UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 1, 2017
____________________________________________________________
TerraForm Power, Inc.
(Exact name of registrant as specified in its charter)
______________________________________________________________
Delaware | 001-36542 | 46-4780940 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I. R. S. Employer Identification No.) |
7550 Wisconsin Avenue, 9th Floor, Bethesda, Maryland 20814
(Address of principal executive offices, including zip code)
(240) 762-7700
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Item 2.02. Results of Operations and Financial Condition.
On August 1, 2017, TerraForm Power, Inc. (“TerraForm Power”) posted presentation materials to the Investors section of its website at http://www.terraformpower.com, which were made available in connection with a previously announced August 1, 2017 investor conference call. A copy of the presentation is furnished herewith as Exhibit 99.1.
In the attached presentation materials, TerraForm Power discloses items not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), or non-GAAP financial measures (as defined in Regulation G promulgated by the U.S. Securities and Exchange Commission). A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the attached presentation materials.
The information in this Current Report on Form 8-K (including the exhibit attached hereto) shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K (including the exhibit attached hereto) shall not be incorporated by reference into any filing or other document under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document.
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in this Form 8-K and the presentation materials attached as an exhibit hereto, this Form 8-K and the presentation materials contain forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the presentation materials regarding these forward-looking statements.
Item 9.01 Financial Statement and Exhibits.
(d) Exhibits
Exhibit No. | Description |
99.1 | Presentation materials, dated August 1, 2017, titled “Investor Call on 4Q 2016 and FY 2016 Results” |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TERRAFORM POWER, INC. | ||
Date: August 1, 2017 | By: | /s/ Rebecca Cranna |
Name: | Rebecca Cranna | |
Title: | Executive Vice President and Chief Financial Officer | |
Exhibit Index
Exhibit No. | Description |
99.1 | Presentation materials, dated August 1, 2017, titled “Investor Call on 4Q 2016 and FY 2016 Results” |
Investor Call on 4Q 2016 and FY 2016 Results
August 1, 2017
Exhibit 99.1
2
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. 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,” “goal,” “guidance,” “outlook,” “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 TerraForm Power expects or anticipates will occur in the future
are forward-looking statements. They may include estimates of expected adjusted EBITDA, cash available for distribution (CAFD), earnings, revenues, adjusted revenues,
capital expenditures, liquidity, capital structure, future growth, and other financial performance items (including future dividends per share), descriptions of management’s plans
or objectives for future operations, products, or services, or descriptions of assumptions underlying any of the above. Forward-looking statements provide TerraForm Power’s
current expectations or predictions of future conditions, events, or results and speak only as of the date they are made. Although TerraForm Power believes its expectations and
assumptions are reasonable, it can give no assurance that these expectations and assumptions will prove to have been correct and actual results may vary materially.
By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking
statements. Factors that might cause such differences include, but are not limited to, risks related the previously announced sponsorship transaction with Brookfield Asset
Management Inc. and its affiliates (the “Sponsorship Transaction”), including the expected timing and likelihood of completion of the Sponsorship Transaction, the timing, receipt
and terms and conditions of any required governmental approvals of the Sponsorship Transaction that could cause the parties to abandon the transaction; the occurrence of any
event, change or other circumstances that could give rise to the termination of the merger agreement relating to the Sponsorship Transaction; the risk of failure of the holders of
a majority of the outstanding Shares to adopt the merger agreement and other agreements contemplated by the Sponsorship Transaction and to obtain the requisite stockholder
approvals; the risk that the parties may not be able to satisfy the conditions to the Sponsorship Transaction in a timely manner or at all; risks related to disruption of management
time from ongoing business operations due to the Sponsorship Transaction; the risk that any announcements relating to the Sponsorship Transaction or the failure or
termination of the Sponsorship Transaction could have adverse effects on the market price of the Company’s common stock; the risk that the Sponsorship Transaction and its
announcement could have an adverse effect on the Company’s ability to retain and hire key personnel and maintain relationships with its suppliers and customers and on its
operating results and businesses generally, risk related to the SunEdison Bankruptcy, including our transition away from reliance on SunEdison for management, corporate and
accounting services, employees, critical systems and information technology infrastructure, and the operation, maintenance and asset management of our renewable energy
facilities; risks related to events of default and potential events of default arising under our revolving credit facility, the indentures governing our senior notes, and/or project-level
financing; risks related to failure to satisfy the requirements of Nasdaq, which could result in the delisting of our common stock; risks related to our exploration and potential
execution of strategic alternatives; pending and future litigation; our ability to integrate the projects we acquire from third parties or otherwise realize the anticipated benefits from
such acquisitions; 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 successfully identify, evaluate, and consummate acquisitions; government regulation, including compliance with regulatory and permit
requirements and changes in market rules, rates, tariffs, environmental laws and policies affecting renewable energy; operating and financial restrictions under agreements
governing indebtedness; the condition of the debt and equity capital markets and our ability to borrow additional funds and access capital markets, as well as our substantial
indebtedness and the possibility that we may incur additional indebtedness going forward; our ability to compete against traditional and renewable energy companies; potential
conflicts of interests or distraction due to the fact that several of our directors and most of our executive officers are also directors and executive officers of TerraForm Global,
Inc.; and hazards customary to the power production industry and power generation operations, such as unusual weather conditions and outages. Furthermore, any dividends
that we may pay in the future will be subject to available capital, market conditions, and compliance with associated laws and regulations. Many of these factors are beyond
TerraForm Power’s control.
TerraForm Power disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new
information, data, or methods, future events, or other changes, except as required by law. The foregoing list of factors that might cause results to differ materially from those
contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties which are described in TerraForm Power’s
Form 10-K for the fiscal year ended December 31, 2015 and Form 10-Q for the period ended June 30, 2016, as well as additional factors it may describe from time to time in
other filings with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not
consider any such list to be a complete set of all potential risks or uncertainties.
Forward-Looking Statements Exhibit 99.1
3
This presentation provides certain financial and operating metrics of TerraForm Power, Inc. (“TerraForm Power” or the
“Company”) as of or for the quarters ended December 31, 2015 and December 31, 2016 and estimates for certain financial and
operating metrics and measures of TerraForm Power for 2017.
Please review these results together with the risk factors detailed in our annual report on Form 10-K for the fiscal year ended
December 31, 2016 filed with the SEC on July 21, 2017.
The year to date and full year 2017 financial information and operating metrics and measures included in this presentation are
preliminary and unaudited and, with respect to full year information, are forward looking and include estimates and forecasts for
the remainder of the year which are inherently uncertain. This financial information may change materially as a result of the
completion of the audit for fiscal year 2017 and our performance for the balance of 2017. Our estimates are based on various
assumptions and are subject to various risks which could cause actual results to differ materially. The information presented on
the following slides does not represent a complete picture of the financial position, results of operation or cash flows of TerraForm
Power, is not a replacement for full financial statements prepared in accordance with U.S. GAAP and should not be viewed as
indicative of future results, which may differ materially. You should also refer to our Form 10-K for the fiscal year 2016 and the
other filings we have made with the SEC.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This presentation may be deemed to be solicitation material in respect of the proposed Transactions. In connection with the
proposed Transactions, Brookfield and the Company intend to file relevant materials with the SEC, including the Company’s proxy
statement on Schedule 14A. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE COMPANY’S PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTIONS. Investors and security holders will be able to obtain the documents
free of charge at the SEC’s website, http://www.sec.gov. The Company’s stockholders will also be able to obtain, without charge,
a copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to
TerraForm Power, Inc., 7550 Wisconsin Avenue, 9th Floor, Bethesda, Maryland 20814: (240) 762-7700, or from the Company’s
website, https://www.terraformpower.com/.
Importance of our Risk Factors and Additional InformationExhibit 99.1
4
TerraForm Power Focused on Key Areas of Execution
▪ Fleet performed slightly below expectations in 2016
▪ Solid progress on implementing stand-alone operating capability
▪ Completed the UK portfolio asset sale on May 11, providing $211M of net
proceeds1 and reducing project debt by £301M
▪ Sold the residential solar portfolio (~1,900 systems, 11 MW) in 1H 2017
▪ Filed our Form 10-K for 2016
▪ Scheduled to hold our annual shareholder meeting on August 10, 2017
▪ Working to finalize and file our 10-Qs for 1Q and 2Q 2017
▪ We are on track to satisfy the conditions to closing the Brookfield transaction,
with progress including:
– Submission of filings for regulatory approvals
– Closing of the UK portfolio sale in May
– Termination of the Hart-Scott-Rodino waiting period in May
– Bankruptcy court approval for SunEdison settlement and voting support agreements in June
– Texas PUC approval in July
1. $211M in proceeds is inclusive of cash on hand for the UK portfolio
Exhibit 99.1
5
1. MW (net) in operation at end of period
2. Revenue adjusted for PPA amortization, changes in fair value of commodity hedges and ITC revenue amortization
3. Excludes non-operating cash costs incurred (costs that are not representative of our core operations)
4. Composed of $56M goodwill impairment of an acquired DG portfolio and $16M impairment on our residential portfolio
Non-GAAP Metrics 4Q 2016 4Q 2015
YoY change
(%)
MW (net) in operation1 2,983 2,931 2%
Capacity Factor 28.2% 22.9% +530 bps
MWh (000s) 1,912 1,069 79%
Adj. Revenue2 / MWh $76 $100 (24%)
Adj. Revenue ($M)2 $146 $107 36%
Adj. EBITDA ($M)3 $112 $72 55%
Adj. EBITDA margin 76.6% 67.1% +950 bps
CAFD ($M)3 $84 $23 263%
4Q 2016 Results
CommentaryMetrics 4Q 2016 4Q 2015
YoY change
(%)
Revenue, net ($M) $135 $106 28%
Net Income / (Loss) ($M) ($135) ($156) n/a
Revenue was slightly below
management estimates, due in
part to lower availability at certain
of our plants
Year-over-year changes driven by
acquired Invenergy wind plants,
which have higher capacity factor
and lower price per MWh vs.
existing TERP fleet
Net loss of $135M due in part to
impairment charges of $72M4
CAFD increased $61M vs. 4Q 2015
primarily due to releases of
restricted cash resulting from
cures of project debt defaults
Exhibit 99.1
6
1. MW (net) in operation at end of period
2. Revenue adjusted for PPA amortization, changes in fair value of commodity hedges and ITC revenue amortization
3. Excludes non-operating cash costs incurred (costs that are not representative of our core operations)
4. Change includes net impact of term loan in 2015 that was repaid using corporate bonds
FY 2016 Results
Commentary
Non-GAAP Metrics 2016 2015
Change
(%)
MW (net) in operation1 2,983 2,931 2%
Capacity Factor 28.6% 22.3% +630 bps
MWh (000s) 7,724 3,462 123%
Adj. Revenue2 / MWh $90 $135 (34%)
Adj. Revenue ($M)2 $692 $467 48%
Adj. EBITDA ($M)3 $516 $358 44%
Adj. EBITDA margin 74.5% 76.6% (210) bps
CAFD ($M)3 $166 $228 (27%)
Metrics 2016 2015
Change
(%)
Revenue, net ($M) $655 $470 39%
Net Income / (Loss) ($M) ($242) ($208) n/a
Revenue for 2016 was 2% below
midpoint of estimated range
Year-over-year changes driven by
acquired Invenergy wind plants,
which have higher capacity factor
and lower price per MWh vs. existing
TERP fleet
Net loss of ($242M) was $82M below
estimated range midpoint of ($160M)
– $56M goodwill impairment of an acquired
DG portfolio
– $19M impairment on our residential
portfolio
CAFD declined $62M vs. 2015
– ($27M) full year impact of corporate bonds
issued in 1H 20154
– ($20M) revolver interest on avg. ~$640M
drawn
– ($23M) reduction in SunEdison support
– +$8M net impact of portfolio growth,
changes in portfolio debt, and all other
Exhibit 99.1
7
1. Revenue adjusted for PPA amortization, changes in fair value of commodity hedges and ITC revenue amortization
2. Excludes non-operating cash costs incurred (costs that are not representative of our core operations)
Updated 2017 Estimates
Adj. Revenue ($M)1 $620–$640 $600–$700
Adj. EBITDA ($M)2 $440–$460 $430–$510
CAFD ($M)2 $90–$110 $120
Metrics
Revised 2017
Estimate
Previous 2017
Estimate
Revenue, net ($M) $590–$610 $570–$670
Net Income / (Loss) ($M) ($130)–($150) ($50)–$50
Year-to-date performance has been adversely impacted by several factors
– Lower than average solar resource
– Lower than expected availability of our solar fleet due primarily to one-off operating issues
– Challenged market conditions in Texas that impacted our 387 MW of wind plants
As a result, we are revising our previous estimates for 2017 as follows:
Exhibit 99.1
8
Appendix
Exhibit 99.1
9
$166
$37
($157)
($28) $9
–
($150)
($100)
($92)
($19) ($9) $20 –
$655
$692
$516
Revenue Adjustments Adj.
Revenue
Cost of
operations
G&A
(corp.
operating)
SUNE
G&A
Support
Adj.
EBITDA
Project
debt:
interest
payments
Holdco
debt
payments
Principal
payments
Distrib.
to NCI
Maint.
capex
Other
adjustments
2016
CAFD
2016 Revenue to CAFD Waterfall
$M, unless otherwise noted
2016 Results
1. Excludes $61M of non-operating cash costs recorded in 2016 (costs that are not representative of our core operations).
2. Does not include special interest payment of $5M.
1 2
Exhibit 99.1
10
Capital Structure
$M, unless otherwise noted
Definitions and Calculations:
Net Holdco debt: Gross Holdco debt less Holdco unrestricted cash
Gross consolidated debt: Drawn Revolver plus Senior Notes and non-recourse debt
Net consolidated debt: Gross consolidated debt less Holdco and project-level unrestricted cash
1. Includes financing lease obligations, but excludes net unamortized discount and deferred financing costs
Metric As of Dec 31, 2016
Holdco unrestricted cash $478
Project-level unrestricted cash $87
Total unrestricted cash $565
Project-level restricted cash $118
Total Cash $683
Drawn Revolver $552
Sr. Notes $1,250
Non-recourse debt1 $2,202
Gross Holdco debt $1,802
Net Holdco debt $1,324
Gross consolidated debt $4,004
Net consolidated debt $3,439
Financial Metrics
Adj. EBITDA $516
CAFD $166
Credit Metrics
Net consolidated debt / Adj. EBITDA 6.7x
Exhibit 99.1
11
$478
$639
$155
($104)
($32)
$211
$86 ($100)
($55)
Starting Balance
(Dec 31,2016)
Project
Distributions
Corp. Operating
Costs and
Interest
Corp. Non
Operating Costs
UK Sale Canada
Financing
Portfolio Term
Loan Partial
Repayment
Revolver Partial
Repayment
Ending Balance
(June 30, 2017)
HoldCo Cash: December 31, 2016 to June 30, 2017
$M, unless otherwise noted
1. June 30, 2017 drawn revolver balance was $497M and outstanding LCs were $61M, resulting in available revolver of $12M
2. June 30, 2017 preliminary actual balance per bank statements and may differ from final US GAAP balances. This reflects cash and cash equivalents.
2
Operating Financing and M&A
Non-
Operating
1
▪ At the end of 2Q we had significant HoldCo cash of $639M, which we expect to use to:
– Repay corporate debt (including a $150M repayment of our revolver made in July)
– Pay the special dividend and costs associated with the Brookfield transaction
Exhibit 99.1
12
2.6 GW Wind and Solar Portfolio …
Exclusively renewable assets
Portfolio as of June 30, 2017
With Estimated Average 26 Year
Remaining Useful Life …
Average asset age of 4 years
With High Credit-Quality Counterparties
High quality average credit rating of A;
84% rated investment grade
1
Under Long-Term Contracts …
Average remaining PPA life of 14 years
1. 11% not rated; 5% rated non-investment grade
(MW Weighted)
(MW Weighted)(MW Weighted)
High-Quality Contracted Renewable Generation Portfolio
Solar
41%
Wind
59%
<2 years
20%
2-5 years
55%
>5 years
25%
20+
years
21%
16-20
years
19%
11-15
years
35%
6-10
years
14%
0-5
years
11%
AAA
1%
AA+
16%
AA
9%
AA-
1%
A+
13%
A
5%
A-
5%
BBB+
26%
BBB
4%
BBB-
4%
< IG
5%
NR
11%
Exhibit 99.1
13
Low Concentration RiskGeographically Diverse Fleet of 2.6 GW
Portfolio as of June 30, 2017
(MW Weighted)
Wind
1,532 MW
Solar
1,075 MW
Total US: 2,348 MW US Wind: 1,454 MW US Solar: 895 MW
Canada
145 MW
78 MW
68 MW
Chile
102 MW
102 MW
UK 1
11 MW
11 MW
OR – 1 MW MN – 2 MW
NE – 181 MW
NV – 32 MW
UT – 42 MW
CO – 10 MW
CA – 488 MW
TX – 387 MW Wind
1 MW Solar
HI – 81 MW Wind
1 MW Solar
OH – 10 MW
ME – 219 MW
NH – 1 MW
VT – 40 MW Wind
8 MW Solar
MA – 123 MW
CT – 1 MW
NY – 160 MW Wind
16 MW Solar
NJ – 63 MW
PA – 8 MW
MD – 19 MW
NC – 36 MW
IL – 386 MW
GA – 5 MW
FL – 9 MW
PR – 5 MW
NM – 1 MW
AZ – 12 MW
Diverse Asset Portfolio in Attractive and Stable Markets
CAISO
18%
ISO-NE
15%
ERCOT
15%Other
13%
PJM
11%
MISO
8%
SPP
7%
NYISO
7%
WECC
4%
SERC
2%
Mount Signal
10%
South Plains
8%
California
Ridge
8%
Bishop Hill
7%
Rattlesnake
7%
Prairie
Breeze
7%
Cohocton
5%
CAP
4%
Regulus
3%
Capital
Dynamics
3%
Other
38%
Exhibit 99.1
14
Definitions: Adjusted Revenue, Adjusted EBITDA and
Cash Available For Distribution (CAFD)
Reconciliation of Operating Revenues, Net to Adjusted Revenue
We define adjusted revenue as operating revenues, net, adjusted for non-cash items including unrealized gain/loss on derivatives, amortization
of favorable and unfavorable rate revenue contracts, net and other non-cash revenue items. This measurement is not recognized in accordance
with GAAP and should not be viewed as an alternative to GAAP measures of performance, including revenue. Please see the next to last slide
of this presentation for additional disclosures on the usefulness of Adjusted Revenue as a supplementary non-GAAP measure and on its
limitations.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
We define adjusted EBITDA as net income (loss) plus depreciation, accretion and amortization, non-cash affiliate general and administrative
costs, acquisition related expenses, interest expense, gains (losses) on interest rate swaps, foreign currency gains (losses), income tax (benefit)
expense and stock compensation expense, and 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. This measurement is not recognized in accordance with GAAP and
should not be viewed as an alternative to GAAP measures of performance, including net income (loss). Please see the next to last slide of this
presentation for additional disclosures on the usefulness of Adjusted EBITDA as a supplementary non-GAAP measure and on its limitations,
Note: As of December 31, 2015, TerraForm Power changed its policy regarding restricted cash to characterize the following as restricted cash:
(i) cash on deposit in collateral accounts, debt service reserve accounts, maintenance and other reserve accounts, and (ii) cash on deposit in
operating accounts but subject to distribution restrictions due to debt defaults, or other causes. Previously, cash available for operating
purposes, but subject to compliance procedures and lender approvals prior to distribution from project level accounts, was also considered
restricted. This cash is now considered unrestricted but is designated as unavailable for immediate corporate purposes. The impact of the new
accounting policy on full year reported or forecasted CAFD is immaterial.
Reconciliation of Adjusted EBITDA to CAFD
Effective December 31, 2015, we define “cash available for distribution” or “CAFD” as adjusted EBITDA of Terra LLC as adjusted for certain
cash flow items that we associate with our operations. Cash available for distribution represents adjusted EBITDA (i) minus deposits into (or
plus withdrawals from) restricted cash accounts required by project financing arrangements to the extent they decrease (or increase) cash
provided by operating activities, (ii) minus cash distributions paid to non-controlling interests in our renewable energy facilities, if any, (iii) minus
scheduled project-level and other debt service payments and repayments in accordance with the related borrowing arrangements, to the extent
they are paid from operating cash flows during a period, (iv) minus non-expansionary capital expenditures, if any, to the extent they are paid
from operating cash flows during a period, (v) plus or minus operating items as necessary to present the cash flows we deem representative of
our core business operations, with the approval of the audit committee. CAFD Is not a measure of liquidity or profitability, is not recognized in
accordance with GAAP and should not be viewed as an alterative to net income (loss), operating income, net cash provided by operating
activities or any other measure determined in accordance with U.S. GAAP. Please see the next to last slide of this presentation for additional
disclosures on the usefulness of CAFD as a supplementary non-GAAP measure and on its limitations.
Exhibit 99.1
15
Reg G: Reconciliation of Net Operating Revenue to Adjusted Revenue,
Net Income / (Loss) to Adjusted EBITDA and Adjusted EBITDA to CAFD
$M, unless otherwise noted
Three Months Ended December
31,
Reconciliation of Operating Revenues, Net to Adjusted Revenue 2016 2015 2016 2015 2017 Midpoint
Operating revenues, net $135 $106 $655 $470 $600
Unrealized loss on derivatives, net (a) 7 2 12 1 –
Amortization of favorable and unfavorable rate revenue contracts, net (b) 10 4 40 5 40
Other non-cash items (c) (6) (4) (15) (9) (10)
Adjusted revenue $146 $107 $692 $467 $630
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Net income (loss) ($135) ($156) ($242) ($208) ($140)
Interest expense, net 67 46 310 168 235
Income tax (provision) expense (3) (16) 0 (13) –
Depreciation, accretion and amortization expense (d) 75 51 284 167 261
General and administrative expenses (e) 19 14 61 51 86
Stock-based compensation expense (f) 2 2 6 12 8
Acquisition and related costs, including affiliate (g) – 23 3 56 –
Loss on prepaid warranty with affiliate (h) – 45 – 45 –
Unrealized loss on derivatives, net (i) 7 2 12 1 –
Loss (gain) on extinguishment of debt, net (j) 1 8 1 16 –
LAP settlement payment (k) – 10 – 10 –
Eastern Maine Electric Cooperative litigation reserve (l) – 14 – 14 –
Impairment charge (m) 72 – 75 – –
Non-recurring facility-level non-controlling interest member transaction fees (n) – 1 – 4 –
Loss (gain) on foreign currency exchange, net (o) 9 10 16 19 –
Loss on investments and receivables with affiliate (p) 2 16 3 16 –
Other non-cash items (q) (6) (5) (15) (9) –
Other non-operating expenses (r) 1 6 1 8 –
Adjusted EBITDA $112 $72 $516 $358 $450
Reconciliation of Adjusted EBITDA to CAFD
Adjusted EBITDA $112 $72 $516 $358 $450
Interest payments (s) (73) (52) (250) (138) (228)
Principal payments (t) (34) (27) (92) (46) (99)
Cash distributions to non-controlling interests, net (u) (4) (6) (19) (23) (15)
Non-expansionary capital expenditures (2) (8) (9) (13) (22)
(Deposits into)/withdrawals from restricted cash accounts 84 (0) (5) 19 8
Other:
Contributions received pursuant to agreements with SunEdison (v) – – 8 15 –
Economic ownership adjustments (w) – 40 – 53 –
Other items (x) 1 5 17 4 5
Estimated cash available for distribution $84 $23 $166 $228 $100
Impact of defaults on changes in restricted cash (y) (5) – (5) – –
Estimated cash available for distribution excluding defaults $89 $23 $171 $228 $100
Twelve Months Ended
December 31,
Exhibit 99.1
16
Footnotes to Reg. G
a) Represents the change in the fair value of commodity contracts not designated as hedges.
b) Represents net amortization of favorable and unfavorable rate revenue contracts included within operating revenues, net.
c) Primarily represents deferred revenue recognized related to the upfront sale of investment tax credits to non-controlling interest members.
d) Includes reductions within operating revenues, due to net amortization of favorable and unfavorable rate revenue contracts, of $5.3 million and $40.2
million for the year ended December 31, 2015 and 2016, respectively, of which $3.7 million and $10.1 million were within the three months ended
December 31, 2015 and 2016, respectively.
e) Pursuant to the management services agreement, SunEdison agreed to provide or arrange for other service providers to provide management and
administrative services to us. For the year ended December 31, 2015, cash consideration of $4.0 million was paid to SunEdison for these services, and the
amount of general and administrative expense – affiliate in excess of the fees paid to SunEdison in the period was treated as an addback in the
reconciliation of net income (loss) to Adjusted EBITDA. In the year ended December 31, 2016 we accrued $8.8 million of routine G&A services provided or
arranged by SunEdison under the Management Services Agreement that were not reimbursed by TerraForm Power and were treated as an addback in the
reconciliation of net income (loss) to Adjusted EBITDA. In addition, non-operating items and other items incurred directly by TerraForm Power that we do
not consider indicative of our core business operations are treated as an addback in the reconciliation of net income (loss) to Adjusted EBITDA. In the year
ended December 31, 2016, these items include extraordinary costs and expenses of $42.1 million related to restructuring, legal, advisory and contractor
fees associated with the bankruptcy of SunEdison and certain of its affiliates (the “SunEdison bankruptcy”) and $9.6 million in investment banking, legal,
third party diligence and advisory fees associated with acquisitions, dispositions and financings. The Company’s normal general and administrative
expenses, paid by Terraform Power, were not added back in the reconciliation of net income (loss) to Adjusted EBITDA. For the three months and year
ended December 31, 2016, Terraform Power incurred $5.5 million and $19.4 million of normal operating corporate general and administrative expenses.
f) Represents stock-based compensation expense recorded within general and administrative expenses and within general and administrative expenses –
affiliate.
g) Represents transaction related costs, including affiliate acquisition costs, associated with acquisitions.
h) In conjunction with the acquisition of certain of the operating assets of First Wind (the “First Wind Acquisition”), SunEdison committed to reimburse us for
capital expenditures not to exceed $50.0 million through 2019 for certain of our wind power plants in the form of a prepaid warranty that was capitalized as
PP&E in purchase accounting. Through the year ended December 31, 2015, the Company received contributions pursuant to this agreement of $2.7
million and recorded depreciation on the related asset of $1.9 million. As a result of the SunEdison bankruptcy, the Company recorded a loss of $45.4
million related to the write-off of this prepaid warranty agreement, which is no longer considered collectible.
i) Represents the unrealized change in the fair value of commodity contracts not designated as hedges.
j) We recognized net losses and (gains) on extinguishment of debt for the following credit facilities in the year ended December 31, 2015: $12.3 million
corporate term loan extinguishment and related fees, $7.5 million relating to the refinancing of project level loans associated with our U.K. solar assets,
$6.4 million of indebtedness associated with assets acquired from First Wind, $1.3 million corporate revolving credit facility, ($11.4 million) Duke Energy
operating facility. During the year ended December 31, 2016, we recognized a net loss of $1.1 million on extinguishment of debt related to the ninth
amendment of the corporate revolving credit facility.
k) Pursuant to a settlement agreement, TERP made a one-time payment to certain parties related to Latin American Power Holding B.V. (“LAP”) in the
amount of $10.0 million in April 2016 in exchange for, and contingent on, the termination of the arbitration and release of all claims against TerraForm
Power. The expense incurred as a result of the one-time payment was recorded to general and administrative expenses for the year ended December 31,
2015.
l) Represents a loss reserve related to the legal judgment in favor of Eastern Maine Electric Cooperative against certain of our subsidiaries for breach of
contract over the proposed sale of a transmission line acquired from First Wind.
Exhibit 99.1
17
Footnotes to Reg. G
m) Impairment charges of $74.8 million recognized in the year ended December 31, 2016 were composed of a $55.9 million impairment of goodwill attributed
to the 2015 acquisition of 77.8 MWs of certain distributed generation assets from Capital Dynamics, and $19.0 million related to residential solar systems
acquired from SunEdison, of which $15.7 million was recorded in the three months ended December 31, 2016.
n) Represents professional fees for legal, tax, and accounting services related to entering certain tax equity financing arrangements that were paid by
SunEdison, and are not representative of our core business operations.
o) Represents net losses and (gains) on foreign currency exchange, primarily due to unrealized gains/losses on the re-measurement of intercompany loans
which are primarily denominated in British pounds.
p) As a result of the SunEdison bankruptcy, we recognized an $11.3 million loss on investment for residential project cancellations during the three months
and year ended December 31, 2015 and an additional $2.5 million in the three months and year ended December 31, 2016. We also recognized a $4.8
million bad debt reserve for outstanding receivables from debtors in the SunEdison bankruptcy during the three months and year ended December 31,
2015, and $0.8 million in the year ended December 31, 2016.
q) Primarily represents deferred revenue recognized for the upfront sale of investment tax credits to non-controlling interest members.
r) Represents certain other items that we believe are not representative of our core business or future operating performance.
s) Represents project-level and other interest payments attributed to normal operations. The reconciliation from Interest expense, net as shown on the
Consolidated Statement of Operations to Interest payments applicable to CAFD for the years ended December 31, 2015 and 2016 is as follows:
t) Represents project-level and other principal debt payments to the extent paid from operating cash. The reconciliation from Principal payments on non-
recourse long-term debt as shown on the Consolidated Statement of Cash Flows to Principal payments applicable to CAFD for the years ended December
31, 2015 and 2016 is as follows:
u) Represents project-level and other principal debt payments to the extent paid from operating cash. The reconciliation from Principal payments on non-
recourse long-term debt as shown on the Consolidated Statement of Cash Flows to Principal payments applicable to CAFD for the years ended December
31, 2015 and 2016 is as follows:
$ in millions 2016 2015
Interest expense, net ($310.3) ($167.8)
Amortization of deferred financing costs and debt discounts 24.2 27.0
Unrealized loss on U.K. interest rate swaps 24.2 -
Accrual of special interest on corporate bonds and revolving credit facility related to August 2016 waiver agreements 11.8 -
Other changes in accrued interest, net of other items 0.2 2.7
Interest payments ($249.9) ($138.1)
$ in millions 2016 2015
Principal payments on non-recourse long-term debt ($156.0) ($517.6)
Construction financings repaid by SunEdison as per terms of acquisition 38.1 429.1
Return of capital to debt providers not used to acquire assets, net 24.7 -
Financing lease obligations repaid by SunEdison as per terms of acquisition - 20.2
Construction financings repaid from term loan proceeds - 18.3
Other, net 1.0 4.1
Principal payments ($92.2) ($45.9)
Exhibit 99.1
18
Footnotes to Reg. G
u) 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 years ended December 31,
2015 and 2016 is as follows:
v) We received an equity contribution of $4.0 million from SunEdison pursuant to the Interest Payment Agreement for the year ended December 31, 2015.
We received an equity contribution from SunEdison of $6.6 million and $8.0 million pursuant to the Amended Interest Payment Agreement during the years
ended December 31, 2015 and December 31, 2016, respectively. In addition, in conjunction with the First Wind Acquisition, SunEdison committed to
reimburse us for capital expenditures and operations and maintenance labor fees in excess of budgeted amounts for certain of our wind power plants.
During the year ended December 31, 2015, the Company received contributions pursuant to this agreement of $4.3 million. No contributions were received
pursuant to either agreement during the three months ended December 31, 2015 or the three months and year ended December 31, 2016.
w) Represents economic ownership of certain acquired operating assets which accrued to us prior to the acquisition close date. The amount recognized for
the year ended December 31, 2015 primarily related to our acquisition of Invenergy Wind, First Wind, and Northern Lights. Per the terms of the Invenergy
Wind acquisition, we received economic ownership of the Invenergy Wind assets effective July 1, 2015 and $39.6 million of CAFD accrued to us from July
1, 2015 through the December 15, 2015 closing date. Per the terms of the First Wind acquisition, we received economic ownership of the First Wind
operating assets effective January 1, 2015 and $7.2 million of CAFD accrued to us from January 1, 2015 through the January 29, 2015 closing date. Per
the terms of the Northern Lights acquisition, we received economic ownership of the Northern Lights facilities effective January 1, 2015 and $3.7 million of
CAFD accrued to us from January 1, 2015 through the June 30, 2015 closing date. The remaining $2.7 million of economic ownership related to our
acquisitions of Moose Power and Integrys, which both closed in the second quarter of 2015.
x) Represents other cash flows as determined by management to be representative of normal operations for 2016 and 2015 as follows:
y) Represents the accumulation of restricted cash as of December 31, 2016 due to the impact of SunEdison bankruptcy-triggered or related defaults for those
defaults not resolved at July 15, 2017.
$ in millions 2016 2015
Distributions to non-controlling interests ($23.8) ($28.1)
Contributions from non-controlling interests 4.6 -
Dividends paid to Class B1 common stockholders - 2.9
Amount reported in 2014 for CAFD purposes - 1.7
Other, net 0.4 -
Cash distributions to non-controlling interests, net ($18.8) ($23.5)
$ in millions 2016 2015
Major maintenance reserve releases / (additions) $9.0 ($4.3)
Regulus reimbursable network upgrade 3.0 4.3
Rattlesnake ERCOT collateral release / (posting) 4.5 (5.0)
Liquidated damages paid to TerraForm Power by SunEdison related to asset management and other performance
agreements
- 4.4
Kaheawa Wind Power I tax reimbursement - 2.4
Other - 2.1
Total Other items $16.5 $3.9
Exhibit 99.1
19
Footnotes to Reg. G.
Adjusted Revenue, Adjusted EBITDA and CAFD are supplemental non-GAAP measures and their limitations are discussed below. Because of the limitations described below, we
encourage you to review, and evaluate the basis for, each of the adjustments made to arrive at Adjusted Revenue, Adjusted EBITDA and CAFD.
Adjusted Revenue
We define adjusted revenue as operating revenues, net, adjusted for non-cash items including unrealized gain/loss on derivatives, amortization of favorable and unfavorable rate
revenue contracts, net and other non-cash revenue items. We disclose Adjusted Revenue as a supplemental non-GAAP measure because we believe it is useful to investors and
other stakeholders in evaluating the performance of our renewable energy assets and comparing that performance across periods in each case without regard to non-cash revenue
items. Adjusted Revenue has certain limitations in that it does not reflect the impact of these non-cash items of revenue on our performance. This measurement is not recognized in
accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance, including revenue.
Adjusted EBITDA
We disclose Adjusted EBITDA because we believe Adjusted EBITDA is useful to investors and other interested parties as a measure of 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 and among us and our
peer companies without regard to interest expense, taxes and depreciation and amortization. In addition, Adjusted EBITDA is also used by our management for internal planning
purposes, including for certain aspects of our consolidated operating budget. We believe Adjusted EBITDA is useful as a planning tool because it allows 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 it is also useful for communicating with shareholders, bondholders and
lenders and other stakeholders. Because of the limitations described below, however, we encourage you to review, and evaluate the basis for, each of the adjustments made to arrive
at Adjusted EBITDA. Adjusted EBITDA is a supplemental non-GAAP financial measure. Our definitions and calculations of these items may not necessarily be the same as those used
by other companies. Adjusted EBITDA is not a measure of liquidity or profitability and should not be considered as an alternative to net income, operating income, net cash provided
by operating activities or any other measure determined in accordance with U.S. GAAP. Moreover, Adjusted EBITDA has certain limitations and should not be considered in isolation.
Some of these limitations are: (i) Adjusted EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual liabilities or future working capital
needs, (ii) Adjusted EBITDA does not reflect the significant interest expenses that we expect to incur or any income tax payments that we may incur, and (iii) Adjusted EBITDA 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 Adjusted EBITDA does
not take into account any cash expenditures required to replace those assets. Adjusted EBITDA also includes, among other things, adjustments for goodwill 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 bankruptcy of SunEdison, Inc. and certain of its subsidiaries (the “SunEdison Bankruptcy”). These adjustments 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 judgment, and the
presentation of Adjusted EBITDA should not be construed to infer that our future results will be unaffected by infrequent, non-operating, unusual or non-recurring items.
Cash Available for Distribution
We disclose CAFD because we believe cash available for distribution is useful to investors in evaluating our operating performance and because securities analysts and other
stakeholders analyze CAFD as a measure of our financial and operating performance and our ability to pay dividends. In addition, cash available for distribution is used by our
management team for internal planning purposes and for evaluating the attractiveness of investments and acquisitions. Because of the limitations described below, however, we
encourage you to review, and evaluate the basis for, each of the adjustments made to calculate CAFD. CAFD is a supplemental non-GAAP financial measure. Our definitions and
calculations of CAFD may not necessarily be the same as those used by other companies. CAFD is not a measure of liquidity or profitability, nor is it indicative of the funds needed by
us to operate our business. It should not be considered as an alternative to net income (loss), operating income, net cash provided by operating activities or any other performance or
liquidity measure determined in accordance with U.S. GAAP. CAFD has certain limitations and should not be considered in isolation. Some of these limitations are: (i) CAFD includes
all of the adjustments and exclusions made to Adjusted EBITDA described above, including, but not limited to, not reflecting depreciation and amortization, and does not capture the
level of capital expenditures required to maintain our assets and excludes certain other cash flow items that are not representative of our core business operations. These adjustments
for items that we do not believe are representative of our core business involve the application of management judgment, and the presentation of CAFD should not be construed to
infer that our future results will be unaffected by infrequent, non-operating, unusual or non-recurring items.
Exhibit 99.1
20
Exhibit 99.1