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Pattern Energy Sells Interest in K2 Wind Facility for $160M

Pattern Energy Group Inc. PEGI announced that it has completed the sale of its minority owned interest in the K2 Wind power facility ("K2") in Ontario for $160 million (CAD 216 million) to a consortium of investors led by Axium Infrastructure. The deal was completed on Dec 31, 2018.

K2 is a 270-MW wind power facility located in the Township of Ashfield-Colborne-Wawanosh. Markedly, Pattern Energy owned minority interest of 90 MW in the wind facility. It will still continue to operate the wind facility.

Focus on Accretive Assets

The company is planning to sell some of its non-core assets and redeploy the proceeds into more accretive assets. Last year, Pattern Energy sold its El Arrayan Wind operation in Chile for net consideration of $68.5 million and decided to expand operations in Japan through acquisitions.

Japan is among the fastest-developing renewable markets in the world. Notably, Pattern Energy already has five renewable energy facilities in the country via acquisitions. Four of these five facilities are in operation and one under construction, totaling 206 MW of owned capacity. The company is also exploring opportunities to expand its renewable operation in Mexico.

Long-Term Plan
The primary objective of the company is to look for growth opportunities across the spectrum of wind, solar, transmission, storage and advanced energy technologies. It supplies low cost energy from renewable sources to customers, which lowers dependency on fossil fuels.

The company owns renewable assets in the United States, Japan and Canada, with owned capacity totaling nearly 2.9 GW. Pattern Energy, through further planned investment in renewable assets, aims to double the megawatts (MW) owned or managed by the company within 2020-end.

Focus on Lowering Emission

Per a release from the U.S. Energy Information Administration (“EIA”), it is quite evident that the primary focus across the United States is to lower emission levels, despite the efforts taken by the new administration to encourage the usage of coal in industries.

EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 32% in 2017 to 35% in 2018 and 2019. In addition, EIA expects wind, solar and other non-hydropower renewables to contribute 11% of the total generation in 2019, up from 10% in 2018.

EIA also forecasts that the electricity generation share from coal will average 26% in 2019, down from 28% in 2018.

Increase in the usage of renewable sources and natural gas in the production of electricity was due increasing awareness regarding emission and continued research to bring down the cost of installing utility scale renewable plants. In addition, support from the government through tax credit is resulting in the development of new renewable generation units.

As a result, we could notice that large utility companies like NextEra Energy Inc. NEE are planning to expand its power generation capacity by adding 5,400-7,800 MW of wind assets in the 2017-2020 time period. Another utility Xcel Energy XEL already owns 1,450 MW of wind assets, and has plans to build 2,950 MW of wind generation and add clean assets in its generation portfolio.

Price Performance

Pattern Energy’s shares have gained 10.5% in the past three months against its industry’s decline of 21%.

Zacks Rank and A Key Pick

Pattern Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock from the same industry is Ameren Corporation AEE, sporting a Zacks Rank #1.

Ameren reported average positive earnings surprise of 15.4% in the last four quarters. Long-term (three to five years) earnings growth of the company is pegged at 6.79%. The Zacks Consensus Estimate for 2019 has moved up 0.3% to $3.28 in the past 60 days.

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