Pattern Energy to enter renewables’ market in Japan

Pattern Energy Group announced a series of transactions including agreements to acquire 206 MW of owned capacity in projects from Pattern Energy Group LP (Pattern Development 1.0.) and Green Power Investments. This includes an additional investment in Pattern Energy Group 2 (Pattern Development 2.0.) to fund the acquisition of a controlling interest in GPI, a Japanese renewable developer, from Pattern Development 1.0.

“These investments represent Pattern Energy’s entry into the exciting Japanese renewables market by acquiring a portfolio of projects and by making an additional investment in Pattern Development 2.0 to fund a well-established operating and development management team, GPI,” said Mike Garland, CEO of Pattern Energy.

“Japan is one of the largest electrical grids in the world and has one of the most robust renewable energy markets. Under the Feed-in Tariff (FiT) power contracts, these initial projects average 25,340 per MWh (or the equivalent of $230 per MWh at a 110 USD exchange rate. GPI’s development pipeline consists of 2.4 GW of projects, including 600 MW of wind capacity which has qualified for FiT contracts. Additionally, we believe that as we grow our portfolio, we will be able to enhance our economics over time with the use of local, low-cost capital.”

Transaction highlights include:

• An increase in Pattern Energy’s operating portfolio to nearly 4 GW of gross capacity, with more than 2.9 GW of owned capacity, across 25 projects, including the projects it has agreed to acquire.
• A 206 MW portfolio consists of two operating solar projects (Futtsu and Kanagi), one operating wind project (Otsuki) — and two in-construction wind projects (Ohorayama and Tsugaru).
• A cash purchase price for the 84-MW portfolio of Futtsu, Kanagi, Otsuki and Ohorayama is approximately $131.5 million, which represents a 10.5x multiple of the five-year average cash available for distribution¹ (CAFD).
• A cash purchase price for the 122-MW Tsugaru project is approximately $194.0 million, which represents a 9.0x multiple of the five-year average CAFD starting with the first full year of operations in 2021.
• A $27 million investment in Pattern Development 2.0’s acquisition of Pattern Development 1.0’s controlling interest in GPI.
• The funding required for the transactions will be provided from available liquidity at Pattern Energy.

The wind projects include:

• Otsuki Wind
  The Otsuki Wind project commenced commercial operations in the fourth quarter of 2006 and operates under a 20-year PPA with Shikoku Electric Power Company, which has an A- credit rating. Located just a few miles from the Ohorayama Wind project in the Kochi prefecture, the 12 MW Otsuki Wind project consists of twelve Mitsubishi wind turbines.

• Ohorayama Wind
  The Ohorayama Wind project is expected to commence commercial operations in March 2018 and will operate under a 20-year power purchase agreement with Shikoku Electric Power Company, which has an A- credit rating. Located in Kochi prefecture, on the island of Shikoku, the 33 MW Ohorayama Wind project consists of eleven 3.0-MW GE wind turbines.The $131.5 million acquisition price for the 84-MW project portfolio (Futtsu, Kanagi, Otsuki, and Ohorayama) and the $27 million investment in Pattern Development 2.0 will be funded from existing corporate liquidity sources. Pattern Energy will also enter into a 12-year hedge agreement for the four projects to manage the foreign exchange movements of the cash flows from the Japanese assets. The acquisition and funding of these projects are expected to close in March 2018.
• Tsugaru Wind
  The Tsugaru Wind project is expected to commence commercial operations in mid-2020 and will operate under a 20-year power purchase agreement with Tohoku Electric Power Company (unrated). Located in Aomori prefecture, the 122 MW Tsugaru Wind project will consist of 38, 3.2 MW GE wind turbines.

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