Pattern Energy (PEGI) To Sell 81 MW Wind Operations In Chile

Pattern Energy Group Inc. (NASDAQ:PEGI) announced that it has entered into an agreement to sell its 81 MW interest in 115 MW El Arrayán Wind project in Chile for $67 million in cash and the divestment is expected to close within 90 days, subject to customary closing conditions.

Pattern Energy expects to reduce $1 million annual overhead cost in relation to business management in Chile.

The company’s decision to discontinue its wind operation in Chile was strategic as the operational hub was located far from the company’s remaining business activities. The wind operation was located nearly 400 km north of Santiago on the Chilean coast, due to which, the company had to incur higher fleet operation cost, different legal, tax and regulatory environments. The sale proceeds will either be utilized to make further accretive investments, clearing debts, share buyback or for other corporate purposes.

Future Plans of Pattern Energy

Pattern Energy is currently working on Pattern 2020 initiative, which sets out targets for its growth into the next decade and beyond. Under this initiative, the company aims to double its existing capability by end of 2020.

Pattern Energy has utility scale renewable operations in U.S., Chile, Japan and Canada. The company is presently focused on expanding its renewable operation in Japan through acquisitions.

The company bought 206 MW of solar and wind portfolio in Japan, of which, four projects with a total of 84MW are in operation and immediately accretive to the company’s business. The remaining 122 MW of solar and wind project is under construction

Expansion in Japan is a very profitable venture for the company as in Japan, the average power contract price is $230 per megawatt hour. So the 206 MW that the company acquired in Japan is equivalent to 400-600 MW in North America. Given the profitability and scope, we expect the company to further widen its scope of operations in Japan.

Importance of Renewable

Renewable Energy source has been gaining momentum globally. Wind and solar power have been two of the fastest growing sources of electricity generation on the international front over the past decade. In 2017, global installed wind capacity grew by nearly 11%, thus bringing the global total to 540 GW. Projections by the International Energy Agency indicate that renewable energy will continue to grow at a faster rate than fossil fuels over the next two decades.

Per U.S. Energy Information Administration report, during the 2014 to 2017 time period, renewable sources accounted for more than 50% of the total utility scale power plant added in the United States. In 2018 9 GW of new solar and wind assets will be added, which shows the rising popularity and importance of renewable sources in the United States.

Price Performance

Shares of Pattern Energy have outperformed its industry in the past 30 days. The stock has gained 0.7% against the 1.8% decline of its industry.

Zacks Rank and Stocks to Consider

Pattern Energy has a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Utility – Electric Power Industry are IDACORP, Inc. (IDA), WEC Energy Group, Inc. (WEC), and CMS Energy Corporation (CMS), each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDACORP, Inc. (NYSE:IDA) reported first-quarter 2018 earnings of 72 cents per share, surpassing the Zacks Consensus Estimate of 71 cents by 1.41%. The Zacks Consensus Estimate for 2018 EPS remained unchanged in the last 30 days to $4.19.

WEC Energy Group, Inc. (NYSE:WEC) reported first-quarter 2018 earnings of $1.23 per share, outpacing the Zacks Consensus Estimate of $1.16 by 6.03%. The Zacks Consensus Estimate for 2018 EPS remained unchanged in the last 30 days to $3.30.

CMS Energy Corporation (NYSE:CMS) reported first-quarter 2018 earnings of 86 cents per share, exceeding the consensus estimate of 82 cents by 4.88%. The Zacks Consensus Estimate for 2018 EPS remained unchanged in the last 30 days to $2.33.

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