TerraForm Power Reports Fourth Quarter and Full Year 2018 Results
TerraForm Power, Inc. (Nasdaq:TERP) (“TerraForm Power”) today reported financial results for the quarter and year ended December 31, 2018.
- Invested $1.2 billion to acquire Saeta Yield, S.A.U. (“Saeta”), a 1,000 MW portfolio of high-quality wind and solar assets located primarily in Spain that established a scale operating platform in Europe
- Invested ~$28 million in organic growth initiatives with an average return on equity of ~19%
- Progressed efforts to execute long term service agreements with General Electric (“GE”) for North American wind fleet that are expected to lock in annual cost savings of ~$20 million and enhance revenues through performance guarantees backed by liquidated damages
- Completed solar performance improvement plan, expected to increase annual production by ~61 GWh and revenue by ~$11 million
- Issued $650 million in equity to fund the Saeta acquisition at attractive terms pursuant to backstop arrangement with affiliates of Brookfield Asset Management
- Raised ~$160 million of non-recourse debt in conjunction with the financing plan for the Saeta acquisition
- Achieved upgrade of corporate credit rating from Moody’s to Ba3
- Repriced $350 million Term Loan B yielding projected annual savings of approximately $2.5 million
- Declared a Q1 2019 dividend of $0.2014 per share, an increase of 6% from Q4 2018, and implying $0.8056 per share on an annual basis
“During 2018, we made significant progress building the foundation to transform TerraForm Power into a fully-integrated renewable power company that delivers a sustainable, total return in the low teens to our shareholders,” said John Stinebaugh, CEO of TerraForm Power. “In 2019, we look forward to reaping the benefits from this foundation and further investing in our repowerings and other growth opportunities.”
3 Months Ended
3 Months Ended
12 Months Ended
12 Months Ended
|Net Loss ($ in millions)||(30)||(142)||(153)||(236)|
|Earnings (loss) per Share1||$(0.07)||$(0.31)||$0.07||$(1.61)|
|Adjusted EBITDA2 ($ in millions)||170||110||590||438|
|Cash Available for Distribution (“CAFD”)2 ($ in millions)||27||26||126||88|
1 Loss per share is calculated using a weighted average diluted Class A common stock shares outstanding. CAFD per share is calculated using a weighted average diluted Class A common
stock and weighted average Class B common stock shares outstanding. For the twelve months ended December 31, 2018, weighted average diluted Class A common stock shares outstanding totaled 182
million, including issuance of 61 million to affiliates (for the twelve months ended December 31, 2017, this amount was 104 million). For the twelve months ended December 31, 2018, there were no
weighted average Class B common stock shares outstanding (for the twelve months ended December 31, 2017, this amount was 38 million).
2 Non-GAAP measures. See “Calculation and Use of Non-GAAP Measures” and “Reconciliation of Non-GAAP Measures” sections. Amounts in 2017 adjusted for sale of our UK and Residential portfolios.
While we made much progress, 2018 was a transitional year for TerraForm Power. During the course of the year, we accelerated our blade inspection and repair program due to the Raleigh outage and to prepare to turn over operations of our wind farms to GE. This resulted in a significant increase in turbine downtime. In addition, we lost a considerable amount of production from our solar fleet, which operated at an availability of 91% in the first half of the year prior to the initiation of our performance improvement plan.
For the full year 2018, TerraForm Power delivered Net Loss, Adjusted EBITDA and cash available for distribution (“CAFD”) of $(153) million, $590 million and $126 million, respectively. This represents a decrease in Net Loss of $83 million, an increase in Adjusted EBITDA of $152 million and an increase in CAFD of $38 million, compared to 2017. The improvement in our results primarily reflects two fiscal quarters of contribution from Saeta. This contribution was offset by below average North American wind production in part due to an especially strong El Niño and challenging ERCOT pricing dynamics as a result of maintenance of the transmission system, which reduced transfer capacity during peak wind resource season. Thus far in 2019, power prices in the Texas panhandle have improved as the transmission system has been fully on-line.
In 2018, North American wind production was 10% below our LTA. Of the shortfall, 4% can be attributed to poor wind resource, particularly in Hawaii and the Midwest, 2% to abnormally high non-reimbursable curtailment, 2% to the impact of the Raleigh-related outages and 2% to downtime for blade inspections and repairs. Our solar and regulated platforms performed in-line with expectations for the most part. In our solar platform, significantly reduced curtailment in Chile due to debottlenecking of the transmission grid offset low availability in the first half of the year. In our regulated platform, lower than expected solar resource was offset by wholesale electricity prices that averaged 10% higher than the prior year.
We continue to progress the execution of the $350 million non-recourse debt component of our financing plan for the Saeta acquisition. We expect to close our third and fourth project financings, raising proceeds of ~$100 million and $90 million, respectively by the end of the first half of 2019.
We also recently launched the refinancing of our wind facility in Uruguay (~95 MW). Based on negotiations with lenders, we are planning on extending the tenor, improving sizing parameters and reducing the margin. Upon expected closing in the second quarter, we anticipate upsizing the financing by approximately $60 million. To further support corporate liquidity, we released $24 million in cash in December by collateralizing reserve accounts with letters of credit at two wind projects in North America. In addition, we launched the consent process for certain Spanish projects to replace cash funded reserve accounts with letters of credit.
To date, we have signed LTSAs with GE for 10 of 16 projects in our North American wind fleet. In parallel, we have made significant progress obtaining the required lender and tax equity partner consents and are in negotiations with service providers for the early termination of existing service contracts. GE is now fully operating six sites, and we anticipate handing over the remaining sites in the first half of this year.
Beginning in Q3 2018, we solicited proposals for LTSAs for 500 MW of our Spanish wind fleet. The fleet is comprised of turbines manufactured by Vestas, GE, Siemens and Gamesa. Based on proposals that we have received, we are in the process of replacing the current operator of the wind farms with the respective manufacturers. In December, we reached a preliminary agreement with Vestas to extend the O&M contract for our Uruguayan wind farms in exchange for an improvement in technical and economic terms. Finally, we recently launched an RFP to improve the O&M contract terms for our North American solar fleet. Thus far, there has been very strong interest from large third-party providers. Our goal is to lower our cost and improve the alignment of interests by implementing production guarantees with penalties and bonuses based upon performance, similar to our North American wind LTSAs. As a result of these initiatives, we believe that we will be able to reduce annual O&M costs by approximately $6 million, commencing in the second half of this year.
Finally, for our North American and European wind farms, we have commenced the technical analysis and permitting to implement turbine optimization technology, including GE’s Power Up offering. Upon completion, we expect to increase production across our wind fleet and generate approximately $2 million of incremental revenue.