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With ample capital for deals, Pattern Energy waits for improved equity markets

hasample capital access for acquisitions, executives said May 9, and the companyis looking at some assets on the market being sold by

Onthe same day it releasedfirst-quarter results, Pattern Energy announced the start of a $200million at-the-market, or ATM, program with RBC Capital Markets LLC, KeyBancCapital Markets Inc. and Morgan Stanley & Co. LLC to sell its class-Astock. On the company's earnings call, Pattern Energy President and CEO MikeGarland emphasized the ATM represents an option to fund, "modest amountsof equity capital from time to time," and has not been slated for aparticular transaction yet. "We view this ATM as one tool in ourbroader toolkit and we intend to use it judiciously for future project-relatedinvestments that are accretive and other corporate purposes," Garland said."Again, to be clear, we do not plan on issuing under the ATM at this timeand at the current stock price."

PatternEnergy CFO Mike Lyon noted that the company has available liquidity, as ofMarch 31, of $335 million, which should provide $100 million to $150 million in"dry powder," to drop down additional assets from .

Butwith this capital on hand for drop downs and asset acquisitions, Garland saidPattern Energy would like to see the attitude of equity markets toward theyieldco model improve before taking action. The strategy reflects a cautiousattitude after a second half of 2015 that saw a major sell-off in yieldcoshares, essentially freezing the ability of such companies to tap equity marketsto do acquisitions.

Inrecent months, those yieldcos with strongparent sponsors, like NextEraEnergy Inc. and its yieldco NextEra Energy Partners, have begun to equity marketsagain, but the high-flying days of 2014 and the first half of 2015 remain adistant memory.

ThoughPattern Energy could drop down assets from Pattern Development, Garlandsuggested the company does not quite view equity markets as receptive to thatactivity just yet.

"There is a quality to the market where it's almost,the market doesn't want to hear much new news at all. And so what we're waitingfor is the market to stabilize a little better so that people look at whateverwe do very positively because we want, obviously, for our investors to see apositive outcome and a growth of the positive reaction to the marketplace,"he said. "And sometimes announcing anything is perceived as not that good.People may not see it as accretive as it should be or timing isn't right orraising any equity creates issues. And so we're being patient and believe thatthe right approach ought to be to just wait until the market settles and feelsa little more solidified than it has been in order to make an acquisition."

That does not mean, however, that if Pattern Energy findshighly accretive asset transactions, it will not move to do a third-party dealbefore drop downs.

"SunEdison, for example, is going through someliquidation of assets, selling of assets, I should say, and we are involved inlooking at those. We will see what the pricing looks like as time goes on. Weare hopeful we'll be able to find a few above-market, if you will, returningprojects, but there's still a lotof competition, as you know, out there to acquire projects,especially operating projects. So it's not like the market has fallen throughthe bottom," Garland said. "I think where you get above-marketreturns is when there's something unusual, like you might need a very fastturnaround. The seller may need a fast turnaround time. Those are the sorts of thingsthat put us in really good position because we generally can move more quicklythan a lot of people."

Garland specified, though, that, "there's nothingcurrently active that we have at Pattern Development or at PEGI."