TerraForm Power Reports Second Quarter 2019 Results
Recent Highlights
- Generated CAFD of
$47 million or$0.22 per share for the quarter and$91 million or$0.44 per share for the first half of the year, reflecting per share growth of 16% and 29% respectively; these results were primarily driven by the accretion from the acquisition of our European platform and our margin enhancement initiatives
- Entered into a definitive agreement to acquire a high-quality, unlevered distributed generation ("DG") platform with approximately 320 megawatts ("MW") of capacity in
the United States , which nearly doubles our DG business and provides significant opportunities for future cash flow growth through operational and commercial synergies
- Completed the roll-out of project-level long term service agreements (“LTSA”) with
General Electric (“GE”) at all but one of our North American wind projects; we are also in advanced stage negotiations to finalize a 10-year outsourcing agreement to provide outsourced Operations and Maintenance (“O&M”) for our North American solar fleet, with the goal of reducing annual operating costs by approximately$5 million through a full wrap contract that includes resource-adjusted production guarantees that are consistent with our Long-Term Average (“LTA”)
- Generated approximately
$5 million of CAFD from margin enhancement activities in accordance with expectations; for the full year, we project that we will generate over$30 million of CAFD from margin enhancement initiatives relative to 2018, compared to approximately$53 million from these initiatives at full annual run-rate
- Closed the financing of three DG portfolios (138 MW) raising net proceeds of
$101 million
- Ended the quarter with approximately
$840 million of corporate liquidity
- Declared a Q3 2019 dividend of
$0.2014 per share, implying$0.8056 per share on an annual basis
“During the quarter, we made significant progress executing our growth strategy,” said
Results
Three Months Ended June 30, 2019 |
Three Months Ended June 30, 2018 |
Six Months Ended June 30, 2019 |
Six Months Ended June 30, 2018 |
|||||||||
Generation (GWh) | 2,450 | 2,036 | 4,849 | 3,870 | ||||||||
Net Loss ($ in millions) | (17 | ) | (28 | ) | (53 | ) | (104 | ) | ||||
Earnings (loss) per Share1 | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.06 | ) | $ | 0.40 | |
Adjusted EBITDA2 ($ in millions) | 196 | 128 | 373 | 224 | ||||||||
CAFD2 ($ in millions) | 47 | 30 | 91 | 53 | ||||||||
CAFD per Share1,2,3 | $ | 0.22 | $ | 0.19 | $ | 0.44 | $ | 0.34 |
______
(1) Earnings (loss) per share is calculated using Net (loss) income attributable to Class A common stockholders divided by the weighted average diluted Class A common stock shares outstanding. For the three months ended
(2) Non-GAAP measures. See “Reconciliation of Non-GAAP Measures” section.
(3) CAFD per share is calculated using CAFD divided by the weighted average diluted Class A common stock shares outstanding.
Growth Initiatives
In July, we entered into an agreement to acquire a high-quality, unlevered DG portfolio with approximately 320 MW of capacity in
We are excited about this transaction as it will nearly double the size of our existing DG platform, increase the average contract duration of our portfolio to 14 years, and enhance our resource diversity. In addition, this transaction highlights our strategy to recycle capital from stabilized assets with limited opportunities for further value creation into newly acquired assets that meet our return targets and have commercial and operational upside that we can extract through our integrated operating platform.
The transaction was driven by some key considerations:
- High-quality asset base in attractive markets. The portfolio represents one of the largest distributed generation platforms in
the United States , comprised of 291 MW of commercial and industrial solar assets, 21 MW of residential solar assets and 10 MW of fuel cells. Diversified across 20 states and theDistrict of Columbia and with over 100 commercial and industrial customers, the portfolio is comprised of assets with an average age of 3.5 years that have power purchase agreements with an average investment grade credit rating of A+/A2 and an average remaining term of over 17 years.
- Attractive returns. We expect to generate returns on this investment within our targeted range of 9% to 11%, and we expect the acquisition to be modestly accretive to CAFD in 2020 and over the next five years.
Financial Results
In the second quarter of 2019,
Consistent with results reported by certain other renewable power asset owners,
Primarily due to weather, we were not able to complete blade repair work and other maintenance required on certain assets in order to fully phase-in GE’s performance guarantees. As a result, we expect modest additional negative impact on our availability this quarter, and we expect to operate at the availability level that underpins our LTA by end of the third quarter.
Liquidity Update
In May, we closed the non-recourse financing of three DG portfolios (138 MW) raising net proceeds of
Operations
Over the past few months, we have made significant progress executing an outsourcing agreement for all of our North American solar fleet. We are currently in advanced negotiations on a full-wrap LTSA. The scope of the LTSA would include comprehensive O&M as well as other balance of plant services for a term of 10 years, with flexibility to terminate early. The agreement would also lock in pricing that is approximately
With respect to the implementation of the LTSAs for our North American wind fleet, we have turned over operations of 15 of 16 wind farms to GE. The final wind farm is expected to be turned over to GE later this summer, at which point we will realize the full cost savings of the GE LTSA. In our Spanish wind fleet, we transitioned operations to new service providers at the beginning of the year under letters of intent. We then executed LTSAs with Vestas in May and with GE in July. We anticipate that we will execute LTSAs for the remainder of our Spanish wind fleet with Siemens Gamesa in the coming weeks.
During the quarter, we continued to make progress on our repowerings. We are currently working through a streamlined permitting process with local authorities in upstate
Legal and Regulatory Update
In June, we received a favorable ruling from the panel overseeing the arbitration involving our
In
Announcement of Quarterly Dividend
Renewal of Share Repurchase Program
The Board of Directors of
About
For more information about
Contacts for Investors / Media:
investors@terraform.com
Quarterly Earnings Call Details
Investors, analysts and other interested parties can access TerraForm Power’s 2019 Second 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
Safe Harbor Disclosure
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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
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 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 on acceptable prices and terms, including as our offtake agreements expire; government regulation, including compliance with regulatory and permit requirements and changes in tax laws, market rules, rates, tariffs, environmental laws and policies affecting renewable energy; our ability to compete against traditional utilities and renewable energy companies; pending and future litigation; our ability to successfully close the acquisition of, and integrate the projects that we expect to acquire from, third parties, including the distributed generation portfolio that we have agreed (subject to certain terms and conditions and post-closing adjustments) to acquire from subsidiaries of
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Operating revenues, net | $ | 255,366 | $ | 179,888 | $ | 480,698 | $ | 307,435 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of operations | 71,575 | 49,805 | 132,326 | 87,128 | |||||||||||
General and administrative expenses | 22,057 | 19,865 | 45,219 | 44,149 | |||||||||||
General and administrative expenses - affiliate | 6,159 | 4,023 | 11,323 | 7,497 | |||||||||||
Acquisition costs | 293 | 2,877 | 475 | 5,957 | |||||||||||
Acquisition costs - affiliate | — | 6,025 | — | 6,630 | |||||||||||
Impairment of renewable energy facilities | — | — | — | 15,240 | |||||||||||
Depreciation, accretion and amortization expense | 100,354 | 69,994 | 207,323 | 135,584 | |||||||||||
Total operating costs and expenses | 200,438 | 152,589 | 396,666 | 302,185 | |||||||||||
Operating income | 54,928 | 27,299 | 84,032 | 5,250 | |||||||||||
Other expenses (income): | |||||||||||||||
Interest expense, net | 71,041 | 50,892 | 157,328 | 104,446 | |||||||||||
Gain on extinguishment of debt, net | — | — | (5,543 | ) | — | ||||||||||
Gain on foreign currency exchange, net | (6,440 | ) | (2,078 | ) | (15,192 | ) | (1,187 | ) | |||||||
Other expenses (income), net | 1,485 | 1,663 | (1,195 | ) | 2,512 | ||||||||||
Total other expenses, net | 66,086 | 50,477 | 135,398 | 105,771 | |||||||||||
Loss before income tax expense | (11,158 | ) | (23,178 | ) | (51,366 | ) | (100,521 | ) | |||||||
Income tax expense | 5,669 | 4,434 | 1,518 | 3,404 | |||||||||||
Net loss | (16,827 | ) | (27,612 | ) | (52,884 | ) | (103,925 | ) | |||||||
Less: Net income (loss) attributable to redeemable non-controlling interests | 2,481 | 4,680 | (6,900 | ) | 2,658 | ||||||||||
Less: Net loss attributable to non-controlling interests | (15,713 | ) | (10,955 | ) | (33,762 | ) | (168,042 | ) | |||||||
Net (loss) income attributable to Class A common stockholders | $ | (3,595 | ) | $ | (21,337 | ) | $ | (12,222 | ) | $ | 61,459 | ||||
Weighted average number of shares: | |||||||||||||||
Class A common stock - Basic | 209,142 | 161,568 | 209,142 | 154,890 | |||||||||||
Class A common stock - Diluted | 209,142 | 161,568 | 209,142 | 154,905 | |||||||||||
(Loss) earnings per share: | |||||||||||||||
Class A common stock - Basic and diluted | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.06 | ) | $ | 0.40 | ||||
Dividends declared per share: | |||||||||||||||
Class A common stock | $ | 0.2014 | $ | 0.19 | $ | 0.4028 | $ | 0.38 | |||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, 2019 |
December 31, 2018 |
||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 204,148 | $ | 248,524 | |||
Restricted cash, current | 30,876 | 27,784 | |||||
Accounts receivable, net | 164,476 | 145,161 | |||||
Derivative assets, current | 16,573 | 14,371 | |||||
Prepaid expenses and other current assets | 55,814 | 65,149 | |||||
Due from affiliate | — | 196 | |||||
Total current assets | 471,887 | 501,185 | |||||
Renewable energy facilities, net, including consolidated variable interest entities of $3,136,579 and $3,064,675 in 2019 and 2018, respectively | 6,564,873 | 6,470,026 | |||||
Intangible assets, net, including consolidated variable interest entities of $715,086 and $751,377 in 2019 and 2018, respectively | 1,890,615 | 1,996,404 | |||||
Goodwill | 150,785 | 120,553 | |||||
Restricted cash | 82,495 | 116,501 | |||||
Derivative assets | 81,140 | 90,984 | |||||
Other assets | 35,299 | 34,701 | |||||
Total assets | $ | 9,277,094 | $ | 9,330,354 | |||
Liabilities, Redeemable Non-controlling Interests and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt, including consolidated variable interest entities of $119,176 and $64,251 in 2019 and 2018, respectively | $ | 496,189 | $ | 464,332 | |||
Accounts payable, accrued expenses and other current liabilities | 184,104 | 181,400 | |||||
Due to affiliates | 8,233 | 6,991 | |||||
Derivative liabilities, current portion | 33,693 | 35,559 | |||||
Total current liabilities | 722,219 | 688,282 | |||||
Long-term debt, less current portion, including consolidated variable interest entities of $795,723 and $885,760 in 2019 and 2018, respectively | 5,105,373 | 5,297,513 | |||||
Operating lease obligations, less current portion, including consolidated variable interest entities of $137,278 in 2019 | 237,486 | — | |||||
Asset retirement obligations, including consolidated variable interest entities of $88,844 and $86,456 in 2019 and 2018, respectively | 219,385 | 212,657 | |||||
Derivative liabilities | 132,912 | 93,848 | |||||
Deferred income taxes | 160,235 | 178,849 | |||||
Other liabilities | 97,973 | 90,788 | |||||
Total liabilities | 6,675,583 | 6,561,937 | |||||
Redeemable non-controlling interests | 33,344 | 33,495 | |||||
Stockholders' equity: | |||||||
Class A common stock, $0.01 par value per share, 1,200,000,000 shares authorized, 209,642,140 shares issued in 2019 and 2018 | 2,096 | 2,096 | |||||
Additional paid-in capital | 2,299,628 | 2,391,435 | |||||
Accumulated deficit | (371,825 | ) | (359,603 | ) | |||
Accumulated other comprehensive income | 15,262 | 40,238 | |||||
Treasury stock, 500,420 shares in 2019 and 2018 | (6,712 | ) | (6,712 | ) | |||
Total TerraForm Power, Inc. stockholders' equity | 1,938,449 | 2,067,454 | |||||
Non-controlling interests | 629,718 | 667,468 | |||||
Total stockholders' equity | 2,568,167 | 2,734,922 | |||||
Total liabilities, redeemable non-controlling interests and stockholders' equity | $ | 9,277,094 | $ | 9,330,354 | |||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (52,884 | ) | $ | (103,925 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation, accretion and amortization expense | 207,323 | 135,584 | |||||
Amortization of favorable and unfavorable rate revenue contracts, net | 18,854 | 19,567 | |||||
Impairment of renewable energy facilities | — | 15,240 | |||||
Amortization of deferred financing costs, debt premiums and discounts, net | 4,143 | 4,258 | |||||
Unrealized loss (gain) on interest rate swaps | 12,850 | (8,777 | ) | ||||
Unrealized gain on commodity contract derivatives, net | (2,563 | ) | (5,292 | ) | |||
Recognition of deferred revenue | (1,594 | ) | (929 | ) | |||
Stock-based compensation expense | 203 | 73 | |||||
(Gain) loss on extinguishment of debt, net | (5,543 | ) | 1,480 | ||||
Loss on disposal of renewable energy facilities | 10,146 | 6,764 | |||||
Gain on foreign currency exchange, net | (14,461 | ) | (5,684 | ) | |||
Deferred taxes | (1,182 | ) | 3,006 | ||||
Other, net | 29 | 344 | |||||
Changes in assets and liabilities, excluding the effect of acquisitions: | |||||||
Accounts receivable | (21,405 | ) | (6,389 | ) | |||
Prepaid expenses and other current assets | 8,301 | 18,321 | |||||
Accounts payable, accrued expenses and other current liabilities | 725 | (7,748 | ) | ||||
Due to affiliates | 1,242 | 2,308 | |||||
Other, net | 12,303 | 7,284 | |||||
Net cash provided by operating activities | 176,487 | 75,485 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (10,622 | ) | (10,333 | ) | |||
Proceeds from energy state rebate and reimbursable interconnection costs | 3,626 | 6,006 | |||||
Proceeds from the settlement of foreign currency contracts | 30,529 | — | |||||
Acquisition of Saeta business, net of cash and restricted cash acquired | — | (831,484 | ) | ||||
Acquisition of renewable energy facilities from third parties, net of cash and restricted cash acquired | (18,255 | ) | (4,105 | ) | |||
Other investing activities | 1,164 | — | |||||
Net cash provided by (used in) by investing activities | 6,442 | (839,916 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from issuance of Class A common stock to affiliates | — | 650,000 | |||||
Proceeds from the Sponsor Line - affiliate | — | 86,000 | |||||
Revolver draws | 83,000 | 539,053 | |||||
Revolver repayments | (270,000 | ) | (157,244 | ) | |||
Term Loan principal payments | (1,750 | ) | (1,750 | ) | |||
Borrowings of non-recourse long-term debt | 179,409 | 103,639 | |||||
Principal payments and prepayments on non-recourse long-term debt | (146,627 | ) | (102,257 | ) | |||
Debt financing fees paid | (10,035 | ) | (3,652 | ) | |||
Sale of membership interests and contributions from non-controlling interests in renewable energy facilities | 5,562 | 7,685 | |||||
Purchase of membership interests and distributions to non-controlling interests in renewable energy facilities |
(11,566 | ) | (12,507 | ) | |||
Due to/from affiliates, net | — | 3,214 | |||||
Payment of dividends | (83,979 | ) | (56,016 | ) | |||
Recovery of related party short swing profit | — | 2,994 | |||||
Net cash (used in) provided by financing activities | (255,986 | ) | 1,059,159 | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (73,057 | ) | 294,728 | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (2,233 | ) | (3,430 | ) | |||
Cash, cash equivalents and restricted cash at beginning of period | 392,809 | 224,787 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 317,519 | $ | 516,085 | |||
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
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 (i) depreciation, accretion and amortization, (ii) interest expense, (iii) non-operating general and administrative costs, (iv) impairment charges, (v) (gain) loss on extinguishment of debt, (vi) acquisition and related costs, (vii) income tax (benefit) expense, (viii) adjustment for wholesale market revenues to the extent above or below the regulated price bands, (ix) management fees to Brookfield, and (x) 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 annualized scheduled interest and project level payments of principal in accordance with the related borrowing arrangements, (iii) minus cash distributions paid to non-controlling interests in our renewable energy facilities, if any, (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, and (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
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 dividends. 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 June 30 |
Six Months Ended June 30 |
||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||
Reconciliation of Net Loss to Adjusted EBITDA | |||||||||||||
Net loss | $ | (17 | ) | $ | (28 | ) | $ | (53 | ) | $ | (104 | ) | |
Depreciation, accretion and amortization expense (a) | 118 | 83 | 237 | 159 | |||||||||
Interest expense, net | 71 | 51 | 157 | 105 | |||||||||
Non-operating general and administrative expenses (b) | 8 | 14 | 20 | 33 | |||||||||
Impairment charges | — | — | — | 15 | |||||||||
Gain on extinguishment of debt | — | — | (6 | ) | — | ||||||||
Acquisition and related costs | — | 9 | — | 13 | |||||||||
Income tax expense | 6 | 4 | 1 | 3 | |||||||||
Regulated Solar and Wind price band adjustment (c) | 3 | — | 8 | — | |||||||||
Management Fee (d) | 6 | 4 | 11 | 7 | |||||||||
Other non-cash or non-operating items (e) | 1 | (9 | ) | (2 | ) | (7 | ) | ||||||
Adjusted EBITDA | $ | 196 | $ | 128 | $ | 373 | $ | 224 | |||||
(in millions) | Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||
Reconciliation of Operating Revenues, net to Adjusted Revenue | 2019 | 2018 | 2019 | 2018 | |||||||||
Operating revenues, net | $ | 255 | $ | 180 | $ | 481 | $ | 307 | |||||
Unrealized (gain) loss on commodity contract derivatives, net (f) | (2 | ) | (7 | ) | (3 | ) | (5 | ) | |||||
Amortization of favorable and unfavorable rate revenue contracts, net (g) | 10 | 10 | 19 | 20 | |||||||||
Regulated Solar and Wind price band adjustment (c) | 3 | — | 8 | — | |||||||||
Other items (h) | (1 | ) | — | 2 | — | ||||||||
Adjusted Revenue | $ | 265 | $ | 183 | $ | 507 | $ | 322 | |||||
(in millions) | Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||
Reconciliation of Adjusted Revenue to Adjusted EBITDA and Adjusted EBITDA to CAFD | 2019 | 2018 | 2019 | 2018 | |||||||||
Adjusted Revenue | $ | 265 | $ | 183 | $ | 507 | $ | 322 | |||||
Direct Operating costs | (70 | ) | (55 | ) | (137 | ) | (98 | ) | |||||
Settled FX gain (loss) | 1 | — | 3 | — | |||||||||
Adjusted EBITDA | $ | 196 | $ | 128 | $ | 373 | $ | 224 | |||||
Fixed management fee (d) | (3 | ) | (3 | ) | (6 | ) | (5 | ) | |||||
Variable management fee (d) | (3 | ) | (1 | ) | (5 | ) | (2 | ) | |||||
Adjusted interest expense (i) | (73 | ) | (56 | ) | (144 | ) | (106 | ) | |||||
Levelized principal payments (j) | (62 | ) | (31 | ) | (122 | ) | (55 | ) | |||||
Cash distributions to non-controlling interests (k) | (5 | ) | (7 | ) | (10 | ) | (12 | ) | |||||
Sustaining capital expenditures (l) | (2 | ) | (2 | ) | (4 | ) | (4 | ) | |||||
Other (m) | 1 | 2 | 9 | 13 | |||||||||
Cash available for distribution (CAFD) | $ | 47 | $ | 30 | $ | 91 | $ | 53 |
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
$ in millions | Q2 2019 | Q2 2018 | YTD 2019 | YTD 2018 | ||||
Operating general and administrative expenses in Corporate | $ | 9 | $ | 7 | $ | 18 | $ | 14 |
c) Represents Regulated Solar and Wind 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 items as detailed in the reconciliation of Adjusted Revenue and associated footnote and certain other items that we believe are not representative of our core business or future operating performance, including but not limited to: loss (gain) on foreign exchange (“FX”), unrealized loss on commodity contracts, loss on investments and receivables with affiliate, sale of transmission line access in Regulated Solar and Wind, 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 and adjustments for solar renewable energy certificate ("SREC") recognition 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 | Q2 2019 |
Q2 2018 |
YTD 2019 |
YTD 2018 |
||||||||
Interest expense, net | $ | (71 | ) | $ |
(51 | ) | $ | (157 | ) | $ | (105 | ) |
Amortization of deferred financing costs and debt discounts | 3 | 1 | 5 | 4 | ||||||||
Other, primarily fair value changes in interest rate swaps and purchase accounting adjustments due to acquisition | (5 | ) | (6 | ) | 8 | (5 | ) | |||||
Adjusted interest expense | $ | (73 | ) | $ | (56 | ) | $ | (144 | ) | $ | (106 | ) |
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
$ in millions | Q2 2019 |
Q2 2018 |
YTD 2019 |
YTD 2018 |
||||||||
Purchase of membership interests | $ | (5 | ) | $ | (7 | ) | $ | (12 | ) | $ | (13 | ) |
Buyout of non-controlling interests and Additional Paid in Capital | — | — | 1 | — | ||||||||
Adjustment for non-operating cash distributions | — | — | 1 | 1 | ||||||||
Purchase of membership interests and distributions to non-controlling interests | $ | (5 | ) | $ | (7 | ) | $ | (10 | ) | $ | (12 | ) |
l) Represents long-term average sustaining capex 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, major maintenance reserve releases or (additions), releases or (postings) of collateral held by counterparties of energy market hedges for certain wind plants, and recognized SREC gains that are covered by loan agreements.
Source: TerraForm Power, Inc.