Pattern Energy Group (PEGI) CEO Mike Garland on Recycling Capital

Pattern Energy Group is depending on "wind energy" to usher in a new age in the renewable energy market.

While Pattern Energy (PEGI) is paying out nearly all its cash flow to support its dividend, the company is working on getting some more breathing room by growing cash flow per share.

One way it’s doing that is by recycling capital, which includes selling assets at a premium and using the cash to buy higher-returning assets. The company recently completed one such trade, selling its El Arrayan project in Chile for $70.4 million and using the capital to acquire a 51% interest in the Mont Sainte-Marguerite project in Quebec for $37.7 million.

The CEO noted that “we continue to look for opportunities to recycle capital where appropriate, and have initiated a process of selling an additional asset interest and expect to acquire Stillwater or [a] similar project before long.” The company took that next step earlier this month by agreeing to sell its interest in the K2 Wind Facility in Ontario for roughly $166 million, which is about 15 times cash flow.

CEO Mike Garland outlined how the company plans to allocate this money by stating on the call:

We intend to use the proceeds from the recycling to fund accretive investments, acquisitions, or repayment of debt. In each case, it improves our CAFD per share. Selling an asset allows us to invest in opportunities that are more accretive to the business. It also demonstrates the significant intrinsic value of the assets in the portfolio compared to the value ascribed to the business in the markets, which we think is considerable.



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