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): November 9, 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 November 9, 2017, TerraForm Power, Inc. (“TerraForm Power”) issued a press release announcing the reporting of its financial results for the quarter ended September 30, 2017. The press release also reported certain financial and operating metrics of TerraForm Power as of or for the quarters ended September 30, 2017 and 2016. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.
On November 9, 2017, TerraForm Power also 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 November 10, 2017 investor conference call. A copy of the presentation is furnished herewith as Exhibit 99.2.
In the attached press release and presentation, 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 press release and presentation.
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 press release and presentation attached as an exhibit hereto, this Form 8-K and the press release and presentation 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 press release and presentation regarding these forward-looking statements.
Item 9.01 Financial Statement and Exhibits.
(d) Exhibits
Exhibit No. | Description |
99.1 | Press release, dated November 9, 2017, titled “TerraForm Power Reports Third Quarter 2017 Financial Results and Files Form 10-Q” |
99.2 | Presentation materials, dated November 10, 2017, titled “TerraForm Power Q3 2017 Supplemental Information” |
Exhibit Index
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: November 9, 2017 | By: | /s/ Matthew Berger |
Name: | Matthew Berger | |
Title: | Chief Financial Officer | |
Exhibit 99.1
TerraForm Power Reports Third Quarter 2017 Results
BETHESDA, Md., Nov. 9, 2017 (GLOBENEWSWIRE) -- TerraForm Power, Inc. (Nasdaq: TERP) (“TerraForm Power”) today 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.”
Q3 2017 Results
3Q 2017 | 3Q 2016 | YTD 2017 | YTD 2016 | ||
Generation (GWh) 1 | 1,378 | 1,582 | 5,315 | 5,504 | |
Net Loss ($M) | ($35) | ($28) | ($92) | ($106) | |
per Share 2 | ($0.31) | ($0.29) | ($0.62) | ($0.53) | |
Adj. EBITDA 1 | $109 | $119 | $344 | $369 | |
CAFD ($M) 1 | $25 | $34 | $92 | $145 | |
per Share 2 | $0.18 | $0.24 | $0.65 | $1.04 | |
1 Adjusted for sale of our UK and Residential portfolios. See discussion regarding use of non-GAAP measures at the end of this press release
2 Calculated on a fully diluted basis
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.
1) | Margin Enhancements |
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We believe there is significant opportunity to enhance our cash flow through productivity enhancements. Within the first year, we are targeting approximately $10 million of cost savings by streamlining our organization structure. We are in the process of implementing a structure which is flatter and eliminates duplicative functions. In addition, we are planning to automate a number of processes that are currently very labor intensive and in-source asset management and certain back office functions.
Over the next 2 to 3 years, we are targeting an additional $15 million in cost savings through reductions in O&M expense of $2 per MWh. We believe these O&M cost savings are achievable in part because we have a number of legacy service agreements in our wind fleet with prices that are significantly above current market. Over the past few years, there has been increased competition in the service sector as OEMs have been competing to gain market share by offering contracts that offer both greater coverage as well as lower rates as compared to those in our legacy agreements. Alternatively, we are exploring whether we can achieve greater benefits by adopting an in-sourcing operating model that leverages Brookfield’s experience in establishing an organization to self-perform its renewable power O&M. We are pleased that we have two paths to achieve our cost savings objectives. Whether we recontract with OEMs or in-source will ultimately depend upon which option offers the best combination of lowest cost, risk mitigation and flexibility for our operations. In total, we expect these margin enhancements to provide cash flow increases to largely fund our dividend per share growth targets through 2020.
2) | Organic Growth |
In addition to cost savings, we are very focused on developing a robust organic growth pipeline comprised of opportunities to invest in our existing fleet on accretive basis as well as add-on acquisitions across our scope of operations. We have identified several compelling opportunities to invest in our fleet, including asset repowerings, site expansions and potentially adding energy storage to existing sites.
There are potential opportunities to repower several of our wind farms in the Northeast and Hawaii by replacing older turbines with new turbines that have increased rotor diameter and superior power generation. With these repowering opportunities, we would be able to utilize existing infrastructure such as the wind farm’s substation, electrical collection systems and potentially its towers, subject to providing necessary reinforcement to the foundations. The preliminary economics for these projects are quite compelling, as they are able to generate incremental power at much lower cost compared to new, greenfield wind projects. However, we will be disciplined and only plan to proceed if we are able to secure long term contracts that mitigate the price risk of these projects.
Another opportunity for organic growth is the potential repowering of projects in our distributed generation solar fleet. Our distributed generation projects typically sell power to customers “behind the meter” at rates that are at a discount to their utility rate. As solar panel costs have declined significantly over the last several years and the efficiency of the panels has increased, there may be opportunities to replace older panels with higher output, lower cost modules as well as to expand the footprint of our solar arrays. We believe this type of repowering represents a “win-win” situation, as our corporate and municipal customers would see even greater savings on their electricity bill, and TerraForm Power would be able to earn attractive returns on its incremental capital investment.
In addition to these opportunities, we also will seek to develop relationships with undercapitalized, private developers that have local expertise and traction in key markets. With Brookfield’s support, we should be able to offer these smaller developers capital as well as assistance in developing their projects. In return, we would look to secure a right of first offer on these projects. We believe these relationships should produce add-on acquisitions with attractive returns compared to auction processes.
We look forward to providing further updates on these organic growth initiatives as they progress.
3) | Value-Oriented Acquisitions |
We are currently evaluating a number of acquisition opportunities, leveraging Brookfield’s significant business development team in our target markets of North America and Western Europe. With the relationships that Brookfield has developed, its team has been very effective at sourcing off-market transactions at more attractive valuations than auction processes. Brookfield has a track record of executing multi-faceted transactions such as take privates and recapitalizations that have historically enabled it to acquire high quality assets at attractive relative values.
Furthermore, TerraForm Power has a right of first offer (ROFO) to acquire renewable power assets in North America and Western Europe owned by Brookfield and its affiliates. The ROFO portfolio currently stands at 3,500 MW. Over time, as Brookfield entities look to sell these assets, TerraForm Power will have the opportunity to make offers for these assets and potentially purchase them if the prices meet our investment objectives.
We believe that TerraForm Power will be able to achieve its dividend growth and total return objectives over the next five years from cost savings and investments in organic growth opportunities. Our five-year business plan requires a modest amount of equity
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issuance of ~$100 million. This will allow us to be patient and disciplined, and we will only pursue larger, value-oriented acquisitions to the extent that they provide upside to our business plan.
Balance Sheet
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.
Contacts for Investors / Media:
Brett Prior
TerraForm Power
investors@terraform.com
Quarterly Earnings Call Details
Investors, analysts and other interested parties can access TerraForm Power’s 2017 Third 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 November 10, 2017 at 9:30 a.m. Eastern Time at https://edge.media-server.com/m6/p/g7z2anva or via teleconference at 1-844-464-3938 toll free in North America. For overseas calls please dial 1-765-507-2638, at approximately 9:20 a.m. Eastern Time. A replay of the webcast will be available for those unable to attend the live webcast.
Safe Harbor Disclosure
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 cash available for distribution (CAFD), dividend growth, cost savings initiatives, earnings, adjusted EBITDA, revenues, income, loss, capital expenditures, liquidity, capital structure, future growth, and other financial performance items (including future dividends per share), descriptions of management’s plans or
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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 to the transition to Brookfield sponsorship; risks related to the SunEdison bankruptcy, including our transition away from reliance on SunEdison for certain services including critical systems and information technology infrastructure; risks related to wind conditions at our wind assets or to weather conditions at our solar assets; risks related to potential events of default at our project financings; risks related to delays in our filing of periodic reports with the SEC; risks related to the effectiveness of our internal controls over financial reporting; pending and future litigation; our ability to successfully identify, evaluate, and consummate acquisitions; 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; 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; cash trapped at the project level, including the risk that such project-level cash may not be released up to the Company in a timely manner; risks related to the proposed relocation of the Company’s headquarters; our ability to compete against traditional and renewable energy companies; 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, 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.
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TERRAFORM POWER, INC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating revenues, net | $ | 153,430 | $ | 178,118 | $ | 474,932 | $ | 519,336 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of operations | 41,859 | 32,820 | 108,402 | 94,534 | |||||||||||
Cost of operations - affiliate | 1,199 | 7,149 | 10,224 | 22,898 | |||||||||||
General and administrative expenses | 21,664 | 26,510 | 99,644 | 64,750 | |||||||||||
General and administrative expenses - affiliate | 2,192 | 2,943 | 6,893 | 10,614 | |||||||||||
Acquisition and related costs | — | — | — | 2,743 | |||||||||||
Impairment of renewable energy facilities | — | — | 1,429 | — | |||||||||||
Depreciation, accretion and amortization expense | 61,830 | 57,988 | 186,039 | 178,026 | |||||||||||
Total operating costs and expenses | 128,744 | 127,410 | 412,631 | 373,565 | |||||||||||
Operating income | 24,686 | 50,708 | 62,301 | 145,771 | |||||||||||
Other expenses (income): | |||||||||||||||
Interest expense, net | 70,232 | 72,818 | 206,749 | 243,111 | |||||||||||
Gain on sale of renewable energy facilities | — | — | (37,116 | ) | — | ||||||||||
(Gain) loss on foreign currency exchange, net | (1,078 | ) | 3,913 | (5,695 | ) | 4,161 | |||||||||
Loss on receivables - affiliate | — | — | — | 845 | |||||||||||
Other (income) expenses, net | (7,015 | ) | 548 | (4,882 | ) | 692 | |||||||||
Total other expenses, net | 62,139 | 77,279 | 159,056 | 248,809 | |||||||||||
Loss before income tax (benefit) expense | (37,453 | ) | (26,571 | ) | (96,755 | ) | (103,038 | ) | |||||||
Income tax (benefit) expense | (2,633 | ) | 1,140 | (4,982 | ) | 3,115 | |||||||||
Net loss | (34,820 | ) | (27,711 | ) | (91,773 | ) | (106,153 | ) | |||||||
Less: Net income attributable to redeemable non-controlling interests | 6,803 | 4,642 | 18,162 | 16,374 | |||||||||||
Less: Net loss attributable to non-controlling interests | (15,077 | ) | (6,182 | ) | (59,045 | ) | (74,968 | ) | |||||||
Net loss attributable to Class A common stockholders | $ | (26,546 | ) | $ | (26,171 | ) | $ | (50,890 | ) | $ | (47,559 | ) | |||
Weighted average number of shares: | |||||||||||||||
Class A common stock - Basic and diluted | 92,352 | 90,860 | 92,228 | 89,140 | |||||||||||
Loss per share: | |||||||||||||||
Class A common stock - Basic and diluted | $ | (0.31 | ) | $ | (0.29 | ) | $ | (0.62 | ) | $ | (0.53 | ) | |||
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TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 462,846 | $ | 565,333 | |||
Restricted cash | 126,083 | 114,950 | |||||
Accounts receivable, net | 104,841 | 89,461 | |||||
Prepaid expenses and other current assets | 62,550 | 61,749 | |||||
Assets held for sale | — | 61,523 | |||||
Total current assets | 756,320 | 893,016 | |||||
Renewable energy facilities, net, including consolidated variable interest entities of $3,309,214 and $3,434,549 in 2017 and 2016, respectively | 4,854,303 | 4,993,251 | |||||
Intangible assets, net, including consolidated variable interest entities of $836,290 and $875,095 in 2017 and 2016, respectively | 1,096,416 | 1,142,112 | |||||
Deferred financing costs, net | 4,585 | 7,798 | |||||
Other assets | 133,539 | 114,863 | |||||
Restricted cash | 26,080 | 2,554 | |||||
Non-current assets held for sale | — | 552,271 | |||||
Total assets | $ | 6,871,243 | $ | 7,705,865 | |||
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TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(CONTINUED)
September 30, 2017 | December 31, 2016 | ||||||
Liabilities, Redeemable Non-controlling Interests and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt and financing lease obligations, including consolidated variable interest entities of $156,621 and $594,442 in 2017 and 2016, respectively | $ | 716,728 | $ | 2,212,968 | |||
Accounts payable, accrued expenses and other current liabilities, including consolidated variable interest entities of $42,555 and $37,760 in 2017 and 2016, respectively | 145,276 | 125,596 | |||||
Deferred revenue | 17,992 | 18,179 | |||||
Due to SunEdison and affiliates, net | 15,775 | 16,692 | |||||
Liabilities related to assets held for sale | — | 21,798 | |||||
Total current liabilities | 895,771 | 2,395,233 | |||||
Long-term debt and financing lease obligations, less current portion, including consolidated variable interest entities of $781,464 and $375,726 in 2017 and 2016, respectively | 2,864,666 | 1,737,946 | |||||
Deferred revenue, less current portion | 44,669 | 55,793 | |||||
Deferred income taxes | 32,889 | 27,723 | |||||
Asset retirement obligations, including consolidated variable interest entities of $95,596 and $92,213 in 2017 and 2016, respectively | 150,743 | 148,575 | |||||
Other long-term liabilities | 33,261 | 31,470 | |||||
Non-current liabilities related to assets held for sale | — | 410,759 | |||||
Total liabilities | 4,021,999 | 4,807,499 | |||||
Redeemable non-controlling interests | 198,031 | 180,367 | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, no shares issued | — | — | |||||
Class A common stock, $0.01 par value per share, 850,000,000 shares authorized, 92,770,614 and 92,476,776 shares issued in 2017 and 2016, respectively, and 92,408,596 and 92,223,089 shares outstanding in 2017 and 2016, respectively | 928 | 920 | |||||
Class B common stock, $0.01 par value per share, 140,000,000 shares authorized, 48,202,310 shares issued and outstanding in 2017 and 2016 | 482 | 482 | |||||
Class B1 common stock, $0.01 par value per share, 260,000,000 shares authorized, no shares issued | — | — | |||||
Additional paid-in capital | 1,480,584 | 1,467,108 | |||||
Accumulated deficit | (285,330 | ) | (234,440 | ) | |||
Accumulated other comprehensive income | 57,334 | 22,912 | |||||
Treasury stock, 362,018 and 253,687 shares in 2017 and 2016, respectively | (5,381 | ) | (4,025 | ) | |||
Total TerraForm Power, Inc. stockholders' equity | 1,248,617 | 1,252,957 | |||||
Non-controlling interests | 1,402,596 | 1,465,042 | |||||
Total stockholders' equity | 2,651,213 | 2,717,999 | |||||
Total liabilities, redeemable non-controlling interests and stockholders' equity | $ | 6,871,243 | $ | 7,705,865 | |||
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TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (91,773 | ) | $ | (106,153 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation, accretion and amortization expense | 186,039 | 178,026 | |||||
Amortization of favorable and unfavorable rate revenue contracts, net | 29,459 | 30,128 | |||||
Gain on sale of renewable energy facilities | (37,116 | ) | — | ||||
Impairment of renewable energy facilities | 1,429 | — | |||||
Amortization of deferred financing costs and debt discounts | 19,729 | 19,579 | |||||
Unrealized loss on U.K. interest rate swaps | 2,425 | 35,840 | |||||
Unrealized (gain) loss on commodity contract derivatives, net | (1,244 | ) | 5,006 | ||||
Recognition of deferred revenue | (11,510 | ) | (9,508 | ) | |||
Stock-based compensation expense | 7,049 | 3,857 | |||||
Unrealized (gain) loss on foreign currency exchange, net | (5,275 | ) | 6,349 | ||||
Loss on extinguishment of debt | 2,518 | — | |||||
Loss on receivables - affiliate | — | 845 | |||||
Deferred taxes | 5,166 | 3,014 | |||||
Other, net | 5,978 | 2,287 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (18,860 | ) | (30,502 | ) | |||
Prepaid expenses and other current assets | (4,997 | ) | (11,827 | ) | |||
Accounts payable, accrued expenses and other current liabilities | (758 | ) | 10,035 | ||||
Deferred revenue | 199 | 2,457 | |||||
Other, net | 3,907 | 5,483 | |||||
Net cash provided by operating activities | 92,365 | 144,916 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (7,472 | ) | (41,698 | ) | |||
Proceeds from sale of renewable energy facilities, net of cash and restricted cash disposed | 183,235 | — | |||||
Proceeds from renewable energy state rebate | 15,542 | — | |||||
Proceeds from reimbursable interconnection costs | 8,079 | — | |||||
Acquisitions of renewable energy facilities from third parties, net of cash and restricted cash acquired | — | (4,064 | ) | ||||
Net cash provided by (used in) investing activities | $ | 199,384 | $ | (45,762 | ) | ||
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TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from financing activities: | |||||||
Borrowings of non-recourse long-term debt | $ | 79,835 | $ | 3,980 | |||
Principal payments and prepayments on non-recourse long-term debt | (199,481 | ) | (122,597 | ) | |||
Revolver repayments | (275,000 | ) | — | ||||
Sale of membership interests and contributions from non-controlling interests in renewable energy facilities | 6,935 | 15,501 | |||||
Distributions to non-controlling interests in renewable energy facilities | (23,017 | ) | (19,365 | ) | |||
Net SunEdison investment | 7,436 | 37,200 | |||||
Due to SunEdison and affiliates, net | (3,097 | ) | (29,036 | ) | |||
Debt financing fees | (10,228 | ) | (12,958 | ) | |||
Other financing activities | (1,030 | ) | — | ||||
Net cash used in financing activities | (417,647 | ) | (127,275 | ) | |||
Net decrease in cash, cash equivalents and restricted cash | (125,898 | ) | (28,121 | ) | |||
Net change in cash, cash equivalents and restricted cash classified within assets held for sale | 54,806 | (54,731 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 3,264 | (5,933 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 682,837 | 793,033 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 615,009 | $ | 704,248 | |||
Supplemental Disclosures: | |||||||
Cash paid for interest | $ | 182,021 | $ | 183,577 | |||
Cash paid for income taxes | — | — | |||||
9
Reconciliation of Non-GAAP Measures
Adjusted Revenue, Adjusted EBITDA and CAFD 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 not necessarily be the same as those used by other companies. These non-GAAP measures have certain limitations, which are described below, and they should not be considered in isolation. We encourage you to review, and evaluate the basis for, each of the adjustments made to arrive at Adjusted Revenue, Adjusted EBITDA and CAFD.
Calculation of Non-GAAP Measures
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 define adjusted EBITDA as net income (loss) plus depreciation, accretion and amortization, non-cash general and administrative costs, interest expense, income tax (benefit) expense, acquisition related expenses, 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.
We define “cash available for distribution” or “CAFD” as adjusted EBITDA (i) minus cash distributions paid to non-controlling interests in our renewable energy facilities, if any, (ii) minus annualized scheduled interest and project level amortization payments in accordance with the related borrowing arrangements, (iii) 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, (iv) plus or minus operating items as necessary to present the cash flows we deem representative of our core business operations.
As compared to the preceding period, we revised our definition of CAFD to (i) exclude adjustments related to deposits into and withdrawals from restricted cash accounts, required by project financing arrangements, (ii) replace sustaining capital expenditures payment made in the year with the average annualized long-term sustaining capital expenditures to maintain reliability and efficiency of our assets, and (iii) annualized debt service payments. 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. For items presented on an annualized basis, we will present actual cash payments as a proxy for an annualized number until the period commencing January 1, 2018.
Furthermore, to provide investors with the most appropriate measures to assess the financial and operating performance of our existing fleet and the ability to pay dividends in the future, we have excluded results associated with our UK solar and Residential portfolios, which were sold in 2017, from adjusted revenue, EBITDA and CAFD reported for all periods presented.
Use of Non-GAAP Measures
We disclose Adjusted Revenue because it presents the component of our operating revenue that relates to the energy production from our plants, and is, therefore, 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.
We disclose Adjusted EBITDA because we believe it is useful to investors and other stakeholders 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. 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 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 SunEdison bankruptcy.
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. CAFD is not a measure of liquidity or profitability, nor is it indicative of the funds
10
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 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 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 these Non-GAAP measures are also useful for communicating with investors and other stakeholders.
11
The following table presents a reconciliation of Operating Revenues to Adjusted Revenue and net loss to Adjusted EBITDA to CAFD and has been adjusted to exclude asset sales in the UK and Residential portfolios:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||
Adjustments to reconcile Operating revenues, net to adjusted revenue | ||||||||||||
Operating revenues, net | 153,430 | 178,118 | 474,932 | 519,336 | ||||||||
Unrealized (gain) loss on commodity contract derivatives, net (a) | (3,896 | ) | (195 | ) | (1,244 | ) | 5,006 | |||||
Amortization of favorable and unfavorable rate revenue contracts, net (b) | 9,936 | 9,803 | 29,460 | 30,128 | ||||||||
Other non-cash items (c) | (4,958 | ) | (4,823 | ) | (10,074 | ) | (8,647 | ) | ||||
Adjustment for Asset Sales | — | (17,507 | ) | (14,754 | ) | (46,691 | ) | |||||
Adjusted revenue | 154,512 | 165,396 | 478,320 | 499,132 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Net loss | (34,820 | ) | (27,711 | ) | (91,773 | ) | (106,153 | ) | ||||
Interest expense, net | 70,232 | 72,818 | 206,749 | 243,111 | ||||||||
Income tax (benefit) expense | (2,633 | ) | 1,140 | (4,982 | ) | 3,115 | ||||||
Depreciation, accretion and amortization expense (d) | 71,761 | 67,791 | 215,494 | 208,154 | ||||||||
Non-operating general and administrative expenses (e) | 13,084 | 13,879 | 66,845 | 41,452 | ||||||||
Stock-based compensation expense | 1,856 | 1,411 | 7,049 | 3,857 | ||||||||
Gain on sale of U.K. renewable energy facilities | — | — | (37,116 | ) | — | |||||||
Adjustment for Asset Sales | — | (13,575 | ) | (9,632 | ) | (35,237 | ) | |||||
Other non-cash or non-operating items (f) | (10,178 | ) | 3,042 | (8,564 | ) | 10,264 | ||||||
Adjusted EBITDA | 109,303 | 118,796 | 344,071 | 368,564 | ||||||||
Interest payments (g) | (57,568 | ) | (59,761 | ) | (172,828 | ) | (177,248 | ) | ||||
Principal payments (h) | (23,022 | ) | (17,778 | ) | (64,843 | ) | (58,546 | ) | ||||
Cash distributions to non-controlling interests, net | (5,892 | ) | (9,979 | ) | (23,017 | ) | (19,365 | ) | ||||
Sustaining capital expenditures | (1,130 | ) | (650 | ) | (8,235 | ) | (6,308 | ) | ||||
Other: | ||||||||||||
Adjustment for Asset Sales | — | (28 | ) | 112 | 10,012 | |||||||
Other items (i) | 3,650 | 3,753 | 16,453 | 28,163 | ||||||||
Estimated cash available for distribution | 25,341 | 34,353 | 91,713 | 145,272 | ||||||||
a) | Represents unrealized (gain) loss on commodity contracts associated with energy derivative contracts that are not designated as hedges for accounting purposes whereby the change in fair value is 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. |
b) | Represents net amortization of purchase accounting related intangibles arising from past business combinations related to favorable and unfavorable rate revenue contracts. |
c) | Primarily represents recognized deferred revenue related to the upfront sale of investment tax credits. |
d) | Includes increases within operating revenues due to net amortization of favorable and unfavorable rate revenue contracts as detailed in the reconciliation of Adjusted Revenue. |
12
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. In the three and nine months ended September 30, 2016 we accrued $3.4 million and $8.4 million, respectively, 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. These items include extraordinary costs and expenses related primarily to restructuring, legal, advisory and contractor fees associated with the bankruptcy of SunEdison and certain of its affiliates (the “SunEdison bankruptcy”) and investment banking, legal, third party diligence and advisory fees associated with the Brookfield transaction, dispositions and financings. The Company’s normal general and administrative expenses, paid by Terraform Power, are the amounts shown below and were not added back in the reconciliation of net income (loss) to Adjusted EBITDA: |
3Q 2017 | 3Q 2016 | September 2017 YTD | September 2016 YTD |
$5.7M | $5.9M | $22.8M | $13.9M |
f) | 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: acquisition related costs, impairment charges, loss (gain) on FX, loss on investments and receivables with affiliate, and loss on extinguishment of debt. |
g) | Represents project-level and other interest payments and interest income attributed to normal operations. The reconciliation from Interest expense, net as shown on the Consolidated Statement of Operations to Interest payments applicable to CAFD is as follows: |
$ in millions | 3Q 2017 | 3Q 2016 | Sep 2017 YTD | Sep 2016 YTD |
Interest expense, net | ($70.2) | ($72.8) | ($206.7) | ($243.1) |
Amortization of deferred financing costs and debt discounts | $3.5 | $4.4 | 13.5 | 19.6 |
Unrealized loss on U.K. interest rate swaps | 0.0 | 4.6 | 2.4 | 34.5 |
Changes in accrued interest and other non-cash | 4.5 | 5.3 | 8.2 | 12.2 |
Loss on extinguishment of debt | 2.5 | 0.0 | 2.5 | 0.0 |
Special interest on corporate bonds related to August 2016 waiver agreements | 0.0 | 0.0 | 7.1 | 0.0 |
Portfolio Term Loan extension fee recorded to unamortized discount, net | -1.8 | 0.0 | -4.2 | 0.0 |
Corporate bond backstop facility fee | 3.1 | 0.0 | 3.1 | 0.0 |
Other, net | 0.8 | -1.3 | 1.3 | -0.4 |
Interest payments | ($57.6) | ($59.8) | ($172.8) | ($177.2) |
h) | 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 is as follows: |
$ in millions | 3Q 2017 | 3Q 2016 | Sep 2017 YTD | Sep 2016 YTD |
Principal payments on non-recourse long-term debt | ($57.9) | ($58.7) | ($199.5) | ($122.6) |
Blackhawk repayment of construction loan by SunEdison | 0 | 16.7 | 0 | 38.1 |
Midco repayment of loan | 0 | 0 | 100.0 | 0 |
CAP prepayment using EPC settlement proceeds | 4.8 | 0 | 4.8 | 0 |
TerraForm Private Operating II repayment of loan | 30.0 | 24.0 | 30.0 | 24.0 |
Other, net | 0.1 | 0.2 | (0.1) | 2.0 |
Principal payments | ($23.0) | ($17.8) | ($64.8) | ($58.5) |
i) | 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 a cash contribution received in 2016 from SunEdison under the Interest Payment Agreement. |
13
TERRAFORM POWER
Q3 2017 Supplemental
Three and Nine Months Ended September 30, 2017
Information
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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 cash available for distribution (CAFD), dividend growth, cost savings initiatives, earnings, adjusted EBITDA, revenues, income, loss,
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 to the transition to Brookfield sponsorship; risks related to the SunEdison
bankruptcy, including our transition away from reliance on SunEdison for certain services including critical systems and information technology infrastructure; risks related to wind
conditions at our wind assets or to weather conditions at our solar assets; risks related to potential events of default at our project financings; risks related to delays in our filing of
periodic reports with the SEC; risks related to the effectiveness of our internal controls over financial reporting; pending and future litigation; our ability to successfully identify,
evaluate, and consummate acquisitions; 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;
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; cash trapped at the project level,
including the risk that such project-level cash may not be released up to the Company in a timely manner; risks related to the proposed relocation of the Company’s headquarters; our
ability to compete against traditional and renewable energy companies; 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, 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.
3
Q3 2017 HIGHLIGHTS
Key Performance Metrics
Key Balance Sheet Metrics
Quarter Highlights
1,378 GWh
Generation
~$720 million
Corporate Liquidity
$25 million
CAFD
Sep 30 Dec 31
2017 2016
721 512
3,632 4,004
6,481 6,902
(2)
(1)
(IN $ MILLIONS)
Corporate liquidity(1)
Total long-term debt
Total capitalization(2)
Total capitalization is comprised of total stockholders’ equity, redeemable non-controlling interests,
and Total long-term debt.
September 30, 2017 liquidity is pro forma for the transaction. See "Liquidity" slide.
• Our portfolio performed slightly below
expectation, delivering adjusted EBITDA
and CAFD of $109 million and $25 million
• Represents a $10 million and $9 million
decrease, respectively, from prior year
o Decrease largely due to weaker
than average wind resource,
which was ~20% below average
o Solar resource was ~5% below
average levels
• Total generation for the quarter of 1,378
GWh was down 13% from 1,582 GWh in
the prior year
• Good fleet availability (96%) with room
for further improvement as we complete
transition to stand alone operations
• Net loss increased $7 million due
primarily to the above noted impacts on
adjusted EBITDA
• Robust liquidity with over $700 million of
corporate liquidity available to fund
growth
2017 2016 2017 2016
1,378 1,582 5,315 5,504
$ (35) $ (28) $ (92) $ (106)
109 119 344 369
25 34 92 145
$ (0.31) $ (0.29) $ (0.62) $ (0.53)
$ 0.18 $ 0.24 $ 0.65 $ 1.04
(3) Loss per share calculated on weighted average basic and diluted Class A shares outstanding. CAFD per share
addit ionally includes Class B shares and unvested Class A shares. For the three and nine months ended September 30,
2017, weighted average basic and diluted Class A shares outstanding totaled 92.4 million and 92.2 million, respectively
(2016: 90.9 million and 89.1 million, respect ively). Class B shares totaled 48.2 million in each respective period.
Three months ended Nine months ended
(M ILLIONS, EXCEPT AS NOTED)
Total generation (GWh)(1)
Sep 30 Sep 30
Earnings (loss) per share(2)
CAFD per share(2)(3)
Net income (loss)
Adjusted EBITDA(2)
CAFD(2)
(1)
(2)
Adjusted for sale of our UK solar and Resident ial port folios.
Non-GAAP measures. See "Calculat ion and Use of Non-GAAP Measures" and "Reconciliat ion of Non-GAAP
Measures” sections. Adjusted for sale of our UK solar and Resident ial port folios.
4
Our Business
TerraForm Power’s mission is to own and operate high quality solar and wind
generation assets in North America and Western Europe
Performance Targets and Key Measures
• Our objective is to deliver an attractive risk adjusted return in the range of 12%
per annum to our shareholders
• Expect to generate total return from an attractive dividend backed by stable
cashflow from our assets and target 5-8% annual dividend per share increase
that is sustainable over the long term
• We target a dividend payout of 80-85% of CAFD
• Over the next five years, growth will be driven by costs savings and organic
investments
• Opportunistic, value-oriented acquisitions will provide upside to our
business plan
• Growth in CAFD per unit is a key performance metric as it is a proxy for our
ability to increase distributions
5
Our Operations
Owner and operator of a 2,606 MW diversified portfolio of high-quality solar and
wind assets, primarily in the US, underpinned by long-term contracts
Solar Wind Total
US 894 MW 1,453 MW 2,347 MW
International 181 MW 78 MW 259 MW
Total 1,075 MW 1,531 MW 2,606 MW
Solar
61%
Wind
39%
2.6 GW
Fleet
Large Scale Portfolio Diversified by
Technology1
20+ years
21%
15-20 years
36%
10-15 years
30%
<10 years
13%
Average
~15 Years
Remaining
Long-Term Offtake Contracts1
1. Weighted on 2016 project CAFD.
6
Selected Income Statement and Balance Sheet Information
The following tables presented selected income statement and balance sheet information by operating
segment:
Income Statement Balance Sheet
2,927 3,596
3,535 3,609
409 501
$ 6,871 $ 7,706
1,204 1,585
1,243 1,379
1,575 1,844
$ 4,022 $ 4,808
1,723 2,011
2,292 2,230
(1,166) (1,343)
$ 2,849 $ 2,898
Total Assets
Solar
Wind
Corporate
Total
Total Liabilities
Solar
Wind
As of
(M ILLIONS) Sep 30, 2017 Dec 31 2016
Solar
Wind
Corporate
Total
Corporate
Total
Total Equity and NCI
2017 2016 2017 2016
46 53 125 76
(37) (22) (44) (20)
(44) (58) (173) (162)
$ (35) $ (28) $ (92) $ (106)
88 93 215 222
26 32 151 161
(5) (6) (22) (14)
$ 109 $ 119 $ 344 $ 369
69 79 149 170
(4) - 53 63
(40) (45) (110) (88)
$ 25 $ 34 $ 92 $ 145Total
Total
CAFD
Solar
Wind
Corporate
Total
Adjusted EBITDA
Solar
Wind
Corporate
(MILLIONS, UNLESS NOTED)
Net income (loss)
Solar
Wind
Corporate
Three months ended Nine months ended
Sep 30 Sep 30
7
Operating Segments
8
Solar
The following table presents selected key performance metrics for our Solar segment:
Overview
• 1,075 MW of capacity
• 515 Sites in diverse geographies
• Average remaining PPA life of 17 years
• Average offtaker credit rating of Aa3
• Diverse mix of high quality modules
Contracted cash flows
• Utility scale – generation contracted by
investment grade counterparties (such
as state utilities)
• Distributed generation – generation
contracted by investment grade public
offtakers (municipalities, universities,
schools, hospitals), commercial and
industrial offtakers or utilities
2017 2016 2017 2016
524 548 1,425 1,532
$ 46 $ 53 $ 125 $ 76
$ 88 $ 93 $ 215 $ 222
$ 69 $ 79 $ 149 $ 170
(1) Adjusted for sale of our UK solar and Residential portfolios.
Three months ended Nine months ended
Sep 30 Sep 30
(M ILLIONS, UNLESS NOTED)
CAFD
Adjusted EBITDA
Net income (loss)
Generation (GWh) (1)
9
Solar (continued)
The following table presents our Solar segment’s
financial results:
The following table presents our key financial metrics for this operating segment by platform:
Quarter Highlights
• Adjusted EBITDA and CAFD were $88 million and
$69 million, respectively, versus $93 million and
$79 million, respectively, in the prior year
• Adjusted EBITDA for our utility scale business
of $55 million was in line with the prior year,
while CAFD of $44 million was down $8 million
as a result of higher debt service costs arising
from the upfinancing of our Canadian solar
assets
• Adjusted EBITDA and CAFD for our distributed
generation business of $33 million and $25
million, respectively, decreased by $5 million
and $2 million due to weaker resource and
deferral of operating costs impacting the prior
year
• Net income of $46 million was $7 million lower
than prior year due primarily to the sale of our UK
and Residential portfolios
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
55 55 114 120 44 52 68 117 (7) 27 27 9
33 38 101 102 25 27 81 53 53 26 98 67
$ 88 $ 93 $ 215 $ 222 $ 69 $ 79 $ 149 $ 170 $ 46 $ 53 $ 125 $ 76Total
(MILLIONS)
Nine months ended
CAFD Net IncomeAdjusted EBITDA
Sep 30
Utility Scale
Distributed Generation
Three months ended Nine months ended Three months ended Nine months ended Three months ended
Sep 30 Sep 30 Sep 30 Sep 30 Sep 30
2017 2016 2017 2016
104 105 256 265
(16) (12) (41) (43)
$ 88 $ 93 $ 215 $ 222
(6) (4) (36) (42)
(11) (7) (27) (21)
(3) (3) (10) (6)
Sustaining capital expenditures - - - -
Adjustment for asset sales - - - 10
1 - 7 7
$ 69 $ 79 $ 149 $ 170
88 93 215 222
(15) (22) (54) (89)
- - - -
(29) (31) (88) (96)
2 13 52 39
$ 46 $ 53 $ 125 $ 76
Sep 30 Sep 30
Three months ended Nine months ended
Income taxes
Depreciation and amortization
Other
Net income (loss)
(M ILLIONS, UNLESS NOTED)
Adjusted revenue
Direct operating costs
Adjusted EBITDA
Cash interest payments
Principal repayments
Distributions to NCI
Other
CAFD
Adjusted EBITDA
Interest expense
10
Wind
Overview
• 1,531 MW of capacity
• 18 Sites in diverse geographies
• Average remaining PPA life of 12 years
• Average offtaker credit rating of A1
• Recently constructed assets (average 5
years old) with primarily top tier turbines
Contracted cash flows
• Substantially all generation is contracted
with investment grade counterparties,
such as state utilities or financial
institutions
The following table presents selected key performance metrics for our Wind segment:
2017 2016 2017 2016
854 1,033 3,890 3,971
$ (37) $ (22) $ (44) $ (20)
$ 26 $ 32 $ 151 $ 161
$ (4) $ 0 $ 53 $ 63CAFD
Three months ended Nine months ended
Sep 30 Sep 30
(M ILLIONS, UNLESS NOTED)
Generation (GWh)
Net income (loss)
Adjusted EBITDA
11
Wind (continued)
The following table presents our Wind segment’s
financial results:
Quarter Highlights
• Adjusted EBITDA and CAFD were $26
million and ($4) million, respectively, versus
$32 million and nil, respectively, in the prior
year
o Adjusted EBITDA decreased $6 million
from prior year, due primarily to lower
production, partially offset by lower
costs. Though our fleet availability was
in-line with expectations, wind resource
was ~20% below average
o Third quarter is the seasonal low period
for the year for our wind segment.
CAFD was $4 million lower than the prior
year due to the above noted impacts to
Adjusted EBITDA
• Net loss for the quarter was $37 million, an
increase of $15 million compared to the prior
year primarily due to lower adjusted EBITDA
and higher depreciation related to changes
to the useful lives for certain wind asset
components
2017 2016 2017 2016
50 60 223 234
(24) (28) (72) (73)
$ 26 $ 32 $ 151 $ 161
(17) (18) (50) (53)
(12) (10) (37) (37)
(3) (7) (13) (13)
Sustaining capital expenditures (1) (1) (8) (6)
3 5 10 11
$ (4) $ - $ 53 $ 63
26 32 151 161
(22) (21) (65) (64)
- - - -
(42) (36) (126) (111)- - - -
1 3 (4) (6)
$ (37) ` (22) $ (44) $ (20)
Three months ended Nine months ended
Sep 30 Sep 30
(MILLIONS, UNLESS NOTED)
Adjusted revenue
Direct operating costs
Adjusted EBITDA
Cash interest payments
Principal repayments
Distributions to NCI
Other
Other
Net income (loss)
CAFD
Adjusted EBITDA
Interest expense
Income taxes
Depreciation and amortization
12
Corporate
The following table presents our Corporate segment’s
financial results:
Quarter Highlights
• Direct operating costs were flat versus the
prior year
• Interest payments decreased versus the
prior year primarily due to lower average
revolver borrowings
• Net loss of $44 million was roughly in-line
with the prior year
2017 2016 2017 2016
(5) (6) (22) (14)
$ (5) $ (6) $ (22) $ (14)
(35) (37) (87) (82)
Other - (2) (1) 8
$ (40) $ (45) $ (110) $ (88)
(5) (6) (22) (14)
(33) (30) (88) (90)
3 (1) 5 (3)
(1) (1) (2) (1)
(8) (20) (66) (54)
$ (44) $ (58) $ (173) $ (162)
Three months ended Nine months ended
Sep 30 Sep 30
(MILLIONS, UNLESS NOTED)
Direct operating costs
Adjusted EBITDA
Income taxes
Depreciation and amortization
Other
Net Income
Cash interest payments
CAFD
Adjusted EBITDA
Interest expense
13
We operate with sufficient liquidity to enable us to fund growth initiatives, capital expenditures, distributions, and to
withstand sudden adverse changes in economic circumstances or short-term fluctuations in generation.
Principal sources of liquidity are cash flows from operations, our credit facilities, up-financings of subsidiary borrowings and
proceeds from the issuance of securities through public markets.
Corporate liquidity and available capital were $721 million and $921 million, respectively as at September 30, 2017, pro
forma for the transaction:
Liquidity
68 $ 388
30 30
Cash available to corporate 98 418
Authorized credit facilities 450 520
Draws on credit facilities (265) (277)
Commitments under revolver (62) (62)
Undrawn Sponsor Line 500 -
623 181
721 $ 599
45 45
152 152
3 3
921 $ 799
Sep 30, 2017 Sep 30
(MILLIONS) Pro Forma 2017
Available capital
Project-level restricted cash
Other project-level unrestricted cash
Project-level credit commitments, unissued
Unrestricted corporate cash
Credit facilities
Available portion of credit facilities
Corporate liquidity
Project-level distributable cash
1 Pro-forma for (i) issuance of $350 million Term Loan B with proceeds used to repay $338 million of the non-recourse portfolio term loan and $12
million of corporate credit facility, (ii) payment of special dividend ($288 million) and (iii) payment of merger related transaction advisory fees ($32
million)
1
14
Maturity Profile
We finance our assets primarily with project level debt that generally has long-term maturities that amortize
over the contract life, few restrictive covenants and no recourse to either TerraForm Power or other projects.
We have long-dated, staggered debt maturities. With the repayment of our non-recourse portfolio term loan
with proceeds from the issuance of the senior secured term loan issued in November, we have no meaningful
maturities over the next five years
The following table summarizes our scheduled principal repayments, overall maturity profile and average
interest rates associated with our borrowings over the next five years:
Notes 5.9 $ - $ - $ - $ - $ - $ 1,250 $ 1,250 6.4%
Term Loan (1) 4.9 - 4 4 4 4 336 350 4.1%
Revolver (1) 2.3 15 - - - 250 - 265 4.0%
Total corporate (1) 5.2 15 4 4 4 254 1,586 1,865 5.6%
Utility scale 15.6 16 36 38 42 45 728 905 5.7%
Distributed generation 9.0 3 10 18 9 9 50 99 6.8%
Solar 14.9 19 46 56 51 54 778 1,004 5.8%
Wind (1) 9.3 15 50 50 51 51 545 762 5.5%
Total non-recourse (1) 12.5 34 96 106 102 105 1,323 1,766 5.7%
Total borrrowings (1) 9.5 $ 49 $ 100 $ 110 $ 106 $ 359 $ 2,909 $ 3,631 5.8%
1% 3% 3% 3% 10% 80%
(1) Pro-forma for issuance of $350 million Term Loan B with proceeds used to repay $338 million of the non-recourse portfolio term loan and
$12 million of corporate credit facility.
Principal Repayments
Corporate borrowings
Non-recourse debt
2020 2021 Thereafter Total
Weighted
Average
Interest
Rate(MILLIONS)
Weighted
Average
Life
Balance of
2017 2018 2019
15
Our portfolio has a weighted-average remaining contract duration of ~15 years. Over the next five years, contracts
accounting for 8% of our expected generation expire. We are focused on securing long-term contracts to the extent these
contracts expire.
The majority of our long-term power purchase agreements are with investment-grade counterparties. The composition of
our contracted generation under power purchase agreements is comprised of:
• Public utilities: 77%
• Financial institutions: 23%
• Commercial and industrial customers: 5%
• Government institutions: 4%
The following table sets out our contracted generation over the next five years as a percentage of expected generation.
We currently have a contracted profile of approximately 94% of future generation and our goal is to maintain this profile
going forward.
Contract Profile
2018 2019 2020 2021
Solar 100% 100% 100% 100% 100%
92% 92% 92% 86% 82%
94% 94% 94% 90% 86%
0% 0% 0% 0% 0%
8% 8% 8% 14% 18%
6% 6% 6% 10% 14%
Wind
Uncontracted
Solar
Wind
FOR THE YEAR ENDED DECEMBER 31
Balance of
2017
Contracted
16
Reconciliation of Non-GAAP Measures
17
Reconciliation of Non-GAAP Measures
for the Three and Nine Months Ended September 30
a) Represents unrealized loss on commodity contracts associated with energy derivative contracts that are not designated as hedges for accounting purposes whereby the change in fair
value is 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.
b) Represents net amortization of purchase accounting related intangibles arising from past business combinations related to favorable and unfavorable rate revenue contracts.
c) Primarily represents recognized deferred revenue related to the upfront sale of investment tax credits.
d) 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.
(MILLIONS, EXCEPT AS NOTED) Solar Wind Corp Total Solar Wind Corp Total Solar Wind Corp Total Solar Wind Corp Total
$107 $46 $0 $153 $126 $52 $0 $178 $275 $200 $0 $475 $314 $205 $0 $519
Unrealized (gain) loss on commodity contract derivatives, net (a) - (4) - (4) - - - - - (1) - (1) - 5 - 5
Amortization of favorable and unfavorable rate revenue contracts, net (b) 2 8 - 10 2 8 - 10 6 24 - 29 6 24 - 30
(5) - - (5) (5) - - (5) (10) - - (10) (9) - - (9)
Adjustment for asset sales - - - - (18) - - (18) (15) - - (15) (47) - - (47)
$104 $50 $0 $155 $105 $60 $0 $165 $256 $223 $0 $478 $265 $234 $0 $499
Net income (loss) $46 ($37) ($44) ($35) $53 ($22) ($58) ($28) $125 ($44) ($173) ($92) $76 ($20) ($162) ($106)
Interest expense, net 15 22 33 70 22 21 30 73 54 65 88 207 89 64 90 243
Income tax (benefit) expense - - (3) (3) - - 1 1 - - (5) (5) - - 3 3
Depreciation, accretion and amortization expense (d) 29 42 1 72 31 36 1 68 88 126 2 215 96 111 1 208
Non-operating general and administrative expenses (e) - - 13 13 - - 14 14 - - 67 67 - - 41 41
Stock-based compensation expense - - 2 2 - - 1 1 - - 7 7 - - 4 4
Gain on sale of U.K. renewable energy facilities - - - - - - - - (37) - - (37) - - - -
Adjustment for asset sales - - - - (13) - - (14) (10) - - (10) (35) - - (35)
(2) (1) (7) (10) - (3) 6 3 (5) 4 (7) (9) (4) 6 9 10
$88 $26 ($5) $109 $93 $32 ($6) $119 $215 $151 ($22) $344 $222 $161 ($14) $369
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
(MILLIONS, EXCEPT AS NOTED) Solar Wind Corp Total Solar Wind Corp Total Solar Wind Corp Total Solar Wind Corp Total
$88 $26 ($5) $109 $93 $32 ($6) $119 $215 $151 ($22) $344 $222 $161 ($14) $369
Interest payments (g) (6) (17) (35) (58) (4) (18) (37) (60) (36) (50) (87) (173) (42) (53) (82) (177)
Principal payments (h) (11) (12) - (23) (7) (10) - (18) (27) (37) - (65) (21) (37) - (59)
Cash distributions to non-controlling interests (3) (3) - (6) (3) (7) - (10) (10) (13) - (23) (6) (13) - (19)
Sustaining capital expenditures - (1) - (1) - (1) - (1) - (8) - (8) - (6) - (6)
Adjustment for asset sales - - - - - - - - - - - - 10 - - 10
Other (i) 1 3 - 4 - 5 (2) 4 7 10 (1) 16 7 11 8 28
$69 ($4) ($40) $25 $79 $0 ($45) $34 $149 $53 ($110) $92 $170 $62 ($88) $145Cash available for distribution (CAFD)
Other non-cash items (c)
Adjusted revenues
Other non-cash or non-operating items (f)
Adjusted EBITDA
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Revenue
Adjusted EBITDA
18
Reconciliation of Non-GAAP Measures
for the Three and Nine Months Ended September 30
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. In the
three and nine months ended September 30, 2016 we accrued $3.4 million and $8.4 million, respectively, 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. These items include extraordinary costs and expenses related primarily to restructuring, legal, advisory and contractor fees
associated with the bankruptcy of SunEdison and certain of its affiliates (the “SunEdison bankruptcy”) and investment banking, legal, third party diligence and advisory fees associated
with the Brookfield transaction, dispositions and financings. The Company’s normal general and administrative expenses, paid by Terraform Power, are the amounts shown below and
were not added back in the reconciliation of net income (loss) to Adjusted EBITDA:
f) 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: acquisition related costs, impairment charges, loss (gain) on FX, loss on investments and receivables with affiliate,
and loss on extinguishment of debt.
g) Represents project-level and other interest payments and interest income attributed to normal operations. The reconciliation from Interest expense, net as shown on the Consolidated
Statement of Operations to Interest payments applicable to CAFD is as follows:
h) 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 is as follows:
i) 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 a cash contribution received in 2016 from SunEdison under the Interest Payment Agreement.
3Q 2017 3Q 2016 September 2017 YTD September 2016 YTD
$5.7M $5.9M $22.8M $13.9M
$ in millions 3Q 2017 3Q 2016 Sep 2017 YTD Sep 2016 YTD
Principal payments on non-recourse long-term debt ($57.9) ($58.7) ($199.5) ($122.6)
Blackhawk repayment of construction loan by SunEdison - 16.7 - 38.1
Midco repayment of loan - - 100.0 -
CAP prepayment using EPC settlement proceeds 4.8 - 4.8 -
TerraForm Private Operating II repayment of loan 30.0 24.0 30.0 24.0
Other, net 0.1 0.2 (0.1) 2.0
Principal payments ($23.0) ($17.8) ($64.8) ($58.5)
$ in millions 3Q 2017 3Q 2016 Sep 2017 YTD Sep 2016 YTD
Interest expense, net ($70.2) ($72.8) ($206.7) ($243.1)
Amortization of deferred financing costs and debt discounts 3.5 4.4 13.5 19.6
Unrealized loss on U.K. interest rate swaps ‐ 4.6 2.4 34.5
Changes in accrued interest and other non-cash 4.5 5.3 8.2 12.2
Loss on extinguishment of debt 2.5 ‐ 2.5 ‐
Special interest on corporate bonds related to August 2016 waiver
agreements ‐ ‐ 7.1 ‐
Portfolio Term Loan extension fee recorded to unamortized discount, net (1.8) ‐ (4.2) ‐
Corporate bond backstop facility fee 3.1 ‐ 3.1 ‐
Other, net 0.8 (1.3) 1.3 (0.4)
Interest payments ($57.6) ($59.8) ($172.8) ($177.2)
19
Calculation and Use of Non-GAAP Measures
Adjusted Revenue, Adjusted EBITDA and CAFD 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 not necessarily be the
same as those used by other companies. These non-GAAP measures have certain limitations, which are described below, and they should not be considered in isolation. We
encourage you to review, and evaluate the basis for, each of the adjustments made to arrive at Adjusted Revenue, Adjusted EBITDA and CAFD.
Calculation of Non-GAAP Measures
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 define adjusted EBITDA as net income (loss) plus depreciation, accretion and amortization, non-cash general and administrative costs, interest expense, income tax (benefit)
expense, acquisition related expenses, 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.
We define “cash available for distribution” or “CAFD” as adjusted EBITDA (i) minus cash distributions paid to non-controlling interests in our renewable energy facilities, if any, (ii) minus
annualized scheduled interest and project level amortization payments in accordance with the related borrowing arrangements, (iii) 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, (iv) plus or minus operating items as necessary to present the cash flows we deem representative of our core business operations.
As compared to the preceding period, we revised our definition of CAFD to (i) exclude adjustments related to deposits into and withdrawals from restricted cash accounts, required by
project financing arrangements, (ii) replace sustaining capital expenditures payment made in the year with the average annualized long-term sustaining capital expenditures to maintain
reliability and efficiency of our assets, and (iii) annualized debt service payments. 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. For items presented on an annualized basis, we will present actual cash payments as a proxy for an
annualized number until the period commencing January 1, 2018.
Furthermore, to provide investors with the most appropriate measures to assess the financial and operating performance of our existing fleet and the ability to pay dividends in the
future, we have excluded results associated with our UK solar and Residential portfolios, which were sold in 2017, from adjusted revenue, EBITDA and CAFD reported for all periods.
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 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. 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 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 SunEdison bankruptcy.
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. 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 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 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 these Non-GAAP measures are also useful for communicating with investors and
other stakeholders.
NASDAQ:
TERP
http://www.terraformpower.com
20