BETHESDA, Md., Nov. 09, 2017 (GLOBE NEWSWIRE) -- TerraForm Power, Inc. (Nasdaq:TERP) reported financial results for the three months ended September 30, 2017.
“We are very excited about the prospects for TerraForm Power,” said John Stinebaugh, CEO of TerraForm Power. “With our high-quality fleet of solar and wind assets and the support of our sponsor, we are confident that we can deliver an attractive total return to our shareholders comprised of a dividend backed by the stable cash flow from our assets and growth that is sustainable over the long term.”
Financial Results and Operations
During the third quarter, our portfolio performed slightly below expectations, delivering adjusted EBITDA and CAFD of $109 million and $25 million, respectively. This represents a decrease of $10 million and $9 million, respectively, compared to the same period last year when we delivered adjusted EBITDA and CAFD of $119 million and $34 million, respectively. The decrease was largely due to unusually weak wind resource, which was ~20% below average for the quarter, resulting in a 13% decrease in total generation compared to the prior year. Wind resource was particularly low at our Hawaii projects, which have a higher than average contract price. Solar resource was also ~5% below normal levels. During the quarter, our fleet availability of 96% continued to show improvement and has further room to increase as we complete the transition to stand alone operations.
After quarter end, we signed an EPC contract to upgrade the batteries at one of our Hawaii wind projects where we are replacing lead acid batteries with lithium ion batteries. Due to lower maintenance expense associated with these new batteries, we expect to earn ~20% unlevered return on the investment of $11 million. In addition, we believe there may be opportunities in the future to expand our battery farm in order to provide further ancillary services for the local utility.
During the quarter, we revised our definition of CAFD to adjusted EBITDA minus cash distributions to non-controlling interest, annualized interest and project-level amortization payments and average annualized long-term sustaining capital expenditures required to maintain reliability and efficiency of our assets, plus any operating items that are representative of our core business operations. We revised our definition as we believe it provides a more meaningful measure for investors to evaluate our financial and operating performance and ability to pay dividends. We encourage you to review the discussion regarding the use of non-GAAP measures at the end of this press release for more detail.
TerraForm Power’s Value Proposition
Our goal is to deliver a total return of approximately 12% to shareholders that is sustainable over the long term. We expect this total return will be comprised of an attractive dividend yield, supported by a payout ratio of 80-85% of CAFD, plus dividend per share growth of 5-8%. Over the next five years, we see multiple paths to achieving this growth plan and delivering compelling returns to our investors.
Since the Brookfield transaction was announced in March, we have taken steps to strengthen our balance sheet and bolster our liquidity. This progress was recently acknowledged when we received upgrades in our corporate credit rating to BB- from S&P and B1 from Moody’s. In the past six months, we have repaid over $450 million of debt with proceeds from asset sales and free cash flow. With the close of the Brookfield transaction, we received a change of control waiver for our $1.25 billion of unsecured bonds and executed a $450 million revolving credit facility with relationship banks in replacement of our previous facility. In early November, we issued a $350 million term loan that was used to repay an intermediate holdco loan, simplifying our capital structure. We are very pleased with the execution of this financing, which we upsized by $50 million and priced at LIBOR + 275, a tightening of 75 basis points below initial price guidance. We believe this is an affirmation of Brookfield’s sponsorship and our plan to further strengthen our balance sheet over time
With the repayment of the intermediate holdco loan, there will no longer be any debt between our projects and our corporate debt. Going forward, we intend to reduce corporate leverage by raising project debt on certain of our unlevered projects and using the proceeds to repay corporate debt. As we grow, we expect to finance acquisitions primarily using non-recourse debt with investment grade metrics, further deleveraging our balance sheet. Over the medium term, our objective is to reduce our corporate debt to cash flow available for debt service (CFADS) ratio to between 4-5 times.
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., totaling more than 2,600 megawatts of installed capacity. TerraForm Power has a mandate to acquire operating solar and wind assets in North America and Western Europe. TerraForm Power is listed on the Nasdaq stock exchange (Nasdaq:TERP). It is sponsored by Brookfield Asset Management, a leading global alternative asset manager with more than US$250 billion of assets under management.
For more information about TerraForm Power, please visit: www.terraformpower.com.