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Pattern Energy Group has acquired interests in the two wind projects that comprise the 324MW Broadview Wind power facilities (Broadview) and associated independent 35-mile 345 kV Western Interconnect transmission line (Western Interconnect) from Pattern Energy Group LP (Pattern Development 1.0) for $269 million, consisting of cash consideration of $215 million and an assumed project loan of $54 million. Broadview, which is located 30 miles north of Clovis, New Mexico, commenced commercial operations in late March.
Highlights
"This extraordinary project brings inexpensive renewable power from eastern New Mexico, one of the highest wind areas in the west, using dedicated transmission capacity from several transmission systems into California. Broadview's production complements production from California's domestic renewable resources helping California transition to a carbon-free, low-cost, renewable grid," said Mike Garland, President and CEO of Pattern Energy. "We are especially excited to bring this project on line because Pattern Development is actively developing several significant opportunities in New Mexico and the southwest U.S. as part of the region's increasing demand for low-cost, renewable energy. These new opportunities will be subject to our ROFO as part of our relationship with Pattern Development."
Pattern Energy has acquired from Pattern Development 1.0 an 84% initial cash flow interest in Broadview and a 99% ownership interest in Western Interconnect. Institutional equity investors have acquired from Pattern Development 1.0 a 16% initial cash flow interest in, and a 99% initial taxable income allocation from, Broadview. Following the acquisition, based on its initial cash flow share, Pattern Energy retains an owned interest of 272 MW in Broadview. Pattern Energy's commitment to own and operate the facility was a core component of securing high-quality institutional equity investors for the project financing.
Pattern Energy acquired Broadview and Western Interconnect for $269 million, including cash consideration of $215 million and an assumed project loan of $54 million secured by Western Interconnect. The cash consideration was funded from available corporate liquidity. The Western Interconnect loan commitment was originally secured at the time of the agreement to acquire Broadview in June 2016. The interest on the debt is 90% swapped over the 19-year amortization term. The debt has a maturity of 10 years.
Broadview will begin receiving both pay-as-you-go ("PAYGO") contributions from Broadview's tax equity investors and certain New Mexico production tax credits starting in 2018. Based on the expected timing of these cash flows and assuming normal wind conditions, Pattern Energy expects the CAFD contribution, after deduction of Western Interconnect financing costs, to be $18 million in 2018 and to increase approximately $2.5 million per year thereafter through 2022. This results in a five-year average CAFD of $23 million per year and a 9.3x CAFD multiple, based on the cash consideration of $215 million paid to acquire Broadview and Western Interconnect.
Broadview consists of 141 Siemens 2.3 MW wind turbines and has the capacity to generate 324 MW of energy, the power equivalent to the annual energy usage of approximately 180,000 California homes. Broadview is limited to 297 MW of injection capacity at Broadview's transmission interconnection point.
Broadview has entered into two 20-year power purchase agreements ("PPAs") with Southern California Edison ("SCE"), which has a BBB+/A2 credit rating, for sale of 100 percent of the output, up to a total of 297 MW, which has been factored into Broadview's economics.
Broadview interconnects to the Western Interconnect transmission project, a 345 kV transmission line, approximately 35 miles in length. To wheel the output from Broadview to the California Independent System Operator system where it is delivered to SCE, Broadview has entered into long-term, firm, point-to-point transmission service agreements to move the output through the Western Interconnect, Public Service of New Mexico and Arizona Public Service transmission systems.
(Photo: Pattern's Gulf Wind Farm in Armstrong, Texas; Source: Pattern Energy)