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Pattern Energy Group: A Wind Energy Yieldco

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Pattern Energy Group (PEGI)

Pattern Energy Group (PEGI) is special in its own way. Unlike other yieldcos that are floated by publicly traded companies, Pattern Energy (PEGI) is floated by privately owned company Pattern Development. The company raised $352 million in an IPO (initial public offering) on September 26, 2013, at a price of $22 a share.

Pattern Development initiates wind (FAN) power projects and holds a 25% stake in PEGI. PEGI owns and operates 12 wind power projects with a total capacity of 1,636 MW. These projects are located in the US, Canada, and Chile.

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Portfolio

Unlike NRG Yield (NYLD), which holds a mix of fossil and renewable assets, PEGI’s entire portfolio is in wind power.

It has 12 operational projects with a total owned capacity of 1,636 MW. Seven of these, with a combined capacity of 1,115 MW, or 68%, are located in the US. Three projects with owned capacity of 340 MW, or 21%, are in Canada. PEGI owns and operates one project in Chile with a capacity of 80 MW, or 5%, and its Puerto Rico facility has a capacity of 101 MW, or 6%.

The weighted average remaining duration on all the company’s contracts was 16 years as of December 2014.

Customer profile

Compared to NRG Yield, PEGI has a relatively diverse customer profile. San Diego Gas & Electric, a subsidiary of Sempra Energy (SRE), was its largest customer in fiscal 2014, contributing 22% toward total revenues of $265 million. Other major customers include these:

  • Manitoba Hydro – 14%
  • NV Energy (BRK-B) – 14%
  • PG&E (PCG) – 11%

All customers are investment-grade companies with a weighted average rating of A- on the Standard & Poor’s scale.

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Dividend history

With the exception of 1Q14, when there was no change in the dividend, PEGI’s dividend payout has shown growth each quarter. The company’s most recent dividend, declared on March 2, was up by 2% compared to the previous quarter.

Bottom line

PEGI has a diverse, high-quality customer base and a broad geographical reach. For investors seeking exposure solely to wind energy, the stock is an attractive proposition. PEGI is a part of the Russell 2000 Index (IWM).

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