Energy, Materials, and Utilities
Earlier this year, Pattern Energy (NASDAQ:PEGI) unveiled a two-year plan aimed at improving the long-term sustainability of its 7.4%-yielding dividend. The renewable energy company expects to grow its cash flow per share at a double-digit annual rate over that time frame. That growth would improve its payout ratio from a dangerous 99% to a more comfortable 80% by the end of next year.
While Pattern Energy experienced some headwinds during the second quarter, the company also made some notable progress on its strategic plan. Because of that, it’s still on track to achieve its targeted payout ratio by the end of next year.
A look at the numbers
Gigawatts hours sold
Cash available for distribution
CAFD per share
Dividend coverage ratio
Data source: Pattern Energy.
Pattern Energy’s power production declined by almost 7% compared to the year-ago period. That’s due to asset sales and unfavorable wind conditions, which more than offset the positive impact from acquisitions.
Those headwinds weighed on Pattern Energy’s earnings and cash flow during the period. The company lost $11 million of EBITDA from the asset sales while weaker wind conditions cost it $3 million. It only partially offset those issues by making acquisitions that added $5 million in EBITDA and recording an incremental $3 million of earnings from its investment in development projects. Those same headwinds impacted cash flow, which isn’t yet benefiting from the development segment since it won’t start distributing cash until next year.
Image source: Getty Images.
What management had to say
“The portfolio and the business continue to perform well,” according to CEO Mike Garland. “We generated strong CAFD of $53