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Growing its portfolio to 12 wind power projects, Pattern Energy Group Inc. recently acquired the 200-MW Logan’s Gap Wind project in Texas, which is currently under construction, from Pattern Energy Group LP.
Upon completion of the project, Pattern Energy will have an owned interest of 164 MW and three institutional tax equity investors will acquire the balance. After construction, the project is structured to be financed with all equity and not with project debt.
The company acquired the Logan’s Gap Wind project for a total cash funding commitment of some $113 million, a portion of which will be used to pay down construction debt upon the completion of construction. The acquisition will be funded from available cash and credit facilities.
- Adds 164 MW – an increase of 11 percent – in owned capacity;
- Expands total owned capacity to 1,636 MW upon completion – an increase of 57 percent – in the past 12 months;
- Increases total projects purchased from Pattern Development to nearly 600 MW in past 12 months, which corresponds to a 50 percent increase in run-rate CAFD;
- Long-term contracts for 75 percent of the expected output, including agreement with Walmart for 58 percent; and
- Cash purchase price represents a 10x to 11x multiple on run-rate CAFD contribution from the project.
“We are pioneering new markets for the sale of our electricity to leading corporations like Walmart who are pursuing clean energy for their businesses,” said Mike Garland, CEO of Pattern Energy. “This project, which was only recently added to our ROFO list, demonstrates that our team can move fast to create value when opportunities arise. Pattern Development has more than 30 projects in development at any given time, providing a broad and deep resource for our continued growth and the potential of accelerated drop downs. Our outlook for future acquisitions is better than we have ever seen, as Pattern Development has recently added more projects to its development pipeline through third-party acquisitions. We look forward to announcing new opportunities that will be added to our ROFO list in the near future.”
Pattern Energy has rights of first offer to Pattern Development’s project development pipeline, which includes more than 3,000 MW. Projects are added to Pattern Energy’s list of identified Right of First Offer (ROFO) projects when they reach identified milestones, such as when a project has executed a power purchase agreement.
Through its strategic relationship with Pattern Development, Pattern Energy is able to acquire projects for which the development risks have been substantially reduced. The company’s fleet of projects, including Logan’s Gap Wind, has limited exposure to fluctuations in the oil and gas markets, as approximately 90 percent of its power output is contracted for sale with long-term agreements.
Wal-Mart Stores Inc. has a 10-year power purchase agreement to acquire 58 percent of the expected output from the project. Seventeen percent of the expected output will be sold under a 13-year fixed price agreement with a A-/Baa2-rated financial institution. The remaining 25 percent of expected output will be sold at ERCOT spot market prices.
Logan’s Gap Wind is being built in Comanche County, Texas, and consists of 87 Siemens 2.3-MW wind turbines. Located near Dallas-Fort Worth, Logan’s Gap Wind will be the company’s fourth wind project in Texas, serving three regions throughout the state.
Once operational, the Logan’s Gap Wind project will create enough clean energy to power 50,000 homes in Texas each year, according to average annual residential energy use data from the Energy Information Administration. Located in ERCOT’s North Zone, the project will connect to Oncor’s 138kV Comanche”Zephyr line, which crosses the project site and supplies power to the Dallas”Fort Worth area.
As part of the acquisition, Pattern Energy has assumed an obligation to make an equity investment upon the completion of construction. Construction financing, which closed concurrent with the acquisition, will be repaid from Pattern Energy’s equity capital contribution and those of the institutional tax equity investors.
The conflicts committee of the board of directors of Pattern Energy, which is composed entirely of independent directors, approved the terms of the acquisition. The committee was advised on financial matters by Evercore Group LLC, which also provided a fairness opinion, and on legal matters by Davis Polk & Wardwell LLP.