better evaluate operating performance and to better understand how management evaluates the business. These non-U.S. GAAP financial measures are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by U.S. GAAP. Descriptions of the non-U.S. GAAP financial measures are discussed below.

We define Adjusted EBITDA as net income before net interest expense, income taxes and depreciation and accretion, including our proportionate share of net interest expense, income taxes and depreciation and accretion of joint venture investments that are accounted for under the equity method, and excluding the effect of certain other items that the Company does not consider to be indicative of its ongoing operating performance such as mark-to-market adjustments and infrequent items not related to normal or ongoing operations, such as early payment of debt and realized derivative gain or loss from refinancing transactions, and gain or loss related to acquisitions or divestitures. In calculating Adjusted EBITDA, we exclude mark-to-market adjustments to the value of our derivatives because we believe that it is useful for investors to understand, as a supplement to net income and other traditional measures of operating results, the results of our operations without regard to periodic, and sometimes material, fluctuations in the market value of such assets or liabilities.

We disclose Adjusted EBITDA, which is a non-U.S. GAAP measure, because management believes this metric assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that our management believes are not indicative of our core operating performance. We use Adjusted EBITDA to evaluate our operating performance. You should not consider Adjusted EBITDA as an alternative to net income (loss), determined in accordance with U.S. GAAP, or as an alternative to net cash provided by operating activities, determined in accordance with U.S. GAAP, as an indicator of our cash flows.

Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:

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Adjusted EBITDA

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does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

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does not reflect changes in, or cash requirements for, our working capital needs;

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does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

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does not reflect our income tax expense or the cash requirement to pay our taxes; and

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does not reflect the effect of certain mark-to-market adjustments and non-recurring items;

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although depreciation and accretion are non-cash charges, the assets being depreciated and accreted will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

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other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP.

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We define cash available for distribution as net cash provided by operating activities as adjusted for certain other cash flow items that we associate with our operations. It is a non-U.S. GAAP measure of our ability to generate cash to service our dividends. During the three months ending September�30, 2014, we received our first cash distribution from an unconsolidated investment, South Kent. Our definition of cash available for distribution has accordingly been modified below from prior periods to include distributions from unconsolidated investments, to the extent such distributions were derived from operating cash flows. Cash available for distribution represents cash provided by (used in) operating activities as adjusted to (i)�add or subtract changes in operating assets and liabilities, (ii)�subtract net deposits into restricted cash accounts, which are required pursuant to the cash reserve requirements of financing agreements, to the extent they are paid from operating cash flows during a period, (iii)�subtract cash distributions paid to noncontrolling interests, which currently reflects the cash distributions to our joint venture partners in our Gulf Wind project in accordance with the provisions of its governing partnership agreement and will in the future reflect distribution to other joint-venture partners, (iv)�subtract scheduled project-level debt repayments in accordance with the related loan amortization schedule, to the extent they are paid from operating cash flows during a period, (v)�subtract non-expansionary capital expenditures, to the extent they are paid from operating cash flows during a period, (vi)�add cash distributions received from unconsolidated investments, to the extent such distributions were derived from operating cash flows and (vii)�add or subtract other items as necessary to present the cash flows we deem representative of our core business operations.

We disclose cash available for distribution because management recognizes that it will be used as a supplemental measure by investors and analysts to evaluate our liquidity. However, cash available for distribution has limitations as an analytical tool because it excludes depreciation and accretion, does not capture the level of capital expenditures necessary to maintain the operating performance of our projects, is not reduced for principal payments on our project indebtedness except to the extent they are paid from operating cash flows during a period, and excludes the effect of certain other cash flow items, all of which could have a material effect on our financial condition and results from operations. Cash available for distribution is a non-U.S. GAAP measure and should not be considered an alternative to net income, net cash provided by (used in) operating activities or any other liquidity measure determined in accordance with U.S. GAAP, nor is indicative of funds available to fund our cash needs. In addition, our calculation of cash available for distribution is not necessarily comparable to cash available for distribution as calculated by other companies. Investors should not rely on this measure as a substitute for any U.S. GAAP measure, including net income (loss) and net cash provided by (used in) operating activities.

Item�9.01 Financial Statements and Exhibits.

(d) Exhibits

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Exhibit Number	��	Description
99.1	��	Press Release issued by Pattern Energy Group Inc. on October 31, 2014.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Pattern Energy Group Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October�31, 2014

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EXHIBIT INDEX

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Exhibit Number	��	Description
99.1	��	Press Release issued by Pattern Energy Group Inc. on October 31, 2014.

Exhibit 99.1

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Pattern Energy Reports Third Quarter Results

� Declares increased dividend of $0.335 per Class�A common share for fourth quarter 2014 �

� Adds 283 MW of owned capacity to identified ROFO list with

three new projects, including its first solar project �

San Francisco, CA, October�31, 2014 � Pattern Energy Group Inc. (NASDAQ: PEGI) (TSX:PEG) (Pattern Energy), an independent power company, today announced its financial results for the third quarter of 2014.

Highlights

(Comparisons made between fiscal Q3 2014 and fiscal Q3 2013 results, unless otherwise noted)

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Cash available for distribution of $10.9 million, up 73%

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Adjusted EBITDA of $44.3 million, up 39%

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Proportional electricity sales of 710 GWh, up 94%

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Revenue of $71.5 million, up 25%

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Added three new projects to the identified ROFO list, representing an addition of 283 MW of owned interest, including its first solar project

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Declared a fourth quarter dividend of $0.335 per Class�A common share, or $1.34 on an annualized basis, representing a 2% increase over the previous quarter�s dividend

�It was a strong quarter as our production and cash flows clearly demonstrate. We continue to add projects to our list of identified ROFO projects which now totals 724 MW of owned capacity, including our first solar project which is ready for financing in Chile,� said Mike Garland, President and CEO of Pattern Energy. �Our identified ROFO projects provide a clear view of our growth pipeline, while our track record of successfully bringing projects online demonstrates our ability to execute. With two more projects scheduled to commence commercial operations this year we expect to enter 2015 with strong momentum.�

Financial Results

Pattern Energy sold 710,325 MWh of electricity on a proportional basis in the third quarter of 2014 compared to 365,766 MWh sold in the same period in 2013. Pattern Energy sold 2,026,233 MWh of electricity on a proportional basis for the nine months ended September�30, 2014 compared to 1,331,149 MWh sold in the same period in 2013. The increases in proportional MWh sold were primarily attributable to the commencement of commercial operations at South Kent, Panhandle 1 and El Array�n and an increase in production at Ocotillo.

Net loss in the third quarter of 2014 was $9.3 million compared to net income of $4.2 million in the same period last year. Net loss for the nine months ended September�30, 2014 was $24.0 million compared to net income of $29.4 million in the same period last year. The changes in net income (loss) during the third quarter and year-to-date periods were due primarily to unrealized losses on interest rate and energy derivatives.

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Adjusted EBITDA was $44.3 million for the third quarter of 2014 compared to $31.9 million in the same period last year. Adjusted EBITDA for the nine months ended September�30, 2014 was $140.4 million compared to $112.4 million in the same period last year. A reconciliation of Adjusted EBITDA to net income (loss) determined in accordance with GAAP is shown below.

Cash available for distribution (CAFD) in the third quarter of 2014 was $10.9 million compared to $6.3 million in the same period last year. CAFD for the nine months ended September�30, 2014 was $44.8 million compared to $37.0 million in the same period last year. The $4.6 million and $7.8 million increases, in the respective periods, were primarily the result of a distribution from unconsolidated investments and the commencement of commercial operations at the El Array�n and Panhandle 1 projects. A reconciliation of cash available for distribution to net cash provided by operating activities determined in accordance with GAAP is shown below.

Quarterly Dividend

Pattern Energy declared an increased dividend for the fourth quarter 2014, payable on January�30, 2015, to holders of record on December�31, 2014, in the amount of $0.335 per Class�A share, which represents $1.34 on an annualized basis. This is a 2% increase from the third quarter 2014 dividend of $0.328.

Construction Pipeline

The table below outlines Pattern Energy�s projects currently in construction, the capacity owned or under contract to be acquired and each project�s anticipated commencement date for commercial operations.

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Asset	��	Location	��	Owned�MW	��	Commercial�Operations
Panhandle 2	��	Texas	��	147	��	Q4 2014
Grand	��	Ontario	��	67	��	Q4 2014
Total	��		��	214	��

Acquisition Pipeline

Pattern Energy has the Right of First Offer (ROFO) on a pipeline of acquisition opportunities from Pattern Development. In addition, Pattern Energy may seek to acquire assets from third parties.

On September�30, 2014, Pattern Energy announced the addition of two new projects, Conejo Solar and Belle River Wind, to its list of identified ROFO projects from Pattern Development. With these new additions, and the Logan�s Gap project announced in August, Pattern Energy has now identified seven projects with a total owned capacity of 724 MW in the list of identified ROFO projects.

Conejo Solar is the first solar project identified within Pattern Energy�s list of identified ROFO projects. It is a 104 MW photovoltaic solar project that is being constructed approximately 30 kilometers east of Taltal in Chile�s Atacama Desert. Conejo Solar is 100% owned by Pattern Development, with Pattern Energy�s ROFO providing at least a 73 MW owned interest in the

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project. A third party will have an option to buy a 30% stake. The project has a 22-year PPA with Minera Los Pelambres, an affiliate of Antofagasta Minerals SA, for approximately 70% of the project�s output over the term of the agreement. Pattern Energy has an existing relationship with Minera Los Pelambres, which has a long-term agreement to purchase power produced by the El Array�n Wind facility in Chile. Antofagasta Minerals SA owns a minority interest in the El Array�n Wind facility. Conejo Solar has its required permits and interconnection rights and is ready for construction financing. Pattern Energy anticipates an end-of-year or early 2015 financial closing.

The 100 MW Belle River Wind project has been jointly developed by Pattern Development and Samsung Renewable Energy, Inc. The project, which will be built in Lakeshore, Ontario, has a 20-year PPA with the Ontario Power Authority. Belle River Wind is in the process of securing its final permits and construction is expected to begin in the fourth quarter of 2016.

The table below sets forth the identified ROFO projects:

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Asset	��	Location	��	Owned�MW	��	Commercial�Operation
Gulf Wind	��	Texas	��	76	��	Operational
K2	��	Ontario	��	90	��	2015 (In construction)
Armow	��	Ontario	��	90	��	2015 (In construction)
Meikle	��	British�Columbia	��	185	��	2016 (Ready�for�financing)
Logan�s Gap	��	Texas	��	160	��	2015 (Ready for financing)
Conejo Solar	��	Chile	��	73	��	2016 (Ready for financing)
Belle River	��	Ontario	��	50	��	2017 (Securing final permits)
Total	��		��	724	��

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Adjusted EBITDA and Cash Available for Distribution Reconciliations

The following tables reconcile net income (loss) to Adjusted EBITDA and net cash provided by operating activities to cash available for distribution, respectively, for the periods presented (in thousands):

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Three�months�ended�September�30,

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Nine�months�ended�September�30,

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2014

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2013

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2014

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2013

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Net (loss) income

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$

(9,281

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$

4,243

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$

(24,013

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$

29,447

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Plus:

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Interest expense, net of interest income

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17,742

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14,260

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47,685

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45,932

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Tax (benefit) provision

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(3,538

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�

595

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(1,505

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�

(6,799

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Depreciation and accretion

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30,015

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21,194

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72,476

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61,758

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EBITDA

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$

34,938

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$

40,292

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$

94,643

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$

130,338

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Unrealized (gain) loss on energy derivative

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�

(3,139

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�

(6,659

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�

11,143

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�

5,222

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Unrealized (gain) loss on derivatives

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�

(66

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�

(776

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�

6,599

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(10,909

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Interest rate derivative settlements

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�

1,030

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�

1,059

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�

3,082

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�

1,059

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Net loss (gain) on transactions

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68

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(14,469

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(7,200

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Plus, proportionate share from equity accounted investments:

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Interest expense, net of interest income

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4,000

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91

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9,197

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39

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Tax (benefit) provision

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�

(36

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�

102

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(84

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Depreciation and accretion

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�

4,299

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3

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�

9,023

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14

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Unrealized loss (gain) on interest rate and currency derivatives

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�

3,215

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(2,143

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�

21,046

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(6,091

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Realized loss (gain) on interest rate and currency derivatives

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118

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22

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(35

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Adjusted EBITDA

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$

44,345

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$

31,949

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$

140,388

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$

112,353

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Three�months�ended�September�30,

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Nine�months�ended�September�30,

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2014

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2013

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2014

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2013

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Net cash provided by operating activities

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$

23,078

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$

26,738

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$

83,900

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$

68,396

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Changes in current operating assets and liabilities

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�

(2,035

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�

(8,753

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�

(7,720

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�

3,004

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Network upgrade reimbursement

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1,236

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�

618

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�

2,472

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�

1,236

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Release of restricted cash to fund general and administrative costs

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�

149

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���

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�

�

210

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���

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Operations and maintenance capital expenditures

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�

(40

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�

�

(56

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�

�

(134

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�

�

(431

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Transaction costs for acquisitions

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�

���

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�

�

���

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1,128

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Operating CAFD from distribution from unconsolidated investment

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�

4,704

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���

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�

�

4,704

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Less:

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�

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Distributions to noncontrolling interests

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�

���

��

�

�

(258

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�

�

(1,470

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�

�

(1,426

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Principal payments paid from operating cash flows

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�

(16,149

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�

�

(11,973

)�

�

�

(38,245

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�

�

(33,788

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��

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Cash available for distribution

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$

10,943

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�

$

6,316

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�

$

44,845

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�

$

36,991

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��

�

�

�

�

�

�

�

�

�

�

�

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Conference Call and Webcast

Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Friday, October�31, 2014. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888)�231-8191 or (647)�427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10-15 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855)�859-2056 or (416)�849-0833 and enter access code 22630205. The replay recording will be available until 11:59 p.m. Eastern Time, November�13, 2014.

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A live webcast of the conference call will be also available on the events page in the investor section of Pattern�s website at www.patternenergy.com. An archived webcast will be available for one year.

About Pattern Energy

Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on the NASDAQ (�PEGI�) and Toronto Stock Exchange (�PEG�). Pattern Energy has a portfolio of eleven wind power projects, including one project it has agreed to acquire, with a total owned interest of 1,472 MW, in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy�s wind power projects generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this press release constitute �forward-looking statements� within the meaning of the Private Securities Litigation Reform Act of 1995 and �forward-looking information� within the meaning of Canadian securities laws, including statements regarding the Company�s ability to increase the ROFO pipeline, the anticipated commercial operation date of construction projects, its ability to acquire additional assets from third parties, and forward looking information regarding the Conejo Solar and Belle River Wind projects that have been added to the ROFO pipeline.

These forward-looking statements represent the Company�s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the documents filed with the SEC and applicable Canadian securities regulatory authorities, including the Company�s annual report on Form 10-K. The risk factors and other factors noted therein could cause actual events or the Company�s actual results to differ materially from those contained in any forward-looking statement.

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Contacts	��		��
Ross Marshall	��	Matt Dallas	��
Investor Relations	��	Media Relations	��
T: (416)�815-0700 ext. 238	��	T: (917)�363-1333	��
E: [email protected]	��	E: [email protected]	��

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Pattern Energy Group Inc.

Consolidated Balance Sheets

(In thousands of U.S. dollars, except share data)

(Unaudited)

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�	��	September�30,		�	�	December�31,		�
�	��	2014		�	�	2013		�
Assets	��				�
Current assets:	��				�
Cash and cash equivalents	��	$	230,658	��	�	$	103,569	��
Trade receivables	��	�	31,782	��	�	�	20,951	��
Related party receivable	��	�	345	��	�	�	167	��
Reimbursable interconnection costs	��	�	38	��	�	�	1,455	��
Derivative assets, current	��	�	13,918	��	�	�	13,937	��
Current deferred tax assets	��	�	573	��	�	�	573	��
Prepaid expenses and other current assets	��	�	17,985	��	�	�	13,927	��
	��	�	�	�	�	�	�	�
Total current assets	��	�	295,299	��	�	�	154,579	��
Restricted cash	��	�	36,913	��	�	�	32,636	��
Property, plant and equipment, net of accumulated depreciation of $248,718 and $179,778 as of September�30, 2014 and December�31, 2013, respectively	��	�	2,072,449	��	�	�	1,476,142	��
Unconsolidated investments	��	�	40,626	��	�	�	107,055	��
Derivative assets	��	�	55,814	��	�	�	82,167	��
Deferred financing costs, net of accumulated amortization of $20,399 and $16,225 as of September�30, 2014 and December�31, 2013, respectively	��	�	32,178	��	�	�	35,792	��
Net deferred tax assets	��	�	6,969	��	�	�	2,017	��
Other assets	��	�	13,092	��	�	�	13,243	��
	��	�	�	�	�	�	�	�
Total assets	��	$	2,553,340	��	�	$	1,903,631	��
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Liabilities and equity	��				�
Current liabilities:	��				�
Accounts payable and other accrued liabilities	��	$	22,835	��	�	$	15,550	��
Accrued construction costs	��	�	6,569	��	�	�	3,204	��
Related party payable	��	�	468	��	�	�	1,245	��
Accrued interest	��	�	1,350	��	�	�	495	��
Dividend payable	��	�	15,394	��	�	�	11,103	��
Derivative liabilities, current	��	�	17,612	��	�	�	16,171	��
Current portion of long-term debt	��	�	61,004	��	�	�	48,851	��
	��	�	�	�	�	�	�	�
Total current liabilities	��	�	125,232	��	�	�	96,619	��
Long-term debt	��	�	1,349,079	��	�	�	1,200,367	��
Derivative liabilities	��	�	9,611	��	�	�	7,439	��
Asset retirement obligations	��	�	26,668	��	�	�	20,834	��
Net deferred tax liabilities	��	�	18,568	��	�	�	9,930	��
Other long-term liabilities	��	�	5,898	��	�	�	438	��
	��	�	�	�	�	�	�	�
Total liabilities	��	�	1,535,056	��	�	�	1,335,627	��
	��	�	�	�	�	�	�	�
Equity:	��				�
Class�A common stock, $0.01 par value per share: 500,000,000 shares authorized; 46,530,876 and 35,531,720 shares issued as of September�30, 2014 and December�31, 2013, respectively; 46,518,162 and 35,530,786 shares outstanding as of September�30, 2014 and December�31, 2013, respectively	��	�	465	��	�	�	355	��
Class B common stock, $0.01 par value per share: 20,000,000 shares authorized; 15,555,000 shares issued and outstanding as of September�30, 2014 and December�31, 2013	��	�	156	��	�	�	156	��
Additional paid-in capital	��	�	738,290	��	�	�	489,412	��
Accumulated loss	��	�	(24,234	)�	�	�	(13,336	)�
Accumulated other comprehensive loss	��	�	(30,367	)�	�	�	(8,353	)�
Treasury stock, at cost; 12,714 and 934 shares of Class�A common stock as of September�30, 2014 and December�31, 2013, respectively	��	�	(404	)�	�	�	(24	)�
	��	�	�	�	�	�	�	�
Total equity before noncontrolling interest	��	�	683,906	��	�	�	468,210	��
Noncontrolling interest	��	�	334,378	��	�	�	99,794	��
	��	�	�	�	�	�	�	�
Total equity	��	�	1,018,284	��	�	�	568,004	��
	��	�	�	�	�	�	�	�
Total liabilities and equity	��	$	2,553,340	��	�	$	1,903,631	��
	��	�	�	�	�	�	�	�

�

6

---

Pattern Energy Group Inc.

Consolidated Statements of Operations

(In thousands of U.S. dollars, except per share data)

(Unaudited)

�

�

��

Three�months�ended�September�30,

�

�

Nine�months�ended�September�30,

�

�

��

2014

�

�

2013

�

�

2014

�

�

2013

�

Revenue:

��

�

�

�

Electricity sales

��

$

64,251

��

�

$

37,950

��

�

$

184,175

��

�

$

130,533

��

Energy derivative settlements

��

�

2,591

��

�

�

2,656

��

�

�

9,309

��

�

�

12,873

��

Unrealized gain (loss) on energy derivative

��

�

3,139

��

�

�

6,659

��

�

�

(11,143

)�

�

�

(5,222

)�

Related party revenue

��

�

868

��

�

�

202

��

�

�

2,330

��

�

�

465

��

Other revenue

��

�

670

��

�

�

9,790

��

�

�

1,404

��

�

�

21,157

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Total revenue

��

�

71,519

��

�

�

57,257

��

�

�

186,075

��

�

�

159,806

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Cost of revenue:

��

�

�

�

Project expense

��

�

23,835

��

�

�

14,592

��

�

�

56,609

��

�

�

42,061

��

Depreciation and accretion

��

�

30,015

��

�

�

21,194

��

�

�

72,476

��

�

�

61,758

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Total cost of revenue

��

�

53,850

��

�

�

35,786

��

�

�

129,085

��

�

�

103,819

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Gross profit

��

�

17,669

��

�

�

21,471

��

�

�

56,990

��

�

�

55,987

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Operating expenses:

��

�

�

�

General and administrative

��

�

5,772

��

�

�

214

��

�

�

15,963

��

�

�

563

��

Related party general and administrative

��

�

1,492

��

�

�

3,607

��

�

�

4,155

��

�

�

8,968

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Total operating expenses

��

�

7,264

��

�

�

3,821

��

�

�

20,118

��

�

�

9,531

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Operating income

��

�

10,405

��

�

�

17,650

��

�

�

36,872

��

�

�

46,456

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Other income (expense):

��

�

�

�

Interest expense

��

�

(17,999

)�

�

�

(14,695

)�

�

�

(48,427

)�

�

�

(48,169

)�

Equity in (losses) earnings in unconsolidated investments

��

�

(5,002

)�

�

�

1,845

��

�

�

(21,238

)�

�

�

5,188

��

Interest rate derivative settlements

��

�

(1,030

)�

�

�

(1,059

)�

�

�

(3,082

)�

�

�

(1,059

)�

Unrealized gain (loss) on derivatives

��

�

66

��

�

�

776

��

�

�

(6,599

)�

�

�

10,909

��

Related party income

��

�

664

��

�

�

���

��

�

�

1,736

��

�

�

���

��

Net (loss) gain on transactions

��

�

(68

)�

�

�

���

��

�

�

14,469

��

�

�

7,200

��

Other income, net

��

�

145

��

�

�

321

��

�

�

751

��

�

�

2,123

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Total other expense

��

�

(23,224

)�

�

�

(12,812

)�

�

�

(62,390

)�

�

�

(23,808

)�

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Net (loss) income before income tax

��

�

(12,819

)�

�

�

4,838

��

�

�

(25,518

)�

�

�

22,648

��

Tax (benefit) provision

��

�

(3,538

)�

�

�

595

��

�

�

(1,505

)�

�

�

(6,799

)�

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Net (loss) income

��

�

(9,281

)�

�

�

4,243

��

�

�

(24,013

)�

�

�

29,447

��

Net (loss) income attributable to noncontrolling interest

��

�

(2,073

)�

�

�

3,248

��

�

�

(13,115

)�

�

�

(690

)�

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Net (loss) income attributable to controlling interest

��

$

(7,208

)�

�

$

995

��

�

$

(10,898

)�

�

$

30,137

��

��

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Cash dividends declared on Class�A common shares

��

�

(15,258

)�

�

�

�

(41,395

)�

�

Deemed dividends on Class B common shares

��

�

(7,222

)�

�

�

�

(14,679

)�

�

��

�

�

�

�

�

�

�

�

�

Net loss attributable to common stockholders

��

$

(29,688

)�

�

�

$

(66,972

)�

�

��

�

�

�

�

�

�

�

�

�

Weighted average number of shares:

��

�

�

�

Class�A common stock - Basic

��

�

40,980,989

��

�

�

�

38,342,998

��

�

Class�A common stock - Diluted

��

�

56,860,637

��

�

�

�

54,201,701

��

�

Class B common stock - Basic and diluted

��

�

15,555,000

��

�

�

�

15,555,000

��

�

Earnings (loss) per share

��

�

�

�

Class A common stock:

��

�

�

�

Basic loss per share

��

$

(0.15

)�

�

�

$

(0.16

)�

�

��

�

�

�

�

�

�

�

�

�

Diluted loss per share

��

$

(0.15

)�

�

�

$

(0.20

)�

�

��

�

�

�

�

�

�

�

�

�

Class B common stock:

��

�

�

�

Basic and diluted loss per share

��

$

(0.06

)�

�

�

$

(0.30

)�

�

��

�

�

�

�

�

�

�

�

�

Cash dividends declared per Class�A common share

��

$

0.33

��

�

�

$

0.96

��

�

��

�

�

�

�

�

�

�

�

�

Deemed dividends per Class B common share

��

$

0.46

��

�

�

$

0.94

��

�

��

�

�

�

�

�

�

�

�

�

2013 pro forma information:

��

�

�

�

Unaudited pro forma net income after tax:

��

�

�

�

Net income before income tax

��

�

�

�

$

22,648

��

Pro forma tax benefit

��

�

�

�

�

(2,232

)�

��

�

�

�

�

�

�

Pro forma net income

��

�

�

�

$

24,880

��

��

�

�

�

�

�

�

�

7

---

Pattern Energy Group Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)

�

�	��	Nine�months�ended�September�30,						�
�	��	2014		�	�	2013		�
Operating activities	��				�
Net (loss) income	��	$	(24,013	)�	�	$	29,447	��
Adjustments to reconcile net (loss) income to net cash provided by operating activities:	��				�
Depreciation and accretion	��	�	72,476	��	�	�	61,758	��
Amortization of financing costs	��	�	4,246	��	�	�	5,428	��
Unrealized loss (gain) on derivatives	��	�	17,742	��	�	�	(5,687	)�
Stock-based compensation	��	�	3,128	��	�	�	���	��
Net gain on transactions	��	�	(16,526	)�	�	�	(7,200	)�
Deferred taxes	��	�	(1,505	)�	�	�	(6,801	)�
Equity in losses (earnings) in unconsolidated investments	��	�	21,238	��	�	�	(5,188	)�
Changes in operating assets and liabilities:	��				�
Trade receivables	��	�	(5,255	)�	�	�	(7,935	)�
Prepaid expenses and other current assets	��	�	13,139	��	�	�	(3,393	)�
Other assets (non-current)	��	�	(503	)�	�	�	(358	)�
Accounts payable and other accrued liabilities	��	�	1,514	��	�	�	4,862	��
Related party receivable/payable	��	�	(1,017	)�	�	�	(291	)�
Income taxes payable	��	�	128	��	�	�	���	��
Accrued interest payable	��	�	(917	)�	�	�	857	��
Long-term liabilities	��	�	25	��	�	�	2,896	��
	��	�	�	�	�	�	�	�
Net cash provided by operating activities	��	�	83,900	��	�	�	68,395	��
	��	�	�	�	�	�	�	�
Investing activities	��				�
Receipt of ITC Cash Grant	��	�	���	��	�	�	173,446	��
Cash paid for acquisitions, net of cash acquired	��	�	(167,585	)�	�	�	���	��
Proceeds from sale of investments	��	�	���	��	�	�	14,254	��
Decrease in restricted cash	��	�	23,861	��	�	�	63,732	��
Increase in restricted cash	��	�	(10,406	)�	�	�	(80,567	)�
Capital expenditures	��	�	(18,615	)�	�	�	(120,965	)�
Deferred development costs	��	�	���	��	�	�	(528	)�
Distribution from unconsolidated investments	��	�	17,104	��	�	�	10,463	��
Contribution to unconsolidated investments	��	�	(2,320	)�	�	�	(8,737	)�
Reimbursable interconnection receivable	��	�	1,418	��	�	�	49,715	��
Other assets (non-current)	��	�	2,472	��	�	�	1,740	��
	��	�	�	�	�	�	�	�
Net cash (used in) provided by investing activities	��	�	(154,071	)�	�	�	102,553	��
	��	�	�	�	�	�	�	�

�

8

---

Pattern Energy Group Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)

�

�	��	Nine�months�ended�September�30,						�
�	��	2014		�	�	2013		�
Financing activities	��				�
Proceeds from public offering, net of expenses	��	$	287,107	��	�	$	���	��
Repurchase of shares for employee tax withholding	��	�	(380	)�	�	�	���	��
Dividends paid	��	�	(37,104	)�	�	�	���	��
Capital contributions - Pattern Development	��	�	���	��	�	�	32,679	��
Capital contributions - noncontrolling interest	��	�	2,550	��	�	�	���	��
Capital distributions - Pattern Development	��	�	���	��	�	�	(98,886	)�
Capital distributions - noncontrolling interest	��	�	(1,470	)�	�	�	(1,426	)�
Decrease in restricted cash	��	�	13,508	��	�	�	116,654	��
Increase in restricted cash	��	�	(13,508	)�	�	�	(126,475	)�
Payment for deferred financing costs	��	�	(603	)�	�	�	(294	)�
Proceeds from revolving credit facility	��	�	���	��	�	�	56,000	��
Repayment of short-term debt	��	�	(14,840	)�	�	�	���	��
Proceeds from short-term debt	��	�	1,087	��	�	�	���	��
Repayment of long-term debt	��	�	(38,245	)�	�	�	(41,283	)�
Proceeds from long-term debt	��	�	���	��	�	�	138,620	��
Repayment of construction and grant loans	��	�	���	��	�	�	(114,056	)�
	��	�	�	�	�	�	�	�
Net cash provided by (used in) financing activities	��	�	198,102	��	�	�	(38,467	)�
	��	�	�	�	�	�	�	�
Effect of exchange rate changes on cash and cash equivalents	��	�	(842	)�	�	�	(966	)�
	��	�	�	�	�	�	�	�
Net change in cash and cash equivalents	��	�	127,089	��	�	�	131,515	��
Cash and cash equivalents at beginning of period	��	�	103,569	��	�	�	17,574	��
	��	�	�	�	�	�	�	�
Cash and cash equivalents at end of period	��	$	230,658	��	�	$	149,089	��
	��	�	�	�	�	�	�	�
Supplemental disclosure	��				�
Cash payments for interest and commitment fees	��	$	42,084	��	�	$	45,178	��
Acquired PP&E for El Array�n and Panhandle 1	��	�	674,743	��	�	�	���	��
Schedule of non-cash activities	��				�
Change in fair value of interest rate swaps	��	�	(18,541	)�	�	�	38,266	��
Change in fair value of contingent liabilities	��	�	���	��	�	�	8,001	��
Amortization of deferred financing costs	��	�	���	��	�	�	175	��
Capitalized interest	��	�	2,320	��	�	�	3,230	��
Capitalized commitment fee	��	�	���	��	�	�	39	��
Change in property, plant and equipment	��	�	(97,051	)�	�	�	(160,021	)�
Transfer of capitalized assets to South Kent joint venture	��	�	���	��	�	�	49,275	��
Non-cash distribution to Pattern Development	��	�	���	��	�	�	(5,748	)�
Non-cash deemed dividends on Class B convertible common stock	��	�	14,679	��	�	�	���	��

�

9

---

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